FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
Commission file number 1-12108
GULFWEST OIL COMPANY
(Exact name of Registrant as specified in its charter)
Texas 87-0444770
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
16800 Dallas Parkway
Suite 250
Dallas, Texas 75248
(Address of principal executive offices) (zip code)
(972) 250-4440
(Registrant's telephone number, including area code)
2644 Sherwood Forest Plaza, Suite 229, Baton Rouge, Louisiana 70816
(504) 293-1100
(Registrant's former address and telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(D) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
NO YES X
1,765,209 shares of the registrant's Class A Common Stock, $.001 par value per
share, were outstanding as of November 13, 1997.
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GULFWEST OIL COMPANY
FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 1997
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Page of
Form 10-Q
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Part I: Financial Information
Item 1. Financial Statements
Balance Sheets, September 30, 1997
and December 31, 1996 3
Statements of Operations for the three months
and nine months ended September 30, 1997 and 1996 5
Statements of Cash Flows for the nine
months ended September 30, 1997 and 1996 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8
Part II: Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 14
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2
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PART I. FINANCIAL INFORMATION
<TABLE>
ITEM 1. FINANCIAL STATEMENTS.
GULFWEST OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 100,764 $ 84,477
Accounts Receivable - Trade, Net of Allowance for Doubtful
Accounts of -0- in 1997 and 1996 688,669 612,439
Prepaid Expenses 80,879 2,343
Notes Receivable 100,000 -
Total Current Assets 970,312 699,259
Oil & Gas Properties, Using the Successful Efforts Method of Accounting:
Undeveloped Properties 100,095 37,910
Developed Properties 16,692,880 14,823,561
Other Property and Equipment 1,053,655 735,507
Less - Accumulated Depreciation, Depletion,
and Amortization (2,136,293) (1,249,472)
Net Oil and Gas Properties and
Other Property and Equipment 15,710,337 14,347,506
Long-Term Accounts and Notes Receivable -
Related Party, Net of Allowance for Doubtful Accounts
of $446,948 in 1997 and 1996 26,166 112,659
Total Assets $ 16,706,815 $ 15,159,424
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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<TABLE>
GULFWEST OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable - Trade $ 959,055 $ 1,018,419
Accrued Expenses 232,955 156,663
Current Portion of Long-Term Debt 4,142,764 1,702,208
Total Current Liabilities 5,334,774 2,877,290
Long-Term Debt, Net of Current Portion 7,850,476 8,352,941
Long-Term Debt, Related Parties 325,000 525,000
Total Long-Term Debt 8,175,476 8,877,941
Commitments and Contingencies - -
Stockholders' Equity:
Preferred Stock, Par Value at $.01, 10,000,000 Shares
Authorized, 5,065 and 4,621 Shares Issued and Outstanding
In 1997 and 1996, respectively 54 46
Common Stock, Par Value at $.001, 20,000,000 Shares
Authorized, 1,753,428 and 1,611,154 Shares Issued and Outstanding
in 1997 and 1996, respectively 1,753 1,611
Additional Paid-in Capital 7,533,671 6,909,092
Retained Deficit (4,338,913) (3,506,556)
Total Stockholders' Equity 3,196,565 3,404,193
Total Liabilities and Stockholders'
Equity $ 16,706,815 $ 15,159,424
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
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<TABLE>
GULFWEST OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<CAPTION>
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
1997 1996 1997 1996
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Revenues:
Oil and Gas Sales $ 921,891 $ 283,340 $ 3,132,514 $ 757,937
Well Servicing Revenues 319,147 - 813,964 -
Operating Overhead and Other Income 88,545 56,497 283,162 141,909
Total Revenues 1,329,583 339,837 4,229,640 899,846
Costs and Expenses:
Lease Operating Expenses 575,476 176,711 1,475,216 387,888
Cost of Well Servicing Operations 263,729 - 684,945 -
Depreciation and Depletion 335,100 99,813 886,821 281,565
Lease Abandonments - - - 85,696
General and Administrative 412,936 261,271 1,110,485 719,779
Total Costs and Expenses 1,587,241 537,795 4,157,467 1,474,928
Income (Loss) From Operations (257,658) (197,958) 72,173 (575,082)
Other Income and Expense:
Interest Income 9,699 11,210 27,090 26,827
Interest Expense (281,550) (57,108) (781,558) (172,671)
Total Other Income and Expense (271,851) (45,898) (754,468) (145,844)
Net (Loss) Before Taxes (529,509) (243,856) (682,295) (720,926)
Income Tax Provision - - - -
Net (Loss) $ (529,509) $ (243,856) $ (682,295) $ (720,926)
(Loss) Per Share $ (.35) $ (.18) $ (.48) $ (.61)
Weighted Average Number of Shares 1,753,428 1,360,931 1,715,055 1,184,393
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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<TABLE>
GULFWEST OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<CAPTION>
1997 1996
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Cash Flows Provided (Used) By Operating Activities:
Net Income (Loss) $ (682,295) $ (720,926)
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided (Used) by Operating Activities:
Depreciation, Depletion, and Amortization 886,821 281,564
Lease Abandonments - 85,696
(Increase) in Accounts Receivable - Other, Net (76,230) (112,153)
(Increase) Decrease in Prepaid Expenses (78,536) 23,025
Increase (Decrease) in Accounts Payable - Trade (59,364) 87,297
Increase (Decrease) in Accrued Expenses 76,292 (6,792)
Net Cash Provided (Used) By Operating Activities 66,688 (362,289)
Cash Flows Provided (Used) By Investing Activities:
Purchase of Oil and Gas Properties (1,931,504) (762,636)
Purchase of Other Equipment (318,148) (60,410)
Net Cash Provided (Used) By Investing Activities (2,249,652) (823,046)
Cash Provided (Used) By Financing Activities:
Amortization Prepaid Interest - 25,002
(Increase) Decrease in Accounts and Notes Receivable - Related Parties 86,493 (119,238)
(Increase) in Notes Receivable (100,000) (69,578)
Proceeds From Notes Payable - Related Parties - 200,000
(Payments) on Notes Payable - Related Parties (200,000) -
Proceeds From Notes Payable - Other 3,252,083 158,344
(Payment) on Notes Payable - Other (1,313,992) (185,474)
Proceeds From Sale of Common Stock and Preferred Stock 624,729 1,304,638
Dividends on Preferred Stock (150,062) -
Net Cash Provided By Financing Activities 2,199,251 1,313,694
Increase in Cash and Cash Equivalents 16,287 128,359
Cash and Cash Equivalents, Beginning of Period 84,477 10,548
Cash and Cash Equivalents, End of Period $ 100,764 $ 138,907
Cash Interest Paid $ 707,780 $ 168,911
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
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GULFWEST OIL COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
1. During interim periods, GulfWest Oil Company ("the Company") follows the
accounting policies set forth in its Annual Report on Form 10-K filed with
the Securities and Exchange Commission. Users of financial information
produced for interim periods are encouraged to refer to the footnotes
contained in the Annual Report when reviewing interim financial results.
2. The accompanying financial statements include the Company and its
wholly-owned subsidiaries: WestCo Oil Company ("WestCo"), formed in 1995;
VanCo Well Service, Inc. ("VanCo") , GulfWest Texas Company ("GWT") and
GulfWest Permian Company ("GWP") all formed in 1996. All material
intercompany transactions and balances are eliminated upon consolidation.
3. In management's opinion, the accompanying interim financial statements
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, the
results of operations, and the statements of cash flows of GulfWest Oil
Company for the interim periods.
4. Loss per share has been computed based upon the weighted average number of
common shares outstanding. Loss per share for the three months and nine
months ended September 30, 1997 was computed by adding the net loss for the
period plus preferred dividends divided by the weighted average shares
outstanding at September 30, 1997.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
GulfWest Oil Company ("GulfWest" or the "Company") is an independent oil
and gas company primarily engaged in the acquisition of producing oil and
gas properties with proved reserves which have the potential for increased
value through continued development and the application of enhanced
recovery technology. The Company's objective is to maximize production and
continue to increase reserves through relatively low-risk development
activities, such as workovers, recompletions, horizontal drilling from
existing wellbores, and infield drilling, efficient use of production
facilities and expansion of existing waterflood operations.
During the fourth quarter of 1996, the Company acquired in two separate
transactions ("Phase I" and "Phase II") oil properties in the Permian Basin
area of West Texas for a total purchase price of $10.65 million. The
Company's subsidiary, WestCo Oil Company ("WestCo") is the operator of the
acquired properties.
Results of Operations
Comparative results of operations for the periods indicated are discussed below.
Three-Month Period Ended September 30, 1997 compared to Three-Month Period
Ended September 30, 1996.
Revenues
Total revenues increased 291% to $1,329,583 for the third quarter of
1997 compared to $339,837 for the third quarter of 1996. Oil and gas
revenues increased by 225% to $921,891 for the period in 1997 compared to
$283,340 for the period in 1996 due to the acquisition of the additional
properties discussed above. Well servicing revenues of $319,147 for the
third quarter of 1997 were generated by the Company's subsidiary, VanCo
Well Service, Inc. ("VanCo") which commenced operations in late September
1996. Accordingly, there were no well servicing revenues generated for the
three-month period of 1996. Revenues from operating overhead and other
income in the third quarter of 1997 increased 57% to $88,545 from $56,497
in the third quarter of 1996 and included management fees, rentals and
saltwater disposal fees.
Costs and Expenses
Costs and expenses increased 195% to $1,587,241 in the third quarter
of 1997 compared to $537,795 in the third quarter of 1996. The increases in
lease operating expenses, depreciation and depletion and general and
administrative expenses were due to the acquisitions of the additional
properties discussed above and the associated expansion of operations.
Interest expense in the third quarter of 1997 increased 393% to
$281,550 from $57,108 in the third quarter of 1996 due to the additional
properties acquired and financed in the fourth quarter of 1996. Also
included is a non-cash expense of $17,500 for options issued to a
non-related third party who guaranteed a $2,750,000 revolving
line-of-credit.
8
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Nine-Month Period Ended September 30, 1997 compared to Nine-Month Period
Ended September 30, 1996.
Revenues
Total revenues increased 370% to $4,229,640 in the first nine months
of 1997 compared to $899,846 in the first nine months of 1996. Oil and gas
revenues increased by 313% to $3,132,514 for the period in 1997 compared to
$757,937 for the period in 1996 due to the acquisition of the additional
properties discussed above.
Well servicing revenues of $813,964 in the nine-month period of 1997
were generated by VanCo which commenced operations in late September 1996.
