<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Year Ended December 31, 1995
Commission File Number 33-55254-07
LONE STAR INTERNATIONAL ENERGY, INC.
(Name of small business issuer in its charter)
NEVADA 87-0434288
(State of incorporation) (IRS Employer
Identification Number)
200 PALO PINTO, SUITE 108
WEATHERFORD, TEXAS 76086
(Address of principal executive offices) (Zip code)
(817) 598-0542
Issuer's telephone number
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 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. [ ] Yes [X] No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for 1995: $173,703
State the aggregate market value of the voting stock held by non-affiliates
computed using $1.50, the price at which the stock was sold on March 3, 1997:
$3,647,925
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, Par Value $.001; 8,431,950 Shares as of January 24, 1997
Traditional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE> 2
PART I
ITEM 1. DESCRIPTION OF BUSINESS
HISTORICAL INFORMATION
Lone Star International Energy, Inc., a Nevada Corporation (the "Company"), was
incorporated in the state of Utah on April 11, 1986 as Quiescent Corporation.
To reincorporate as a Nevada corporation, on December 31, 1993, the Company's
shareholders approved a merger with a newly formed Nevada corporation with the
same name. A Certificate of Merger of the Utah and Nevada corporations was
executed on December 30, 1993 and following that action the Utah corporation
filed Articles of Dissolution in Utah on December 30, 1993. In October, 1995
the Company discovered that Articles of Merger had not been recorded in Nevada
and on October 12, 1995 Articles of Merger were filed in Nevada. The status of
the Company resulting from the filing of the Articles of Dissolution in 1993
and the filing of the Articles of Merger in 1995 is not clear. The Company
believes the merger is effective for all purposes and has and continues to act
accordingly. The Company had no operations until the completion of the reverse
acquisition described below on May 2, 1995.
Reverse Acquisition - The Company entered into an Agreement dated as of April
10, 1995, with Cumberland Petroleum, Inc., a Texas corporation ("Cumberland"),
pursuant to which, on May 2, 1995 the Company acquired from C.E. Justice, 100%
of the capital stock of Cumberland in the exchange for the issuance of
5,000,000 shares of the Company's common stock. Cumberland operates oil and gas
properties. The Company changed its name to Cumberland Holdings, Inc. on May 3,
1995, and to Cumberland Companies, Inc. On August 17, 1995, and to Lone Star
International Energy, Inc. on January 30, 1997.
CERTAIN STATEMENTS CONTAINED IN THIS DOCUMENT, INCLUDING WITHOUT LIMITATION
STATEMENTS CONTAINING THE WORDS "BELIEVES", "ANTICIPATES", "INTENDS",
"EXPECTS", AND WORDS OF SIMILAR IMPORT, CONSTITUTE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT. SUCH
FORWARD LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
THE COMPANY TO MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD LOOKING STATEMENTS.
GENERAL
The Company is engaged in the production and sale of oil and gas. Principal
products are crude oil and natural gas which are sold to various purchasers,
including pipeline companies which service the areas in which the producing
wells are located. Until 1997, the Company served as operator for most of the
oil and gas properties in which it owns an interest. The Company may enter into
farm-out, joint venture, drilling participation, limited partnership or any
other suitable arrangement with respect to developing its properties and
acquiring additional properties.
The Company has no operations in foreign countries. The acquisition,
development, production and sale of oil and gas is subject to many factors
which are outside the Company's control, including national and international
economic conditions, the availability of drilling rigs, casing, pipe and other
equipment and supplies, proximity to the pipelines, the supply and price of
other fuels, and the regulation of production, transportation and pricing by
state and federal governmental regulatory agencies.
OTHER BUSINESS MATTERS
Competition for the sale of oil and gas is principally related to pricing as it
is affected by quality, availability of transportation and transportation
costs. The price for the oil is widely followed and is generally subject to
worldwide market factors.
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<PAGE> 3
The Company had sales to the following companies that amounted to 10% or more
of oil and gas revenues:
<TABLE>
<CAPTION>
1996
through
1995 09/30/96
---- --------
<S> <C> <C>
Team Energy Marketing Co. 45% 27%
Geer Tank Trucks, Inc. 26% 35%
Atoka Resources Corp. 17% 27%
Enserch 10% 11%
</TABLE>
Because of the ready market for its oil and gas, the Company does not consider
itself dependent on any single customer or group of customers.
The Company must comply with laws affecting the discharge of materials into the
environment. Compliance with such laws has not been a material factor in the
Company's operations.
No insurance needed. No loss of production coverage has been sought.
Many services normally requiring employees are performed by contractors. As a
result the Company had only two officers in 1995 and 1996. The Company had no
non-officer employees in 1995 and one employee in 1996.
REGULATORY MATTERS
The Company's exploration, production and marketing operations are regulated at
the federal, state and local levels. Oil and gas exploration, development and
production activities are subject to various laws and regulations governing a
wide variety of matters. For example, there are statutes or regulations
addressing conservation practices and the protection of correlative rights, and
such regulations may affect the Company's operations and limit the quantity of
oil or gas that the Company may produce or sell. Other regulated matters
include marketing, transportation and valuation of royalty payments.
Among other regulatory matters at the federal level, the Federal Energy
Regulatory Commission ("FERC") regulates interstate transportation of natural
gas under the Natural Gas Act and regulates the maximum selling prices of
certain categories of gas sold in "first sales" in interstate commerce under
the Natural Gas Policy Act ("NGPA"). The Company's gas sales are affected by
regulation of intrastate and interstate gas transportation. In an attempt to
promote competition, the FERC has issued a series of orders which have altered
significantly the marketing and transportation of natural gas. To date, the
Company has not experienced any material adverse effect on gas marketing as a
result of these FERC orders. However, the Company cannot predict what effect
these or subsequent regulations may have on its future gas marketing.
