SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Tatonka Energy, Inc.
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(Name of Registrant as Specified in its Charter)
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(Name Of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange
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PRELIMINARY COPY
TATONKA ENERGY, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD June 1, 1998
To the Shareholders of Tatonka Energy, Inc.:
The Annual Meeting of the Shareholders of Tatonka Energy, Inc., an
Oklahoma corporation ("the Company"), will be held on Monday, June 1, 1998, at
10:00 A.M. at 9603 White Rock Trail, Suite 100, Dallas, Texas 75238, for the
following purposes:
1. To increase the number of directors from three to five and
elect five Directors for the coming year.
2. To approve an amendment to the Certificate of Incorporation to
change the Company's name to "PhyMed, Inc."
3. To approve an amendment to the Certificate of Incorporation to
approve a 1-for-10 reverse stock split of the Common Stock.
4. To establish a new Series B 12% Convertible Preferred Stock,
to change all shares of Preferred Stock which may be
undesignated at any time to simply "Preferred Stock," and to
authorize the Board of Directors to determine the preferences,
limitations and relative rights of all shares of Preferred
Stock which may be undesignated at any time, or one or more
series of Preferred Stock, and to issue such shares from time
to time on terms and conditions approved by the Board of
Directors.
5. To approve and ratify a stock option agreement granted to the
Chief Executive Officer and two stock option agreements
granted to Directors.
6. To approve and ratify Indemnity Agreements between the Company
and its Directors and certain officers.
7. To ratify the selection of Grant Thornton LLP as the
independent public accountants for the Company for the fiscal
year ending December 31, 1998.
8. To act upon such other matters as may properly come before the
meeting or any adjournments thereof.
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The shareholders list will be available for inspection at least ten
days before the Annual Meeting at the executive offices of the Company, 9603
White Rock Trail, Suite 100, Dallas, Texas 75238.
Shareholders of record of the Company's Common Stock, $.001 par value,
at the close of business on May 18, 1998, will be entitled to notice of and to
vote at the Annual Meeting and any adjournment thereof.
By Order of the Board of Directors
Judith F. Barker
Dallas, Texas Secretary
May 20, 1998
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PRELIMINARY COPY
TATONKA ENERGY, INC.
9603 WHITE ROCK TRAIL, SUITE 100
DALLAS, TEXAS 75238
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AT 10:00 A.M. ON JUNE 1, 1998
This Proxy Statement and the enclosed form of Proxy are being furnished
to shareholders of Tatonka Energy, Inc. (the "Company" or "Tatonka Energy").
Only those shareholders of record at the close of business on May 18, 1998, are
entitled to notice of and to vote at the Annual Meeting. The Annual Meeting will
be held at 9603 White Rock Trail, Suite 100, Dallas, Texas 75238.
This Proxy Statement and the accompanying proxy are solicited on behalf
of the Board of Directors of the Company and are first being mailed to
shareholders on or about May 20, 1998. The Annual Report to Shareholders for the
fiscal year ended December 31, 1997, is also being mailed to shareholders with
this Proxy Statement. In addition, upon the written request of any shareholder,
the Company will furnish, at no charge to the shareholder, a copy of the
Company's Form 10-KSB for the fiscal year ending December 31, 1997, as filed
with the Securities and Exchange Commission. The request should be directed to
the Secretary of the Company at 9603 White Rock Trail, Suite 100 Dallas, Texas
75238.
GENERAL
Outstanding Shares and Voting Rights
On the record date, May 18, 1998, the Company had outstanding
49,099,069 shares of common stock, par value $.001 (the "Common Stock"), all of
which shares were voting shares. The presence, in person or by proxy, of the
holders of at least one third of the outstanding shares of Common Stock is
necessary to constitute a quorum of such class at the Annual Meeting.
Shareholders have no cumulative voting rights.
Any person signing and mailing the enclosed proxy may vote in person if
in attendance at the Annual Meeting. Proxies may be revoked at any time before
they are voted by notifying the Secretary of such revocation, in writing, at the
Annual Meeting, or by submitting a later dated proxy. The persons named as
proxies in the enclosed form were selected by the Board of Directors of the
Company.
Shareholders are encouraged to vote on the matters to come before the
Annual Meeting by marking their preferences on the enclosed proxy and by dating,
signing, and returning the proxy in
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the enclosed envelope. Shares represented by properly executed proxies received
by the Company will be voted at the Annual Meeting in the manner specified
therein or, if no specification is made, will be voted (1) "FOR" the proposal to
increase the number of Directors from three to five and elect all five nominees
for director named herein; (2) "FOR" the proposal to approve the amendment to
the Company's Certificate of Incorporation to change the name of the Company to
"PhyMed, Inc.;" (3) "FOR" the proposal to approve the amendment to the Company's
Certificate of Incorporation to effect a 1-for-10 reverse stock split; (4) "FOR"
the proposal to approve the amendment to the Company's Certificate of
Incorporation to establish a new Series B 12% Cumulative Convertible Preferred
Stock and to grant the Board of Directors "blank check" authority to establish
additional series of Preferred Stock; (5) "FOR" the ratification and approval of
three stock option agreements granted to members of Management; (6) "FOR" the
ratification and approval of Indemnity Agreements between the Company and
members of Management; and (7) "FOR" the proposal to ratify the selection of
auditors for fiscal 1998.
The Board of Directors knows of no matters other than those reported
herein that are to be brought before the Annual Meeting. However, in the event
that any other matters are properly presented at the Annual Meeting for action,
the persons named in the proxy will vote the proxies (which confer authority
upon them to vote on any such matters) in accordance with their judgment.
Abstentions and shares of record held by a broker or nominee ("Broker
Shares") that are voted on any matter will be included in determining the
existence of a quorum. With respect to the tabulation of votes on any matter,
Broker Shares that are not voted are treated as shares as to which voting power
has been withheld by the beneficial owners of such shares and, therefore, as
shares not entitled to vote on the proposal, and will not be included in
determining the existence of a quorum. Since the vote required to approve
Proposal 1 is a plurality of the shares present at the Annual Meeting, and the
vote required to approve Proposals 5, 6 and 7 is an affirmative majority of the
shares present in person or represented by proxy at the Annual Meeting,
non-voted Broker Shares will not have an effect on Proposals 1, 5, 6 or 7.
HOWEVER, SINCE THE VOTE REQUIRED TO APPROVE EACH PROPOSALS 2, 3 AND 4
IS A MAJORITY OF THE COMPANY'S OUTSTANDING COMMON SHARES, NON-VOTED BROKER
SHARES WILL HAVE THE SAME EFFECT AS A VOTE AGAINST PROPOSALS 2, 3 AND 4.
George C. Barker owns of record or beneficially 40,083,513 (80.17%) of
the 49,099,069 shares of Common Stock outstanding on the record date, May 4,
1998, and has informed the Company he intends to vote all such shares in favor
of all seven proposals.
Record Date
The close of business on May 18, 1998, has been fixed as the record
date for the determination of shareholders entitled to receive notice of and to
vote at the Annual Meeting. Each outstanding share of Common Stock is entitled
to one vote on all matters herein.
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Expenses of Solicitation
The expenses of solicitation of proxies will be borne by the Company,
including expenses in connection with the preparation and mailing of this Proxy
Statement and all documents which now accompany or may hereafter supplement it.
Solicitations will be made only by the use of the mails, except that, if deemed
desirable, Directors, officers and regular employees of the Company may solicit
proxies by telephone, telegraph, fax or personal calls. It is contemplated that
brokerage houses, custodians, nominees and fiduciaries will be requested to
forward the proxy soliciting material to the beneficial owners of the Common
Stock held of record by such persons and that the Company will reimburse them
for their reasonable expenses incurred in connection therewith.
The shareholders list will be available for inspection at least ten
days before the Annual Meeting at the executive offices of the Company, 9603
White Rock Trail, Suite 100, Dallas, Texas 75238.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS, IF PROPERLY SIGNED AND
RETURNED, WILL BE VOTED "FOR" ALL SEVEN PROPOSALS, INCLUDING THE ELECTION OF THE
FIVE NOMINEES LISTED BELOW AS DIRECTORS OF THE COMPANY, UNLESS OTHERWISE
DIRECTED THEREIN.
RECENT DEVELOPMENTS
Recent Acquisition
At December 31, 1997, the Company had only nominal assets and no
operations, having disposed of its remaining assets during 1997 to entities that
are now former affiliates. See "Certain Transactions."
On April 3, 1998, George C. Barker, ("Barker"), individually and as
Trustee for the Phy.Med., Inc. Employee Stock Ownership Plan (the "ESOP"),
acquired control of the Company. Prior to such date, such parties owned all the
outstanding shares of Phy.Med., Inc., a Texas corporation ("PhyMed"), and on
such date they acquired from the Company, in the aggregate, immediate ownership
of and the right to receive an aggregate of 69,415,409 treasury shares and
authorized but unissued shares of Common Stock, $.001 par value, of the Company,
as presently constituted, which, if all such shares were outstanding, would
constitute 88.5% of the Company's then outstanding 78,430,965 shares of Common
Stock (87.5% of the 79,331,896 shares on a fully diluted basis).
The terms of the acquisition contemplate a change of the Company's name
to PhyMed, Inc. and a 1-for-10 reverse stock split, both of which will become
effective shortly after the Annual Meeting. Upon the effectiveness of such
reverse split, Barker and the ESOP will own 6,941,541
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shares of 7,843,097 shares, $.01 par value, then outstanding (7,933,190 shares
on a fully diluted basis). The Company will continue to have 50,000,000 shares
of Common Stock authorized.
PhyMed's Present Business and Contemplated Growth
PhyMed is a seven-year-old company engaged in the operation and
management of medical diagnostic imaging centers, which provide a full scope of
medical diagnostic imaging services including magnetic resonance imaging (MRI),
computer axial tomography (CAT) scans, x-rays and other radiological services to
physicians. Currently, PhyMed owns and operates a diagnostic imaging center (the
"Center" or the "Dallas Center") in Dallas, Texas, which provides diagnostic
services to physicians in the greater Dallas area. The Dallas Center occupies
approximately 13,000 square feet in leased premises. PhyMed also manages an
imaging center in Plano, Texas for other owners.
Prior to the acquisition, PhyMed was a privately-held company and the
transaction with PhyMed was undertaken as part of an overall plan for expanding
the business of PhyMed through, among other possible endeavors, the development
of new centers, acquisitions of existing centers and commencing and expanding
the use of exclusive capitated services contracts, with a view towards
increasing the per-share value of the Company for the benefit of the
shareholders. There is no assurance any of these expansion efforts will take
place or that, if undertaken, they will be undertaken on terms favorable to the
Company, will be continued, or will be profitable.
PhyMed also has plans to establish a radiological professional
practices division and a capitated services division to market its radiological
services to self-insured corporations, health maintenance organizations,
preferred provider organizations and insurance companies; and a physician
practice management and services division. There is no assurance either of these
divisions will become actual business operations, or that, if commenced, any
such business operations will be conducted on terms favorable to the Company,
will be continued, or will be profitable.
This expansion will require additional capital, and the managements of
the Company and PhyMed believe that raising additional capital can best be
achieved through PhyMed having access to the public shareholders and reporting
company status under the Securities Exchange Act of 1934, which the Company
affords.
In furtherance of this goal of raising additional capital for
expansion, the Company has recently commenced a private offering of securities
to accredited investors only. The offering seeks to raise a minimum of $200,000
and a maximum of $3,000,000 from the sale of Units of a new Series B 12%
Convertible Preferred Stock and Warrants to purchase Common Stock. Proposal 4
includes the authorization of such new series of Preferred Stock. See "4.
Authorizations Regarding Preferred Stock." There is no assurance any of such
capital, or any other capital, will be raised.
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1. ELECTION OF DIRECTORS
Changes in Management on April 3, 1998
The shareholders elected three Directors at the last Annual Meeting of
Shareholders on July 15, 1997. The three Directors were Messrs. Joe R. Love, Joe
P. Foor and Richard A. Green, Sr. Mr. Green resigned as a Director and officer
of the Company on July 21, 1997, in connection with the sale of a controlling
interest in the Company beneficially owned by him. George C. Barker was elected
as a director on April 3, 1998, in connection with the Merger, to fill the
existing vacancy.
Management proposes that Messrs. Barker, Love and Foor be re-elected as
Directors for the coming year and that two additional Directors be elected;
namely, Marilyn Moss and Judith F.
Barker. George C. Barker and Judith F. Barker are married.
The Company's Certificate of Incorporation provides that the number of
Directors shall be as specified in the Bylaws, and the Bylaws provide that the
number of Directors shall be not less than one nor more than seven. The Bylaws
further provide that the shareholders may at any annual meeting determine the
number of Directors, and the number so determined shall remain fixed until
changed at a subsequent annual meeting. The present number of authorized
Directors is three, and management proposes to enlarge the Board of Directors to
five members. Therefore, Proposal No. 1 includes the shareholders taking action
to increase the number of Directors from three to five, as well as to elect the
five nominees selected by Management.
The Board of Directors has no reason to believe that any nominee will
become unavailable. However, in the event that any of the nominees should become
unavailable, shareholders proxies will be voted for substitute nominees or
additional nominees designated by the Board of Directors.
Each Director elected at the Annual Meeting will serve until the next
Annual Meeting and until his or her successor has been duly elected and
qualified.
Information Concerning Nominees
Management's five nominees for Director are listed below with brief
statements setting forth their principal occupations and other biographical
information. Certain information concerning the five nominees to the Board of
Directors is set forth in "Security Ownership of Certain Beneficial Owners and
Management."
George C. Barker
Joe R. Love
Joe P. Foor
Marilyn Moss
Judith F. Barker
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George C. Barker has a background in management and healthcare of more
than twenty-five years. He was appointed to the Board of Directors of the
Company in April 1998 after the acquisition of Phy.Med., Inc. At the same time,
he was also elected Chairman of the Board, President and Chief Executive
Officer. He co-founded Phy.Med., Inc. in 1990 and has been the President, Chief
Executive Officer and the Chairman of the Board of Directors of that company
since 1993. Mr. Barker's background includes financial and administrative
positions with large hospitals, division level management with national hospital
management companies and radiology center operations. His management duties have
included responsibilities for annual budgets exceeding $45 million and 1,100
employees. He earned his MBA at Suffolk University and his undergraduate degree
at New Hampshire College and is 54 years old.
Joe R. Love has been a Director since the Company's inception in the
early 1980's. In addition to being co-founder and Chairman of CCDC, Inc., he is
on the Board of Directors of First Cash, Inc., a public company which operates a
chain of pawn shops, for which Mr. Love has served as a Board member since 1991.
He is also a director of Western Country Clubs, Inc., a public company which
operates country and western night clubs. He has been instrumental in arranging
public offerings totaling approximately $52 million for a number of his
portfolio companies. Over the last ten years, Mr. Love has been involved in
several other public companies as well as being active in real estate and
restaurant ventures. His real estate activities include acting as general
partner of a $94 million joint venture with Metropolitan Life Insurance Company.
He has also been involved as a partner in several Hilton Hotels. Mr. Love is a
graduate of the University of Oklahoma with a BBA and is 59 years old.
Joe P. Foor has been a Director of the Company since 1996. He is the
Chief Executive Officer of Featherstone Financial Services, representing such
clients as Greenbriar Corporation (a publicly-held company based in Dallas,
Texas), Qual-Med, Inc., Catalyst Energy Systems, and other businesses. Mr. Foor
holds a BA from The University of Oklahoma and a Masters Degree from Southern
Methodist University and is 59 years old.
Marilyn Moss is a nominee for Director and has been Executive Vice
President - Operations since April 1998. She has over twenty years experience in
the radiology services business. She joined PhyMed in February 1998 as Executive
Vice President - Operations. Previously, she had been, since 1994, the Vice
President-Diagnostic Imaging for Physicians Resource Network, Inc., a publicly
traded company in the Dallas area and had responsibility for six outpatient
imaging centers, twenty cancer centers and 32 radiologists. From March 1993 to
December 1994, she was the administrator for Southwest Diagnostic Imaging
Center. It was a joint venture between a large urban hospital and physician
limited partners. Ms. Moss is a registered radiology technologist and a
certified nuclear medicine technologist. She earned her BBA at Dallas Baptist
College and her MBA from East Texas State University and is 49 years old.
Judith F. Barker is a nominee for Director and has been Secretary and
Treasurer of the Company since April 1998. She has been the Secretary of PhyMed
and the Business Office Manager of PhyMed Diagnostic Imaging Center Dallas for
more than the last five years. She has been
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involved in office management, health facility billing and collections for over
twenty years. Her experience has been gained at individual physician and large
group practice offices, hospitals and credit companies. Since 1992, she has
played a key role in the management of PhyMed's accounts receivable. Mrs. Barker
is 57 years old.
Board of Directors-Meetings and Committees
The Board of Directors held three meetings during calendar year 1997.
The Board of Directors had no Audit Committee, Compensation or Nomination
Committees during 1997 and does not currently have an Audit, Compensation, or
Nomination Committee.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Names of Officers
At the time of the Merger on April 3, 1998, the officers of the Company
were Joe P. Foor and Joe R. Love who were President and Secretary of the
Company. In connection with the Merger, they resigned their offices so that new
officers could be elected. George C. Barker was elected Chairman of the Board,
President and Chief Executive Officer, Marilyn Moss was elected Executive Vice
President - Operations, and Judith F. Barker was elected Secretary and Treasurer
of the Company. Mr. and Mrs. Barker are married.
After the Annual Meeting, the newly elected Directors will hold a
regular annual meeting of the Board of Directors (or sign a unanimous consent of
directors in lieu of holding the meeting) and re-elect the following officers
for the coming year:
George C. Barker Chairman of the Board, President
and Chief Executive Officer
Marilyn Moss Executive Vice President - Operations
Judith F. Barker Secretary and Treasurer
Executive Compensation
During calendar 1997, Richard A. Green, Sr. served as President and
Chief Executive Officer of the Company from January 1 to July 21. He resigned on
July 21 in connection with his sale of his control of the Company. From that
date until October 9, 1997, the office of President was vacant. On October 9,
Joe P. Foor was elected President and Chief Executive Officer. He held such
position until April 3, 1998.
