<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
DECEMBER 8, 1995
- ------------------------------------------------------------------------------
(Date of Report)
AMERICAN RIVERS OIL COMPANY
- ------------------------------------------------------------------------------
(Exact Name of Registrant as specified in its charter)
WYOMING
- ------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
0- 10006 84-0839926
- ----------------------------- ---------------------------------------
(Commission File Number) (IRS Employer Identification Number)
700 EAST NINTH AVENUE, SUITE 106, DENVER, CO. 80203
- ------------------------------------------------------------------------------
(Address of principal executive offices including zip code)
(303) 832-1117
- ------------------------------------------------------------------------------
(Registrant's telephone number including area code)
METRO CAPITAL CORPORATION
716 COLLEGE VIEW DRIVE, RIVERTON, WYOMING 82501
- ------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
AMERICAN RIVERS OIL COMPANY
ITEM 1. CHANGES IN CONTROL OF THE REGISTRANT.; AND
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
ASSET PURCHASE AGREEMENT
Pursuant to an Asset Purchase Agreement dated October 19,
1995 among the Company, Karlton Terry Oil Company ("KTOC"),
Karlton Terry and Jubal Terry (the "Shareholders"), the Company
acquired certain assets (the "Assets") of KTOC and the
Shareholders in exchange for 7,717,820 "restricted" shares of
Class B Common Stock, $.01 par value, of the Company (the "Class
B Common Stock"), referred to herein as the Transaction.
Included in the Assets were assets acquired through option
agreements with third parties. The 7,717,820 shares of the Class
B Common Stock represented 80% of the aggregate issued and
outstanding shares of both classes of the Company's Common Stock
immediately after the closing (the "Closing"). KTOC and the
Shareholders are referred to herein collectively as the Sellers.
As a result of the Transaction, KTOC and the Shareholders own in
the aggregate 6,714,875 shares or 87% of the Class B Common Stock
which was issued pursuant to the Transaction. The Closing of the
Transaction took place in escrow on November 30, 1995 and the
escrow was released on December 8, 1995, the effective date of
the Transaction. In connection with the Transaction, the Company
changed its name to American Rivers Oil Company.
The Assets acquired by the Company pursuant to the
Transaction consist of various oil and gas leases covering
developed and undeveloped acreage underlying large rivers through
several oil fields in the United States (the "River Leases").
The River Leases are expected to be developed with horizontal and
diagonal wells. Besides the River Leases, the Company acquired
certain producing oil and gas properties. Karlton and Jubal
Terry and certain of their affiliates will retain overriding
royalty interests burdening the working interests transferred to
the Company, ranging from 1.7% to 7.5%. Because an overriding
royalty interest bears no share of the costs of developing an oil
and gas property, it may be advantageous for the holder of the
interest to conduct drilling and other operations even if they
may not be economic for the Working Interest owner. Therefore,
the existence of these overriding royalty interests creates
potential conflicts of interest between the Company and these
persons.
The Board of Directors of the Company valued the Assets
based upon, among other things, the financial statements with
respect to the Assets, the reserve reports with respect to the
Assets and other information regarding the Assets.
2
<PAGE>
In connection with the Transaction, the Company transferred
to Bishop Capital Corporation, formerly Bishop Cable
Communications Corporation, its wholly-owned Wyoming subsidiary
(the "Subsidiary"), all of the Company's assets (the "Excluded
Assets") except for $700,000 and its working interest in, and its
operating agreement with respect to, the property owned by the
Company known as Twenty Mile Hill. The Company intends to
distribute the shares of the Subsidiary to the holders of the
Company's Common Stock as soon as practicable on a non-taxable
basis. In any event, and regardless of tax consequences, the
Company intends such distribution to occur not later than 36
months from the Closing.
The Class B Common Stock possesses all of the rights of the
Company's Common Stock, except that: (i) the Class B Common Stock
will not be entitled to participate in any distribution of shares
or assets of the Subsidiary; and (ii) each share of Class B
Common Stock will be entitled to 1.6 votes on all issues
presented for vote by the shareholders. The Class B Common Stock
is convertible on a one-for-one share basis into the Company's
Common Stock commencing 36 months from the Closing. Commencing
30 months from the Closing, the Class B Common Stock will be
convertible on a one-for-one share basis, provided that the
number of shares so converted until the date 36 months after the
Closing will be limited to that number of shares of Common Stock
that may be sold by an affiliate pursuant to the volume
limitation provisions of Rule 144 promulgated under the
Securities Act of 1933, as amended. Subsequent to the Closing,
450,000 shares of Class B Common Stock are to be converted into
450,000 shares of Common Stock to acquire certain option
properties which were part of the assets acquired under the
Agreement. The 450,000 shares of Common Stock are subject to
certain registration rights commencing six months from the date
of conversion. As a result of the Transaction, up to 7,717,820
shares of the Company's Common Stock may be issued to holders of
the Company's Class B Common Stock.
In connection with the Transaction, the Company amended its
Articles of Incorporation to: (i) change its name to American
Rivers Oil Company; (ii) authorize 8,000,000 shares of Class B
Common Stock, $.01 par value; (iii) increase the number of its
authorized shares of Common Stock, $.01 par value from 6,000,000
to 20,000,000 shares; and (iv) increase the number of its
authorized shares of $.50 par value Preferred Stock from
3,000,000 to 5,000,000 shares. The Company also increased the
aggregate number of shares of the Company's Common Stock reserved
for issuance under its 1992 Stock Option Plan (the "1992 Plan")
from 150,000 to 500,000 shares. The Transaction and the
foregoing changes to the Company's capital structure and its 1992
Plan were approved by the Company's shareholders at a meeting
held on November 27 and 29, 1995.
In connection with the Agreement, the Company granted an
option (the "Option") to the Subsidiary to acquire 800,000 shares
of Common Stock (the "Option Shares") to be distributed PRO RATA to
3
<PAGE>
the holders of the Common Stock. The Option will be
exercisable for a period of 120 days at an exercise price of $.10
per share commencing 36 months from the Closing in the event that
one of the following events has not occurred by such time: (a)
the Company has a minimum of $16.5 Million of Proved and Probable
Reserves as set forth in an independent petroleum engineer's
report prepared in accordance with SEC pricing and cost
assumptions; or, (b) the average bid price for the Common Stock
shall have been at least $4.00 for two periods of twenty
consecutive trading days; or (c) cash flow (gross revenues from
oil and gas production less expenses directly charged against
such production) for the Company shall have been greater than
$2,000,000 for any fiscal year. The Option will be distributed
to the shareholders, if at all, 36 months from the Closing. The
Company is obligated to register the Option Shares with the SEC.
Until the date two years after the date of the Agreement, or
such longer period as provided in the Agreement (collectively the
"Restriction Period"), the Sellers have agreed to maintain their
ownership of at least 39% of the issued and outstanding shares
(the "Restricted Shares") of the Class B Common Stock received by
Sellers, which shares bear a legend evidencing such obligations
and restrictions. Sellers will be allowed to transfer such
Restricted Shares free and clear of such restriction during the
Restriction Period only if they substitute stock or other assets
subject to such legend or other similar restriction as may be
reasonably requested by the management of the Subsidiary and
having a value not less than the lesser of the value of the
Restricted Securities or $4,000,000. Each share of Restricted
Securities will be deemed to have a value of 75% of the market
value of a share of the Common Stock, as defined in the
Agreement.
Under the Agreement, the Company, KTOC and the Subsidiary
entered into a five-year operating agreement (the "Operating
Agreement") pursuant to which the Subsidiary will be operated
autonomously by the current management of the Company as set
forth in a Management Agreement described below entered into with
Robert E. Thrailkill, and employment agreements entered into with
John A. Alsko and Robert J. Thrailkill who are the officers and
directors of the Subsidiary. Any determination by the Board of
Directors of the Subsidiary with respect to the business,
operations and assets of the Subsidiary will be final, conclusive
and binding and will not be subject to any modification
whatsoever by the Board of Directors or management of the Company
for any reason; provided, however, that in no event will any
member of the Board of Directors or any other officer of the
Company be required to breach his or her fiduciary duty to the
Company or its shareholders.
Pursuant to the Management Agreement entered into among the
Company, the Subsidiary and Robert E. Thrailkill, Mr. Thrailkill
will serve as the Subsidiary's President, Chairman of the Board
of Directors and Chief Executive Officer for a term of five
years. Mr. Thrailkill will receive a salary of no less than
$145,000 per
4
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year, subject to certain increases. The compensation payable to
Mr. Thrailkill will be self-funded by the Subsidiary and not the
Company. The Management Agreement may not be terminated by the
Company in any event but may be terminated by the Subsidiary in
the event of the death or disability of Mr. Thrailkill or for
"Cause" as defined in the agreement and may be terminated by
Mr. Thrailkill for "Good Reason" as defined in the agreement or for
impaired health. If Mr. Thrailkill's employment is terminated by
the Company or the Subsidiary in breach of the agreement or by
Mr. Thrailkill for Good Reason, the Company and the Subsidiary will
pay Mr. Thrailkill his full salary through the date of termination
and a lump sum equal to his annual salary multiplied by the greater
of the number of years (including partial years) remaining under
the agreement or the number three. The Management Agreement supersedes
the Executive Employment Agreement effective January 1, 1993 between
Mr. Thrailkill and the Company.
In connection with the Transaction, Karlton Terry has been
elected President and Jubal Terry has been elected Chief
Operations Officer, Executive Vice President and Secretary-
Treasurer of the Company. The new Board of Directors of the
Company consists of Karlton Terry, Jubal Terry and Denis Bell.
The Company intends to enter into three-year employment
agreements with Karlton Terry and Jubal Terry providing for
salaries of $125,000 and $75,000, respectively, and such other
terms and conditions to be negotiated. In addition, the
Subsidiary has entered into three-year employment agreements with
John A. Alsko and Robert J. Thrailkill providing for salaries of
$50,000 and $36,000, respectively.
The Company, the Subsidiary and the Sellers also entered
into a five-year Voting Agreement under which the Company and the
Sellers appointed Robert E. Thrailkill as attorney and proxy to
vote in his sole and absolute discretion, all of the shares of
all classes of the Common Stock of the Company and/or the
Subsidiary owned by them with respect to any matter brought
before the shareholders of the Company and/or the Subsidiary
relating to or involving exclusively the Subsidiary (including,
without limitation, the election of directors, and other matters
listed in the Operating Agreement).
Prior to the negotiation and execution of the Agreement,
there existed no relationship between the Company and the Sellers
or any of the assets acquired.
OTHER MATTERS
The Company has agreed to issue 100,000 shares of Common
Stock to counsel for the Company for legal services rendered in
connection with the Transaction. The Company also has agreed to
issue 100,000 shares of Common Stock to a non-affiliated third
party for property acquisition services rendered in connection
with the Transaction.
5
<PAGE>
In connection with the Agreement, the Company has agreed to
grant various registration rights with respect to certain
securities outstanding or to be issued. As soon as practicable,
the Company will register on Form S-8 (or such other form as is
appropriate) 866,500 shares of Common Stock as follows: (i) the
200,000 shares to be issued as described in the above paragraph;
(ii) 82,500 shares previously issued as bonus shares; (iii)
70,000 shares reserved under the Company's 1987 Stock Bonus
Plan; and (iv) 514,000 shares underlying options. Commencing
six months from the Closing, an additional 63,000 shares of
Common Stock underlying outstanding options will be subject to
demand registration rights and 63,000 shares of Common Stock
underlying outstanding options will be subject to "piggy-back"
registration rights.
ITEM 5. OTHER EVENTS
The Company currently is conducting a private placement of
1.8 million shares of the Company's Common Stock at $1.00 per
share. Proceeds from the private placement will be used to
purchase production, repay outstanding bank debt and fund
development of the Company's properties, including general and
administrative expenses. The Company intends to register all of
the Common Stock issued in the private placement with the SEC six
months after the close of the private placement. There can be no
assurance that such offering will be successful.
The Company also has issued to non-affiliated third parties
options to acquire up to 400,000 shares of Common Stock at $1.00
per share in lieu of cash for future services to be performed on
behalf of the Company, which shares are subject to registration
on Form S-8 as set forth above.
The Company knows of no arrangement the operation of which
may at a subsequent date result in a change in control of the Company.
6
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Audited and Unaudited Financial Statements of the KTOC
Contributed Properties and the KTOC Option Properties
(b) Pro Forma Financial Statements.
(c) Exhibits.
10.1 Asset Purchase Agreement dated October 19, 1995
among the Registrant, Karlton Terry Oil Company,
Karlton Terry and Jubal Terry.
10.2 Operating Agreement dated November 30, 1995 among
the Registrant, Karlton Terry Oil Company, Bishop
Cable Communications Corporation, Karlton Terry
and Jubal Terry.
10.3 Management Agreement dated November 30, 1995
among the Registrant, Bishop Cable Communications
Corporation and Robert E. Thrailkill.
10.4 Voting Agreement dated November 30, 1995 among
the Registrant, Bishop Cable Communications
Corporation, Karlton Terry Oil Company, Karlton
Terry and Jubal Terry.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
AMERICAN RIVERS OIL COMPANY
Date: December 18, 1995 By: /s/ Karlton Terry
------------------------------------
Karlton Terry, President
8
<PAGE>
KTOC CONTRIBUTED PROPERTIES
FINANCIAL STATEMENT
FOR THE YEAR ENDED
DECEMBER 31, 1994
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Karlton Terry Oil Company
Denver, Colorado
We have audited the accompanying statement of assets and liabilities of KTOC
Contributed Properties as of December 31, 1994 and the related statements of
direct revenues and expenses for the years ended December 31, 1994 and 1993.
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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The accompanying financial statements were prepared on the basis described in
Note 1 and are not intended to be a complete presentation of Karlton Terry
Oil Company.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets and liabilities of KTOC Contributed
Properties as of December 31, 1994, and their direct revenues and expenses
for the years ended December 31, 1994 and 1993, in conformity with generally
accepted accounting principles.
/s/ Hein + Associates LLP
HEIN + ASSOCIATES LLP
Denver, Colorado
September 12, 1995
F-1
<PAGE>
KTOC CONTRIBUTED PROPERTIES
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Oil and gas sales receivable $ 32,400 $ 46,400
Accounts receivable, joint interest owners
(including amounts due from related parties
of $18,000 in 1995 and $19,100 in 1994) 42,000 43,000
-------- --------
Total current assets 74,400 89,400
OIL AND GAS PROPERTIES, at cost, using the
successful efforts method:
Proved properties 474,300 457,900
Less accumulated depreciation, depletion and
amortization (98,700) (72,500)
-------- --------
Net oil and gas properties 375,600 385,400
-------- --------
TOTAL ASSETS 450,000 474,800
-------- --------
LIABILITIES
CURRENT LIABILITIES:
Current maturities of long-term debt 48,000 50,700
Accounts payable, trade 43,600 20,300
Oil and gas sales payable 38,500 27,800
-------- --------
Total current liabilities 130,100 98,800
LONG-TERM DEBT, less current maturities 111,000 149,400
-------- --------
TOTAL LIABILITIES 241,100 248,200
-------- --------
NET ASSETS $208,900 $226,600
-------- --------
-------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-2
<PAGE>
KTOC CONTRIBUTED PROPERTIES
STATEMENTS OF DIRECT REVENUES AND EXPENSES
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
--------------------- --------------------
1995 1994 1994 1993
-------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
REVENUE:
Oil and gas sales $ 83,200 $ 101,000 $ 146,400 $ 184,800
Operator fees 3,800 - 2,500 -
-------- --------- --------- ---------
Total revenue 87,000 101,000 148,900 184,800
EXPENSES:
Oil and gas production costs 40,400 38,300 53,400 55,100
Depreciation, depletion and amortization 26,100 29,500 32,200 40,300
-------- --------- --------- ---------
Total expenses 66,500 67,800 85,600 95,400
-------- --------- --------- ---------
20,500 33,200 63,300 89,400
OTHER INCOME (EXPENSE):
Gain on drilling arrangements - 138,200 138,200 -
Interest expense (15,100) (18,700) (19,700 (15,500
-------- --------- --------- ---------
Excess of direct revenues over
expenses $ 5,400 $ 152,700 $ 181,800 $ 73,900
-------- --------- --------- ---------
-------- --------- --------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-3
<PAGE>
KTOC CONTRIBUTED PROPERTIES
NOTES TO FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying financial statements present the assets and liabilities
of certain oil and gas properties (the "Properties") which are currently
owned by Karlton Terry Oil Company and affiliated individuals (collectively
referred to herein as "KTOC") and their historical direct revenues and
expenses. Most of the properties are located in Louisiana and along the
Ohio River in West Virginia, Kentucky and Indiana and consist of both
developed and undeveloped acreage. As discussed in Note 6, the Properties
(along with additional interests in the properties which KTOC has rights to
acquire pursuant to option agreements) are subject to an agreement with
Metro Capital Corporation ("Metro") whereby, subject to approval by
Metro's shareholders, the Properties and the options will be sold to Metro
in exchange for 80% of the outstanding shares of Metro.