Accordingly, there were no well servicing revenues generated in the
nine-month period of 1996. Revenues from operating overhead and other
income in the nine- month period of 1997 increased 100% to $283,162 from
$141,909 in the nine-month period of 1996, due to the additional management
fees for the operation of the properties acquired in the fourth quarter of
1996.
Costs and Expenses
Costs and expenses increased 182% to $4,157,467 in the first nine
months in 1997 compared to $1,474,928 in the first nine months in 1996. The
increases in lease operating expenses, depreciation and depletion and
general and administrative expenses were due to the acquisitions of the
additional properties discussed above and the associated expansion of
operations. There were no well servicing expenses in the nine-month period
of 1996.
Interest expense in the first nine months of 1997 compared to the
first nine months of 1996 increased 353% to $781,558 from $172,671 due to
the additional properties acquired and financed in the fourth quarter of
1996. Also included is a non-cash expense of $37,500 for options issued to
a non-related third party who guaranteed a $2,750,000 revolving
line-of-credit.
Financial Condition and Capital Resources
During the fourth quarter of 1996, the Company acquired and assumed
operations for $10,654,000 in oil properties in West Texas. In connection
with these acquisitions, the Company issued senior secured notes payable
(the "Senior Debt") due October and December, 1999 in the original
principal amount of $7,400,000. The Company is currently negotiating with
banking institutions to refinance the outstanding balance of the Senior
Debt which was $6,645,000 at October 31, 1997. There can be no assurance
that this refinancing will be completed, and that if completed, on terms
favorable to the Company.
On January 7, 1997, the Company established a $2,000,000 revolving
line-of-credit with Southwest Bank of Texas, with part of the proceeds to
be used for payment of short-term notes incurred for acquisitions made
during the fourth quarter of 1996. The line-of-credit is guaranteed by an
unrelated third party in exchange for options to purchase 250,000 shares of
the Company's Common Stock at an exercise price of $2.88 per share. The
Company used the Black-Sholes option pricing model to estimate the fair
value of the options, resulting in a $40,000 non-cash interest expense
amortized over one year, with $10,000 recorded each quarter.
9
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On July 2, 1997, the Company's revolving line-of-credit was increased
to $2,750,000 with the additional funds to be used for acquisitions and
further enhancements of the Company's West Texas properties. In connection
with the increase in the line-of-credit, the guarantor received additional
options to purchase 100,000 shares of the Company's Common Stock at an
exercise price of $2.56 per share. The Company used the Black-Sholes option
pricing model to estimate the fair value of the options, resulting in a
$15,000 non-cash interest expense amortized over six months, with $7,500
recorded each quarter.
The Company is currently negotiating with a group of investors (the
"Investor Partners") regarding the formation of a drilling partnership to
fund the intangible drilling costs associated with the exploitation and
development of several of the Company's Proved Undeveloped Reserves. The
formation and terms of the drilling partnership are conditioned upon
several events the occurrence of which are unable to be predicted with
reasonable certainty.
To date, the Company has completed two separate acquisitions of oil
and gas properties in 1997, with a combined total of approximately 330 MBOE
of net Proved Reserves as of the effective date of each acquisition. (1)
Effective May 1, 1997, the Company purchased a 25% Working Interest in
certain oil and gas properties in Hardin County, Texas from an independent
oil company for a purchase price of $240,000. (2) Effective October 1,
1997, the Company purchased a 75% Working Interest in certain oil and gas
properties in Blaine County, Oklahoma from an independent oil company for a
purchase price of $190,000.
On April 2, 1997, the Company entered into a Purchase and Sale
Agreement to acquire oil and gas properties ("Phase III") for a purchase
price of $4,774,000, subject to acceptable financing, with a balance to be
paid in cash and through a net profits interest from oil and gas sales
under certain terms and conditions. Closing will occur upon the Company's
receipt of evidence of: (1) the properties meeting a certain production
quota, (2) satisfactory title to the properties, and (3) acceptable
financing.
Management does not anticipate closing any additional acquisitions in
1997; however, management does intend to pursue an aggressive acquisition
strategy during 1998 and continues to explore the possibilities of issuing
more Common and/or Preferred Stock as the market allows to fund such
acquisitions.
The matters discussed herein may contain "forward-looking" statements
that involve risks and uncertainties including, without limitation,
competitive factors in the marketplace.
10
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits -
Number Description
X2.1 Restructuring Agreement Regarding Madisonville Prospect, dated April
18, 1995.
X2.2 Unanimous Consent to First Amendment to Regulations of S.G.C.
Transmission, L.L.C., dated July 17, 1995.
X2.3 Security Agreement RE: Subsequently Acquired Interests, dated July 17,
1995.
^2.4 Purchase and Sale Agreement, with amendments, between Pharaoh Oil and
Gas, Inc, as Seller, and WestCo Producing Company, as Purchaser, dated
June 12, 1996.
^2.5 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.
^2.6 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.
^2.7 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.
+2.8 Purchase and Sale Agreement between Pharaoh Oil and Gas, Inc., Taylor
Link Operating Co. and Gary O. Bolen, Individually and d/b/a Badger
Oil Company (collectively, "Pharaoh"), as Seller, and WestCo Producing
Company, as Purchaser, dated November 6, 1996.
+2.9 Addendum of Purchase and Sale Agreement between Pharaoh and WestCo
Producing Company, dated December 5, 1996.