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During the last three fiscal years, neither the Chief Executive Officer
of the Company, nor any executive officer, received any cash or noncash
compensation for serving in such capacity. During fiscal 1997, no options were
granted to the Company's officers; no outstanding options were exercised; and no
options were terminated. However, compensation was paid directly or to
affiliates for serving as a consultant or proving management services.
See"Certain Transactions." No stock appreciations rights have been awarded to
any executive officer of the Company in the last three fiscal years.
Compensation to Mr. Barker
In 1993, PhyMed and Mr. Barker entered into a ten-year employment
Merger pursuant to which PhyMed pays Mr. Barker $240,000 per annum. In
connection with the Merger, on April 3, 1998 Mr. Barker became an employee of
the Company and the Company assumed the obligations of PhyMed under the
employment Merger.
During the fiscal year ended December 31, 1997, George C. Barker was
the Chief Executive Officer of PhyMed and the only executive officer of PhyMed
whose total compensation exceeded $100,000. PhyMed paid or accrued $240,000 of
salary to Mr. Barker during such period.
On May 4, 1998, the Board of Directors of the Company granted Mr.
Barker an option to purchase 5,000,000 shares of Common Stock, as presently
constituted (500,000 shares after the effectiveness of the 1-for-10 reverse
stock split), with vesting to be contingent upon the attainment by the Company
of certain financial objectives. For additional information, see "5.
Ratification and Approval of Stock Options."
PhyMed Employee Stock Ownership Plan
In 1993, PhyMed established an employee stock ownership plan ("ESOP")
for its employees. Such plan is qualified under the provisions of the Internal
Revenue Code of 1986 as a defined contribution retirement plan designed to
invest primarily in qualifying employer securities. This provides a means for
employees to have an ownership interest in their employer. Upon establishment,
the ESOP purchased certain shares of PhyMed from a shareholder for a cash down
payment and a promissory note payable in installments. PhyMed makes
contributions to the ESOP which enable it to make timely payments of principal
and interest on its note to the former shareholder. Mr. and Mrs. Barker own in
the aggregate approximately 70% of the vested interests of participants in the
ESOP. See "Security Ownership of Certain Beneficial Owners and
Management-Possible Change of Control."
Compensation of Directors
On May 4, 1998, the Board of Directors granted to each Mr. Love and
Mr. Foor an option to purchase 2,500,000 shares of Common Stock, as presently
constituted (250,000 shares after the
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effectiveness of the 1-for-10 reverse stock split). For additional information,
see "5. Ratification and Approval of Stock Options."
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 and the rules
promulgated thereunder require that directors and executive officers of the
Company and beneficial owners of greater than 10% of the Company's Common Stock
file various reports with the Securities and Exchange Commission (the "SEC").
The Company has reviewed its files and does not find that any Forms 3, 4 or 5
were furnished to the Company during or with respect to 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On or about July 21, 1997, Richard A. Green, Sr., controlled the
Company through Verde, Inc. It owned 2,051,136 shares of Common Stock, and Mr.
Green was a Director and President of the Company. On or about July 21, 1997,
Verde, Inc. sold its holdings to Richard Bowes and Joe R. Love for $50,000 cash,
and Mr. Green resigned all positions with the Company.
In connection with the sale of control, the Company sold its wholly
owned subsidiary, Crescent Contractors, Inc., to Rustown Homes, Inc. on June 11,
1997, for $414.00. Also, on the same date, the Company sold its wholly owned
subsidiary Cresthaven, Inc. to Crestmont International, Inc. for $414.00. In
each case, the amount of the consideration constituted full reimbursement to the
Company of all expenditures paid on behalf of the subsidiary. In addition, in
each case the buyer was owned or partly owned by Richard A. Green, Sr. No gain
or loss was realized by the Company on these sales.
In March 1997, the Company sold all remaining items of restaurant
equipment it owned to Food Franchises, Inc. for an extension of credit of
$37,448.00 Food Franchises, Inc. was an affiliate Mr. Green. On July 7, 1997, in
connection with the sale of Mr. Green's control, the Company sold the $37,448.00
receivable to Verde, Inc., in exchange for the assumption of liabilities of the
Company in the amount of $25,636.00. The Company recognized a loss on the
transaction of $11,812.00.
During the first six months of the year ending December 31, 1997,
International Green Team, Inc. ("IGT") managed the Company under a monthly fee
arrangement. IGT was an affiliate of Mr. Green and provided the Company with
office space and managerial, accounting and clerical services. The Company paid
IGT total fees of $15,600 and $24,000 for the years ended December 31, 1997 and
1996.
Messrs. Richard Bowes, Joe R. Love and Joe P. Foor rendered management
services to the Company from late July to December 31, 1997. In consideration of
such services, the Company authorized the issuance of an aggregate of 3,000,000
shares, as presently constituted, valued at
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$60,000, to such persons, each of whom received 1,000,000 of such shares. The
Common Stock was trading at about $0.06 per share on December 31, 1997. The
shares were valued at $0.02 per share, on the basis of the market value of the
stock, discounted for being "restricted securities" and lack of liquidity, as
well as the Company's lack of earnings and book value.
On March 31, 1998, the Company entered into a letter agreement with Joe
P. Foor and CCDC, Inc., a company controlled by Joe R. Love. Mr. Foor and CCDC,
Inc. (the "consultants") have agreed to provide certain specified consulting and
advisory services of a corporate development nature as the Company may need.
These include the identification, evaluation and negotiation of acquisitions,
strategic planning, optimization of capital structure, access to capital
markets, and similar services. The agreement is for a term of one year and will
continue after one year until terminated by either party upon 30 days' notice.
The Company will pay the consultants a $36,000 annual retainer, plus
out-of-pocket expenses. The consultants will also earn a transaction fee for
each acquisition or capital placement completed the Company completes. The
amount of the retainer will be credited against any transaction fees earned by
the consultants. The transaction fee will be based on the total amount paid by
the acquiring party or the total capital raised and will be a minimum of 3% of
such transaction amount. If greater than 3%, the transaction fee will be
determined by what is generally referred to as the "Lehman Formula," which is an
amount equal to the sum of:
5% of the first $1,000,000 of transaction amount;
4% of the second $1,000,000;
3% of the third $1,000,000;
2% of the fourth $1,000,000; and
1% of the remainder of the transaction amount.
As described previously, the Company is seeking to raise additional
capital for the expansion of the business of PhyMed and has recently commenced a
private offering of securities. See "Recent Developments-PhyMed's Present
Business and Contemplated Growth." The offering is being made to accredited
investors only and seeks to raise a minimum of $200,000 and a maximum of
$3,000,000 from the sale of Units of a new Series B 12% Convertible Preferred
Stock and Warrants to purchase Common Stock. See "3. 1-for-10 Reverse Stock
Split-Issuable Shares of Common Stock." The consultants will earn a transaction
fee on any capital the Company raises in this securities offering.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information, as of May 4, 1998,
concerning the beneficial ownership of Common Stock by all Directors and
nominees, certain executive officers, all Directors and executive officers of
the Company, as a group, and each person who beneficially
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owns more than 5% of the 49,099,069 outstanding shares of Common Stock, $.001
par value. Unless otherwise indicated, each person named has sole voting and
investment power over the shares indicated.
<TABLE>
<S> <C>
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership (1) of Class (1)
------------------- ------------------------ ------------
George C. Barker 69,415,409 (2)(3)(4) 88.5%
9603 White Rock Trail, Suite 100
Dallas, Texas 75238
Joe R. Love 5,076,280 (5) 9.8%
1601 N.W. Expressway, Suite 2101
Oklahoma City, Oklahoma
Joe P. Foor 4,554,080 (6) 8.8%
3535 NW Parkway
Dallas, Texas 75225
Judith F. Barker 69,415,409 (2)(3)(4) 88.5%
9603 White Rock Trail, Suite 100
Dallas, Texas 75238
Marilyn Moss 10,000 (7)
9603 White Rock Trail, Suite 100
Dallas, Texas 75238
All directors and officers 79,029,099 94.6%
as a group (5 persons)
</TABLE>
- --------------------------------------------
(1) In April 1998, the Board of Directors authorized, subject to
shareholder approval, a 1-for-10 reverse stock split, which includes
increasing the par value of the Common Stock from $.001 to $.01.
(2) Includes 31,315,245 outstanding shares owned directly by Mr. Barker and
8,768,268 outstanding shares owned by the Phy.Med., Inc. Employee Stock
Option Plan, as to which Mr. Barker is the sole trustee and has sole
voting power. Also includes shares the Company is still obligated to
issue to Mr. Barker (22,915,544 shares) and the ESOP (6,416,352 shares)
in connection with the Merger. Such shares would have been issued at
the time of the Merger but the Company did not have the necessary
authorized but unissued shares. See "3. 1-for-10 Reverse Stock Split."
Mr. and Mrs. Barker own in the aggregate approximately 70% of the
vested interests of participants in the ESOP.
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(3) Does not include shares which can be purchased upon the exercise of a
recently granted stock option. On May 4, 1998, the Board of Directors
granted Mr. Barker an option to purchase 5,000,000 shares of Common
Stock, as presently constituted (500,000 shares after the effectiveness
of the 1-for-10 reverse stock split), with vesting to be contingent
upon the attainment by the Company of certain financial objectives.
Therefore, it is not presently exercisable and will not be exercisable
within the next 60 days. For additional information, see "5.
Ratification and Approval of Stock Options."
(4) George C. Barker and Judith F. Barker are married. Mr. Barker is the
owner of record or has the power to vote all the outstanding shares
beneficially owned by him. Mrs. Barker is also deemed to be the
beneficial owner of the same shares. Mrs. Barker disclaims any
beneficial ownership of shares held by Mr. Barker as sole trustee of
the ESOP but allocated to the accounts of ESOP participants other than
Mr. or Mrs. Barker.
(5) Includes (a) holdings of family members of Mr. Love, (b) 68,280 shares
issuable upon conversion of Series A Preferred Stock held by a
corporation controlled by Mr. Love, and (c) 2,500,000 shares which can
be purchased upon the exercise of a recently granted stock option. See
"5. Ratification and Approval of Stock Options."
(6) Includes (a) 26,667 shares issuable upon conversion of Series A
Preferred Stock held by Mr. Foor's wife, Anne Foor, and (b) 2,500,000
shares which can be purchased upon the exercise of a recently granted
stock option. See "5. Ratification and Approval of Stock Options."
(7) Less than 1%.
By virtue of his beneficial ownership of Common Stock, Mr. Barker may
be deemed to be a "parent" of the Company as such term is defined in the rules
and regulations of the Securities and Exchange Commission.
Possible Change of Control
Prior to the Merger on April 3, 1998, there were 800 common shares of
PhyMed outstanding, of which 500 were owned by Mr. Barker, individually, and 300
were owned by the ESOP.
In the Merger, the 500 PhyMed common shares owned by Barker were
converted into immediate ownership of and the right to receive 54,230,788 shares
of Common Stock of the Company, and 140 of the 300 PhyMed common shares owned by
the ESOP were converted in like manner into 15,184,621 shares of Common Stock of
the Company. The remaining 160 PhyMed common shares held by the ESOP now
constitute the 20% of PhyMed common shares not owned by the Company.
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<PAGE>
The 800 shares of PhyMed owned by Barker and the ESOP at the time of
the Merger were pledged to Patrick Alan Luckett ("Luckett") to secure the
payment of (a) two promissory notes payable to the order of Luckett, which were
issued to him as partial payment for shares of PhyMed purchased from him, and
(b) a guaranty of such notes.
On September 21, 1993, Barker and Luckett owned all the then
outstanding common shares of PhyMed, Inc., each of them owning of 500 common
shares. On such date Luckett sold 200 of his shares to PhyMed and 300 shares to
the ESOP. The sales were for cash and promissory notes. One note was issued by
PhyMed in the original principal amount of $800,000 pursuant to the terms of a
Loan and Security Merger dated September 21, 1993, and the second promissory
note was issued by the ESOP in the original principal amount of $800,000. Both
notes were guaranteed by Barker. The PhyMed note was secured by the 200 shares
repurchased from Luckett by PhyMed; the ESOP note was secured by the 300 shares
the ESOP purchased from Luckett; and the 500 shares already owned by Barker were
pledged to secure his guaranty of the two notes.
The aggregate of 69,415,409 shares of Common Stock of the Company
received and to be received by Barker and the ESOP as a result of the Merger
have been and will be substituted in the pledge for the 640 PhyMed shares which
were released from the pledge and converted into such shares of Common Stock of
the Company. The 20% of PhyMed still owned by the ESOP remains pledged for such
purpose.
As of April 1, 1998, the unpaid principal balance on the PhyMed note
was $186,008, and the ESOP note was $384,167.
2. CHANGE OF THE COMPANY'S NAME TO "PHYMED, INC."
The Company acquired its 80% ownership of PhyMed in a reverse
triangular merger (the "Merger"). This was the consummation of the transaction
contracted for in an Agreement and Plan of Reorganization and Merger dated March
6, 1998 (the "Merger Agreement"), between the Company, PhyMed, Mr. Barker, the
ESOP and a transitory subsidiary of the Company.
The parties to the Merger Agreement agreed that the Company will change
its name to "PhyMed, Inc." The Company had only nominal assets and liabilities
and no business operations prior to the Merger, so the Company's business is now
PhyMed's business. Therefore, the Board of Directors believes the name "PhyMed,
Inc." is more appropriate because it reflects the name used in the Company's
post-Merger business operations. Therefore, on April 3, 1998, in connection with
the Merger, the Board of Directors approved a resolution, subject to shareholder
approval, amending Article 5 of the Company's Certificate of Incorporation to
change its name to "PhyMed, Inc."
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is required to adopt the proposed amendment to change the
name of the Company. Mr. Barker owns of record or beneficially 40,083,513
(80.17%) of the 49,099,069 outstanding Common Shares of the Company and has
informed the Company that he intends to vote all such shares in favor of the
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proposed amendment. If approved by the shareholders, the amendment will take
effect upon filing with the Secretary of State of Oklahoma, which is expected to
occur shortly after the Annual Meeting.
3. 1-FOR-10 REVERSE STOCK SPLIT
General
The Company presently is authorized to issue 50,000,000 shares of
Common Stock having a par value of $.001 per share. After giving effect to the
Merger on April 3, 1998, 49,099,069 shares of Common Stock were issued and
outstanding. The remaining 900,931 authorized but unissued shares, were reserved
for issuance upon conversion of the Company's outstanding Series A Preferred
Stock. Therefore, the Company has no shares remaining for other purposes.
Number of Shares of Authorized Common Stock Needed
As described below, the Company is still obligated to issue 29,331,896
shares to Mr. Barker and the ESOP to fulfill the Company's obligations under the
Merger. In addition, an aggregate of 10,000,000 shares, as presently
constituted, will be issuable upon the exercise of the stock options the Board
of Directors has granted to Messrs. Barker, Love and Foor. See "5. Ratification
and Approval of Stock Options."
Further, the Company is presently conducting a private offering of
securities to accredited investors only. The offering seeks to raise a minimum
of $200,000 and a maximum of $3,000,000 from the sale of Units of securities.
Each $10.00 Unit consists of one share of a new Series B 12% Cumulative
Convertible Preferred Stock and Series A Warrants to purchase Common Stock. Each
share of the Series B Preferred Stock will be convertible into 50 shares of
Common Stock, as presently constituted, and each Series A Warrant will be
exercisable to purchase 20 shares of Common Stock at $0.325, as presently
constituted. If the Company were to sell maximum in this private offering, as to
which there can be no assurance, the Company would need to reserve for issuance
an additional 21,000,000 authorized shares of Common Stock, as presently
constituted. These shares would be issuable upon conversion of the Series B
Preferred Stock and the exercise of the Series A Warrants.
The terms of the Series B Preferred authorize the Board of Directors
not to pay dividends on the Series B Preferred Stock until the end of the first
full fiscal year ending on or after December 31, 1998, during which the
Corporation reports net income after taxes of at least $1,200,000. After such
point in time, the Board of Directors may choose to pay the 12% cumulative
annual dividends on the Series B Preferred Stock in shares of Common Stock. In
such event, the number of shares of Common Stock to be issued will depend on the
then current market value of the Common Stock at the time the dividend is paid.
If the Company were to sell the maximum of $3,000,000 in the private offering,
then at the present bid price of $0.15 per share of Common Stock, the Company
would need an additional 2,400,000 authorized but unissued shares of Common
Stock each year to pay dividends
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<PAGE>
on the Series B Preferred Stock, should the Board of Directors determine to pay
such dividends in shares of Common Stock for an entire year.
In connection with the Merger on April 3, 1998, George C. Barker,
individually, the Phy.Med., Inc. Employee Stock Ownership Plan (the "ESOP"),
acquired from the Company, in the aggregate, immediate ownership of and the
right to receive an aggregate of 69,415,409 authorized but unissued shares of
Common Stock, $.001 par value, of the Company, as presently constituted, which,
if all such shares were outstanding, would constitute 88.5% of the Company's
then outstanding 78,430,965 shares of Common Stock (87.5% of the 79,331,896
shares which would be outstanding on a fully diluted basis).
The parties to the Merger Agreement contemplate a 1-for-10 reverse
stock split which will become effective shortly after the annual meeting of
shareholders. Upon the effectiveness of such reverse split, Mr. Barker and the
ESOP will own 6,941,540 shares of the 7,843,097 shares, $.01 par value,
outstanding (7,933,190 shares on a fully diluted basis). The Company will
continue to have 50,000,000 shares of Common Stock authorized.
The Company has 50,000,000 shares of Common Stock authorized for
issuance and, at the time of the Merger, had 9,916,487 shares issued and
outstanding or reserved for issuance. To the extent that the terms of the Merger
would have resulted in the issuance of more than 50,000,000 shares, the excess
over 50,000,000 shall not be issued until such time as the shareholders of the
Company have approved an appropriate amendment to the Company's Certificate of
Incorporation. Prior to such approval, Barker and the ESOP will continue to have
a contractual right, pursuant to the Merger and the Articles of Merger filed
with the Secretary of State of Texas at the time of the Merger, to receive such
excess shares, subject to such required shareholder approval.
In summary, Mr. Barker and the ESOP received an aggregate of 40,083,513
shares of the Company at the time of the Merger, the same being 80.167% of the
49,099,069 shares outstanding on the record date. Of such number, Barker,
individually, received 31,315,245 shares (approximately 62.6%) of the
outstanding shares, and the ESOP received 8,768,268 shares (approximately
17.5%).