These financial statements present the properties to be acquired and
liabilities to be assumed, along with related operating receivables and
payables at their historical cost basis, and the direct revenues and
expenses of these properties on the accrual basis. They are not intended
to be a complete presentation of the financial position and results of
operations of KTOC.
UNAUDITED INFORMATION - The accompanying financial statements as of
September 30, 1995 and for the nine-month periods ended September 30, 1995
and 1994 are included herein without audit. In the opinion of management
of KTOC, these financial statements contain all adjustments (consisting
only of normal recurring items) necessary to present fairly the financial
position and the results of operations for the periods presented. The
results of operations for the nine months ended September 30, 1995 are not
necessarily indicative of the results to be expected for the full year.
2. SIGNIFICANT ACCOUNTING POLICIES:
OIL AND GAS PRODUCING ACTIVITIES - KTOC follows the "successful efforts"
method of accounting for its oil and gas properties. Under this method of
accounting, all property acquisition costs and costs of exploratory and
development wells are capitalized when incurred, pending determination of
whether the well has found proved reserves. If an exploratory well has not
found proved reserves, the costs of drilling the well are charged to
expense. The costs of development wells are capitalized whether productive
or nonproductive.
Geological and geophysical costs and the costs of carrying and retaining
undeveloped properties are expensed as incurred. Depreciation and
depletion of capitalized costs for producing oil and gas properties is
provided using the units-of-production method based upon proved reserves
for each well. Management estimates that the salvage value of lease and
well equipment will approximately offset the future liability for plugging
and abandonment of the related wells.
The net capitalized costs of proved oil and gas properties are limited to
the aggregate undiscounted future net revenues (the "ceiling") related to
such properties. If the net capitalized costs exceed the ceiling, the
excess will be recorded as a charge to operations.
F-4
<PAGE>
KTOC CONTRIBUTED PROPERTIES
NOTES TO FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
Gains and losses are generally recognized upon the sale of interests in
proved oil and gas properties based on the portion of the property sold.
For sales of partial interests in unproved properties, KTOC treats the
proceeds as a recovery of costs with no gain recognized until all costs
have been recovered.
INCOME TAXES - No income tax provision is included in the accompanying
financial statements, since KTOC's shareholder has elected to be taxed
under Subchapter S of the Internal Revenue Code. Accordingly, KTOC's
taxable income or loss is required to be reported in the shareholder's
individual income tax return.
REVENUE RECOGNITION - Revenue from oil and gas sales is recorded on an
accrual basis as sales are made and deliveries occur.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS - In March 1995, the
Financial Accounting Standards Board issued a new Statement titled
"Accounting for Impairment of Long-Lived Assets." This new standard is
effective for years beginning after December 15, 1995 and would change the
method of determining impairment of proved oil and gas properties.
Management has not performed a detailed analysis of the impact of this new
standard on the financial statements.
3. NOTE PAYABLE:
In April 1993, KTOC financed the acquisition of a producing oil and gas
property with a note payable to a bank with a principal balance of
$200,000 at December 31, 1994. The note provides for monthly payments
of $5,841 through April 1998 when the remaining balance is due. Interest
accrues at a variable rate which is equal to the bank's base rate plus 2%
(11% at December 31, 1994). Borrowings under the note are collateralized
by an oil and gas property located in Louisiana and an assignment of
production. Additionally, KTOC's president has personally guaranteed
KTOC's obligations under the note agreement.
The aggregate maturities of long-term debt at December 31, 1994, are as
follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31, AMOUNT
------------- ---------
<S> <C>
1995 $ 50,700
1996 56,400
1997 62,900
1998 30,100
---------
$ 200,100
---------
---------
</TABLE>
F-5
<PAGE>
KTOC CONTRIBUTED PROPERTIES
NOTES TO FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
4. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS:
Substantially all of the KTOC's accounts receivable at December 31, 1994
result from crude oil and natural gas sales and/or joint interest billings
to companies in the oil and gas industry. This concentration of customers
and joint interest owners may impact KTOC's overall credit risk, either
positively or negatively, since these entities may be similarly affected
by changes in economic or other conditions. Receivables are generally not
collateralized except through operator liens. Historical credit losses
incurred on trade receivables by KTOC have been insignificant.
5. RELATED PARTY TRANSACTIONS:
In addition to the working interests in the oil and gas properties
included in the accompanying financial statements, KTOC also owns
royalty interests in some of the properties and has rights to reversionary
interests. These interests are excluded from the accompanying financial
statements since they are being retained by KTOC.
6. SUBSEQUENT EVENTS (UNAUDITED):
In October 1995, KTOC and certain affiliates entered into an agreement with
Metro Capital Corporation ("Metro") whereby Metro agreed to acquire certain
oil and gas properties (including the properties for which KTOC has an
option as discussed in the following paragraph) and assume certain
liabilities of KTOC. The Agreement provides for the issuance to KTOC and
certain affiliates of 80% of the issued and outstanding voting shares of
Metro.
In August and September 1995, KTOC entered into agreements with certain
joint interest owners, which provide KTOC with an option to acquire
additional working interests in the properties. Upon exercise of the
options, KTOC is required to pay $641,000 in cash, issue 1,062,946 Class B
Metro common shares (of which 450,000 shares are immediately convertible
to Metro common stock), and pay $130,000 in production payments.
On November 29, 1995, the shareholders of Metro approved the transaction
and the closing occurred on December 8, 1995.
F-6
<PAGE>
KTOC CONTRIBUTED PROPERTIES
NOTES TO FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1994 IS UNAUDITED)
7. COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES:
The following is a summary of costs incurred in oil and gas producing
activities for the years ended December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Property acquisition costs $ - $ 487,300
Development costs 219,900 427,000
Exploration costs - 15,000
--------- ---------
Total $ 219,900 $ 929,300
--------- ---------
--------- ---------
</TABLE>
F-7
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Karlton Terry Oil Company
Denver, Colorado
We have audited the accompanying Historical Summaries of Oil and Gas Revenues
and Direct Operating Expenses (the "Historical Summaries") of the Option
Properties (the "Properties") for the years ended December 31, 1994 and 1993.
The Historical Summaries are the responsibility of Karlton Terry Oil
Company's management. Our responsibility is to express an opinion on the
Historical Summaries based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Historical Summaries are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Historical Summaries.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the Historical Summaries. We believe that our audits
provides a reasonable basis for our opinion.
The Historical Summaries were prepared on the basis described in Note 1 and
are not intended to be a complete presentation of the Properties' revenues
and expenses.
In our opinion, the Historical Summaries referred to above present fairly, in
all material respects, the oil and gas revenues and direct operating expenses
described in Note 1 of the Properties, for the years ended December 31, 1994
and 1993 in conformity with generally accepted accounting principles.
/s/ Hein + Associates LLP
HEIN + ASSOCIATES LLP
Denver, Colorado
September 8, 1995
F-8
<PAGE>
HISTORICAL SUMMARIES OF OIL AND GAS REVENUES AND
DIRECT OPERATING EXPENSES OF THE OPTION PROPERTIES
<TABLE>
<CAPTION>
NINE MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------- --------------------
1995 1994 1994 1993
------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue -
Oil and gas sales $95,900 $135,800 $190,700 $233,800
Expenses -
Direct operating expenses 78,200 108,500 143,900 146,600
------- -------- -------- --------
Revenues in excess of direct operating expenses $17,70 $ 27,300 $ 46,800 $ 87,200
------- -------- -------- --------
------- -------- -------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE HISTORICAL SUMMARIES.
F-9
<PAGE>
NOTES TO HISTORICAL SUMMARIES OF OIL AND GAS REVENUES AND
DIRECT OPERATING EXPENSES OF THE OPTION PROPERTIES
1. BASIS OF PRESENTATION:
The accompanying Historical Summaries have been prepared from accounting
records provided by KTOC and include only those revenues and direct
operating expenses attributable to the properties which are subject to
option agreements (the "Option Properties") between the current owners and
KTOC. The financial information for the nine-month periods ended September
30, 1995 and 1994 is unaudited but reflects, in the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary
to present fairly the interests in the oil and gas revenues and direct
operating expenses for such periods. The oil and gas revenues and direct
operating expenses for such interim periods are not necessarily indicative
of results to be expected for the full year.
The accompanying Historical Summaries are included to provide historical
information on the revenues and direct operating expenses of the Option
Properties and may not be representative of future operations. A provision
for depreciation, depletion and amortization has not been included since the
purchaser's basis in the properties will be significantly different from the
basis of the current owners. General and administrative expenses have not
been included because the historical expenses incurred by the current owners
may not be comparable to amounts expected to be incurred by the purchaser.
The Historical Summaries also do not include Federal and state income taxes
or interest.
F-10
<PAGE>
AMERICAN RIVERS OIL COMPANY
(FORMERLY METRO CAPITAL CORPORATION)
INTRODUCTION TO PRO FORMA FINANCIAL INFORMATION
In October 1995, Metro Capital Corporation (Metro) and KTOC entered into an
Asset Purchase Agreement whereby KTOC agreed to exchange certain oil and gas
properties (the "Contributed Properties") for a combined total of 7,717,820
shares of common stock and Class B common stock of Metro, which represents
80% of the issued and outstanding voting securities of Metro. On November
29, 1995, the shareholders of Metro voted in favor of this transaction and
the closing occurred on December 8, 1995. In addition, the shareholders
voted in favor of changing the name of the Company from Metro to American
Rivers Oil Company (AROC). At the closing date, additional working interests
in the KTOC oil and gas properties (the "Option Properties") were acquired
for cash, a portion of the Class B common shares issued in the transaction
and other consideration.
These pro forma financial statements give effect to these transactions by
recording KTOC's assets at their historical carrying value since the KTOC
owners continue to exercise control through their 80% voting interest.
Metro's assets are also reflected at their historical carrying value since
its assets, except for $700,000 cash and an insignificant oil property, were
transferred to a wholly-owned subsidiary (the "Subsidiary") where they are
being operated autonomously by the current management of Metro pursuant to
the terms of an Operating Agreement. The Option Properties will be recorded
based on the cash and the fair value of securities and other consideration
which was issued upon exercise of the options.
As a result of the Operating Agreement discussed in the preceding paragraph,
there is a lack of control over the operations of the Subsidiary.
Accordingly, the accompanying pro forma financial statements present the
combined results of AROC and the Subsidiary, as well as the separate results
of the Subsidiary and the results of AROC utilizing the equity method of
accounting for the Subsidiary.
The accompanying pro forma combined statement of operations combines the
statements of operations of Metro and KTOC for the years ended March 31, 1995
and December 31, 1994, respectively. The combined interim statement of
operations combines the statements of operations of Metro and KTOC for the
nine months ended September 30, 1995.
The pro forma combined statements of operations are presented as if the
acquisitions had occurred at the beginning of the periods presented. The pro
forma combined balance sheet is presented as if the acquisitions had occurred
as of September 30, 1995.
These statements are not necessarily indicative of future operations or the
actual results that would have occurred had the transactions been consummated
at the beginning of the periods indicated. The pro forma combined financial
statements should be read in conjunction with the historical financial
statements and notes thereto of Metro and the KTOC Contributed Properties and
the historical summaries for the Option Properties, included elsewhere in
this document.
F-11
<PAGE>
AMERICAN RIVERS OIL COMPANY
(FORMERLY METRO CAPITAL CORPORATION)
PRO FORMA BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ---------------------------------------
---------------------- PRO FORMA EQUITY
METRO KTOC ADJUSTMENTS COMBINED SUBSIDIARY METHOD
---------- -------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Current Assets $2,052,611 $ 74,400 $(641,000)(a) $ 1,411,611 $1,352,611 $ 59,000
(74,400)(i)
Oil and Gas Properties 1,286,941 474,300 641,000 (a) 4,480,887 1,067,051 3,413,836
612,946 (b)
675,000 (c)
150,000 (d)
50,000 (e)
77,200 (f)
513,500 (g)
Accumulated depreciation,
depletion and amortization (695,944) (98,700) - (794,644) (633,555) (161,089)
---------- -------- --------- ----------- ---------- -----------
Net oil and gas properties 590,997 375,600 2,719,646 3,686,243 433,496 3,252,747
Investment in Subsidiary - - - - - 1,780,954
Other assets, net 828,531 - - 828,531 828,531 -
---------- -------- --------- ----------- ---------- -----------
TOTAL ASSETS $3,472,139 $450,000 $2,004,246 $ 5,926,385 $2,614,638 $ 5,092,701
---------- -------- --------- ----------- ---------- -----------
---------- -------- --------- ----------- ---------- -----------
Current Liabilities $150,413 $130,100 ($82,100)(i) $ 198,413 $ 150,413 $ 48,000
Deferred Income Taxes - - 513,500 (g) 513,500 - 513,500
Long-Term Debt - 111,000 77,200 (f) 188,200 - 188,200
Stockholders' Equity:
Preferred Stock - - - - - -
Common Stock and Additional
Paid-in Capital 3,057,718 - 675,000 (c) 4,032,718 1,780,954 4,032,718
150,000 (d)
150,000 (e)
Class B Common Stock and
Additional Paid-in Capital - - 612,946 (b) 829,546 - 829,546
216,600 (i)
Unrealized Holding Gain 683,271 - - 683,271 683,271 -
Retained Earnings 1,316,799 - (100,000)(e) 1,216,799 - 1,216,799
Treasury Stock (1,736,062) - (1,736,062) - (1,736,062)
Net Assets - 208,900 (216,600)(h) - - -
7,700 (i)
---------- -------- --------- ----------- ---------- -----------
TOTAL LIABILITIES AND EQUITY $3,472,139 $450,000 $2,004,246 $ 5,926,385 $2,614,638 $ 5,092,701
---------- -------- --------- ----------- ---------- -----------
---------- -------- --------- ----------- ---------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA FINANCIAL STATEMENTS.
F-12
<PAGE>
AMERICAN RIVERS OIL COMPANY
(FORMERLY METRO CAPITAL CORPORATION)
PRO FORMA STATEMENTS OF OPERATIONS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL --------------------------------------
--------------------- PRO FORMA EQUITY
METRO KTOC ADJUSTMENTS COMBINED SUBSIDIARY METHOD
--------- -------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Oil and gas sales $ 74,452 $179,100 $ - $ 253,552 $ 44,377 $ 209,175
Well Overhead fees 2,966 3,800 6,766 - 6,766
--------- -------- -------- ---------- --------- ---------
Total revenue 77,418 182,900 - 260,318 44,377 215,941
--------- -------- -------- ---------- --------- ---------
Costs and expenses:
Oil and gas production costs 46,888 118,600 - 165,488 8,733 156,755
General and administrative 393,952 - 230,700 (j) 624,652 384,758 239,894
Depreciation, depletion and
amortization 117,403 26,100 92,800 (k) 236,303 114,071 122,232
--------- -------- -------- ---------- --------- ---------
Total costs and expenses 558,243 144,700 323,500 1,026,443 507,562 518,881
--------- -------- -------- ---------- --------- ---------
Income (loss) from operations (480,825) 38,200 (323,500) (766,125) (463,185) (302,940)
Other credits (charges):
Other income, net 130,454 - - 130,454 129,082 1,372
Equity in partnership losses (40,591) - - (40,591) (40,591) -
Equity in Subsidiay's losses - - - - - (236,094)
Interest expense - (15,100) (6,400)(l) (21,500) - (21,500)
--------- -------- -------- ---------- --------- ---------
Income (loss) before
income tax benefit (390,962) 23,100 (329,900) (697,762) (374,694) (559,162)
Income tax benefit - - 259,500 (m) 259,500 138,600 120,900
--------- -------- -------- ---------- --------- ---------
Net income (loss) $(390,962) $ 23,100 $ (70,400) $ (438,262) $(236,094) $(438,262)
--------- -------- -------- ---------- --------- ---------
--------- -------- -------- ---------- --------- ---------
Net Loss Per Common Share
Common stock $ (.24) $ (.12)
--------- ----------
--------- ----------
Class B common stock $ (.02)
----------
----------
Average Number of Shares Outstanding
Common stock 1,599,455 2,249,455
--------- ----------
--------- ----------
Class B common stock 7,267,820
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA FINANCIAL STATEMENTS.