As an owner and operator of oil and gas properties, the Company is additionally
subject to various federal, state and local environmental regulations,
including air and water quality control laws. These laws and regulations may,
among other things, impose liability on the lessee under an oil and gas lease
for the cost of pollution clean-up resulting from operations, subject the
lessee to liability for pollution damages, and require suspension or cessation
of operations in affected areas and impose restrictions on the injection of
liquids into subsurface aquifers that may contaminate groundwater. Although the
Company believes that it is in substantial compliance with existing applicable
environmental laws and regulations, there can be no assurance that substantial
costs for compliance will not be incurred in the future. Moreover, it is
possible that other developments, such as stricter environmental laws,
regulations and enforcement policies thereunder, could result in additional,
presently unquantifiable, costs or liabilities to the Company.
ITEM 2. DESCRIPTION OF PROPERTIES
OIL AND GAS PROPERTIES
The principal oil and gas properties of the Company at the end of 1995
consisted of working interests in
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producing oil and gas leaseholds located in Texas. The Company owns these
leasehold interests in percentages that vary. The terms of producing oil and
gas leaseholds are continuing and such leases remain in force by virtue of, and
for as long as, production from lands under each lease is maintained. The terms
of leases without production or production less than required by the lease may
expire at fixed dates in the future. These leases may or may not be extended,
depending upon the lease in question, by further exploration and development
within varying periods of time.
Effective September 1, 1995 the Company acquired working interests in oil and
gas properties in exchange for 750,000 shares of restricted common stock and
promissory notes in the aggregate amount of $500,000. The promissory notes are
now due on September 15, 1997 and interest payable monthly beginning at the
rate of 7% per annum.
The following table sets forth information concerning the Company's leasehold
ownership interests as of December 31, 1995.
TABLE I
LEASEHOLD INTEREST
<TABLE>
<CAPTION>
GROSS (B) NET (C)
--------- -------
<S> <C> <C>
Developed Acreage (a) 1,076 785
Undeveloped Acreage (d) 3,211 2,420
Active Working Interest Wells:
Oil 11.0 8.2
Gas 28.0 21.9
</TABLE>
(a) Developed acreage is acreage spaced for or assignable to productive
wells.
(b) A gross well or acre is a well or acre in which a working interest is
owned. The number of gross wells is the total number of wells in which a
working interest is owned. The number of gross acres is the total number
of acres in which a working interest is owned.
(c) A net well or acre is deemed to exist when the sum of fractional
ownership working interests in gross wells or acres equals one. The
number of net wells or acres is the sum of the fractional working
interests owned in gross wells or acres expressed as whole numbers and
fractions thereof.
(d) Undeveloped acreage is oil and gas acreage on which wells have not been
drilled or to which no Proved Reserves other than Proved Undeveloped
Reserves have been attributed.
NET PRODUCTION, UNIT SALES AND PRODUCTION COSTS
The following table summarizes the net oil and natural gas production for the
Company, the average sales price per barrel (bbl) of oil and per 1000 cubic
feet (mcf) of natural gas produced and the average production (lifting) cost
per unit of production, for the year ended December 31, 1995.
TABLE II
PRODUCTION, PRICE AND COST DATA
<TABLE>
<CAPTION>
09/01/95 to
12/31/95
-----------
<S> <C>
Oil (a):
Production (Bbls) 879
Revenue $ 14,591
Average Bbls per day 7
Average Sales price per Bbl $ 16.60
Gas:
Production (Mcf) 33,783
Revenue $ 54,520
Average Mcf per day 279
Average Sales price per Mcf $ 1.61
Production costs:
Production costs $111,465
Equivalent Bbls (b) 6,509
Production cost per equivalent Bbl $ 17.12
Production cost per sales dollar $ 1.61
Total Revenues $ 69,111
</TABLE>
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- ---------
(a) Includes condensate and natural gas liquids.
(b) Gas production is converted to equivalent bbls at the rate of six mcf
per bbl, representing the estimated relative energy content of natural
gas to oil.
ESTIMATED FUTURE NET REVENUES FROM PROVED OIL AND GAS RESERVES
A summary projection of the estimated future net revenues and present value of
future net reserve categories, as of December 31, 1995, is as follows:
TABLE III
ESTIMATED FUTURE NET REVENUES FROM PROVED RESERVES (A)
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
PROVED
----------
<S> <C>
Estimated future net
revenues before income taxes
1996 $ 652,482
1997 698,290
1998 571,404
1999 412,908
2000 322,787
Thereafter 1,223,129
----------
Total before estimated future income taxes $3,881,000
==========
Present value of estimated
future net revenues
before income taxes $2,486,634
==========
</TABLE>
_______
(a) Prepared in accordance with the rules and regulations of the SEC based
on the reserve reports and the Company's financial statement
disclosures. Estimated future net revenues represent estimated future
gross revenues from the production and sale of proved reserves, net of
estimated production costs and future development costs estimated to be
required to achieve estimated future production.
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ESTIMATED NET PROVED OIL AND GAS RESERVES
The estimated proved developed oil and gas reserves for the Company are
summarized below:
TABLE IV
PROVED RESERVES
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
PROVED
---------
<S> <C>
Oil and liquids (bbls):
Proved developed 34,892
Proved undeveloped 53,294
---------
Total 88,186
=========
Natural gas (mcf):
Proved developed 997,137
Proved undeveloped 2,343,480
---------
Total 3,340,617
=========
</TABLE>
- ---------
The table above should read in connection with the following definitions:
Proved Reserves Estimated quantities of crude oil, natural gas and natural
gas liquids which geological and engineering data
demonstrate with reasonable certainty to be economically
producible in future years from known reservoirs under
existing economic and operating conditions, e.g., prices
and costs as of the date the estimate was made, assuming
continuation of current regulatory practices using
conventional production methods and equipment.
