UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) OCTOBER 27, 1997.
ARXA INTERNATIONAL ENERGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 2-99565 13-3784149
(State or other jurisdiction Commission (IRS Employer
of Incorporation) File Number Identification No.
110 CYPRESS STATION DR., SUITE 280 HOUSTON, TEXAS 77090
(Address of principal executive offices (Zip Code)
Registrant's Telephone Number, including area code: (281) 444-1088
25227 GROGAN'S MILL ROAD, SUITE 125 HOUSTON, TEXAS 77380
(Former name or former address, if changed since last report.)
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FORM 8-K
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
As a result of the issuance of the 12,786,310 shares of Registrant's Common
Stock to acquire the assets of Phoenix Energy Group, Inc., as reported in Item 2
below, Phoenix Energy Group, Inc. holds approximately 63% of the 20,263,112
issued and outstanding shares of Registrant's Common Stock following such
transaction. The consideration for which the shares were issued was the assets
acquired in the transaction, as described in Item 2 below.
Following the acquisition transaction, changes were made in the directors and
officers of Registrant as reported in Item 5 below.
Prior to the transaction, William J. Bippus, the Registrant's President and CEO,
who owns 1,612,094 shares of Registrant's Common Stock, was in control of the
Registrant.
Phoenix Energy Group, Inc. is controlled by L. Craig Ford, its President and
CEO, who holds approximately 9% of its common stock.
Phoenix Energy Group, Inc. intends to hold the shares received and to
function as a holding company of Registrant.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 27, 1997 the Registrant entered into a formal Purchase and Sale
Agreement with Phoenix Energy Group, Inc., culminating the previously announced
negotiations. Under the Agreement, Registrant has acquired substantially all of
the assets of Phoenix Energy Group, Inc. in exchange for 12,786,310 shares of
Registrant's Common Stock, representing approximately 63% of the issued and
outstanding shares of Common Stock following the transaction.
The assets acquired consisted of leasehold rights to properties associated with
the oil & gas rights acquired, ownership of oil & gas reserves, the working and
net revenue mineral interests in oil & gas properties, and the proportionate
interests in the plant and equipment associated with such properties.
Additionally, the assets consisted of all accounts receivable, all bank
accounts, credits due and debts owed, seller's corporate offices and all related
fixtures, office space, furniture, automobiles, computers and leasehold
improvements.
ITEM 5. OTHER EVENTS.
BOARD OF DIRECTORS
In connection with the Purchase and Sale Agreement with Phoenix Energy Group,
Inc., Registrant restructured its Board of Directors. Mr. William J. Bippus
and Mr. Gregory A. Stephens remained as directors, while Mr. Thomas A. Abate
and Mr. Umberto Brovedani resigned, creating two vacancies. The vacancies
were filled by the election of L. Craig Ford, President of Phoenix Energy
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Group, Inc. and Mr. John Moran, both directors of Phoenix Energy Group, Inc.
L. Craig Ford, age 50, has served as the President and Chief Executive Officer
of Phoenix Energy Group, Inc. since its inception in March, 1996. In that
capacity he managed Phoenix's acquisition of 95% of the available working
interests formerly managed by Prospector Petroleum, Inc. for which he had been
Vice President of Finance from 1994 through 1995. During January and February
of 1996 he was working with the owners of the working interests to form Phoenix.
From 1992 through 1993, Mr. Ford was a financial consultant to two California
venture capital projects, Systematic Irrigation and C.J. Comm, to which he
provided corporate and product strategic advice.
John Moran, age 51, has served as a director of Phoenix Energy Group, Inc. since
January, 1997 and he has been Phoenix's Vice President of Exploration since
March, 1997. Mr. Moran is the President of Integrated Petroleum Exploration,
Inc. ("IPX") a 2-D and 3-D geological and geophysical prospect development
company in which Phoenix has made a sizable investment. Prior to forming IPX, in
1995 Mr. Moran formed and operated TeTra Exploration, Inc., developing large 3-D
seismic projects for sale to the oil & gas industry. Prior to that, from 1991 to
1995 Mr. Moran served as Chief Geologist, Vice President of Business
Development, and Vice President of Exploration Services for Apache Corporation.
In those capacities he managed the Corporate Reservoir Engineering, Corporate
Land Administration, Corporate Environmental Health and Safety, and Corporate
Land and Analysis (technical computing) Departments. Mr. Moran also served on
the Board of Directors of Apache International, Inc. From 1984 to 1991, as
Apache's Midcontinent Exploration Manager, Mr. Moran was responsible for
planning and directing the exploration activities for Apache's Midcontinent
Regional Office.
OFFICER CHANGES
Mr. William J. Bippus, formerly President and CEO, resigned those positions, and
was replaced by L. Craig Ford. Mr. Bippus was appointed as Vice President of
Development.
Mr. Gregory A. Stephens, formerly Treasurer, resigned that position and was
replaced by Mr. L. Craig Ford.
Mr. John Moran (see resume above) was elected as the Vice President of
Exploration.
Mr. Mitchell F. Veh, Jr., age 48, was elected as the Vice President of
Acquisitions and Engineering. A Registered Professional Engineer in Texas and
Louisiana since 1981, Mr. Veh has served as Vice President of Acquisitions and
Engineering of Phoenix Energy Group, Inc. since June, 1997. From 1993 to May,
1997 Mr. Veh was a Senior Petroleum Engineer with Torch Energy Advisors with
responsibilities for evaluating oil and gas reserves as well as the further
exploitation and/or development of the properties. From 1991 to 1992, he was
Vice President of Acquisitions and Development with Ultramar Oil and Gas Ltd.
where he was responsible for the evaluation and acquisition of oil and gas
reserves and the subsequent management and development of the properties.
Mr. Kenneth Koepke, age 43, was elected as the Vice President of Corporate
Relations. Since March, 1997 Mr. Koepke has served as Vice President of
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Corporate Communications for Phoenix Energy Group, Inc. Mr. Koepke was a
significant investor in a group of joint ventures managed by Prospector
Petroleum, Inc. and he was instrumental in securing the approval of the
investors for Phoenix to become the substituted Joint Venture Manager. From
October, 1996 through February, 1997 Mr. Koepke assisted Mr. Ford in the
acquisition by Phoenix of approximately 95% of the joint venture owners. Prior
to his involvement with Phoenix, Mr. Koepke was engaged in the pharmaceutical
industry. From 1994 to 1996, Mr. Koepke was a marketing manager for Flemming
Pharmaceuticals with responsibilities for direct sales in the medical community
and in the training of that company's field personnel. From 1988 through 1993,
he was a pharmaceutical sales representative for Whitby Pharmaceuticals and
Forest Pharmaceuticals.
Mr. Dennis P. McGrath, age 49, was elected Vice President and Controller. A
Certified Public Accountant since 1976, Mr. McGrath was a sole practitioner from
January, 1995 to March, 1997 when he joined Phoenix Energy Group, Inc. as Vice
President and Controller. From June, 1996 through February, 1997 Mr. McGrath was
engaged by Phoenix to conduct an audit of the Prospector Petroleum, Inc. joint
ventures for the four year period prior to Phoenix becoming the Joint Venture
Manager. From 1986 to 1994 Mr. McGrath was a partner in the Houston office of
the regional public accounting firm of Simonton, Kutac and Barnidge, L.L.P.
where he was the firm's partner-in-charge of small business consulting and
out-sourcing services. A large portion of his clients were engaged in the
business of oil & gas exploration and development. During the period from 1972
to 1986 Mr. McGrath held financial management positions with various oil & gas
companies.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The financial statements required in connection with the asset acquisition
reported in Item 2 will be filed by amendment within sixty (60) days of the date
of filing this Form.
Attached as Exhibit 2 is the Purchase and Sale Agreement between Phoenix Energy
Group, Inc. and ARXA International Energy, Inc. executed on October 27, 1997.
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.
ARXA International Energy, Inc.
Date: November 7, 1997 /s/ L. CRAIG FORD
(Signature)
EXHIBIT 2
PURCHASE AND SALE AGREEMENT
BETWEEN
PHOENIX ENERGY GROUP, INC.
AS SELLER
AND
ARXA INTERNATIONAL ENERGY, INC.
AS BUYER
EXECUTED ON OCTOBER 27, 1997
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PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "AGREEMENT"), executed this 27th day
of October 1997 and to be effective as of October 27, 1997 (the "EFFECTIVE
DATE"), is between Phoenix Energy Group, Inc. a Texas corporation, whose offices
are located at 110 Cypress Station Drive, Suite 280, Houston, TX 77090
("SELLER"), and, Arxa International Energy, Inc., a Delaware corporation, whose
offices are located at 25227 Grogan's Mill Road, The Woodlands, Texas 77381
("BUYER").
RECITALS:
Buyer wishes to buy and Seller wishes to sell, transfer and assign to
Buyer substantially all the assets of Seller, including without limitation,
certain oil and gas properties.
Accordingly, in consideration of the mutual promises contained in this
Agreement, Buyer and Seller agree as follows:
ARTICLE 1. DEFINITIONS
The following terms shall have the meaning set forth opposite such term (and the
definition of each such term is to be equally applicable to both singular and
plural forms of such term):
"AFFILIATE": means any Person that, directly or
indirectly, controls or is controlled by or
under common control with another Person.
For purposes of this definition, "control"
(including the terms "controlled by" and
"under common control with"), as used with
respect to any Person, means the power to
direct or cause the direction of the
management and policies of such Person,
directly or indirectly, whether through the
ownership of voting securities or by
contract or otherwise.
"CERCLA": means the Comprehensive Environmental
Response, Compensation and Liability Act of
1980 as amended, 42 USC Section 9601, et
seq.
"CODE": means the Internal Revenue Code of 1986, as
amended.
"EMPLOYEE" or "EMPLOYEES": means the regular full and part time
employees of the relevant employer.
"EXCLUDED ASSETS": means those assets of Seller's Business,
which are not included in the Assets as
described in Section 2.2.
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"GOVERNMENTAL BODY": means any court or any federal, state,
municipal or other governmental department,
commission, board, bureau, agency or
instrumentality, domestic or foreign.
