SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 4, 1996
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S.O.I. INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Commission file number 1-12572
Delaware 59-2158586
(State of Incorporation) (IRS Employer Identification No.)
16910 Dallas Parkway, Suite 100, Dallas, Texas 75248
(Address of principal executive offices) (Zip Code)
(972) 248-1922
(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets.
On November 4, 1996, Doblique Energy Corporation ("Doblique"), a wholly-owned
subsidiary of S.O.I. Industries, Inc. (the "Registrant"), closed an acquisition
of domestic producing oil and gas properties for a total purchase price of
$1,865,689 from Magnum Hunter Production, Inc. The purchase price was comprised
of $100,000 payable on November 20, 1996, a $1,615,689 promissory note and
120,000 shares of the Registrant's newly-issued shares of its Series A
convertible preferred stock (convertible into 120,000 shares of the Registrant's
common stock). The promissory note is secured by the acquired properties with a
term of 36 months, bearing interest at 12% per annum. The value assigned to the
Series A convertible preferred stock was based on the thirty day average closing
price of the Registrant's common stock, as traded on the American Stock
Exchange, discounted by 25%. The acquisition had an effective date of October 1,
1996.
The properties are concentrated in Oklahoma, Texas and New Mexico and include
ownership interest in 53 wells. The properties contain proved reserves estimated
by a third party petroleum engineer of 214,381 barrels of oil and 1,318,164 mcf
of natural gas. The present value of the properties, discounted at 10% (using
constant prices and costs) was approximately $2.2 million as of the effective
date of October 1, 1996.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired. Required Financial
Statements for the acquired business described in Item 2 are
unavailable as of the date of this filing, but will be filed within 60
days.
(b) Pro forma financial information. Required pro forma financial
information are unavailable as of the date of this filing, but will be
filed within 60 days.
(c) Exhibits.
2.1 Asset purchase and sale agreement between Doblique Energy
Corporation, S.O.I. Industries, Inc. and Magnum Hunter
Production, Inc., dated November 4, 1996.
10.1 Term promissory note between Doblique Energy Corporation and
Magnum Hunter Production, Inc., dated November 4, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: November 19, 1996 S.O.I. INDUSTRIES, INC.
/s/ Kevin B. Halter
By: _________________________________
Kevin B. Halter, President
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Exhibit 2.1
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ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (this "Agreement"), dated as of
this 4th day of November, 1996, is executed by and among Magnum Hunter
Production, Inc. or its assigns, hereinafter collectively referred to as
"Seller", and Doblique Energy Corporation, hereinafter referred to as "Buyer",
and S.O.I. Industries, Inc., hereinafter referred to as Buyer's "Parent"
Company.
ARTICLE I
DEFINITION OF TERMS
As used herein, the terms specified below shall have the following
meanings:
SECTION 1.1: Properties
The term "Properties" shall include each kind or character of right,
title, claim or interest which the Seller, has in the oil, gas and/or mineral
leases as more particularly described in Exhibit "A", which is attached hereto
and incorporated herein, as of the Closing date, including all mineral interests
and royalty interests owned by Seller, all ratifications, extensions and
renewals thereof, any unitization, farmout or forced pooling agreements
associated therewith, the interest in or units created by such agreements, and
all easements, permits, servitudes, rights-of-way, licenses, operating
agreements, and oil and/or gas purchase/sale agreements directly related
thereto. Notwithstanding the above, the term Properties shall not, however,
include the following properties, rights, interest or assets:
(a) Any right, title or interest of Seller in or to any accounts
receivable, money held in escrow or suspense accounts, or future receipts
attributable to Seller's interest in the oil and gas and other hydrocarbons
produces and sold from the Properties before the Effective Date.
(b) All claims and causes of action of Seller against others (except
claims or causes of action involving title to any of the Properties) arising
from acts or transactions affecting or relating to any of the Properties
occurring prior to the Effective Date including, but not limited to, rights and
claims against purchasers of production, rights to rate entitlements arising
from regulatory proceedings and other monetary claims or rights against others.
SECTION 1.2: Personalty
The term "Personalty" shall include the following rights and interests:
(a) All right, title or interest which Seller has in or to any personal
property, and improvements located on the Properties described on Exhibit "A",
which are attached to and made a part hereof and incorporated herein, as of the
Closing Date (including, but not limited to, wells, tanks, boilers, fixtures,
inventories, machinery and other equipment) for the exploration, development,
operation and maintenance of the Properties and related equipment and inventory.
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SECTION 1.3: Existing Wells
The term "Existing Wells" shall mean the oil, gas and/or mineral wells
located on the Properties which are currently producing or non-producing and
which are more particularly described in Exhibit "A", which is attached hereto
and incorporated herein.
ARTICLE II
AGREEMENT TO PURCHASE AND SALE
SECTION 2.1: Agreement
On the terms and subject to the conditions herein set forth, Buyer
agrees to purchase Seller's right, title, and interest in the Properties,
Existing Wells and Personalty from Seller and Seller agrees to sell, transfer,
assign and convey to Buyer, Seller's right, title and interest in the
Properties, Existing Wells and Personalty as further described on Exhibit "A".
SECTION 2.2: Purchase Price
The purchase price agreed to be paid by Buyer for Seller's right, title
and interest in the Properties, Existing Wells and Personalty is One Million
Eight Hundred Fifty Thousand Dollars and No Cents ($1,850,000) (the "Base
Purchase Price"), subject to any applicable purchase price adjustment as
provided for herein. The total consideration will be structured as follows:
(a) One Hundred Fifty Thousand Dollars and No Cents ($150,000.00) in
fully paid and nonassessable shares of S.O.I. Industries, Inc.
restricted convertible preferred stock, the terms of which are
attached as outlined on Exhibit "D," free and clear of all liens
and encumbrances, the value of which is based upon the thirty
(30) day average closing price prior to October 15, 1996, as
traded on the American Stock Exchange, discounted by twenty-five
percent (25%), due at the time of Closing; and
(b) One Million Seven Hundred Fifteen Thousand Six Hundred
Eighty-Nine Dollars and No Cents ($1,715,689.00) Promissory Note
secured by i) the Properties described on Exhibit "A" and ii)
750,000 shares of common stock, $0.0002 par value of Digital
Communications Technology Corporation, free and clear of all
liens and encumbrances. The Promissory Note will bear interest at
twelve percent (12%) per annum and have a term of thirty-six (36)
months. A One Hundred Thousand Dollar and No Cents ($100,000.00)
payment will be due November 20, 1996. Thereafter, interest and
principal will be due and payable monthly beginning December 1,
1996 from one hundred percent (100%) of the net oil and gas
income, after lease operating expenses and monthly management
fees due to Gruy Petroleum Management Co. The Promissory Note
will have the unconditional corporate guaranty of S.O.I.
Industries, Inc.