Proved Developed
Reserves Proved oil and gas reserves which are expected to be
recovered from existing wells with existing equipment and
operating methods. Developed reserves include both
producing and non-producing reserves. Producing reserves
are those reserves expected to be recovered from existing
completion intervals producing to a market as of the date
of the appropriate reserve report. Non-producing reserves
are reserves that are currently shut-in awaiting a
pipeline connection or in reservoirs behind the casing or
at minor depths above or below the producing zone and are
considered proved by production either from wells in the
field, by successful drill-stem tests, or by core analyses
from the particular zones. Non-producing reserves require
only moderate expense for recovery.
Proved Undeveloped
Reserves Proved oil and gas reserves which are expected to be
recoverable from additional wells yet to be drilled or
from existing wells where a relatively major expenditure
is required for completion.
For information concerning costs incurred by the Company for oil and gas
operations, net revenues from oil and gas production, estimated future revenues
attributable to the Company's oil reserves and present value of future net
revenues on a 10% discount rate and changes therein, refer to the Company's
Financial Statements and the related Notes. The Company emphasizes that reserve
estimates are inherently imprecise and that estimates of new discoveries are
more imprecise than those of producing oil and gas properties. Accordingly, the
estimates are subject to change as further information becomes available.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Response is not required.
6
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded in the over the counter market under the
symbol LNST effective January 1997. Prior to January 1997 the Company's symbol
was CUMC. As of January 24, 1997, there were 801 shareholders of record of the
Company's common stock. The transfer agent for the Company's common stock is
National Stock Transfer, Salt Lake City, Utah. The amounts below represent the
trading prices for the periods indicated. Historically the Company's common
stock has not traded actively.
PRICE RANGE OF COMMON STOCK
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1995:
Third Quarter August 31, 1995 through
September 30, 1995 4 1/10
Fourth Quarter 5 1/2 1 1/2
1996:
First Quarter 5/8 1/16
Second Quarter 3/32 3/32
Third Quarter 3/20 3/20
Fourth Quarter 2/5 3/32
1997:
First Quarter through March 5, 1997 2 1/16
</TABLE>
The Company has not paid dividends on its Common Stock, and it is the present
policy of the Company not to do so, but to retain earnings for future growth
and business activities.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CERTAIN STATEMENTS CONTAINED IN THIS DOCUMENT, INCLUDING WITHOUT LIMITATION
STATEMENTS CONTAINING THE WORDS "BELIEVES", "ANTICIPATES", "INTENDS",
"EXPECTS", AND WORDS OF SIMILAR IMPORT, CONSTITUTE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT. SUCH
FORWARD LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
THE COMPANY TO MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD LOOKING STATEMENTS.
This discussion should be read in conjunction with the audited financial
statements of Lone Star International Energy, Inc.
PLAN OF OPERATION
Effective May 2, 1995, the Company acquired Cumberland. Until January 1, 1997
Cumberland acted as an operater of oil and gas properties. For accounting
purposes, the transaction has been treated as a recapitalization of Cumberland
with Cumberland as the acquirer (reverse acquisition). For purposes of
discussion the Company's operations will be considered those of Cumberland.
The reverse acquisition was accounted for under the pooling of interest method
of accounting.
The Company intends to increase production and reserves through development of
existing oil and gas properties and future acquisitions. The Company believes
its current revenue is adequate to meet existing needs. Future acquisitions
will require additional capital and the Company believes it can raise such
capital through either public or private financings, or a combination of both.
The Company does not intend to seek bank financing to expand its operations.
7
<PAGE> 8
The Company periodically evaluates other businesses within what it broadly
describes as the energy industry. The Company does not expect that any
associated costs to evaluate such business projects will impair its liquidity.
RESULTS OF OPERATIONS.
During the last quarter of 1994 the Company commenced business as an
independent contract operator of oil and gas properties which generated only
$21,150 in revenue. Effective September 1, 1995 the Company purchased working
interests in several oil and gas properties in exchange for 750,000 shares of
restricted common stock valued at $1,108,067 and $500,000 in promissory notes
due September 15, 1997.
Revenues increased from $21,150 in 1994 to $173,400 in 1995 primarily as a
result of the above described purchase of working interests and having its
contract operator revenue for a full year. Revenues for 1994 reflect the
Company's activity only as a contract oil and gas lease operator while the 1995
revenue includes both oil and gas sales ($69,111) as well as contract operator
revenue ($104,355).
The Company believes that except for "general and administrative", the expenses
for 1994 as compared to 1995 reflect only the timing differences of the Company
commencing its revenue producing activities. The Company believes its oil and
gas property operating expenses as compared to oil and gas revenues have been
higher than anticipated due to time constraints placed upon management relating
to issues surrounding the Company's efforts to regain its current filing status
under the securities laws and related issues, rather than the anticipated
economics of the respective oil and gas properties. General and administrative
expenses for 1995 reflect the following significant costs not incurred in 1994,
nor are they anticipated to occur in 1996: consulting fee $100,000;
professional fees $202,000; and salary $130,000.
ITEM 7. FINANCIAL STATEMENTS.
Financial Statements for 1994 and 1995 with the accountant's reports are
attached hereto following the signature page.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
(a)
(i) On March 10, 1997 the Company, dismissed Hollander, Gilbert & Co. as
its auditors and engaged Davis, Kinard & Co.,P.C. as its auditors to audit its
1995 and 1996 financial statements.
(ii) Hollander, Gilbert & Co.'s report on the 1994 financial statements of
the Company did not contain an adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principles.
(iii) The decision to change accountants was approved by the board of
directors.
(iv) There were no disagreements with Hollander, Gilbert & Co. on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope of procedure during 1994 and through the date of dismissal,
which if it had not been resolved to the satisfaction of Hollander, Gilbert &
Co. would have caused it to make reference to the subject matter of the
disagreement(s) in connection with its report.