F-13
<PAGE>
AMERICAN RIVERS OIL COMPANY
(FORMERLY METRO CAPITAL CORPORATION)
PRO FORMA STATEMENTS OF OPERATIONS (UNAUDITED)
YEAR ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL -------------------------------------
------------------------- PRO FORMA EQUITY
METRO KTOC ADJUSTMENTS COMBINED SUBSIDIARY METHOD
----------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Oil and gas sales $ 115,988 $ 337,100 $ - $ 453,088 $ 68,176 $ 384,912
Well Overhead fees 4,941 2,500 - 7,441 - 7,441
----------- ---------- ---------- ---------- ---------- ----------
Total revenue 120,929 339,600 - 460,529 68,176 392,353
----------- ---------- ---------- ---------- ---------- ----------
Costs and expenses:
Oil and gas production costs 73,369 197,300 - 270,669 9,549 261,120
General and administrative 488,254 - 307,600 (j) 795,854 475,163 320,691
Depreciation, depletion and
amortization 164,041 32,200 98,574 (k) 294,815 159,181 135,634
Abandoned leases 13,576 - - 13,576 8,891 4,685
----------- ---------- ---------- ---------- ---------- ----------
Total costs and expenses 739,240 229,500 406,174 1,374,914 652,784 722,130
----------- ---------- ---------- ---------- ---------- ----------
Income (loss) from operations (618,311) 110,100 (406,174) (914,385) (584,608) (329,777)
Other credits (charges):
Other income, net 102,640 - - 102,640 102,496 144
Equity in partnership losses (41,282) - - (41,282) (41,282) -
Equity in Subsidiary's losses - - - - - (329,694)
Interest expense - (19,700) (8,500)(l) (28,200) - (28,200)
Gain on drilling arrangements - 138,200 - 138,200 - 138,200
----------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income
tax benefit (556,953) 228,600 (414,674) (743,027) (523,394) (549,327)
Income tax benefit - - 274,900 (m) 274,900 193,700 81,200
----------- ---------- ---------- ---------- ---------- ----------
Net income (loss) $ (556,953) $ 228,600 $ (139,774) $ (468,127) $ (329,694) $ (468,127)
----------- ---------- ---------- ---------- ---------- ----------
----------- ---------- ---------- ---------- ---------- ----------
NET LOSS PER COMMON SHARE
Common stock ($.35) $(.16)
----------- ----------
----------- ----------
Class B common stock $(.01)
----------
----------
AVERAGE NUMBER OF SHARES OUTSTANDING
Common stock 1,599,455 2,249,455
----------- ----------
----------- ----------
Class B common stock 7,267,820
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA FINANCIAL STATEMENTS.
F-14
<PAGE>
AMERICAN RIVERS OIL COMPANY
(FORMERLY METRO CAPITAL CORPORATION)
NOTES TO PRO FORMA FINANCIAL STATEMENTS
PRO FORMA ADJUSTMENTS:
(a) Entry to record cash payment for purchase of the Option Properties.
(b) Entry to record the issuance of 612,946 shares of Class B common stock
valued at $1.00 per share for purchase of the Option Properties.
(c) Entry to record the issuance of 450,000 shares of common stock valued at
$1.50 per share for purchase of the Option Properties.
(d) Entry to record the issuance of 100,000 shares of common stock valued at
$1.50 per share for commission relating to the purchase of the Option
Properties.
(e) Entry to record the issuance of 100,000 shares of common stock valued at
$1.50 per share for legal services, of which $50,000 was recorded as
property acquisition costs.
(f) Entry to record $130,000 production payment at net present value relating
to purchase of the Option Properties.
(g) Entry to record deferred income taxes relating to temporary differences
between the tax basis and financial reporting basis of the oil and gas
properties.
(h) Entry to record the issuance of 6,654,874 shares of Class B common stock
for certain oil and gas properties exchanged by KTOC.
(i) Entry to eliminate receivables and payables of KTOC which are not included
in the acquisition.
(j) Entry to increase general and administrative expenses for additional salary
costs as provided for in the Asset Purchase Agreement and anticipated
increases in other administrative expenses.
(k) Entry to record additional depreciation, depletion and amortization to give
effect to the increased carrying value of the oil and gas properties.
(l) Entry to record imputed interest on the production payments.
(m) Entry to record deferred tax benefit resulting from operating losses.
(n) The computation of net loss per share is based on the rights of each class
of common stock. The Class B common stock has all of the rights of the
common stock except that: (i) the Class B common stock is not entitled to
participate in any distribution of shares or assets of the wholly-owned
subsidiary into which certain assets were transferred from Metro prior to
the closing date and (ii) each share of Class B common stock will be
entitled to 1.6 votes on all issues presented for vote by the shareholders.
Accordingly, the common shares were allocated 100% of the subsidiary's loss
and a pro rata percentage of the remaining combined loss based on the ratio
of common shares outstanding to total common and Class B shares
outstanding. The Class B common shares were allocated the remaining pro
rata percentage of the loss.
F-15
<PAGE>
KARLTON TERRY OIL AND GAS INTERESTS
PRO FORMA COMBINED OIL AND GAS DISCLOSURES (UNAUDITED)
The accompanying reserve information relates to the oil and gas properties
which are currently owned by KTOC, as well as the properties for which KTOC
has an option to acquire additional interests.
OIL AND GAS RESERVE QUANTITIES - Proved oil and gas reserves are the
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 oil and gas reserves
are those reserves expected to be recovered through existing wells with
existing equipment and operating methods. However, reserve information
should not be construed as the current market value of the oil and gas
reserves or the costs that would be incurred to obtain equivalent reserves.
Reserve calculations involve the estimation of future net recoverable
reserves of oil and gas and the timing and amount of future net revenues to
be received therefrom. These estimates are based on numerous factors, many
of which are variable and uncertain. Accordingly, it is common for the
actual production and revenues to vary from earlier estimates.
The reserve data is based on studies which were prepared by one of the
working interest owners of the properties and reviewed by an independent
petroleum engineer. Reserve estimates require substantial judgment on the
part of petroleum engineers resulting in imprecise determinations,
particularly with respect to new discoveries. Since all of the producing
wells were drilled within the past few years, it is expected that the
estimates of reserves will change as future production and development
information becomes available. Additionally, due to short production
histories for certain properties, it was necessary to prepare a portion of
the reserve estimates using volumetric methods which are generally less
precise than performance based estimates. A portion of the proved
developed reserves are currently non-producing as certain wells require
recompletions in additional productive zones and the purchase of a salt
water disposal well.
All proved reserves of oil and gas are located in the United States. The
following tables present estimates of the net proved oil and gas reserves,
and changes therein for the years indicated.
CHANGES IN NET QUANTITIES OF PROVED RESERVES
<TABLE>
<CAPTION>
1994 1993
--------------------- -----------------
OIL GAS OIL GAS
(BBLS) (MCF) (BBLS) (MCF)
--------- --------- ------- -------
<S> <C> <C> <C> <C>
Proved reserves, beginning of year 98,000 828,000 - -
Extensions, discoveries, and 1,109,000 1,600,000 - -
other additions
Purchase of minerals in place - - 115,000 898,000
Production (15,000) (60,000) (17,000) (70,000)
--------- --------- ------- -------
Proved reserves, end of year 1,192,000 2,368,000 98,000 828,000
--------- --------- ------- -------
--------- --------- ------- -------
Proved developed reserves, end of year 207,000 1,057,000 98,000 828,000
--------- --------- ------- -------
--------- --------- ------- -------
</TABLE>
F-16
<PAGE>
KARLTON TERRY OIL AND GAS INTERESTS
PRO FORMA COMBINED OIL AND GAS DISCLOSURES (UNAUDITED)
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS - Statement of
Financial Accounting Standards No. 69 prescribes guidelines for computing a
standardized measure of future net cash flows and changes therein relating to
estimated proved reserves. These guidelines are briefly discussed below.
Future cash inflows and future production and development costs are
determined by applying year-end prices and costs to the estimated quantities
of oil and gas to be produced. Estimated future income taxes are computed
using current statutory income tax rates including consideration for
estimated future statutory depletion and tax credits. The resulting future
net cash flows are reduced to present value amounts by applying a 10% annual
discount factor.
The assumptions used to compute the standardized measure are those prescribed
by the Financial Accounting Standards Board and, as such, do not necessarily
reflect KTOC's expectations for actual revenues to be derived from those
reserves nor their present worth. The limitations inherent in the reserve
quantity estimation process, as discussed previously, are equally applicable
to the standardized measure computations since these estimates are the basis
for the valuation process.
The following summary sets forth KTOC's (including reserves for which KTOC
has options to acquire additional interests) future net cash flows relating
to proved oil and gas reserves as of December 31, 1994 based on the
standardized measure prescribed in Statement of Financial Accounting
Standards No. 69.
<TABLE>
<S> <C>
Future cash inflows $23,561,000
Future production costs (6,480,000)
Future development costs (1,382,000)
Future income tax expense (5,200,000)
-----------
Future net cash flows 10,499,000
10% annual discount for estimated timing of cash flow (5,207,000)
-----------
Standardized Measure of Discounted
Future Net Cash Flows $ 5,292,000
-----------
-----------
</TABLE>
Changes in the Standardized Measure are not presented since KTOC did not have
reserve estimates prepared in the prior year.
F-17
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of this 19th day of October, 1995, by and
among METRO CAPITAL CORPORATION, a Wyoming corporation (the "Purchaser"), and
KARLTON TERRY OIL COMPANY, a Colorado corporation ("KTOC"), KARLTON TERRY and
JUBAL TERRY (the "Shareholders.") (KTOC and the Shareholders are referred to
herein collectively as the "Sellers").
WHEREAS, the Sellers are willing to sell, and the Purchaser is willing
to purchase, certain of the assets, and assume certain of the liabilities, of
the Sellers on the terms and conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the
parties hereto covenant and agree as follows:
ARTICLE 1
PURCHASE AND SALE OF THE ASSETS
1.1 PURCHASE AND SALE OF THE ASSETS. At the Closing (as hereinafter
defined), subject to the terms and conditions stated herein, the Sellers
agree to sell, assign, convey and transfer to the Purchaser, and the
Purchaser agrees to purchase from the Sellers, the following described
interests (the "Assets"):
(a) The undivided interests described in Exhibit A hereto in and
to the entire estates created by the leases, licenses, permits and other
agreements described in Exhibit A (the "Leases"), insofar as the Leases cover
and relate to the land described in Exhibit A (the "Land"), together with
identical undivided interests in and to all the property and rights incident
thereto, including all rights in, to and under all agreements, product
purchase and sale contracts, leases, permits, rights-of-way, easements,
licenses, farmouts, options and orders in any way relating thereto;
(b) Identical undivided interests in and to all of the personal
property, fixtures and improvements now or as of the Effective Time (as
defined in Section 1.2 below) on the Land, appurtenant thereto or used or
obtained in connection therewith or with the production, treatment, sale or
disposal of hydrocarbons or water produced therefrom or attributable thereto
and all other appurtenances there unto belonging;
(c) All files, books, records and engineering and geological data
related to the foregoing; and
(d) Those options (the "Asset Options") described in Exhibit A to
acquire interests in the Leases and Land.
<PAGE>
1.2 EFFECTIVE TIME. The purchase and sale of the Assets shall be
effective for all purposes as of November 1, 1995 at 7:00 A.M., local time
(the "Effective Time"), said time to be determined for each locality
described in Exhibit A in accordance with the time generally observed in said
locality.
1.3 PURCHASE PRICE; ALLOCATION COVENANTS. In full consideration for
the purchase of the Assets, the Purchaser will issue to the Sellers, in the
respective percentages to be specified by Sellers to Purchaser prior to
Closing, 7,717,820 shares of restricted Class B Common Stock of the Purchaser
(the "Class B Common Stock"), having the attributes set forth in Section 1.5,
which when issued will be validly issued, fully paid and nonassessable shares
of Class B Common Stock. At Closing, such 7,717,820 shares of Class B Common
Stock shall represent 80% of the issued and outstanding securities of the
Purchaser after giving effect to the issuances of certain of the securities
described on Schedule 10.19. The Purchaser and the Sellers each covenants
with the other that it will promptly give written notice to the other of any
inquiry or challenge of such allocation by any federal, state or local tax
authority. It is the intention of the parties, and a condition precedent to
the obligation of the Sellers to complete the transaction contemplated
hereby, that such transaction qualify as a nontaxable event pursuant to
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code").
1.4 PURCHASER SUBSIDIARY. Prior to the Closing, the Purchaser will
transfer (and Sellers agree to such transfer) to Bishop Cable Communications
Corporation, its wholly-owned Wyoming subsidiary (the "Subsidiary") all of
its assets (the "Purchaser Excluded Assets") except for (i) the amount of
cash and marketable securities in excess of $1.2 million, which amount in any
event shall be at least $700,000; and, (ii) its working interest in, and its
operating agreement with respect to, the property known as Twenty Mile Hill,
which is held by Metro Minerals Corporation, a wholly-owned subsidiary of
Purchaser (a copy of the legal description of which is hereto attached as
Exhibit B). All economic credit for any net operating loss of the Purchaser
calculated as of September 30, 1995, shall be given to the Subsidiary, and
the Subsidiary shall have no obligation whatsoever for payment of any
consolidated tax liability until such time as the separate taxable income of
the Subsidiary exceeds the aforementioned net operating loss, which as of
June 30, 1995, was approximately $830,000. In the event Closing occurs after
November 30, 1995, then the net operating loss shall be calculated as of the
end of the calendar month preceding the month in which Closing occurs. After
the Closing, the Subsidiary shall loan the Purchaser, upon its request,
amounts up to $18,000 as are necessary to pay debt service on that portion of
the Assets known as the Lake Hatch properties, which loans shall be made for
a period of up to 90 days on a fully secured basis with simple interest at
the annual rate of 10% and pursuant to other commercially reasonable terms
and conditions to be agreed upon by the parties. Such loan shall be repaid as
the first priority out of proceeds of a private placement of Purchaser's
securities but in any event shall be repaid within 90 days after the making
of such loan.
The Common Stock of the Subsidiary shall be distributed to the holders
of the Purchaser's Common Stock as soon as practicable and, if so qualified,
on a non-taxable basis. In any event, and regardless of tax consequences,
the parties intend, and Purchaser shall cause, such distribution to occur not
later than 36 months from the Closing. The Subsidiary shall be operated
autonomously
2
<PAGE>
by the current management of the Purchaser, but in no event for more than
five years, pursuant to the terms of an operating agreement (the "Operating
Agreement") and management agreement (the "Management Agreement") to be
entered into with the Purchaser and its management. Copies of the Operating
Agreement and the Management Agreement are attached hereto as Exhibits C and
D, respectively. Such compensation shall be self funded by the Subsidiary
and not the Purchaser. The Operating Agreement and the Management Agreement
shall be ratified by the Purchaser immediately after the Closing Date. The
Subsidiary shall assume, and shall indemnify and hold harmless Sellers and
Purchaser from, any and all liabilities, costs, claims and assessments
related to the Purchaser Excluded Assets.
1.5 CLASS B COMMON STOCK. The Class B Common Stock shall have all of
the rights of the currently issued and outstanding shares of the Purchaser's
Common Stock, except that (i) the Class B Common Stock shall not be entitled
to participate in any distribution of shares or assets of the Subsidiary and
(ii) each share of Class B Common Stock shall be entitled to 1.6 votes on all
issues presented for vote by the shareholders. The rights and restrictions of
the Class B Common Stock shall be set forth in the materials submitted to the
shareholders of Purchaser pursuant to Section 5.4, which materials must be
acceptable to Sellers, in their reasonable discretion. The Class B Common
Stock shall be fully convertible on a one-for-one share basis into the
Purchaser's Common Stock commencing 36 months from the Closing Date.
Commencing 30 months from the Closing Date, the Class B Common Stock shall be
convertible on a one to one share basis, provided that the number of shares
so converted until the date 36 months after the Closing Date shall be limited
to that number of shares of Common Stock of the Purchaser that may be sold by
an affiliate pursuant to the volume limitation provisions of Rule 144
promulgated under the Securities Act of 1933, as amended. Up to 500,000
shares of Class B Common Stock may be converted into the Purchaser's Common
Stock to the extent used by the Sellers to exercise the Asset Options. Such
shares of the Purchaser's Class B Common Stock will be subject to demand
registration rights commencing six months from the date of conversion, which
registration rights will include one demand registration right and other
terms and conditions as are agreed to by the parties.
1.6 PERFORMANCE PROVISION. Prior to Closing, Purchaser shall grant an
option (the "Option") in a form mutually acceptable to the parties to issue
800,000 shares of the Purchaser's Common Stock (the "Option Shares"), the
terms of which shall be as follows:
(i) Exercisability- The Option shall become exercisable commencing
36 months from the Closing in the event that one of the following events has
not occurred by such time: (a) realization of a minimum of $16.5 Million of
Proved and Probable Reserves; or, (b) the average bid price for the
Purchaser's Common Stock shall have been at least $4.00 for two periods of
twenty consecutive trading days; or (c) cash flow (gross revenues from oil
and gas production less expenses directly charged against such production)
for the Purchaser shall have been greater than $2,000,000 for any fiscal year.
(ii) Optionees- The Options shall be distributed PRO RATA to the
then current holders of the Purchaser's Common Stock.
(iii) Term- The Option shall be exercisable for a period of 120 days.
3
<PAGE>
(iv) Exercise Price- The Option shall be exercisable at a per share
price of $0.10.
(v) Registration Rights- All shares issued upon exercise of the
Option shall be registered with the SEC as soon as is practicable, but in no
event later than nine months after the end of the Option Term.
1.7 CLOSING OF THE PURCHASE. The closing of the purchase and sale
provided for herein (the "Closing") shall take place at the offices of
Brenman Key & Bromberg, P.C., 1775 Sherman Street, Suite 1001, Denver
Colorado, or at such other location as the parties may agree, on or before
November 17, 1995, or as soon as practicable thereafter in the event
additional time is necessary to comply with applicable requirements of the
SEC with respect to the Proxy Materials to be issued by the Purchaser as
provided under Section 5.4 hereof, which date may be extended by ten days by
the mutual agreement of the parties (the "Closing Date"). In no event shall
the Closing Date be later than January 1, 1996, provided that the party
responsible for any delay after November 17 shall reimburse the other party
for all reasonable out of pocket expenses incurred by the other party.