"IRS": means the Internal Revenue Service.
"KNOWN" or "KNOWLEDGE": Whenever a statement regarding the existence
or absence of facts in this Agreement is
qualified by such words as "to the Knowledge
of" or "Known by", it is intended by the
parties that the only information to be
attributed to such party is information (i)
in the case of Seller actually known to
Craig L. Ford or Ken Koepke, or (ii) in the
case of Buyer actually known to William J.
Bippus or Greg Stephens, and unless
otherwise specifically provided in this
Agreement, no party is represented to have
made a separate or special investigation or
inquiry in connection with this Agreement to
determine the existence or absence of facts
in any statement qualified by phrases such
as "Known by" or "to the Knowledge of".
"LICENSES": means those licenses, permits or other
consents required by the State of Texas, or
any other Governmental Body.
"LIEN": collectively means all mortgages, deeds of
trust, liens, security interests, pledges,
leases, conditional sale contracts, claims,
rights of first refusal, options, charges,
liabilities, obligations, agreements,
privileges, reservations, restrictions and
other encumbrances of any kind or nature.
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"MATERIAL ADVERSE EFFECT": means (i) any change, development or effect
(individually or in the aggregate) in the
general affairs, management, business,
results of operations, conditions (financial
or otherwise), assets, liabilities or
prospect (whether or not the result thereof
would be covered by insurance) that would be
material and adverse, taken as a whole,
after giving effect to the transaction
contemplated hereby, or (ii) any fact or
development which would (individually or in
the aggregate), after giving effect to the
transaction contemplated hereby, impair a
designated Person's ability or obligations
to perform on a timely basis any material
obligation he, she or it has under this
Agreement.
"ORDER": means any order, writ, injunction, decree,
judgment, award or determination of any
court or other Governmental Body.
"PERMITS": means all permits, authorizations,
certificates, approvals, registrations,
variances, exemptions, franchises,
privileges, immunities, grants, ordinances,
Licenses, concessions, and other rights of
every kind and character (i) under any (1)
federal, state or foreign statute, ordinance
or regulation, (2) Order or (3) contract
with any Governmental Body or (ii) granted
by any Governmental Body.
"PERMITTED ENCUMBRANCES": means (i) the Liens described or referred to
in Exhibit 2.1, (ii) Liens for current Taxes
and assessments not yet due and payable,
including, but not limited to, Liens for
nondelinquent ad valorem or personal
property Taxes, nondelinquent statutory
Liens arising other than by reason of any
default on the part of Seller, and (iii)
such Liens or minor imperfections of title
as do not in any material respect detract
from the value, and do not interfere with
the present use of the property subject
thereto.
"PERSON": means any individual, partnership, joint
venture, corporation, limited liability
company, bank, trust, unincorporated
organization, or Governmental Body.
"RECORDS": means all of the books, files, records,
data, papers and instruments of whatever
nature and wherever located of the Seller,
including, but not limited to, engineering,
seismic, geological, geophysical and other
technical data, accounting and financial
records, contracts, receipts, maintenance
records, personnel and contractor records,
environmental records and reports, sales and
property Tax records and returns, sales and
rental records, and income Tax records and
returns.
<PAGE>
"TAXES": means any federal, state, local or foreign
income, sales, excise, real or personal
property or other taxes, assessments, fees,
levies, imposts, duties, or other charges of
any nature whatsoever, including, but not
limited to, interest, additions to tax and
penalties thereon imposed by any law, rule
or regulation.
ARTICLE 2. PURCHASE AND SALE
2.1 The ASSETS. Subject to the terms of this Agreement, including specifically
Section 2.2 below, Seller agrees to sell and assign to Buyer and Buyer agrees to
purchase and acquire from Seller at the Closing all of the assets, rights and
properties of every kind and description of Seller, both tangible and
intangible, real, personal and mixed (collectively the "Assets"), including,
without limitation, the following items, free and clear of all Liens except
Permitted Encumbrances (including those described in Exhibit 2.1) and those
specifically permitted hereunder or in the Exhibits:
2.1.1 The oil, gas and mineral lease(s) and other interests in oil and gas
described in Exhibit 2.1.1 and all rights, privileges and obligations
appurtenant to the leases (the "LEASES");
2.1.2 All rights in any unit in which the Leases are included, to the
extent that these rights arise from and are associated with the Leases,
including without limitation all rights derived from any unitization, pooling,
operating, communitization or other agreement or from any declaration or Order
of any Governmental Body;
2.1.3 All oil, gas and condensate wells (whether producing, not producing
or temporarily abandoned but not permanently abandoned wells), water source,
water injection and other injection or disposal wells, located on the Leases or
lands unitized or pooled with the Leases ("WELLS"), including without limitation
those wells listed on Exhibit 2.1.3;
2.1.4 All equipment, pipelines, facilities and other personal property on
the Leases used in developing or operating the Leases or producing, treating,
storing, compressing, processing, gathering, or transporting hydrocarbons on or
from the Leases;
2.1.5 All easements, rights-of-way, Licenses, Permits, servitudes and
similar interests applicable to or used in operating the Leases or the personal
property described above, to the extent they are assignable or transferable and
subject to any consents to assignment or transfer to which they may be subject;
2.1.6 All contracts and contractual rights, obligations and interests
relating to the Leases, including without limitation, unit agreements, farmout
agreements, farm-in agreements, operating agreements, and hydrocarbon sales,
purchase, gathering, transportation, treating, marketing, exchange, processing
and fractionating agreements (the Seller's "RELATED CONTRACTS"), including
without limitation those Related Contracts described in Exhibit 2.1.6;
2.1.7 All hydrocarbon production from the Wells and Leases;
<PAGE>
2.1.8 All original Records (but, to the extent such Records and files also
relate to any Excluded Assets, copies thereof);
2.1.9 All accounts receivable and payable, all bank accounts, credits due
and debts owed, all audit adjustment claims and all refunds due;
2.1.10 Seller's corporate offices and all related fixtures, equipment,
office space, furniture, automobiles, computers, leasehold improvements,
signage, all property located at 110 Cypress Station Drive, Suite 280, Houston,
Texas on the Closing Date (including all supplies) and all tangible personal
property of Seller, all of which is itemized on Exhibit 2.1.10 (herein
collectively designated "FIXED ASSETS") and all leases, contracts or rental
agreements related to the Fixed Assets;
2.1.11 All of Seller's rights and titles in and to any trade names
used by Seller;
2.1.12 All of Seller's interest in and to telephone numbers;
2.1.13 All goodwill associated with Seller, all assignable Licenses and
Permits with respect to Seller, all express and implied warranties from Seller's
vendors relating to the Fixed Assets that are freely transferable, and all other
freely transferable and assignable interests of Seller.
2.2 EXCLUDED ASSETS. Buyer shall not buy and does not agree to pay for any asset
of Seller other than those included in the "Assets" such non-purchased assets
being the "EXCLUDED ASSETS". It is specifically acknowledged that the Assets do
not include (i) Ten thousand dollars ($10,000.00) cash which shall remain in the
account of Seller, (ii) items of damaged, spoiled or unsalable inventory, (iii)
Seller's corporate minute book, original tax returns and related records.
ARTICLE 3. PURCHASE PRICE
3.1 PURCHASE PRICE. Buyer shall pay and deliver to Seller as full consideration
for the Assets, and in consideration of the covenants and agreements contained
herein, the Purchase Price (as hereinafter defined). The aggregate "PURCHASE
PRICE" for the Assets shall be payable upon the Closing as follows: (i) Buyer
shall issue to Seller 12,786,310 fully paid and non-assessable shares of common
stock, par value $0.001 per share, of Buyer (the Stock), and (ii) Buyer shall
issue to Seller warrants to purchase 3,297,000 shares of the common stock of
Buyer a price per $2.00 per share in the form of Exhibit 3.1 (the "WARRANTS").
Seller acknowledges that the certificate(s) representing the Stock and the
Warrants shall bear a legend stating that such securities have not been
registered under the Securities Act of 1933 nor under any state securities or
blue sky laws. Seller acknowledges that the certificate(s) representing the
stock issued upon exercise of the Warrants shall bear a legend stating that such
securities have not been registered under the Securities Act of 1933 nor under
any state securities or blue sky laws.
<PAGE>
3.2 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated,
pursuant to Section 1060 of the Code, in accordance with Exhibit 3.2. It is
agreed that the values set out in Exhibit 3.2 represent the fair market values
of the respective Assets. Buyer and Seller agree to report this transaction for
federal income tax purposes on IRS Form 8594 in substantially the form made part
of Exhibit 3.2. However, if the IRS takes a position with respect to one party
that is inconsistent with any allocation made above, the other party may take a
protective position adopting the IRS' contention until the controversy is
resolved.
3.3 ASSUMPTION OF CERTAIN SPECIFIC LIABILITIES. At the Closing, Buyer shall
assume and agree to pay or discharge when due the following obligations and
liabilities of Seller:
(a) obligations to suppliers for goods ordered by Seller in the ordinary
course of business prior to closing for delivery to the Business (all of which
goods, when delivered shall become the property of Buyer);
(b) ad valorem taxes for the calendar year 1997 for the real and personal
property of Seller included in the Assets;
(c) all the rights, duties, obligations and liabilities of ownership of
the Assets arising after the Closing and assumption of the Assumed Liabilities,
including without limitation: (i) all of the express and implied obligations and
covenants under the terms of the Seller's Disclosed Contracts; (ii)
responsibility for all royalties, overriding royalties, production payments, net
profits obligations, rentals, shut-in payments and other burdens or encumbrances
to which the Assets are subject; and (iii) all other obligations assumed by
Buyer under this Agreement;
(d) the following obligations of Seller related to the Assets, whether
arising before or after the Effective Date (the "PLUGGING AND ABANDONMENT
OBLIGATIONS"): (i) plugging, and abandoning all Wells; (ii) removing and
disposing of all structures and equipment located on or comprising part of the
Assets; (iii) the necessary and proper capping and burying of all associated
flow lines located on or comprising part of the Assets; (iv) restoring the
leasehold premises of the Assets, both surface and subsurface, to the condition
they were in before commencement of oil and gas operations, as may be required
by applicable laws, regulation or contract; and (v) any necessary disposal of
Assets contaminated by naturally occurring radioactive material ("NORM").