The above allocation represents the fair market value as determined and
agreed to by the parties. All assets sold under this Agreement are Class III
assets as defined under IRS Treas. Reg. 1.060 - 1T. The parties agree that the
above allocation shall be reported on Form 8594 or similar form to be filed by
Buyer or Seller with the Internal Revenue Service and any other taxing authority
requiring allocation of the purchase price and said allocation shall be
consistent with this
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Section 2.2. In the event any taxing authority questions the above allocations,
the parties agree to make any modifications that may be required to this
allocation after consultation with one another and mutual agreement to the same.
SECTION 2.3: Effective Time, Closing Date and Closing
The "Effective Time" of the sale shall be October 1, 1996, at 7:00 a.m.
CDT. Buyer's purchase of Seller's interest pursuant to this Agreement shall take
place on or before 2 p.m. Central Daylight Time on November 4, 1996, which date
and time shall herein be referred to as the "Closing Date". The place of
"Closing" shall be at the offices of Buyer, located at 600 East Las Colinas
Blvd., Suite 1200, Irving, Texas 75039.
SECTION 2.4: Base Purchase Price Adjustment
The Base Purchase Price shall be increased by:
(a) All expenditures paid by Seller in connection with the operation,
maintenance or repair of the Properties from the Effective Time to
Closing (as herein defined);
(b) All prepaid expenses paid by Seller attributable to the Properties
from the Effective Time to Closing, including, but not limited to, any
delay rentals or shut-in royalties;
(c) All underproduced gas imbalances as of the Effective Date as reflected
on Exhibit "B" attached hereto, the value of such gas production
imbalance adjustment shall be calculated by multiplying the net volume
of gas in the account by $2.42 per MCF (thousand cubic feet before Btu
adjustment) which Seller represents is the most current price received
for the Properties where gas balancing is an issue;
(d) Any other amount agreed upon in writing by Buyer and Seller;
and shall be reduced by:
(e) The ownership interest proportioned to the Base Purchase Price for
which title cannot be delivered on those Properties outlined on
Exhibit "A", but in on event, shall such amount exceed 10% of the Base
Purchase Price;
(f) All proceeds received by Seller from sales of production attributable
to the Properties that is produced from the Effective Time to Closing
(net of burdens, production and severance taxes deducted therefrom and
paid by or on behalf of Seller);
(g) All other proceeds received by Seller which are attributable to the
Properties from the Effective Time to Closing;
(h) All overproduced gas imbalances as of the Effective Date as reflected
on Exhibit "B" attached hereto, the value of such gas production
imbalance adjustment shall be calculated by multiplying the net volume
of gas in the account by $2.42 per MCF (thousand cubic feet before Btu
adjustment) which Seller represents is the most current price received
for the Properties where gas balancing is an issue;
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(i) Any other amount agreed upon in writing by Buyer and Seller.
ARTICLE III
REPRESENTATION OF BUYER
CONCERNING PURCHASE OF PROPERTY
SECTION 3.1: Buyer's Representations
(a) Buyer represents to Seller that Buyer has available to it oil and gas
expertise or has in Buyer's employ qualified Geologists, Engineers,
Professional Counsel or industry knowledgeable personnel to
competently evaluate reserves of oil and gas remaining beneath the
Properties represented by this Agreement, and, based upon Buyer's
appraisal of this property, Buyer has ascertained a minimum market
value of $1,850,000.00 for Seller's ownership interest in the
Properties and Personalty and Existing Wells, as of the Effective
Time.
(b) Buyer acknowledges Seller has made no representations, either
expressed or implied, as to the remaining oil and gas reserves
recoverable beneath the Properties represented in this Agreement which
has not been subsequently reviewed by Buyer and Buyer's independent
reservoir engineer(s).
(c) Buyer acknowledges that Seller has made no representations, either
expressed or implied, in regard to the value of the Properties,
Personalty and Existing Wells.
(d) Buyer is incorporated in the State of Texas.
ARTICLE IV
CLOSING
SECTION 4.1: Actions to be Taken at Closing
At the time of Closing, the following events and actions shall occur:
(a) Seller shall execute and deliver to Buyer Assignments, Bills of Sale
and Conveyances covering Seller's interest in the Personalty and Oil
and Gas Leases, including Seller's ownership interest in the Existing
Wells and Properties described in the attached Exhibit "A", subject to
any depth limitation of record.
Said Assignments, Bills of Sale and Conveyances shall be without
warranties of merchantability or fitness for a particular purpose,
either express or implied except for those in Section 5.1(c). However,
said Assignments, Bills of Sale and Conveyances of Oil and Gas Leases
shall be with special warranty of title as against claims asserted by,
through or under Seller, but not otherwise, and shall also include a
warranty against mortgages, liens, judgments, security interests, and
encumbrances of any kind created by, through or under Seller, but not
otherwise. Said Assignments, Bills of Sale and Conveyances of Oil and
Gas Leases shall be made specifically subject to all of the terms and
provisions of this Agreement, all of which shall survive the Closing.
(b) Buyer shall make payment to Seller for the full purchase price by
executing a promissory note and providing a corporate guarantee from
Buyer's parent company, S.O.I. Industries, Inc., and causing Buyer's
parent company, S.O.I. Industries, Inc., to issue Seller a stock
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certificate representing one hundred twenty thousand (120,000)
aggregate shares of fully paid and nonassessable securities of S.O.I.
Industries, Inc. Convertible Preferred Stock (restricted), free and
clear of all liens and encumbrances. The number of shares of such
stock will be based upon the following:
The Convertible Preferred Stock consideration will be calculated
based upon the average of the closing price of S.O.I. Industries,
Inc. common stock thirty (30) business (trading) days prior to
October 15, 1996 as traded on the American Stock, discounted by
twenty-five percent (25%).
(c) Seller shall maintain on behalf of Buyer all well files. Seller shall
deliver to Buyer completed and executed pertinent forms on the wells
necessary for the change of ownership. Buyer and Seller shall each
deliver to the other such other documents, certificates, opinions and
materials as are required under the provisions of this Agreement,
including the accounting and funds in payment thereof as provided for
in Sections 2.4 herein.
(d) The Seller agrees to pay all sales taxes incurred in connection with
the conveyances and assignments made pursuant to this Agreement, if
applicable.
SECTION 4.2: Conditions to Obligations of Buyer
The obligations of Buyer pursuant to this Agreement are subject to the
conditions that on the Closing Date:
(a) All terms, covenants and conditions and warranties made by the Seller
in this Agreement shall be true and correct as of the Closing Date.
(b) No action or proceeding by or before any court or other governmental
body shall have been instituted or threatened to restrain, prohibit or
invalidate the transactions contemplated hereby or which might affect
the right of Buyer to own, control and enjoy the full benefit of the
Personalty, Existing Wells and the Properties after the Closing Date.
(c) Due Diligence Investigation. Buyer shall have completed its due
diligence investigation of the Properties on or before November 1,
1996 (the "Due Diligence Period"), and the results of such
investigation shall be satisfactory to Buyer in all respects, as
determined in Buyer's sole discretion. Buyer shall notify Seller in
writing of Buyer's determination of whether or not the due diligence
investigation was satisfactory to Buyer.