ARTICLE 2
REPRESENTATIONS OF THE SELLERS
As an inducement to the Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, and with the knowledge that
the Purchaser will rely thereon, the Sellers represent and warrant to the
Purchaser as follows, which representations shall be true, both as of the
date hereof and as of the Closing Date.
2.1 DUE INCORPORATION AND QUALIFICATION. KTOC is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Colorado, and has the corporate power and lawful authority to carry on its
business as now being conducted. KTOC is duly qualified or otherwise
authorized as a foreign corporation to transact business in every
jurisdiction in which: (a) the nature of the business conducted or the
character or location of the properties owned by it makes such
qualification necessary; and (b) failure to so qualify might impair title to
properties or the right to enforce contracts against others, result in
exposure to liability in such jurisdictions or have an adverse effect on the
assets or business of KTOC.
2.2 STOCK OWNERSHIP. The Shareholders own all of the issued capital
stock of KTOC. There are no outstanding rights to acquire any of the capital
stock of KTOC either from KTOC or the Shareholders.
2.3 TITLE TO ASSETS. Except for Permitted Encumbrances (as defined in
Schedule 2.3) and those other matters listed in SCHEDULE 2.3, the Sellers
have good and defensible title to the Assets subject to no encumbrance, lien,
charge, option, right of first refusal, or other restriction of any kind or
character.
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2.4 AUTHORITY AND CONSENTS. KTOC and Shareholders each have full power
and authority to execute and deliver this Agreement and the other agreements
required to be executed and delivered hereunder (this Agreement and such
other agreements being hereinafter referred to as the "Closing Documents")
and to carry out the transactions contemplated hereby and KTOC has taken all
requisite corporate action to authorize the execution, delivery and
performance of the Closing Documents. The Sellers are not subject to, or a
party to, any charter, bylaw, mortgage, lien, lease, license, permit,
agreement, contract, instrument, law, rule, ordinance, regulation, order,
judgment or decree, or any other restriction of any kind or character that is
not typical of similarly situated oil and gas entities and that materially,
adversely affect the business, operation or condition of any Seller or the
Assets or would prevent consummation of the transactions contemplated by this
Agreement. The Closing Documents are valid and binding agreements of the
Sellers enforceable in accordance with the terms thereof. No consent,
authorization or approval of, or declaration, filing or registration with,
any governmental or regulatory authority or any consent, authorization or
approval of any other third party is required to enable KTOC or the
Shareholders to enter into and perform their respective obligations under the
Closing Documents, and neither the execution and delivery of the Closing
Documents nor the consummation of the transactions contemplated thereby will:
(a) Be in violation of the Certificate of Incorporation or Bylaws
of KTOC or constitute a breach of any evidence of indebtedness or
agreement to which KTOC or the Shareholders is a party;
(b) Cause a default under any mortgage or deed of trust or other
lien, charge or encumbrance to which any of the Assets are subject or
under any material contract to which any of the Sellers is a party, or
permit the termination of any such contract by another person;
(c) Result in the creation or imposition of any security interest,
lien, charge or other encumbrance upon the Assets under any agreement or
commitment to which any of the Sellers is bound;
(d) Accelerate, or constitute an event entitling, or which would,
upon notice or lapse of time or both, entitle the holder of any
indebtedness to accelerate the maturity of any such indebtedness;
(e) Conflict with or result in the breach of any writ, injunction
or decree of any court or governmental instrumentality;
(f) Violate any statute, law or regulation of any jurisdiction
as such statute, law or regulation relates to the Assets; or
(g) Violate or cause any revocation of or limitation on any Permit
(as hereinafter defined in Section 2.9).
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2.5 FINANCIAL STATEMENTS. Audited statement of assets and liabilities
of KTOC Contributed Properties as at December 31, 1994 and audited statement
of direct revenues and expenses for the two years then ended (hereinafter,
the "KTOC Audited Financial Statements") and an unaudited statement of assets
and liabilities of KTOC Contributed Properties as at June 30, 1995 and
unaudited statements of direct revenues and expenses for the six months ended
June 30, 1995 and 1994 (hereinafter, the "KTOC Unaudited Financial
Statements") will be provided to Purchaser within 10 days after the date
hereof. The KTOC Audited and KTOC Unaudited Financial Statements are
referred to hereinafter collectively as the KTOC Financial Statements. The
KTOC Financial Statements will be complete and accurate in all material
respects. The KTOC Audited Financial Statements, including the footnotes
thereto, will be prepared in accordance with generally accepted accounting
principles ("GAAP") and will present fairly the assets and liabilities of
KTOC Contributed Properties as of the dates thereof and their direct revenues
and expenses for the periods indicated. The KTOC Audited Financial Statements
shall have been (i) audited by KTOC's independent certified public
accountants in accordance with generally accepted auditing standards and
(ii) based upon information prepared in accordance with customary industry
standards and practices.
2.6 TAX MATTERS. The Sellers have paid all federal, state, county,
local, foreign and other taxes, including, without limitation, income
taxes, estimated taxes, excise taxes, sales taxes, use taxes, gross receipts
taxes, franchise taxes, employment and payroll related taxes, property taxes
and import duties, whether or not measured in whole or in part by net income
(individually, a "Tax" and collectively, the "Taxes") required to be paid by
them through the date hereof, and all deficiencies or other additions to any
Tax, interest and penalties owed by them in connection with any Tax.
2.7 NO TAX LIENS. None of the Assets is subject to any lien pursuant to
Section 6321 of the Code for nonpayment of federal taxes, or any lien in
favor of any state under any comparable provision of state law, under which
transferee liability might be imposed upon the Purchaser under Section 6323
of the Code or any comparable provision of state or local law.
2.8 COMPLIANCE WITH LAWS; PERMITS. The Sellers are not in violation of
any applicable order, judgment, injunction, award or decree relating to their
businesses. To the Sellers' knowledge, the Sellers are not in violation of
any federal, state, local or foreign law, ordinance or regulation or any
other requirement of any governmental or regulatory body, court or arbitrator
applicable to the Assets, the violation of which would have a material,
adverse effect on the Assets. The Sellers hold all licenses, permits, orders
and approvals of any federal, state or local governmental or regulatory
bodies (collectively, "Permits") that are material to or necessary for the
conduct of their businesses as now conducted. All Permits are in full force
and effect and no proceeding to revoke or limit any of such Permits is
pending or, to the knowledge of the Sellers, threatened.
2.9 LITIGATION. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, governmental or regulatory
body or arbitration tribunal against or involving the Assets. Except as set
forth in SCHEDULE 2.9, there are no actions or suits against the Sellers or,
to the knowledge of the Sellers, claims or investigations (whether or not the
defense thereof or liabilities in respect thereof are covered by insurance)
pending or, to the knowledge of the Sellers,
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threatened against or involving the Assets. Responsibility for any
litigation involving the Assets pending prior to the Closing, including
without limitation, the matters set forth on SCHEDULE 2.9 and the
satisfaction of judgments (including related costs and fees) shall remain
with the Sellers.
2.10 CONTRACTS AND OTHER AGREEMENTS. With respect to each material
contract under which any of the Sellers are obligated, neither the Sellers
nor any other party to each such contract is in default nor has any default
been asserted by any party, and there has not occurred any event which, with
the passage of time or giving of notice, or both, would constitute such
default or permit termination, modification or acceleration of such contract.
2.11 LEASES. With respect to each Lease, neither the Sellers nor any
other party to each such Lease is in default nor has any default been
asserted by any party, and there has not occurred any event which, with the
passage of time or giving of notice, or both, would constitute such default
or permit termination, modification or acceleration of the Lease.
2.12 LIABILITIES. Except as otherwise set forth in this Agreement or
any Schedule hereto, the Sellers have no direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility,
known or unknown, asserted or unasserted, fixed or unfixed, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or
otherwise which has of could have a material adverse effect on the Assets.
2.13 RELATIONSHIPS. No officer or director of KTOC possesses, directly
or indirectly, any financial interest in, or is a director, officer,
stockholder or employee of, any corporation, firm, association or business
organization that is a manufacturer for, or client, supplier, customer,
lessor, lessee, or competitor or potential competitor of, KTOC.
2.14 DISCLOSURE. Neither this Agreement nor any Schedule, Exhibit or
certificate delivered in accordance with the terms hereof or any document,
report or statement in writing that has been supplied by or on behalf of the
Sellers or by any of KTOC's directors or officers in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact, or omits any statement of a material fact necessary in order to make
the statements contained herein or therein not misleading. There is no fact
or circumstance known to the Sellers that materially and adversely affects or
that may materially and adversely affect the Assets, which has not been set
forth in this Agreement, the Schedules, Exhibits, certificates or
statements furnished in writing to the Purchaser in connection with the
transactions contemplated by this Agreement.
2.15 BROKER'S OR FINDER'S FEES. Except as provided on Schedule 2.15
attached hereto, no agent, broker, person or firm acting on behalf of any of
the Sellers is, or will be, entitled to any commission or broker's or
finder's fees from any of the parties hereto, or from any person controlling,
controlled by or under common control with any of the parties hereto, in
connection with any of the transactions contemplated herein.
2.16 INSURANCE. The Sellers maintain those insurance policies set
forth on Schedule 2.16.
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ARTICLE 3
REPRESENTATIONS OF THE PURCHASER
As an inducement to the Sellers to enter into this Agreement and to
consummate the transactions contemplated hereby, and with the knowledge that
the Sellers will rely thereon, the Purchaser represents and warrants to the
Sellers the following (both as of the date hereof and as of the Closing Date):
3.1 DUE INCORPORATION AND QUALIFICATION. The Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Wyoming, and has the corporate power and lawful
authority to carry on its business as now being conducted.
3.2 CERTIFICATE OF INCORPORATION, BYLAWS AND MINUTES; CAPITAL
STRUCTURE. The Purchaser has heretofore delivered to the Sellers true and
complete copies of its and each of its Subsidiaries' Certificate of
Incorporation (certified by the Secretary of State of Wyoming) and their
Bylaws (certified by their corporate secretary) as in effect on the date
hereof. As of the date hereof, the authorized capital stock of Purchaser
consists of 6,000,000 shares of common stock and 3,000,000 shares of
preferred stock, of which 1,649,455 shares of common stock and no shares of
preferred stock are validly issued and outstanding, and are fully paid and
nonassessable. As of the date hereof and immediately after the Closing,
except as set forth on Schedule 10.19, (A) Purchaser is not and will not be a
party to or be bound by any contract, agreement or arrangement to issue or
sell any capital stock or any other security convertible into any capital
stock or other security of Purchaser (other than pursuant to this Agreement)
(B) there will not be any outstanding preemptive rights, rights of first
refusal, options, warrants or other rights to subscribe for or purchase or
contracts, agreements, or arrangements with respect to any capital stock or
other security of Purchaser authorized or not or any other security
convertible into any capital stock or any other security authorized or not of
Purchaser, and (C) Purchaser shall have no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein, or to pay any dividend or make any other
distribution in respect thereof. All of the issued and outstanding shares of
capital stock of Purchaser have been offered, issued and sold by Purchaser in
compliance with applicable federal and state securities laws. Except for
stock issued pursuant to outstanding options, no additional shares of
Purchaser's capital stock will be issued between the date hereof and the
Closing Date without the prior written consent of Sellers.
3.3 AUTHORITY OF THE PURCHASER. The Purchaser has full power and
authority to execute and deliver this Agreement and the Closing Documents and
to carry out the transactions contemplated hereby. The Purchaser is not
subject to, or a party to, any charter, bylaw, mortgage, lien, lease,
license, permit, agreement, contract, instrument, law, rule, ordinance,
regulation, order, judgment or decree, or any other restriction of any kind
or character that is not typical of similar situated entities and that
materially, adversely affect the business, operation or condition of
Purchaser or would prevent consummation of the transactions contemplated by
this Agreement. The Closing Documents are valid and binding agreements of
the Purchaser, enforceable in accordance with their terms. No consent,
authorization or approval of, or declaration, filing or registration with, any
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governmental or regulatory authority or any consent, authorization or
approval of any other third party is necessary in order to enable the
Purchaser to enter into and perform its obligations under the Closing
Documents, and neither the execution and delivery of the Closing Documents
nor the consummation of the transactions contemplated thereby will:
(a) Be in violation of its Certificate of Incorporation or Bylaws
or constitute a breach of any evidence of indebtedness or agreement to
which it is a party;
(b) Cause a default under any mortgage or deed of trust or other
lien, charge or encumbrance to which any of its property is subject or
under any contract to which it is a party, or permit the termination of
any such contract by another person;
(c) Result in the creation or imposition of any security interest,
lien, charge or other encumbrance upon any of its property or assets under
any agreement or commitment to which it is bound;
(d) Accelerate, or constitute an event entitling, or which would,
upon notice or lapse of time or both, entitle the holder of any
indebtedness to accelerate the maturity of any such indebtedness;
(e) Conflict with or result in the breach of any writ, injunction
or decree of any court or governmental instrumentality;
(f) Violate any statute, law or regulation of any jurisdiction as
such statute, law or regulation relates to it; or
(g) Violate or cause any revocation of or limitation on any permit.
3.4 COMPLIANCE WITH LAWS. The Purchaser is not in violation of any
applicable order, judgment, injunction, award or decree.
3.5 RESTRICTIVE DOCUMENTS. The Purchaser is not subject to, or a party
to, any charter, bylaw, mortgage, lien, lease, license, permit, agreement,
contract, instrument, law, rule, ordinance, regulation, order, judgment or
decree, or any other restriction of any kind or character, which adversely
affects the business practices, operations or condition of the Purchaser or
any of its assets, or which would prevent consummation of the transactions
contemplated by this Agreement.
3.6 THE CLASS B COMMON STOCK. The Class B Common Stock to be issued to
the Sellers in accordance with Section 1.5, will be validly issued, fully
paid, non-assessable shares of Class B Common Stock.
3.7 DISCLOSURE. Neither this Agreement nor any Schedule, Exhibit or
certificate delivered in accordance with the terms hereof or any document or
statement in writing that has been supplied by or on behalf of the Purchaser
in connection with the transactions contemplated hereby, contains any
untrue statement of a material fact, or omits any statement of a material
fact necessary
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in order to make the statements contained herein or therein not misleading.
There is no fact or circumstance known to the Purchaser that materially and
adversely affects or that may materially and adversely affect the
Purchaser, which has not been set forth in this Agreement, the Schedules,
Exhibits, certificates or statements furnished in writing to the Sellers in
connection with the transactions contemplated by this Agreement.
3.8 FINANCIAL STATEMENTS. Purchaser has provided Sellers with the
audited balance sheets of Purchaser and all of its subsidiaries as at March
31, 1994 and 1995 and audited statements of operations and cash flows for the
two years then ended (hereinafter, the "Purchaser Audited Financial
Statements") and an unaudited balance sheet of Purchaser as at June 30, 1995
and unaudited statements of operations and cash flows for the three months
then ended (hereinafter, the "Purchaser Unaudited Financial Statements.") The
Purchaser Audited and Unaudited Financial Statements are referred to
hereinafter collectively as the Purchaser Financial Statements. The Purchaser
Financial Statements are complete and accurate in all material respects. The
Purchaser Audited Financial Statements, including the footnotes thereto,
have been prepared in accordance with GAAP and present fairly the financial
position of Purchaser at the dates thereof and the results of its operations
and cash flows for the periods indicated. The Purchaser Audited Financial
Statements have been audited by Purchaser's independent certified public
accountants in accordance with generally accepted auditing standards.
3.9 TAX MATTERS. The Purchaser has paid all federal, state, county,
local, foreign and other taxes, including, without limitation, income
taxes, estimated taxes, excise taxes, sales taxes, use taxes, gross receipts
taxes, franchise taxes, employment and payroll related taxes, property taxes
and import duties, whether or not measured in whole or in part by net income
(individually, a "Tax" and collectively, the "Taxes") required to be paid by
it through the date hereof, and all deficiencies or other additions to any
Tax, interest and penalties owed by them in connection with any Tax.
3.10 NO TAX LIENS. None of the assets of Purchaser is subject to any
lien in favor of the United States pursuant to Section 6321 of the Code for
nonpayment of federal taxes, or any lien in favor of any state under any
comparable provision of state law, under which transferee liability might be
imposed upon the Purchaser under Section 6323 of the Code or any comparable
provision of state or local law.
3.11 COMPLIANCE WITH LAWS; PERMITS. The Purchaser is not in violation
of any applicable order, judgment, injunction, award or decree relating to
its businesses. To the Purchaser's knowledge, the Purchasers are not in
violation of any federal, state, local or foreign law, ordinance or
regulation or any other requirement of any governmental or regulatory body,
court or arbitrator applicable to its assets, the violation of which would
have a material, adverse effect on such assets. The Purchaser holds all
permits that are material to or necessary for the conduct of its businesses
as now conducted. All Permits are in full force and effect and no proceeding
to revoke or limit any of such Permits is pending or, to the knowledge of the
Purchaser, threatened.