(v) During 1994 and through the date of dismissal (each of the following
A-D, a "reportable event"):
(A) Hollander, Gilbert & Co. has not advised the Company that the
internal controls necessary for the Company to develop reliable financial
statements do not exist;
(B) Hollander, Gilbert & Co. has not advised the Company that
information has come to Hollander, Gilbert & Co.'s attention that has led it to
no longer be able to rely on management's representations, or that has made it
unwilling to be associated with the financial statements prepared by
management;
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(C) Hollander, Gilbert & Co. has not advised the Company of the need to
expand significantly the scope of its audit, or that information has come to
Hollander, Gilbert & Co.'s attention that if further investigated may: (i)
materially impact the fairness or reliability of either: a previously issued
audit report or the underlying financial statements; or the financial
statements issued or to be issued covering the fiscal period(s) subsequent to
the date of the most recent financial statements covered by an audit report
(including information that may prevent it from rendering an unqualified audit
report on those financial statements), or (ii) cause it to be unwilling to rely
on management's representations or be associated with the Company's financial
statements, or
(D) Hollander, Gilbert & Co. has not advised the Company that
information has come to Hollander, Gilbert & Co.'s attention that it has
concluded materially impacts the fairness or reliability of either (i) a
previously issued audit report or the underlying financial statements, or (ii)
the financial statements issued or to be issued covering the fiscal period(s)
subsequent to the date of the most recent financial statements covered by an
audit report (including information that, unless resolved to Hollander, Gilbert
& Co.'s satisfaction, would prevent it from rendering an unqualified audit
report on those financial statements).
(b) Attached hereto as Exhibit 16 is a letter from Hollander, Gilbert & Co.
addressed to the Securities and Exchange Commission stating that it agrees with
the above statements of the Company.
(c) Davis, Kinard & Co., P.C. was engaged effective January 14, 1997 to
audit the Company's 1995 and 1996 financial statements. During 1995 and 1996
and the subsequent interim period prior to engaging Davis, Kinard & Co., P.C.,
neither the Company(nor someone on its behalf) consulted Davis, Kinard & Co.,
P.C. regarding (i) either: the application of accounting principles to a
specified transaction, either completed or proposed; or the type of audit
opinion that might be rendered on the Company's financial statements, and
either a written report was provided to the Company or oral advice was provided
that Davis, Kinard & Co.,P.C. concluded was an important factor considered by
the Company in reaching a decision as to the accounting, auditing or financial
reporting issue; or (ii) any matter that was either the subject of a
disagreement (as defined in paragraph (a)(iv) above and the instructions to
Item 304 of Regulation S-K under the federal securities laws) or a reportable
event (as defined in paragraph (a)(v)above).
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
EXECUTIVE OFFICERS AND DIRECTORS.
CECIL E. JUSTICE (40), President and Chairman of the Board of Directors of the
Company since April 1995, has been employed in the oil and gas industry since
1979. Mr. Justice worked for Pinto Petroleum, Inc. A Dallas, Texas based
production and operating company with properties in Texas and Oklahoma from
1979 thru 1982. In 1983, Mr. Justice was founder and President of Cherokee Oil,
Inc. Cherokee's properties and operations were in North Central Texas. In 1987
Cherokee was sold to Genex Resources, Inc., a public company trading on the
Vancouver, BC exchange. From 1987 until present Mr. Justice put together joint
ventures in many oil and gas prospects and has started and owned several
companies including but not limited to furniture, construction, video rental
chains and a vending corporation. After high school, Mr. Justice joined
the United States Army where he spent 1975 thru 1977. Mr. Justice attended The
University of Texas at Arlington where he completed several oil and gas,
logging and compressor and business courses.
WILLIAM D. JOSSERAND JR. (31), Vice President of Field Operations, Secretary
and Director of the Company, joined the Company in November 1995 as Vice
President of Field Operations and was elected a Director of the Company and
employed as Secretary in February 1997. Mr. Josserand has been employed in the
oil and gas industry since 1994. From 1994 until 1996 Mr. Josserand managed
contract field services, field operations, and production. In 1996, Mr.
Josserand formed Trace Management, Inc., a Texas oil and gas production and
operating company, where he acted as Chairman and President. Trace Management,
Inc. primarily involved with field production management and operations in the
Fort Worth Basin area for both public and private oil and gas companies. Mr.
Josserand received a Bachelor of Business Administration in
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Finance from the University of North Texas in 1988.
MICHAEL D. HERRINGTON (33), Chief Financial Officer, Treasurer and Director of
the Company, was elected a Director in February, 1997, was employed as Chief
Financial Officer in February, 1997. Mr. Herrington has been engaged in public
and private accounting since 1992. Prior to 1992 Mr. Herrington was employed in
various oil and gas related fields, as well as the manufacturing industry. Mr.
Herrington graduated from Tarleton State University with a Bachelor's degree in
Business Administration in Accounting in 1992.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. The Company does not have a
class of securities registered under Section 12 of the Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION.
For 1995 Cecil E. Justice was the chief executive officer and sole
director of the Company. The Company did not have any other paid officers
during 1995. The Company did make payments to Mr. Josserand in 1995, see Item
12. Certain Relationships and Related Transactions. The Company commenced
operations in 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION AWARDS(2)
---------------------------------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SECURITIES UNDERLYING COMPENSATION
FISCAL YEAR SALARY ($) OPTION/SARS (#) ($)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cecil E. Justice 1995 131,718 -0- -0-
President, Director 1994 -0- -0- -0-
</TABLE>
(1) The column for "Bonus and Other Annual Compensation" provided in
the SEC's standard summary compensation table is omitted because
no such benefits or other compensation were provided.
(2) The Company did not award restricted stock or stock appreciation
rights ("SARs") during fiscal years 1994 and 1995, nor did it
make any payouts pursuant to long-term incentive plans during
such period. Accordingly, the columns for such items provided in
the SEC's standard summary compensation table have been omitted.
The Company has no existing or proposed plan for the provision of
annuity, pension or retirement benefits to its officers and directors.
The Company has no existing or proposed plan involving any incentive
compensation for officers and directors or for stock purchase, profit sharing
or thrift plans for any officer or director.
