SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 9, 1998
PEASE OIL AND GAS COMPANY
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(Exact name of registrant as specified in its charter)
Nevada 0-6580 87-0285520
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(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
751 Horizon Court, Suite 203, Grand Junction, Colorado 81506-8718
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(Address of principal executive offices) (Zip Code)
Registrant telephone number including area code: (970) 245-5917
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Item 5. OTHER MATERIAL EVENTS.
On September 9, 1998, the Registrant engaged San Jacinto Securities, Inc.,
a member firm of the National Association of Securities Dealers, Inc., in
Dallas, Texas ("SJS"), to assist the Registrant in pursuing strategic
alternatives to enhance shareholder value. In the agreement, SJS was engaged to
assist the Registrant to identify one or more other companies or entities with
appropriate corporate objectives, financial condition and an interest in
entering into an acquisition transaction with the Registrant and to provide
other related services in connection with any transaction to which the
Registrant may become a party.
Registrant agreed to pay a nonrefundable initial financial advisory fee of
$150,000 which shall be credited against the amount of any transaction fee which
may be earned. In the event the Registrant enters into a transaction with any
entity identified by SJS, SJS shall be entitled at closing to a transaction fee
equal to 3.5% of the total value of the transaction, less the amount of the
initial advisory fee.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
Exhibit 10.1 Letter Agreement, signed September 9, 1998 between Pease
Oil and Gas Company and San Jacinto Securities, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 17, 1998
PEASE OIL AND GAS COMPANY
By /s/ Willard H. Pease, Jr.
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Willard H. Pease, Jr., President
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EXHIBIT INDEX
Exhibit Description Page No.
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10.1 Letter Agreement, signed September 9, 1998 between
Pease Oil and Gas Company and San Jacinto Securities,
Inc. as of March 3, 1998. 5
4
SAN JACINTO SECURITIES, INC.
member N.A.S.D.
September 4, 1998
PERSONAL AND CONFIDENTIAL
Pease Oil and Gas Co.
751 Horizon Center, Suite 203
P. 0. Box 60219
Grand Junction, CO 81506-8758
Attention: William F. Warnick, Chairman
RE: Engagement of San Jacinto Securities Inc.
Dear Sirs:
Representatives of San Jacinto Securities, Inc. ("SJS") and Pease Oil and Gas
Co. (the ("Company"), have discussed on a confidential basis, the Company's
short-term, and long-term financial and business objectives, goals and needs and
the financial advisory and investment banking services (collectively,
"Investment Banking Services") which SJS can provide to the Company. More
specifically, the Company has requested that SJS assist the Company in locating
a party or parties for the purpose of acquiring the Company or merging with the
Company, such party called hereinafter a "Candidate." At this time, neither the
Company nor SJS can determine the nature or form of any possible transaction or
transactions between the Company and a Candidate or Candidates, and, for
purposes of this letter (this "Agreement'), any transaction with or between a
Candidate will be referred to generically as a "Transaction."
Accordingly, this Agreement will confirm and set forth the following terms and
Conditions under which SJS will render Investment Banking Services to the
Company based on its understanding of the Company's current intentions:
1. Engagement. The Company will engage SJS as its exclusive financial advisor
for the purpose of providing Investment Banking Services with respect to a
possible transaction between the Company and a Candidate. In addition, during
the term of its engagement, SJS will provide such other Investment Banking
Services as the officers of the Company may reasonably request. For purposes
hereof the term "Company" shall include any subsidiary or affiliate of the
Company.
2. General Services. SJS along with the management of the Company will develop a
strategy for the Company identifying specific corporate objectives, financial
needs and companies or other parties who are Candidates for a Transaction with
the Company
ENGAGEMENT AGREEMENT
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5949 Sherry Lane o Suite 960 o Dallas, Texas 75225 o Phone: 214-890-7677
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3. Transaction Candidates. After a suitable Candidate has been identified, SJS
will assist the Company in evaluating such Candidate and, if requested by the
Company, will make contact with appropriate parties regarding such Candidate and
assist in negotiations.
4. Compensation. The Company agrees to pay SJS an initial financial advisory fee
of $150,000 payable as follows:
1. $50,000 upon signing of this Agreement;
2. $50,000 on or before October 1, 1998; and
3. $50,000 on or before October 20, 1998.
The amount of such fee shall be non-refundable except as provided in paragraph 9
below and shall be credited against the amount of any Transaction fee owing
hereunder. In the event the Company enters into a Transaction as contemplated
herein with any Candidate during the term hereof, SJS shall be entitled at
closing thereof to an amount of cash equal to three and one half percent (3
1/2%) of the total value of such Transaction. For purposes hereof, the total
value of the Transaction shall include the value of all cash, securities or
other property given by a Candidate or Candidates for assets or securities of
the Company. The Company also agrees to reimburse SJS for its reasonable out of
pocket expenses.
5. Identification of Transaction Candidates. SJS will identify parties and
companies which are Candidates for the Company. Before or within thirty (30)
days following the identification of any such Candidate, SJS will confirm the
identification of such Candidate by letter to the Company and such Candidate
shall be deemed to be an identified Candidate ("Identified Candidate") within
the terms of this letter. In the event the Company enters into a Transaction
with any Identified Candidate within one (1) year following the expiration of
this engagement, SJS will be entitled to a fee determined in accordance with
paragraph 4 above.
