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
October 10, 1996
Date of Report (Date of earliest event reported)
GULFWEST OIL COMPANY
(Exact name of registrant as specified in its charter)
Texas
(State or other jurisdiction of incorporation)
33-13760-LA 87-0444770
(Commission File Number) (IRS Employer
Identification Number)
2644 Sherwood Forest Plaza, Suite 229, Baton Rouge, Louisiana 70816
(Address of principal executive offices)
Registrant's telephone number, including area code: (504) 293-1100
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ITEM 2. ACQUISITION OF ASSETS
On October 10, 1996, GulfWest Texas Company, a wholly owned subsidiary
of GulfWest Oil Company (the "Company"), purchased from Gary O. Bolen,
individually and d/b/a Badger Oil Company, and Pharaoh Oil and Gas, Inc.,
unrelated parties (collectively "Pharaoh"), 100% working interest in 279 oil
wells on 5,100 acres in the Vaughn Field, Crockett County, Texas, for $3.1
million, pursuant to a Purchase and Sale Agreement (the "Agreement") dated
June 12, 1996.
Currently, 82 of the oil wells acquired are active, producing an
aggregate of 235 barrels of oil per day. The Company plans to place 80 of the
inactive wells back in production over the next six months through enhancement
and recompletions, increasing production to approximately 420 barrels per day.
The properties have proved developed producing and non-producing oil reserves
estimated at 1.3 million barrels. The field has numerous infield drilling
locations as well as secondary recovery potential.
Under the terms of the Agreement, the Company paid $1.6 million in
cash, using substantially all of the proceeds of the Companys recent Private
Offering of preferred stock, and the balance was financed by the seller. The
Company executed a term note to Pharaoh for $1.5 million, together with interest
thereon, at a variable rate of interest per annum equal to the Prime Rate of the
Texas Commerce Bank National Association of Midland, Texas plus 1.5% per annum,
but in no event to exceed the highest lawful rate. The note is due and payable
in thirty-six (36)monthly installments with the first thirty-five (35) in the
amount of $14,342.88 plus accrued interest due and payable on or before the 22nd
day of each and every month, beginning on November 22, 1996, and one final
installment of the entire unpaid balance of principal and accrued interest due
on or before October 22, 1999, unless otherwise extended. The properties are
encumbered by a first mortgage held by the Texas Commerce Bank, who has agreed
to release the mortgage upon receipt of $1,274,000 in principal, plus accrued
interest.
Management of the Company negotiated the purchase price based upon a
report on the property provided by the independent engineering firm of Ryder
Scott Company, Denver, Colorado.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
It is impracticable to provide the required financial state-
ments at this time. Such statements will be filed under cover
of Form 8 no later than December 9, 1996.
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(b) Pro Forma Financial Information
Pro forma information will also be filed under cover of Form
8 no later than December 9, 1996.
(c) Exhibits
2.1 Purchase and Sale Agreement, with amendments, between
Pharaoh Oil and Gas, Inc., as Seller, and WestCo
Producing Company, as Purchaser, dated June 12, 1996.
2.2 Addendum of Purchase and sale Agreement by and
between Gary O. Bolen, Individually and d/b/a Badger
Oil Company, Pharaoh Oil and Gas, Inc. and GulfWest
Texas Company.
2.3 Assignment of Purchase and Sale Agreement by and
between Gary O. Bolen, Individually and d/b/a Badger
Oil Company, Pharaoh Oil and Gas, Inc., GulfWest
Texas Company and WestCo Producing Company.
2.4 Assignment and Bill of Sale by and between Gary O.
Bolen, Individually and d/b/a Badger Oil Company and
Pharaoh Oil and Gas, Inc. as Assignor and GulfWest
Texas Company as Assignee.
3.1 Articles of Incorporation of the Company and Amend-
ments thereto previously filed with the Companys
Registration Statement (on Form S-1, Reg. No.
33-53526), filed with the Commission on October 21,
1992.
3.2 Statement of Resolution Establishing and Designating
the Companys Class AA Preferred Stock, filed with
the Secretary of State of Texas as an amendment to
the Companys Articles of Incorporation on September
23, 1996.
3.3 Statement of Resolution Establishing and Designating
the Companys Class AAA Preferred Stock, filed with
the Secretary of State of Texas as an amendment to
the Companys Articles of Incorporation on September
23, 1996.
4.1 Term Note in the amount of $1,500,000.00 payable to
the order of Pharaoh Oil and Gas, Inc and to be
executed by GulfWest Texas Company.
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SIGNATURE
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.
GULFWEST OIL COMPANY
Date: October 25, 1996 By: /s/Jim C. Bigham
Jim C. Bigham
Executive Vice President\Secretary
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EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
June 12, 1996
THIS PURCHASE AND SALE AGREEMENT ("Agreement") is entered into as of
the 12th day of June, 1996, between PHARAOH OIL & GAS, a Texas corporation, with
offices at 400 W. Illinois, Suite 940, Midland, Texas 79701, herein collectively
referred to as "SELLER," and WESTCO PRODUCING COMPANY, a Texas corporation, with
offices at 16800 Dallas Parkway, Suite 250, Dallas, Texas 75248, herein referred
to as "PURCHASER," with SELLER and PURCHASER being sometimes collectively
referred to hereafter as the "Parties", or individually as a "Party".
RECITALS:
a. SELLER owns the Properties described and defined in
Exhibit A (attached hereto and hereinafter referred to as the Properties).
b. The Parties hereto have agreed that subject to the
exclusions and conditions set forth herein and in the Assignment, SELLER shall
sell and convey, and PURCHASER shall purchase and accept, all of SELLER's right,
title and interest in and to the Properties.
WITNESSETH:
IN CONSIDERATION OF the covenants, obligations, and agreements of the
Parties set forth herein, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties, for themselves
and their respective successors and assigns, covenant, and agree as follows:
ARTICLE I
SALE AND PURCHASE OF INTERESTS
Section 1.01. Agreement to Sell; Purchase Price. Subject
to the terms and conditions of this Agreement, SELLER shall sell and convey, and
PURCHASER shall purchase and accept 100% (all) of SELLERS interests in and to
the oil, gas and mineral leases, wells, and equipment related to as set out and
described in Exhibit A, for a total Purchase Price of THREE MILLION DOLLARS
($3,000,000) (hereinafter the "Purchase Price"), payable by PURCHASER in the
manner described in Section 1.03. All references herein to "$" or "dollars"
shall be to United States currency.
Section 1.02. Performance Deposit. As evidence of good faith,
PURCHASER agrees to deposit with SELLER upon execution of this Agreement, a cash
performance deposit of ONE HUNDRED THOUSAND DOLLARS ($100,000.00). The perfor-
mance deposit is non-refundable except as specifically provided for herein, and,
if refunded, shall be without interest. In the event PURCHASER fails, refuses,
or is unable for any reason to close the sale in accordance with the terms and
conditions of this Agreement, then unless material breach of this Agreement by
SELLER causes the sale not to close or the PURCHASER is otherwise expressly
excused under Section 2.07 or 3.02 of this Agreement from performance under the
terms and conditions herein, SELLER may, at its option, retain the performance
deposit as agreed liquidated damages and not as a penalty. If closing occurs,
the performance deposit will be applied to the purchase price without credit for
interest.
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Section 1.03. Payment of Purchase Price. Subject to the
terms and conditions of this Agreement, at the closing for the Properties,
PURCHASER shall pay to SELLER the Purchase Price for the Properties by certified
or immediately available funds.
Section 1.04. Conveyance of Title. The Properties shall
be assigned and conveyed by SELLER to PURCHASER on the closing date by delivery
of the assignment in the form of Exhibit B attached hereto (the "Assignment"),
incorporated herein by this reference, which assignment shall be dated effective
as of the Closing Date, which will be on or before September 10, 1996 (the
Closing Date).
Section 1.05. Ownership of Properties. SELLER shall be
entitled to all of the respective rights of ownership of the Properties (and
shall be subject to the duties and liabilities of such ownership) attributable
to the Properties and attributable to periods of time prior to the Closing
Date, including oil in the tanks prior to 7:00 a.m. local time on the Closing
Date. PURCHASER shall be entitled to all of the rights of ownership of the
Properties (and shall be subject to the duties and liabilities of such owner-
ship) attributable to the Properties and attributable to periods of time from
and after the Closing Date.
ARTICLE II
TITLE MATTERS
Section 2.01. Assignment of Properties. The Assignment
shall be made and evidenced by delivery to PURCHASER of duly executed and
acknowledged counterpart Assignments.
Section 2.02. Assignment of Personal Property. The sale
of the Personal Property (as such term is defined in the Assignment) is to be
made "AS IS" and "WHERE IS" without any warranty, other than a special warranty
of SELLER as to the absence of liens, security interests, and encumbrances. No
provision of or limitation or negation of any warranties in this Section,
Section 2.02, or in the Assignment(s) and transfer instruments to be delivered
to PURCHASER upon the Closing(s) hereof shall be construed to limit or affect
and shall not operate to limit or affect the indemnities from SELLER in favor of
PURCHASER in this Agreement, including Section 2.04 hereof, or in said
Assignment(s).