+2.10 Assignment of Purchase and Sale Agreement by and between Pharaoh,
GulfWest Permian Company and WestCo Producing Company, dated December
5, 1996.
+2.11 Form of Assignment and Bill of Sale by and between Pharaoh as Assignor
and GulfWest Permian Company as Assignee.
*3.1 Articles of Incorporation of the Registrant and Amendments thereto.
11
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*3.2 Bylaws of the Registrant.
^4.1 Statement of Resolution Establishing and Designating the Company's
Class AA Preferred Stock, filed with the Secretary of State of Texas
as an amendment to the Company's Articles of Incorporation on
September 23, 1996.
^4.2 Statement of Resolution Establishing and Designating the Company's
Class AAA Preferred Stock, filed with the Secretary of State of Texas
as an amendment to the Company's Articles of Incorporation on
September 23, 1996.
@4.3 Form of Note Purchase and Sale Agreement for the Company's 1995 Series
A 9.5% Subordinated Notes, undated.
@4.4 Subscription and Registration Rights Agreement for the Purchase of
Preferred Stock Between the Company and Eco2, Inc. dated March 13,
1996.
^4.5 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.
+4.6 Term note in the amount of $5,900,000.00 payable to the order of
Pharaoh Oil and Gas, Inc. and executed by GulfWest Permian Company,
dated December 5, 1996.
+4.7 Term note in the amount of $1,604,000.00 payable to the order of
Pharaoh Oil and Gas, Inc. and executed by GulfWest Permian Company,
dated December 5, 1996.
!10.1 GulfWest Oil Company 1994 Stock Option Plan, approved by the Board of
Directors on February 11, 1994.
!10.2 Form of Nonqualified Stock Option Agreement, dated February 11, 1994
between the Company and certain officers, directors and advisors of
the Company.
#10.3 Letter Agreement between the Company and Madisonville Project,
Limited, dated December 28, 1993 and amendment dated March 28, 1994.
#10.4 Investment Letter Subscription Agreement of the Madisonville Project,
Limited, executed by the Company on July 31, 1994.
#10.5 The Madisonville Project, Limited Agreement of Limited Partnership,
dated July 31, 1994.
!10.6 Warrant Agreement between the Company and Jackson & Walker, L.L.P.,
dated December 21, 1994.
@10.7 Stock Option Agreement between the Company and John E. Loehr, dated
May 11, 1995.
@10.8 Stock Option Agreement between the Company and Marshall A. Smith III,
dated May 11, 1995.
12
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10.9 Employment Agreement between the Company and Marshall A Smith III,
dated September 9, 1997, filed herewith.
10.10 Employment Agreement between the Company and Jim C. Bigham, dated
September 9, 1997, filed herewith.
10.11 Employment Agreement between the Company and Richard L. Creel, dated
September 9, 1997, filed herewith.
27 Article 5 Financial Data Schedule
_______________
+ Previously filed with the Company's Current Report on Form 8-K, dated
December 5, 1996, filed with the Commission on December 17, 1996.
^ Previously filed with the Company's Current Report on Form 8-K, dated
October 10, 1996, filed with the Commission on October 25, 1996.
@ Previously filed with the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, filed with the Commission on April 12, 1996.
X Previously filed with the Company's Current Report on Form 8-K, dated July
17, 1995, filed with the Commission on July 31, 1995.
! Previously filed with the Company's Annual Report on Form 10-K for the year
ended December 31, 1994, filed with the Commission on April 14, 1995.
# Previously filed with the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1994, filed with the Commission on August 14, 1994.
* Previously filed with the Company's Registration Statement (on Form S-1,
Reg. No. 33-53526), filed with the Commission on October 21, 1992.
(b) Form 8-K -
Current Report on Form 8-K/A-2 to amend the Company's Current Report on
Form 8-K dated October 10, 1996 as amended by the Company's Current Report
on Form 8-K/A dated December 30, 1996, filed with the Commission on July
15, 1997.
Current Report on Form 8-K/A-2 to amend the Company's Current Report on
Form 8-K dated December 5, 1996 as amended by the Company's Current Report
on Form 8-K/A dated February 19, 1997, filed with the Commission on July
15, 1997.
13
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GULFWEST OIL COMPANY
(Registrant)
Date: November 14, 1997 By: /s/ Jim C. Bigham
Jim C. Bigham
Executive Vice President
and Secretary
Date: November 14, 1997 By: /s/ John E. Loehr
John E. Loehr
Chief Financial Officer
14
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EXHIBIT 10.9
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 9th of September, 1997, by and between GulfWest
Oil Company, hereinafter called the Employer, and Marshall A. Smith III,
hereinafter called the Employee.
1. Employment. Employer hereby employs the Employee and the Employee hereby
accepts employment upon the terms and conditions hereinafter set forth.
2. Term. Subject to the provisions for termination as hereinafter provided,
the term of this Agreement shall be for a period of three (3) years, commencing
on the effective date of this Agreement between Employer and Employee.
3. Compensation. For all services rendered by the Employee under this
Agreement, the Employer shall pay the Employee a base salary of $125,000
increasing a minimum of 15% annually.
4. Medical Insurance. The Employee shall be entitled to coverage pursuant
to the terms and provisions of Employer's Medical/Hospitalization insurance
coverage and such other prerequisites as are generally available to executive
employees of the Company.