Barker and the ESOP continue to have a contractual right to receive, in
the aggregate, an additional 29,331,896 shares, which will result in their
having, collectively, 87.5% of the Common Stock of the Company on a
fully-diluted basis. Of such additional shares, 22,915,544 will be received by
Barker, individually, and 6,416,352 shares will be received by the ESOP.
The parties to the Merger Agreement contemplate that the shareholders
of the Company will approve an amendment to the Company's Certificate of
Incorporation approving a 1-for-10 reverse stock split (including an increase in
the par value of the Common Stock from $.001 to $.01). Upon the effectiveness of
such reverse stock split, all outstanding shares of common stock of the Company,
including the shares which were issued to Barker and the ESOP upon the
effectiveness of the Merger, will represent one-tenth (1/10th) as many shares.
In addition, all shares reserved for issuance, including the shares which the
Company will still have a contractual obligation to issue to Barker and
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<PAGE>
the ESOP, will become rights to receive one-tenth (1/10th) as many shares. The
unissued shares due Barker and the ESOP from the Merger will then be immediately
issued because the Company will then have a sufficient number of authorized but
unissued shares to issue for this purpose.
Proposed Charter Amendment Regarding the 1-For-10 Reverse Stock Split
In connection with the Merger, the Board of Directors has approved a
resolution, subject to shareholder approval, amending Article 5 of the Company's
Certificate of Incorporation to multiply the par value of the Common Stock by a
factor of 10, thereby increasing the par value from $.001 to $.01, and, at the
same time, divide the number of outstanding and reserved shares by 10. The text
of Article 5, as proposed to be amended (including the authorizations regarding
Preferred Stock described in Proposal 4 below), is attached to this Proxy
Statement as Exhibit "A."
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is required to adopt the proposed amendment in order to
effect the 1-for-10 reverse stock split. Mr. Barker owns of record or
beneficially 40,083,513 (80.17%) of the 49,099,069 outstanding Common Shares of
the Company and has informed the Company that he intends to vote all such shares
in favor of the proposed amendment. If approved by the shareholders, the
amendment will take effect upon filing with the Secretary of State of Oklahoma,
which is expected to occur shortly after the Annual Meeting.
4. AUTHORIZATIONS REGARDING PREFERRED STOCK
General
The authorized capital stock of the Company consists of fifty million
(50,000,000) shares of Common Stock, par value $.001 per share, of which
49,099,069 are issued and outstanding, an additional 900,931 are reserved for
issuance. In addition, the Company is obligated, subject to shareholder
approval, to issue an additional 29,331,896 shares to Mr. Barker and the ESOP in
connection with the Merger. The authorized capital stock of the Company also
includes one million (1,000,000) shares of Series "A" Preferred Stock, par value
$1.00 per share, of which 135,139 shares are issued outstanding.
The Certificate of Incorporation does not grant the Board of Directors
"blank check" authority to establish new series of Preferred Stock and fix the
terms of new series of Preferred Stock and determine the number of shares of
authorized Preferred Stock to be designated to each series. The Board of
Directors proposes that the shareholders approve an amendment to the Certificate
of Incorporation which will establish a new Series B 12% Convertible Preferred
Stock, change all shares of Preferred Stock which may be undesignated at any
time from "Series 'A' Preferred Stock" to simply "Preferred Stock," and
authorize the Board of Directors to determine the preferences, limitations and
relative rights of all shares of Preferred Stock which may be undesignated at
any time, or one or more series of Preferred Stock, and to issue such shares
from time to time on terms and conditions approved by the Board of Directors.
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<PAGE>
"Blank Check" Authority Regarding Preferred Stock
As part of this proposed amendment, the Board of Directors desires to
have general authority to issue shares of Preferred Stock in one or more series
and to establish by resolution or resolutions, the designation, number, full or
limited voting powers, or the denial of voting powers, preferences and relative,
participating, optional, and other special rights and the qualifications,
limitations, restrictions, and other distinguishing characteristics of each
series to be issued. This is commonly referred to as authorizing "blank check"
Preferred Stock. No further authorization by the shareholders for the issuance
of any shares of Preferred Stock is to be obtained.
The Certificate of Incorporation presently provides that all 1,000,000
shares of authorized Preferred Stock shall be designated as Series "A" Preferred
Stock (Non-Voting). The proposed amendment would also change this to designate
135,139 shares of Preferred Stock as Series "A" Preferred Stock (Non-Voting) and
300,000 shares as Series B 12% Cumulative Convertible Preferred Stock, as
described below. The amendment would otherwise refer to the remaining shares of
Preferred Stock as simply "Preferred Stock." These shares would be undesignated
Preferred Stock, and the Board of Directors could exercise its "blank check"
authority over such shares.
The only offering of Preferred Stock contemplated at the present time
is the proposed Series B Preferred Stock., which is discussed below. As part of
the amendment, the Board of Directors will be authorized to determine the terms
of any other series of Preferred Stock to be issued, including dividend rates,
conversion prices, voting rights, redemption prices and similar matters.
However, the Board of Directors will not have the authority to change the rights
or preferences of shares of Series "A" Preferred Stock or Series B Preferred
Stock which are outstanding at the time any authorized change is to take effect.
The Board of Directors believes that the proposed authorization of
"blank check" authority over Preferred Stock is desirable to enhance the
Company's flexibility in connection with possible future actions, such as
financings, corporate mergers, acquisitions of businesses or other assets, or
other corporate purposes. Having such authorized shares available for issuance
in the future would allow shares of Preferred Stock to be issued without the
expense and delay of a special shareholders' meeting. The shares of Preferred
Stock would be available for issuance from time to time for any proper corporate
purposes in one or more series (which may be "customized" by the Board for the
particular purpose) without further action by the holders of shares of Common
Stock or any then-outstanding shares of Preferred Stock, except as may be
required by applicable law. In this respect, the situation will be similar to
the issue of additional shares of authorized but unissued Common Stock, which
can now be issued and sold by the Board of Directors for any proper corporate
purpose without further action by shareholders, except as may be required by
applicable law.
It is not possible to state the precise effects of the authorization of
"blank check" authority over Preferred Stock upon the rights of holders of
Common Stock until the Board of Directors determines the respective preferences,
limitations and relative rights of the holders of one or more series of new
Preferred Stock that are actually issued in the future. However, such effects
might
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<PAGE>
include (a) a reduction of the amount otherwise available for payment of any
dividends on Common Stock, to the extent dividends are payable on any issued
shares of a new series of Preferred Stock, and restrictions on dividends on
Common Stock if dividends on then outstanding shares of any new series of
Preferred Stock are in arrears; (b) dilution of the voting power of the Common
Stock to the extent that any issued series of any new series of Preferred Stock
has voting rights as may be determined by the Board; and (c) the holders of
Common Stock not being entitled to share in the Company's assets upon
liquidation until satisfaction of any liquidation preference granted to then
outstanding shares of any new series of Preferred Stock.
The Series B Preferred Stock
General. In connection with the private offering of securities
described in "Recent Developments" above, the Board of Directors has authorized,
subject to approval by the shareholders, the creation and issuance of up to
three hundred thousand (300,000) shares of Series B 12% Cumulative Convertible
Preferred Stock, par value $1.00 per share, ("Series B Preferred Stock") such
series will have the rights, preferences and privileges hereafter described. The
Board of Directors proposes that the shareholders approve an amendment to the
Company's Certificate of Incorporation that will create the Series B Preferred
Stock.
The general effect of the authorization or issuance of the Series B
Preferred Stock will be to create additional rights that are senior and prior to
those of the holders of Common Stock, particularly, dividend, redemption and
liquidation rights.
Dividend Rights. The holders of Series B Preferred Stock will be
entitled to receive dividends out of any funds legally available for that
purpose at the annual rate of 12% of the amount of the liquidation preference
and no more, payable annually, or at such shorter intervals as the Board of
Directors may from time to time determine. These dividend rights are subject to
certain conditions described below and also to the senior and prior dividend
rights of the holders of the Series "A" Preferred Stock.
Subject to the limitation described in the next succeeding paragraph,
dividends will accrue on all shares of Series B Preferred Stock from the date
they are issued and will accrue from day to day, whether or not earned or
declared. Dividends will be payable when, as and if declared by the Board of
Directors. The Board of Directors will not be obligated to declare any dividends
to the holders of Series B Preferred Stock, and such holders will have no right
to receive any dividends unless and until declared by the Board of directors in
its sole and absolute discretion. Dividends are payable once a year within
forty-five (45) days after completion of the audit of the Corporation's
financial statements for the fiscal year just ended.
Accrued but unpaid dividends on the Series B Preferred Stock will be
payable before any dividends are paid, declared, or set apart for holders of any
other series of Preferred Stock junior to the Series B Preferred Stock or for
holders of Common Stock. In addition, dividends are cumulative so that if, for
any dividend period, the preferential dividends on Series B Preferred Stock are
not paid,
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<PAGE>
or declared, or set apart, the deficiency must be fully paid or declared and set
apart, without interest, before any distribution (by dividend or otherwise) is
paid on, declared, or set apart for any other series of Preferred Stock junior
to the Series B Preferred Stock or for Common Stock.
The Board of Directors may determine that dividends will not accrue and
will not be paid on the Series B Preferred Stock for all or any part of the
period prior to the end of the first full fiscal year ending on or after
December 31, 1998, during which the Corporation shall have reported net income
after taxes of at least $1,200,000, as reflected on the Corporation's audited
financial statements for such year. In such event, the holders of Series B
Preferred Stock will not be entitled to receive dividends during such period of
time.
Separate and apart from the limitation on the payment of dividends
described in the preceding paragraph, the Board of Directors may determine to
pay dividends on the Series B Preferred Stock either in shares of Common Stock
or in cash for any period or periods of time, whether consecutive or not. In
such event, the value of a share of Common Stock will be determined by averaging
the daily high bid and low asked prices for a share for the 10 consecutive
trading days on which such shares are actually traded preceding the end of the
period, if the Common Stock is traded at the time other than on the NASDAQ
National Market System. The high bid and low asked prices used shall be those
reported in the Wall Street Journal, or if not so reported, as furnished by a
professional market maker making a market in the Common Stock and selected by
the Board of Directors. If the Common Stock is traded on NASDAQ at the time, the
value of a share of Common Stock will be determined by averaging the daily
closing prices (i.e., last sale price, regular way) for a share for the 10
consecutive trading days on which such shares are actually traded on the NASDAQ
National Market System preceding the end of the period.
Conversion and Redemption. Beginning August 31, 1998, each share of
Series B Preferred Stock is convertible at the option of the holder into 50
shares of Company's Common Stock, as presently constituted (five shares after
the effectiveness of the 1-for-10 reverse stock split), but unless previously
converted, is subject to call and redemption by the Company at $10.00 per share
at any time after 5:00 p.m. Dallas, Texas time, on July 31, 1999.
Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Company, holders of the Series B Preferred Stock are entitled
to receive, out of legally available funds, a liquidation preference of $10.00
per share, plus an amount equal to any unpaid dividends to the payment date,
before any payment or distribution is made to the holders of the Company's
Common Stock or any other class of the Company's stock that ranks junior to the
Series B Preferred Stock. These liquidation rights are subject to the senior and
prior rights of the holders of the Series "A" Preferred Stock.
Other Rights. The holders of Series B Preferred Stock will have no
voting, preemptive, sinking fund or other rights as shareholders of the Company,
other than the rights described above.
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<PAGE>
The Private Offering
General. As discussed above, the Company is conducting a private
offering of securities to accredited investors, and shares of Series B Preferred
Stock will be issued to investors who purchase securities in this offering, if
the Company sells at least the $200,000 minimum offering. See "Recent
Developments-PhyMed's Present Business and Contemplated Growth" and "3. 1-For-3
Reverse Stock Split."
Use of Proceeds. The net proceeds of the offering are expected to be
$170,000, if the minimum offering is sold, and $2,700,000, if the maximum
offering is sold. The Company presently intends that the net proceeds of this
offering will be used primarily to expand PhyMed's business through the
development of new medical diagnostic imaging (radiological) centers, the
acquisition of existing centers and commencing and expanding the use of
capitated services agreements.
The offering is in effect a "blind pool" offering. Management is
investigating and exploring a number of possible expansion projects. Specific
proposed undertakings have not yet been selected to be financed with the
proceeds of the offering, in part because such decisions will depend on how much
capital is raised in the offering. The specific projects which are ultimately
selected will depend on several factors, such as the terms, if any, that can be
negotiated, the availability and timing of various items, and the amount of
financing needed and available. Management will use its best judgment in
negotiating and selecting projects, but there is no assurance that any of such
projects will produce a return on investment. Investors must, of necessity, rely
on the ability and judgment of Management in selecting, negotiating and managing
projects.
Within this framework, the following table sets forth the Company's
best estimate of the uses that will be made of the offering proceeds, assuming
in the alternative that either only the minimum or only the maximum is sold:
Minimum Maximum
Acquisition and Development of Centers $100,000 $2,000,000
Development of Capitated Contracts 60,000 400,000
General, Administrative & Working Capital 10,000 300,000
-------- ----------
Total $170,000 $2,700,000
Series A Preferred Stock
General. The Company's Certificate of Incorporation authorizes one
million (1,000,000) shares of Series "A" Preferred Stock, par value $1.00 per
share, of which 135,139 shares are issued outstanding. However, the Certificate
of Incorporation does not set forth the rights and preferences of the Company's
Series A Preferred Stock other than to provide that they have no voting rights.
Therefore, the rights and preferences of the outstanding 135,139 shares of
Series A Preferred Stock cannot be determined conclusively.
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<PAGE>
Such 135,139 shares were issued by the Company's predecessor, Sooner
Energy Corp. ("Sooner-British Columbia"), when such company was domiciled in
British Columbia, Canada. In 1988, Sooner-British Columbia filed resolutions
with the Registrar of Companies in British Columbia authorizing certain Series
"A" Preferred Shares, Can. $1.00 par value, and designating certain of such
authorized shares as Series "A-1," Series "A-2" and Series "A-3" Preferred
Shares. The resolutions fixed the rights and designations of each of the three
series of preferred shares, which rights included non-cumulative dividend
rights, a preference upon liquidation, rights to convert such shares into common
shares of Sooner, and no voting rights. The Company's present management
believes without assurance the outstanding 135,139 shares of the Company's
Series A Preferred Stock were originally issued by Sooner-British Columbia as
Series "A-1" Preferred Shares for an amount equal to their par value.
In 1994, Sooner-British Columbia was "continued" as a Wyoming
corporation with the same name ("Sooner-Wyoming") and was immediately merged
into the Company, which was a wholly-owned subsidiary of Sooner-Wyoming. The
effect of the continuation documents filed in Wyoming was to preserve any rights
or privileges which had accrued in favor of the holders of the Sooner- British
Columbia Series A Preferred Shares prior to the continuation and to deem that
such shares had been issued in compliance with Wyoming law. The documents on
file with Wyoming and Oklahoma public officials provide that each share of
Series "A" Preferred Stock of Sooner-Wyoming outstanding at the time of the
merger was converted into one share of Series A Preferred Stock of the Company.
However, none of such documents sets forth the rights and preferences of either
Sooner- Wyoming's or the Company's Series A Preferred Stock, other than to
provide that they have no voting rights.
Thus, the rights and preferences of the Series A Preferred Stock cannot
be determined conclusively. The Company believes without assurance that an
Oklahoma court having jurisdiction over the matter would determine that the best
evidence of those rights and preferences is the resolutions fixing the rights
and preferences of the original Series "A-1" Preferred Shares filed by
Sooner-British Columbia with the Registrar of Companies in 1988.
Based on the foregoing, the Company believes that the 135,139 shares of
Series A Preferred Stock currently outstanding have the following rights,
preferences and privileges:
Dividend Rights. The holders of Series A Preferred Stock are entitled
to receive dividends out of any funds legally available for that purpose at the
rate of 5% per annum of the amount paid in with respect to such shares (which
the Company believes was Can. $1.00 per share), before any dividends are paid to
the holders of any other class of the Company's stock that ranks junior to the
Series A Preferred Stock, such as the Company's Series B Preferred Stock or the
Common Stock.
Conversion Rights. Each of the 135,139 shares of Series A Preferred
Stock currently outstanding is convertible at the option of the holder into
6.6667 shares of the Company's Common Stock, as the same is presently
constituted (0.66667, after the effectiveness of the 1-for-10 reverse
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stock split). Accordingly, the 135,139 shares of Series A Preferred Stock are
convertible into an aggregate of 900,931 shares of such Common Stock.
The Company's position is that the 1-for-10 reverse stock split will
decrease the conversion rate from 6.6667 to 0.66667 and thereby reduce the
number of shares issuable upon conversion after the reverse split to 1/10th of
the number of shares issuable before the split. Accordingly, if the 135,139
shares of Series A Preferred Stock continue to be outstanding on the date the
reverse split becomes effective, they will convertible after the reverse split
into 90,093 shares of Common Stock instead of 900,931 shares.
However, the charter of Sooner-British Columbia is not clear on this
point and is susceptible of a contrary interpretation. Article 24.3.F(v)B of the
charter provides for the Company's position of a proportionate reduction "[i]n
the event of any consolidation . . . . of the common shares at any time on or
before the 1st day of May, 1989, while any of the Series "A-1" Preferred Shares
are outstanding into a lesser number . . . of shares." The Series "A-1"
Preferred Shares first became convertible on such date and the conversion rate
was determined on such date by reference to a formula in the applicable
subsection of Article 24.3, but there is no indication as to why the
anti-dilution provisions should terminate on such date. It is the Company's
position that the insertion of this date was the result of a drafting error and
that the proportionate reduction will occur, as described above.
Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Company, holders of the Series A Preferred Stock are entitled
to receive, out of legally available funds, a liquidation preference equal to
the amount paid in with respect to such shares (which the Company believes was
Can. $1.00 per share), plus an amount equal to any unpaid dividends to the
payment date, before any payment or distribution is made to the holders of any
other class of the Company's stock that ranks junior to the Series A Preferred
Stock, such as the Company's Series B Preferred Stock or the Common Stock.
Other Rights. The holders of Series A Preferred Stock have no voting,
redemption, or sinking fund rights, and the Company believes without assurance
that they have no preemptive rights.