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Section 2.03. Indemnity.
(a) Definitions. For purposes of this Agreement, the following
terms shall have the meanings set out below:
(i) "Claims" means any and all claims, costs, and expenses of
any nature whatsoever, including without limitation on the generality of the
foregoing, any and all pending, asserted, threatened, and/or final claims,
demands, suits or actions (including without limitation any and all state,
federal, and/or municipal arbitral, administrative damage, injunctive,
declaratory judgment, and/or other suits, hearings, and/or actions, and any
appeals therefrom, and any rehearings, trials de nova, and/or new trials in
whole or in part thereof), judgments, orders, rulings, decrees, awards, costs,
expenses, attorneys' fees, court costs, costs and fees of witnesses of any type,
costs of investigation, settlements, causes of action, costs of discovery and
depositions, costs of any bonds (to the extent required under applicable rules
and law governing the filing and/or appeal of any suit or action, or to the
extent necessary to release a lien or garnishment on, or sequestration of, any
property), and any civil and/or criminal penalties or assessments.
(ii) "Covered Events" means any and all Claims which arise
out of or in connection with, or are occasioned by, directly or indirectly, (a)
the use, ownership, operation, maintenance, repair, handling, resale, occupancy,
disposal, and/or abandonment of any of the Properties assigned and/or sold under
this Agreement, (b) any injuries to persons or damages to or loss of property in
connection with the use, ownership, operation, maintenance, repair, handling,
resale, occupancy, disposal, and/or abandonment of any of the Properties
assigned and/or sold under this Agreement, (c) the violation of or non-
compliance with any applicable laws, rules, orders, and/or regulations
(including without limitation, those relating to the environment) relating to
the use, ownership, operation, maintenance, repair, handling, resale, occupancy,
disposal, and/or abandonment of any of the Properties assigned and/or sold here-
under, and/or (d) the breach by and Party of the covenants, obligations, and/or
warranties of such Party under this Agreement or the documents and instruments
required to be delivered upon the Closing(s), or under the Leases, unit agree-
ments, operating agreements, permits, easement, rights of way, licenses, surface
leases, gas contracts, processing agreements, and other contracts and agreements
to which all or any part of the Properties may be subject or to which such Party
may be bound.
(b) Indemnity by PURCHASER. PURCHASER covenants and
agrees to, and shall, indemnify, defend, and hold SELLER (and its successors,
assigns, attorneys, representatives, agents, officers, and employees) harmless
from and against any and all Covered Events arising after the Closing Date.
For purposes of the preceding sentence, a Covered Event "arises" on the date
when the first fact, condition, conduct, act, or omission constituting the basis
for such covered Event occurred or took place, rather than on the date on which
a Claim respecting such Covered Event was asserted or became payable. Notwith-
standing anything contained herein to the contrary, PURCHASER shall in
compliance with all applicable leases,
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laws, rules, and regulations, cause to be plugged and abandoned (which shall
include the restoration of the lands, the filling of all salt water reserve and
other pits, and the removal of all concrete structures, equipment, and other
facilities, to the extent necessary or required by applicable leases, rules,
laws, and regulations in connection with such plugging and abandonment), any and
all wells on the Properties; and shall indemnify, defend, and hold SELLER harm-
less from and against all Claims relating to such plugging and abandonment.
Section 2.04. Indemnity by SELLER. SELLER covenants and
agrees to, and shall, indemnify, defend, and hold PURCHASER (and its successors,
assigns, attorneys, representatives, agents, officers, and employees) harmless
from and against any and all Covered Events arising before the Closing Date.
For purposes of the preceding sentence, a Covered Event "arises" on the date
when the first fact, condition, conduct, act, or omission constituting the basis
for such Covered Event occurred or took place, rather than upon the date on
which a Claim respecting such Covered Event was asserted or became payable.
Section 2.05. Liens and Encumbrances. As of the date
hereof and the Closing Date, SELLER represents that the Properties are free and
clear of all liens, encumbrances, and defects, except those liens, encumbrances
and defects described on Exhibit E ("Permitted Encumbrances").
Section 2.06. Preferential Rights. Without hereby lim-
iting the conditions in this Agreement or other provisions hereof, SELLER shall
obtain and deliver to PURCHASER 15 days before the Closing Date, waivers of all
preferential rights to purchase all or any part of the Properties and any
consent of third parties necessary to complete the contemplated transfer of the
Properties.
Section 2.07. Title Defects. As a condition to
PURCHASER's obligations under this Agreement, title to the Properties shall as
of the Closing Date be good and marketable, and free and clear of any and all
title defects, mortgages, liens, security interests, encumbrances,
encroachments, claims or requirements prior to the Closing Date ("title
defects"). If a title defect cannot be cured, within 30 days, to the satisfac-
tion of the PURCHASER'S lender or investment banker, the $100,000 deposit will
be returned to the PURCHASER.
ARTICLE III
ACCESS TO DATA AND INFORMATION
Section 3.01. Access of PURCHASER. As a public company,
PURCHASER has a reporting requirement to the Securities and Exchange Commission
("SEC") based upon the accounting data for the properties for the one (1) calen-
dar year prior to the purchase. SELLER shall continue to provide PURCHASER full
access to SELLER's books, records, files, and other pertinent data relating to
the Properties, including the aforementioned accounting data, and shall make
available to PURCHASER all documents, data, and information whatsoever relating
to the Properties, including, without limitation, all books, records, files,
reports, studies, logs, summaries, and other data and information in the posses-
sion of SELLER. To the extent SELLER
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does not have possession of any of the documents, instruments, data, or informa-
tion needed by PURCHASER, SELLER shall expend best efforts to obtain same from
any operator or other person(s) in possession thereof.
Section 3.02. Third Party Reserve Report. The PURCHASER is required to
have a third party engineering and evaluation report prepared using S.E.C. guide
lines. It is necessary as a condition of closing that this report reflects the
proved reserves and economic value as set forth in Exhibit F. PURCHASER will
be responsible for all cost as of this report.
ARTICLE IV
REPRESENTATIONS, WARRANTIES, AND ADDITIONAL COVENANTS
Section 4.01. Representations, Warranties, and Additional
Covenants of SELLER. SELLER represents, warrants, and covenants to and for the
benefit of PURCHASER that:
(a) This Agreement has been duly executed and delivered on its be-
half and constitutes the binding and legal obligation of SELLER, and at the
Closing Date all documents and instruments required hereunder to be executed and
delivered by it shall have been duly executed and delivered and shall constitute
the binding legal obligation of SELLER.
(b) No suit, action, other proceeding, or claim is, or at and as
of the Closing Date shall be, pending, asserted, anticipated, or threatened
before any court, arbitrator, or governmental agency seeking to restrain or
prohibit or declare illegal, or seeking damages in connection with or related in
any manner to, the Properties.
(c) It has, and will have on and as of the Closing Date, a good
and legal right to sell and convey the Properties to PURCHASER and SELLER is in
good standing with all government agencies.
(d) All due and payable taxes and assessments (including appli-
cable penalties and interest based upon or measured by the ownership of property
or the production of hydrocarbons or the receipt of proceeds therefrom on the
Properties) have been, and will have been on and as of the Closing Date, paid in
full.
(e) It is not, and at Closing shall not be, obligated to deliver
hydrocarbons at some future time without then or thereafter receiving full pay-
ment therefor. No person or entity shall have any call upon, option to purchase
or similar rights with respect to any portion of the production from the Proper-
ties.
(f) From the date hereof until the Closing Date, it will not enter
into any new agreements or commitments with respect to the Properties, will not
incur any obligations or liabilities other than for normal operating expenses
with respect to the Properties, will not abandon, or consent to abandonment of,
any producing or shut-in well located on the Properties
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nor release or abandon all or any portion of any of the Properties, will not
modify or terminate any of the agreements, licenses, leases, or permits relating
to the Properties, and will not encumber, sell or otherwise dispose of the
Properties other than personal property which is replaced by equivalent property
or consumed in the ordinary course of operation of the Properties.
(g) To the best of its knowledge, all valid laws, regulations and
orders of all governmental entities or persons having jurisdiction over the
Properties have been complied with.
(h) To the best of its knowledge and belief it has made available
to PURCHASER for inspection and copying copies of all contracts and agreements
in its possession affecting or pertaining to the Properties.
(i) Since the date hereof until Closing, SELLER has caused all
debts and liabilities of any character incurred in the operation, maintenance,
and development of the Properties prior to the Closing Date for such Properties
and attributable to the interest of SELLER to be paid. SELLER has caused all
rentals, royalties, and other payments payable under the leases, surface leases,
and other contracts and agreements forming a part of the Properties to be
properly and timely paid.
Section 4.02. PURCHASERS' Representations and Warranties.
PURCHASER represents to and for the benefit of SELLER that:
(a) The execution, delivery, and performance of this Agreement and
the transactions contemplated hereby have been duly and validly authorized by
all requisite action on the part of PURCHASER.
(b) This Agreement has been duly executed and delivered on behalf
of PURCHASER, and at the Closing all documents and instruments required here-
under to be executed and delivered by PURCHASER shall have been duly executed
and delivered.