Buyer's obligations under this subsection 3.3(e) include without limitation
obligations arising from contractual requirements and demands made by authorized
regulatory bodies or parties claiming a vested interest in the Assets; and
(e) the following occurrences, events and activities on or relating to the
Assets, whether arising before or after the Effective Date (the "ENVIRONMENTAL
OBLIGATIONS"): (i) environmental pollution or contamination, including pollution
of the soil, groundwater or air; (ii) underground injection activities and waste
disposal on-site or offsite; (iii) clean-up responses, and the cost of
remediation, control or compliance with respect to surface and subsurface
pollution caused by spills, pits, ponds or lagoons; (iv) failure to comply with
applicable land use, surface disturbance, licensing or notification
requirements; and (v) violation of environmental or land use rules, regulations,
demands or Orders of appropriate Governmental Bodies.
<PAGE>
Buyer shall not assume and does not agree to pay or discharge any other
debt, obligation or liability of Seller. The parties expressly agree that Seller
shall remain liable for all of the contracts, agreements, commitments and
undertakings of Seller not expressly assumed by Buyer pursuant to this
Agreement. Seller expressly agrees to pay all of its trade accounts payable,
accrued expenses, debts and any other liabilities in the due course of its
business through the Closing.
The debts, liabilities and obligations to be assumed by Buyer under this
Section 3.3 are herein designated the "ASSUMED LIABILITIES". The assumption by
Buyer of the Assumed Liabilities shall not enlarge any rights or remedies of any
third parties under any contracts or arrangements with Seller, except to the
extent the other parties to such contracts become able to enforce such contracts
against Buyer.
ARTICLE 4. REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Buyer hereby represents,
warrants and covenants to Seller as follows, all of which covenants,
representations and warranties shall be true, correct and performed at the
Closing and as of the Closing Date:
4.1.1 INCORPORATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Exhibit 4.1.1(a) is a true and correct copy of the certificate of
incorporation of Buyer in effect on the Effective Date and on the Closing Date.
Exhibit 4.1.1(b) is a true and correct copy of the by-laws of Buyer in effect on
the Effective Date and on the Closing Date.
4.1.2 REQUISITE APPROVALS. Buyer has taken all necessary actions pursuant
to its Certificate of Incorporation, By-laws and other governing documents to
fully authorize it to consummate the transaction contemplated by this Agreement
other than fulfillment of the conditions precedent set forth in Article 7.
4.1.3 VALIDITY OF OBLIGATION. Buyer has all the requisite power and
authority to enter into and perform this and the other contracts or documents
contemplated herein (hereinafter designated "ANCILLARY DOCUMENTS") and this
Agreement and the Ancillary Documents do and will constitute valid and binding
legal obligations of Buyer enforceable in accordance with the respective terms
thereof, subject to (i) the fact that equitable remedies, including the remedies
of specific performance and injunction, may only be granted in the discretion of
a court, and (ii) bankruptcy, insolvency, moratorium, reorganization or other
laws relating to or affecting the enforcement of creditors' rights generally.
4.1.4 IMPEDIMENTS TO CONSUMMATION OF AGREEMENT. Buyer's execution,
delivery and performance of this Agreement does not and will not constitute or
result in the conflict with, or breach or default of or under, any agreement or
instrument (written or oral) to which Buyer is a party, or any law, rule,
regulation, ordinance, judgment, decree, License, Permit or Order to which it is
subject and does not or will not result in the creation of any Lien that will
have a Material Adverse Effect on the Buyer or its business or assets.
<PAGE>
4.1.5 NO OTHER AGREEMENTS. Except as listed on Exhibit 4.1.5, no Person
has any agreement option, understanding or commitment, or any right or privilege
(whether by law or contractual) capable of becoming an agreement, option or
commitment for the purchase, assignment, License or exercise of any of the
rights, benefits or use of any of the assets of Buyer. Buyer has not granted any
special or general power of attorney to any Person that will or could continue
in effect after the Closing Date and that might affect the ownership, operation
or other aspect of any of the assets of Buyer.
4.1.6 BANKRUPTCY. There are no bankruptcy, reorganization or receivership
proceedings pending, being contemplated by, or to its Knowledge, threatened
against Buyer. Buyer is not insolvent and has not had any execution, charging
order, levy or distress warrant become enforceable or become levied upon any of
its assets.
4.1.7 BROKER'S FEES. All negotiations relative to this Agreement, the
Ancillary Documents and transactions contemplated hereby have been carried on by
Buyer and its counsel directly with Seller and its counsel and by counsel
representing both Buyer and Seller in this transaction, without the intervention
of any Person in any such manner as to give rise to any valid claim against any
of the parties for a brokerage commission, finder's fee or similar payment.
4.1.8 INDEPENDENT EVALUATION. Buyer is experienced and knowledgeable in
the oil and gas business. Buyer has been advised by and has relied solely on its
own expertise and legal, accounting, tax, reservoir engineering, environmental
and other professional counsel concerning this transaction, the Assets and the
value thereof.
4.1.9 QUALIFICATION. Buyer or its designated agent is now or at Closing
will be, and thereafter will continue to be, qualified to operate oil, gas and
mineral leases in all jurisdictions in which Buyer will assume operations,
including meeting all bonding requirements.
4.1.10 SECURITIES LAWS. Buyer has complied with all federal and state
securities laws, if any, applicable to the purchase of the Assets.
4.1.11 CERTAIN TRANSACTIONS. All transactions during Buyer's last full
fiscal year between the Buyer and any person who is or was during such last
fiscal year, an officer, director or 5% stockholder of Buyer have been
accurately disclosed in the consolidated financial statements of Buyer as of the
last fiscal year and the terms of each such transaction were in all material
respects fair to Buyer.
<PAGE>
4.1.12 EMPLOYEE BENEFIT PLAN. Buyer has no and has had no employee benefit
plans ("Employee Benefit Plan"), as defined in the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and no bonus, retirement, pension,
profit sharing, stock bonus, thrift, stock option, stock purchase, incentive,
severance, deferred or other compensation or welfare benefit plan, program,
agreement or arrangement of, or applicable to Employees of Buyer or its
Subsidiaries.
4.1.13 EMPLOYMENT LAWS. Each of Buyer and its Subsidiaries is in
compliance in all material respects with all federal, state and local laws and
regulations respecting the employment of its Employees and employment practices,
terms and conditions of employment and wages and hours relating thereto. There
are no actual or threatened claims of Employees or former Employees of the Buyer
or its Subsidiaries against Buyer or its Subsidiaries.
4.1.14 INTERNAL ACCOUNTING CONTROLS. Buyer maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization: (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted United States
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board that are applicable to the circumstances as of the date of
determination ("GAAP") and to maintain accountability for assets; (iii) access
to assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
4.1.15 CAPITALIZATION. All outstanding shares of capital stock of the
Subsidiaries of Buyer have been duly authorized and validly issued, are fully
paid and non-assessable, and are owned, directly or indirectly, by Buyer free
and clear of all liens, encumbrances and security interests. No options,
warrants or other rights to purchase, agreements or other obligations to issue,
or other rights to convert any obligations into shares of capital stock or
ownership interests in any Subsidiary of Buyer are outstanding.
The authorized capitalization of Buyer is 100,000,000 shares of common stock,
par value $0.001 per share, of which 7,520,181 shares, not including the Stock,
are issued and outstanding or committed to be issued and outstanding as of the
Closing Date, and 2,000,000 shares of preferred stock, par value $1.00 per
share, of which no shares are issued and outstanding. All of the issued and
outstanding shares of capital stock of the Buyer are duly authorized, validly
issued, fully paid and non-assessable, were offered and sold in compliance with
all federal and state securities laws, and were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or purchase
securities.
Exhibit 4.1.15(a) lists all of the shareholders of Buyer who are beneficial
owners of more than 5% of the issued and outstanding shares of common stock of
Buyer and the number of shares owned by each.
<PAGE>
Exhibit 4.1.15(b) lists all holders of warrants to purchase the capital stock of
Buyer and a general description of the material terms thereof, including the
number of shares each of them is entitled to purchase and the price at which
they may be purchased.
Exhibit 4.1.15(c) lists all holders of options to purchase the capital stock of
Buyer and a general description of the material terms of each, including the
number of shares each of them is entitled to purchase and the price at which
they may be purchased.
Except as listed on Exhibit 4.1.15(d), Buyer does not own any capital stock,
bond or other security of or have any equity, profits, participating or
proprietary interest in, any corporation, partnership, joint venture, limited
liability company, trust or unincorporated association. The entities listed on
Exhibit 4.1.15(d) are referred to herein as Buyer's "SUBSIDIARIES."
4.1.16 REGISTRATION RIGHTS. Except as set forth in Exhibit 4.1.16, no
Person has any right to register or to cause Buyer to register any securities of
Buyer including shares of Buyer's capital stock or shares issuable upon the
exercise of outstanding warrants, options, convertible securities or other
rights to acquire shares of such capital stock exist.
4.1.17 OPTIONS, WARRANTS, ETC. Except as set forth on Exhibit 4.1.17,
there are no bonds, notes, debentures, warrants, preferred shares or other
securities of Buyer which may, either directly or indirectly, be converted to
stock of Buyer.
4.1.18 LAWSUITS AND CLAIMS. Except as set forth on Exhibit 4.1.18, neither
Buyer nor any of Buyers Subsidiaries has notice of any suit, action, proceeding,
arbitration, investigation, claim or demand pending or threatened against Buyer
or any of its Subsidiaries and to the Knowledge of Buyer, there are no lawsuits,
claims, or demands pending or threatened in writing against Buyer or any
Subsidiary of Buyer or the operator of any portion of the assets of Buyer or any
of Buyer's Subsidiaries, nor any compliance orders or notices of probable
violation or similar governmental agency actions relating to the assets of Buyer
or any of its Subsidiaries, nor, to the Knowledge of Buyer, do any facts exist
which might result in any such action, suit, proceeding, arbitration or
investigation. Buyer is not in default with respect to any Order or any decision
of an arbitrator.