The Company has no existing or proposed plan or arrangement for any
officer or director to receive remuneration resulting from his resignation,
retirement or other termination or from a change in control of the Company or a
change in the individual's responsibilities after such a change in control.
Further, the Company has not engaged in any transactions with third parties
where the primary purpose of such transaction was to furnish remuneration to
any officer or director of the Company.
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<PAGE> 11
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of March 1,1997, certain information
regarding beneficial ownership of Common Stock by (a) each person known by the
Company to own beneficially more than 5% of its outstanding Common Stock, (b)
each director of the Company, and (c) all directors and officers as a group.
Each person listed below is a director. Each person listed below has sole
voting and dispositive power over the shares indicated.
<TABLE>
<CAPTION>
AMOUNT & NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OUTSTANDING
OF BENEFICIAL OWNER OWNERSHIP SHARES
- ------------------- --------- ------
<S> <C> <C>
Cecil E. Justice.(1)(2) . . . . . . . . . . 5,000,000 59.3
200 Palo Pinto, Suite 108
Weatherford, Texas 76086
William D. Josserand Jr (2). . . . . . . . -0- -0-
200 Palo Pinto, Suite 108
Weatherford, Texas 76086
Michael D. Herrington (2) . . . . . . . . . -0- -0-
200 Palo Pinto, Suite 108
Weatherford, Texas 76086
All officers and directors as a group . . . 5,000,000 59.3
(3 persons)
</TABLE>
- ---------
(1) Owns directly.
(2) Director.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On April 10, 1995 the Company entered into an agreement with Cumberland
Petroleum, Inc., a Texas corporation (Cumberland) pursuant to which, on May 2,
1995 the Company acquired from Cecil E. Justice, 100% of the capital stock of
Cumberland in exchange for 5,000,000 shares of Company common stock. In
connection with this transaction Mr. Justice was elected the president of the
Company and its sole director. Previous officers and directors resigned at the
time of the transaction. Also at the time of this transaction the Company paid
$100,000 and issued 200,000 shares to Capital General Corporation, the former
controlling shareholder of the Company. As a result of this transaction the
Company assumed an approximate $106,000 account receivable from Mr. Justice
that Cumberland had incurred as a result of advances to Mr. Justice. In 1995
this account receivable was reduced to $66,580 as a result of crediting Mr.
Justice for a portion of his salary.
During 1995 and 1996 the Company paid William D. Josserand $74,525 and
$60,369, respectively as compensation and reimbursed expenses for services he
provided as an independent contractor handling field services. Certain of the
payments in 1996 were to Trace Management Inc.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<S> <C>
2.1 agreement dated as of April 10, 1995 between Cumberland Petroleum, Inc.
And Quiescent Corporation, previously filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K dated May 19, 1995, and
incorporated herein by reference.
2.2 Articles of Merger of Cumberland Companies, Inc. and Quiescent
Corporation, a Utah corporation.
3.1 Articles of Incorporation of the Company and amendments filed with the
Secretary of State of Nevada.
3.2 Bylaws of the Company
10.1 Oil and Gas Property Purchase Agreement between the Company and Ford and
Myrt Fullingim Trust dated September 18, 1995.
</TABLE>
11
<PAGE> 12
<TABLE>
<S> <C>
10.2 General Promissory Note by the Company to Ford and Myrt Fullingim Trust
dated September 15, 1995 in the original principal amount of $89,643.
10.3 Oil and Gas Property Purchase Agreement between the Company and O.O.
Thompson and Bea Thompson dated September 18, 1995.
10.4 General Promissory Note by the Company to O.O. Thompson and Bea Thompson
dated September 15, 1995 in the original principal amount of $ 104,198.
10.5 Oil and Gas Property Purchase Agreement between the Company and Randy J.
Mason dated September 18, 1995.
10.6 General Promissory Note by the Company to Randy J. Mason dated September
15, 1995 in the original principal amount of $ 210,001.
10.7 Oil and Gas Property Purchase Agreement between the Company and J. L.
Keas dated September 18, 1995.
10.8 General Promissory Note by the Company to J.L. Keas dated September 15,
1995 in the original principal amount of $ 17,143.
10.9 Oil and Gas Property Purchase Agreement between the Company and Charles
and Romana Hibbs dated September 18, 1995.
10.10 General Promissory Note by the Company to Charles and Romana Hibbs dated
September 15, 1995 in the original principal amount of $ 55,357.
10.11 Oil and Gas Property Purchase Agreement between the Company and J. L.
Thompson dated September 18, 1995.
10.12 General Promissory Note by the Company to J.L. Thompson dated September
15, 1995 in the original principal amount of $ 22,857.
16 Letter dated March [10], 1997 from Hollander, Gilbert & Co., Certified
Public Accountants
21 List of Subsidiaries
27 Financial Data Schedule
</TABLE>
12
<PAGE> 13
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
LONE STAR INTERNATIONAL ENERGY, INC.
By: /s/ Cecil E. Justice
President
March 11, 1997
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<S> <C> <C>
/s/ Cecil E. Justice President, Director March 11, 1997
(Principal executive
officer)
/s/ Michael D. Herrington Chief Financial Officer,
Treasurer, Director March 11, 1997
(Principal accounting
officer)
/s/ William D. Josserand Jr. Vice President of Field
Operations, Secretary
and Director March 11,1997
</TABLE>
13
<PAGE> 14
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholder
Cumberland Petroleum, Inc.
We have audited the accompanying statement of operations, stockholder's
deficiency and cash flows of Cumberland Petroleum, Inc. for the year ended
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of operations, stockholder's
deficiency and cash flows are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement of operations, stockholder's deficiency and cash flows. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
statement of operations, stockholder's deficiency and cash flows. We believe
that our audit of the statement of operations, stockholder's deficiency and cash
flows provides a reasonable basis for our opinion.
In our opinion, the statement of operations, stockholder's deficiency and
cash flows referred to above present fairly, in all material respects, the
results of operations, stockholder's deficiency and cash flows for the year
ended December 31, 1994, in conformity with generally accepted accounting
principles.