Section 4.03. Confidentiality. Until the earlier of the
termination of this Agreement according to its terms or the Closing Date,
PURCHASER shall maintain confidentiality regarding this Agreement and shall not
disclose, other than to its employees, directors, shareholders, affiliates,
attorneys, agents, consultants, financial institutions, financial partners, or
participants and as required by court order, applicable law or regulations,
information regarding the foregoing except with the prior written consent of
SELLER, which consent shall not be unreasonably withheld. In the event the
SELLER and PURCHASER consummate the transaction contemplated herein, the obliga-
tions of PURCHASER regarding information contained in this Section4.03 shall
terminate at the Closing.
After the Closing Date, SELLER shall maintain confidentiality regarding
this Agreement and shall not disclose, other than to its employees, directors,
shareholders, affiliates, attorneys, agents, consultants, financial institu-
tions, and as required by court order, applicable law or regulations, or for
purposes of the preparation of SELLER's tax returns, information regarding the
foregoing except for announcements of the fact of sale and the purchaser thereof
(but not specific details on the terms of such sale), or except with the prior
written consent of PURCHASER, which consent shall not be unreasonably withheld.
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Section 4.04. Warranties and Representations at Closing.
SELLER and PURCHASER represent and warrant, for a period from the Closing
through the expiration of eighteen (18) calendar months thereafter, that the
representations and warranties of the Parties contained in Sections 4.01 and
4.02 were true at and as of the Closing.
ARTICLE V
Conditions Precedent to the Closing
Section 5.01. Conditions Precedent to SELLER's Obligation
to Close. SELLER shall be obligated to consummate the sale of the Properties as
contemplated hereby at the Closing provided the following conditions precedent
shall have been satisfied, or if not satisfied, shall have been waived in
writing by SELLER:
(a) All representations and warranties of PURCHASER contained in
this Agreement shall be true and correct in all material respects as of the
Closing.
(b) PURCHASER in all material respects shall have complied with
this Agreement on or prior to the Closing.
Section 5.02. Conditions Precedent to PURCHASER'S Obliga-
tions to Close. PURCHASER shall be obligated to consummate the purchase of the
Properties as contemplated by this Agreement at the Closing, provided that the
following conditions precedent shall have been satisfied, or, if not satisfied,
shall have been waived in writing by PURCHASER:
(a) All representations and warranties of SELLER contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing.
(b) SELLER in all material respects shall have complied with this
Agreement on or prior to the Closing.
(c) The conveyance of the Properties from SELLER to PURCHASER will
not violate any laws or agreements applicable to or affecting the Properties;
and PURCHASER, upon consummation of the purchase of the Properties will succeed
to the interest of SELLER in and to the Properties.
(d) Since the date hereof there shall have been no material and a
dverse change in the condition or value of the Properties.
(e) PURCHASER shall have received sufficient information from
SELLER to permit PURCHASER, in the opinion of its auditors and legal counsel, to
comply with all reporting and disclosure rules of the SEC and each state.
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ARTICLE VI
Closing
Section 6.01. Closing. The consummation of the purchase
and sale of the Properties (the "Closing") shall occur on or before September
10, 1996 or fifteen (15) business days following the satisfaction of all condi-
tions hereto, unless extended as provided in other provisions hereof, (the
"Closing Date"), at the offices of SELLER, or at such other date or place as may
be agreed upon by the Parties. At the Closing, the following shall occur:
(a) SELLER shall execute, acknowledge, and deliver to PURCHASER
four (4) counterpart original Assignments in proper and recordable form.
(b) Subject to Section 1.02, PURCHASER shall pay and deliver, in
immediately available funds, the Purchase Price for the Properties.
(c) SELLER shall deliver to PURCHASER the originals of all con-
sents to assignment, waivers of preferential rights of purchase, and such other
consents and waivers as may be required under any Leases, surface leases, ease-
ments, unit agreements, operating agreements, or other contracts or agreements
affecting all or any part of the Properties or constituting all or any part of
the Properties.
(d) SELLER shall deliver to PURCHASER evidence satisfactory to
PURCHASER's attorneys that all title defects identified by PURCHASER, its
attorneys, SELLER, its attorneys or other persons, have been cured, or provision
for their cure satisfactory to PURCHASER has been made.
(e) SELLER shall deliver to PURCHASER the originals of all lease
files (including Leases), surface leases, documents, agreements, instruments,
contracts, unit agreements, data, and information respecting the Properties and/
or constituting a part of the Properties which are required to be made available
to PURCHASER under other provisions of this Agreement.
(f) Each SELLER and PURCHASER shall deliver to the other duly
executed, acknowledged, sworn, and/or certified originals of the following:
(i) Consents and resolutions of their respective Boards
of Directors, dated as of the Closing Date, authorizing each Party's officers to
enter into and consummate this Agreement.
(ii) A certificate from the corporate secretary of each
Party dated as of the Closing Date certifying the authority and signatures of
the officers empowered to execute this Agreement and related documents and
instruments, and certifying that the articles of incorporation and by-laws
attached to such certificates are true and correct and that there exist no
amendments thereto except as attached, and certifying this Agreement and related
documents and instruments to constitute the binding and legal obligation of such
Party.
(iii) A copy of the articles of incorporation or organiza-
tion and amendments thereto of each Party certified by the Secretary of State of
the State in which each Party is incorporated, dated no later than 15 days prior
to the Closing Date.
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(iv) Certificates of existence and good standing from the
Secretary of State of each State in which each Party is incorporated, dated no
later than 15 days prior to the Closing Date.
(g) At the Closing, and thereafter as may be necessary, the
Parties hereto shall execute, acknowledge and deliver such other instruments and
shall take such other action as may be necessary to carry out their respective
obligations under this Agreement. Simultaneously with the consummation of this
transaction, SELLER shall put PURCHASER into full possession and enjoyment of
the Properties.
Section 6.02. Letters in Lieu. At the Closing, SELLER and
PURCHASER shall each execute and deliver to the other documents necessary or
appropriate to effect a change in ownership, including Letters in Lieu of Divi-
sion orders in a form satisfactory to SELLER and PURCHASER which shall identify
the Properties by the appropriate well, lease, tract, or property numbers used
by the purchasers of production to identify the Properties, and will cause the
same to be delivered to each purchaser of production from the Properties,
instructing such purchaser to make all future payments directly to PURCHASER or
its designated agent.
ARTICLE VII
Termination
Section 7.01. Certain Obligations Upon Termination. In
the event the purchase and sale is not consummated and/or this Agreement is
terminated in accordance with its terms prior to Closing, PURCHASER shall return
all books, records, maps, files, papers, and other property in PURCHASER's
possession relating to the Properties belonging to SELLER.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Further Assurances. From time to time,
(whether at or after the Closing) and without further consideration, the Parties
as appropriate, shall execute and deliver or cause to be delivered such further
instruments of conveyance, security, assignment and transfer, including but not
limited to, assignments, bills of sale, transfer and division orders, mortgages
and financing statements and take such other action as may reasonably be
requested in order to more effectively or completely convey and secure the
Properties.
Section 8.02. Notices. All communications required or
permitted under this Agreement shall be in writing and any communication or
delivery hereunder shall be deemed to have been duly made if actually delivered,
or if mailed by certified mail, postage prepaid, addressed to SELLER and to
PURCHASER at the addresses set forth above. Any Party may, by written notice
so delivered to the others, change the address to which delivery shall there-
after be made.
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Section 8.03. Entire Agreement. This instrument states
the entire agreement among the Parties hereto with respect to the subject matter
hereof and may be supplemented, altered, amended, modified or revoked by writing
only, if signed by all of the Parties.
Section 8.04. Headings. The title and headings that
appear in this Agreement have been included solely for ease of reference and
shall not be considered in the interpretation or construction of this Agreement.
Section 8.05. Exhibits. Wherever a reference to an
Exhibit appears in this Agreement, that Exhibit is incorporated by reference as
if fully set out herein.
Section 8.06. Survival. The representations and warran-
ties of PURCHASER and SELLER contained in Sections 4.01 and 4.02 of this Agree-
ment shall terminate, expire, and be extinguished upon the expiration of
eighteen (18) months following the Closing of the Properties. Such termination
shall not cause the termination, modification or extinction of those warranties
contained in Section 2.07 of this Agreement. Further, such termination shall
not cause the termination, modification, or extinction of any representation,
warranty, or provision of any documents or instruments (including the Agreement)
executed at Closing. The covenants, indemnities, and obligations of the Parties
shall survive the Closing and not be merged in, impaired, or abrogated by the
consummation of such Closing or the delivery of any documents or instruments on
such Closing.
Section 8.07. No Third Party Beneficiaries. Nothing in
this Agreement shall entitle any party other than PURCHASER and SELLER and their
respective successors and assigns to any claim, cause of action, remedy or right
of any kind.
Section 8.08. Governing Law. The law of the State of
Texas shall govern this Agreement and all transactions contemplated herein,
including any choice of law rules which may require the application of the laws
of another state.