3.12 LITIGATION. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, governmental or regulatory body
or arbitration tribunal against or involving Purchaser or its assets. There
are no actions or suits against the Purchaser or, to the knowledge of
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the Purchaser, claims or investigations (whether or not the defense thereof
or liabilities in respect thereof are covered by insurance) pending or, to
the knowledge of the Purchaser, threatened against or involving its assets.
Responsibility for any litigation involving the Purchaser Excluded Assets
pending prior to the Closing and the satisfaction of judgments (including
related costs and fees) shall remain with the Purchaser.
3.13 CONTRACTS AND OTHER AGREEMENTS. With respect to each material
contract under which the Purchaser is obligated, neither the Purchaser nor
any other party to each such contract is in default nor has any default been
asserted by any party, and there has not occurred any event which, with the
passage of time or giving of notice, or both, would constitute such default
or permit termination, modification or acceleration of such contract.
3.14 LIABILITIES. Except as otherwise set forth in this Agreement or
any Schedule hereto, neither the Purchaser nor its wholly-owned subsidiary,
Metro Minerals Corporation, has any direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility,
known or unknown, asserted or unasserted, fixed or unfixed, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or
otherwise which has of could have a material adverse effect on either of such
entity's business or its assets.
3.15 BROKER'S OR FINDER'S FEES. No agent, broker, person or firm acting
on behalf of the Purchaser is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto, or from any person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated herein.
3.16 INDEPENDENT INVESTIGATION. Purchaser acknowledges that it has
conducted its independent review and analysis of the Assets and has not
relied upon Sellers or any representation of Sellers, other than as
explicitly set forth in this Agreement, concerning the amount or value of
reserves attributable to the Assets or the condition of any property included
in the Assets.
3.17 SUBSIDIARIES. There are no subsidiaries of Purchaser other than as
described in its most recent form 10-K filed with the Securities and Exchange
Commission.
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ARTICLE 4
TITLE PROCEDURES AND OTHER MATTERS
4.1 TITLE PROCEDURES. If any of the information or material supplied by
Sellers to Purchaser pursuant to this Agreement or any other information or
data reflects the existence of any encumbrance, encroachment, defect in or
objection to title, other than those set forth in the Schedules attached
hereto, that render title to the Assets or any portion thereof less than good
and defensible (collectively, "Title Defects"), written notice of the Title
Defects shall be given to Sellers at least 15 days before the scheduled
Closing Date. If Title Defects shall be so specified, Sellers shall use their
reasonable efforts to cure or remove the Title Defects at the expense of
Sellers. If the Title Defects are not cured or removed at or prior to the
Closing, Purchaser may elect in writing to:
(a) Grant a further period or periods of time (up to an additional
30 days) within which Sellers may cure or remove the Title Defects;
(b) Terminate this Agreement; or
(c) Proceed with the Closing, provided, however, that completion of
the Closing shall operate as a waiver by Purchaser of any Title Defects.
4.2 ENGINEERING AND ACCOUNTING MATTERS. Purchaser shall have 10 days
from the date on which Sellers have completed and delivered to Purchaser
Sellers' accounting and engineering audits and reports (collectively the
"Reports") in which to review the Reports and provide Sellers with notice of
any alleged deficiencies (the "Deficiencies") therein. If any Deficiencies
are so specified, Sellers shall have the option, at their expense, to remedy
such Deficiencies. If the deficiencies are not remedied to Purchaser's
reasonable satisfaction within 30 days after the date hereof, then Purchaser
may elect to terminate this Agreement by providing written notice of such
election to Sellers.
4.3 SELLERS' REVIEW OF PURCHASER'S CORPORATE RECORDS. For a period of
two weeks following the date of this Agreement, Sellers shall have the right
to review all records of Purchaser. If any of the information or material so
reviewed reflects the existence of any liability, indebtedness, claim, loss,
damage, deficiency, obligation or responsibility accrued, absolute,
contingent or otherwise which has not been previously disclosed to Sellers,
then Sellers may at their option provide Purchaser with a notice of such
matter and Purchaser shall have ten days in which to cure or remove such
matter. In the event that Purchaser is unable to cure or remove such matter,
then Sellers may elect in writing to:
(a) grant a further period or periods of time (up to an additional
30 days) within which Purchaser may cure or remove such matter;
(b) terminate this Agreement; or
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(c) proceed with the Closing, provided, however, that completion of
the Closing shall operate as a waiver by Sellers of any such matter.
ARTICLE 5
COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING
The parties hereto covenant and agree that between the date hereof and
the Closing Date:
5.1 CONDUCT OF BUSINESS. The parties shall conduct their respective
businesses in the ordinary course and in such a manner so that the
representations and warranties contained in Articles 2 and 3 shall continue
to be true and correct on and as of the Closing Date as if made on and as of
the Closing Date.
5.2 NOTICE OF EVENTS. Each party shall promptly notify the other party
of (a) any event, condition or circumstance occurring from the date hereof
through the Closing Date that would constitute a violation or breach of this
Agreement, or (b) any event, occurrence, transaction or other item which
would have been required to have been disclosed on any Schedule, Exhibit or
statement delivered hereunder, had such event, occurrence, transaction or
item existed on the date hereof, other than items arising in the ordinary
course of business which would not render any of the representations,
warranties or other agreements of the notifying party misleading.
5.3 EXAMINATIONS AND INVESTIGATIONS. Prior to the Closing Date, each
party shall be entitled, through its employees, agents, counsel, accountants
and other representatives, and such party's lenders, to make such
investigation of the assets, properties, business and operations of the other
party's businesses, and such examination of the books, records and financial
condition of the other party's businesses as the examining party wishes. If
this Agreement terminates (a) each party shall keep confidential and shall
not use in any manner any information or documents obtained from the other
party, unless readily ascertainable from public or published information, or
trade sources, or subsequently developed by the examining party, or received
from a third party not under an obligation to the other party to keep such
information confidential, and (b) any documents obtained from the other party
shall be promptly returned to it. Without limiting the foregoing, Sellers
agree to make available to Purchaser all title opinions, abstracts, status
reports and other title data relating to the Assets.
5.4 PURCHASER SHAREHOLDER MEETING. Prior to the Closing Date, the Board
of Directors of the Purchaser shall prepare proxy materials (the "Proxy
Materials") and give notice of and convene a special meeting of shareholders
(the "Special Shareholders Meeting") for the purpose of: (1) approving this
Agreement and the transactions contemplated hereby; (2) approving an
amendment to the Purchaser's Articles of Incorporation (the "Articles of
Amendment") to (a) change the Purchaser's name to American Rivers Oil
Company, Inc.; (b) increase the number of authorized shares of the
Purchaser's Common Stock and Preferred Stock and authorize shares of Class B
Common Stock in amounts and containing terms so as to allow
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the consummation of the transactions contemplated hereby; and (3) approving
an increase in the number of shares of the Purchaser's Common Stock covered
by the Purchaser's 1992 Incentive Stock Option Plan to an amount equal to
five percent of the issued and outstanding capital stock of Purchaser. All
such actions and communications shall be taken and given in compliance with
all laws, rules and regulations applicable to Purchaser.
The Sellers shall cooperate with the Purchaser in the preparation and
processing of the Proxy Materials in all reasonable respects as requested by
the Purchaser and will furnish in writing to the Purchaser the information
relating to the Sellers which is required to be set forth therein. Sellers
shall pay one-half of Purchaser's reasonable expenses in printing and mailing
the Proxy Materials. If at any time prior to the Closing, any event should
occur relating to the Sellers which is required to be set forth in an
amendment of or supplement to the Proxy Materials, such party shall promptly
inform the Purchaser and shall furnish all necessary information with respect
thereto to the Purchaser.
Purchaser agrees to recommend to its shareholders that they approve all
of the items specified above in this Section 5.4. Robert E. Thrailkill, John
A. Alsko and Robert J. Thrailkill join in this agreement for the purposes of
agreeing to support and recommend such items to Purchaser's shareholders and
agree to vote their stock in Purchaser in favor of such proposals.
5.5 STAND-STILL AGREEMENT. From and after the date hereof and up to and
including the Closing or the termination of this Agreement, the parties agree
to conduct their respective businesses in the ordinary course and agree that
during such period each shall have the exclusive right to negotiate with the
other with respect to the Assets and stock that are the subject of this
Agreement, and during such period each party agrees not to directly or
through intermediaries solicit, entertain or otherwise discuss with any
person or entity any offers to purchase or otherwise acquire any or all of
the Assets or such stock. Should any party be in violation of this provision,
that party shall be liable on an accountable basis to the other parties for
their expense, including time of their personnel, reasonably incurred in
connection with the negotiation and preparation of this Agreement, together
with reasonable attorney fees for collection.
5.6 PURCHASER'S EFFORTS TO CLOSE.
(a) Purchaser shall use its best efforts to take or cause to be
taken all such actions as may be necessary or advisable to consummate and
make effective the purchase of the Assets and the transactions contemplated
by this Agreement and to assure that as of the Closing Date it will not be
under any material corporate, legal or contractual restriction that would
prohibit or delay the timely consummation of such transactions.
(b) Purchaser shall cause all the representations and warranties
of Purchaser contained in this Agreement to be true and correct on and as of
the Closing Date. To the extent the conditions precedent to the obligations
of Sellers are within the control of Purchaser, Purchaser shall cause such
conditions to be satisfied on or prior to the Closing Date and, to the extent
the conditions precedent to the obligations of Sellers are not within the
control
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of Purchaser, Purchaser shall use its best efforts to cause such conditions
to be satisfied on or prior to the Closing Date.
5.7 SELLERS' EFFORTS TO CLOSE.
(a) Sellers shall use their best efforts to take or cause to be
taken all such actions as may be necessary or advisable to consummate and
make effective the sale of the Assets and the transactions contemplated by
this Agreement and to assure that as of the Closing Date they will not be
under any material corporate, legal or contractual restriction that would
prohibit or delay the timely consummation of such transactions.
(b) Sellers shall cause all the representations and warranties of
Sellers contained in this Agreement to be true and correct on and as of the
Closing Date. To the extent the conditions precedent to the obligations of
Purchaser are within the control of Sellers, Sellers shall cause such
conditions to be satisfied on or prior to the Closing Date and, to the extent
the conditions precedent to the obligations of Purchaser are not within the
control of Sellers, Sellers shall use their best efforts to cause such
conditions to be satisfied on or prior to the Closing Date.
ARTICLE 6
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO CLOSE
The obligation of the Purchaser to enter into and to complete the
transactions contemplated by this Agreement is subject to the fulfillment on
or prior to the Closing Date of the following conditions, any one or more of
which may be waived by the Purchaser only in writing:
6.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of the Sellers contained in
this Agreement shall be true on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date. The Sellers
shall have performed and complied with all covenants and agreements required
by this Agreement to be performed or complied with by them on or prior to the
Closing Date. The Sellers shall have delivered to the Purchaser certificates,
dated the Closing Date, to such effect.
6.2 GOVERNMENTAL PERMITS AND APPROVALS. All permits and approvals from
any governmental or regulatory body required for the lawful consummation of
the transactions which are the subject of this Agreement shall have been
obtained.
6.3 THIRD PARTY CONSENTS. All consents, permits and approvals from
parties to any contracts or other agreements with the Sellers that may be
required in connection with the performance by the Sellers of their
respective obligations under this Agreement or the continuance of such
contracts or other agreements without material modification after the Closing
Date shall have been obtained. The Purchaser also shall have received all
required waivers or consents under any
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material debt instrument or other material agreement to which any of the
Sellers is a party or by which any of them is bound.
6.4 LITIGATION. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the transactions contemplated by this Agreement
or to seek damages or a discovery order in connection with such
transactions, or that has or could reasonably be expected to have, in the
opinion of the Purchaser, a materially adverse effect on the Assets.
6.5 TRANSFER DOCUMENTS. The Purchaser shall have received assignments
and such other instruments of sale, transfer, conveyance and assignment
transferring all of the Assets from the Sellers.
6.6 CERTIFICATES, ETC. OF KTOC. KTOC shall have delivered all certified
resolutions, certificates, documents or instruments with respect to KTOC's
authority and such other matters as the Purchaser's counsel may have
reasonably requested prior to the Closing Date.
6.7 ADEQUATE FINANCIAL STATEMENTS. The Sellers shall have supplied to
the Purchaser the Financial Statements and pro forma financial statements
adequate to comply with the requirements of Items 7(a) and 7(b) of Form 8-K
under the Exchange Act and Section 10(a)(3) of the Securities Act and shall
demonstrate an ability to supply other financial statements as such may
become necessary to comply with the requirements of the Exchange Act.
6.8 PURCHASER SHAREHOLDER APPROVAL. The Purchaser's Special
Shareholders Meeting shall have been held and all matters listed in Section
5.4 shall have been approved.
6.9 APPROVAL OF COUNSEL. All actions and proceedings hereunder and
all documents and other papers to be delivered by the Sellers hereunder or in
connection with the consummation or the transactions contemplated hereby, and
all other related matters shall have been approved by counsel to Purchaser,
as to their form.
6.10 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
operation, condition, or value if the Assets shall have occurred since the
date hereof.
6.11 ASSET OPTIONS. The Asset Options shall have been duly exercised,
which exercise may be achieved as provided in Section 10.21.
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ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE SELLERS TO CLOSE
The obligation of the Sellers to enter into and to complete the
transactions contemplated by this Agreement is subject to the fulfillment on
or prior to the Closing Date of the following conditions, any one or more of
which may be waived by the Sellers only in writing:
7.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of the Purchaser contained
in this Agreement shall be true on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date. The Purchaser
shall have performed and complied with all covenants and agreements required
by this Agreement to be performed or complied with by it on or prior to the
Closing Date. The Purchaser shall have delivered to the Sellers a
certificate, dated the Closing Date, to such effect.
7.2 GOVERNMENTAL PERMITS AND APPROVALS. All permits and approvals from
any governmental or regulatory body required for the lawful consummation of
the transactions which are the subject of this Agreement shall have been
obtained.
7.3 LITIGATION. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted
or threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the transactions contemplated by this Agreement,
or to seek damages or a discovery order in connection with such transactions,
or that has or could reasonably be expected to have, in the opinion of the
Sellers, a materially adverse effect on the assets, properties, businesses,
operations or financial condition of the Purchaser.
7.4 TAX TREATMENT. Sellers shall be satisfied, in their reasonable
judgment, that the transaction contemplated hereby will qualify as a
nontaxable event pursuant to Section 351 of the Code.
7.5 OPERATING AND MANAGEMENT AGREEMENTS. The Purchaser and the
Purchaser's Subsidiary shall have entered into the Operating and Management
Agreements substantially in the forms attached as Exhibits C and D, and
Sellers hereby approve of such agreements.
7.6 PURCHASER'S SHAREHOLDER APPROVAL. The Purchaser's Special Meeting
of Shareholders shall have been held and all matters listed in Section 5.4
shall have been approved.
7.7 TRANSFER TO SUBSIDIARY. The Purchaser shall have transferred to
the Subsidiary the Purchaser Excluded Assets as provided for in Section 1.4
hereof, and Sellers hereby approve of such transfer.
7.8 CERTIFICATES, ETC. OF PURCHASER. Purchaser shall have delivered
all certified resolutions, certificates, documents or instruments with
respect to Purchaser's authority and such other matters as Seller's counsel
may have reasonably requested prior to the Closing Date.
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7.9 APPROVAL OF COUNSEL. All actions and proceedings hereunder and all
documents and other papers to be delivered by the Purchaser hereunder or in
connection with the consummation or the transactions contemplated hereby, and
all other related matters shall have been approved by counsel to Sellers, as
to their form.
7.10 NO MATERIAL ADVERSE CHANGE. There shall have occurred no material
adverse change in the operation, value or condition of Purchaser.
ARTICLE 8
ACTIONS TO BE TAKEN AT THE CLOSING
The following actions shall be taken at the Closing, each of which shall
be conditioned on completion of all the others and all of which shall be
deemed to have taken place simultaneously:
8.1 TRANSFER DOCUMENTS. The Sellers shall deliver duly executed
transfer documents and/or instruments of assignment in accordance with
Section 6.5.
8.2 THE CLASS B COMMON STOCK. The Purchaser shall deliver to the
Sellers certificates representing the Class B Common Stock in accordance with
the terms of Section 1.5. The Sellers shall deliver to the Purchaser
executed investment letters.
8.3 ITEMS RELATING TO LEGENDS. The Purchaser and Sellers shall take
those actions described in Section 10.19 relating to resignations, opinion of
counsel and instruction letter to transfer agent.
8.4 OPERATING AND MANAGEMENT AGREEMENTS. The Purchaser shall deliver
the executed Operating and Management Agreements
8.5 CLOSING CERTIFICATES OF THE SELLERS. The Sellers shall deliver to
the Purchaser closing certificates as required by Section 6.1, dated the
Closing Date, in a form satisfactory to the Purchaser.