Common Stock
The par value of the 50,000,000 shares of Common Stock is $.001 per
share. Of such number, 49,099,069 shares are issued and outstanding and 900,931
are reserved for issuance upon the conversion of the Series "A" Preferred Stock.
In addition, the Company is obligated, subject to shareholder approval, to issue
an additional 29,331,896 shares to Mr. Barker and the ESOP in connection with
the Merger. After the effectiveness of the proposed 1-for-10 reverse stock
split, the par value of the Common Stock will be $.01 per share.
Holders of the Common Stock are entitled to one vote per share on all
matters voted on by stockholders. There are no cumulative voting rights, which
means that the holders of a majority of
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the outstanding Common Stock are able to elect all of the Directors and that the
holders of the remaining Common Stock are not able to elect any Director.
Holders of the Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of funds lawfully available for the
payment of dividends, and upon any liquidation, dissolution or winding up of the
affairs of the Company, to receive, pro rata, all of the assets of the Company
available for distribution to stockholders after payment of debt and any
liquidation preferences to the holders of any Series "A" referred Stock or
Series B Preferred Stock that may be outstanding at the time.
Holders of the Common Stock have no preemptive, redemption, sinking
fund or conversion rights.
The transfer agent for the Company's Common Stock is Securities
Transfer Corporation, 16910 Dallas Parkway, Suite 100, Dallas, Texas 75248.
Series A Warrants
The proposed Series A Warrants being offered as part of the Units in
the private offering will entitle the holder of each Warrant to purchase 20
shares of the Company's Common Stock at an exercise price of $0.325 per share,
as presently constituted (two shares at $3.25 per share, after the effectiveness
of the proposed 1-for-10 reverse split). The Series A Warrants may be exercised
commencing one year after the date of issuance and will expire at 5:00 p.m.,
Dallas, Texas time, on July 31, 2001.
Proposed Charter Amendment Regarding Preferred Stock
In connection with the Merger, the Board of Directors has approved a
resolution, subject to shareholder approval, amending Article 5 of the Company's
Certificate of Incorporation by establishing the Series B Preferred Stock and
authorizing the Board of Directors to exercise "blank check" authority in regard
to the Preferred Stock. The text of Article 5, as proposed to be amended
(including the authorizations regarding the 1-for-10 reverse stock split
described in Proposal 3 above), is attached to this Proxy Statement as Exhibit
"A."
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is required to adopt the proposed amendment. Mr. Barker
owns of record or beneficially 40,083,513 (80.17%) of the 49,099,069 outstanding
Common Shares of the Company and has informed the Company that he intends to
vote all such shares in favor of the proposed amendment. If approved by the
shareholders, the amendment will take effect upon filing with the Secretary of
State of Oklahoma, which is expected to occur shortly after the Annual Meeting.
5. RATIFICATION AND APPROVAL OF STOCK OPTIONS
Effective May 4, 1998, the Board of Directors granted stock options to
Messrs. Barker, Love and Foor, subject to the approval of the shareholders. Each
of the options is subject to a separate stock option agreement and is not part
of a plan. The three options are exercisable to purchase a total
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of 10,000,000 shares of the Company's Common Stock at $0.075 per share, as
presently constituted (1,000,000 shares at $.75 per share, after the
effectiveness of the 1-for-10 reverse stock split).
Mr. Barker's option is exercisable to purchase 5,000,000 shares of
Common Stock, as presently constituted (500,000 shares, after the effectiveness
of the 1-for-10 reverse stock split). The option is not immediately exercisable.
It vests and becomes exercisable in full at the end of any quarter during any
fiscal year when the cumulative "Operating Profit Before Corporate Overhead" for
such fiscal year to date equals or exceeds $1,065,483.
Mr. Barker's option has a term of 10 years and expires on May 4, 2008.
The purpose of Mr. Barker's stock option is to retain and incentivise him as
Chairman of the Board, President and Chief Executive Officer of the Company.
The options granted to Mr. Love and Mr. Foor are each exercisable to
purchase 2,500,000 shares, as presently constituted (250,000 shares, after the
effectiveness of the 1-for-10 reverse stock split). Each option can be exercised
in whole or in part at any time after the effectiveness of the 1-for- 10 reverse
stock split, has a term of 10 years and expires on May 4, 2008. The purpose of
the options granted to Mr. Love and Mr. Foor is to compensate them for serving
as Directors of the Company.
The number of shares subject to an option is subject to proportional
adjustment for any increase or decrease in the number of shares issued by the
Company without receipt of consideration by the Company, such as a stock
dividend or a stock split.
The options are non-qualified stock options under the Internal Revenue
Code of 1986. As a general rule, no tax is imposed on the optionee upon the
grant of an option, nor will the Company be entitled to a tax deduction by
reason of such grant. Generally, upon the exercise of an option, an optionee
will be treated as receiving compensation taxable as ordinary income in the year
of exercise in an amount equal to the excess of the fair market value of the
shares on the date of exercise over the exercise price. Thereafter, if the
holder holds the stock for a period of one year or less the sale will be treated
as subject to ordinary income tax rates. Stock held for a period exceeding one
year receives capital gain tax rate treatment. The Company will be entitled to a
tax deduction in an amount equal to the compensation recognized by the optionee.
Set forth below is certain information with respect to the options
granted as of May 4, 1998, subject to approval of the options by the
shareholders.
New Plan Benefits
-----------------
1998 Stock Option Agreements
----------------------------
Number of Shares
----------------
Name and Position Dollar Value Pre-Split Post-Split
- ----------------- ------------ --------- ----------
George C. Barker -0-(3) 5,000,000(1) 500,000(1)
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Chairman of the Board, President
and Chief Executive Officer
Joe R. Love -0- 3) 2,500,000(2) 250,000(2)
Director
Joe P. Foor -0-(3) 2,500,000(2) 250,000(2)
Director
Executive Group -0-(3) 5,000,000(1) 500,000(1)
Non-Executive Director Group -0-(3) 5,000,000(2) 500,000(2)
Non-Executive Officer -0- -0- -0-
Employee Group
- ---------------------------------------------
(1) Mr. Barker's option vests and becomes exercisable in full at the end of
any quarter during any fiscal year when the cumulative "Operating
Profit Before Corporate Overhead" for such fiscal year to date equals
or exceeds $1,065.483.
(2) Vested immediately upon the date of grant, May 4, 1998, subject to
approval of the stock options by the shareholders of the Company at the
Annual Meeting.
(3) The option price is $0.075 per share, as the Common Stock is presently
constituted ($0.75 per share, after the effectiveness of the 1-for-10
reverse split). The dollar value of the option is equal to (a) the
value of one share of Common Stock in excess of $0.075 per share,
multiplied by (b) the number of shares covered by the option. On May 4,
1998, the date the options were granted, the bid and asked prices on
the Common Stock were approximately $0.15 and $0.30. However, there is
no established trading market in the Common Stock, and trades of the
Common Stock take place only sporadically. Therefore, the Board of
Directors has determined that the fair market value of the Common Stock
on such date was $0.075, as the Common Stock is presently constituted
($0.75 per share, after the effectiveness of the 1-for-10 reverse
split). Accordingly, the dollar value of the option is zero.
Vote Required for Ratification and Approval of the Stock Options
The stock option agreements must be ratified and approved by the
affirmative vote of the holders of a majority of the shares of Common Stock of
the Company present in person or represented by proxy at the Annual Meeting. Mr.
Barker owns of record or beneficially 40,083,513 (80.17%) of the 49,099,069
outstanding Common Shares of the Company and has informed the Company that he
intends to vote all the 40,083,513 shares beneficially owned by him in favor of
Proposal 5. Copies
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of Mr. Barker's and Mr. Love's Stock Option Agreements are attached to this
Proxy Statement as Exhibit "B." Mr. Love's and Mr. Foor's agreements are the
same.
6. RATIFICATION AND APPROVAL OF INDEMNITY AGREEMENTS
General
The Board of Directors has authorized and the Company has entered into
separate Indemnity Agreements (the "Indemnity Agreements"), each in the form
attached hereto as Exhibit "C," with its existing Directors and non-director
officers. After the election of Directors at the Annual Meeting, the Company
intends from time to time to enter into such Indemnity Agreements with any
newly- elected Directors and also with any non-director officers selected by the
Board of directors in its sole and absolute discretion. The Board believes that
the Indemnity Agreements are in the best interests of the Company and its
shareholders. In the Board's view, it is extremely important for the Company to
continue to be able to retain and attract responsible and well-qualified
individuals to serve as its Directors and officers. At the same time, the Board
feels that the Company's ability in this regard is threatened by a growing risk
of litigation directed against corporate directors and officers generally, and
the difficult market for directors' and officers' liability insurance, in which
the available coverage is more limited than in the past and the cost of such
insurance has increased substantially. The Indemnity Agreements will, in the
Board's opinion, enhance the Company's ability to retain and attract
well-qualified Directors and officers. The Directors have expressed their
concern over the lack of directors' and officers' insurance coverage available
to them. No nominee for Director has indicated that he will decline to serve or
resign as a Director because of this problem.
Although shareholder approval of the Indemnity Agreements is not
required by law, the board of Directors considers it appropriate to submit the
Indemnity Agreements to the shareholders of the Company for their ratification
and approval, because the members of the Board are parties to, and therefore the
beneficiaries of the rights contained in, the Indemnity Agreements. The Company
believes that shareholder approval will remove as a basis for challenging the
enforceability of such Agreements the fact that directors may be deemed to be
interested parties under Section 1030 of the Oklahoma General Corporation Act
(the "Oklahoma Law"). Although the Company cannot determine in advance its
position with respect to any challenge to the enforceability of the Indemnity
Agreements by a shareholder, the Company may assert shareholder approval of the
Indemnity Agreements as a defense. A shareholder of the Company may be estopped
from making a claim that the Indemnity Agreements or future Indemnity Agreements
entered into by the Company with Directors and officers of the Company are
invalid, if the shareholder votes in favor of such ratification and approval.
Each Indemnity Agreement provides that it shall terminate at the
conclusion of this year's Annual Meeting if it has not been ratified and
approved at such meeting by the affirmative vote of the holders of a majority of
the shares of Common Stock of the Company present in person or represented by
proxy at such meeting. In the event such approval is not received, the Company's
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Directors and officers would continue to have indemnification rights provided by
the Oklahoma Law, Article 12 of the Company's Certificate of Incorporation.
The Board anticipates that Indemnity Agreements substantially in the
form of Exhibit "C" hereto will, if the Indemnity Agreements now in effect are
ratified and approved as proposed, be entered into from time to time in the
future with any newly-elected Directors and also with any non-director officers
selected by the Board of directors in its sole and absolute discretion. Such new
Indemnity Agreements will be subject to being authorized by the Board. The Board
of Directors currently expects that such future agreements may differ from the
Indemnity Agreements now in effect in that the future agreements may not provide
for the termination thereof upon the failure to receive shareholder approval,
and the Board at present does not expect to seek shareholder approval or
ratification for any such future agreements. A shareholder of the Company may be
estopped from making a claim that such future agreements entered into by the
Company with directors and officers of the Company are invalid, if the
shareholder votes in favor of such ratification and approval.
The Indemnity Agreements became effective upon their execution and
delivery and will, in accordance with their terms, provide indemnification
protection to the Company's Directors and officers who are parties thereto, with
respect to actions, suits and proceedings threatened or commenced before, as
well as after, such date. The Board of Directors knows of no threatened, pending
or completed action, suit or proceeding to which the Indemnity Agreements would
apply.
The Company has no present plans to provide indemnification protection
to its directors and officers beyond that provided by the Indemnity Agreements.
Existing Indemnification Protection Apart From Indemnity Agreements
Apart from the Indemnity Agreements, the Company currently affords
protection, by means of indemnification to its Directors and officers. The
Company is incorporated under the Oklahoma Law. Section 1031 of the Oklahoma Law
provides a detailed statutory framework covering indemnification of Directors
and officers against liabilities and expenses arising out of legal proceedings
brought against them by reason of their status or service as directors and
officers. Article 12 of the Company's Certificate of Incorporation provides that
the Company shall indemnify its Directors and officers to the fullest extent
authorized by the Oklahoma Law.
Article 12 of the Certificate of Incorporation (which is based upon the
statutory indemnification scheme contained in Section 1030 of the Oklahoma Law)
provides, in effect, that a Director or officer of the Company (i) shall be
indemnified by the Company for all expenses of such litigation when he is
successful on merits, (ii) shall be indemnified by the Company for the expenses,
judgments, fines and amounts paid in settlement of such litigation (other than a
derivative suit), even if he is not successful on the merits, if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company (and, in the case of a criminal proceeding, had no
reason to believe his conduct was unlawful), and (iii) shall be indemnified by
the Company for expenses of a derivative suit (a suit by a shareholder by or in
the right of the Company alleging
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a breach by a director or officer of a duty owed to the Company even if he is
not successful on the merits, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, provided that no such indemnification may be made in accordance with
this clause (iii) if he is adjudged liable to the Company, unless a court
determines that, despite such adjudication but in view of all of the
circumstances, he is entitled to indemnification. The indemnification described
in clauses (ii) and (iii) above shall be made only upon a determination by a
majority of a quorum of disinterested directors, independent legal counsel or
the shareholders that indemnification is proper because the applicable standard
of conduct has been met. It is possible that indemnification pursuant to clause
(ii) above would be authorized where a Director or officer of the Company has
been adjudged to have been negligent or grossly negligent, if the standard
specified in clause (ii) has been satisfied. The Board of Directors of the
Company may also authorize the advancement of litigation expenses to a Director
or officer upon receipt of an undertaking by such Director or officer to repay
such expenses if it is ultimately determined that he is not entitled to be
indemnified by the Company.
Limitations of Existing Indemnification Protection Apart from Indemnity
Agreements
There are, in the Board's judgment, certain limitations inherent in the
protection currently afforded to the Company's Directors and officers apart from
the Indemnity Agreements. For one thing, the Certificate of Incorporation,
including the indemnification provisions contained therein, is subject to
amendment upon obtaining the required vote of shareholders. One of the principal
purposes of the Indemnity Agreements is to provide the Directors and officers
entering into the same with a continuing basis of indemnification protection
that cannot be made the subject of unilateral amendment or revocation. As a
contracting party, each indemnified Director or officer must grant his written
consent to any amendment to his Indemnity Agreement.
In addition, the Board of Directors believes that the indemnification
provided by the Certificate of Incorporation which is based on the statutory
indemnification scheme, has other limitations: (i) Section 1031 of the Oklahoma
Law does not provide for indemnification of a director or officer for amounts
paid in settlement of a derivative action; and (ii) the Company is under no
obligation to advance litigation expenses to a Director or officer. The
Indemnity Agreements address each of these limitations. In view of the nature of
a derivative suit (a suit by a shareholder by or in the right of a corporation
alleging a breach by a director or officer of a duty owed bo the corporation),
the requirement under the Indemnity Agreements of indemnification for amounts
paid in settlement of derivative actions could result in the Company reimbursing
the Directors or officers who are the defendants in such a case for amounts
recovered by the Company from such defendants pursuant to a settlement of the
case.
The Indemnity Agreements are based on the indemnification scheme set
forth in Section 1031 of the Oklahoma Law which is incorporated into Article 12
of the Certificate of Incorporation as discussed above (See "Existing
Indemnification Protection Apart From Indemnity Agreements"), with certain
changes and additions. The Indemnity Agreements, however, do not obligate the
Company to provide indemnification coverage for actions of a Director or officer
beyond what the Company
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is already obligated to provide by Article 12 of the Certificate of
Incorporation, except that the Indemnity Agreements obligate the Company to
provide indemnification for amounts paid in settlement of a derivative action.
In view of the foregoing limitations of the indemnification and
insurance protection currently afforded to the Company's Directors and officers
apart from the Indemnity Agreements, and for the reasons mentioned above, the
Board of Directors believes that it is in the best interests of the Company and
its shareholders to supplement such protection with the Indemnity Agreements.
Indemnity Agreements
The Indemnity Agreements are based on the indemnification scheme set
forth in Section 1031 of the Oklahoma Law which is incorporated into Article 12
of the Certificate of Incorporation as discussed above (See "Existing
Indemnification Protection Apart From Indemnity Agreements"), with certain
changes and additions. The description of the Indemnity Agreements set forth
herein is qualified in its entirety by the full text of the Indemnity Agreement
attached as Exhibit "C". The principal changes and additions are as follows:
First, the Indemnity Agreements establish the presumption that the
Director or officer has met the applicable standard of conduct required for
indemnification. Indemnification will be made unless the Board of Directors or
independent counsel determines that the applicable standard of conduct has not
been met. Following a Change in Control of the Company (as defined in the
Indemnity Agreements), this determination must be made by independent counsel
selected in the manner provided in the Indemnity Agreements. The Indemnity
Agreements provide a detailed procedure relating to the selection of independent
counsel following a Change in Control of the Company in which the Board of
Directors following a Change in Control of the Company participates.
Furthermore, the Indemnity Agreements provide that the independent counsel shall
not have provided legal services to the Company or the person seeking
indemnification during the preceding five years. The Board, therefore, does not
believe that this provision will discourage a potential acquirer from attempting
to accomplish a Change in Control of the Company.
Second, the Indemnity Agreements provide that litigation expenses shall
be advanced to a Director or officer at his request provided that he undertakes
to repay the amount advanced in it is ultimately determined that he is not
entitled to indemnification for such expenses.
Third, the Indemnity Agreements explicitly provide for indemnification
of amounts paid in settlement of a derivative suit.
Fourth, in the event of a determination by the disinterested members of
the Board of Directors or independent counsel that a Director or officer did not
meet the standard of conduct required for indemnification, the Indemnity
Agreements allow such Director or officer to contest this determination by
petitioning a court to make an independent determination of whether such
Director or officer is entitled to indemnification under his Indemnity
Agreement.
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Fifth, the Indemnity Agreements explicitly provide for partial
indemnification of costs and expenses in the event that a Director or officer is
not entitled to full indemnification under the terms of his Indemnity Agreement.
Sixth, in the event a lawsuit is dismissed without prejudice, the
Indemnity Agreements provide that the Director or officer shall be entitled to
indemnification for his expenses.
Seventh, the Indemnity Agreements provide that the expenses incurred by
a Director or officer in enforcing his rights under the Indemnity Agreements
shall be reimbursed by the Company.