Section 8.09. Partial Invalidity. If one or more of the
provisions contained in this Agreement shall be held invalid, illegal or
unenforceable in any respect, such invalidity shall no affect any other provi-
sion of this Agreement and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision or provisions had never been contained herein
unless the deletion of such provision or provisions would result in such a
material change a to cause completion of the transactions contemplated hereby to
be unreasonable.
<PAGE>
Section 8.10. Expense of this Agreement. Unless otherwise
specified in this Agreement, each Party shall be solely responsible for all
expenses incurred by it in connection with this transaction (including, without
limitation, fees and expenses of its own counsel, engineers, and accountants)
and shall not be entitled to any reimbursement therefor from the other Parties
hereto unless such costs and expenses result from a material breach of this
Agreement by the other Party.
Section 8.11. Signatures. The persons signing below, by
their execution, represent and warrant that they have full and lawful authority
to bind the respective entities on whose behalf they are signing.
Section 8.12. Successors and Assigns. This Agreement
shall be binding upon and shall inure to the benefit of the Parties hereto and
their respective successors and assigns.
EXECUTED as of the day and year first above mentioned.
SELLER
By:
PURCHASER
WESTCO PRODUCING COMPANY
By:
Marshall A. Smith III, President
<PAGE>
EXHIBIT A
Leases, Wells, and Other Interests
[To be provided by SELLER, in form and substance
reasonably satisfactory to PURCHASER]
EXHIBIT B
Form of Assignment
[To be provided by PURCHASER, in form and substance
reasonably satisfactory to SELLER]
EXHIBIT C
Accounting
[To be supplied by PURCHASER, in form and substance
reasonably satisfactory to SELLER]
EXHIBIT D
Plat
[To be supplied by SELLER, in form
reasonably satisfactory to PURCHASER]
EXHIBIT E
Permitted Encumbrances
[To be supplied by SELLER, in form
reasonably satisfactory to PURCHASER]
EXHIBIT F
Economic Evaluation and Engineering Report
[To be supplied by PURCHASER]
<PAGE>
June 25, 1996
Mr. Gary S. Barker
Pharaoh Oil & Gas
400 W. Illinois, Suite 940
Midland, Texas 79701
RE: Addendum to Purchase and Sale Agreement date June 12, 1996
Dear Mr. Barker:
The following Letter of Understanding is an addendum to and made a part
thereof of the Purchase and Sale Agreement (Agreement) between Pharaoh Oil &
Gas (Pharaoh) and WestCo Producing Company (WestCo) dated June 12, 1996.
Pharaoh agrees to expend the capital funds to provide the equipment
necessary to place approximately twenty (20) currently non-producing wells back
in production. Upon closing of the Agreement, WestCo will reimburse Pharaoh for
the capital costs incurred on these wells.
Pharaoh agrees to provide WestCo status reports concerning the subject
wells on the first and fifteenth of the month until closing. Such reports will
include actual capital equipment costs, production and other pertinent informa-
tion that may be necessary to finalize WestCos third party engineering report.
Sincerely,
Marshall A. Smith
President
AGREED:
PHARAOH OIL & GAS
By:
<PAGE>
July 3, 1996
Mr. Gary S. Barker
Pharaoh Oil & Gas, Inc.
400 W. Illinois, Suite 940
Midland, Texas 79701
RE: 1. Purchase and Sale Agreement between Pharaoh Oil & Gas, Inc.
("Pharaoh") and WestCo Producing Company ("WestCo"), dated
June 12, 1996.
2. Letter of Agreement between Pharaoh and WestCo concerning news
release, dated June 12, 1996.
3. Addendum to Purchase and Sale Agreement, dated June 25, 1996
(collectively referred to as the "Agreement").
Dear Mr. Barker:
During the course of our due diligence since executing the referenced
Agreement, we have discovered that titles for the subject properties are in the
name of Gary O. Bolen, DBA Badger Oil Company, and the properties are burdened
with a Deed of Trust to Texas Commerce Bank in the name of Gary O. Bolen,
individually and DBA Badger Oil Company.
This letter constitutes an addendum to the Agreement whereby Gary O.
Bolen, individually and DBA Badger Oil Company shall be added as a Seller under
the same terms and conditions of the Agreement. Please acknowledge this
addendum on behalf of and as agent for Gary O. Bolen, individually and DBA
Badger Oil Company, under authority of the Power of Attorney executed by Gary O.
Bolen on July 3, 1996.
Sincerely,
Jim C. Bigham
Executive Vice President and Secretary
ACKNOWLEDGED:
PHARAOH OIL & GAS, INC. ON BEHALF OF GARY O. BOLEN,
INDIVIDUALLY AND DBA
BADGER OIL COMPANY
By:
By:
Title: Gary S. Barker, Agent
<PAGE>
August 1, 1996
Mr. Gary S. Barker
Pharaoh Oil & Gas, Inc.
1801 West Texas Avenue
Midland, Texas 79701
RE: Purchase and Sale Agreement between Pharaoh Oil & Gas, Inc., Gary O.
Bolen, individually and DBA Badger Oil Company, and WestCo Producing
Company, dated June 12, 1996 (the "Agreement").
Dear Mr. Barker:
As mutually agreed and in accordance with referenced Agreement, Section
1.02, we are tendering an additional $100,000.00 performance deposit to extend
the Closing Date to October 10, 1996. All other terms and conditions will
remain as stated in the Agreement.
If acceptable, please sign in the appropriate spaces below.
Sincerely,
Jim C. Bigham
Executive Vice President and Secretary
ACCEPTED:
PHARAOH OIL & GAS, INC. ON BEHALF OF GARY O. BOLEN,
INDIVIDUALLY AND DBA
BADGER OIL COMPANY
By: By:
Gary S. Barker, Agent
Title:
<PAGE>
September 25, 1996
Mr. Gary S. Barker
Pharaoh Oil & Gas, Inc.
1801 West Texas Avenue
Midland, Texas 79701
RE: Purchase and Sale Agreement between Pharaoh Oil & Gas, Inc., Gary O.
Bolen, individually and DBA Badger Oil Company, and WestCo Producing
Company, dated June 12, 1996 (the "Agreement").
Dear Mr. Barker:
As mutually agreed and under Section 1.02 of the Agreement, we have
funded an dditional $100,000.00 for a performance deposit total of $300,000.00.
All other terms and conditions will remain as stated in the Agreement.
Please acknowledge receipt of the $300,000.00 performance deposit by
signing in the appropriate spaces below on behalf of Pharaoh Oil & Gas, Inc. and
as agent for Gary O. Bolen, individually and DBA Badger Oil Company, under
authority of the Power of Attorney executed by Gary O. Bolen on July 3, 1996.
Sincerely,
Jim C. Bigham
Executive Vice President and Secretary
ACKNOWLEDGED:
PHARAOH OIL & GAS, INC. ON BEHALF OF GARY O. BOLEN,
INDIVIDUALLY AND DBA
BADGER OIL COMPANY
By: By:
Gary S. Barker, Agent
Title:
<PAGE>
EXHIBIT 2.2
ADDENDUM TO PURCHASE AND SALE AGREEMENT
This Addendum is hereby entered into on this 10th day of October, 1996,
by and between:
GARY O. BOLEN, Individually and d/b/a
BADGER OIL & GAS COMPANY,
a resident of the full age of majority of the County of ____________,
State of Texas, appearing through Gary S. Barker, Agent and Attorney-in-
Fact, and
PHARAOH OIL & GAS, INCORPORATED,
a Texas business corporation appearing herein through Gary S. Barker,
its duly authorized President,
(hereinafter collectively referred to as Sellers)
and
GULFWEST TEXAS COMPANY,
a Texas business corporation appearing herein through Marshall A.
Smith, III, its duly authorized President, hereinafter referred to as
Purchaser.
who did agree as follows:
WHEREAS, Sellers entered into a Purchase and Sale Agreement with WestCo
Producing Company (WestCo) on June 12, 1996 which was amended by letter agree-
ment dated July 3, 1996 (collectively the Purchase and Sale Agreement) for
the sale to WestCo of certain Oil and Gas Leases described on Exhibit A in the
Purchase and Sale Agreement and attached hereto and made a part hereof; and
WHEREAS, WestCo assigned all of its rights, title and interest in and
to the Purchase and Sale Agreement to Purchaser by act dated October 10, 1996:
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties do hereby agree as
follows:
1.
To add additional Sections to Article IV, Representations, Warranties,
and Additional Covenants to read as follows:
<PAGE>
4.05 The Working Interest to be conveyed shall not be greater than
nor the Net Revenue Interest less than as set forth on Exhibit
B attached hereto and made a part hereof.
4.06 Seller will timely make its monthly payments on the Term Note
in the principal amount of $2,000,000.00 and the Revolving
Line of Credit Note in the principal amount of $7,530,000.00,
both dated May 31, 1996 secured by that Deed of Trust in favor
of Texas Commerce Bank National Association (Prior
Indebtedness) which is secured in part by the Oil and Gas
interests to be assigned to Purchaser and Sellers will not
permit an Event of Default to occur on the Prior Indebtedness.
All of the covenants, warranties, representations, indemnities, terms,
and conditions of the Purchase and Sale Agreement shall remain in full force and
effect.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto, their respective heirs, successors, and assigns.