8.6 CLOSING CERTIFICATE OF THE PURCHASER. The Purchaser shall deliver
to the Sellers a closing certificate as required by Section 7.1, dated the
Closing Date, in a form satisfactory to the Sellers.
8.7 CERTIFICATE REGARDING RESOLUTIONS OF KTOC. KTOC shall deliver to
the Purchaser copies of resolutions certified as required by Section 6.6.
8.8 CERTIFICATE REGARDING RESOLUTIONS OF PURCHASER. Purchaser shall
deliver to Sellers copies of resolutions certified as required by Section 7.8.
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8.9 OPINION OF SELLERS' COUNSEL. The Sellers shall deliver an opinion
of their counsel in form and substance satisfactory to the Purchaser.
8.10 OPINION OF PURCHASER'S COUNSEL. The Purchaser shall deliver an
opinion of its counsel in form and substance satisfactory to the Sellers.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the parties contained in this Agreement
shall survive the Closing for a period of two years after the Closing Date
with the exception of Sections 2.6 and 3.9, which shall survive for a period
of time which is equal to the statute of limitations period applicable to the
respective Tax liability being asserted.
9.2 INDEMNITY AGREEMENTS OF THE SELLERS. The Sellers shall indemnify,
defend, reimburse and hold harmless the Purchaser from and against any and
all claims, demands, penalties, fines, liabilities, obligations, losses,
settlements, damages, costs and expenses resulting from:
(i) any inaccuracy in, or breach of, any representation and
warranty or nonfulfillment of any covenant on the part of the
Sellers contained in this Agreement, or
(ii) any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of the Sellers contained in any other
agreement, certificate or other instrument furnished or to be
furnished to the Purchaser by the Sellers pursuant to this Agreement.
(iii) all costs, expenses, claims and liabilities relating to
the operation of the Assets for periods of time prior to the Closing
Date;
(iv) any of the matters set forth in SCHEDULE 2.9;
(v) the violation or alleged violation by the Sellers of any
Environmental Laws (as hereinafter defined), or any orders,
requirements or demands of any governmental authorities related
thereto, resulting from events or circumstances occurring on or
before the Closing Date; and
(vi) fees and disbursement of counsel incident to any of the
foregoing.
For purposes of this Agreement, "Environmental Laws" shall mean any and
all federal, state, local or municipal laws, rules, orders, regulations,
statutes, ordinances, codes, decrees, or requirements of any governmental
authority regulating, relating to or imposing liability or standards
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of conduct concerning environmental protection matters, including all
requirements pertaining to reporting, licensing, permitting, investigation,
removal or remediation of emissions, discharges, releases, or threatened
releases of Hazardous Materials (as hereinafter defined), chemical
substances, pollutants or contaminants or relating to the manufacture,
generation, processing, distribution, use, treatment, storage, disposal,
transport, or handling of Hazardous Materials, chemical substances,
pollutants or contaminants.
For purposes of this Agreement, "Hazardous Materials" shall mean any
substance (i) the presence of which requires investigation, removal or
remediation under any federal, state or local statute, regulation, rule,
ordinance, order, action, policy or common law, (ii) which is or becomes
defined as a "hazardous substance," "hazardous material," "pollutant" or
"contaminant" under any federal, state or local statute, regulation, rule or
ordinance or any amendments thereto, and/or (iii) which is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or
otherwise hazardous and is or becomes regulated by any governmental authority.
9.3 INDEMNITY AGREEMENT OF THE PURCHASER. The Purchaser shall
indemnify, defend, reimburse and hold harmless the Sellers from and against
any and all claims, demands, penalties, fines, liabilities, obligations,
losses, settlements, damages, costs and expenses resulting from:
(i) any inaccuracy in, or breach of, any representation and
warranty or nonfulfillment of any covenant on the part of the Purchaser
contained in this Agreement;
(ii) the transfer or operation of the Purchaser Excluded
Assets;
(iii) claims made by the holders of Purchaser's Common Stock
related to the operation or management or any other issue regarding
the Subsidiary; or
(iv) the violation or alleged violation by the Purchaser or
Metro Minerals Corporation of any Environmental Laws, or any orders,
requirements or demands of any governmental authorities related thereto,
resulting from events or circumstances occurring on or before the
Closing Date;
(v) any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of the Purchaser, contained in any other
agreement, certificate or other instrument furnished or to be furnished
to the Sellers by the Purchaser pursuant to this Agreement.
(vi) any liability specifically assumed by the Purchaser; and
(vii) fees and disbursement of counsel incident to any of the
foregoing.
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9.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS.
(a) NOTICE OF CLAIM AND DEFENSE. The party seeking
indemnification under this Article 9 shall give the party from whom
indemnification is sought prompt written notice of the assertion of any third
party claim of which said party has knowledge which is covered by the
indemnity agreements set forth in Section 9.2 or Section 9.3 and the party
obligated to indemnify will undertake the defense thereof by representatives
chosen by the party seeking indemnification but acceptable to the party
obligated to indemnify. If the party obligated to indemnify, within a
reasonable period of time after notice of any such claim fails to defend, the
party seeking indemnification will have the right to undertake the defense,
compromise or settlement of such claim on behalf of and for the account and
risk of the party obligated to indemnify, subject to the right of the party
obligated to indemnify to assume the defense of such claim at any time prior
to settlement, compromise or final determination thereof. Anything in this
Section 9.4 to the contrary notwithstanding, if there is a reasonable
probability that a claim may adversely affect the party seeking
indemnification, other than as a result of money damages or other payments,
the party seeking indemnification shall have the right, at the cost and
expense of the party obligated to indemnify, to defend, compromise or settle
such claim.
(b) PAYMENT OF SUMS DUE. After any final judgment or award shall
have been rendered by a court, arbitration board or administrative agency of
competent jurisdiction, or a settlement shall have been consummated, or the
parties shall have arrived at a mutually binding agreement, with respect to
each separate third party claim indemnified by the party obligated to
indemnify, the party seeking indemnification shall forward to the party
obligated to indemnify notice of any sums due and owing by the party seeking
indemnification with respect to such claim and the party obligated to
indemnify shall pay such sums to the party seeking indemnification in cash,
within 30 days after the date of such notice.
9.5 GOOD FAITH EFFORTS TO SETTLE DISPUTES. Each of the parties agrees
that, prior to commencing any litigation against the other concerning any
matter with respect to which such party intends to claim a right of
indemnification in such proceeding, such parties shall meet in a timely
manner and attempt in good faith to negotiate a settlement of such dispute
during which time such parties shall disclose to the others all relevant
information relating to such dispute.
9.6 FEES AND EXPENSES. Notwithstanding any other provision in this
Article 9, in the event of any dispute or controversy, the prevailing party
in such dispute shall, in addition to any other remedies the prevailing party
may obtain in such dispute, be entitled to recover from the other party all
of its reasonable legal fees and out-of-pocket costs incurred by such party
in enforcing or defending its rights hereunder.
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ARTICLE 10
CERTAIN ADDITIONAL AGREEMENTS
10.1 PROCEEDS OF PRODUCTION; EXPENSES. Purchaser and Sellers shall
be entitled to the proceeds from the Assets as follows:
(a) Purchaser shall be entitled to receive all proceeds,
including without limitation proceeds of production, and shall be obligated
to bear all expenses attributable to the Assets after the Effective Time.
(b) Sellers shall be entitled to receive all proceeds, including
without limitation proceeds of production, and shall be obligated to bear all
expenses attributable to the Assets prior the Effective Time.
10.2 PUBLIC STATEMENTS. No party to this Agreement shall issue any
public statement or announcement concerning the transactions contemplated by
this Agreement without the prior consent of the other parties, except as
otherwise may be required by law.
10.3 ENTIRE AGREEMENT. This Agreement, including all Schedules and
Exhibits hereto, and the other Closing Documents constitute the entire
agreement of the parties with respect to the subject matter hereof, and may
not be modified, amended or terminated except by a written instrument
specifically referring to this Agreement signed by each of the parties hereto
or as otherwise provided in this Agreement.
10.4 CONSTRUCTION. In the event of 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 the 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.
10.5 WAIVERS AND CONSENTS. All waivers and consents given hereunder
shall be in writing. No waiver by any party hereto of any breach or
anticipated breach of any provision hereof by any other party shall be deemed
a waiver of any other contemporaneous, preceding or succeeding breach or
anticipated breach, whether or not similar, on the part of the same or any
other party.
10.6 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given only if and when (a)
personally delivered, or (b) three business
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days after mailing, postage prepaid, by certified mail, or (c) when delivered
(and receipted for) by an overnight delivery service, addressed in each case
as follows:
(i) If to the Sellers, to:
Karlton Terry, President
Karlton Terry Oil Company
700 East 9th Avenue, Suite 106
Denver, Colorado 80203
FAX NO. (303) 832-2404
with a copy to:
William R. Roberts, Esq.
Holme Roberts & Owen LLC
1401 Pearl Street, Suite 400
Boulder, Colorado 80202
FAX NO. (303) 444-1063
(ii) If to the Purchaser, to:
Robert E. Thrailkill, President
Metro Capital Corporation
716 College View Drive
Riverton, Wyoming 82501
FAX NO. (307) 856-1851
with a copy to:
A. Thomas Tenenbaum, Esq.
Brenman Key & Bromberg, P.C.
1775 Sherman Street, Suite 1001
Denver, Colorado 80203
FAX NO. (303) 839-1633
Any party to this Agreement may change the address for the giving of notices
and communications to it or him, and/or copies thereof, by written notice to
the other parties in conformity with the foregoing.
10.7 FURTHER ASSURANCES. From and after the date of this Agreement,
each of the parties hereto will cooperate with each other and will use its or
his best efforts to obtain all necessary waivers and consents from third
parties. The Sellers, at any time and from time to time on and after the
Closing, upon request by the Purchaser and without further consideration,
shall take or cause to be taken such actions and execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, such transfers,
conveyances and assurances as may be required or desirable for the
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better conveying, transferring, assigning, delivering, assuring and
confirming the Assets to the Purchaser.
10.8 RIGHTS OF THIRD PARTIES. All conditions of the obligations of the
parties hereto, and all undertakings herein, except as otherwise provided by
a written consent, are solely and exclusively for the benefit of the parties
hereto and their successors and assigns, and no other person or entity shall
have standing to require satisfaction of such conditions or to enforce such
undertakings in accordance with their terms or be entitled to assume that any
party hereto will refuse to consummate the exchange contemplated hereby in
the absence of strict compliance with any or all thereof, and no other person
or entity shall, under any circumstances, be deemed a beneficiary of such
conditions or undertakings, any or all of which may be freely waived in whole
or in part, by mutual consent of the parties hereto at any time, if in their
sole discretion they deem it desirable to do so.
10.9 HEADINGS. The Table of Contents and Article and Section
headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
10.10 GOVERNING LAW. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the internal
laws of the State of Wyoming.
10.11 ARBITRATION.
(a) GENERAL. All disputes and claims arising in connection with this
Agreement shall be settled in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, except as modified below, by a
panel of three arbitrators, one of whom will be selected by the Sellers, one
by the Purchaser and one mutually agreed to by the arbitrators selected by
the Sellers and the Purchaser. Initiation of an arbitration will not stay the
operation of this Agreement and the parties will continue to abide by their
respective obligations set forth herein. The parties will settle all accounts
based upon the results of said arbitration within 30 days of the conclusion
of the arbitration.
(b) LOCATION OF ARBITRATION. Any such arbitration shall take place in
Cheyenne, Wyoming.
(b) SERVICE OF PROCESS. Service of process in any such arbitration
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail) or delivery by
overnight courier, postage and/or fees prepaid.
(c) MODIFICATIONS TO THE ARBITRATION RULES. The provisions of the
Commercial Arbitration Rules of the American Arbitration Association which
shall apply to arbitrations hereunder are hereby modified as follows:
(1) Any demand for arbitration must be in writing and in no
event may be made after the date that institution of legal proceedings based
upon the claim made in the demand would be barred by the applicable statute
of limitations.
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(2) The arbitrators' decision must be made within 45 days from
the date the arbitration proceedings are initiated and shall be binding on
the parties. Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
(3) The prevailing party shall be awarded reasonable attorneys'
fees and expenses, and other costs and expenses incurred in connection with
the arbitration, unless the arbitrators for good cause determine otherwise.
(4) Costs and fees of the arbitrators shall be borne by the
nonprevailing party, unless the arbitrators for good cause determine
otherwise.
10.12 PARTIES IN INTEREST. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by
operation of law or with the consent of the other parties. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
10.13 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
10.14 SEVERABILITY. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
10.15 BULK SALES. The Purchaser hereby waives compliance by the
Sellers with the provisions of the Bulk Sales law of any state, if applicable
to the transfer of the Assets, and the Sellers agree to indemnify and hold
the Purchaser harmless from any liability, other than liabilities expressly
assumed by the Purchaser hereunder, incurred as a result of the failure to so
comply.
10.16 EXPENSES. Except as provided in Section 5.4 with respect to
certain of the expenses related to the Proxy Materials, each party shall pay
its own costs and expenses, including the fees and disbursements of its
respective counsel, in connection with the negotiation, preparation and
execution of the Agreement and the consummation of the transactions
contemplated hereby whether or not the transactions contemplated hereby are
consummated.
10.17 BOOKS AND RECORDS. The files, books and records comprising a
portion of the Assets may be maintained after the Closing Date at the current
offices of KTOC, which may become the principal offices of Purchaser.
10.18 JOINDER BY SUBSIDIARY. The Subsidiary joins in this Agreement
for the purpose of guaranty, and does hereby jointly and severally guaranty,
all of the obligations of Purchaser hereunder, including without limitation
any and all indemnities and covenants of Purchaser in favor of Sellers. In
the event Sellers have any right to pursue indemnity from Purchaser, Sellers
may elect to pursue any such remedy against the Subsidiary without making any
claim against or pursuing any other remedy against Purchaser.
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10.19 ISSUANCES OF SECURITIES. Schedule 10.19 describes securities of
Purchaser recently issued and to be issued pursuant to obligations of
Purchaser, and certain rights and obligations related to such securities. At
Closing Sellers will cause Purchaser to ratify such issuances and
obligations. Pursuant to Rule 144(k) promulgated under the Securities Act of
1993, as amended, Purchaser shall remove all restrictive legends from
certificates evidencing shares of Common Stock owned for more than three
years by Messrs. Robert E. Thrailkill, John A. Alsko, Gene E. York, John
Benesch and Robert J. Thrailkill (collectively the "Requesting Parties")
90 days after receipt of their resignations from their positions as officers
and directors of Purchaser, which resignations shall be delivered at Closing,
together with an opinion of counsel stating that (i) none of the Requesting
Parties is an "affiliate" of the Purchaser, as defined in Rule 144 and
(ii) the three-year holding period for each Requesting Party has been
satisfied. Also at Closing, Purchaser shall deliver to the Requesting Parties
instructions from Purchaser's new board of directors to Purchaser's transfer
agent directing the transfer agent to so remove such legends.
10.20 OBLIGATIONS OF SELLERS. Notwithstanding any other term or
provision hereof to the contrary the maximum liability of the Sellers to
Purchaser, the Subsidiary or any other party claiming by, through or under
either of them under this Agreement, or any other document or certificate
executed in connection herewith, shall be the value of their Restricted
Stock, as defined below. Until the date two years after the date hereof, or
such longer period as may be required as provided below (collectively the
"Restriction Period"), Sellers shall maintain their ownership of at least 39%
of the issued and outstanding shares (the "Restricted Shares") of the Class B
Common Stock received by Sellers, which shares shall bear a legend evidencing
the obligations and restrictions contained in this Section 10.20. Sellers
shall be allowed to transfer such Restricted Shares free and clear of such
restriction and the terms hereof during the Restriction Period only if they
substitute stock or other assets subject to such legend or other similar
restriction as may be reasonably requested by the management of the
Subsidiary and having a value not less than the lesser of the value of the
Restricted Securities or $4,000,000. For purposes of determining the value
of the Restricted Securities, each share of Restricted Securities shall be
deemed to have a value of 75% of the market value of a share of the
Purchaser's common stock. For purposes of this Section 10.20, the market
value of the share of Purchaser's common stock shall be determined by the
average bid and asked price for the previous 20 days of trading of such stock
prior to the date of valuation or, if there is no public market then
available for such stock, then the fair market value shall be determined by
the agreement of the parties. In the event that a claim is made against
Sellers under this agreement during the period allowed under Section 9.1,
then the Restriction Period shall be extended until such time as the claim is
finally resolved or satisfied.
10.21 ESCROW. Upon the election of either the Sellers or the
Purchaser, the Closing contemplated hereby shall take place into escrow with
Brenman Key & Bromberg, P.C. through its counsel, Tom Tenenbaum, Esq., acting
as escrow agent, pursuant to an agreement to be entered into promptly after
the date hereof containing the following described terms and such other terms
as the parties may agree. Such escrow agreement shall provide that the
transfer documents described in 8.1 above, the Class B Common Stock described
in 8.2 above, the Operating and Management Agreements and all the other
closing documents described in this Article 8 shall be placed into escrow.