SECTION 4.3: Termination Events
This Agreement may, by written notice given at or prior to the Closing
in the manner hereinafter provided, be terminated:
(a) by either Buyer or Seller if a material default or breach shall be
made by the other party hereto with respect to the due and timely
performance of any of its covenants and agreements contained herein,
or with respect to the due compliance with any of its representations,
warranties or covenants, and such default cannot be cured and has not
been waived;
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(b) by Buyer if all of the conditions set forth in Section 4.2 shall not
have been satisfied on or before the Closing Date, other than through
failure of Buyer to fully comply with its obligations hereunder, and
shall not have been waived by Buyer on or before such date;
(c) by mutual written consent of Buyer and Seller; or
(d) by either Buyer or Seller if the Closing shall not have occurred,
other than through failure of any such party to fulfill its
obligations hereunder, on or before November 4, 1996 or such later
date as may be mutually agreed upon by the parties.
Each party's right of termination hereunder is in addition to any other
rights it may have hereunder or otherwise and the exercise of a right of
termination shall not be an election of remedies.
SECTION 4.4: Effect of Termination
In the event this Agreement is terminated pursuant to Section 4.3, all
further obligations of the parties hereunder shall terminate; provided that, if
this Agreement is so terminated by a party because one or more of the conditions
to such party's obligations hereunder is not satisfied as a result of the other
party's willful failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies for breach of contract or
otherwise, including, without limitation, damages relating thereto, shall also
survive such termination unimpaired.
SECTION V
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 5.1: Representations and Warranties of Seller
Seller hereby represents and warrants to Buyer, that:
(a) This Agreement constitutes the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms.
(b) Seller will permit Buyer full access at all reasonable times on or
before November 4, 1996, or such other extension date as may be
mutually agreed upon in writing by Buyer and Seller.
(c) Seller has good and defensible title to the Real Property Interests
and tangible and intangible personal property owned by it that
comprise the Properties, free and clear of Liens, other than liens and
defects of title which do not, individually or in the aggregate,
materially detract from the value of the Assets or the use or
enjoyment thereof in the ordinary course of business.
The equipment associated with the operation of the Properties (i) is
in good operating condition, order and repair, subject to ordinary
wear and tear, and has been maintained in accordance with standard
industry practice; (ii) is capable of being used for the purpose for
which it is intended without present need for repair or replacement
except in the ordinary course of the business; (iii) conforms in all
material respects with all applicable legal requirements known to
Seller; and (iv) in the aggregate provides the capacity to enable
Seller to engage in commercial
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operation on a continuous basis (subject to normal maintenance and
repair in the ordinary course). All of the equipment constituting the
operating of the Properties is adequate and sufficient for all
operations conducted by Seller in substantially the same manner as
conducted prior to the Closing.
All real and tangible personal properties held by Seller under lease
are held under valid and binding lease agreements that are in full
force and effect. To Seller's knowledge, Seller is not in default, and
no notice of alleged default has been received by Seller, under any
such lease and no lessor is in default or alleged to be in default
thereunder. None of the rights of Seller under any lease will be
impaired by the consummation of the transactions contemplated by this
Agreement.
(d) To Seller's knowledge, all easements, rights-of-way, permits, crossing
agreements and surface rights included with the Properties are in full
force and effect and are valid and subsisting and freely assignable,
and all rentals and other payments due thereunder have been properly
and timely paid and all conditions necessary to keep them in force
have been duly performed.
(e) Environmental Matters
(i) To Sellers' knowledge, no written notice, notification, demand,
request for information, citation, summons, complaint or order has
been received, no complaint has been filed, no penalty has been
assessed and no investigation or review is pending or has been
threatened by a governmental entity or other party with respect to any
(A) alleged violation by Seller of any Environmental Laws, (B) alleged
failure by Seller to have any environmental permit, certificate,
license, approval, registration or authorization required in
connection with the conduct of the Business or (C) Regulated Activity
conducted by Seller.
(ii) To Seller's knowledge, Seller has no material Environmental
Liabilities and there has been no release of Hazardous Substances into
the environment by Seller or with respect to any of its properties
which has had, or would reasonably be expected to have, a material
adverse effect on Seller.
(iii) During the period of time Seller has owned the Properties,
Seller is not aware of the existence of any mercury meters on or
attached to any part of the Properties.
(iv) For the purposes of this Agreement, the following terms have the
following meanings:
"Environmental Laws" shall mean all Federal, state and local
statutes, laws, regulations, ordinances, rules, judgements,
orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements, and governmental
restrictions applicable to the Properties now in effect and
relating to human health, the environment or to emissions,
discharges or releases of pollutants, containments, Hazardous
Substances or wastes into the environment or otherwise relating
to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants,
contaminants, Hazardous Substances or wastes or the clean-up or
other remediation thereof.
"Environmental Liabilities" shall mean all liabilities, whether
vested or unvested, contingent or fixed, actual or potential,
which (i) arise under or relate to Environmental Laws and (ii)
relate to actions occurring or conditions existing on or prior to
the Effective Time.
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"Hazardous Substances" shall mean any toxic, radioactive, caustic
or otherwise hazardous substance, including glycol and petroleum,
their derivatives, by-products and other hydrocarbons, or any
substance having any constituent elements displaying any of the
foregoing characteristics.
"Regulated Activity" shall mean any generation, treatment,
storage, recycling, transportation, disposal or release of any
Hazardous Substances.
(f) Licenses and Permits. Seller possesses all the licenses, permits
authorizations, approvals, registrations and other rights of every
kind and character ("Permits"), copies of all which have been
delivered to Buyer. Such Permits constitute all the Permits necessary
under law or otherwise for Seller to construct, own, operate, maintain
and use the Assets in the manner in which they are now being
constructed, operated, maintained and used. Each of such Permits and
Seller's rights with respect thereto (i) is valid and substituting, in
full force and effect, and enforceable by Seller, and (ii) following
consummation of the transactions contemplated hereby, will continue to
be valid and subsisting in full force and effect, and enforceable by
Buyer without any consent or approval of any court or any federal,
state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign or third party;
or in lieu of such existing Permits, replacement or substitute Permits
will be available to or obtainable by Buyer at little or no cost in
the ordinary course after application by Buyer thereof. To Seller's
knowledge, Seller is in compliance in all material respects with the
terms of such Permits. None of such Permits have been, or to the
knowledge of Seller, is threatened to be, revoked, canceled, suspended
or modified.
(g) Disclosure. No representation, warranty or covenant by Seller
contained in this Agreement or the Exhibits or Schedules hereto, or
any agreement, document or instrument to be delivered at the Closing
by Seller, contains or shall contain any untrue statement of a
material fact or omits or shall omit to state therein a material fact
(other than those facts generally recognized to be industry risks
normally associated with the Properties) necessary in order to make
the statements therein, in light of the circumstances under which they
are made, not misleading. Copies of all documents furnished to Buyer
in connection with this Agreement or pursuant hereto are true and
complete in all material respects. Seller knows of no facts (other
than those facts generally recognized to be industry risks normally
associated with the Properties) related to the Properties which have
not been disclosed in writing to Buyer which materially and adversely
affect or will materially and adversely affect such Properties or the
ability Seller to perform this Agreement.