4.1.19 TAXES. There are no federal, state or local Tax liens filed against
Buyer or encumbering any of its Assets. Buyer duly and timely filed all Tax
reports and returns which are required to be filed and has timely paid (i) all
Taxes shown as being owing on said returns and (ii) all assessments received by
Buyer to the extent that such Taxes have become due.
<PAGE>
4.1.20 CERTAIN CONTRACTS. Certain material or significant contracts of
Buyer are referenced on Exhibit 4.1.20 (herein designated "BUYER'S DISCLOSED
CONTRACTS"). Except as described in Exhibit 4.1.20, there are no Liens which
might affect title to, or exclusive possession and use of, or any other right of
Buyer to the benefits of, any or all of Buyer's contractual rights or benefits
with regard to the Buyer's Disclosed Contracts. Buyer has no Knowledge that
Buyer is in default or breach of any material obligation under the Buyer's
Disclosed Contracts or any other contract, arrangement or commitment, and Buyer
has no Knowledge of any facts which, after notice or lapse of time, or both,
would constitute such a default or breach. To the Knowledge of Buyer, each of
the Buyer's Disclosed Contracts is in good standing and in full force and effect
without amendment thereto (except for written amendments referenced in Exhibit
4.1.20), and Buyer is entitled to all benefits thereunder. Buyer has no
Knowledge of any party to any of the Buyer's Disclosed Contracts having an
intention to terminate, whether by notice or breach, any of the Buyer's
Disclosed Contracts. Buyer has no Knowledge that any party to any of the Buyer's
Disclosed Contracts is in material default or breach of any of such party's
obligations thereunder.
4.1.21 BUYER'S ASSETS. Since July 31, 1997, Buyer has not sold,
transferred, leased, distributed or otherwise disposed of any of its assets, or
agreed to or entered into negotiations to do so, except for sales in the
ordinary course of business or the disposition of immaterial assets in the
ordinary course of business or which are not necessary or advisable to the
efficient operations of its business.
4.1.22 HEALTH, SAFETY OR ENVIRONMENTAL MATTERS. To the Knowledge of Buyer,
Buyer is not in violation of, or and has not violated, or is not and has not
been in non-compliance with, in any material respect, any Health, Safety and
Environmental Laws in connection with the ownership, use, maintenance or
operation of, or conduct of business related to Buyer. As used in this
Agreement, "HEALTH, SAFETY AND ENVIRONMENTAL LAWS" means any applicable federal,
state, or local laws, rules, or regulations, common law or strict liability
provisions, and any judicial or administrative interpretations thereof,
including any judicial or administrative orders or judgments, relating to
health, safety, industrial hygiene, pollution or environmental matters currently
in effect.
4.1.23 ABSENCE OF CHANGES. Except as disclosed in Exhibit 4.1.23, and
except as may have occurred in the ordinary course of business, there has been
no Material Adverse Effect in the business, financial condition or results of
operations of Buyer from that reflected in the July 31, 1997 financial
statements. Since July 31, except as referenced in Exhibit 4.1.23, Buyer has:
(a) conducted its operations in the ordinary course;
(b) not entered into any material transaction or contract, or
amended or terminated any material transaction or contract, except normal
transactions or contracts consistent in nature and scope with prior
practices and entered into in the ordinary course of business;
(c) not mortgaged, sold, transferred, distributed or otherwise
disposed of any of its material assets, except in the ordinary course of
business;
(d) not experienced any damage, destruction or loss to any of its
material assets except in the ordinary course of business and except to
the extent that any such assets damaged, destroyed or losses have been
repaired or replaced; and
(e) not made or agreed to make any capital expenditures for
additions to property or equipment.
<PAGE>
4.2 SELLER'S REPRESENTATIONS. Seller hereby represents, warrants and
covenants to Buyer as follows, all of which covenants, representations and
warranties shall be true, correct and performed at the Closing and as of the
Closing Date:
4.2.1 INCORPORATION AND GOOD STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. Exhibit 4.2.1(a) is a true and correct copy of the articles of
incorporation of Seller in effect on the Effective Date and on the Closing Date.
Exhibit 4.2.1(b) is a true and correct copy of the by-laws of Seller in effect
on the Effective Date and on the Closing Date.
4.2.2 REQUISITE APPROVALS. Seller has taken all necessary actions pursuant
to its Articles of Incorporation, By-laws and other governing documents to fully
authorize it to consummate the transaction contemplated by this Agreement other
than fulfillment of the conditions precedent set forth in Article 7. Seller held
a meeting of its shareholders on September 17, 1997, which approved the
transactions contemplated by this Agreement.
4.2.3 VALIDITY OF OBLIGATION. Seller has all the requisite power and
authority to enter into and perform this and the Ancillary Documents, and this
Agreement and the Ancillary Documents do and will constitute valid and binding
legal obligations of Seller enforceable in accordance with the respective terms
thereof, subject to (i) the fact that equitable remedies, including the remedies
of specific performance and injunction, may only be granted in the discretion of
a court, and (ii) bankruptcy, insolvency, moratorium, reorganization or other
laws relating to or affecting the enforcement of creditors' rights generally.
4.2.4 IMPEDIMENTS TO CONSUMMATION OF AGREEMENT. Seller's execution,
delivery and performance of this Agreement does not and will not constitute or
result in the conflict with, or breach or default of or under, any agreement or
instrument (written or oral) to which Seller is a party, or any law, rule,
regulation, ordinance, judgment, decree, License, Permit or Order to which it is
subject and does not or will not result in the creation of any Lien that will
have a Material Adverse Effect on Seller or its business or assets.
4.2.5 NO OTHER AGREEMENTS. Except as listed on Exhibit 4.2.5, no Person
has any agreement option, understanding or commitment, or any right or privilege
(whether by law or contractual) capable of becoming an agreement, option or
commitment for the purchase, assignment, License or exercise of any of the
rights, benefits or use of any of the Assets. Seller has not granted any special
or general power of attorney to any Person that will or could continue in effect
after the Closing Date and that might affect the ownership, operation or other
aspect of any of the Assets.
4.2.6 BANKRUPTCY. There are no bankruptcy, reorganization or receivership
proceedings pending, being contemplated by, or to its Knowledge, threatened
against Seller. Seller is not insolvent and has not had any execution, charging
order, levy or distress warrant become enforceable or become levied upon any of
its assets.
<PAGE>
4.2.7 BROKER'S FEES. All negotiations relative to this Agreement, the
Ancillary Documents and transactions contemplated hereby have been carried on by
Buyer and its counsel directly with Seller and its counsel and by counsel
representing both Buyer and Seller in this transaction, without the intervention
of any Person in any such manner as to give rise to any valid claim against any
of the parties for a brokerage commission, finder's fee or similar payment.
4.2.8 INDEPENDENT EVALUATION. Seller is experienced and knowledgeable in
the oil and gas business. Seller has been advised by and has relied solely on
its own expertise and legal, accounting, tax, reservoir engineering,
environmental and other professional counsel concerning this transaction,
Buyer's business, and the value thereof.
4.2.9 CERTAIN TRANSACTIONS. All transactions during Seller's last full
fiscal year between the Seller and any person who is or was during such last
fiscal year, an officer, director or 5% stockholder of Seller have been
accurately disclosed in the consolidated financial statements of Seller as of
the last fiscal year and the terms of each such transaction were in all material
respects fair to Seller.
4.2.10 EMPLOYEE BENEFIT PLAN. Seller has no and has had no employee
benefit plans ("Employee Benefit Plan"), as defined in the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and no bonus, retirement,
pension, profit sharing, stock bonus, thrift, stock option, stock purchase,
incentive, severance, deferred or other compensation or welfare benefit plan,
program, agreement or arrangement of, or applicable to Employees of Seller or
its Subsidiaries.
4.2.11 EMPLOYMENT LAWS. Each of Seller and its Subsidiaries is in
compliance in all material respects with all federal, state and local laws and
regulations respecting the employment of its Employees and employment practices,
terms and conditions of employment and wages and hours relating thereto. There
are no actual or threatened claims of Employees or former Employees of the
Seller or its Subsidiaries against Seller or its Subsidiaries.
4.2.12 INTERNAL ACCOUNTING CONTROLS. Seller maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization: (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted United States
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board that are applicable to the circumstances as of the date of
determination ("GAAP") and to maintain accountability for assets; (iii) access
to assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
<PAGE>
4.2.13 SUBSIDIARIES. Except as listed on Exhibit 4.2.13, Seller does not
own any capital stock, bond or other security of or have any equity, profits,
participating or proprietary interest in, any corporation, partnership, joint
venture, limited liability company, trust or unincorporated association. The
entities listed on Exhibit 4.2.14 are referred to as Seller's "SUBSIDIARIES."
4.2.14 LAWSUITS AND CLAIMS. Except as set forth on Exhibit 4.2.14, neither
Seller nor any of Seller's Subsidiaries has notice of any suit, action,
proceeding, arbitration, investigation, claim or demand pending or threatened
against Seller or any of its Subsidiaries and to the Knowledge of Seller, there
are no lawsuits, claims, or demands pending or threatened in writing against
Seller or any Subsidiary of Seller or the operator of any portion of the Assets,
nor any compliance orders or notices of probable violation or similar
governmental agency actions relating to the assets of Seller or any of its
Subsidiaries, nor, to the Knowledge of Seller, do any facts exist which might
result in any such action, suit, proceeding, arbitration or investigation.
Seller is not in default with respect to any Order or any decision of an
arbitrator.
4.2.15 TAXES. There are no federal, state or local Tax liens filed against
Seller or encumbering any of the Assets. Seller duly and timely filed all Tax
reports and returns which are required to be filed and has timely paid (i) all
Taxes shown as being owing on said returns and (ii) all assessments received by
Seller to the extent that such Taxes have become due.