Finally, the Indemnity Agreements provide that, to the extent permitted
by applicable law, the Company may, but is not obligated to, secure its
obligations to its Directors and officers under the Indemnity Agreements through
insurance, collateral, letters of credit or other security devices approved by
the Board of Directors. No action has been taken by the Board of Directors to
provide such security, although the Board will have the authority to take such
action in the future.
The Securities and Exchange Commission ("{SEC") takes the position that
indemnification of directors or officers against violations of the Securities
Act of 1933 is against public policy and unenforceable, and any time the Company
registers securities with the SEC it must execute an undertaking to submit to a
court any such indemnification claim arising with respect to the registered
securities for a determination whether the clause is enforceable and to be bound
by the court's decision. Accordingly, any claim made by a Director or officer of
the Company for indemnification under an Indemnity Agreement with respect to a
claim subject to the Company's undertaking to the SEC will have to be submitted
to a court before final payment thereunder would be made to the Director or
officer.
Vote Required for Ratification and Approval of the Indemnity Agreements
The Indemnity Agreements must be ratified and approved by the
affirmative vote of the holders of a majority of the shares of Common Stock of
the Company present in person or represented by proxy at the Annual Meeting. Mr.
Barker owns of record or beneficially 40,083,513 (80.17%) of the 49,099,069
outstanding Common Shares of the Company and has informed the Company that he
intends to vote all the 40,083,513 shares beneficially owned by him in favor of
Proposal 6.
7. INDEPENDENT AUDITORS
The shareholders are being asked to ratify the selection by the Board
of Directors of Grant Thornton LLP as the independent public accountants for the
Company for the fiscal year ending December 31, 1998.
The firm of Grant Thornton LLP has served as the independent public
accountants for the Company for the fiscal year ending December 31, 1997, and
the Board of Directors has selected Grant
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Thornton LLP to serve as the Company's independent public accountant for the
current fiscal year.
Representatives of Grant Thornton LLP are expected to be present at the
Annual Meeting, to have the opportunity to make a statement, if they so desire,
and to be available to respond to appropriate questions from shareholders.
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the Company's Proxy
Statement for the Annual Meeting to be held in 1999, all shareholder proposals
must be received by the Company on or prior to January 16, 1999. Any proposal
should be sent to the attention of the Company.
By the Order of the Board of Directors
Judith F. Barker
May 20, 1998 Secretary
UPON THE WRITTEN REQUEST OF ANY SHAREHOLDER, THE COMPANY WILL FURNISH,
AT NO CHARGE TO THE SHAREHOLDER, A COPY OF THE COMPANY'S FORM 10-KSB FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE REQUEST SHOULD BE DIRECTED TO THE SECRETARY OF THE COMPANY AT
9603 WHITE ROCK TRAIL, SUITE 100 DALLAS, TEXAS 75238.
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EXHIBIT "A"
TEXT OF AMENDED ARTICLE 5 OF CERTIFICATE OF INCORPORATION
If Proposals 3 and 4 are both approved by the shareholders, the present
Article 5 of the Certificate of Incorporation of Tatonka Energy, Inc. will be
deleted in its entirety and replaced with the following Article 5:
"5. The shares to be issued by the Corporation shall be of two classes,
namely, Voting Common Stock, of a par value of One Cent ($0.01) per
share, and Preferred Stock, of a par value of One Dollar ($1.00) per
share. The Corporation shall have the authority to allot an aggregate
number of fifty million (50,000,000) shares of the Voting Common Stock
and an aggregate number of one million (1,000,000) shares of Preferred
Stock.
A. Authority of the Board of Directors. Regarding Preferred Stock,
135,139 shares are designated as Series "A" Preferred Stock
(Non-Voting) and 300,000 shares are designated as Series B 12%
Cumulative Convertible Preferred Stock. The Board of Directors shall be
vested with and shall have the authority to issue any or all shares of
Preferred Stock in one or more series and by resolution or resolutions,
to establish the designation, number, full or limited voting powers, or
the denial of voting powers, preferences and relative, participating,
optional, and other special rights and the qualifications, limitations,
restrictions, and other distinguishing characteristics of each series
to be issued; provided, however, that the Board of Directors may not
change the rights and preferences of shares of Series "A" Preferred
Stock (Non-Voting) or Series B 12% Cumulative Convertible Preferred
Stock, which are outstanding at the time any authorized change is to
take effect.
B. Series B 12% Cumulative Convertible Preferred Stock. The "Series B
12% Cumulative Convertible Preferred Stock" (the "Series B Preferred
Stock") shall have the powers, preferences and relative, participating,
optional, and other special rights and the qualifications, limitations,
restrictions, and other distinguishing
characteristics set forth below.
(a) Voting Rights. The Series B Preferred Stock shall be
nonvoting stock, and the holders (hereinafter called
"Holders") of Series B Preferred Stock shall have no
voting rights except where required by law.
(b) Dividend Rights. Subject to the restrictions and
limitations of subparagraphs (ii) and (iii) below,
the Holders of Series B Preferred Stock shall be
entitled to receive dividends as provided in
subparagraph (i) below:
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(i) The Holders of Series B Preferred Stock shall be
entitled to receive dividends out of any funds
legally available for that purpose at the annual rate
of 12% of the amount of the liquidation preference
and no more, payable annually, or at such shorter
intervals as the Board of Directors may from time to
time determine. Dividends shall accrue on all shares
of Series B Preferred Stock from the date they are
issued and shall accrue from day to day, whether or
not earned or declared. Such dividends shall be
payable when, as and if declared by the Board of
Directors. Nothing contained herein shall obligate
the Board of Directors to declare any dividends to
the Holders of Series B Preferred Stock, and such
Holders shall have no right to receive any dividends
unless and until declared by the Board of directors
in its sole and absolute discretion. Dividends shall
be paid once a year within forty-five (45) days after
completion of the audit of the Corporation's
financial statements for each fiscal year. Accrued
but unpaid dividends on the Series B Preferred Stock
will be payable before any dividends are paid,
declared, or set apart for holders of any other
series of Preferred Stock junior to the Series B
Preferred Stock or for holders of Common Stock. In
addition, dividends are cumulative so that if, for
any dividend period, the preferential dividends on
Series B Preferred Stock are not paid, or declared,
or set apart, the deficiency must be fully paid or
declared and set apart, without interest, before any
distribution (by dividend or otherwise) is paid on,
declared, or set apart for any other series of
Preferred Stock junior to the Series B Preferred
Stock or for Common Stock
(ii) Prior to the end of the first full fiscal year
ending on or after December 31, 1998, during which
the Corporation shall have reported net income after
taxes of at least $1,200,000, as reflected on the
Corporation's audited financial statements for such
year, the Board of Directors shall have the right and
option, in its sole and absolute discretion, at any
time or times, or intermittently from time to time,
to determine or declare that dividends shall not
accrue from day to day and, accordingly, shall not be
paid, on the Series B Preferred Stock. In the event
of such determination or determinations by the Board
of directors, the Holders of Series B Preferred Stock
shall not be entitled to receive dividends during
such period of time or times as the Board of
Directors may determine.
(iii) Notwithstanding any other term or provision
contained herein, and as a completely separate and
independent matter from the provisions of
subparagraph (ii) above, the Board of Directors
shall, in its sole and absolute discretion, have the
right and option, but not the
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obligation, to pay dividends on the Series B
Preferred Stock either in shares of Common Stock or
in cash for any period or periods of time, whether
consecutive or not, such as, for example, for an
entire year, for a portion or portions of a year, for
multiple years, or for portions of multiple years. If
the Board of Directors determines to pay dividends
for any period in shares of Common Stock, the value
of a share shall be determined by averaging the daily
closing prices (i.e., last sale price, regular way)
for a share of Common Stock for the 10 consecutive
trading days on which such shares are actually traded
on the NASDAQ National Market System preceding the
end of the period, if the Common Stock is so traded
at the time. If not, the average of the high bid and
low asked prices as reported in the Wall Street
Journal, or if not so reported, as furnished by a
professional market maker making a market in the
Common Stock and selected by the Board of Directors
of, shall be used.
(c) Liquidation Preference. On any voluntary or
involuntary liquidation of the Corporation, the
Holders of Series B Preferred Stock shall receive
a liquidation preference equal to $10.00 per share,
plus any declared and unpaid dividends on Series B
Preferred Stock, and no more, before any amount is
paid to the holders of the Common Stock. or any other
series of Preferred Stock junior to the Series B
Preferred Stock. Each certificate representing shares
of Series B Preferred Stock shall show on its face
the amount of the liquidation preference per share.
If the assets of the Corporation should be
insufficient to permit payment to the Holders of
Series B Preferred Stock of their full liquidation
preference amounts as herein provided, then such
assets will be distributed ratably among the holders
of outstanding shares of Series B Preferred Stock.
If the assets of the Corporation are sufficient to
permit payment to the Holders of Series B Preferred
Stock of their liquidation preference in full, the
holders of any other series of Preferred Stock junior
to the Series B Preferred Stock and/or the holders of
Common Stock shall receive ratably all the
remaining assets of the Corporation. A merger or
consolidation of the Corporation with or into any
other corporation, or a sale of all or substantially
all of the assets of the Corporation will be deemed
a liquidation of the Corporation within the meaning
of this paragraph, thereby entitling Holders to the
liquidation preference.
(d) Conversion Rights of Holders. The Holder of any shares of
Series B Preferred Stock shall have the right and option to
convert any of such shares of Series B Preferred Stock into
shares of Common Stock on the following terms:
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(i) Conversion Rate. Commencing August 31, 1998, each
outstanding share of Series B Preferred Stock shall be
convertible at any time and from time to time, at the option
of the Holder, into five (5) shares of Common Stock.
(ii) Procedure. Any Holder may convert by delivering to the
office of the Corporation or its transfer agent a written
notice electing to convert and surrendering the Holder's
certificate(s) evidencing the shares of Series B Preferred
Stock being converted, duly endorsed for transfer.
(e) General Conversion Provisions. The following provisions apply
to conversion:
(i) Anti-dilution Rights. While the Series B Preferred
Stock is outstanding, if the Corporation:
(w) divides its outstanding shares of Common
Stock into a greater number of shares;
(x) combines its outstanding shares of Common
Stock into a small number of shares;
(y) pays a dividend or makes a distribution on
its Common Stock in shares of its capital
stock or other property; or
(z) issues by reclassification of its Common
Stock any shares of its capital stock or
other property;
then the conversion privilege in effect immediately before
such action will be adjusted so that the each Holder of the
Series B Preferred Stock thereafter converted may receive the
number of shares of Common Stock, capital stock or other
property that he would have owned immediately following such
action if he had converted the shares of Series B Preferred
Stock immediately before the record date (or, if no record
date, the effective date) for such action.
The adjustment will become effective immediately after the
record date in the case of a dividend or distribution and
immediately after the effective date in the case of a
subdivision, combination or reclassification.
(ii) No Fractional Shares. Neither fractional shares, nor
scrip or other certificates evidencing such fractional shares,
will be issued by the Corporation on conversion of Series B
Preferred Stock, but the Corporation will pay in lieu thereof
the Determined Value (defined below) in cash to the
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holders who would be entitled to receive such fractional
shares. The "Determined Value" means the otherwise-issuable
fraction of a share of Common Stock multiplied by the average
of the daily closing prices (i.e., last sale price, regular
way) for a share of Common Stock for the 10 consecutive
trading days on which such shares are actually traded on the
NASDAQ National Market System (if the Common Stock is so
traded at the time) preceding the date the Holder delivered to
the office of the Corporation or its transfer agent a written
notice electing to convert and surrendering the Holder's
certificate(s) evidencing the shares of Series B Preferred
Stock being converted, duly endorsed for transfer. If the
Common Stock is not so traded at the time, the average of the
high bid and low asked prices as reported in the Wall Street
Journal, or if not so reported, as furnished by a professional
market maker making a market in the Common Stock and selected
by the Board of Directors of, shall be used.
(iii) Status of Converted Shares. Shares of Series B Preferred
Stock that are converted will be restored to the status of
authorized but unissued shares of Preferred Stock, and will no
longer be authorized but unissued shares of Series B Preferred
Stock.
(iv) Reservation of Shares. The Corporation will at all times
reserve and keep available out of its authorized but unissued
shares of Common Stock such number of shares of Common Stock
as may be necessary for the purpose of converting all
outstanding shares of Series B Preferred Stock into the full
number of shares of Common Stock issuable upon conversion of
all such Series B Preferred Stock.
(f) Redemption. The Corporation may redeem Series B Preferred
Stock under the following terms and conditions:
(i) Terms of Redemption. On or after 5:00 p.m. Dallas, Texas
time, July 31, 1999, the Corporation, may, at the option of
the Board of Directors, redeem the whole, or from time to time
any part, of the outstanding Series B Preferred Stock by
paying in cash $10.00 per share, plus all dividends accrued,
unpaid, and accumulated thereon, as provided in this paragraph
through and including the redemption date (the "Redemption
Price") and by giving to each record Holder of Series B
Preferred Stock at his or her last known address as shown on
the Corporation's records, at least thirty (30) but not more
than sixty (60)days' notice. This "Redemption Notice" may be
either in person or in writing, by mail, postage prepaid and
must state the class or series or part of any class or series
of shares to be redeemed, along with the date and plan of
redemption, the Redemption Price, and the place where the
shareholders may obtain payment of the Redemption Price on
surrendering their share
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certificates. If only a part of the outstanding Series B
Preferred Stock is redeemed, redemption will be by lot or pro
rata, as the Board of Directors prescribes. But no Series B
Preferred Stock may be redeemed unless all accrued and
accumulated dividends on all outstanding Series B Preferred
Stock have been paid for all past dividend periods and full
dividends for the current period through and including the
redemption date have been paid or declared and set apart for
payment. On or after the date fixed for redemption, each
Holder of shares called for redemption may, unless the Holder
has previously exercised the option to convert the Holder's
Series B Preferred Stock as provided elsewhere herein,
surrender to the Corporation the certificate for the shares at
the place designated in the Redemption Notice and will then be
entitled to receive payment of the Redemption Price. If fewer
than all the shares represented by any surrendered certificate
are redeemed, a new certificate for the unredeemed shares will
be issued. If the Redemption Notice is duly given and
sufficient funds are available on the date fixed for
redemption, then, whether or not the certificates representing
the shares to be redeemed are surrendered, all the Holders'
rights with respect to the shares called for redemption will
terminate on the date fixed for redemption, except for the
Holders' right to receive the Redemption Price, without
interest, on surrendering their certificates.
(ii) Deposit of Funds. Shares are considered redeemed, and
dividends on them cease to accrue after the date fixed for
redemption, if, on or before any date fixed for redeeming the
Series B Preferred Stock as provided in this paragraph, the
Corporation deposits as a trust fund with any bank or trust
company in Oklahoma or Texas (or any bank or trust company in
the United States duly appointed and acting as the
Corporation's transfer agent) a sum sufficient to redeem, on
the date fixed for redemption, the shares called for
redemption, with irrevocable instructions and authority to the
bank or trust company (a) to publish the Redemption Notice (or
to complete publication already begun), and (b) to pay, on and
after the date fixed for redemption or before that date, the
Redemption Price of the shares to their holders when they
surrender their certificates. The deposit is considered to
constitute full payment of the shares to their holders, and
from the date of the deposit the shares will no longer be
considered outstanding. Moreover, the Holders of the shares
will cease to be shareholders with respect to the shares,
except to receive from the bank or trust company payment of
the Redemption Price of the shares (without interest) on
surrendering of the certificates and to convert the shares to
Common Stock as provided elsewhere herein. Any money so
deposited on account of the Redemption Price of Series B
Preferred Stock shares converted after the deposit is made
must be repaid immediately to the corporation on conversion of
those shares of Series B Preferred Stock.
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(iii) Status of Redeemed Shares. Shares of Series B Preferred
Stock redeemed by the Corporation shall be restored to the
status of authorized but unissued shares.
(i) No Preemptive Rights. Holders of Series B Preferred Stock will
not have any preemptive rights to subscribe for or purchase
any additional shares of Preferred Stock of any series or any
shares of the Corporation's Common Stock.
(j) Restriction of Surplus. The liquidation preference of the
Series B Preferred Stock exceeds the par value thereof by
$9.99 per share. As long as any shares of Series B Preferred
Stock are outstanding, surplus shall be restricted on any
specific date by an amount equal to the product of (i) $9.99
multiplied by (ii) the number of shares of Series B
Preferred Stock then outstanding. In furtherance of this
restriction of surplus, the Corporation covenants and agrees
that, so long as any shares of Series B Preferred Stock are
issued and outstanding, the Corporation shall not pay any
dividend, make any other distribution, or enter into or
consummate any transaction which would have the effect of
reducing the combined (i) par value of all shares of Series
B Preferred Stock then outstanding and (ii) surplus of the
Corporation to an amount less than the aggregate liquidation
preference of all the then- outstanding shares of Series B
Preferred Stock.
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EXHIBIT "B"
STOCK OPTION AGREEMENT
George C. Barker
Stock Option Agreement made this 4th day of May, 1998, between Tatonka
Energy, Inc., an Oklahoma corporation ("Company") and George C. Barker,
("Optionee").
WHEREAS, The Company desires to provide the Optionee with an
opportunity to acquire a proprietary interest in the business of the Company
and, through stock ownership, an increased personal interest in its continued
success and progress:
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter set forth, and other good and valuable consideration, the Company
and Optionee agree as follows:
1. The Company hereby grants to the Optionee the option to purchase an
aggregate of 5,000,000 shares of Company's Common Stock, par value of $0.0001
(as presently constituted), on the terms and conditions hereinafter set forth,
at the purchase price of $0.075 per share as presently constituted (500,000
shares at $0.75 per share, after the effectiveness of the proposed 1-for-10
reverse stock split).
2. The Option shall be exercisable in whole or in part at any time, or
from time to time, after the end of any quarter in which the Company's
cumulative operating profits (before corporate overhead) exceed the sum of
$1,065,483 . Notice shall be given to the Company by the Employee of such
exercise of the Option as provided below.
3. (a) The Option shall be exercisable as to not less than 10,000
shares, as presently constituted (1,000 shares, after the effectiveness of the
proposed 1-for-10 reverse stock split), or a multiple thereof, or the remaining
shares covered by the Option if less than such minimum. Notice shall be given to
the Company by the Optionee of such exercise of the Option as provided below.