/s/ HOLLANDER, GILBERT & CO.
------------------------------------
Hollander, Gilbert & Co.
Los Angeles, California
August 26, 1996
F-1
<PAGE> 15
[DAVIS, KINARD & CO., P.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Cumberland Companies, Inc.
Weatherford, Texas:
We have audited the accompanying consolidated balance sheet of Cumberland
Companies, Inc. and subsidiary as of December 31, 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
The consolidated financial statements for the year ended December 31, 1994,
have been restated to reflect the pooling of interests of Cumberland Petroleum,
Inc. with Cumberland Companies, Inc. (formerly Quiescent Corporation) as
described in Note 2 to the consolidated financial statements. We did not audit
the 1994 financial statements of Cumberland Companies, Inc. or Cumberland
Petroleum, Inc., which statements reflect total revenues of $21,150 for the
year then ended. Those statements were audited by other auditors whose reports
have been furnished to us, and our opinion, insofar as it relates to the
amounts included for Cumberland Companies, Inc. and Cumberland Petroleum, Inc.
for the year ended December 31, 1994, is based solely on the reports of the
other auditors.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cumberland
Companies, Inc. and subsidiary as of December 31, 1995, and the results of its
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
1
<PAGE> 16
As discussed in Note 2, the financial statements are presented on a
consolidated basis due to Cumberland Companies, Inc. (formerly Quiescent
Corporation) acquiring all of the common stock Cumberland Petroleum, Inc. in a
stock for stock exchange.
/s/ DAVIS, KINARD & CO., P.C.
DAVIS, KINARD & CO., P.C.
Abilene, Texas,
February 10, 1997.
2
<PAGE> 17
CUMBERLAND COMPANIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
ASSETS
CURRENT ASSETS:
Accounts receivable - oil and gas revenues $ 42,809
Accounts receivable - JIB, net of allowance of $20,500 21,264
Accounts receivable - related party 264,023
-----------
Total current assets 328,096
-----------
Properties and equipment, at cost 1,631,706
Less - accumulated depreciation, depletion and amortization (26,624)
-----------
Property and equipment, net 1,605,082
-----------
Other assets 225
-----------
TOTAL ASSETS $ 1,933,403
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash overdraft $ 2,660
Accounts payable 80,081
Production payable 126,031
Accrued interest payable 10,948
Accrued payroll taxes payable 15,748
Notes payable 467,963
Accounts payable - interest owners 39,750
-----------
Total current liabilities 743,181
-----------
STOCKHOLDERS' EQUITY:
Common stock - par value $.001, 100,000,000 shares
authorized, 7,796,000 shares issued and outstanding 7,796
Common shares to be issued 271,475
Additional paid in capital 1,497,571
Retained deficit (586,620)
-----------
Total stockholders' equity 1,190,222
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,933,403
===========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
3
<PAGE> 18
CUMBERLAND COMPANIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
REVENUES:
Oil and gas production $ 69,111 $
Operating income 104,355 21,150
----------- -----------
Total revenues 173,466 21,150
----------- -----------
EXPENSES:
Production expenses 111,465
Supervision expenses 35,915 5,693
Depreciation, depletion and amortization 22,415 2,806
General and administrative expenses 567,635 6,437
----------- -----------
Total expenses 737,430 14,936
----------- -----------
Operating income (loss) (563,964) 6,214
OTHER INCOME (EXPENSE)
Other income 237 485
Interest expense (16,817)
----------- -----------
Other income (expense), net (16,580) 485
----------- -----------
Net income (loss) before income taxes (580,544) 6,699
Provision (benefit) for income taxes
----------- -----------
Net income (loss) $ (580,544) $ 6,699
=========== ===========
Net income (loss) per common share $ (0.0865) $ 0.0011
=========== ===========
Weighted average shares outstanding 6,714,452 6,000,000
=========== ===========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
4
<PAGE> 19
CUMBERLAND COMPANIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Common Stock
-------------------------- Stock to Additional Stock Retained
Shares Par value be Issued Paid in Capital (deficit)
----------- ----------- ----------- --------------- -----------
<S> <C> <C> <C>
Balance December 31, 1993,
as previously reported 1,000,000 $ 1,000 $ $ $ (1,000)
Effects of pooling of interest 5,000,000 5,000 (11,775)
----------- ----------- ----------- ----------- -----------
Balance December 31, 1993, as restated 6,000,000 6,000 (12,775)
Net income 6,699
----------- ----------- ----------- ----------- -----------
Balance December 31, 1994 6,000,000 6,000 (6,076)
Issuance of Cumberland Petroleum, Inc.