4.2.16 COMPLIANCE WITH LAWS. Seller has no notice to the effect that any
portion of the Assets has been or is being operated in violation of any
applicable law, rule, regulation or Order of a Governmental Body with
jurisdiction, including without limitation, any environmental laws, rules,
Orders or regulations of any federal, state or municipal body, CERCLA, the
Resource Conservation and Recovery Act of 1976, as amended, the Safe Drinking
Water Act, the Toxic Substance Control Act, and the Hazardous Materials
Transportation Act, and to Seller's Knowledge, the Assets has been operated
prior to the Effective Date in substantial compliance with all applicable laws,
rules, regulations and Orders of all Governmental Bodies with jurisdiction over
the Assets, including without limitation all environmental laws, rules, Orders
or regulations of all federal, state or municipal body, CERCLA, the Resource
Conservation and Recovery Act of 1976, as amended the Safe Drinking Water Act,
the Toxic Substance Control Act, and the Hazardous Materials Transportation Act
and Seller is not in default under any Permit, License or agreement relating to
the operation and maintenance of the Assets.
4.2.17 OPEN AFES. Except as set forth on Exhibit 4.2.17, there are no
outstanding authorizations for expenditures related to the Assets, which
individually exceed $5,000.
<PAGE>
4.2.18 CONTRACTS. Prior to or contemporaneous herewith, Seller has
provided Seller with copies of the Leases and all other material or significant
contracts to which Seller is a party, which Leases and material or significant
contracts are collectively referenced on Exhibit 4.2.18 (herein designated
"SELLER'S DISCLOSED CONTRACTS"). Except as described in Exhibit 4.2.18, there
are no Liens which might affect title to, or exclusive possession and use of, or
any other right of Seller to the benefits of, any or all of Seller's contractual
rights or benefits with regard to the Disclosed Contracts. Seller has no
Knowledge that Seller is in default or breach of any material obligation under
the Seller's Disclosed Contracts or any other contract, arrangement or
commitment, and Seller has no Knowledge of any facts which, after notice or
lapse of time, or both, would constitute such a default or breach. To the
Knowledge of Seller, each of Seller's Disclosed Contracts is in good standing
and in full force and effect without amendment thereto (except for written
amendments referenced in Exhibit 4.2.18), and Seller is entitled to all benefits
thereunder. Seller has no Knowledge of any party to any of the Seller's
Disclosed Contracts having an intention to terminate, whether by notice or
breach, any of the Seller's Disclosed Contracts. Seller has no Knowledge that
any party to any of the Seller's Disclosed Contracts is in material default or
breach of any of such party's obligations thereunder. To Seller's Knowledge all
payments (including, without limitation, royalties, delay rentals, shut-in
royalties, production payments, and valid calls under unit or operating
agreements) due under the Seller's Disclosed Contracts have been timely paid.
4.2.19 OPERATION OF THE ASSETS. To Seller's Knowledge, the operators of
the Wells have operated them in a good and workmanlike manner in accordance with
good oil field practices.
4.2.20 PERFORMANCE OF OBLIGATIONS. Seller, and to Seller's Knowledge, the
operators of the Wells, have complied with and performed all terms and
conditions of the Leases, whether express or implied, and made all payments due
under the Leases and no Lease has been forfeited, released, terminated or
surrendered.
4.2.21 PURCHASE FOR OWN ACCOUNT. The Stock is being acquired for the
Seller's own account and with no intention of distributing or reselling such
securities or any part thereof in any transaction that would be in violation of
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (Securities Act) or the securities laws of any state,
without prejudice, however, to the rights of the Seller at all times to sell or
otherwise dispose of all or any part of its Stock, under an effective
registration statement under the Securities Act, or under an exemption from such
registration available under the Securities Act. If the Seller should in the
future decide to dispose of any of the Stock, Seller understands and agrees that
it may do so only in compliance with the Securities Act and applicable state
securities laws as then in effect. Seller agrees to the imprinting, so long as
required by law, of a legend on certificates representing all of its Stock to be
issued upon conversion or exercise thereof to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS."
Seller agrees to Buyer's issuance of "Stop Transfer" instructions to the
Transfer Agent.
<PAGE>
4.2.22 ASSETS. Since September 30,1997, Seller has not sold, transferred,
leased, distributed or otherwise disposed of any of its assets, or agreed to or
entered into negotiations to do so, except for sales in the ordinary course of
business or the disposition of immaterial assets in the ordinary course of
business or which are not necessary or advisable to the efficient operations of
its business.
4.2.23 HEALTH, SAFETY OR ENVIRONMENTAL MATTERS. To the Knowledge of
Seller, Seller is not in violation of, or and has not violated, or is not and
has not been in non-compliance with, in any material respect, any Health, Safety
and Environmental Laws in connection with the ownership, use, maintenance or
operation of, or conduct of business related to Seller. As used in this
Agreement, "HEALTH, SAFETY AND ENVIRONMENTAL LAWS" means any applicable federal,
state, or local laws, rules, or regulations, common law or strict liability
provisions, and any judicial or administrative interpretations thereof,
including any judicial or administrative Orders or judgments, relating to
health, safety, industrial hygiene, pollution or environmental matters currently
in effect.
4.2.24 FINANCIAL STATEMENTS. The following financial statements have been
delivered to Buyer and are attached as Exhibit 4.2.24 (all of which financial
statements are herein designated "SELLER'S FINANCIAL STATEMENTS": financial
statements for the fiscal year ended 1996 and for the nine (9) months ended
September 30, 1997. The Seller's Financial Statements have been prepared from
the books and records of the Seller in conformity with the accounting principles
historically employed by the Seller applied on a basis consistent with preceding
years and throughout the periods involved, and present fairly the financial
positions of the Seller as of the date of the respective Seller's Financial
Statements. Seller has no liabilities other than (i) those set forth or reserved
against in the most recent Seller's Financial Statements, (ii) those incurred
since the ending date of the most recent Seller's Financial Statements in the
ordinary course of business, and (iii) those disclosed in Exhibit 4.1.24. Seller
has no contingent or contested liabilities.
4.2.25 ABSENCE OF CHANGES. Except as disclosed in Exhibit 4.2.25, and
except as may have occurred in the ordinary course of business, since September
30, 1997 there has been no Material Adverse Effect in the business, financial
condition or results of operations of Seller from that reflected in the most
recent September 30, 1997 financial statements. Since September 30, 1997, except
as referenced in Exhibit 4.2.25, Seller has:
(a) conducted its operations in the ordinary course;
(b) not entered into any material transaction or contract, or
amended or terminated any material transaction or contract, except
normal transactions or contracts consistent in nature and scope with
prior practices and entered into in the ordinary course of business;
(c) not mortgaged, sold, transferred, distributed or otherwise
disposed of any of its material assets, except in the ordinary
course of business;
(d) not experienced any damage, destruction or loss to any of its
material assets except in the ordinary course of business and except
to the extent that any such assets damaged, destroyed or losses have
been repaired or replaced; and
<PAGE>
(e) not made or agreed to make any capital expenditures for
additions to property or equipment.
4.3 NOTICE. Seller and Buyer shall each give the other prompt written notice of
any matter materially affecting any of its representations or warranties under
this Article 4 or rendering any such warranty or representation untrue.
ARTICLE 5. WARRANTIES
5.1 TITLE; ENCUMBRANCES. SELLER SELLS AND TRANSFERS THE PROPERTY TO BUYER
SUBJECT TO ALL ROYALTIES, OVERRIDING ROYALTIES, BURDENS AND ENCUMBRANCES, AND
WITHOUT WARRANTY OF TITLE EXPRESS, STATUTORY, OR IMPLIED, EXCEPT BY, THROUGH AND
UNDER SELLER AND AS SET FORTH IN THIS SECTION 5.1. SELLER HEREBY WARRANTS THAT
SELLER HAS NOT ALLOWED ANY LIENS, MORTGAGES, SECURITY INTERESTS AND SIMILAR
ENCUMBRANCES TO BE PLACED ON THE REAL PROPERTY INTERESTS WHICH ARE INCLUDED IN
THE ASSETS. SELLER HEREBY WARRANTS GOOD AND DEFENSIBLE TITLE TO THE REAL
PROPERTY BY, THROUGH AND UNDER SELLER BUT NOT OTHERWISE AND AGREES TO INDEMNIFY
AND SAVE BUYER HARMLESS, INCLUDING WITHOUT LIMITATION FOR REASONABLE ATTORNEY'S
FEES, FEES OF EXPERTS AND COURT COSTS, FROM AND AGAINST ALL ADVERSE CLAIMS TO
THE TITLE TO THE REAL PROPERTY INCLUDED IN THE ASSETS BY THROUGH OR UNDER
SELLER. SELLER AGREES THAT BUYER IS HEREBY SUBROGATED TO ANY AND ALL RIGHTS THAT
SELLER MAY HAVE AGAINST ANY PREDECESSOR OF SELLER WITH RESPECT TO TITLE TO THE
REAL PROPERTY INCLUDED IN THE ASSETS OR CLAIMS AGAINST SUCH TITLE. SELLER HEREBY
REPRESENTS AND WARRANTS THAT TO THE BEST OF ITS KNOWLEDGE, ALL ROYALTIES,
OVERRIDING ROYALTIES, BURDENS AND ENCUMBRANCES ARE DISCLOSED.
<PAGE>
5.2 OTHER ASSET WARRANTIES. EXCEPT AS OTHERWISE PROVIDED IN SECTION 5.1, BUYER
ACCEPTS THE ASSETS "AS IS", "WHEREIS"AND "WITH ALL FAULTS".
5.3 INFORMATION ABOUT THE ASSETS. SELLER MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS, STATUTORY OR IMPLIED, AS TO (I) THE ACCURACY, COMPLETENESS, OR
MATERIALITY OF ANY DATA, INFORMATION OR RECORDS FURNISHED TO BUYER IN CONNECTION
WITH THE ASSETS; (II) THE QUALITY AND QUANTITY OF HYDROCARBON RESERVES (IF ANY)
ATTRIBUTABLE TO THE ASSETS; (III) THE ABILITY OF THE ASSETS TO PRODUCE
HYDROCARBONS, INCLUDING WITHOUT LIMITATION PRODUCTION RATES, DECLINE RATES AND
RECOMPLETION OPPORTUNITIES; (IV) THE PRESENT OR FUTURE VALUE OF THE ANTICIPATED
INCOME, COSTS OR PROFITS, IF ANY, TO BE DERIVED FROM THE ASSETS, OR (V) THE
ENVIRONMENTAL CONDITION OF THE ASSETS. ANY AND ALL DATA, INFORMATION OR OTHER
RECORDS FURNISHED BY SELLER ARE PROVIDED TO BUYER AS A CONVENIENCE AND BUYER'S
RELIANCE ON OR USE OF THE SAME IS AT BUYER'S SOLE RISK.