ARTICLE VI
AGREEMENTS AND COVENANTS OF SELLER
SECTION 6.1: Affirmative Covenants
During the period from the Effective Time to the Closing Date, Seller has:
(a) Carried on the business with respect to the Personalty, Properties and
the Existing Wells in a prudent and diligent manner in accordance with
prevailing industry standards;
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(b) Promptly notified Buyer of the receipt of any notice or claim, written
or oral, of default, breach by Seller, or of any termination or
cancellation of any material contract, lease or other agreements
relating to the Properties, Personalty or Existing Wells;
(c) Promptly notified Buyer of the loss of or damage to any of the
Personalty or Existing Wells;
(d) Given prompt notice to Buyer of any claims or litigation, threatened
or instituted or any other material event or occurrence involving or
affecting any of the Properties, Personalty or Existing Wells; and
(e) Reasonably cooperated with the Buyer in endeavoring to obtain
additional title and other information with respect to the Properties,
Personalty or Existing Wells.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 7.1: Representations and Warranties of Buyer
Buyer represents and warrants to Seller that:
(a) Buyer is Doblique Energy Corporation.
(b) This Agreement constitutes the valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.
(c) Buyer is acquiring Seller's interest in the Personalty, Properties and
the Existing Wells as outlined on Exhibit "A" and represents that it
has had the ability to perform an independent examination and
inspection of the accounting, land, legal and well files of Seller.
(d) The execution and delivery of this Agreement will not violate any
provision of or constitute a default under any statute, or any order,
rule or regulation of any court or governmental agency into which
Buyer is subject.
(e) Upon cessation of production, Buyer will properly plug and abandon all
producing and/or non-producing wells upon said Properties which wells
now exist or which may exist in the future, in accordance with state
and federal regulatory requirements.
(f) Buyer has had the opportunity to inspect the oil and gas properties
outlined on Exhibit "A" and has had the opportunity to satisfy itself
as to the current operating condition of the Properties.
(g) Buyer will promptly file after Closing with the American Stock
Exchange a "Supplemental Listing Application" listing the common
shares underlying the Convertible Preferred Stock issued to the Seller
hereunder, and shall use all prudent and reasonable efforts to cause
such Supplemental Listing Application to be approved by the American
Stock Exchange.
(h) Buyer is qualified to do business in Texas.
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ARTICLE VIII
Section 8.1 Securities Laws and Compliance
The parties will arrange for and effect all necessary procedures under
the requirements of applicable federal and state securities laws, including
those of the Securities and Exchange Commission and the state securities boards
promulgated thereunder to the extent that this Agreement is properly consummated
to comply with all federal and state securities registration requirements, or to
take full advantage of any appropriate exemptions therefrom, and otherwise to be
in accord with all federal and state securities law anti-fraud restrictions.
A. KNOWLEDGE RESPECTING ACQUIRING PROCEDURES. Buyer and Seller each
represent, respectively, and acknowledge that:
1. In the case of Seller:
(a) Seller knows, or has had the opportunity to acquire, all
information concerning the business, affairs, financial
condition and prospects of S.O.I. Industries, Inc. which it
deems relevant to make a fully informed decision regarding
the consummation of the transaction contemplated hereby, and
(b) Seller has been supplied with, or had the opportunity to
review, copies of all Forms 10-KSB, 10-QSB and 8-K, and all
proxy statements filed by S.O.I. Industries, Inc. within the
two year period immediately preceding the date of this
Agreement. Without limiting the foregoing, Seller
understands and acknowledges that neither S.O.I. Industries,
Inc. nor anyone acting on its behalf has made any
representations or warranties other than those contained
herein regarding S.O.I. Industries, Inc. or the future
conduct of S.O.I. Industries, Inc.'s business or of its
subsidiary's business, Doblique Energy Corporation and
Seller has not relied upon any representations or warranties
other than those contained herein.
2. In the case of Buyer:
(a) Buyer has had the opportunity to acquire all information
concerning the Properties which it deems relevant to make a
fully informed decision regarding the consummation of the
transaction contemplated hereby.
B. STATUS OF SHARES TO BE ISSUED. Seller agrees, acknowledges, and
confirms that it has been advised and understands as follows:
1. It is acquiring the securities (shares of S.O.I. Industries,
Inc.) without a view to any distribution or resale, which may be
made without violating the registration provisions of the
Securities Act of 1933, as amended (the "1933 Act") or applicable
state law. The shares of S.O.I. Industries, Inc. are "restricted
securities" within the meaning of Rule 144 under the 1933 Act and
have not been registered under the 1933 Act or the laws of any
state:
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2. There shall be endorsed on the certificates evidencing the shares
of S.O.I. Industries, Inc. stock delivered at closing legends
substantially similar to the following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR THE
SECURITIES LAWS OF ANY STATE OR JURISDICTION. THE SHARES MAY NOT
BE SOLD, TRANSFERRED, PLEDGED OR DISTRIBUTED IN THE ABSENCE OF:
(1) AN EFFECTIVE REGISTRATION STATEMENT REGISTERING THE SHARES
UNDER THE SECURITIES ACT OF 1933, ANY APPLICABLE STATE LAW, OR IN
LIEU THEREOF, OR (2) AN OPINION OF COUNSEL, WHICH OPINION IS
SATISFACTORY TO THE ISSUER OF THE SHARES, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACTS".
"A FULL STATEMENT OF ALL THE DESIGNATIONS, PREFERENCES,
LIMITATIONS, AND RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OF
SHARES WHICH THE CORPORATION IS AUTHORIZED TO ISSUE IS SET FORTH
IN THE ARTICLES OF INCORPORATION AND THE AMENDMENTS THERETO ON
FILE IN THE OFFICE OF THE SECRETARY OF STATE AND THE CORPORATION
WILL FURNISH A COPY OF SAID STATEMENT TO THE RECORD HOLDER OF
THIS CERTIFICATE WITHOUT CHARGE ON WRITTEN REQUEST TO THE
CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS."
3. Except under certain limited circumstances, the restrictions on
the transfer of the securities will also apply to all the shares
of capital stock or other securities issued to or otherwise
acquired with respect to such shares including, without
limitation, shares and securities issued or acquired as a result
of any stock dividend, stock split or exchange or any
distribution of shares or securities pursuant to any corporate
reorganization, reclassification or similar event.
C. INDEMNIFICATION BY PARTIES. If at any time in the future Seller should
offer, sell, assign, pledge, hypothecate, transfer, or otherwise
dispose of any of securities without registration under the 1933 Act,
as amended, or such similar federal statute as may then be in effect,
each of the parties hereby agree to indemnify and hold harmless the
other party against any and all claims, liabilities, penalties, costs
and expenses that may be asserted against or suffered by such party as
a result of such disposition.