5. Duties. The Employee is engaged in an executive capacity with the
Employer and shall be assigned to supervise and direct the activities of the
Employer as well as to maintain the public relations and good will of the
Employer. The precise services of the Employee may be specified or changed from
time to time at the direction of the Board of Directors of Employer.
6. Extent of Services. The Employee shall devote as much of his time,
attention and energies to the business of the Employer as shall be necessary in
the reasonable determination of the Board of Directors of Employer, to carry out
the duties and responsibilities delegated to Employee by Employer, but Employee
shall not be precluded from engaging in other business activities so long as
such additional business activities do not, in the reasonable determination of
the Board of Directors of Employer, conflict with the interests of Employer,
whether or not such business activity is pursued for gain, profit or other
pecuniary advantages.
<PAGE>
7. Disclosure of Information. Employee will make no unauthorized disclosure
of any Employer's trade secrets or confidential information, the disclosure of
which would be detrimental to Employer. In the event of a breach or threatened
breach by the Employee of the provisions of this paragraph, the Employer shall
be entitled to an injunction restraining the Employee from disclosing such
information, in whole or in part, or from rendering any services to any person,
firm, corporation, association or other entity to whom such information, in
whole or in part, has been disclosed or is threatened to be disclosed. Nothing
herein shall be construed as prohibiting the Employer from pursuing any other
remedies available to the Employer for such breach or threatened breach,
including the recovery of damages from the Employee.
8. Expenses. The Employee is authorized to incur reasonable expenses for
promoting the business of the Employer, including expenses for automobile,
entertainment, travel and similar items. The Employer will reimburse the
Employee for all such expenses upon the presentation by the Employee, from time
to time, of an itemized account of such expenditures.
9. Vacations. The Employee shall be entitled each year to a vacation of
three (3) weeks during which time his compensation shall be paid in full.
10. Disability. If the Employee is unable to perform his services by reason
of illness or incapacity for a continuous period of more than three months, the
compensation otherwise payable to him shall cease during the continued period of
such illness or incapacity. The Employee's full compensation shall be reinstated
upon his return to employment and the discharge of his full duties hereunder.
Notwithstanding anything herein to the contrary, the Employer may terminated
this Agreement at any time after the Employee shall be absent from his
employment, for whatever cause, for a continuous period of more than three
months, and all obligation of the Employer hereunder shall cease upon any such
termination.
11. Death During Employment. If the Employee dies during the term of his
employment, the Employer shall pay to the estate of the Employee the
compensation which would otherwise be payable to the Employee up to the end of
the month in which the Employee's death occurs.
12. Restrictive Covenant. If the Employee is terminated with cause or
leaves the employ of the Employer for any reason, then for a period of one year
following such termination by the Employer, the Employee will not, within any
geographical area wherein Employer conducts its business, engage directly or
indirectly, own, manage, operate, control, be employed by, participate in, or
engage in any manner with the ownership, management, operation, or control of
any business entity whose primary activity includes the exploration for oil
and/or gas, or engaging in any other similar business which would in any way
compete with the business conducted by the Employer, at the time of the
termination of said Employee.
<PAGE>
13. Notices. Any notice of termination of the Agreement shall be sufficient
if in writing, and if sent by certified mail to his residence in the case of the
Employee, or to its principal offices in the case of the Employer.
14. Termination. The Employer shall have the right to terminate the
employment of Employee at any time for cause. As used herein, the term "Cause"
is defined to mean (a) willful action intended by the Employee to adversely
impact the Employer or (b) the conviction of Employee of a felony or any other
offense involving moral turpitude. Employee may terminate this agreement at any
time by the giving of ninety (90) days' prior written notice to Employer, in
which case Employer shall be obligated to pay Employee all compensation accrued
through the effective date of the termination of the employment, after which
neither party shall have any further rights or obligations except the obligation
of Employee described in paragraph 7 and 13 hereof.
15. Waiver of Breach. The waiver by the Employer of a breach of any
provision of this Agreement by the Employee shall not operate or be construed as
a waiver of any subsequent breach by the Employee.
16. Assignment. The rights and obligations of the Employee under this
Agreement shall not be assignable without the prior written consent of the
Employer, which consent may be withheld at the discretion of the Employer.
17. Attorney's Fees. If either party hereto is required to retain the
services of legal counsel to enforce its rights hereunder, the party prevailing
in any such proceeding shall be entitled to reimbursement of its reasonable
legal expenses incurred.
18. Additional Compensation to Employee in the Event of the Change of
Control of the Board of Directors of Employer. In the event of a change of
control, the Employee will have the option to continue as an employee of the
Company under the terms of the Agreement or receive a lump-sum cash severance
payment equal to 300% of his annual base salary for the year following the
change of control, it being understood by Employer that Employee would not
otherwise commit to provide his services to Employer upon the Terms and
conditions set forth herein. Such additional sums shall be paid to Employee
within fifteen (15) business days from the written demand therefor by Employee.
A "change of control" is defined as: (i) an acquisition (other than from
the Company) by an individual, entity or a group (excluding the Company, its
subsidiaries, a related employee benefit plan or a corporation the voting stock
of which is beneficially owned following such acquisition 50% or more by the
Company's stockholders in substantially the same proportions as their holdings
in the Company prior to such acquisition) of beneficial ownership
<PAGE>
of 20% or more of the Company's voting stock; (ii) a change in a majority of the
Board of Directors (excluding any persons approved by a vote of at least a
majority of the incumbent Board other than in connection with a proxy contest);
(iii) the approval by the stockholders of a reorganization, merger or
consolidation (other than a reorganization, merger or consolidation in which all
or substantially all of the stockholders of the Company receive 50% or more of
the voting stock of the surviving company); or (iv) a complete liquidation or
dissolution of the Company or the sale of all, or substantially all, of its
assets.