(b) The purchase price of any shares as to which the Option
shall be exercised shall be paid in full at the time of such exercise or, except
as hereinafter provided, may, at the election of the Optionee, be paid in
installments, in which case the first installment shall be paid at the time of
such exercise. In the event that the purchase price of such shares shall be paid
in full at the time of such exercise, such shares shall be issued as fully paid
and nonassessable shares. In the event, however, that the Optionee shall elect
to pay the purchase price of such shares in installments:
(i) such shares shall be issued as partly paid and assessable
shares,
(ii) the first installment shall be amount equal to not less
than 20% of such purchase price,
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(iii) the unpaid balance of such purchase price shall be paid
(without interest) in equal installments, the first installment at the end of 12
months commencing with the date of such exercise and subsequent installments at
the end of each successive 12-month interval until the balance is paid in full
(the Optionee to have the right of prepaying at any such time the latest
maturing installment or installments of such purchase price then remaining
unpaid), or may be prepaid in whole at any time, provided, however, that any
unpaid balance of the purchase price shall be due and payable forthwith upon any
termination of the Option as hereinafter provided,
(iv) each installment paid in respect of such shares after the
first installment shall be applied to the partial payment of such shares as
nearly as possible in an equal amount,
(v) such shares shall not be assigned or transferred (except
by will or operation of law) and the certificates issued therefor shall bear a
legend indicating that such share are not assignable or transferrable,
(vi) any dividend on the Common Stock shall be paid on such
shares in direct proportion to the percentage of the purchase price therefor
which shall have been paid by the record date for such dividend,
(vii) each certificate for such shares shall, immediately upon
issue, be delivered to the Company, endorsed in blank by the Optionee or
accompanied by a separate stock power so endorsed, in pledge as security for the
unpaid balance of the purchase price of the shares represented by such
certificate,
(viii) such shares shall be subject to assessment and call in
accordance with the laws of the State of Texas; further the Company shall have
the right, by notice to that effect, without the necessity of any such call or
assessment, to require the prepayment, in whole at any time or in part from time
to time of the unpaid balance of the purchase price of such shares or any of
them, whether or not prepayment shall be required of any other person holding
partly paid shares, and
(ix) when the balance of the purchase price of such shares
which shall be represented by any certificate shall have been paid in full, such
certificate shall be promptly released from pledge, stamped full paid,
nonassessable, and transferable, and delivered to the Optionee in person or my
certified mail, of if the Company so desires, such certificate shall be promptly
released from pledge and surrendered to the Company, and a new certificate for
full paid and nonassessable shares shall be promptly delivered to the Optionee
by certified mail in lieu thereof.
(c) In the event that there shall be a default in the payment
when due hereunder of any installment, or of any call, assessment, or prepayment
required by the Company, with respect to any partly paid shares, and such
default shall not be cured within thirty days after written notice thereof by
the Company, the Company shall have the right to take such of the following
actions as it shall deem desirable in its sole discretion:
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(i) To cancel the Option and all other options granted to the
Optionee under the Company's "Stock Option Agreement";
(ii) To take by forfeiture all right, title, and interest of
the Optionee in and to such partly paid shares;
(iii) To (A) determine that the unpaid balance of the purchase
price of all partly paid shares issued hereunder is immediately due and payable,
without further demand or notice of any kind, in which case such balance shall
thereupon be due and payable; (B) sell, as full paid, nonassessable, and
transferable shares, all shares then pledged hereunder, either at the Stock
Exchange or any public or private sale, without further notice or advertising of
any kind, and buy all or any part of such shares at such sale free from any
right or equity of redemption; (C) charge the Optionee with the entire expense
of such sale; and (D) apply the proceeds of such sale against the balance of the
purchase price owed for all partly paid shares issued hereunder and the expense
of such sale, with the remainder, if any, to be paid over to the Optionee;
provided, however, that if such proceeds shall not be sufficient to liquidate
such balance and expenses in full, the Optionee shall remain liable to the
Company for any unliquidated portion of such balance and expense; and
(iv) To take such other action (including extending the time
for payment of such installment, call, assessment, or prepayment) as shall be
permitted by law. The rights granted to the Company hereunder shall be in
addition to and not in lieu of any other rights or remedies the Company may have
as a result of such default.
(d) Anything herein contained to the contrary notwithstanding,
the purchase price of any shares as to which the Option shall be exercised after
the termination of the Optionee's employment (by retirement, death, or
otherwise) shall be paid in full at the time of exercise of the Option with
respect to such shares.
4. The Option may not be assigned, transferred (except as aforesaid),
pledged, or hypothecated in any way (whether by operation of law or otherwise),
and shall not be subject to execution, attachment, or similar process. Any
attempted assignment, transfer, pledge, hypothecation, or other disposition of
the Option contrary to the provision hereof, and the levy of any attachment or
similar process upon the Option, shall be null and void and without effect. The
Company shall have the right to terminate the Option, in the event of any such
assignment, transfer, pledge, hypothecation, other disposition of the Option, or
levy of attachment or similar process, by notice to that effect to the person
then entitled to exercise the Option, provide, however, that termination of the
Option thereunder shall not prejudice any rights or remedies which the Company
or a subsidiary corporation may have under this Agreement or otherwise.
5. (a) Subject to the terms and conditions of this Agreement, the
Option shall be exercisable by notice to the Company. Each such notice shall
state the election to exercise the Option and the number of shares in respect of
which it is being exercised,
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(ii) state whether the shares in respect of which the Option
is being exercised are being paid for in full or will be paid for in
installments,
(iii) be signed by the person or persons exercising the Option
and, in the event that the Option is being exercised by any person or persons
other than the Optionee, be accompanied by proof, satisfactory to counsel for
the Company, of the right of such person or persons to exercise the Option, and
(iv) be accompanied by a check payable to the order of the
Company in an amount equal to the purchase price of the shares in respect of
which the Option is being exercised or the first installment of such purchase
price, depending upon whether such shares are being paid for in full or will be
paid for in installments.
The Option shall not be deemed to have been exercised unless all the
preceding provisions of this paragraph shall have been complied with, and for
all purposes of this Agreement the date of the exercise of the Option with
respect to any particular shares shall be the date on which such notice, proof
(if required), and check shall have all been mailed by certified mail or
delivered to the Company. The certificate or certificates for the shares as to
which the Option shall have ben so exercised shall be registered in the name of
the persons or persons so exercising the Option and shall be delivered to or
upon the written order of the person or persons exercising the Option within
fifteen days after receipt by the Company of such notice, proof (if required),
and check. Such delivery shall be made at the office of the Company, or at such
other place as the Company shall thereof have designated by notice.
(b) In the event that the purchase price of any shares as to
which the Option shall be exercised shall be payable in installments, each
installment shall be accompanied by a notice to the Company of the payment of
such installment.
6. Each notice relating to this Agreement shall be in writing and
delivered in person or by certified mail to the Company at its office, attention
of the Secretary. All notices to the Optionee or other person shall be delivered
to the Optionee or such other person or persons at the Optionee's address below
specified.
7. Neither this Option nor the shares of Common Stock issuable upon
exercise hereof, have been registered under the Securities Act of 1933, as
amended, or any state securities laws. The Optionee, by accepting this Option,
represents and warrants that he is acquiring this Option for his own account for
investment and not with a view to or for sale in connection with any
distribution thereof except in conformity with the provisions of the Securities
Act of 1933, as amended, and the Rules and Regulations promulgated thereunder,
and applicable state securities laws, and further agrees that this Option may
not be sold or transferred in the absence of an effective registration statement
under the Securities Act of 1933, and applicable state securities laws, or an
opinion of counsel which opinion and which counsel shall be satisfactory to the
Company to the effect that there is an exemption from such registration. In
addition, the Optionee agrees to deliver to the Company
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a similar written statement in the form of the Investment Letter attached hereto
with respect to any shares of Common Stock purchased upon the exercise of this
Option unless such shares have at the time of issuance been registered under the
Securities Act of 1933, as amended, and applicable state securities laws, or the
Optionee can demonstrate the availability of federal and state exemptions from
registration and qualification not requiring same.
8. Any dispute or disagreement which shall arise under; as a result of,
or in any way relate to the interpretation or construction of this Agreement
shall be determined by the by arbitration under the rules of the American
Arbitration Association, under the rules of that body. Any such determination
made hereunder shall be final, binding and conclusive for all purposes.
9. This Agreement shall be governed by the laws of the State of Texas.
10. This Agreement shall inure to the benefit of and be binding upon
each successor and assign of the Company. All obligations imposed upon the
Optionee, and all rights granted to the Company, hereunder or as stipulated in
the Plan shall be binding upon the Optionee's heirs, legal representatives and
successors.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its name by its President and attested by its Secretary on the day
and year first above written, and the Optionee has hereunto set his hand and
seal on the day and year specified below.
TATONKA ENERGY, INC.
By
---------------------------
George C. Barker, President
Attest:
- ------------------------------
, Secretary
---------------------------
George C. Barker, Optionee
---------------------------
Address
Date:
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Investment Letter
To: PhyMed, Inc.
(formerly, Tatonka Energy, Inc.)
In connection with my purchase of shares of Common Stock of PhyMed,
Inc. pursuant to the exercise of a Stock Option Agreement, I hereby represent
that I am acquiring said shares for my own account for investment and not with a
view to or for sale in connection with any distribution of said shares.
Dated: , 199
------------- - ------------------------------------
(Signature)
------------------------------------
(Printed or Typed Name)
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EXHIBIT "C"
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into as of May 4, 1998, by and
between TATONKA ENERGY, INC., an Oklahoma corporation (the "Corporation"), and
- ---------------------- ("Indemnitee"), a Director or Officer of the Corporation.
RECITALS
--------
WHEREAS, it is essential to the Corporation to retain and attract as
Directors and Officers the most capable persons available; and
WHEREAS, the substantial increase in corporate litigation subjects
Directors and Officers of the Corporation to expensive litigation risks at the
same time that the availability of Directors' and Officers' liability insurance
has been severely limited; and
WHEREAS, it is now and has always been the express policy of the
Corporation to indemnify persons serving as its Directors and Officers so as to
provide them with the maximum possible protection permitted by law; and
WHEREAS, Indemnitee does not regard the protection available under the
Corporation's Articles of Incorporation, By-laws and insurance as adequate in
the present circumstances, and may not be willing to serve as a Director or
Officer of the Corporation without adequate protection, and the Corporation
desires Indemnitee to serve in such capacity.
NOW, THEREFORE, in consideration of the premises and the mutual
promises contained herein, the Corporation and Indemnitee hereby agree as
follows:
1. Agreement to Serve. Indemnitee agrees to serve or continue to serve
as a Director or Officer of the Corporation for so long as he is duly elected or
appointed or until such time as he tenders his resignation in writing.
2. Definitions. For purposes of this Agreement:
(a) The term "proceeding" shall include any threatened, pending or
completed action, suit or proceeding, whether brought by or in the right of the
Corporation or otherwise and whether of a civil, criminal, administrative or
investigative nature, in which Indemnitee may be or may have been involved as a
party or otherwise, by reason of the fact that Indemnitee is or was a Director
or Officer of the Corporation, by reason of any action taken by him or by reason
of the fact the he is or was
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serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise; in each case whether or not he is acting or serving in any such
capacity at the time any liability or expense is incurred for which
indemnification or reimbursement can be provided under this Agreement.
(b) The term "Expenses" shall include, without limitation, expenses of
investigations, judicial or administrative proceedings or appeals, amounts paid
in settlement by or on behalf of Indemnitee, attorneys' fees and disbursement
and any expenses of establishing a right to indemnification under Section 7 of
this Agreement, but shall not include the amount of judgments, fines or
penalties against Indemnitee.
(c) References to "other enterprise." shall include employee benefit
plans; references to "fines shall include any excise tax assessed with respect
to any employee benefit plan; references to "serving at the request of the
Corporation" shall include any service as to Director, Officer, employee or
agent of the Corporation which imposes duties on, or involves services by, such
Director, Officer, employee, or agent with respect to any employee benefit plan,
its participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the best interests of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Agreement.
(d) A "Change in Control of the Corporation" shall be deemed to have
occurred if (i) any "person" [as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended], who is not currently a
stockholder of the Corporation, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation or a corporation
owned directly or indirectly by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of the Corporation
representing 20% or more of the total voting power of the then outstanding
shares of capital stock of the Corporation entitled to vote generally in the
election of directors (the "Voting Stock"), or (ii) during any period of two
consecutive years, individuals, who at the beginning of such period constitute
the Board of Directors of the Corporation, and any new director, whose election
by the Board of Directors or nomination for elections by the Corporation's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof, or (iii) the stockholder
of The Corporation approve a merger or consolidation of the Corporation with any
other corporation, other than a merger or consolidation which would result in
the Voting Stock outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least 80% of the total voting power represented by the
Voting Stock or the voting securities of such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Corporation approve a plan of complete liquidation of the Corporation or an
agreement for the sale or disposition by the Corporation of all or substantially
all of the Corporation's assets.
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3. Indemnity in Third-Party Proceedings. The Corporation shall
indemnify Indemnitee in accordance with the provisions of this Section 3 if
Indemnitee is a party to or threatened to be made a party to or otherwise
involved in any Proceeding (other than a Proceeding by or in the right of the
Corporation to procure a judgment in its favor) by reason of the fact that
Indemnitee is or was a Director or officer of the Corporation, or is or was
serving at the request of the Corporation or as a director, officer, employee or
agent of another corporation, partnership joint venture, trust or other
enterprise, against all Expenses, judgment fines and penalties, actually and
reasonably incurred by Indemnitee in connection with the defense or settlement
of such Proceeding, but only if Indemnitee acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the Corporation and, in the case of a criminal proceeding, in addition, had no
reasonable cause to believe that his conduct was unlawful. The termination of
any such Proceeding by judgment, order of court, settlement, conviction or upon
a pleas of nolo contendere, or its equivalent, shall not, of itself, create a
presumption that Indemnitee did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, or with respect to any criminal proceeding, that such person had
reasonable cause to believe that his conduct was unlawful.
4. Indemnity in Proceedings by or in the Right of the Corporation. The
Corporation shall indemnify indemnitee in accordance with the provisions of this
Section 4 if indemnitee is a party to or threatened to be made a party to any
Proceeding by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that Indemnitee is or was a Director or Officer of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against all Expenses actually and reasonably
incurred by Indemnitee in connection with the defense or settlement of such
Proceeding, but only if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification for Expenses shall be made under
this Section 4 in respect of any claim, issue or matter as to which Indemnitee
shall have been adjudged to be liable to the Corporation, unless and only to the
extent that any court in which such Proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all of
the circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity for such Expenses as such court shall deem proper.
5. Indemnification of Expenses of Successful Party. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee has been
successful on the merits or otherwise in defense of any Proceeding or in defense
of any claim, issue or matter therein, including dismissal without prejudice,
Indemnitee shall be indemnified by the Corporation against all Expenses incurred
in connection therewith.
6. Advances of Expenses. Expenses incurred by Indemnitee in connection
with any Proceeding shall be paid by the Corporation in advance of the final
disposition thereof upon the written request of Indemnitee, if Indemnitee shall
undertake to repay such amount if and to the extent it is ultimately determined
that Indemnitee is not entitled to indemnification.
-51-
<PAGE>
7. Right of Indemnitee to Indemnification Upon Application, Procedure
Upon Application.
(a) Whenever Indemnitee believes that he or she is entitled to
indemnification pursuant to this Agreement, Indemnitee shall submit a written
request for indemnification to the Corporation. Any request for indemnification
shall include sufficient documentation or information reasonably available to
Indemnitee to support his or her claim for indemnification. The President or the
Secretary or other appropriate officer shall, promptly upon receipt of
Indemnitee's request for indemnification, advise the Board of Directors in
writing that Indemnitee has made such request. Determination of Indemnitee's
entitlement to indemnification shall be made not alter than sixty (60) days
after the Corporation's receipt of Indemnitee's written request for
indemnification; if no determination has been made in such 60-day period, the
Corporation shall be deemed to have approved the request.
(b) In the event that the Corporation refuses indemnification or
advances as provided by this Agreement, a panel of three arbitrators, one
selected by the Corporation, another by Indemnitee and the third by the first
two arbitrators selected, shall hear the claim and make a determination. The
arbitrators shall be selected from the American Arbitration Association and
shall conduct the hearing pursuant to the commercial arbitration rules of the
American Arbitration Association now in effect. In such action, the burden of
proving that indemnification is not required hereunder shall be on the
Corporation.
8. Indemnification Hereunder Not Exclusive .
(a) The indemnification provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may be entitled under the
Certificate of Incorporation or the By-laws of the Corporation, any agreement,
any vote of stockholders or disinterested Directors, the General Corporation Law
of the State of Oklahoma, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
(b) The indemnification under this Agreement shall continue as to
Indemnitee even though he may have ceased to be a Director or Officer of the
Corporation and shall inure to the benefit of the heirs and personal
representatives of Indemnitee.
9. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Corporation for some or a
portion of the Expenses, judgments, fines or penalties actually and reasonably
incurred by him in the investigation, defense, appeal or settlement of any
Proceeding but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify Indemnitee for the portion of such Expenses, judgments,
fines or penalties as to which Indemnitee is so entitled to indemnification.
-52-
<PAGE>
10. Saving Clause. If this Agreement or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, the
Corporation shall nevertheless indemnify Indemnitee as to Expenses, judgments,
fines and penalties with respect to any Proceeding to the full extent permitted
by any applicable portion of this Agreement that shall not have been invalidated
or by any applicable law.
11. Stockholder Approval: Termination. This Agreement shall terminate
at the conclusion of the next annual meeting of the stockholders of the
Corporation in the event that it shall not have been ratified and approved by
such stockholders at such annual meeting, by the affirmative vote of the holders
of at least a majority of the voting power of the Corporation's voting stock
present in person or represented by proxy at such annual meeting; provided,
that, in the event of such termination, all rights and liabilities of the
parties which shall have arisen under this Agreement prior to such termination
(whether by reason of the circumstances giving rise to such rights and
liabilities having occurred prior thereto or otherwise) shall survive such
termination. Subject to the foregoing provisions of this Section, this Agreement
shall continue in full force and effect until terminated by an instrument in
writing signed by both of the parties
12. Notice . Indemnitee shall, as a condition precedent to his right to
be indemnified under this Agreement, give to the Corporation notice in writing
as soon as practicable of any claim made against him for which indemnity will or
could be sought hereunder. Notice to the Corporation shall be directed to
Tatonka Energy, Inc. (name to be changed to "PhyMed, Inc."), 9603 White Rock
Trail, Suite 100, Dallas, Texas 75238, Attention: President (or such other
address as the Corporation shall designate in writing to Indemnitee). Notice
shall be deemed received three days after the date postmarked if sent by prepaid
mail, properly addressed. In addition, Indemnitee shall give the Corporation
such information and cooperation as it may reasonably require and shall be
within Indemnitee's power.