D. INVESTMENT CERTIFICATE. Seller will execute an investor representation
letter, substantially in the form set out in Exhibit "C" hereto,
acknowledging the restrictions on the Common Stock issued pursuant to
this Agreement.
E. PIGGYBACK RIGHTS OF SELLER. Parent hereby grants to Seller "piggyback
rights" to register the shares of common stock which are ultimately
issued to Seller under this Agreement. Parent shall notify Seller of
its intent to file a registration statement covering its common stock
or other securities under the 1933 Act. Such notice from Parent shall
set forth the types of securities to be registered, and other
information, if applicable, such as the maximum proposed offering
price, commissions and discounts in connection therewith,
11 of 18
<PAGE>
and other relevant information. For the purposes of these registration
rights, the common stock underlying the Preferred Stock issued to
Seller pursuant to this Agreement, is herein referred to as
"Registerable Shares". Upon the written request from Seller, given
within fifteen (15) business days after receipt of any such notice, to
register any Registerable Shares (which request shall specify the
common stock intended to be sold or disposed of by such stockholders
and shall state the intended method of disposition of such common stock
by the prospective Seller), Parent shall use all commercially
reasonable efforts to cause all such Registerable Shares to be
registered under the 1933 Act and applicable state law so that such
times and in such manner as Seller determine in accordance with the
terms of the applicable prospectus.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1: Notice
Any notice or other communication required or permitted to be given
under this Agreement must be in writing, and may be given by depositing the same
in the United States mail, certified delivery, return receipt requested,
properly addressed as provided below. Notice deposited in the mail in the manner
provided above shall be effective and shall be deemed received upon the
expiration of three business days.
For purposes of notices hereunder, the addresses of the parties shall
be as follows:
Seller: Magnum Hunter Production, Inc.
600 East Las Colinas Blvd., Suite 1200
Suite 1200
Irving, Texas 75039
Attn: Mr. Richard R. Frazier
President
Buyer or S.O.I. Industries, Inc.
Buyer's Parent: Doblique Energy Corporation
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
Attn: Mr. Kevin B. Halter
President
Any party may change its address for the giving of notice hereunder at
any time by giving notice of change in the manner specified above.
SECTION 9.2: Survival of Representations, Warranties, Covenants and Agreements
The representation, warranties, covenants and agreements of Buyer and
Seller set forth herein shall survive the Closing.
12 of 18
<PAGE>
SECTION 9.3: Waiver
No term or condition of this Agreement shall be deemed to have been
waived nor shall there be any estoppel to enforce any provision of this
Agreement except by written instrument of the party charged waiver or estoppel.
SECTION 9.4: Entire Agreement
This Agreement constitutes the entire agreement and understanding
between the parties hereto and may not be modified or amended except in writing
signed by the parties hereto:
SECTION 9.5: Expense
Buyer and Seller shall each pay their respective expenses and costs in
connection with this Agreement and the transactions contemplated thereby.
SECTION 9.6: Heading
Descriptive headings are used for convenience only and shall not
control or affect the meaning or construction of any provision of this
Agreement.
SECTION 9.7: Applicable Law
This Agreement shall be governed by and interpreted in accordance with
laws of the State of Texas applicable to contracts made and performed entirely
therein.
SECTION 9.8: Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto, and their successors and assigns; provided, no assignment by
either party shall be made without the express written consent of the other
party and if such consent is granted, no assignment shall relieve such party of
any of its obligations hereunder.
SECTION 9.9: Assignment of Agreements and Covenants
Neither Buyer nor Seller shall assign or delegate this Agreement to a
third party without the prior written consent of the other party hereto.
SECTION 9:10: Indemnification/Risk of Loss
Risk of Loss to the Properties, Existing Wells and Personalty shall be
upon Seller until the time of Closing. At Closing, said risk of loss shall pass
to Buyer. Notwithstanding anything to the contrary herein, Seller shall
indemnify and hold Buyer free and harmless from liability for any and all costs,
expenses and causes of action of every kind and character in connection with the
Personalty, Properties and the Existing Wells for events occurring prior to the
Closing Date. Likewise, notwithstanding anything to the contrary herein, Buyer
shall indemnify and hold Seller free and harmless from liability for any and all
costs, expenses and causes of action of every kind and character in connection
with the Personalty, Properties and the Existing Wells for events occurring
after the Closing Date.
13 of 18
<PAGE>
SECTION 9.11: Signature in Counterparts
This Agreement may be signed in multiple counterparts by the Buyer and
Seller, each of which, when taken together, shall constitute the original
document.
SECTION 9.12: Brokers
Each party agrees that it will hold the other party harmless from any claim
by any broker or finder asserting it was employed by such party in connection
with the transactions contemplated hereby. SECTION 9.13: Post Closing Signatures
Each of the parties hereto agree to execute any and all
mutually-acceptable documents so as to vest title to Buyer in the interests and
the properties outlined on the attached Exhibit "A", which is attached hereto
and incorporated herein.
"SELLER"
WITNESS: MAGNUM HUNTER PRODUCTION, INC.
/s/ Steven P. Smart /s/ Richard R. Frazier
- ------------------------ ---------------------------------
Richard R. Frazier
President
"BUYER"
ATTEST: DOBLIQUE ENERGY CORPORATION
(Corporate Seal)
/s/ Kevin B. Halter, Jr. /s/ Kevin B. Halter
- ------------------------ ---------------------------------
Secretary Kevin B. Halter
President
"BUYER'S PARENT COMPANY"
ATTEST: S.O.I. INDUSTRIES, INC.
(Corporate Seal)
/s/ Kevin B. Halter, Jr. /s/ Kevin B. Halter
- ------------------------- ---------------------------------
Secretary Kevin B. Halter
President
14 of 18
<PAGE>
ACKNOWLEDGMENTS
STATE OF TEXAS ss.
COUNTY OF DALLAS ss.
The foregoing instrument was acknowledged before me this the 4th day of
November 1996, by RICHARD R. FRAZIER as President of MAGNUM HUNTER PRODUCTION,
INC. on behalf of the corporation.
/s/ Vicki Newman
------------------------------
Notary Public
My Commission Expires:
02-01-1997
STATE OF TEXAS ss.
COUNTY OF DALLAS ss.
The foregoing instrument was acknowledged before me this the 4th day of
November, 1996, by KEVIN B. HALTER, as President of DOBLIQUE ENERGY CORPORATION,
on behalf of the corporation.
/s/ Vicki Newman
------------------------------
Notary Public
My Commission Expires:
02-01-1997
STATE OF TEXAS ss.
COUNTY OF DALLAS ss.
The foregoing instrument was acknowledged before me this the 4th day of
November, 1996, by KEVIN B. HALTER, as President of S.O.I. INDUSTRIES, INC. on
behalf of the corporation.