5.4 NORM. BUYER ACKNOWLEDGES THAT IT HAS BEEN INFORMED THAT OIL AND GAS
PRODUCING FORMATIONS CAN CONTAIN NATURALLY OCCURRING RADIOACTIVE MATERIAL
("NORM"). SCALE FORMATION OR SLUDGE DEPOSITS CAN CONCENTRATE LOW LEVELS OF NORM
ON EQUIPMENT AND OTHER PROPERTY. SOME OR ALL OF THE EQUIPMENT, MATERIALS AND
OTHER PROPERTY INCLUDED IN THE ASSETS MAY HAVE LEVELS OF NORM ABOVE BACKGROUND
LEVELS. A HEALTH HAZARD MAY EXIST IN CONNECTION WITH THIS EQUIPMENT, MATERIALS
AND OTHER PROPERTY. THEREFORE, BUYER MAY NEED TO FOLLOW SAFETY PROCEDURES WHEN
HANDLING THIS EQUIPMENT, AND OTHER PROPERTY.
ARTICLE 6. PRE-CLOSING OBLIGATIONS
6.1 PERMITS AND APPROVALS. Seller and Buyer will use their respective best
efforts to obtain all necessary consents, approvals, or filings for the sale of
the Assets and consummation of the transaction contemplated hereby as may be
required under any their charters, bylaws or any agreement or governmental law
or regulation.
6.2 INTERIM OPERATIONS OF BUYER. During the period from and after the Effective
Date or date of execution of this Agreement and until the Closing Date, except
with the prior written consent of the Seller, Buyer will conduct its business
only in the ordinary and normal course consistent with past practice.
Additionally:
6.2.1 MAINTENANCE OF ASSETS. Buyer will not sell or dispose of any asset
of Buyer or any of its Subsidiaries (except for the sale of hydrocarbons on a
month to month basis in the normal course of business) nor shall Buyer enter
into any agreement to do so or allow any of its Subsidiaries to enter into any
agreement to do so.
6.2.2 OFFICERS AND EMPLOYEES. Except as provided in Article 9, Buyer will
not (i) increase the compensation paid to any officer of Buyer or its
Subsidiaries, (ii) grant to any officer of Buyer or its Subsidiaries any stock
of Buyer or its Subsidiaries or any warrant or option to purchase stock of Buyer
or any of its Subsidiaries, (iii) enter into any severance, employment or
consulting agreement or amend or modify any severance, employment or consulting
agreement, (iv) hire any new Employee or consultant, (v) enter into any
agreement to do any of the foregoing, or (vi) allow any of its Subsidiaries to
do any of the foregoing.
<PAGE>
6.2.3 CONTRACTS. Except as provided in Article 9 of this Agreement, Buyer
will not enter into any contract or agreement except those contracts and/or
agreements necessary for the day to day operation of Buyer and will not allow
any of its Subsidiaries enter into any contract or agreement except those
contracts and/or agreements necessary for the day to day operation of such
Subsidiary.
6.2.4 CORPORATE ORGANIZATION. Buyer will not (i) issues new shares of any
class or series of the capital stock of Buyer (except to Seller pursuant to this
Agreement), or allow its Subsidiaries to do so; (ii) purchase any shares of the
capital stock of Buyer or its subsidiaries or allow its Subsidiaries to do so;
(iii) authorize or issue any new class or series of shares of Buyer or allow its
Subsidiaries to authorize or issue any new class or series of their shares; (iv)
issue any debt instrument or incur any debt or allow its Subsidiaries to do so;
(v) alter, modify or amend Buyer's certificate of incorporation, by-laws or
other governing document or allow its Subsidiaries to alter, modify or amend
their certificates or articles of incorporation, by-laws or other governing
documents; (vi) form any additional Subsidiary of Buyer; (vii) or enter into any
agreement to do any of the foregoing.
6.3 INTERIM OPERATIONS OF SELLER. During the period from and after the
[Effective Date or date of execution of this Agreement] and until the Closing
Date, except with the prior written consent of the Buyer, Seller will conduct
its business only in the ordinary and normal course consistent with past
practice. Additionally:
6.3.1 MAINTENANCE OF ASSETS. Seller will not sell or dispose of any asset
of Seller or any of its Subsidiaries (except for the sale of hydrocarbons on a
month to month basis in the normal course of business) nor shall Seller enter
into any agreement to do so or allow any of its Subsidiaries to enter into any
agreement to do so.
6.3.2 OFFICERS AND EMPLOYEES. Except as provided in Article 9, Seller will
not (i) enter into any severance, employment or consulting agreement or amend or
modify any severance, employment or consulting agreement, (ii) hire any new
Employee or consultant, (iii) enter into any agreement to do any of the
foregoing, or (iv) allow any of its Subsidiaries to do any of the foregoing.
6.3.3 CONTRACTS. Except as provided in Article 9 of this Agreement, Seller
will not enter into any contract or agreement except those contracts and/or
agreements necessary for the day to day operation of Seller and will not allow
any of its Subsidiaries enter into any contract or agreement except those
contracts and/or agreements necessary for the day to day operation of such
Subsidiary.
ARTICLE 7. CLOSING
7.1 CLOSING DATE. The closing of this purchase and sale (the "CLOSING") will
occur on October 27, 1997 in the offices of Salem Partners Inc. in New York, New
York, the parties agree to use their best efforts to consummate the Closing by
October 30, 1997.
<PAGE>
7.2 CONDITIONS TO THE OBLIGATIONS OF BUYER. Unless waived (in whole or in part)
in writing by Buyer the obligations of Buyer hereunder are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions precedent by Seller:
7.2.1 NO MATERIAL ERRORS. The representations and warranties of Buyer in
Article 4 hereof shall be deemed to have been made again on the Closing Date and
must be then true and correct, subject to any changes contemplated by this
Agreement.
7.2.2 CERTIFICATE OF SELLER. Seller shall have delivered to Buyer a
certificate, dated as of the Closing Date and executed by a duly authorized
representative of Seller certifying that the conditions specified in Sections
7.2.1 and 7.2.3 hereof have been fulfilled.
7.2.3 COMPLIANCE WITH AGREEMENT. All of the terms and conditions of this
Agreement to be complied with and performed by Seller on or before the Closing
Date shall have been complied with and performed.
7.2.4 APPROVAL OF LEGAL MATTERS BY BUYER'S COUNSEL. The validity or
legality of all actions, proceedings, instruments and documents required to
carry out this Agreement shall have been approved by Buyer's legal counsel.
7.2.5 LITIGATION. There shall not have been instituted or threatened any
legal proceeding by any third party seeking to prohibit the consummation of the
transactions contemplated hereby or to obtain damages from Buyer with respect
thereto, or to otherwise void this Agreement or any of the Ancillary Documents
or any of such transactions. None of the parties shall be prohibited by any
Order from consummating the transactions contemplated hereby, and no action or
proceeding shall then be pending which questions the validity of this Agreement,
any of the Ancillary Documents, the transactions contemplated hereby, or any
action which has been taken by any of the parties in connection herewith or in
connection with the transactions contemplated hereby.
7.2.6 DELIVERY OF DOCUMENTS. Seller shall have made, executed and
delivered the following documents in form and substance satisfactory to Buyer
and its legal counsel:
(a) An executed and acknowledged Assignment and Bill of Sale (in
sufficient counterparts for recording) in the form of Exhibit 7.2.6(a) (the
"ASSIGNMENT AND BILL OF SALE");
(b) Letters in lieu of transfer orders, in a form reasonably
satisfactory to Buyer, signed by Seller and addressed to all parties which pay
Seller for hydrocarbons produced from the Assets directing such party to pay
Buyer for all such hydrocarbons produced and sold after the Effective Date;
(c) Any other instruments as Buyer may reasonably request to effect
or support the transaction contemplated in this Agreement, including, without
limitation, any lease assignment forms or other forms or filings required by
federal or state agencies to transfer ownership of the Assets, certificates of
resolutions and incumbency, shareholder consents, certificate of bylaws, etc.
<PAGE>
7.2.7 CONSENTS, NOTICE AND APPROVAL. All consents and approvals of all
Persons necessary for the consummation of the transactions contemplated hereby
under any agreement, Permit, law or regulation (other than consents of the type
typically obtained after closing and consents to the transfer of Seller's
Disclosed Contracts) shall have been received and delivered to Buyer and all
notices to any Person required hereunder to be given (prior to Closing) by
Seller in respect to the transactions contemplated hereunder, shall have been
duly given. Requisite approval of Buyer's and Seller's shareholders shall have
been obtained.
7.3 CONDITIONS TO THE OBLIGATIONS OF SELLER. Unless waived (in whole or in
part) in writing by Seller the obligations of Seller hereunder are subject to
the fulfillment, prior to or on the Closing Date, of each of the following
conditions precedent by Buyer:
7.3.1 NO MATERIAL ERRORS. The representations and warranties of Seller in
Article 4 hereof shall be deemed to have been made again on the Closing Date and
must be then true and correct, subject to any changes contemplated by this
Agreement.
7.3.2 CERTIFICATE OF BUYER. Buyer shall have delivered to Seller a
certificate, dated as of the Closing Date and executed by a duly authorized
representative of Buyer certifying that the conditions specified in Sections
7.3.1 and 7.3.3 hereof have been fulfilled.
7.3.3 COMPLIANCE WITH AGREEMENT. All of the terms and conditions of this
Agreement to be complied with and performed by Buyer on or before the Closing
Date shall have been complied with and performed.
7.3.4 APPROVAL OF LEGAL MATTERS BY SELLER'S LEGAL COUNSEL. The validity or
legality of all actions, proceedings, instruments and documents required to
carry out this Agreement shall have been approved by Seller's legal counsel.