[Remainder of Page Intentionally Left Blank]
<PAGE>
US DONE AND SIGNED on the date first above written, after reading of the whole.
GARY O. BOLEN, Individually
and d/b/a BADGER OIL & GAS
COMPANY
BY:_______________________________
Gary S. Barker, Agent and
Attorney-in-Fact
PHARAOH OIL & GAS, INC.
BY:_______________________________
Gary S. Barker, President
GULFWEST TEXAS COMPANY
BY:_______________________________
Marshall A. Smith, III,
President
<PAGE>
EXHIBIT 2.3
ASSIGNMENT OF PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is hereby entered into on this 10th day of October,
1996, by and between:
GARY O. BOLEN, Individually and d/b/a
BADGER OIL COMPANY,
a resident of the full age of majority of the County of
____________, State of Texas, appearing herein by and through Gary S.
Barker, his agent and attorney-in-fact,
PHARAOH OIL & GAS, INC.,
a Texas business corporation appearing herein through Gary S.
Barker, its duly authorized President,
hereinafter collectively referred to as Sellers, and
WESTCO PRODUCING COMPANY,
a Texas business corporation appearing herein through
Marshall A. Smith, III, its duly authorized President, hereinafter
referred to as WestCo, and
GULFWEST TEXAS COMPANY,
a Texas business corporation appearing herein through
Marshall A. Smith, III, its duly authorized President, hereinafter
referred to as Purchaser,
<PAGE>
who declared that:
WHEREAS, Sellers entered into that Purchase and Sale Agreement dated
June 12, 1996 and amended by letter dated July 3, 1996 and further amended by
that Addendum to Purchase Agreement dated October 10, 1996 (collectively
referred to as the Purchase and Sale Agreement) wherein Sellers agreed to
assign Oil and Gas Leases to WestCo; and
WHEREAS, WestCo has agreed to assign all of its rights, title, and
interest in and to the Purchase and Sale Agreement to Purchaser and Purchaser
does hereby agree to purchase from Sellers said Oil and Gas Leases:
NOW, THEREFORE, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
1. WestCo assigns all of its rights, title, and interest
in and to the Purchase and Sale Agreement unto Purchaser;
2. Purchaser agrees to be bound by all of the terms and
conditions of the Purchase and Sale Agreement;
3. Sellers hereby consent to the assignment of the
Purchase and Sale Agreement to Purchaser ;
4. All of the parties hereto agree that in all other
respects, the covenants, representations, warranties,
indemnities, obligations, terms, and conditions of the
Purchase and Sale Agreement shall remain in full force and
effect.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto, their respective heirs, successors and assigns.
THUS DONE AND SIGNED on the date first above written, after reading of
the whole.
GARY O. BOLEN, individually and d/b/a
BADGER OIL COMPANY
BY:______________________________
Gary S. Barker, Agent and
Attorney-in-Fact
PHARAOH OIL & GAS, INC.
BY:______________________________
Gary S. Barker, President
WESTCO PRODUCING COMPANY
<PAGE>
BY:_____________________________
Marshall A. Smith, III, President
GULFWEST TEXAS COMPANY
BY:______________________________
Marshall A. Smith, III, President
<PAGE>
EXHIBIT 2.4
ASSIGNMENT AND BILL OF SALE
STATE OF TEXAS
KNOW ALL MEN BY THESE PRESENTS
COUNTY OF CROCKETT
This Assignment and Bill of Sale is entered into this 10th day of October, 1996,
by and between Gary O. Bolen, individually and d/b/a Badger Oil Company, Pharaoh
Oil & Gas, Inc., a Texas corporation, Midland, Texas, herein referred to as
Assignor, and GULFWEST TEXAS COMPANY, a Texas corporation, Dallas, Texas,
herein referred to as Assignee.
For an adequate consideration, the receipt and sufficiency of which are hereby
acknowledged, Assignor does hereby grant, assign and convey, with warranty of
title and special warranty covenants and subject to the terms and conditions
contained herein, unto Assignee all of Assignors right, title and interest in
the Oil and Gas Leases and the wells thereon acquired by those certain Assign-
ment and Bill of Sales from Xeric Oil and Gas Corporation to Badger Oil Company
dated June 5, 1995 and September 20, 1995; and recorded in Volume 518 at page
232 and Volume 521 at page 547 respectively, of the Official Records of Crockett
County, Texas, and that certain Assignment and Bill of Sale from Badger Oil
Company to Pharoh Oil and Gas, Inc. dated the 11th day of February, 1996, and
recorded in Volume 534, at page 820, of the official records of Crockett County,
Texas, said leases described on Exhibit A attached hereto and incorporated
herein by this reference for all purposes, together with all of Assignors
interest in all personal property and equipment, to include but not limited to
wellbores, casing, tubing, all surface equipment and buildings, tank batteries,
office building, storage yard, etc. located on, used or obtained in connection
with said leases and lands and operations thereof as follows: SAVE AND EXCEPT
that certain Deep Ellenburger well presently known as the I. Vaughn/Deep #1 Well
(RRC#04380) for which Assignor reserves unto itself, its heirs, successors and
assigns all of Assignors right, title and interest in and to the 40 acres
surrounding said well out of the E/2 of Section 85, GC&SF RR Co. Survey, Block
OP as to all depths.
SEE ATTACHED EXHIBIT "A"
The interests assigned herein are conveyed subject to the following:
1. The terms and provisions of said leases and any and all intervening
assignments thereof.
2. All federal, state and local laws, rules. orders and regulation which
may govern or apply to the acquisition, ownership, operation or transfer of said
leases, or any portion thereof, and
3. It is the intent of the Assignor hereunder to assign all of its right,
title and interest in and to the leases described in Exhibit A attached
hereto, including, but not limited to the interests in the leasehold described
therein as to those depths held of record by Assignor as of the effective date
of this assignment.
4. Assignor shall be responsible for all ad valorem taxes, real property
taxes, personal property taxes, production severance taxes, and similar obliga-
tions arising from and incurred during the operations and ownership of Assignor.
With respect to the year 1996, ad valorem taxes have been prorated accordingly
between the parties and Assignee shall be solely responsible for the payment of
same for the year 1996 and all subsequent years.
5. Assignor saves and excepts herefrom any and all sums, adjustments of
production, and proceeds owed Assignor accruing by virtue of production sold
from the Lease(s) and the Lands prior to 7:00 a.m. local time on the Effective
date of this Assignment, and any and all payments owed Assignor under any other
agreements, as set out below, to which this Assignment is made subject.
Assignor and Assignee agree that production in the tanks as of the effective
date hereof is hereby assigned and conveyed to Assignee.
6. Assignee expressly agrees to fully protect, defend, indemnify and hold
harmless Assignor, its employees and agents, successors and assigns from and
against each and every claim, demand, action, cause of action, or lawsuit, and
any liability, cost, expense, damage, or loss, including court costs and
attorneys fees, and including claims based upon theories of negligence, gross
negligence or willful Misconduct (collectively, "Claims") arising from or
relating to, directly or indirectly, Assignees operation or ownership of the
Property after 7:00 a.m. local time of the Effective Date.
<PAGE>
7. Assignor expressly agrees to fully protect, defend, indemnify and hold
harmless Assignee, its employees and agents, successors and assigns from and
against each and every claim, demand, action, cause of action, or lawsuit, and
any liability, cost, expense, damage, or loss, including court costs and
attorneys fees, and including claims based upon theories of negligence,
gross negligence or willful misconduct (collectively, "Claims") arising from or
relating to, directly or indirectly, Assignors operation or ownership of the
Property before 7:00 a.m. local time of the Effective Date.
8. This Assignment and Bill of Sale of the personal property and equip-
ment is made on an AS IS, WHERE IS basis without any warranty, except to the
special warranties, covenants, representations expressly agreed to by Assignor
and Assignee in that certain Purchase and Sale Agreement dated June 12, 1996,
amended by that letter Agreement dated July 3, 1996 and further amended by
Addendum to the Purchase and Sale Agreement dated October 10, 1996, and all
subsequent addendums thereof; and, ASSIGNOR MAKES NO WARRANTIES OR REPRESENTA-
TIONS EXPRESS OR IMPLIED WITH RESPECT TO 1) ORIGIN, QUANTITY, QUALITY,
CONDITION, MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PUPPOSE, SAFETY OF
EQUIPMENT, AND 2) THE QUANTITY, VALUE OR EXISTENCE OF RESERVES OF OIL, GAS OR
OTHER MINERALS PRODUCIBLE OR RECOVERABLE FROM THE LANDS, OR CONDITION OF THE
LANDS AND RELATED FIXTURES AND IMPROVEMENTS.
FURTHER, except as provided for herein, the title to the interest in and to the
oil and gas leases and the wells thereon described in Exhibit A is conveyed
herein by Assignor, its heirs, successors and assigns with special warranties,
covenants and indemnities expressly agreed to in the hereinabove described
Purchase and Sale Agreement, unto Assignee, its successors and assigns, against
all persons whomsoever lawfully claiming or to claim the same or any part
thereof, by, through, or under it, but not otherwise.