stock which was exchanged for
restricted common stock 369,000 369 37,500 184,131
Issuance of restricted common stock in
exchange for oil and gas properties 750,000 750 1,107,317
Issuance of restricted common stock,
net of commissions 477,000 477 206,323
Issuance of restricted common stock for
consulting services 200,000 200 (200)
Cash received for restricted common
stock to be issued 233,975
Net loss (580,544)
----------- ----------- ----------- ----------- -----------
Balance December 31, 1995 7,796,000 $ 7,796 $ 271,475 $ 1,497,571 $ (586,620)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
5
<PAGE> 20
CUMBERLAND COMPANIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (580,544) $ 6,699
Adjustments to reconcile net income (loss) to net cash provided by
by operating activities:
Depreciation, depletion and amortization 22,415 2,806
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 6,842 (70,415)
Increase (decrease) in unapplied advances (2,672) (22,328)
Increase (decrease) in accounts payable and accrued expenses 53,080 53,697
Increase (decrease) in revenues payable 92,021 34,010
----------- -----------
Net cash flows provided (used) by operating activities (408,858) 4,469
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in other assets 775 (1,000)
Acquisition of property and equipment (4,002)
Increase in notes receivable (5,733)
Increase in due from related parties (123,756) (114,635)
----------- -----------
Net cash flows (used) by investing activities (126,983) (121,368)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings from interest owners 39,750
Increase in cash overdraft 2,660
Proceeds from the sale of stock 662,775
Payment of notes payable (136,142)
Proceeds from notes payable 74,531
----------- -----------
Net cash flows provided by financing activities 529,293 114,281
----------- -----------
Net (decrease) in cash (6,548) (2,618)
Cash - beginning of year 6,548 9,166
----------- -----------
Cash - end of year $ $ 6,548
=========== ===========
Non-cash financing and investing activities:
Acquisition of oil & gas properties for stock and notes payable
Properties $ 1,608,067 $
Notes payable (500,000)
Common stock (1,108,067)
Supplemental disclosures:
Interest paid 1,070
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
6
<PAGE> 21
CUMBERLAND COMPANIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cumberland Companies, Inc., a Nevada corporation (the Company), was
incorporated in the state of Utah on April 11, 1986 as Quiescent
Corporation. On December 31, 1993, the Company was reincorporated
in the State of Nevada. The Company was in the development state
from incorporation until completion of the reverse acquisition
described in Note 2 on May 2, 1995. The Company is engaged in the
operation of oil and gas properties, as well as the acquisition and
development of oil and gas properties. Operations have been
located entirely in Texas.
Basis of Presentation
The consolidated financial statements include the accounts of
Cumberland Companies, Inc. and its wholly owned subsidiary
Cumberland Petroleum, Inc. Significant intercompany accounts and
transactions have been eliminated in the consolidation.
Oil and Gas Properties
The Company uses the full-cost method of accounting for oil and gas
properties. Under this method, all costs associated with property
acquisition, exploration and development activities are capitalized
within one cost center. For each cost center, the capitalized
costs are subject to a limitation so as not to exceed the present
value of future net revenues from estimated production of proved
oil and gas reserves net of income tax effect plus the lower of
cost or estimated fair value of unproved properties included in the
cost center. Capitalized costs within a cost center, together with
estimates of costs for future development, dismantlement and
abandonment, are amortized on a unit-of-production method using
the proved oil and gas reserves. Gain or loss is recognized only
on the sale of oil and gas properties involving significant
reserves. Proceeds from the sale of insignificant reserves and
undeveloped properties are applied to reduce the costs in the cost
center.
Income Taxes
The Company accounts for certain income and expense items
differently for financial reporting and income tax purposes.
Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets
and liabilities applying enacted statutory tax rates in effect for
the year in which the differences are expected to reverse.
Cumberland Petroleum, Inc. was taxed as an S corporation prior to
being acquired by the Company.
7
<PAGE> 22
CUMBERLAND COMPANIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results
will differ from those estimates, and such differences may be
material to the financial statements.
Significant estimates inherent in the preparation of the
accompanying consolidated financial statements include the reserve
valuation of the oil and gas properties. It is reasonably possible
that oil and gas prices will change, that the costs of future
development could increase and that the quantities produced will
change. These changes could change management's decisions
regarding future development and production of the reserves.
Equipment
Depreciation of other equipment is provided using accelerated
methods over the estimated useful life of the equipment.
Income (Loss) Per Share
Net income (loss) per share is based on 6,714,452 weighted average
shares in 1995 and 6,000,000 shares in 1994. The shares issued in
the acquisition are reflected as being outstanding for all of 1994
and 1995 since the acquisition was treated as a pooling of
interests. In addition, cash received for stock which had not been
issued at December 31, 1995 was treated as if the shares had been
issued. Earnings per share for 1994 have been restated to include
the net income of Cumberland Petroleum, Inc.
NOTE 2: REVERSE MERGER ACQUISITION
The Company entered into an Agreement dated as of April 10, 1995,
with Cumberland Petroleum, Inc., a Texas corporation (Cumberland),
pursuant to which, on May 2, 1995 the Company acquired from C.E.
Justice, 100% of the capital stock of Cumberland in exchange for
the issuance of 5,000,000 shares of the Company's common stock.
The Company changed its name to Cumberland Holdings, Inc. on May 3,
1995, and to Cumberland Companies, Inc. on August 17, 1995.
8
<PAGE> 23
CUMBERLAND COMPANIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2: REVERSE MERGER ACQUISITION - (continued)
For accounting purposes, the transaction has been treated as a
recapitalization of Cumberland with Cumberland as the acquirer
(reverse acquisition). This has been recorded as a pooling of
interests. The financial statements presented have been restated
to include the Company and Cumberland. The historical financial
statements prior to May 2, 1995 are those of Cumberland. The
historical stockholder's equity accounts of Cumberland at December
31, 1993 have been retroactively restated to reflect the equivalent
number of shares of common stock received in this transaction after
giving effect to the difference in par value.
In conjunction with the reverse acquisition, Cumberland agreed to
issue 200,000 shares of common stock to the former controlling
shareholder and paid consulting fees of $100,000 to the former
controlling shareholder. The shares issued were not assigned any
value.