In addition, the proceeds of the loan described in Section 1.4 and up to
500,000 shares of the Class B Common Stock described in Section 1.5 shall be
placed into escrow to be delivered by the escrow agent to the optionees under
the Asset Options. At such time as the escrow agent is satisfied that the
Asset Options have been duly and validly exercised, then the escrow agent
shall
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close the escrow by delivering the relevant documents, funds and stock
certificates to the appropriate parties.
10.22 CHANGE OF OPERATOR. Sellers shall use all reasonable efforts to
enable Purchaser to take over as operator promptly after Closing each of
those Assets operated by any Seller on the date hereof. In the event any such
operation cannot be transferred, the Seller who remains as operator shall pay
to Purchaser any economic benefit of being operator net of such Seller's
actual costs of operating.
10.23 EMPLOYMENT AGREEMENTS. The Shareholders shall each enter into
Employment agreements with the Purchaser to be effective immediately after
the Closing and having terms of three years, providing for salaries of
$125,000 and $75,000, respectively for Karlton Terry and Jubal Terry, and
containing such other terms and conditions as the parties may agree.
IN WITNESS WHEREOF, the parties hereto have caused their names to be
hereunto subscribed, all as of the day and year first above written.
"PURCHASER"
METRO CAPITAL CORPORATION
By /s/ Robert E. Thrailkill
_______________________________
Robert E. Thrailkill, President
"SELLER"
KARLTON TERRY OIL COMPANY
By /s/ Karlton Terry
______________________________
Karlton Terry, President
"SHAREHOLDERS" AND "SELLERS"
/s/ Karlton Terry
_________________________________
Karlton Terry
/s/ Karlton Terry
_________________________________
Jubal Terry by Karlton Terry
POA
27
<PAGE>
Bishop Cable Communications Corporation
By: /s/ Robert E. Thrailkill
______________________________
The undersigned join in this Agreement solely for the purposes set
forth in Section 5.4.
/s/ Robert E. Thrailkill
_________________________________
Robert E. Thrailkill
/s/ John A. Alsko
_________________________________
John A. Alsko
/s/ Robert J. Thrailkill
_________________________________
Robert J. Thrailkill
28
<PAGE>
OPERATING AGREEMENT
THIS AGREEMENT is made as of this 30th day of November, 1995, by and
among METRO CAPITAL CORPORATION, a Wyoming corporation (the "Company"),
KARLTON TERRY OIL COMPANY, a Colorado corporation, KARLTON TERRY and JUBAL
TERRY (collectively, "KTOC"), and BISHOP CABLE COMMUNICATIONS CORPORATION, a
Wyoming corporation and wholly-owned subsidiary of the Company (the
"Subsidiary").
Pursuant to an Asset Purchase Agreement, dated as of October 19, 1995,
between the Company and KTOC (the "Asset Purchase Agreement"), KTOC will be
obtaining control of the Company. KTOC is transferring certain assets to the
Company and the Company is transferring to the Subsidiary all of its assets
except for (i) the amount of cash and marketable securities in excess of $1.2
million, which amount in any event shall be at least $700,000; and (ii) the
Company's working interest in, and its operating agreement with respect to,
the property known as Twenty Mile Hill, which is held by Metro Minerals
Corporation, a wholly-owned subsidiary of the Company. The Subsidiary is to
be operated autonomously by the current management of the Company pursuant to
the terms hereof. The Company and the Subsidiary recognize that such
management has extensive experience in the management of the Company's
business.
In order to effect, ensure and preserve the autonomous operation of the
Subsidiary by the current management of the Company, the Company, KTOC and
the Subsidiary wish to enter into an operating agreement on the terms and
conditions set forth below. Accordingly, in consideration of the promises
and the respective covenants and agreements of the parties herein contained,
and intending to be legally bound hereby, the parties hereto agree as follows:
1. MANAGEMENT. The Company, KTOC and the Subsidiary hereby agree that
the Subsidiary is to be operated by the current management of the Company as
set forth in management agreement to be executed as of the Closing under the
Asset Purchase Agreement (the "Management Agreement") among the Subsidiary
and Robert E. Thrailkill and such other persons, including John A. Alsko and
Robert J. Thrailkill, who may be appointed to management positions by the
Board of Directors of the Subsidiary (collectively, the "Management").
2. TERM. The operation of the Subsidiary by the Management as
provided in Section 1. will commence on the date hereof and continue for five
years from the date hereof.
3. BOARD OF DIRECTORS OF THE SUBSIDIARY. Any determination by the
Board of Directors of the Subsidiary with respect to the business, operations
and assets of the Subsidiary shall be final, conclusive and binding and shall
not be subject to any modification whatsoever by the Board of Directors or
management of the Company for any reason; provided, however, that in no event
shall any member of the Board of Directors or any other officer of the
Company be required to breach his or her fiduciary duty to the Company or its
shareholders.
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<PAGE>
4. RELATIONS BETWEEN THE COMPANY AND THE SUBSIDIARY. The Board of
Directors of the Subsidiary shall make the officers and directors of the
Subsidiary available to discuss the business and operations of the Subsidiary
with the Company and its management at reasonable times. The Management
shall cooperate with the Company in the preparation and filing of all
materials to be filed with the Securities and Exchange Commission, the
Internal Revenue Service and other applicable governmental authorities. Each
party shall pay all costs and expenses relating to its respective business
operations. Each party agrees to pay its proportionate share of costs and
expenses attributable to it in connection with the preparation of
consolidated financial statements and consolidated income tax returns. Each
party shall pay the other party, on terms to be agreed upon in advance, for
any services performed by personnel of the other party (and costs associated
therewith) as such party may request. The Subsidiary shall bear the costs
and expenses incurred in connection with the preparation and filing of
materials to be filed with the Securities and Exchange Commission that it
requests that the Company file on its behalf; and, each party shall cooperate
with the other party in the preparation and filing of any such materials.
5. BUSINESS, OPERATIONS AND ASSETS OF THE SUBSIDIARY. The Board of
Directors of the Subsidiary shall have sole authority and discretion with
respect to the business, operations and assets of the Subsidiary, except as
provided in Section 3 above. The Company shall not take any action with
respect to the business, operation or assets of the Subsidiary without first
obtaining the written consent of the Board of Directors of the Subsidiary.
Without limiting the generality of the foregoing, and provided that it
complies with all applicable laws, the Board of Directors of the Subsidiary
may take any or all of the following actions in its sole and absolute
discretion to:
(a) dispose of, encumber or otherwise hypothecate any, all or
substantially all of the assets of the Subsidiary, whether
owned as of the date hereof or hereafter acquired;
(b) acquire additional assets on behalf of the Subsidiary;
(c) change the business of the Subsidiary;
(d) merge or consolidate the Subsidiary with any entity;
(e) incur any indebtedness on behalf of the Subsidiary;
(f) declare any legal dividends on behalf of the Subsidiary; or
(g) liquidate and dissolve the Subsidiary.
6. CONTROL OF SUBSIDIARY BY THE MANAGEMENT. The Subsidiary is to be
controlled and operated exclusively by the Management and not by the Company.
The Company and KTOC represent and warrant that they will maintain the
Management Agreement and this Operating Agreement in full force and effect
during the term of this Agreement and will not take any action whatsoever
which interferes, intervenes or disrupts the control and operation of the
Subsidiary by the Management, except as provided in Section 3.
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<PAGE>
7. VOTING AGREEMENT. The Company and KTOC agree at all times during
the term of this Agreement to be bound by the terms of the voting agreement
(the "Voting Agreement"), in the form attached hereto as Exhibit A.
8. INDEBTEDNESS. The Company shall not incur any indebtedness on
behalf of the Subsidiary or take any action, directly or indirectly, to
encumber, or cause any claims to be made with respect to, any or all of the
assets of the Subsidiary. The Subsidiary shall not incur any indebtedness or
take any other action, directly or indirectly, to encumber, or cause any
claims to be made with respect to, any or all of the assets of the Company.
The subsidiary agrees to timely pay, or establish appropriate reserves, for
any and all taxes and assessments against it or its assets.
9. TERMINATION. Except as otherwise provided in Section 2 hereof,
neither the Company nor KTOC may terminate this Agreement for any reason
without the written consent of the Board of Directors of the Subsidiary.
10. SUCCESSORS; BINDING AGREEMENT. The Company and KTOC will require
any successor by purchase, merger, consolidation or otherwise to all or a
controlling interest in the Company, by agreement in form and substance
satisfactory to the Board of Directors of the Subsidiary, to expressly assume
and agree to perform this Agreement. Failure by the Company or KTOC to
obtain such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law and
"control" shall have the same meaning given to it in the Management Agreement.
11. INDEMNIFICATION. The Subsidiary agrees to indemnify and hold
harmless the Company, its officers, directors, employees and agents, from any
and all liabilities, losses, costs, claims, actions, suits, proceedings,
damages, penalties and expenses (including attorneys' fees and expenses and
costs of investigation and litigation, and including any such attorneys' fees
and expenses incurred in connection with enforcing this Section) suffered or
incurred by any such party by reason of or arising out of any actions or
omissions by the Management.
12. BREACH. Any breach of any provisions of this Agreement shall be
deemed a breach of the Asset Purchase Agreement and of the Management
Agreements and all rights and remedies under such agreements shall be
available hereunder. There shall be full recourse against the Company by the
parties to the Management Agreements for any action by the Company that
impairs any of the parties' rights legally and validly asserted under the
Management Agreements.
13. NOTICE. For purposes of this Agreement, notices, demands and all
other communications provided for in the agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States registered mail, return receipt requested,
postage prepaid, addressed to the Company, KTOC and the Subsidiary at the
following addresses:
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<PAGE>
(i) If to the Company:
Karlton Terry, President
Metro Capital Corporation
700 East Ninth Avenue, Suite 106
Denver, Colorado 80203
(ii) If to KTOC:
Karlton Terry, President
Karlton Terry Oil Company
700 East Ninth Avenue, Suite 106
Denver, Colorado 80203
(iii) If to the Subsidiary:
Robert E. Thrailkill, President
Bishop Cable Communications Corporation
716 College View Drive
Riverton, Wyoming 82501
Any party to this Agreement may change the address for giving notices by
written notice to the other parties in conformity with the foregoing, except
that notices of change of address shall be effective only upon receipt.
14. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed
to in writing signed by the parties. No waiver by any party hereto at any
time of any breach by any other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by any party which are not set forth
expressly in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Wyoming.
15. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not effect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which together will constitute one and the same instrument.
17. GOVERNING LAW. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the internal
laws of the State of Wyoming.
4
<PAGE>
18. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
which shall be conducted according to the terms of Section 10.11 of the Asset
Purchase Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
METRO CAPITAL CORPORATION
By:___________________________________
Karlton Terry, President
KARLTON TERRY OIL COMPANY
By:___________________________________
Karlton Terry, President
______________________________________
KARLTON TERRY
______________________________________
JUBAL TERRY
BISHOP CABLE COMMUNICATIONS CORPORATION
By:___________________________________
Robert E. Thrailkill, President
5
<PAGE>
MANAGEMENT AGREEMENT
THIS AGREEMENT is made as of this 30th day of November, 1995, by and
among METRO CAPITAL CORPORATION, a Wyoming corporation (the "Company"),
BISHOP CABLE COMMUNICATIONS CORPORATION, a Wyoming corporation and
wholly-owned subsidiary of the Company (the "Subsidiary") and ROBERT E.
THRAILKILL ("R. E. Thrailkill") (the "Executive").
R. E. Thrailkill is presently employed by the Company as President and
Chief Executive Officer and has previously entered into an Executive
Employment Agreement, dated April 1, 1993, whereby he is to be employed as
the President of the Company until March 31, 1998. This Agreement supersedes
and constitutes a novation of the Executive Employment Agreement between the
Company and R. E. Thrailkill.
Pursuant to an Asset Purchase Agreement, dated October 19, 1995, between
the Company and Karlton Terry Oil Company, Karlton Terry and Jubal Terry
(collectively "KTOC"), KTOC will be obtaining control of the Company. KTOC
is transferring certain assets to the Company and the Company is transferring
to the Subsidiary all of its assets except for (i) the amount of cash and
marketable securities in excess of $1.2 million, which amount in any event
shall be at least $700,000; and, (ii) the Company's working interest in, and
its operating agreement with respect to, the property known as Twenty Mile
Hill, which is held by Metro Minerals Corporation, a wholly-owned subsidiary
of the Company. The Subsidiary is to be operated autonomously by the current
management of the Company until the Company effects a distribution of the
Common Stock of the Subsidiary to the holders of the Company's Common Stock,
but in no event for more than five (5) years.
The Company and the Subsidiary recognize (i) that the Executive's
contribution to the growth and success of the Company since its inception has
been substantial, (ii) the Executive has extensive experience in the
management of the Company's business, and (iii) KTOC has extensive experience
in the management of KTOC's oil and gas business. The Company and the
Subsidiary desire to provide for the continued employment of the Executive by
the Subsidiary and to make certain changes in the Executive's employment
arrangements with the Company which the Company and the Subsidiary have
determined will reinforce and encourage the Executive's continued attention
and dedication to the Subsidiary as members of the Subsidiary's management.
The Executive is willing to commit himself to serve the Subsidiary, on the
terms and conditions herein provided.
In order to effect the foregoing, the Company, the Subsidiary and the
Executive wish to enter into a management/employment agreement on the terms
and conditions set forth below. Accordingly, in consideration of the promises
and the respective covenants and agreements of the parties herein contained,
and intending to be legally bound hereby, the parties hereto agree as follows:
1. EMPLOYMENT. The Subsidiary hereby agrees to employ the Executive,
and the Executive hereby agrees to serve the Subsidiary, on the terms and
conditions set forth herein.
<PAGE>
2. TERM. The employment of the Executive by the Subsidiary as
provided in Section 1 will commence on the date hereof and continue for five
(5) years from the date hereof, unless sooner terminated as hereinafter
provided. On September 30, 1996, and on the last day of September of each
year thereafter, the term of each Executive's employment shall be
automatically extended an additional year unless, prior to such last day of
September, the Subsidiary shall have delivered to the Executive or the
Executive shall have delivered to the Subsidiary written notice that the term
of the Executive's employment hereunder will not be extended.
3. POSITIONS AND DUTIES. R. E. Thrailkill shall serve as President of
the Subsidiary, his powers and duties in that capacity to be such as may be
determined from time to time by the Board of Directors of the Subsidiary.
During the period of this Agreement, R. E. Thrailkill shall serve also,
without additional compensation, as Chairman of the Board, Chief Executive
Officer and a director of the Subsidiary, and to any other such office as he
may be elected or appointed by the Board of Directors of the Subsidiary,
provided such other duties will not interfere with R. E. Thrailkill's duties
as President of the Subsidiary. His duties in those capacities shall be as
set forth in the Bylaws of the Subsidiary.
The Subsidiary agrees to headquarter the Executive in the Riverton,
Wyoming area except for required travel on the Subsidiary's business.
4. EXTENT OF SERVICES. The Executive shall devote his entire time,
attention and energies to the business of the Subsidiary and shall not,
during the term of this Agreement, be engaged in any other business activity,
whether or not such business activity is pursued for gain, profit or other
pecuniary advantage, unless prior approval therefor has been obtained from
the Board of Directors of the Subsidiary. This provision shall not be
construed as preventing the Executive from investing his assets in such form
or manner as will not require any services on the part of the Executive in
the operation of the affairs of the companies in which such investments are
made.
5. COMPENSATION AND RELATED MATTERS. The Executive's compensation, as
set forth below, is to be self-funded by the Subsidiary with no liability to
pay such compensation by the Company.
(a) SALARY. During the period of R. E. Thrailkill's employment
hereunder, the Subsidiary shall pay to R. E. Thrailkill a salary at a rate of
not less than $145,000 per annum.
The Executive's salary shall be paid in equal installments as nearly as
practicable on the 15th and the last days of each month in arrears. The
Executive's salary may be increased from time to time (i) in accordance with
normal business practices of the Subsidiary, (ii) based upon the Executive's
performance and/or (iii) to reflect increases in the cost of living. The
Executive's salary, if so increased, shall not thereafter during the term of
this Agreement be decreased. Compensation of the Executive by salary
payments shall not be deemed exclusive and shall not prevent the Executive
from participating in any other compensation or benefit plan of the
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<PAGE>
Subsidiary or the Company. The salary payments (including any increased
salary payments) hereunder shall not in any way limit or reduce any other
obligation of the Company or the Subsidiary hereunder, and no other
compensation, benefit or payment hereunder shall in any way limit or reduce
the obligation of the Subsidiary to pay the Executive's salary hereunder.
(b) EXPENSES. During the term of the Executive's employment
hereunder, the Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by the Executive in performing services
hereunder, including all expenses of travel and living expenses while away
from home on business or at the request of and in the service of the
Subsidiary, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures presently established by the
Company.