7.3.5 LITIGATION. There shall not have been instituted or threatened any
legal proceeding by any third party seeking to prohibit the consummation of the
transactions contemplated hereby or to obtain damages from Seller with respect
thereto, or to otherwise void this Agreement or any of the Ancillary Documents
or any of such transactions. None of the parties shall be prohibited by any
Order from consummating the transactions contemplated hereby, and no action or
proceeding shall then be pending which questions the validity of this Agreement,
any of the Ancillary Documents, the transactions contemplated hereby, or any
action which has been taken by any of the parties in connection herewith or in
connection with the transactions contemplated hereby.
<PAGE>
7.3.6 DELIVERY OF DOCUMENTS. Buyer shall have made, executed and delivered
the following in form and substance satisfactory to Seller and its legal
counsel:
(a) the Warrants, and a certificate or multiple certificates (as
Seller may reasonably request) representing the Stock;
(b) any ratification and joinder instruments executed by Seller as
may be required to transfer Seller's rights, obligations and interests in the
Seller's Disclosed Contracts and the other Assets;
(c) any applications executed by Seller which may be necessary to
transfer regulatory Permits to which the Assets or any of them are subject;
(d) written resignation of all officers of Buyer from all of their
positions with Buyer and its Subsidiaries effective as of the Closing Date and
the written resignation of all members of the board of directors of Buyer,
except William J. Bippus and Gregory Stephens, effective as of the Closing Date;
(e) a true and correct copy of the written resolutions of the Board
of Directors of Buyer, certified by the President of Buyer, in accordance with
Article 10 hereof which resolutions shall not be amended, modified or revoked;
(f) a certificate dated the Closing Date and signed by the Secretary
or an Assistant Secretary of Buyer, certifying (a) that the attached copies of
the Articles of Incorporation and Bylaws of Buyer, are all true, complete and
correct and remain unamended and in full force and effect and (b) as to the
incumbency and specimen signature of each officer of Buyer executing this
Agreement and any other document delivered in connection herewith on behalf of
Buyer. Attached to such certificate shall be certificate of good standing for
the state of Delaware and each other jurisdiction where Buyer is required to be
so qualified or authorized;
(g) an amendment to the employment agreement between Buyer and
William Bippus in accordance with Section 10.2; and
(h) any and all other documents or instruments as Seller may
reasonably request (including, but not limited to, certificate of resolutions
and incumbency, certificate as to shareholder approval, certificate of bylaws,
etc.).
7.3.7 CONSENTS, NOTICE AND APPROVAL. All consents and approvals of all
Persons necessary for the consummation of the transactions contemplated hereby
under any agreement, Permit, law or regulation (other than consents of the type
typically obtained after closing and consents to the transfer of Buyer's
Disclosed Contracts) shall have been received and delivered to Seller and all
notices to any Person required hereunder to be given (prior to Closing) by Buyer
in respect to the transactions contemplated hereunder, shall have been duly
given. Requisite approval of Seller's and Buyer's shareholders shall have been
obtained.
<PAGE>
7.4 POST-CLOSING OBLIGATIONS. Seller and Buyer have the following
post-Closing obligations:
7.4.1 RECORDS. Within fifteen (15) days after Closing, Seller shall
deliver to Buyer the originals (or if originals are not available, legible
copies) of the Records, at a location designated by Buyer. Buyer shall use its
best efforts to preserve and maintain the Records for at least seven (7) years
after the Closing Date. Buyer shall notify Seller before destroying any of the
Records during such period. Seller reserves the right to access and copy (at its
own expense) the Records for seven (7) years after the Closing Date, and Buyer
agrees to provide access to the Records to Seller during normal business hours.
7.4.2 RECORDING AND FILING. Buyer, within thirty (30) days after Closing,
shall (i) record the Assignment and Bill of Sale and all other instruments that
must be recorded to effectuate the transfer of the Assets, and (ii) file for
approval with the applicable government agencies all state and federal transfer
and assignment documents for the Assets. Buyer shall provide Seller a recorded
copy of the Assignment and Bill of Sale and other recorded instruments, and
approved copies of the state and federal transfer and assignment documents as
soon as they are available.
7.4.3 FURTHER ASSURANCES. Buyer and Seller agree to execute and deliver
from time to time such further instruments and do such other acts as may be
reasonably necessary to effectuate the purposes of this Agreement.
7.4.4 ADDITIONAL DIRECTOR. At such time, following the Closing, as Seller
may determine William J. Bippus and Gregory A. Stephens agree to elect such
nominee as seller may nominate.
7.5 NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made in this Agreement shall be deemed to be material, and shall
be deemed to have been relied upon by the party to whom such warranties or
representations are given or made, as a material inducement to enter into and
close this Agreement and to consummate the transfer of the Assets,
notwithstanding any inspection made by such party. All representations and
warranties of the parties made in this Agreement (i) shall survive the Closing
and all inspections, examinations or audits on behalf of the parties and (ii)
shall be subject to legal claims until the applicable statute of limitation
runs.
ARTICLE 8. INDEMNIFICATION, TERMINATION
<PAGE>
8.1 INDEMNIFICATION. Buyer, on the one hand, and Seller on the other hand,
(herein designated "INDEMNIFYING PARTY") each hereby agrees to indemnify, defend
and hold harmless the other (hereinafter severally designated "INDEMNIFIED
PARTY") against and in respect of any and all Indemnified Damages that result to
Indemnified Party from (i) any breach or inaccuracy of any representation or
warranty or any material omission made by or on behalf of the Indemnifying Party
in or pursuant to this Agreement or any of the Ancillary Documents, and/or (ii)
any breach or default in the performance by the Indemnifying Party of any of the
obligations to be performed by the Indemnifying Party hereunder. For purposes of
this Section 8.1, the term "INDEMNIFIED DAMAGES" means any and all claims,
actions, demands, losses, costs, expenses, liabilities, penalties, and other
damages, including without limitation, reasonable attorneys' fees and other
costs and expenses reasonably incurred in investigating or attempting to avoid
same, in opposing the imposition of the same, and/or in enforcing this
indemnity. The Indemnifying Party shall obtain the prior written consent of the
Indemnified Party, which shall not be unreasonably withheld, conditioned or
delayed before ceasing to defend against such claim or entering into any
settlement, adjustment, or compromise of such claim unless such settlement,
adjustment, or compromise involves only the payment of monetary consideration by
the Indemnifying Party and does not involve any admission of fact that might
have a Material Adverse Effect on the future business or operations of the
Indemnified Party or which might reasonably prejudice the Indemnified Party in
subsequent or other litigation. The Indemnifying Party shall reimburse the
Indemnified Party on demand for any payment made or damages sustained by the
Indemnified Party at any time after the Closing Date, whether based upon the
judgment of any court of competent jurisdiction, pursuant to a bona fide
compromise or settlement of claims, demands or actions, or otherwise in respect
of any Indemnified Damages. The Indemnified Party agrees that promptly upon
receipt by the Indemnified Party of notice of any demand, assertion, claim,
action, or proceeding, judicial or otherwise, with respect to any matter as to
which the Indemnifying Party has agreed to indemnify the Indemnified Party, the
Indemnified Party will give prompt written notice thereof to the Indemnifying
Party, together, in each instance, with a statement of such information
respecting such demand, assertion, claim, action, or proceeding as the
Indemnified Party shall then possess. The Indemnifying Party reserves the right
to contest and defend by all appropriate legal or other proceedings any demand,
assertion, claim, action or proceeding with respect to which it has been called
upon to indemnify the Indemnified Party under the provisions of this Agreement;
provided, however, that:
8.1.1 Notice of the intention so to contest shall be delivered to the
Indemnified Party within fourteen (14) calendar days from the date of receipt by
the Indemnifying Party of notice of the assertion of such demand, assertion,
claim, action, or proceeding;
8.1.2 The Indemnifying Party shall pay all cost and expenses of such
contest, including all attorneys' and accountants' fees and the cost of any bond
required by law to be posted in connection with such contest; and
8.1.3 Such contest shall be conducted by reputable attorneys employed by
the Indemnifying Party at the Indemnifying Party's cost and expense, but the
Indemnified Party shall have the right to participate in such proceedings and to
be represented by attorneys of his or its own choosing at its expense.
<PAGE>
If after such opportunity, the Indemnifying Party does not elect to participate,
or does not participate, in any such proceedings, the Indemnifying Party shall
be bound by the results obtained by the Indemnified Party, including without
limitation any out-of-court settlement or compromise. If the Indemnifying Party
elects to contest any demand, assertion or claim, the Indemnifying Party shall
not be obligated to make any payments to the Indemnified Party with respect
thereto until the legal remedies available to the Indemnifying Party or
Indemnified Party, as the case may be, with respect to such demand, assertion or
claim shall have been exhausted or waived by the Indemnifying Party and/or the
Indemnified Party. If requested by the Indemnifying Party, the Indemnified Party
agrees to cooperate with the Indemnifying Party in contesting any demand,
assertion or claim which the Indemnifying Party elects to contest, or if
appropriate, in the making of any counterclaim that the Indemnifying Party may
have against the Person asserting such demand, assertion or claim or any
cross-complaint that the Indemnifying Party may have against any Person, but the
Indemnifying Party will reimburse the Indemnified Party, within seven (7) days
of demand therefor, for any expenses incurred by the Indemnified Party in so
cooperating with the Indemnifying Party. If such counterclaim or cross-complaint
results in receipt by the Indemnified Party of amounts in excess of the amount
which is subject to any such demand, assertion or claim, such excess shall first
be applied to the payment of the reasonable costs and expenses of the
Indemnified Party incurred in connection with such contest, counterclaim, or
cross-complaint, and the balance retained by the Indemnifying Party.
8.2 TERMINATION OF AGREEMENT. This Agreement may, by written notice given at or
prior to Closing in the manner hereinafter provided, be terminated or abandoned:
(a) by either party if the Closing does not occur on or before
November 15, 1997.