13. Security. To the fullest extent permitted by applicable law, the
Corporation may from time to time, but shall not be required to, provide such
insurance, collateral, letters of credit or other security devices as its Board
of Directors may deem appropriate to support or secure the Corporation's
obligations under this Agreement.
14. Amendment. This Agreement may not be amended, except by an
instrument in writing signed by both of the parties hereto.
15. Counterparts. This Agreement may be executed in any number of
counterparts, Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the Slate of Oklahoma.
17 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Corporation and its successors and assigns and
Indemnitee and his heirs and personal representatives.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
- ----------------------------------
, Indemnitee
- -----------------
Takonka Energy, Inc.
An Oklahoma corporation
By:
------------------------------
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<PAGE>
LIST OF APPENDICES
1. Form of Proxy
2. Three Stock Option Agreements (not yet signed)
-55-
<PAGE>
PRELIMINARY COPY
Tatonka Energy, Inc. PROXY/VOTING INSTRUCTION CARD
Dallas, Texas
- --------------------------------------------------------------------------------
This proxy is solicited on behalf of the Board of Directors for the Annual
Meeting on June 1, 1998.
The undersigned hereby appoints George C. Barker, Joe R. Love and Joe P. Foor
and each of them the proxy for the undersigned with full powers of substitution
to vote all shares of Common Stock of TATONKA ENERGY., INC., that the
undersigned is entitled to vote, at the annual meeting of shareholders of
TATONKA ENERGY, INC., at Dallas, Texas, at 10:00 A.M. on Monday, June 1, 1998,
and any adjournment thereof in the manner indicated on the reverse side of this
proxy, and upon such other business as may lawfully come before the meeting. IF
NO DIRECTION AS TO THE MANNER OF VOTING THE PROXY IS MADE, THE PROXY WILL BE
VOTED FOR THE ELECTION OF DIRECTORS AND "FOR" PROPOSALS 2 THROUGH 7, AS
INDICATED ON THE REVERSE SIDE HEREOF.
You are encouraged to specify your choices by marking the appropriate
boxes (SEE REVERSE SIDE) but you need not mark any boxes if you wish to vote in
accordance with the Board of Director's recommendations.
You acknowledge receipt of the Annual Report to Shareholders for the
fiscal year ended December 31, 1997, the Notice of Meeting of Shareholders and
the Proxy Statement by signing on the reverse side.
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<PAGE>
Please mark your vote as in this example. |X|
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder(s). If no direction is made, this
proxy will be voted FOR all proposals.
The Board of Directors recommends a vote FOR Proposals 1 through 7.
FOR WITHHOLD AGAINST
1. To increase the number of Directors
from three to five and
elect five directors:
George C. Barker [] [] []
Joe R. Love [] [] []
Joe P. Foor [] [] []
Judith F. Barker [] [] []
Marilyn Moss [] [] []
FOR ABSTAIN AGAINST
2. To change the Company's name to
"PhyMed, Inc." [] [] []
3. To effect a 1-for-10
reverse stock split. [] [] []
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<PAGE>
4. To establish a new Series B 12%
Convertible Preferred Stock and
authorize the Board of Directors
to exercise "blank check" authority
regarding Preferred Stock. [] [] []
5. To ratify and approve three stock
option agreements granted to
Management. [] [] []
6. To ratify and approve Indemnity
Agreements for Directors and
certain officers. [] [] []
7. To ratify the selection of auditors
for fiscal 1998. [] [] []
8. In their discretion, the Proxies are
authorized to vote upon such other
business as may properly come before
the meeting. [] [] []
Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title
as such.
------------------------------------------------------------
------------------------------------------------------------
SIGNATURE(S) DATE
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<PAGE>
STOCK OPTION AGREEMENT
Joe P. Foor
Stock Option Agreement made this 4th day of May, 1998, between Tatonka
Energy, Inc., an Oklahoma corporation ("Company") and Joe P. Foor, ("Optionee").
WHEREAS, The Company desires to provide the Optionee with an
opportunity to acquire a proprietary interest in the business of the Company
and, through stock ownership, an increased personal interest in its continued
success and progress:
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter set forth, and other good and valuable consideration, the Company
and Optionee agree as follows:
1. The Company hereby grants to the Optionee the option to purchase an
aggregate of 2,500,000 shares of Company's Common Stock, par value of $0.0001
(as presently constituted), on the terms and conditions hereinafter set forth,
at the purchase price of $0.075 per share as presently constituted (250,000
shares at $0.75 per share, after the effectiveness of the proposed 1-for-10
reverse stock split).
2. The Option shall be exercisable in whole or in part at any time, or
from time to time, upon notice given to the Company by the Optionee of such
exercise of the Option as provided below.
3. (a) The Option shall be exercisable as to not less than 10,000
shares, as presently constituted (1,000 shares, after the effectiveness of the
proposed 1-for-10 reverse stock split), or a multiple thereof, or the remaining
shares covered by the Option if less than such minimum. Notice shall be given to
the Company by the Optionee of such exercise of the Option as provided below.
(b) The purchase price of any shares as to which the Option shall
be exercised shall be paid in full at the time of such exercise or, except as
hereinafter provided, may, at the election of the Optionee, be paid in
installments, in which case the first installment shall be paid at the time of
such exercise. In the event that the purchase price of such shares shall be paid
in full at the time of such exercise, such shares shall be issued as fully paid
and nonassessable shares. In the event, however, that the Optionee shall elect
to pay the purchase price of such shares in installments:
(i) such shares shall be issued as partly paid and assessable shares,
(ii) the first installment shall be amount equal to not less than 20%
of such purchase price,
(iii)the unpaid balance of such purchase price shal be paid (without
interest) in equal installments, the first installment at the end of 12
months commencing with the date of such exercise and subsequent
installments at the end of each successive 12-month interval until the
balance is paid in full (the Optionee to have the right of prepaying at any
such time the latest maturing installment
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<PAGE>
or installments of such purchase price then remaining unpaid), or may be
prepaid in whole at any time, provided, however, that any unpaid balance of
the purchase price shall be due and payable forthwith upon any termination
of the Option as hereinafter provided,
(iv) each installment paid in respect of such shares after the first
installment shall be applied to the partial payment of such shares as
nearly as possible in an equal amount,
(v) such shares shall not be assigned or transferred (except by will
or operation of law) and the certificates issued therefor shall bear a
legend indicating that such share are not assignable or transferrable,
(vi) any dividend on the Common Stock shall be paid on such shares in
direct proportion to the percentage of the purchase price therefor which
shall have been paid by the record date for such dividend,
(vii) each certificate for such shares shall, immediately upon issue,
be delivered to the Company, endorsed in blank by the Optionee or
accompanied by a separate stock power so endorsed, in pledge as security
for the unpaid balance of the purchase price of the shares represented by
such certificate,
(viii) such shares shall be subject to assessment and call in
accordance with the laws of the State of Texas; further the Company shall
have the right, by notice to that effect, without the necessity of any such
call or assessment, to require the prepayment, in whole at any time or in
part from time to time of the unpaid balance of the purchase price of such
shares or any of them, whether or not prepayment shall be required of any
other person holding partly paid shares, and
(ix) when the balance of the purchase price of such shares which shall
be represented by any certificate shall have been paid in full, such
certificate shall be promptly released from pledge, stamped full paid,
nonassessable, and transferable, and delivered to the Optionee in person or
my certified mail, of if the Company so desires, such certificate shall be
promptly released from pledge and surrendered to the Company, and a new
certificate for full paid and nonassessable shares shall be promptly
delivered to the Optionee by certified mail in lieu thereof.
(c) In the event that there shall be a default in the payment when
due hereunder of any installment, or of any call, assessment, or prepayment
required by the Company, with respect to any partly paid shares, and such
default shall not be cured within thirty days after written notice thereof by
the Company, the Company shall have the right to take such of the following
actions as it shall deem desirable in its sole discretion:
(i) To cancel the Option and all other options granted to the
Optionee under the Company's "Stock Option Agreement";
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<PAGE>
(ii) To take by forfeiture all right, title, and interest of the
Optionee in and to such partly paid shares;
(iii) To (A) determine that the unpaid balance of the purchase
price of all partly paid shares issued hereunder is immediately due and payable,
without further demand or notice of any kind, in which case such balance shall
thereupon be due and payable; (B) sell, as full paid, nonassessable, and
transferable shares, all shares then pledged hereunder, either at the Stock
Exchange or any public or private sale, without further notice or advertising of
any kind, and buy all or any part of such shares at such sale free from any
right or equity of redemption; (C) charge the Optionee with the entire expense
of such sale; and (D) apply the proceeds of such sale against the balance of the
purchase price owed for all partly paid shares issued hereunder and the expense
of such sale, with the remainder, if any, to be paid over to the Optionee;
provided, however, that if such proceeds shall not be sufficient to liquidate
such balance and expenses in full, the Optionee shall remain liable to the
Company for any unliquidated portion of such balance and expense; and
(iv) To take such other action (including extending the time
for payment of such installment, call, assessment, or prepayment) as shall be
permitted by law. The rights granted to the Company hereunder shall be in
addition to and not in lieu of any other rights or remedies the Company may have
as a result of such default.
(d) Anything herein contained to the contrary notwithstanding,
the purchase price of any shares as to which the Option shall be exercised after
the termination of the Optionee's employment (by retirement, death, or
otherwise) shall be paid in full at the time of exercise of the Option with
respect to such shares.
4. The Option may not be assigned, transferred (except as aforesaid),
pledged, or hypothecated in any way (whether by operation of law or otherwise),
and shall not be subject to execution, attachment, or similar process. Any
attempted assignment, transfer, pledge, hypothecation, or other disposition of
the Option contrary to the provision hereof, and the levy of any attachment or
similar process upon the Option, shall be null and void and without effect. The
Company shall have the right to terminate the Option, in the event of any such
assignment, transfer, pledge, hypothecation, other disposition of the Option, or
levy of attachment or similar process, by notice to that effect to the person
then entitled to exercise the Option, provide, however, that termination of the
Option thereunder shall not prejudice any rights or remedies which the Company
or a subsidiary corporation may have under this Agreement or otherwise.
5. (a) Subject to the terms and conditions of this Agreement, the
Option shall be exercisable by notice to the Company. Each such notice shall
state the election to exercise the Option and the number of shares in respect of
which it is being exercised,
(ii) state whether the shares in respect of which the Option
is being exercised are being paid for in full or will be paid for in
installments,
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<PAGE>
(iii) be signed by the person or persons exercising the Option and,
in the event that the Option is being exercised by any person or persons other
than the Optionee, be accompanied by proof, satisfactory to counsel for the
Company, of the right of such person or persons to exercise the Option, and
(iv) be accompanied by a check payable to the order of the
Company in an amount equal to the purchase price of the shares in respect of
which the Option is being exercised or the first installment of such purchase
price, depending upon whether such shares are being paid for in full or will be
paid for in installments.
The Option shall not be deemed to have been exercised unless all the
preceding provisions of this paragraph shall have been complied with, and for
all purposes of this Agreement the date of the exercise of the Option with
respect to any particular shares shall be the date on which such notice, proof
(if required), and check shall have all been mailed by certified mail or
delivered to the Company. The certificate or certificates for the shares as to
which the Option shall have ben so exercised shall be registered in the name of
the persons or persons so exercising the Option and shall be delivered to or
upon the written order of the person or persons exercising the Option within
fifteen days after receipt by the Company of such notice, proof (if required),
and check. Such delivery shall be made at the office of the Company, or at such
other place as the Company shall thereof have designated by notice.
(b) In the event that the purchase price of any shares as to
which the Option shall be exercised shall be payable in installments, each
installment shall be accompanied by a notice to the Company of the payment of
such installment.
6. Each notice relating to this Agreement shall be in writing and
delivered in person or by certified mail to the Company at its office, attention
of the Secretary. All notices to the Optionee or other person shall be delivered
to the Optionee or such other person or persons at the Optionee's address below
specified.
7. Neither this Option nor the shares of Common Stock issuable upon
exercise hereof, have been registered under the Securities Act of 1933, as
amended, or any state securities laws. The Optionee, by accepting this Option,
represents and warrants that he is acquiring this Option for his own account for
investment and not with a view to or for sale in connection with any
distribution thereof except in conformity with the provisions of the Securities
Act of 1933, as amended, and the Rules and Regulations promulgated thereunder,
and applicable state securities laws, and further agrees that this Option may
not be sold or transferred in the absence of an effective registration statement
under the Securities Act of 1933, and applicable state securities laws, or an
opinion of counsel which opinion and which counsel shall be satisfactory to the
Company to the effect that there is an exemption from such registration. In
addition, the Optionee agrees to deliver to the Company a similar written
statement in the form of the Investment Letter attached hereto with respect to
any shares of Common Stock purchased upon the exercise of this Option unless
such shares have at the time of issuance been registered under the Securities
Act of 1933, as amended, and applicable state
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<PAGE>
securities laws, or the Optionee can demonstrate the availability of federal and
state exemptions from registration and qualification not requiring same.
8. Any dispute or disagreement which shall arise under; as a result of,
or in any way relate to the interpretation or construction of this Agreement
shall be determined by the by arbitration under the rules of the American
Arbitration Association, under the rules of that body. Any such determination
made hereunder shall be final, binding and conclusive for all purposes.
9. This Agreement shall be governed by the laws of the State of Texas.
10. This Agreement shall inure to the benefit of and be binding upon
each successor and assign of the Company. All obligations imposed upon the
Optionee, and all rights granted to the Company, hereunder or as stipulated in
the Plan shall be binding upon the Optionee's heirs, legal representatives and
successors.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its name by its President and attested by its Secretary on the day
and year first above written, and the Optionee has hereunto set his hand and
seal on the day and year specified below.
TATONKA ENERGY, INC.
By
------------------------------
George C. Barker, President
Attest:
- ------------------------------
, Secretary
-----------------------------
Joe P. Foor, Optionee
-----------------------------
Address
Date:
-63-
<PAGE>
Investment Letter
To: PhyMed, Inc.
(formerly, Tatonka Energy, Inc.)
In connection with my purchase of shares of Common Stock of PhyMed,
Inc. pursuant to the exercise of a Stock Option Agreement, I hereby represent
that I am acquiring said shares for my own account for investment and not with a
view to or for sale in connection with any distribution of said shares.
Dated , 1998
-------------
- ------------------------------------
(Signature)
- ------------------------------------
(Printed or Typed Name)
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<PAGE>
STOCK OPTION AGREEMENT
George C. Barker
Stock Option Agreement made this 4th day of May, 1998, between Tatonka
Energy, Inc., an Oklahoma corporation ("Company") and George C. Barker,
("Optionee").
WHEREAS, The Company desires to provide the Optionee with an
opportunity to acquire a proprietary interest in the business of the Company
and, through stock ownership, an increased personal interest in its continued
success and progress:
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter set forth, and other good and valuable consideration, the Company
and Optionee agree as follows:
1. The Company hereby grants to the Optionee the option to purchase an
aggregate of 5,000,000 shares of Company's Common Stock, par value of $0.0001
(as presently constituted), on the terms and conditions hereinafter set forth,
at the purchase price of $0.075 per share as presently constituted (500,000
shares at $0.75 per share, after the effectiveness of the proposed 1-for-10
reverse stock split).
2. The Option shall be exercisable in whole or in part at any time, or
from time to time, after the end of any quarter in which the Company's
cumulative operating profits (before corporate overhead) exceed the sum of
$1,065,483 . Notice shall be given to the Company by the Employee of such
exercise of the Option as provided below.
3. (a) The Option shall be exercisable as to not less than 10,000
shares, as presently constituted (1,000 shares, after the effectiveness of the
proposed 1-for-10 reverse stock split), or a multiple thereof, or the remaining
shares covered by the Option if less than such minimum. Notice shall be given to
the Company by the Optionee of such exercise of the Option as provided below.
(b) The purchase price of any shares as to which the Option shall
be exercised shall be paid in full at the time of such exercise or, except as
hereinafter provided, may, at the election of the Optionee, be paid in
installments, in which case the first installment shall be paid at the time of
such exercise. In the event that the purchase price of such shares shall be paid
in full at the time of such exercise, such shares shall be issued as fully paid
and nonassessable shares. In the event, however, that the Optionee shall elect
to pay the purchase price of such shares in installments:
(i) such shares shall be issued as partly paid and assessable
shares,
(ii) the first installment shall be amount equal to not less than
20% of such purchase price,
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(iii) the unpaid balance of such purchase price shall be paid
(without interest) in equal installments, the first installment at the end of 12
months commencing with the date of such exercise and subsequent installments at
the end of each successive 12-month interval until the balance is paid in full
(the Optionee to have the right of prepaying at any such time the latest
maturing installment or installments of such purchase price then remaining
unpaid), or may be prepaid in whole at any time, provided, however, that any
unpaid balance of the purchase price shall be due and payable forthwith upon any
termination of the Option as hereinafter provided,
(iv) each installment paid in respect of such shares after the
first installment shall be applied to the partial payment of such shares as
nearly as possible in an equal amount,
(v) such shares shall not be assigned or transferred (except
by will or operation of law) and the certificates issued therefor shall bear a
legend indicating that such share are not assignable or transferrable,
(vi) any dividend on the Common Stock shall be paid on such
shares in direct proportion to the percentage of the purchase price therefor
which shall have been paid by the record date for such dividend,
(vii) each certificate for such shares shall, immediately upon
issue, be delivered to the Company, endorsed in blank by the Optionee or
accompanied by a separate stock power so endorsed, in pledge as security for the
unpaid balance of the purchase price of the shares represented by such
certificate,
(viii) such shares shall be subject to assessment and call in
accordance with the laws of the State of Texas; further the Company shall have
the right, by notice to that effect, without the necessity of any such call or
assessment, to require the prepayment, in whole at any time or in part from time
to time of the unpaid balance of the purchase price of such shares or any of
them, whether or not prepayment shall be required of any other person holding
partly paid shares, and
(ix) when the balance of the purchase price of such shares
which shall be represented by any certificate shall have been paid in full, such
certificate shall be promptly released from pledge, stamped full paid,
nonassessable, and transferable, and delivered to the Optionee in person or my
certified mail, of if the Company so desires, such certificate shall be promptly
released from pledge and surrendered to the Company, and a new certificate for
full paid and nonassessable shares shall be promptly delivered to the Optionee
by certified mail in lieu thereof.