19. Entire Agreement. This instrument contains the entire agreement of the
parties. It may not be changed orally but only by an agreement in writing signed
by the party against whom enforcement or any waiver, change, modification or
discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement on the 9th day
of September, 1997.
EMPLOYER:
GULFWEST OIL COMPANY
By:/s/John E. Loehr
Name: John E. Loehr
Title: Chairman of the Board
EMPLOYEE:
/s/Marshall A. Smith III
<PAGE>
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 9th of September, 1997, by and between GulfWest
Oil Company, hereinafter called the Employer, and Jim C. Bigham, hereinafter
called the Employee.
1. Employment. Employer hereby employs the Employee and the Employee hereby
accepts employment upon the terms and conditions hereinafter set forth.
2. Term. Subject to the provisions for termination as hereinafter provided,
the term of this Agreement shall be for a period of three (3) years, commencing
on the effective date of this Agreement between Employer and Employee.
3. Compensation. For all services rendered by the Employee under this
Agreement, the Employer shall pay the Employee a base salary of $75,000
increasing a minimum of 15% annually.
4. Medical Insurance. The Employee shall be entitled to coverage pursuant
to the terms and provisions of Employer's Medical/Hospitalization insurance
coverage and such other prerequisites as are generally available to executive
employees of the Company.
5. Duties. The Employee is engaged in an executive capacity with the
Employer and shall be assigned to supervise and direct the activities of the
Employer as well as to maintain the public relations and good will of the
Employer. The precise services of the Employee may be specified or changed from
time to time at the direction of the Board of Directors of Employer.
6. Extent of Services. The Employee shall devote as much of his time,
attention and energies to the business of the Employer as shall be necessary in
the reasonable determination of the Board of Directors of Employer, to carry out
the duties and responsibilities delegated to Employee by Employer, but Employee
shall not be precluded from engaging in other business activities so long as
such additional business activities do not, in the reasonable determination of
the Board of Directors of Employer, conflict with the interests of Employer,
whether or not such business activity is pursued for gain, profit or other
pecuniary advantages.
<PAGE>
7. Disclosure of Information. Employee will make no unauthorized disclosure
of any Employer's trade secrets or confidential information, the disclosure of
which would be detrimental to Employer. In the event of a breach or threatened
breach by the Employee of the provisions of this paragraph, the Employer shall
be entitled to an injunction restraining the Employee from disclosing such
information, in whole or in part, or from rendering any services to any person,
firm, corporation, association or other entity to whom such information, in
whole or in part, has been disclosed or is threatened to be disclosed. Nothing
herein shall be construed as prohibiting the Employer from pursuing any other
remedies available to the Employer for such breach or threatened breach,
including the recovery of damages from the Employee.
8. Expenses. The Employee is authorized to incur reasonable expenses for
promoting the business of the Employer, including expenses for automobile,
entertainment, travel and similar items. The Employer will reimburse the
Employee for all such expenses upon the presentation by the Employee, from time
to time, of an itemized account of such expenditures.
9. Vacations. The Employee shall be entitled each year to a vacation of
three (3) weeks during which time his compensation shall be paid in full.
10. Disability. If the Employee is unable to perform his services by reason
of illness or incapacity for a continuous period of more than three months, the
compensation otherwise payable to him shall cease during the continued period of
such illness or incapacity. The Employee's full compensation shall be reinstated
upon his return to employment and the discharge of his full duties hereunder.
Notwithstanding anything herein to the contrary, the Employer may terminated
this Agreement at any time after the Employee shall be absent from his
employment, for whatever cause, for a continuous period of more than three
months, and all obligation of the Employer hereunder shall cease upon any such
termination.
11. Death During Employment. If the Employee dies during the term of his
employment, the Employer shall pay to the estate of the Employee the
compensation which would otherwise be payable to the Employee up to the end of
the month in which the Employee's death occurs.
12. Restrictive Covenant. If the Employee is terminated with cause or
leaves the employ of the Employer for any reason, then for a period of one year
following such termination by the Employer, the Employee will not, within any
geographical area wherein Employer conducts its business, engage directly or
indirectly, own, manage, operate, control, be employed by, participate in, or
engage in any manner with the ownership, management, operation, or control of
any business entity whose primary activity includes the exploration for oil
and/or gas, or engaging in any other similar business which would in any way
compete with the business conducted by the Employer, at the time of the
termination of said Employee.
<PAGE>
13. Notices. Any notice of termination of the Agreement shall be sufficient
if in writing, and if sent by certified mail to his residence in the case of the
Employee, or to its principal offices in the case of the Employer.
14. Termination. The Employer shall have the right to terminate the
employment of Employee at any time for cause. As used herein, the term "Cause"
is defined to mean (a) willful action intended by the Employee to adversely
impact the Employer or (b) the conviction of Employee of a felony or any other
offense involving moral turpitude. Employee may terminate this agreement at any
time by the giving of ninety (90) days' prior written notice to Employer, in
which case Employer shall be obligated to pay Employee all compensation accrued
through the effective date of the termination of the employment, after which
neither party shall have any further rights or obligations except the obligation
of Employee described in paragraph 7 and 13 hereof.