(b) by Purchaser if a material default or breach is made by Seller
with respect to the due and timely performance of Seller's
covenants, representations, warranties, and agreements contained
herein, or with respect to the correctness of or due compliance with
any of Shareholders' representations and warranties hereof and such
default (i) cannot be cured within ten (10) days after written
notice thereof has been delivered by Purchaser to Seller or (ii) has
not been waived; provided, however, if Seller notifies Purchaser of
any default or breach by Seller hereunder and Purchaser elects in
writing not to terminate this Agreement, Purchaser shall be deemed
to have waived such default or breach;
(c) by Seller if a material default or breach is made by Purchaser
with respect to the due and timely performance of any of Purchaser's
covenants, representations, warranties and agreements contained
herein or with respect to the correctness of or due compliance with
any of Purchaser's representations and warranties hereof, and such
default (i) cannot be cured within ten (10) days after written
notice thereof has been delivered by Seller to Purchaser or (ii) has
not been waived; provided, however, if Seller notifies Purchaser of
any default or breach by Purchaser hereunder and Seller chooses not
to terminate this Agreement, Seller shall be deemed to have waived
such default or breach; or
(d) by mutual consent of the parties.
ARTICLE 9. TAXES AND EXPENSES.
9.1 RECORDING EXPENSES. Buyer shall pay all costs of recording and filing the
Assignment and Bill of Sale for the Assets, all state and federal transfer and
assignment documents, and all other instruments.
<PAGE>
9.2 SALES TAXES. Buyer shall remit all applicable state and county sales taxes
due after Closing on the Assets.
ARTICLE 10. MANAGEMENT OF BUYER
10.1 BOARD OF DIRECTORS AND OFFICERS. At or prior to the Closing the Board of
Directors of Buyer shall sign unanimous written resolutions to be effective as
of the Closing Date, which must be acceptable to Seller and which; (i) appoint
L. Craig Ford as President, Secretary and Chief Executive Officer and as a
Director of Buyer; (ii) appoints John L. Moran as a Vice President and as a
Director of Buyer; (iii) appoint William J. Bippus as a Vice President and as a
Director of Buyer (iv) appoint Gregory Stephens as a Director of Buyer, (v)
appoints no others as Directors of Buyer; (vi) appoint Mitchell F. Veh, Jr.,
Dennis P. McGrath, and Kenneth R. Koepke and as Vice Presidents of Buyer; and
(vii) appoints no other officers of Buyer.
10.2 BIPPUS EMPLOYMENT. Promptly after execution of this Agreement Buyer and
William J. Bippus shall modify Mr. Bippus' employment agreement, to be effective
as of the Closing Date, whereby Buyer shall employ Mr. Bippus as a Vice
President and Mr. Bippus' salary will become $84,000 per annum, beginning
November 1, 1997. As of October 31, 1997 and by agreement of Mr. Bippus and the
Board of Directors of ARXA the accrued and unpaid salary due Mr. Bippus is
$48,750.00.
ARTICLE 11. MISCELLANEOUS
11.1 PRESS RELEASES. Neither party may make press releases or other public
announcements concerning this transaction, without the other party's prior
written consent and agreement to the form of the announcement, except as may be
required by applicable laws or rules and regulation of any governmental agency
or stock exchange, which consent may be withheld, conditioned or delayed for any
reasonable purpose. Unless and until this Agreement has been terminated Seller
shall not:
(a) directly or indirectly, encourage, solicit, initiate or
participate in any discussions or negotiations with any Person or
group concerning any merger, sale of substantial assets, business
combination, sale of shares of capital stock or similar transactions
involving Seller or the Assets, whether by providing non-public
information of otherwise; or
<PAGE>
(b) disclose, directly or indirectly, any information not
customarily disclosed to any Person concerning Seller or the Assets,
afford to any other Person access to the properties, books or
records, or otherwise assist any Person in connection with any of
the foregoing.
11.2 NOTICES. All notices given in connection with this Agreement must be in
writing. Any notice under this Agreement may be given by personal delivery,
facsimile transmission, U.S. mail (postage prepaid), or commercial delivery
service, and will be deemed duly given when received by the party charged with
such notice and addressed as follows:
Seller: Buyer:
Phoenix Energy Group, Inc. Arxa International Energy, Inc.
110 Cypress Station Drive, Suite 280 25227 Grogan's Mill Road
Houston, TX 77090 The Woodlands, TX 77381
Telephone: (281) 444-1088 Telephone: (281) 296-1621
Fax: (281) 444-4616 Fax: (281) 296-1676
William J. Bippus
25227 Grogan's Mill Road
The Woodlands, TX 77380
Telephone: (281) 296-1621
Fax: (281) 296-1676
Any party, by written notice to the other, may change the address or the
individual to which or to whom notices are to be sent under this Agreement.
11.3 BINDING EFFECT; ASSIGNMENT. Neither party may assign its rights or
obligations under this Agreement without the prior written consent of the other,
unless the assignment occurs by merger, reorganization or sale of all of a
party's assets. This Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by each of the parties, and their successors and
permitted assigns. This Agreement shall not be assigned by Buyer without the
consent of Seller or by Seller without the consent of the Buyer, except that
Seller or Buyer may assign its rights (but not its obligations) hereunder to any
Subsidiary or Affiliate. This provision pertains to this Agreement only and does
not require Buyer to obtain the consent of Seller prior to selling all or any
part of the Assets after Closing.
11.4 ENTIRETY OF AGREEMENT; AMENDMENT. This Agreement, including the Exhibits,
constitutes the entire understanding between the parties with respect to subject
matter hereof, superseding all negotiations, prior discussions, representations,
and prior agreements and understandings relating hereto.
11.5 GOVERNING LAW. THIS AGREEMENT IS GOVERNED BY AND MUST BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS EXCLUDING ANY CONFLICTS-OF-LAW
RULE OR PRINCIPLE THAT MIGHT APPLY THE LAW OF ANOTHER JURISDICTION.
<PAGE>
11.6 EXHIBITS. The Exhibits attached to this Agreement are incorporated into and
made a part of this Agreement. In the event of a conflict between the provisions
of the Exhibits or the executed Assignment and Bill of Sale and the foregoing
provisions of this Agreement, the provisions of this Agreement take precedence
over the foregoing Exhibits and the executed Assignment and Bill of Sale. In the
event of a conflict between the provisions of the pro forma Assignment and Bill
of Sale attached to this Agreement as Exhibit 7.2.6(a) and the executed
Assignment and Bill of Sale, the provisions of the executed Assignment and Bill
of Sale take precedence.
11.7 OPERATOR. Upon and after Closing, Seller shall take all action and execute
all documents reasonably requested by Buyer so as to have Buyer named as
successor operator on those portions of the Assets where Seller is operator as
of the date hereof.
11.8 HEADINGS. Headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
11.9 REFERENCES TO THIS AGREEMENT. "This Agreement", "hereto", "herein",
"hereby", "hereunder", "hereof", and similar expressions refer to this
Agreement, any addenda and amendments to this Agreement and the exhibits
attached to this Agreement and not to any particular article, section,
subsection, paragraph, subparagraph, clause or any other portion of this
agreement and include any and every supplemental or ancillary agreement to this
Agreement.
11.10 EXHIBITS. Each of the Exhibits referenced in this Agreement have been
attached to this Agreement and are hereby incorporated herein for all purposes
as though fully set forth.
11.11 THIRD PARTY RIGHTS. Notwithstanding any other provision of this Agreement,
this Agreement shall not create benefits on behalf of any Person who is not a
party to this Agreement (including without limitation any broker or finder), and
this Agreement shall be effective only as between the parties hereto, their
successors and permitted assigns; PROVIDED HOWEVER, that Indemnified Parties are
intended third party beneficiaries hereof to the extent provided in Section 8.1.
11.12 EXPENSES OF TRANSACTION. Seller and Purchaser, having been represented
common legal counsel, shall share in equal proportions the fees and expenses of
such legal counsel, and shall each bear the fees and expenses of any legal
counsel who represented it separately in negotiating this Agreement and the
Ancillary Documents and in closing the transaction contemplated hereby.
<PAGE>
Authorized representatives of Seller and Buyer sign below indicating their
agreement to the terms of this Agreement.
SELLER: BUYER:
PHOENIX ENERGY GROUP, INC. ARXA INTERNATIONAL ENERGY, INC.
By: /s/ L. CRAIG FORD, By: /s/ WILLIAM J. BIPPUS,
L. Craig Ford, President William J. Bippus, President
Date: 10-27-97 Date:10-27-97
/s/ WILLIAM J. BIPPUS
WILLIAM J. BIPPUS, individually
(signing only to indicate his assent to
the provisions of Section 10.2 and Section
7.4.4)
Date: 10-27-97
/s/ GREGORY A. STEPHENS
GREGORY A. STEPHENS, individually
(signing only to indicate his assent to
the provisions of Section 7.4.4)
Date: 10-27-97
<PAGE>
INDEX OF EXHIBITS
EXHIBIT NUMBER HEADING OF EXHIBIT
- -------------- ------------------
2.1 Permitted Encumbrances
2.1.1 Leases
2.1.3 Wells
2.1.6 Seller's Related Contracts
2.10 Seller's Fixed Assets
3.1 Form of Warrant
3.2 Allocation of Purchase Price and Form 8594
4.1.1(a) Buyer's Certificate of Incorporation
4.1.1(b) Buyer's Bylaws
4.1.5 Other Agreements of Buyer relating to its assets
4.1.15(a) Principal Shareholders of Buyer
4.1.15(b) Holders of Buyer's Warrants
4.1.15(c) Holders of Buyer's Options
4.1.15(d) Buyer's Subsidiaries
4.1.17 Registration Rights relating to Buyer
4.1.18 Buyer's Convertible Securities
4.1.19 Buyer's Litigation
4.1.21 Buyer's Disclosed Contracts
4.1.24 Buyer's Recent Changes
4.2.1(a) Seller's Articles of Incorporation
<PAGE>
4.2.1(b) Seller's Bylaws
4.2.13 Seller's Subsidiaries
4.2.14 Seller's Litigation
4.2.17 Seller's Open AFE's
4.2.18 Seller's Disclosed Contracts
4.2.24 Seller's Financial Statement
4.2.25 Seller's Recent Changes
7.2.6(a) Form of Assignment and Bill of Sale