All descriptions set forth herein and all information heretofore or hereafter
furnished to Assignee by Assignor concerning any or all of the leases, lands,
wells, contracts and/or personal property and the operation thereof, have been
and shall be furnished solely for Assignees convenience and have not
constituted and shall not constitute a representative or warranty of any kind by
Assignor, and any reliance thereupon by Assignee shall be at Assignees sole
risk and liability.
This Assignment shall be binding upon and inure to the benefits of
Assignor, Assignee and their respective heirs, successors and assigns.
This Assignment and Bill of Sale is dated this 10th day of October, 1996
but shall be effective as of 7:00 a.m. local time, the 1st day of October, 1996.
ASSIGNOR
Gary O. Bolen, Individually and d/b/a Badger Oil Company
_______________________________________
By: Gary S. Barker, Agent and Attorney in Fact by virtue
of Power of Attorney
PHARAOH OIL & GAS, INC.
_______________________________________
By: Gary S. Barker, President
ASSIGNEE:
GULFWEST TEXAS COMPANY
_______________________________________
By: Marshall A. Smith, III, President
<PAGE>
***************************************
ACKNOWLEDGMENT
STATE OF TEXAS
COUNTY OF _______________________
This instrument was acknowledged before me on this the ________ day of
October, 1996, by Gary S. Barker, Agent and Attorney in Fact for Gary Bolen,
Individually and d/b/a Badger Oil Company.
My Commission Expires:___________ ______________________________
Notary Public in and for the
State of Texas
************************************
ACKNOWLEDGMENT
STATE OF TEXAS
COUNTY OF _____________________
This instrument was acknowledged before me on this the ________ day of
October, 1996, by Gary S. Barker, President of Pharaoh Oil & Gas, Inc.
My Commission Expires:___________ ______________________________
Notary Public in and for the
State of Texas
***************************************
ACKNOWLEDGMENT
STATE OF TEXAS
COUNTY OF ____________________________
This instrument was acknowledged before me on this the ________ day of
October, 1996, by Marshall A. Smith, III, President of GulfWest Texas Company.
My Commission Expires:___________ ______________________________
Notary Public in and for the
State of Texas
<PAGE>
EXHIBIT 3.2
STATEMENT OF RESOLUTION
ESTABLISHING AND DESIGNATING A SERIES OF SHARES
OF
GULFWEST OIL COMPANY
10% Convertible Preferred Stock, par value $.01 per share
Pursuant to the provisions of Article 2.13 of the Texas Business Corpora-
tion Act, and pursuant to Article 4.1 of its Articles of Incorporation, the
undersigned, GulfWest Oil Company (the "Issuer"), hereby submits the following
statement for the purposes of establishing and designating a series of shares
and fixing and determining the relative rights and preferences thereof:
I.
The name of the Issuer is GulfWest Oil Company.
II.
The following resolution establishing and designating a series of shares
and fixing and determining the relative rights and preferences thereof was duly
adopted by the Board of Directors of the Issuer on July 2, 1996:
III.
RESOLVED, by the Board of Directors (the "Board") of GulfWest Oil Company, a
Texas corporation (the "Issuer"), that pursuant to authority expressly granted
to and vested in the Board by the provisions of the Articles of Incorporation of
the Issuer (the "Articles of Incorporation"), the Board hereby creates a series
of the class of authorized Preferred Stock, par value $.01 per share, of the
Issuer (the "Preferred Stock"), and authorizes the issuance thereof, and hereby
fixes the designation and amount thereof and the voting powers, preferences and
relative, participating, optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof, as follows:
SECTION 1. Designation of Series. The shares of such series
shall be designated "Class AA Preferred Stock" (hereinafter called "Class AA
Preferred Stock").
SECTION 2. Number of Shares. The number of shares of Class
AA Preferred Stock shall be 4,000, of which number the Board may decrease (but
not below the number of shares of the series then outstanding).
SECTION 3. Dividends.
(a) Rate. The dividend rate for each share of the Class AA
Preferred Stock shall be $50.00 per share per annum. Cash dividends at such
rate shall be payable in quarterly installments, as declared by the Board, on
each March 31, June 30, September 30, and December 31, commencing on December
31, 1996 (a "Dividend Payment Date"). Such dividends shall be cumulative from
the date of initial issuance of such share of the Class AA Preferred Stock and
shall be payable to holders of record as their names appear on the stock
transfer books of the Issuer on such record date.
<PAGE>
(b) Preference. No distribution shall be declared or paid or
set apart for payment on any stock ranking, as to dividends, junior to the Class
AA Preferred Stock, including without limitation the shares of the Issuers
Common Stock, par value $.001 per share (the "Common Stock"), for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid on the Class AA Preferred Stock for all dividend payment periods termina-
ting on or prior to the date of payment of the distribution on such junior
stock; provided that the foregoing restriction shall not be applicable to divi-
dends payable in Common Stock or another stock of the Issuer ranking junior to
the Class AA Preferred Stock as to dividends and liquidation rights.
SECTION 4. Redemption Rights. The Class AA Preferred Stock
is redeemable in whole or in part at any time, at the option of the Issuer, at
a price equal to 120% of the price paid by the purchaser plus all accrued and
undeclared or unpaid dividends.
SECTION 5. No Sinking Fund. The Class AA Preferred Stock
shall not be entitled to the benefits of any retirement or sinking fund.
SECTION 6. Liquidation. The holders of the Class AA
Preferred Stock shall, in case of voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Issuer, be entitled to receive
in full out of the assets of the Issuer, including its capital, before any
amount shall be paid or distributed among the holders of the Common Stock, the
amount of $500 per share, plus an amount per share equal to all then accrued and
unpaid dividends.
SECTION 7. Conversion Rights. The holders of the Class AA
Preferred Stock shall have the right, at their option, to convert all or any
part of such shares into Common Stock of the Issuer at any time on and subject
to the following terms and conditions:
(a) Conversion Price. The number of shares of Common Stock
issuable upon conversion of each share of the Class AA Preferred Stock shall be
based upon a purchase value of $500 per share of the Class AA Preferred Stock,
plus dividends accumulated thereon through the Dividend Payment Date immediate-
ly preceding the conversion date and unpaid on the conversion date, divided by
the price of $5.00 per share.
(b) Procedure. Each holder of the Class AA Preferred Stock
may exercise such conversion privilege by delivering to the Issuer the certifi-
cate for the shares of Class AA Preferred Stock to be converted into Common
Stock and written notice that the holder elects to convert such shares.
Conversion shall be deemed to have been effected immediately prior to the close
of business on the date when such deliver is made. On the conversion date or as
promptly thereafter as practicable, the Issuer shall deliver to the holder of
the Class AA Preferred Stock surrendered for conversion, or as otherwise
directed by such holder in writing, a certificate for the number of shares of
Common Stock deliverable upon the conversion of such Class AA Preferred Stock.
No fractional shares of the Common Stock will be issued upon conversion; any
fractional interest which would result from conversion shall be rounded up or
down to the nearest whole share and there shall be no cash due by or to the
Issuer in respect of such fractional interest.
SECTION 8. Voting Rights. Except as otherwise expressly
required by law, the holders of the Class AA Preferred Stock shall not be
entitled to vote as a class on any matters.
<PAGE>
SECTION 9. Participation. In addition to cumulative divi-
dends as declared, the holders of the Class AA Preferred Stock will receive
cumulative prorata distributions from the Issuers net profits (the "Net
Profits"), as hereinafter defined, on an annual basis, with payments commencing
December 31, 1997. The total annual distributions to the holders of the Class
AA Preferred Stock, as a class, cannot exceed 25% of the Issuers net profits
derived from the properties purchased with the proceeds from the sale of the
Class AA Preferred Stock. Net Profits is defined as the Issuers net proceeds
from oil and gas sales (after royalties, overrides and severance taxes have been
deducted) less (i) the cost to produce such sales, including lease operating
expenses, compression, transportation and taxes; (ii) any capital expenditures
not funded by the sale of the Class AA Preferred Stock; (iii) the prorata share
of any dividend payments attributable to the Class AA Preferred Stock; and (iv)
the amount of any debt service (principal and interest) required to purchase
the Subject Properties.
IN WITNESS WHEREOF, this Statement of Resolution is executed on
behalf of the Issuer by its Executive Vice President and Secretary this 2nd day
of July, 1996.
GULFWEST OIL COMPANY
By:
Jim C. Bigham
Executive Vice President and Secretary
<PAGE>
EXHIBIT 3.3
STATEMENT OF RESOLUTION
ESTABLISHING AND DESIGNATING A SERIES OF SHARES
OF
GULFWEST OIL COMPANY
9% Convertible Preferred Stock, par value $.01 per share
Pursuant to the provisions of Article 2.13 of the Texas Business Corpora-
tion Act, and pursuant to Article 4.1 of its Articles of Incorporation, the
undersigned, GulfWest Oil Company (the "Issuer"), hereby submits the following
statement for the purposes of establishing and designating a series of shares
and fixing and determining the relative rights and preferences thereof:
I. The name of the Issuer is GulfWest Oil Company.
II. The following resolution establishing and designating a series of
shares and fixing and determining the relative rights and preferences thereof
was duly adopted by the Board of Directors of the Issuer on August 22, 1996:
III. RESOLVED, by the Board of Directors (the "Board") of GulfWest Oil
Company, a Texas corporation (the "Issuer"), that pursuant to authority
expressly granted to and vested in the Board by the provisions of the Articles
of Incorporation of the Issuer (the "Articles of Incorporation"), the Board
hereby creates a series of the class of authorized Preferred Stock, par value
$.01 per share, of the Issuer (the "Preferred Stock"), and authorizes the
issuance thereof, and hereby fixes the designation and amount thereof and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereof, as follows:
SECTION 1. Designation of Series. The shares of such series
shall be designated "Class AAA Preferred Stock" (hereinafter called "Class AAA
Preferred Stock").