(c) In the event that there shall be a default in the payment when
due hereunder of any installment, or of any call, assessment, or prepayment
required by the Company, with respect to any partly paid shares, and such
default shall not be cured within thirty days after written notice thereof by
the Company, the Company shall have the right to take such of the following
actions as it shall deem desirable in its sole discretion:
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<PAGE>
(i) To cancel the Option and all other options granted to the
Optionee under the Company's "Stock Option Agreement";
(ii) To take by forfeiture all right, title, and interest of the
Optionee in and to such partly paid shares;
(iii) To (A) determine that the unpaid balance of the purchase
price of all partly paid shares issued hereunder is immediately due and payable,
without further demand or notice of any kind, in which case such balance shall
thereupon be due and payable; (B) sell, as full paid, nonassessable, and
transferable shares, all shares then pledged hereunder, either at the Stock
Exchange or any public or private sale, without further notice or advertising of
any kind, and buy all or any part of such shares at such sale free from any
right or equity of redemption; (C) charge the Optionee with the entire expense
of such sale; and (D) apply the proceeds of such sale against the balance of the
purchase price owed for all partly paid shares issued hereunder and the expense
of such sale, with the remainder, if any, to be paid over to the Optionee;
provided, however, that if such proceeds shall not be sufficient to liquidate
such balance and expenses in full, the Optionee shall remain liable to the
Company for any unliquidated portion of such balance and expense; and
(iv) To take such other action (including extending the time for
payment of such installment, call, assessment, or prepayment) as shall be
permitted by law. The rights granted to the Company hereunder shall be in
addition to and not in lieu of any other rights or remedies the Company may have
as a result of such default.
(d) Anything herein contained to the contrary notwithstanding,
the purchase price of any shares as to which the Option shall be exercised after
the termination of the Optionee's employment (by retirement, death, or
otherwise) shall be paid in full at the time of exercise of the Option with
respect to such shares.
4. The Option may not be assigned, transferred (except as aforesaid),
pledged, or hypothecated in any way (whether by operation of law or otherwise),
and shall not be subject to execution, attachment, or similar process. Any
attempted assignment, transfer, pledge, hypothecation, or other disposition of
the Option contrary to the provision hereof, and the levy of any attachment or
similar process upon the Option, shall be null and void and without effect. The
Company shall have the right to terminate the Option, in the event of any such
assignment, transfer, pledge, hypothecation, other disposition of the Option, or
levy of attachment or similar process, by notice to that effect to the person
then entitled to exercise the Option, provide, however, that termination of the
Option thereunder shall not prejudice any rights or remedies which the Company
or a subsidiary corporation may have under this Agreement or otherwise.
5. (a) Subject to the terms and conditions of this Agreement, the
Option shall be exercisable by notice to the Company. Each such notice shall
state the election to exercise the Option and the number of shares in respect of
which it is being exercised,
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(ii) state whether the shares in respect of which the Option is
being exercised are being paid for in full or will be paid for in
installments,
(iii) be signed by the person or persons exercising the Option
and, in the event that the Option is being exercised by any person or persons
other than the Optionee, be accompanied by proof, satisfactory to counsel for
the Company, of the right of such person or persons to exercise the Option, and
(iv) be accompanied by a check payable to the order of the
Company in an amount equal to the purchase price of the shares in respect of
which the Option is being exercised or the first installment of such purchase
price, depending upon whether such shares are being paid for in full or will be
paid for in installments.
The Option shall not be deemed to have been exercised unless all the
preceding provisions of this paragraph shall have been complied with, and for
all purposes of this Agreement the date of the exercise of the Option with
respect to any particular shares shall be the date on which such notice, proof
(if required), and check shall have all been mailed by certified mail or
delivered to the Company. The certificate or certificates for the shares as to
which the Option shall have ben so exercised shall be registered in the name of
the persons or persons so exercising the Option and shall be delivered to or
upon the written order of the person or persons exercising the Option within
fifteen days after receipt by the Company of such notice, proof (if required),
and check. Such delivery shall be made at the office of the Company, or at such
other place as the Company shall thereof have designated by notice.
(b) In the event that the purchase price of any shares as to
which the Option shall be exercised shall be payable in installments, each
installment shall be accompanied by a notice to the Company of the payment of
such installment.
6. Each notice relating to this Agreement shall be in writing and
delivered in person or by certified mail to the Company at its office, attention
of the Secretary. All notices to the Optionee or other person shall be delivered
to the Optionee or such other person or persons at the Optionee's address below
specified.
7. Neither this Option nor the shares of Common Stock issuable upon
exercise hereof, have been registered under the Securities Act of 1933, as
amended, or any state securities laws. The Optionee, by accepting this Option,
represents and warrants that he is acquiring this Option for his own account for
investment and not with a view to or for sale in connection with any
distribution thereof except in conformity with the provisions of the Securities
Act of 1933, as amended, and the Rules and Regulations promulgated thereunder,
and applicable state securities laws, and further agrees that this Option may
not be sold or transferred in the absence of an effective registration statement
under the Securities Act of 1933, and applicable state securities laws, or an
opinion of counsel which opinion and which counsel shall be satisfactory to the
Company to the effect that there is an exemption from such registration. In
addition, the Optionee agrees to deliver to the Company
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a similar written statement in the form of the Investment Letter attached hereto
with respect to any shares of Common Stock purchased upon the exercise of this
Option unless such shares have at the time of issuance been registered under the
Securities Act of 1933, as amended, and applicable state securities laws, or the
Optionee can demonstrate the availability of federal and state exemptions from
registration and qualification not requiring same.
8. Any dispute or disagreement which shall arise under; as a result of,
or in any way relate to the interpretation or construction of this Agreement
shall be determined by the by arbitration under the rules of the American
Arbitration Association, under the rules of that body. Any such determination
made hereunder shall be final, binding and conclusive for all purposes.
9. This Agreement shall be governed by the laws of the State of Texas.
10. This Agreement shall inure to the benefit of and be binding upon
each successor and assign of the Company. All obligations imposed upon the
Optionee, and all rights granted to the Company, hereunder or as stipulated in
the Plan shall be binding upon the Optionee's heirs, legal representatives and
successors.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its name by its President and attested by its Secretary on the day
and year first above written, and the Optionee has hereunto set his hand and
seal on the day and year specified below.
TATONKA ENERGY, INC.
By
---------------------------
George C. Barker, President
Attest:
- ------------------------------
, Secretary
-----------------------------
George C. Barker, Optionee
-----------------------------
Address
Date:
-69-
<PAGE>
Investment Letter
To: PhyMed, Inc.
(formerly, Tatonka Energy, Inc.)
In connection with my purchase of shares of Common Stock of PhyMed,
Inc. pursuant to the exercise of a Stock Option Agreement, I hereby represent
that I am acquiring said shares for my own account for investment and not with a
view to or for sale in connection with any distribution of said shares.
Dated: , 199
-------------- - ------------------------------------
(Signature)
------------------------------------
(Printed or Typed Name)
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<PAGE>
STOCK OPTION AGREEMENT
Joe R. Love
Stock Option Agreement made this 4th day of May, 1998, between Tatonka
Energy, Inc., an Oklahoma corporation ("Company") and Joe R. Love, ("Optionee").
WHEREAS, The Company desires to provide the Optionee with an
opportunity to acquire a proprietary interest in the business of the Company
and, through stock ownership, an increased personal interest in its continued
success and progress:
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter set forth, and other good and valuable consideration, the Company
and Optionee agree as follows:
1. The Company hereby grants to the Optionee the option to purchase an
aggregate of 2,500,000 shares of Company's Common Stock, par value of $0.0001
(as presently constituted), on the terms and conditions hereinafter set forth,
at the purchase price of $0.075 per share as presently constituted (250,000
shares at $0.75 per share, after the effectiveness of the proposed 1-for-10
reverse stock split).
2. The Option shall be exercisable in whole or in part at any time, or
from time to time, upon notice given to the Company by the Optionee of such
exercise of the Option as provided below.
3. (a) The Option shall be exercisable as to not less than 10,000
shares, as presently constituted (1,000 shares, after the effectiveness of the
proposed 1-for-10 reverse stock split), or a multiple thereof, or the remaining
shares covered by the Option if less than such minimum. Notice shall be given to
the Company by the Optionee of such exercise of the Option as provided below.
(b) The purchase price of any shares as to which the Option
shall be exercised shall be paid in full at the time of such exercise or, except
as hereinafter provided, may, at the election of the Optionee, be paid in
installments, in which case the first installment shall be paid at the time of
such exercise. In the event that the purchase price of such shares shall be paid
in full at the time of such exercise, such shares shall be issued as fully paid
and nonassessable shares. In the event, however, that the Optionee shall elect
to pay the purchase price of such shares in installments:
(i) such shares shall be issued as partly paid and assessable
shares,
(ii) the first installment shall be amount equal to not less than
20% of such purchase price,
(iii) the unpaid balance of such purchase price shall be paid
(without interest) in equal installments, the first installment at the end of 12
months commencing with the date of such exercise and subsequent installments at
the end of each successive 12-month interval until the balance is paid in full
(the Optionee to have the right of prepaying at any such time the latest
maturing installment
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or installments of such purchase price then remaining unpaid), or may be prepaid
in whole at any time, provided, however, that any unpaid balance of the purchase
price shall be due and payable forthwith upon any termination of the Option as
hereinafter provided,
(iv) each installment paid in respect of such shares after the
first installment shall be applied to the partial payment of such shares as
nearly as possible in an equal amount,
(v) such shares shall not be assigned or transferred (except
by will or operation of law) and the certificates issued therefor shall bear a
legend indicating that such share are not assignable or transferrable,
(vi) any dividend on the Common Stock shall be paid on such
shares in direct proportion to the percentage of the purchase price therefor
which shall have been paid by the record date for such dividend,
(vii) each certificate for such shares shall, immediately upon
issue, be delivered to the Company, endorsed in blank by the Optionee or
accompanied by a separate stock power so endorsed, in pledge as security for the
unpaid balance of the purchase price of the shares represented by such
certificate,
(viii) such shares shall be subject to assessment and call in
accordance with the laws of the State of Texas; further the Company shall have
the right, by notice to that effect, without the necessity of any such call or
assessment, to require the prepayment, in whole at any time or in part from time
to time of the unpaid balance of the purchase price of such shares or any of
them, whether or not prepayment shall be required of any other person holding
partly paid shares, and
(ix) when the balance of the purchase price of such shares
which shall be represented by any certificate shall have been paid in full, such
certificate shall be promptly released from pledge, stamped full paid,
nonassessable, and transferable, and delivered to the Optionee in person or my
certified mail, of if the Company so desires, such certificate shall be promptly
released from pledge and surrendered to the Company, and a new certificate for
full paid and nonassessable shares shall be promptly delivered to the Optionee
by certified mail in lieu thereof.
(c) In the event that there shall be a default in the payment
when due hereunder of any installment, or of any call, assessment, or prepayment
required by the Company, with respect to any partly paid shares, and such
default shall not be cured within thirty days after written notice thereof by
the Company, the Company shall have the right to take such of the following
actions as it shall deem desirable in its sole discretion:
(i) To cancel the Option and all other options granted to the
Optionee under the Company's "Stock Option Agreement";
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<PAGE>
(ii) To take by forfeiture all right, title, and interest of
the Optionee in and to such partly paid shares;
(iii) To (A) determine that the unpaid balance of the purchase
price of all partly paid shares issued hereunder is immediately due and payable,
without further demand or notice of any kind, in which case such balance shall
thereupon be due and payable; (B) sell, as full paid, nonassessable, and
transferable shares, all shares then pledged hereunder, either at the Stock
Exchange or any public or private sale, without further notice or advertising of
any kind, and buy all or any part of such shares at such sale free from any
right or equity of redemption; (C) charge the Optionee with the entire expense
of such sale; and (D) apply the proceeds of such sale against the balance of the
purchase price owed for all partly paid shares issued hereunder and the expense
of such sale, with the remainder, if any, to be paid over to the Optionee;
provided, however, that if such proceeds shall not be sufficient to liquidate
such balance and expenses in full, the Optionee shall remain liable to the
Company for any unliquidated portion of such balance and expense; and
(iv) To take such other action (including extending the time
for payment of such installment, call, assessment, or prepayment) as shall be
permitted by law. The rights granted to the Company hereunder shall be in
addition to and not in lieu of any other rights or remedies the Company may have
as a result of such default.
(d) Anything herein contained to the contrary notwithstanding,
the purchase price of any shares as to which the Option shall be exercised after
the termination of the Optionee's employment (by retirement, death, or
otherwise) shall be paid in full at the time of exercise of the Option with
respect to such shares.
4. The Option may not be assigned, transferred (except as aforesaid),
pledged, or hypothecated in any way (whether by operation of law or otherwise),
and shall not be subject to execution, attachment, or similar process. Any
attempted assignment, transfer, pledge, hypothecation, or other disposition of
the Option contrary to the provision hereof, and the levy of any attachment or
similar process upon the Option, shall be null and void and without effect. The
Company shall have the right to terminate the Option, in the event of any such
assignment, transfer, pledge, hypothecation, other disposition of the Option, or
levy of attachment or similar process, by notice to that effect to the person
then entitled to exercise the Option, provide, however, that termination of the
Option thereunder shall not prejudice any rights or remedies which the Company
or a subsidiary corporation may have under this Agreement or otherwise.
5. (a) Subject to the terms and conditions of this Agreement, the
Option shall be exercisable by notice to the Company. Each such notice shall
state the election to exercise the Option and the number of shares in respect of
which it is being exercised,
(ii) state whether the shares in respect of which the Option
is being exercised are being paid for in full or will be paid for in
installments,
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<PAGE>
(iii) be signed by the person or persons exercising the Option
and, in the event that the Option is being exercised by any person or persons
other than the Optionee, be accompanied by proof, satisfactory to counsel for
the Company, of the right of such person or persons to exercise the Option, and
(iv) be accompanied by a check payable to the order of the
Company in an amount equal to the purchase price of the shares in respect of
which the Option is being exercised or the first installment of such purchase
price, depending upon whether such shares are being paid for in full or will be
paid for in installments.
The Option shall not be deemed to have been exercised unless all the
preceding provisions of this paragraph shall have been complied with, and for
all purposes of this Agreement the date of the exercise of the Option with
respect to any particular shares shall be the date on which such notice, proof
(if required), and check shall have all been mailed by certified mail or
delivered to the Company. The certificate or certificates for the shares as to
which the Option shall have ben so exercised shall be registered in the name of
the persons or persons so exercising the Option and shall be delivered to or
upon the written order of the person or persons exercising the Option within
fifteen days after receipt by the Company of such notice, proof (if required),
and check. Such delivery shall be made at the office of the Company, or at such
other place as the Company shall thereof have designated by notice.
(b) In the event that the purchase price of any shares as to
which the Option shall be exercised shall be payable in installments, each
installment shall be accompanied by a notice to the Company of the payment of
such installment.
6. Each notice relating to this Agreement shall be in writing and
delivered in person or by certified mail to the Company at its office, attention
of the Secretary. All notices to the Optionee or other person shall be delivered
to the Optionee or such other person or persons at the Optionee's address below
specified.
7. Neither this Option nor the shares of Common Stock issuable upon
exercise hereof, have been registered under the Securities Act of 1933, as
amended, or any state securities laws. The Optionee, by accepting this Option,
represents and warrants that he is acquiring this Option for his own account for
investment and not with a view to or for sale in connection with any
distribution thereof except in conformity with the provisions of the Securities
Act of 1933, as amended, and the Rules and Regulations promulgated thereunder,
and applicable state securities laws, and further agrees that this Option may
not be sold or transferred in the absence of an effective registration statement
under the Securities Act of 1933, and applicable state securities laws, or an
opinion of counsel which opinion and which counsel shall be satisfactory to the
Company to the effect that there is an exemption from such registration. In
addition, the Optionee agrees to deliver to the Company a similar written
statement in the form of the Investment Letter attached hereto with respect to
any shares of Common Stock purchased upon the exercise of this Option unless
such shares have at the time of issuance been registered under the Securities
Act of 1933, as amended, and applicable state
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<PAGE>
securities laws, or the Optionee can demonstrate the availability of federal and
state exemptions from registration and qualification not requiring same.
8. Any dispute or disagreement which shall arise under; as a result of,
or in any way relate to the interpretation or construction of this Agreement
shall be determined by the by arbitration under the rules of the American
Arbitration Association, under the rules of that body. Any such determination
made hereunder shall be final, binding and conclusive for all purposes.
9. This Agreement shall be governed by the laws of the State of Texas.
10. This Agreement shall inure to the benefit of and be binding upon
each successor and assign of the Company. All obligations imposed upon the
Optionee, and all rights granted to the Company, hereunder or as stipulated in
the Plan shall be binding upon the Optionee's heirs, legal representatives and
successors.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its name by its President and attested by its Secretary on the day
and year first above written, and the Optionee has hereunto set his hand and
seal on the day and year specified below.
TATONKA ENERGY, INC.
By
----------------------------
George C. Barker, President
Attest:
- ------------------------------
, Secretary
-----------------------------
Joe R. Love, Optionee
-----------------------------
Address
Date:
-75-
<PAGE>
Investment Letter
To: PhyMed, Inc.
(formerly, Tatonka Energy, Inc.)
In connection with my purchase of shares of Common Stock of PhyMed,
Inc. pursuant to the exercise of a Stock Option Agreement, I hereby represent
that I am acquiring said shares for my own account for investment and not with a
view to or for sale in connection with any distribution of said shares.
Dated: , 199
------------- -
------------------------------------
(Signature)
-----------------------------------
(Printed or Typed Name)
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