15. Waiver of Breach. The waiver by the Employer of a breach of any
provision of this Agreement by the Employee shall not operate or be construed as
a waiver of any subsequent breach by the Employee.
16. Assignment. The rights and obligations of the Employee under this
Agreement shall not be assignable without the prior written consent of the
Employer, which consent may be withheld at the discretion of the Employer.
17. Attorney's Fees. If either party hereto is required to retain the
services of legal counsel to enforce its rights hereunder, the party prevailing
in any such proceeding shall be entitled to reimbursement of its reasonable
legal expenses incurred.
18. Additional Compensation to Employee in the Event of the Change of
Control of the Board of Directors of Employer. In the event of a change of
control, the Employee will have the option to continue as an employee of the
Company under the terms of the Agreement or receive a lump-sum cash severance
payment equal to 300% of his annual base salary for the year following the
change of control, it being understood by Employer that Employee would not
otherwise commit to provide his services to Employer upon the Terms and
conditions set forth herein. Such additional sums shall be paid to Employee
within fifteen (15) business days from the written demand therefor by Employee.
A "change of control" is defined as: (i) an acquisition (other than from
the Company) by an individual, entity or a group (excluding the Company, its
subsidiaries, a related employee benefit plan or a corporation the voting stock
of which is beneficially owned following such acquisition 50% or more by the
Company's stockholders in substantially the same proportions as their holdings
in the Company prior to such acquisition) of beneficial ownership
<PAGE>
of 20% or more of the Company's voting stock; (ii) a change in a majority of the
Board of Directors (excluding any persons approved by a vote of at least a
majority of the incumbent Board other than in connection with a proxy contest);
(iii) the approval by the stockholders of a reorganization, merger or
consolidation (other than a reorganization, merger or consolidation in which all
or substantially all of the stockholders of the Company receive 50% or more of
the voting stock of the surviving company); or (iv) a complete liquidation or
dissolution of the Company or the sale of all, or substantially all, of its
assets.
19. Entire Agreement. This instrument contains the entire agreement of the
parties. It may not be changed orally but only by an agreement in writing signed
by the party against whom enforcement or any waiver, change, modification or
discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement on the 9th day
of September, 1997.
EMPLOYER:
GULFWEST OIL COMPANY
By:/s/Marshall A. Smith III
Name: Marshall A. Smith III
Title: President
EMPLOYEE:
/s/Jim C. Bigham
<PAGE>
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 9th of September, 1997, by and between GulfWest
Oil Company, hereinafter called the Employer, and Richard L. Creel, hereinafter
called the Employee.
1. Employment. Employer hereby employs the Employee and the Employee hereby
accepts employment upon the terms and conditions hereinafter set forth.
2. Term. Subject to the provisions for termination as hereinafter provided,
the term of this Agreement shall be for a period of three (3) years, commencing
on the effective date of this Agreement between Employer and Employee.
3. Compensation. For all services rendered by the Employee under this
Agreement, the Employer shall pay the Employee a base salary of $50,000
increasing a minimum of 15% annually.
4. Medical Insurance. The Employee shall be entitled to coverage pursuant
to the terms and provisions of Employer's Medical/Hospitalization insurance
coverage and such other prerequisites as are generally available to executive
employees of the Company.
5. Duties. The Employee is engaged in an executive capacity with the
Employer and shall be assigned to supervise and direct the activities of the
Employer as well as to maintain the public relations and good will of the
Employer. The precise services of the Employee may be specified or changed from
time to time at the direction of the Board of Directors of Employer.
6. Extent of Services. The Employee shall devote as much of his time,
attention and energies to the business of the Employer as shall be necessary in
the reasonable determination of the Board of Directors of Employer, to carry out
the duties and responsibilities delegated to Employee by Employer, but Employee
shall not be precluded from engaging in other business activities so long as
such additional business activities do not, in the reasonable determination of
the Board of Directors of Employer, conflict with the interests of Employer,
whether or not such business activity is pursued for gain, profit or other
pecuniary advantages.
<PAGE>
7. Disclosure of Information. Employee will make no unauthorized disclosure
of any Employer's trade secrets or confidential information, the disclosure of
which would be detrimental to Employer. In the event of a breach or threatened
breach by the Employee of the provisions of this paragraph, the Employer shall
be entitled to an injunction restraining the Employee from disclosing such
information, in whole or in part, or from rendering any services to any person,
firm, corporation, association or other entity to whom such information, in
whole or in part, has been disclosed or is threatened to be disclosed. Nothing
herein shall be construed as prohibiting the Employer from pursuing any other
remedies available to the Employer for such breach or threatened breach,
including the recovery of damages from the Employee.
8. Expenses. The Employee is authorized to incur reasonable expenses for
promoting the business of the Employer, including expenses for automobile,
entertainment, travel and similar items. The Employer will reimburse the
Employee for all such expenses upon the presentation by the Employee, from time
to time, of an itemized account of such expenditures.
9. Vacations. The Employee shall be entitled each year to a vacation of
three (3) weeks during which time his compensation shall be paid in full.