(c) OTHER BENEFITS. The Company and the Subsidiary shall maintain
in full force and effect, and the Executive shall be entitled to continue to
participate in, all of its employee benefit plans and arrangements in effect
on the date hereof in which the Executive participates or plans or
arrangements providing the Executive with at least equivalent benefits
thereunder (including without limitation each stock option plan, stock bonus
plan, life insurance and health-and-accident plan and arrangement, medical
insurance plan, disability plan and vacation plan). The Company and the
Subsidiary shall not make any changes in such plans or arrangements which
would adversely affect the Executive's rights or benefits thereunder, unless
such change occurs pursuant to a program applicable to all executives of the
Company and the Subsidiary and does not result in a proportionately greater
reduction in the rights of or benefits to the Executive as compared with any
other of the executives of the Company. The Executive shall be entitled to
participate in or receive benefits under any employee benefit plan or
arrangement made available by the Company or the Subsidiary in the future to
executives and key management employees, subject to and on a basis consistent
with the terms, conditions and overall administration of such plans and
arrangements. Nothing paid to the Executive under any plan or arrangements
presently in effect or made available in the future shall be deemed to be in
lieu of the salaries payable to the Executive pursuant to paragraph (a) of
this Section. Any payments or benefits payable to the Executive hereunder in
respect of any calendar year during which the Executive is employed by the
Subsidiary for less than the entire such year shall, unless otherwise
provided in the applicable plan or arrangement, be prorated in accordance
with the number of days in such calendar year during which the Executive is
so employed.
(d) VACATIONS. The Executive shall be entitled to the number of
vacation days in each calendar year, and to compensation in respect of earned
but unused vacation days, determined in accordance with the Subsidiary's
vacation plan. The Executive shall also be entitled to all paid holidays
given by the Subsidiary to its executives.
(e) SERVICES FURNISHED. The Subsidiary shall furnish the
Executive with office space and such other facilities and services as shall
be suitable to the individual Executive's positions and adequate for the
performance of their respective duties as set forth in Section 3 hereof.
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<PAGE>
6. DISCLOSURE OF INFORMATION. The Executive recognizes and
acknowledges that the operation of the Company and the Subsidiary's
businesses and know how as it may exist from time to time, and the Company
and the Subsidiary's trade secrets are valuable, special and unique assets of
the Company and the Subsidiary's businesses. The Executive will not, during
or after the term of his employment, disclose such information and know how
or any part thereof, or any trade secrets, to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever. In the
event of a breach or threatened breach by an Executive of the provisions of
this paragraph, the Company and/or the Subsidiary shall be entitled to an
injunction restraining the Executive from disclosing in whole or in part such
information or any trade secrets or from rendering any services to any
person, firm, corporation, association or other entity to whom such
information in whole or in part has been disclosed or is threatened to be
disclosed. Nothing herein shall be construed as prohibiting the Company or
the Subsidiary from pursuing any other remedies available to the Company or
the Subsidiary for such breach or threatened breach, including the recovery
of damages from the Executive.
7. TERMINATION. The Company may not terminate the Executive's
employment for any reason. The individual Executive's employment hereunder
may be terminated only by the Subsidiary without any breach of this Agreement
only under the following circumstances:
(a) DEATH. The Executive's employment hereunder shall terminate
upon his death.
(b) DISABILITY. If, as a result of the Executive's incapacity due
to physical or mental illness, the Executive shall have been absent from his
duties hereunder on a full-time basis for the entire period of six
consecutive months, and within thirty (30) days after written notice of
termination is given (which may occur before or after the end of such
six-month periods) shall not have returned to the performance of his duties
hereunder on a full-time basis, the Subsidiary may terminate the Executive's
employment hereunder.
(c) CAUSE. The Subsidiary may terminate the Executive's
employment hereunder for Cause. For purposes of this Agreement, the
Subsidiary shall have "Cause" to terminate the Executive's employment
hereunder upon (A) the willful and continued failure by the Executive to
substantially perform his duties hereunder (other than any such failure
resulting from the executive's incapacity due to physical or mental illness),
after demand for substantial performance is delivered by the Subsidiary that
specifically identifies the manner in which the Subsidiary believes the
Executive has not substantially performed his duties, or (B) the willful
engaging by the Executive in misconduct which is materially injurious to the
Subsidiary, monetarily or otherwise. For purposes of this paragraph, no act,
or failure to act, on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by him not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Subsidiary. Notwithstanding the foregoing, the Executive shall not be deemed
to have been terminated for Cause without (i) reasonable notice to the
Executive setting forth the reasons for the Subsidiary's intention to
terminate for Cause; (ii) an opportunity for the Executive, together with his
counsel, to be heard before the Board of Directors of the Subsidiary, and
(iii) delivery to the Executive of
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<PAGE>
a Notice of termination as defined in subsection (e) hereof from the Board of
Directors of the Subsidiary finding that in the good faith opinion of such
Board the Executive was guilty of conduct set forth above in clause (A) or (B)
of the preceding sentence, and specifying the particulars thereof in detail.
(d) TERMINATION BY THE EXECUTIVE. The Executive may terminate his
employment hereunder (i) for Good Reason or (ii) if his health should become
impaired to an extent that makes his continued performance of his duties
hereunder hazardous to his physical or mental health or his life, provided
that the Executive shall have furnished the Subsidiary with a written
statement from a qualified doctor to such effect.
For purposes of this Agreement, "Good Reason" shall mean (A) a change in
control of the Subsidiary (as defined below) which is not approved by the
Executive, (B) a failure by the Company or the Subsidiary to comply with any
material provision of this Agreement which has not been cured within ten days
after notice of such noncompliance has been given by the Executive to the
Company and Subsidiary as the case may be, or (C) any purported termination
of the Executive's employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of paragraph (e) hereof (and for
purposes of this Agreement no such purported termination shall be effective).
For purposes of this Agreement, a "change in control of the Subsidiary"
shall mean a change in control of a nature that would be required to be
reported in response to Item 5(f) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934 (the "Exchange Act");
provided that, without limitation, such a change in control shall be deemed
to have occurred if (i) any "person" (as that term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than the Subsidiary or any "person" who
on the date hereof is a director or officer of the Subsidiary, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company or the Subsidiary
representing 20% or more of the combined voting power of the Subsidiary's
then outstanding securities, or (ii) during any period of two consecutive
years during the term of this Agreement, individuals who at the beginning of
such period constitute the Board of the Subsidiary cease for any reason to
constitute at least a majority thereof, unless the election of each director
who was not a director at the beginning of such period has been approved in
advance by directors representing at least two-thirds of the directors then
in office who were directors at the beginning of the period.
The Company shall consult with the Executive regarding any proposed
change in control of the Company. For purposes hereof, "change in conrol"
shall have the same meaning as set forth in the preceding paragraph.
(e) Any termination of the Executive's employment by the
Subsidiary or by the Executive (other than termination pursuant to subsection
(a) above) shall be communicated by written Notice of Termination to the
other parties hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific
termination provision
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<PAGE>
in this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
(f) "Date of Termination" shall mean (i) if the Executive's
employment is terminated by his death, the date of his death, (ii) if the
Executive's employment is terminated pursuant to subsection (b) above, 30
days after Notice of Termination is given (provided that the Executive shall
not have returned to the performance of his duties on a full-time basis
during such 30 days period), (iii) if the Executive's employment is
terminated pursuant to subsection (e) above, the date specified in the Notice
of Termination, and (iv) if the Executive's employment is terminated for any
other reason, the date on which a Notice of Termination is given; provided
that if within 30 days after any Notice of Termination is given the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date
on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding and final arbitration award or by a
final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been perfected).
8. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) If the Executive is unable to perform his services by reason
of illness or incapacity for a period of more than six months, the
compensation otherwise payable to him during the continued period of such
illness or incapacity shall be reduced by the amount of any insurance
benefits provided by the Company or the Subsidiary. The Subsidiary may
terminate this Agreement at any time after Executive shall be absent from his
employment for whatever cause, for a continuous period of more than six
months and all obligations of the Subsidiary and shareholders hereunder shall
cease upon such termination, provided, however, that in the event that such
absence is due to illness or incapacity, the Subsidiary shall be obligated to
pay the full amount of Executive's salary for the balance of the term of this
Agreement or until Executive becomes gainfully employed, whichever is sooner.
(b) If the Executive's employment is terminated by his death, the
Subsidiary shall pay to the Executive's spouse, or if he leaves no spouse, to
his estate, commencing on the next succeeding day which is the 15th day or
last day of the month, as the case may be, and semi-monthly thereafter on the
15th and last days of each month, until a total of 24 payments has been made,
an amount on each payment date equal to the semi-monthly salary payment
payable to the Executive pursuant to Section 5(a) hereof at the time of his
death.
(c) If the Executive's employment shall be terminated for Cause,
the Subsidiary shall pay the Executive his full salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given
and the Subsidiary shall have no further obligations to the Executive under
this Agreement.
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(d) If (A) in breach of this Agreement, the Company or the
Subsidiary shall terminate an Executive's employment other than pursuant to
Section 7(b) or 7(c) hereof (it being understood that a purported termination
pursuant to Section 7(b) or 7(c) hereof which is disputed and finally
determined not to have been proper shall be a termination by the Company
and/or the Subsidiary in breach of this Agreement) or (B) the Executive shall
terminate his employment for Good Reason, then
(i) the Company and the Subsidiary shall pay the Executive
his full salary through the Date of Termination at the rate in effect at the
time Notice of Termination is given;
(ii) in lieu of any further salary payments to the Executive
for periods subsequent to the Date of Termination, the Subsidiary shall pay
as severance pay to the Executive an amount equal to the product of (A) the
Executive's annual salary rate in effect as of the Date of termination,
multiplied by (B) the greater of the number of years (including partial
years) remaining in the term of employment hereunder or the number three,
such payments to be made in a lump sum on or before the 5th day following the
Date of Termination;
(iii) if termination of the Executive's employment arises out
of a breach by the Subsidiary of this Agreement, the Subsidiary shall pay all
other damages to which the Executive may be entitled as a result of such
breach, including damages for any and all loss of benefits to the Executive
under the Company and the Subsidiary's employee benefit plans (other than the
Subsidiary's Incentive Compensation Plan) which the Executive would have
received if the Subsidiary had not breached this Agreement and had the
Executive's employment continued for the full term provided in Section 2
hereof, and including all legal fees and expenses incurred by him as a result
of such termination; and
(iv) if termination of the Executive's employment arises out
of a breach by the Company of this Agreement, the Company shall pay all other
damages to which the Executive may be entitled as a result of such breach,
including damages for any and all loss of benefits to the Executive under the
Company and the Subsidiary's employee benefit plans (other than the Company's
Incentive Compensation Plan) which the Executive would have received if the
Company had not breached this Agreement and had the Executive's employment
continued for the full term provided in Section 2 hereof, and including all
legal fees and expenses incurred by him as a result of such termination.
(e) If the Executive shall terminate his employment under clause
(ii) of Section 7(d) hereof, the Subsidiary shall pay the Executive his full
salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given together with such reasonable severance
payment, if any, or the Subsidiary's Board of Directors may determine.
(f) Unless the Executive is terminated for Cause, the Company and
the Subsidiary shall maintain in full force and effect, for the continued
benefit of the Executive for the greater of the number of years (including
partial years) remaining in the term of employment hereunder
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<PAGE>
or the number three, all employee benefit plans and programs in which the
Executive was entitled to participate immediately prior to the Date of
Termination provided that the Executive's continued participation is possible
under the general terms and provisions of such plans and programs. In the
event that the Executive's participation in any such plan or program is
barred, the Company and the Subsidiary shall arrange to provide the Executive
with benefits substantially similar to those which the Executive would
otherwise have been entitle to receive under such plans and programs from
which his continued participation is barred.
(g) The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 8 by seeking other employment or
otherwise.
9. SUCCESSORS: BINDING AGREEMENT.
(a) The Company and the Subsidiary will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company or
the Subsidiary, by agreement in form and substance satisfactory to the
Executive, to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company and the Subsidiary would
be required to perform it if no such succession had taken place. Failure by
the Company or the Subsidiary to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of the Agreement and
shall entitle the Executive to compensation from the Company and the
Subsidiary in the same amount and on the same terms as they would be entitled
to hereunder if they terminated their employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Subsidiary" shall mean the Subsidiary as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this
Section 9 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which executes and delivers the agreement
provided for in this Section 9 or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.
(b) This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If an Executive should die while any
amounts would still be payable to him hereunder if he had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's devisee,
legatee or other designee or, if there be no such designee, to the
Executive's estate.
10. INDEMNIFICATION. The Subsidiary shall indemnify and hold the
Company harmless for all actions of the Executive.
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<PAGE>
11. NOTICE. For purposes of this Agreement, notices, demands and all
other communications provided for in the agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States registered mail, return receipt requested,
postage prepaid, addressed to the Company, the Subsidiary and the Executive
at the following addresses:
(i) If to the Company:
Karlton Terry, President
Metro Capital Corporation
700 E. 9th Ave., Suite 106
Denver, Colorado 80203
(ii) If to the Subsidiary:
Robert E. Thrailkill, President
Bishop Cable Communications Corporation
716 College View Drive
Riverton, Wyoming 82501
(iii) If to the Executive:
Robert E. Thrailkill
716 College View Drive
Riverton, Wyoming 82501
Any party to this Agreement may change the address for giving notices by
written notice to the other parties in conformity with the foregoing, except
that notices of change of address shall be effective only upon receipt.
12. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed
to in writing signed by the Executives and such officers as may be
specifically designated by the Company and the Subsidiary. No waiver by any
party hereto at any time of any breach by any other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by any party which are
not set forth expressly in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws
of the State of Wyoming.
13. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not effect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect.
-9-
<PAGE>
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which together will constitute one and the same instrument.
15. GOVERNING LAW. This interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the internal
laws of the State of Wyoming.
16. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators, in Riverton, Wyoming, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. The expense of such arbitration shall be borne by the
Company.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
METRO CAPITAL CORPORATION
By______________________________
Karlton Terry, President
BISHOP CABLE COMMUNICATIONS
CORPORATION
By_______________________________
Robert E. Thrailkill, President
__________________________________
Robert E. Thrailkill
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<PAGE>
VOTING AGREEMENT
THIS VOTING AGREEMENT is made as of this 30th day of November, 1995, by
and among METRO CAPITAL CORPORATION, a Wyoming corporation (the "Company"),
KARLTON TERRY OIL COMPANY, a Colorado corporation, KARLTON TERRY and JUBAL
TERRY (collectively, "KTOC"), and BISHOP CABLE COMMUNICATIONS CORPORATION, a
Wyoming corporation and wholly-owned subsidiary of the Company (the
"Subsidiary").
Pursuant to an Asset Purchase Agreement, dated October 19, 1995, between
the Company and KTOC (the "Asset Purchase Agreement"), KTOC will be obtaining
control of the Company. KTOC is transferring certain assets to the Company
and the Company is transferring to the Subsidiary all of its assets except
for (i) the amount of cash and marketable securities in excess of $1.2
million, which amount in any event shall be at least $700,000; and (ii) the
Company's working interest in, and its operating agreement with respect to,
the property known as Twenty Mile Hill, which is held by Metro Minerals
Corporation, a wholly-owned subsidiary of the Company. The Subsidiary is to
be operated autonomously by the current management of the Company pursuant to
the terms of an Operating Agreement dated as of November 30, 1995 among the
Company, KTOC and the Subsidiary (the "Operating Agreement'). The Company
and the Subsidiary recognize that such management has extensive experience in
the management of the Company's business.
AGREEMENT
1. The parties to this agreement, intending to legally bind
themselves, their successors, executors, administrators, heirs and assigns,
agree that they will at all times during the term of this Agreement be bound
by the following terms. With respect to any matter brought before the
shareholders of the Company and/or the Subsidiary relating to or involving
exclusively the Subsidiary (including, without limitation, the election of
directors, and those other matters listed in Section 5(a)-(g) of the
Operating Agreement), the Company and KTOC hereby appoint Robert E.
Thrailkill or such person as he shall designate (as applicable, the
"Designated Attorney-In-Fact") as their attorney and proxy to appear, attend
and vote all of the shares of all classes of the Common Stock of the Company
and/or the Subsidiary with respect to such matters in his sole and absolute
discretion.
2. The Subsidiary shall indemnify and hold harmless the Company, its
officers, directors, employees and agents from any and all liabilities,
losses, costs, claims, actions, suits, proceedings, damages, penalties and
expenses (including attorneys' fees and expenses and costs of investigation
and litigation, and including any such attorneys' fees and expenses incurred
in connection with enforcing this paragraph) suffered or incurred by any such
party by reason of or arising out of any actions or omissions by the
Designated Attorney-In-Fact, including without limitation any liability
arising from a suit by the holders of common stock of the Company based upon
allegations of improper behavior by the Designated Attorney-In-Fact or the
management of the Subsidiary.
<PAGE>
3. This Voting Agreement shall terminate five years from the date
hereof unless terminated sooner by mutual consent of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
METRO CAPITAL CORPORATION
By:___________________________________
Karlton Terry, President
KARLTON TERRY OIL COMPANY
By:___________________________________
Karlton Terry, President
______________________________________
KARLTON TERRY
______________________________________
JUBAL TERRY
BISHOP CABLE COMMUNICATIONS CORPORATION
By:___________________________________
Robert E. Thrailkill, President
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