6. Excepted Candidates. Within three (3) days of the date hereof, the Company
may identify in writing to SJS, a list of Candidates which shall be excepted
Candidates under this Agreement. In the event the Company enters into a
Transaction with an excepted Candidate during the term hereof, SJS shall not be
entitled to a Transaction fee, although SJS will still assist in negotiations
with such Candidate and provide Investment Banking Services with respect to the
Transaction as requested by the Company.
7. Refinancing. In the event the Company is able to obtain additional financing
or refinancing through its own initiative during the term hereof, SJS at the
Company's request will assist the Company with respect to such financing but
will not be entitled to a Transaction fee.
8. Due Diligence Investigation. From and after the date of execution and
delivery of this Agreement, the Company will continue to afford SJS and its
agents, attorneys and accountants reasonable access to the business records and
properties of the Company and will furnish to SJS all information concerning its
business for the purpose of enabling SJS to make such financial, accounting,
legal or other investigations deemed necessary or appropriate by SJS.
ENGAGEMENT AGREEMENT
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9. Early Termination of Agreement. This Agreement may be terminated with or
without cause by the Company or SJS at any time, without liability or continuing
obligation by either party to the other with the exception of fees earned or
expenses incurred by SJS; provided, however that if SJS elects to terminate this
Agreement it shall refund to the Company a portion of the initial financial
advisory fee determined by multiplying $150,000 by the ratio of the number of
days the Agreement was in effect to 180 days.
10. Subsequent Agreement. At the time the scope of SJS's Investment Banking
Services becomes definitive, the Company and SJS may enter into an appropriate
agreement in form and substance satisfactory to SJS and the Company. Neither the
foregoing sentence nor any such additional agreement shall affect SJS's rights
hereunder or the enforceability of this Agreement except to the extent
specifically provided therein.
11. Disavowal of Agency. In no event shall SJS or any of its principals or
employees be deemed to be an agent or employee of the Company and shall not hold
themselves out as such. While SJS may assist the Company in the negotiation of
final agreements, the terms and conditions of such final agreements, including
all representations, warranties, covenants and conditions to closing, shall be
the sole responsibility of the Company, its officers and directors.
12. Confidentiality. Except as otherwise is agreed to by the Company or as is
required by law or is necessary to complete its engagement hereunder, SJS will
keep confidential all information which is supplied by the Company and which has
not previously entered the public domain, and will not use any such information
for its own benefit except in connection with the matters undertaken pursuant to
the terms of this engagement. At the termination of this agreement, upon the
request of the Company, SJS shall return all information, and copies thereof,
furnished by the Company.
13. Reliance Upon Information. SJS has and will rely without independent
verification on all information supplied by the Company. In addition, SJS may
and will rely on public information and information supplied by Candidates
without independent verification thereof unless the Company requests such
verification.
14. Indemnification. THE COMPANY AGREES TO INDEMNIFY AND HOLD SJS HARMLESS
AGAINST AND FROM ANY AND ALL LOSSES, CLAIMS, DAMAGES OR LIABILITIES, JOINT OR
SEVERAL, TO WHICH SJS MAY BECOME SUBJECT IN CONNECTION WITH THE TRANSACTIONS
REFERRED TO HEREIN UNDER ANY OF THE FEDERAL SECURITIES LAWS, UNDER ANY OTHER
STATUTE, AT COMMON LAW OR OTHERWISE, AND TO REIMBURSE SJS FOR ANY LEGAL OR OTHER
EXPENSES (INCLUDING THE COST OF ANY INVESTIGATION AND PREPARATION) INCURRED BY
SJS ARISING OUT OF OR IN CONNECTION WITH ANY ACTION OR CLAIM IN CONNECTION
THEREWITH) WHETHER OR NOT RESULTING IN ANY LIABILITY; PROVIDED, HOWEVER, THAT
THE COMPANY SHALL NOT BE LIABLE IN ANY SUCH CASE TO THE EXTENT THAT ANY SUCH
LOSS, CLAIM, DAMAGE OR LIABILITY IS FOUND IN A FINAL JUDGMENT BY A COURT TO HAVE
RESULTED FROM SJS'S GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR BAD FAITH IN
PERFORMING SUCH SERVICES. THE INDEMNITY AGREEMENT IN THIS PARAGRAPH SHALL EXTEND
UPON THE SAME TERMS AND CONDITIONS TO THE OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS OF SJS AND TO EACH PERSON, IF ANY, WHO MAY BE DEEMED TO CONTROL SJS.
ENGAGEMENT AGREEMENT
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15. Governing Law. This letter and the engagement resulting herefrom shall be
governed by and construed under the laws of the State of Texas.
16. Term. This Agreement shall continue in effect for a term of one hundred and
eighty (180) days from the date of the Company's acceptance hereof unless
earlier terminated under paragraph 9 above or replaced by a subsequent
agreement.
If the foregoing correctly sets forth our understanding, please sign and return
the enclosed copy of this Agreement. The second copy is for your files.
SAN JACINTO SECURITIES, INC.
by /s/ Kenneth R. Etheredge
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Kenneth R. Etheredge, President
Accepted and Agreed to this 9th
day of September, 1998.
PEASE OIL AND GAS CO.
by /s/ Patrick J. Duncan
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Patrick J. Duncan
ENGAGEMENT AGREEMENT
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