/s/ Vicki Newman
------------------------------
Notary Public
My Commission Expires:
02-01-1997
15 of 18
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXHIBIT "A"
- --------------------------------------------------------------------------------------------------------------------------
Well Name County/State Working Net Revenue OH Rate Per Well
Interest Interest
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Maveety State Gas Com #8 Lea Co., New Mexico 0.25000 0.10938 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Maveety State Gas Com #9 Lea Co., New Mexico 0.25000 0.10938 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Vest A #1 Winkler Co., Texas 0.50000 0.39869 $113.90
- ---------------------------------------------------------------------------------------------------------------------------
Bell A #3 Winkler Co., Texas 0.50000 0.37500 $341.69
- ---------------------------------------------------------------------------------------------------------------------------
Kermit A #1,2,3,4 Winkler Co., Texas 0.50000 0.31248 $113.90
- ---------------------------------------------------------------------------------------------------------------------------
Bell A #1 & 2 Winkler Co., Texas 0.25000 0.18750 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Mowles 30-2 Dewey Co., Oklahoma ORRI 0.00057 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Rounds 1-30 Dewey Co., Oklahoma ORRI 0.00568 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Bledsoe 1-26 LeFlore Co., Oklahoma 0.03125 0.02539 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Wasson #2 LeFlore Co., Oklahoma 0.02933 0.02742 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Wasson #1-3 LeFlore Co., Oklahoma 0.12500 0.10966 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Nortwest Dower Unit Beaver Co., Oklahoma 0.00865 0.00757 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
SE Cement Permian Sand Unit Caddo Co., Oklahoma 1.00000 0.77213 $368.06
- ---------------------------------------------------------------------------------------------------------------------------
NW Cement Permian Sand Unit Caddo Co., Oklahoma 0.78843 0.64622 $368.06
- ---------------------------------------------------------------------------------------------------------------------------
Geraldine 1-6 Beaver Co., Oklahoma 0.18422 0.14968 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Kidwell 14-1 McClain Co., Oklahoma ORRI 0.01330 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Brooks 23-1 NHNE McClain Co., Oklahoma ORRI 0.00446 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Wilson Unit Tulip Creek SESE McClain Co., Oklahoma 0.08242 0.07212 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Megamet #1-36 McClain Co., Oklahoma ORRI 0.00562 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Hawley West Miss Unit Grant Co., Oklahoma 0.07636 0.06869 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Harold L Rogers EHNW Garvin Co., Oklahoma 1.00000 0.87500 $518.20
- ---------------------------------------------------------------------------------------------------------------------------
Rogers Unit SWNW Garvin Co., Oklahoma 0.85000 0.74375 $363.45
- ---------------------------------------------------------------------------------------------------------------------------
West Short Junction Cleveland Co., Oklahoma 0.00855 0.00684 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Jerome Berryman #1 (Wellbore Only) Ellis Co., Oklahoma 0.21875 0.19141 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Car #19-4 (Wellbore Only) Roger Mills Co., Oklahoma 0.01053 0.00921 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Dean #1 (Wellbore Only) Roger Mills Co., Oklahoma 0.02633 0.02303 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
T&S #1-19 (Wellbore Only) Roger Mills Co., Oklahoma 0.02633 0.02303 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Patton #1-19 (Wellbore Only) Roger Mills Co., Oklahoma 0.02633 0.02303 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Salisbury #1-11 Woodward Co., Oklahoma 0.12500 0.10156 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Young Estate #2-12 Woodward Co., Oklahoma 0.04688 0.04004 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Wakita Red Fork Unit Grant Co., Oklahoma 0.06971 0.05576 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Wasson #3 LeFlore Co., Oklahoma ORRI 0.01880 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Williams, Pearl #1 Irion Co., Texas 0.42740 0.33390 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Winterbotham #1 Irion Co., Texas 0.39270 0.30630 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Winterbotham A #1 Irion Co., Texas 0.31890 0.24140 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Beville, Tennis #1 Wise Co., Texas 0.25000 0.19940 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Teague Gas Unit #3-1 Freestone Co., Texas 0.02630 0.02020 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Sadler Penn Unit Grayson Co., Texas 0.08285 0.07250 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Teague Gas Unit #3-2 Freestone Co., Texas 0.02630 0.02020 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Balcom Gas Unit PUD Shelby Co., Texas 0.43750 0.33690 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Hemus-Redgrave #1 Rusk Co., Texas ORRI 0.00094 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Tully #1 Payne Co., Oklahoma 0.25000 0.19181 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Arthur PUD Location Payne Co., Oklahoma 0.25000 0.19181 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Arthur #1 & #2 Payne Co., Oklahoma 0.25000 0.19181 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Dorsey #2 Payne Co., Oklahoma 0.25000 0.19181 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
Hand, Letha #1 Shackelford Co., Texas 1.00000 0.75000 $100.00
- ---------------------------------------------------------------------------------------------------------------------------
Ledbetter, OH #1 Shackelford Co., Texas 1.00000 0.75000 $150.00
- ---------------------------------------------------------------------------------------------------------------------------
Leigh, Kristi #1 Shackelford Co., Texas 1.00000 0.75000 $100.00
- ---------------------------------------------------------------------------------------------------------------------------
Reno #1 Shackelford Co., Texas 1.00000 0.75000 $100.00
- ---------------------------------------------------------------------------------------------------------------------------
Nell #1 (G. Thomas) Shackelford Co., Texas 1.00000 0.81250 $150.00
- ---------------------------------------------------------------------------------------------------------------------------
Clair Ledbetter #1 (C. Smith) Shackelford Co., Texas 1.00000 0.81250 $150.00
- ---------------------------------------------------------------------------------------------------------------------------
Miss "O" SWD Well Shackelford Co., Texas 1.00000 1.00000 $100.00
- ---------------------------------------------------------------------------------------------------------------------------
W.L. Gray Unit #1 Fort Bend Co., Texas 0.10000 0.08215 Outside Operated
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
16 of 18
<PAGE>
EXHIBIT "B"
To that Purchase and Sale Agreement By and Among Magnum Hunter
Production, Inc., as Seller, and Doblique Energy Corporation, as Buyer, dated
this 4th day of November, 1996.
GAS BALANCING
OVERAGE
T&S 17,513 mcf
Dean 2,323 mcf
19,836 mcf
UNDERAGE
Patton -26,319 mcf
- 6,483 mcf
Amount due Seller 6,483 x $2.42 = $15,689.00
==========
17 of 18
<PAGE>
EXHIBIT "C"
To That Purchase and Sale Agreement By and Among Magnum Hunter
Production, Inc., as Seller, and Doblique Energy Corporation, as Buyer,
dated this 4th day of November, 1996.
INVESTMENT CERTIFICATE
The undersigned corporation Magnum Hunter Production, Inc., (herein
referred to as "Magnum"), hereby warrants and represents to S.O.I.
Industries, Inc. the following:
1. That in acquiring 120,000 shares of Convertible Preferred Stock
(restricted) of S.O.I. Industries, Inc. warrant that they are
taking such shares for investment purposes only and fully
understand the concept.