10. Disability. If the Employee is unable to perform his services by reason
of illness or incapacity for a continuous period of more than three months, the
compensation otherwise payable to him shall cease during the continued period of
such illness or incapacity. The Employee's full compensation shall be reinstated
upon his return to employment and the discharge of his full duties hereunder.
Notwithstanding anything herein to the contrary, the Employer may terminated
this Agreement at any time after the Employee shall be absent from his
employment, for whatever cause, for a continuous period of more than three
months, and all obligation of the Employer hereunder shall cease upon any such
termination.
11. Death During Employment. If the Employee dies during the term of his
employment, the Employer shall pay to the estate of the Employee the
compensation which would otherwise be payable to the Employee up to the end of
the month in which the Employee's death occurs.
12. Restrictive Covenant. If the Employee is terminated with cause or
leaves the employ of the Employer for any reason, then for a period of one year
following such termination by the Employer, the Employee will not, within any
geographical area wherein Employer conducts its business, engage directly or
indirectly, own, manage, operate, control, be employed by, participate in, or
engage in any manner with the ownership, management, operation, or control of
any business entity whose primary activity includes the exploration for oil
and/or gas, or engaging in any other similar business which would in any way
compete with the business conducted by the Employer, at the time of the
termination of said Employee.
13. Notices. Any notice of termination of the Agreement shall be sufficient
if in writing, and if sent by certified mail to his residence in the case of the
Employee, or to its principal offices in the case of the Employer.
14. Termination. The Employer shall have the right to terminate the
employment of Employee at any time for cause. As used herein, the term "Cause"
is defined to mean (a) willful action intended by the Employee to adversely
impact the Employer or (b) the conviction of Employee of a felony or any other
offense involving moral turpitude. Employee may terminate this agreement at any
time by the giving of ninety (90) days' prior written notice to Employer, in
which case Employer shall be obligated to pay Employee all compensation accrued
through the effective date of the termination of the employment, after which
neither party shall have any further rights or obligations except the obligation
of Employee described in paragraph 7 and 13 hereof.
15. Waiver of Breach. The waiver by the Employer of a breach of any
provision of this Agreement by the Employee shall not operate or be construed as
a waiver of any subsequent breach by the Employee.
16. Assignment. The rights and obligations of the Employee under this
Agreement shall not be assignable without the prior written consent of the
Employer, which consent may be withheld at the discretion of the Employer.
17. Attorney's Fees. If either party hereto is required to retain the
services of legal counsel to enforce its rights hereunder, the party prevailing
in any such proceeding shall be entitled to reimbursement of its reasonable
legal expenses incurred.
18. Additional Compensation to Employee in the Event of the Change of
Control of the Board of Directors of Employer. In the event of a change of
control, the Employee will have the option to continue as an employee of the
Company under the terms of the Agreement or receive a lump-sum cash severance
payment equal to 300% of his annual base salary for the year following the
change of control, it being understood by Employer that Employee would not
otherwise commit to provide his services to Employer upon the Terms and
conditions set forth herein. Such additional sums shall be paid to Employee
within fifteen (15) business days from the written demand therefor by Employee.
A "change of control" is defined as: (i) an acquisition (other than from
the Company) by an individual, entity or a group (excluding the Company, its
subsidiaries, a related employee benefit plan or a corporation the voting stock
of which is beneficially owned following such acquisition 50% or more by the
Company's stockholders in substantially the same proportions as their holdings
in the Company prior to such acquisition) of beneficial ownership
<PAGE>
of 20% or more of the Company's voting stock; (ii) a change in a majority of the
Board of Directors (excluding any persons approved by a vote of at least a
majority of the incumbent Board other than in connection with a proxy contest);
(iii) the approval by the stockholders of a reorganization, merger or
consolidation (other than a reorganization, merger or consolidation in which all
or substantially all of the stockholders of the Company receive 50% or more of
the voting stock of the surviving company); or (iv) a complete liquidation or
dissolution of the Company or the sale of all, or substantially all, of its
assets.
19. Entire Agreement. This instrument contains the entire agreement of the
parties. It may not be changed orally but only by an agreement in writing signed
by the party against whom enforcement or any waiver, change, modification or
discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement on the 9th day
of September, 1997.
EMPLOYER:
GULFWEST OIL COMPANY
By:/s/Marshall A. Smith III
Name: Marshall A. Smith III
Title: President
EMPLOYEE:
/s/Richard L. Creel
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GULFWEST OIL
COMPANY'S QUARTERLY REPORT FILED ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER
30,1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000813779
<NAME> 0
<MULTIPLIER> 1
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-1-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 100,764
<SECURITIES> 0
<RECEIVABLES> 688,669
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 970,312
<PP&E> 17,846,630
<DEPRECIATION> 2,136,293
<TOTAL-ASSETS> 16,706,815
<CURRENT-LIABILITIES> 5,334,774
<BONDS> 0
0
54
<COMMON> 1,753
<OTHER-SE> 3,194,758
<TOTAL-LIABILITY-AND-EQUITY> 16,706,815
<SALES> 3,132,514
<TOTAL-REVENUES> 4,229,640
<CGS> 0
<TOTAL-COSTS> 4,157,467
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (781,558)
<INCOME-PRETAX> (682,295)
<INCOME-TAX> 0
<INCOME-CONTINUING> (682,295)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (682,295)
<EPS-PRIMARY> (.48)
<EPS-DILUTED> (.48)
</TABLE>