SECTION 2. Number of Shares. The number of shares of Class
AAA Preferred Stock shall be 4,000, of which number the Board may decrease (but
not below the number of shares of the series then outstanding).
SECTION 3. Dividends.
(a) Rate. The dividend rate for each share of the Class AAA
Preferred Stock shall be $45.00 per share per annum. Cash dividends at such
rate shall be payable in quarterly installments, as declared by the Board, on
each December 31, March 31, June 30, and September 30, commencing on December
31, 1996 (a "Dividend Payment Date"). Such dividends shall be cumulative from
the date of initial issuance of such share of the Class AAA Preferred Stock and
shall be payable to holders of record as their names appear on the stock
transfer books of the Issuer on such record date. The Class AAA Preferred Stock
shall be non-participating and holders thereof shall not be entitled to receive
any dividends thereon other than the dividends referred to in this Section 3.
<PAGE>
(b) Preference. No distribution shall be declared or paid or
set apart for payment on any stock ranking, as to dividends, junior to the Class
AAA Preferred Stock, including without limitation the shares of the Issuers
Common Stock, par value $.001 per share (the "Common Stock"), for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid on the Class AAA Preferred Stock for all dividend payment periods
terminating on or prior to the date of payment of the distribution on such
junior stock; provided that the foregoing restriction shall not be applicable to
dividends payable in Common Stock or another stock of the Issuer ranking junior
to the Class AAA Preferred Stock as to dividends and liquidation rights.
SECTION 4. Redemption Rights. The Class AAA Preferred Stock
is not redeemable.
SECTION 5. No Sinking Fund. The Class AAA Preferred Stock
shall not be entitled to the benefits of any retirement or sinking fund.
SECTION 6. Liquidation. The holders of the Class AAA P
referred Stock shall, in case of voluntary or involuntary liquidation, dissolu-
tion or winding up of the affairs of the Issuer, be entitled to receive in full
out of the assets of the Issuer, including its capital, before any amount shall
be paid or distributed among the holders of the Common Stock, the amount of $500
per share, plus an amount per share equal to all then accrued and unpaid
dividends.
SECTION 7. Conversion Rights. The holders of the Class AAA
Preferred Stock shall have the right, at their option, to convert all or any
part of such shares into Common Stock of the Issuer at any time on and subject
to the following terms and conditions:
(a) Conversion Price. The number of shares of Common Stock
issuable upon conversion of each share of the Class AAA Preferred Stock shall be
based upon a purchase value of $500 per share of the Class AAA Preferred Stock,
plus dividends accumulated thereon through the Dividend Payment Date
immediately preceding the conversion date and unpaid on the conversion date,
divided by the lesser of (i) $3.50 per share or (ii) 70% of the average closing
bid price of the Common Stock as reported by the Nasdaq for the 15 trading days
that end on the 3rd business day preceding the date of the conversion (the
"Conversion Price").
(b) Procedure. Each holder of the Class AAA Preferred Stock
may exercise suchconversion privilege by delivering to the Issuer the certifi-
cate for the shares of Class AAA Preferred Stock to be converted into Common
Stock and written notice that the holder elects to convert such shares.
Conversion shall be deemed to have been effected immediately prior to the close
of business on the date when such deliver is made. On the conversion date or as
promptly thereafter as practicable, the Issuer shall deliver to the holder of
the Class AAA Preferred Stock surrendered for conversion, or as otherwise
directed by such holder in writing, a certificate for the number of shares of
Common Stock deliverable upon the conversion of such Class AAA Preferred Stock.
No fractional shares of the Common Stock will be issued upon conversion; any
fractional interest which would result from conversion shall be rounded up or
down to the nearest whole share and there shall be no cash due by or to the
Issuer in respect of such fractional interest.
SECTION 8. Voting Rights. Except as otherwise expressly
required by law, the holders of the Class AAA Preferred Stock shall not be
entitled to vote as a class on any matters, except:
<PAGE>
(a) Directors. Under the conditions described in Section 8(b)
below, the number of directors of the Company shall be increased to such number
that permit the Class AAA Preferred Stockholders and all such other preferred
stockholders ("Preferred Class"), voting as a single class, to elect one-fourth
of the directors of the Company.
(b) Default or Non-Payment of Dividends. If the Company has
been notified of a default in payment of debt which it is unable to cure or if
the dividends on the Class AAA Preferred Stock are in arrears by more than six
quarters, the number of directors of the Company shall be increased to permit
the holders of the Class AAA Preferred Stock and all such other preferred stock-
holders ("Preferred Class"), voting as a single class, to elect one-fourth of
the directors of the Company. The election of such additional directors by
holders of the Preferred Stock shall be held at the next annual meeting of
shareholders. The right of the holders of the Class AAA Preferred Stock to
elect additional directors shall cease, the term of the additional directors
elected pursuant to this Section shall terminate forthwith, and the number of
directors of the Issuer shall be reduced by such number whenever the default in
payment of debt is cured or full cumulative dividends on the Class AAA Preferred
Stock shall have been declared and paid.
SECTION 9. Registration Rights.
(a) Pursuant to a subscription agreement and the registration rights
defined therein (the "Subscription Agreement") to be entered into between the
Issuer and the initial purchasers, the Issuer agrees to file with the Securities
and Exchange Commission (the "Commission") a registration statement ("Registra-
tion Statement") to cover public resales of Common Stock issuable upon
conversion of the Class AAA Preferred Stock, by holders thereof, in each case to
satisfy certain conditions relating to the providing of information in connec-
tion with the Registration Statement. The Issuer shall be further obligated to
use its reasonable best efforts to have any such Registration Statement declared
effective as soon as practicable after the filing date thereof and not later
than May 15, 1997. The Issuer shall also take such action as may be necessary
to keep the Registration Statement effective for a period of 12 months after the
effective date and will notify the holders 45 days prior to close of the
registration. If the Issuer fails to meet certain of its obligations under the
Subscription Agreement, a supplemental payment will be made to holders of the
Class AAA Preferred Stock and the Common Stock affected thereby.
(b) If (i) the Registration Statement is not filed with the Commission
or is not declared effective by the Commission by May 15, 1997 or (ii) at any
time during which the Registration Statement is required to be kept effective,
it shall cease to be effective (other than as a result of the effectiveness of
a successor registration statement) and such effectiveness is not restored
within 45 days thereafter (each such event referred to in clause (i) or (ii) of
this paragraph (b), a "Registration Default"), the Issuer will pay a supple-
mental registration payment ("Supplemental Registration Payment") to each holder
of the Class AAA Preferred Stock, or of the Common Stock which are "restricted"
securities under the Securities Act of 1933 intended to be eligible for resale
under the Registration Statement and who satisfy certain conditions relating to
the providing of information in connection with the Registration Statement.
During the first 90-day period immediately following the occurrence of a
Registration Default, such Supplemental Registration Payment shall be in an
amount equal to the $2.00 per week per $1,000 purchase amount of the Class AAA
Preferred Stock. The amount of Supplemental Registration Payment will increase
by an additional $.10 per week of $1,000 purchase amount of the Class AAA
Preferred Stock.
<PAGE>
All accrued Supplemental Registration Payments shall be paid by wire transfer of
immediately available funds or by federal funds check by the Issuer on each
regularly scheduled dividend payment date for the Class AAA Preferred Stock.
Following the cure of all Registration Defaults, the payment of Supplemental
Registration Payments will cease.
(c) Notwithstanding the foregoing, to the extent necessary, there
shall be added to all time limitation periods that number of days representing
delays in the Issuers filings with the Commission caused by events beyond the
Issuers control despite its best efforts in either of the following categories:
(i) events affecting issuers generally, such as the temporary closure of federal
agencies, or (ii) events directly affecting the Issuer such as inability to
obtain all information of an acquisition entity constituting a significant
subsidiary within a time period that would permit independent auditors to
prepare required audited information on a timely basis.
SECTION 10. Exchangeability. Provided the Class AAA Preferred Stock has
not been converted to Common Stock and the dividends on the Class AAA Preferred
Stock are in arrears by more than four quarters, the Class AAA Preferred Stock
is exchangeable at the holders option on any dividend payment date after
January 1, 1998 to Common Stock of the newly formed and wholly-owned subsidiary
of the Issuer which owns the properties acquired with the proceeds from the sale
of the Class AAA Preferred Stock. The holder of the Class AAA Preferred Stock
may elect to exchange the Class AAA Preferred Stock on a prorata basis whereby
4,000 shares of the Class AAA Preferred Stock are exchangeable for 100% of the
Common Stock of the subsidiary with an assigned value of $2,000,000. The
Company is prohibited from issuing additional shares of the subsidiary so that
it remains wholly-owned as long as the Class AAA Preferred Stock is outstanding.