2. That Magnum considers himself an "accredited investor" as that
term is known in the securities industry in that he does not need
nor require the protection afforded to him by filing of a
registration statement with the United States Securities and
Exchange Commission in regard to this transaction.
3. That Magnum has other investments and financial commitments which
enable it to take the aforementioned shares for a long-term
indefinite investment period.
4. The parties hereto have agreed that all shares being acquired are
"restricted securities" as that term is defined under SEC Rule
144 and may have to be held for an indefinite period of time.
Certificates representing the restricted securities will have a
restrictive legend.
5. It is understood by Magnum that transfer by it of the restrictive
securities which are the subject of this Investment Certificate
will not be effected unless a Registration Statement is in effect
with regard thereto or unless an exemption from registration is
available.
DATED this 4th day of November, 1996.
Magnum Hunter Production, Inc.
/s/ Richard Frazier
------------------------------
Name: Richard Frazier
Title: President
18 of 18
<PAGE>
EXHIBIT "D"
CERTIFICATE OF DESIGNATION
Series A Preferred Stock:
Section 1. Designation and Amount. The shares of such series shares be
designated as Series A "Convertible Preferred Stock" ( the "Convertible
Preferred Stock") and the number of shares constituting the Convertible
Preferred Stock shall be 1,000,000. Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Convertible Preferred Stock to a number
less than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Convertible Preferred Stock.
Section 2. Conversion Rights.
a. Right to Convert. Each share of Convertible Preferred Stock may be
converted at the option of the holder thereof at any time and without the
payment of any additional consideration thereof, into equal number of fully
paid, nonassessable shares of common stock $.0002 par value per share, of
the Corporation (the "Common Stock").
b. Mechanics of Conversion. In order to convert Convertible Preferred Stock
into shares of Common Stock, the holder shall surrender the certificate or
certificates thereof, duly endorsed, to the office of the Corporation s
transfer agent for the Convertible Preferred Stock; provided, however, that
the Corporation shall not be obligated to issue certificates evidencing
shares of Common Stock issuable upon such conversion unless certificates
evidencing such shares of Convertible Preferred Stock are delivered to the
Corporation s transfer agent as provided above, or the holder notifies the
Corporation s transfer agent that such certificates have been lost, stolen
or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with
such certificates.
Section 3. Corporate Events.
a. Notices of Record Date. In the event of (i) any declaration by the
Corporation of a record date of the holders of any class of securities for
the purposes of determining the holders thereof who are entitled to receive
any dividend or distribution or (ii) any capital reorganization of the
Corporation, any reclassification or recapitalization of the capital stock
of the Corporation, any merger or consolidation of the Corporation and any
other entity or person, or any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the Corporation shall mail to
each holder of Convertible Preferred Stock at least 10 days prior to the
record date specified herein, a notice specifying (A) the date on which any
such record date is to be declared for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the
Exhibit "D" -- Page 1
<PAGE>
date on which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected
to become effective, and (C) the time, if any, that is to be fixed as to
when the holders of record of Common Stock (or other securities) become
eligible to receive securities or other property deliverable upon such
reorganization, reclassification, transfer, consolidation, merger,
dissolution or winding up.
Section 4. Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common stock solely for the purpose of effecting the
conversion of shares of Convertible Preferred Stock, such number of its shares
of Common Stock as shall from time be sufficient to effect the conversion of all
then outstanding shares of Convertible Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to affect the conversion of all then outstanding shares of the Convertible
Preferred Stock, the Corporation will take such corporate action as may be
necessary to increases its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
Section 5. Voting Rights. The holders of convertible Preferred Stock
will not have any voting rights except as set forth below or as otherwise from
time to time required by law. The affirmative vote or consent of the holders of
at least a majority of the outstanding shares of Convertible Preferred Stock,
voting separately as a class, will be required for an amendment, alteration or
repeal of the Corporation s Certificate of Incorporation (including any
certificate of designation of preferences) if, and only if, the amendment,
alteration or repeal adversely affects the powers, preferences or special rights
of the Convertible Preferred Stock.
To the extent that under Delaware law the vote of the holders of the
Convertible Preferred Stock, voting separately as a class, is required to
authorize a given action of the Corporation, the affirmative vote or consent of
the holders of at least a majority of the outstanding shares of the Convertible
Preferred Stock shall constitute the approval of such action by the class. To
the extent that under Delaware law the holders of the Convertible Preferred
Stock are entitled to vote on a matter with holders of Common Stock, voting
together as one class, each share of Convertible Preferred Stock shall be
entitled to one vote. Holders of the Convertible Preferred Stock shall be
entitled to notice of all shareholders meetings or written consents with respect
to which they would be entitled to vote, which notice would be provided pursuant
to the Corporation s by laws and applicable statutes.
Section 6. Protective Provisions. So long as shares of Convertible
Preferred Stock are outstanding the Corporation shall not take any action that
would impair the rights of the holders of the Convertible Preferred Stock set
forth herein and shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least a majority of
the then outstanding shares of Convertible Preferred Stock:
Exhibit "D" -- Page 2
<PAGE>
a. alter or change the rights, preferences or privileges of the shares of
the Convertible Preferred Stock or an other securities so as to affect
adversely the Convertible Preferred Stock;
b. create any new class or series of stock having a preference over the
Convertible Preferred Stock; or
c. do any act or thing which would result in taxation of the holders of
shares of the Convertible Preferred Stock under Section 305 of the
Internal Revenue Code of 1986, as amended (or any comparable provision
of the Internal Revenue Code as hereinafter from time to time
amended).
/s/ Kevin B. Halter /s/ Kevin B. Halter, Jr.
- ------------------------ --------------------------
President Corporate Secretary
S.O.I. Industries, Inc. S.O.I. Industries, Inc.
November 4, 1996 November 4, 1996
Date:____________________ Date:______________________
Exhibit "D" -- Page 3
<PAGE>
CERTIFICATE OF DESIGNATIONS OF
CONVERTIBLE SERIES A PREFERRED STOCK
OF
S.O.I. INDUSTRIES, INC.
I, Kevin B. Halter, am the Chief Executive Officer of S.O.I. Industries,
Inc. organized and existing under the laws of the State of Delaware (the
"Corporation"), in accordance with the provisions of The Delaware General
Corporation Law.
That pursuant to the authority conferred upon the Corporation s Board of
Directors (the "Board of Directors") by the Certificate of Incorporation, as
amended, of the said Corporation, originally filed in the office of the
Secretary of State of Delaware on November 28, 1995, the said Board of
Directors, pursuant to a unanimous written consent signed as of November 1, 1996
(which is the effective date hereof) adopted the following resolutions regarding
its Convertible Series A Preferred Stock to read as follows:
RESOLVED, that pursuant to the authority vested in Board of Directors of
this Corporation in accordance with the provisions of its Certificate of
Incorporation , as amended, a series of preferred stock of the Corporation be
and it hereby is created, and that the designation and amount thereof and the
powers, preferences, and relative, participating, optional, redemption, and
other special rights of the shares of such series, and the qualifications,
limitations, or restrictions thereof are as described on Exhibit A attached
hereto.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations of Series A Preferred Stock to be duly executed by the Corporation
s duly authorized officer as shown below and attested to by its Secretary, this
1st day of November, 1996.
S.O.I. INDUSTRIES, INC.
/s/ Kevin B. Halter
By: __________________________________
Kevin B. Halter, Chairman
ATTEST:
/s/ Kevin B. Halter, Jr.
- ----------------------------------
Secretary
Exhibit "D" -- Page 4
<PAGE>
Secretary's Certificate
The undersigned, KEVIN B. HALTER, JR. hereby certifies that he is the
duly elected, qualified and acting Secretary of S.O.I. Industries, Inc., a
Delaware corporation (the "Corporation"), and that as such he is familiar with
the facts herein certified and is duly authorized to certify the same and does
hereby further certify as follows:
Attached hereto is a true and correct copy of certain resolutions duly
and validly adopted by unanimous consent of the Board of Directors of the
Corporation on November 1, 1996. Such resolutions are still in full force and
effect, and have not been revoked, suspended or modified in any manner.
IN WITNESS WHEREOF, I have executed this certificate the 4th day of
November, 1996, and affixed the seal of the Corporation.
/s/ Kevin B. Halter, Jr.
- -----------------------------
Kevin B. Halter, Jr., Secretary
(SEAL)
Exhibit "D" -- Page 5
<PAGE>
Exhibit 10.1
<PAGE>
TERM PROMISSORY NOTE
November 4, 1996 Dallas, Texas
FOR VALUE RECEIVED, Doblique Energy Corporation, a Texas corporation,
(herein referred to as "Maker"), promises to pay to Magnum Hunter Production,
Inc., a Texas corporation, (herein referred to as "Magnum"), the principal
amount of One Million Seven Hundred Fifteen Thousand Six Hundred Eighty-Nine
Dollars and No/100 ($1,715,689.00), with interest at the rate of twelve percent
(12%) per annum, as follows:
1. Place of Payment. All payments shall be made to Magnum at 600 East Las
Colinas Blvd., Suite 1200, Irving, Texas 75039, or at such other place as Magnum
may, from time to time, designate in writing. Payments should be made to the
attention of Gary C. Evans, Chairman, until further notice.
2. Security. Payment of the Note shall be secured by the following:
a. Mortgage, Deed of Trust, Assignment of Production, Security Agreement
and Financing Statement from the Maker to Magnum covering the oil and
gas properties pledged by Maker; and
b. Borrower Pledge Agreement.
3. Term. This Note is due and payable November 1, 1999.
4. Repayment. Payment in the amount of One Hundred Thousand Dollars and No/100
is due November 20, 1996. Thereafter, payments are due and payable monthly
beginning December 1, 1996 from one hundred percent (100%) of the net oil and
gas income, after lease operating expenses and monthly management fees due to
Gruy Petroleum Management Co., and will be applied first to interest, then to
principal reductions of the loan.
5. Prepayment. This Note may be prepaid in full or in part at any time without
penalty.
6. Default Remedies. In the event of a default hereunder, Maker shall have ten
(10) days after receiving written notice of such default from Magnum in which to
cure such default. If Maker fails to cure such default within such ten (10) day
period, the entire unpaid principal balance of this Note shall immediately be
due and payable at the option of Magnum.
7. Cumulative Rights. No delay on the part of Magnum in the exercise of any
power or right under this Note or under any other instrument executed pursuant
hereto shall operate as a waiver thereof, nor shall a single or partial exercise
of any power or right preclude other or further exercise thereof or the exercise
of any other power or right.
8. Waiver. Except as expressly otherwise provided for herein, Maker and all
other endorsers, sureties and guaranties of this Note waive demand, presentment
for payment, protest, notice of dishonor, notice of nonpayment, notice of
intention to accelerate, notice of protest and any and all lack of diligence or
delay in collection or the filing of suit hereon which may occur, and agree to
all extensions and partial payments, before or after maturity, without prejudice
to Magnum.
9. Cost of Collection. In the event that Maker default hereunder, and in the
event that this Note is placed in the hands of an attorney for collection, or in
the event that this Note is collected in whole or in part through legal
proceedings of any nature, there shall be added to the unpaid principal balance
hereof all reasonable costs of collection including, but not limited to,
reasonable attorneys' fees, whether or not suit is filed.
10. Governing Law. This Note shall be construed in accordance with the laws of
the State of Texas.
11. Headings. The headings of the sections of this Note are inserted for
convenience only and shall not be deemed to constitute a part hereof.
<PAGE>
12. Usury. All agreements between Maker and Magnum, whether now existing or
hereafter arising and whether written or oral, are expressly limited so that no
contingency or event whatsoever, whether by acceleration of the maturity of this
Note or otherwise, shall the amount paid, or agreed to be paid, to Magnum for
the indebtedness hereunder, exceed the maximum amount permissible under
applicable law. If fulfillment of any provision of this Note or of any other
document evidencing, securing or pertaining to the indebtedness evidenced
hereby, at the time performance of such provision shall be due, involve
transcending the limit of validity, prescribed by law, then ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity, and
if from any such circumstances Magnum shall ever receive as interest under this
Note or any other document evidencing, securing or pertaining to the
indebtedness evidenced hereby or otherwise an amount that would exceed the
highest lawful rate, such amount that would be excessive interest shall be
applied to the reduction of the principal amount owning under this Note or on
account of any other indebtedness of Maker to Magnum relating to this Note, and
not to the payment of interest, or if such excessive interest exceeds the unpaid
balance of principal of this Note and such other indebtedness, such excess shall
be refunded to Maker. In determining whether or not the interest paid or payable
with respect to any indebtedness of Maker to Magnum or the holder hereof, under
any specific contingency, exceeds the highest lawful rate, Maker and Magnum or
the holder hereof shall, to the maximum extent permitted by applicable law, (a)
characterize any non-principal payment as an expense, fee or premium rather than
as interest, (b) exclude voluntary prepayments and the effects thereof, (c)
amortize, prorate, allocate and spread the total amount of interest throughout
the full term of such indebtedness so that the actual rate of interest on
account of such indebtedness is uniform throughout the term thereof, and/or (d)
allocate interest between portions of such indebtedness, to the end that no such
portion shall bear interest at a rate greater than that permitted by law. The
terms and provisions of this section shall control and supersede every other
conflicting provision of all agreements between Maker and Magnum.
13. Successors and Assigns. All of the stipulations, promises and agreements in
this Note contained by or on behalf of Maker and Magnum shall bind the
successors and assigns of Maker and Magnum, and shall inure to the benefit of
the successors and assigns of Maker and Magnum.
14. Severability. In the event any one or more of the provisions contained in
this Note shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not effect
any other provision hereof, and this Note shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
day and year first written above.
Doblique Energy Corporation
/s/ Kevin B. Halter
By:_______________________
Kevin B. Halter
President
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