SECTION 11. Prohibition on Issuance of Additional Preferred Stock With
Greater Rights.
As long as the Class AAA Preferred Stock is outstanding, the
Company is prohibited from issuing additional preferred stock with greater
preference regarding payment of dividends or liquidation rights.
IN WITNESS WHEREOF, this Statement of Resolution is executed on
behalf of the Issuer by its Executive Vice President and Secretary this 22nd
day of August, 1996.
GULFWEST OIL COMPANY
By:
Jim C. Bigham
Executive Vice President and Secretary
<PAGE>
EXHIBIT 4.1
TERM NOTE
Dallas, Texas October 10, 1996 $1,500.000.00
For value received, GULFWEST TEXAS COMPANY, a Texas corporation (herein-
after called Maker, whether one or more, and jointly and severally, if more
than one) promises to pay to the order of Pharaoh Oil & Gas, Inc. (hereinafter
called Assignee) at its offices at 1801 West Texas Avenue, Midland, Midland
County, Texas 79701, in lawful money of the United States of America, the sum of
ONE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($1,500,000.00), together
with interest thereon from the date hereof until maturity at a variable rate
of interest per annum (Variable Rate) equal to Prime Rate of the Texas
Commerce Bank National Association of Midland, Texas (Bank), as hereinafter
defined, plus one and one-half percentage points (1.5%) per annum, but in no
event to exceed the Highest Lawful Rate, as hereinafter defined, with adjust-
ments in the Variable Rate to be made on the same date as any change in the
Prime Rate and adjustments due to changes in the Highest Lawful Rate to be made
on the effective date of any change in the Highest Lawful Rate.
Notwithstanding the foregoing, if at any time the Variable Rate exceeds the
Highest Lawful Rate, the rate of interest to accrue on this Note shall be
limited to the Highest Lawful Rate. but any subsequent reductions in such
Variable Rate shall not reduce the rate of interest to accrue on this Note below
the Highest Lawful Rate until the total amount of interest accrued on this Note
equals the amount of interest which would have accrued if the Variable Rate had
at all times been in effect.
If at maturity or final payment of this Note the total amount of interest
paid or accrued under the foregoing provisions is less than the total amount of
interest which would have accrued if the Variable Rate had at all times been in
effect, then Maker agrees to pay to Assignor, to the extent permitted by law,
an amount equal to the difference between (a) the lesser of (i) the amount of
interest which would have accrued on this Note if the Highest Lawful Rate had at
all times been in effect, or (ii) the amount of interest which would have
accrued if the Variable Rate had at all times been in effect, and (b) the amount
of interest accrued in accordance with the other provisions of this Note.
The term Prime Rate shall mean the rate as determined from time to time
by the Bank as being its prime rate, and thereafter entered in the minutes of
the Bank's Loan and Discount Committee. Without notice to the Maker or any
other person, the Prime Rate shall change automatically from time to time as and
in the amount by which the prime rate shall fluctuate, with each such change to
be effective as of the date of each change in such prime rate. The Prime Rate
is a reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. The Bank may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.
The term Highest Lawful Rate shall mean the maximum nonusurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged, collected or received by the Bank in connection with
this Note under laws applicable to the Bank which are presently in effect, or to
the extent allowed by law, under applicable laws which may hereafter be in
effect and which allow a higher maximum nonusurious interest rate than appli-
cable laws now allow.
All past due principal and interest on this Note shall bear interest from
the maturity thereof until paid, at the Highest Lawful Rate. Unless otherwise
specified below, interest and fees shall be computed on a monthly basis of a
month of 30 days and on a per annum basis of 360 days and for the actual number
of days elapsed (including the first but excluding the last day) unless such
calculation would result in a usurious rate, in which case interest shall be
calculated on a monthly basis of the actual number of days in each month and on
a per annum basis of a year of 365 or 366 days, as the case may be.
<PAGE>
This Note shall be due and payable in thirty-six (36) monthly installments
with the first thirty-five (35) due and payable on or before the 22nd day of
each and every month, beginning on November 22, 1996, and one final installment
of the entire unpaid balance of principal and accrued interest due on or before
October 22, 1999 unless extended as hereinafter set forth.
(1) The first (1st) through and including the thirty-fifth (35th)
monthly installments shall each be in the amount of $14,342.88, plus accrued
interest; and
(2) The thirty-sixth (36th) and final installment shall be in the
amount of the unpaid balance of principal plus accrued and unpaid interest, and
shall be due and payable on or before October 22, 1999 unless otherwise
extended.
If any installment or payment of principal or interest of this Term Note is
not paid when due; or if Maker or any drawer, acceptor, endorser, guarantor,
surety, accommodation party, or other person now or hereafter primarily or
secondarily liable upon or for payment of all or any part of this Note shall
become insolvent (however such insolvency may be evidenced); or if any
proceeding, procedure, or remedy supplementary to or in enforcement of judgment
shall be restored to or commenced against Maker or any other liable party, or
with respect to any property of any of them; or it any governmental authority or
any court at the instance thereof shall take possession of any substantial part
of the property of or assume control over the affairs or operations of, or a
receiver shall be appointed for or take possession of the property of, or a writ
or order of attachment or garnishment shall be issued or made against any of the
property of Maker or any other liable party; or any other liable party (if other
than a natural person) shall be dissolved, wound up, liquidated or otherwise
terminated, or a party to any merger or consolidation without the written
consent of Assignor; thereupon at the option of Assignor, the principal balance
and accrued interest of this Note shall become and be due and payable forthwith
without demand, notice of default, notice of intent to accelerate the maturity,
notice of acceleration hereof, notice of nonpayment, presentment, protest or
notice of dishonor, all of which are hereby expressly waived by Maker and each
other liable party.
If this Note is not paid at maturity whether by acceleration or otherwise
and is placed in the hands of an attorney for collection. or suit is filed
hereon, or proceedings are had in probate, bankruptcy, receivership, reorganiza-
tion. arrangement or other legal proceedings for collection hereof, Maker and
each other liable party agree to pay Lender its collection costs, including a
reasonable amount (which is agreed to be an additional amount equal to ten (10%)
percent of the unpaid principal and interest hereof) for attorney's fees, but in
no event to exceed the maximum amount permitted by law. Maker and each other
liable party are and shall be directly and primarily, jointly and severally,
liable for the payment of all sums called for hereunder, and Maker and each
other liable party hereby expressly waive bringing of suit and diligence in
taking any action to collect any sums owing hereon and in the handling of any
security, and Maker and each other liable party hereby consent to and agree to
remain liable hereon regardless of any renewals, extensions for any period or
rearrangements hereof, or partial prepayments hereon, or any release or substi-
tution of security hereof, in whole or in part, with or without notice, from
time to time, before or after maturity.
It is the intention of Maker and Assignor to conform strictly to applicable
usury laws. Accordingly, if the transactions contemplated hereby would be
usurious under applicable law, then, in that event, notwithstanding anything to
the contrary herein or in any agreement entered into in connection with or as
security for this Note, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under applicable law that is taken,
reserved, contracted for, charged or received under this Note or under any of
the other aforesaid agreements or otherwise in connection with this Note shall
under no circumstances exceed the maximum amount of nonusurious interest allowed
by applicable law, and any excess shall be credited on this Note by the holder
hereof (or, to the extent that this Note shall have been or would thereby be
paid in full, refunded to Maker); and (ii) in the event that maturity of this
Note is accelerated by reason of an election by the holder hereof resulting from
any default hereunder or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest may never include
more than the maximum amount of nonusurious interest allowed by applicable law,
and excess interest, if any, provided for in this Note or otherwise shall be
canceled automatically as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited on this Note (or, to the extent that this
Note shall have been or would thereby be paid in full, refunded to Maker).
<PAGE>
The principal of this Note may be prepaid, in whole or in part, at any time
and from time to time, without premium or penalty, provided, however, there
shall be no interest past due under the terms of this Note on the date(s) of
such prepayment.
This Note shall be non-transferable and non-assignable.
All payments hereunder, whether designated as payment of principal or
interest, shall be applied first to the payment of interest, and second to the
reduction of principal.
Unless otherwise specified below, this Note shall be construed under and
governed by the laws of the State of Texas.
Unless changed in accordance with law, the applicable rate ceiling under
Texas law shall be the indicated (weekly) rate ceiling from time to time in
affect as provided in Tex. Rev. Civ. Stat. Ann. art. 5069-1.04, as amended.
Maker warrants and represents to Assignor, and to all other holders of this
Note that all loans evidenced by this Note are and will be for business,
commercial, investment or other similar purposes and not primarily for personal,
family, household or agricultural use, as such terms are used in Chapter One of
Title 79, Texas Revised Civil Statutes, 1925, as amended.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
GULFWEST TEXAS COMPANY
BY:__________________________________
Marshall A. Smith, III, President
<PAGE>