Combined and separate results of the Company and Cumberland during
the periods preceding the merger were as follows:
<TABLE>
<CAPTION>
Company CPI Combined
-------- -------- --------
<S> <C> <C> <C>
Four Months Ended
April 30, 1995 (Unaudited)
Revenue $ -- $ 46,550 $ 46,550
Net loss -- (20,526) (20,526)
</TABLE>
NOTE 3: NOTES PAYABLE
Notes payable include the following at December 31, 1995:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Unsecured notes payable to two stockholders, due
December 31, 1995, with interest at 8.5% $ 75,593
Notes payable to five stockholders, secured by oil and gas
properties, interest at 7% due monthly beginning November 15, 1995
with the principal due September 15, 1996. At the option of
the stockholders, the maturity date can be extended 363,857
Unsecured loans, non-interest bearing, payable on demand 28,513
--------
Total $467,963
========
</TABLE>
9
<PAGE> 24
CUMBERLAND COMPANIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4: INCOME TAXES
Income before taxes and provisions for income tax expense (benefit)
from operations at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Current federal income taxes $ $
Deferred federal income taxes
Current state income taxes
-------- --------
Total $ $
======== ========
</TABLE>
The actual income tax expense attributable to operations for the
years ended December 31, 1995 and 1994 differed from the amounts
computed by applying the U.S. federal tax rate of 34 percent to
pretax earnings as a result of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Computed expected tax expense $ $ 2,278
Effect of S Corporation (2,278)
-------- --------
Provision (benefit) for income tax $ $
======== ========
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss $ 135,000 $
Accounts receivable allowance 5,125
Less valuation allowance (140,125)
--------- --------
Net deferred tax assets $ $
======== ========
</TABLE>
Deferred income taxes reflect the tax consequences on future years
of differences between the tax bases of assets and liabilities and
their bases for financial reporting purposes. In addition,
Statement of Financial Accounting Standards No. 109 (SFAS 109)
requires the recognition of future tax benefits, such as net
operating loss carryforwards (NOLs), to the extent that realization
of such benefits are more likely than not.
10
<PAGE> 25
CUMBERLAND COMPANIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4: INCOME TAXES - (continued)
The Company had NOLs of approximately $540,000 at December 31,
1995. These NOLs expire in 2012. A deferred tax asset was
recorded assuming that the benefits will be utilized at an average
rate of 25%. The full amount of the deferred tax asset was offset
by a valuation allowance due to the lack of operating history for
the Company and the need to raise additional funds to develop the
current oil and gas properties.
NOTE 5: RELATED PARTY TRANSACTIONS
During 1995 certain individuals and their companies became related
parties due to them acquiring stock in various transactions. These
individuals previously were investors in oil and gas properties
operated by the Company or contracted to provide services to the
Company. Many of the receivable or payable balances existed at the
beginning of the year.
At December 31, 1995, there were accounts receivable from officers
and stockholders for amounts advanced to them and for amounts due
on joint interest billings amounting to $264,023. In addition,
there were amounts due to officers and stockholders primarily for
undistributed oil and gas production. Substantially all of the
liability can be offset against the joint interest billing
receivable noted above. As discussed in Note 3, there are notes
payable with stockholders totaling $439,450 and accrued interest
payable of $10,948.
As discussed in Note 2, the Company paid consulting fees of
$100,000 and issued 200,000 shares of common stock to Capital
General Corporation, the former controlling shareholder.
NOTE 6: PROPERTIES AND EQUIPMENT
At December 31, 1995, properties and equipment consisted of the
following:
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Oil and gas properties $ 1,608,067
Office equipment 3,294
Equipment 20,345
-----------
1,631,706
Accumulated depreciation, depletion and amortization (26,624)
-----------
Net properties and equipment $ 1,605,082
===========
</TABLE>
11
<PAGE> 26
CUMBERLAND COMPANIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7: FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has a number of financial instruments, none of which
are held for trading purposes. The following methods and
assumptions were used by the Company in determining its fair value
disclosures for financial instruments:
Accounts receivable, cash overdraft and accounts and revenue
payable - It is assumed that the amounts will be settled within the
next operating cycle for the recorded amounts. Consequently, the
recorded amounts approximate fair value.
Accounts receivable related party - Since the amounts are not due
from third parties, the payment terms are subject to change. It is
not practicable to estimate fair value.
Notes payable - Notes payable are primarily due to stockholders.
Since the amounts are not payable to an independent third party, it
is not practicable to determine the fair value of the notes
payable.
NOTE 8: OIL AND GAS PRODUCING ACTIVITIES
Capitalized Costs
Capitalized cost associated with oil and gas producing activities
are as follows at December 31, 1995:
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Proved properties $ 1,608,067
Accumulated depreciation, depletion and amortization (19,238)
-----------
Net capitalized costs $ 1,588,829
===========
</TABLE>
12
<PAGE> 27
CUMBERLAND COMPANIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8: OIL AND GAS PRODUCING ACTIVITIES - (continued)
Costs Incurred
Information relating to the Company's costs incurred in its oil and
gas operations is summarized as follows for the years ended
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Property acquisition $1,608,067 $
</TABLE>
Acquisition of Oil and Gas Properties
In September 1995 the Company purchased working interests in
several oil and gas properties in exchange for 750,000 shares of
restricted common stock valued at $1,108,067 and $500,000 in notes
payable. A portion of the interests acquired were, in effect,
acquired from the controlling shareholder. The values utilized to
record this transaction were based on a reserve evaluation
performed by an independent petroleum engineer for interests
acquired from third parties and the cost of the properties for the
interests acquired, in effect, from the controlling shareholder.
All of the Company's oil and gas properties were acquired in
September 1995. There were no sales of oil and gas properties in
1995 and no allowance for impairment was deemed necessary. Several
of the properties acquired were plugged during 1996; however, no
loss will be recognized for these retirements.
13
<PAGE> 28
CUMBERLAND COMPANIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8: OIL AND GAS PRODUCING ACTIVITIES - (continued)
Results of Operations
Results of operations for oil and gas producing activities are as
follows for the years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Revenues $ 69,111 $
Production costs (111,465)
Depreciation and depletion (19,238)
---------- ----------
(61,592)
Net income tax
---------- ----------
Results of operations (excluding corporate overhead
and interest costs) $ (61,592) $
========== ==========
</TABLE>
Unaudited Oil and Gas Reserve Quantities
The following unaudited reserve estimates presented as of December
31, 1995 (first year with production) were prepared by Harper &
Associates, Inc., an independent petroleum engineer, as of
September 1, 1995 and adjusted for production between then and year
end. There are many uncertainties inherent in estimating proved
reserve quantities and in projecting future production rates and
the timing of development expenditures. In addition, reserve
estimates of new discoveries that have little production history
are more imprecise than those of properties with more production
history. Accordingly, these estimates are expected to change as
future information becomes available.
Proved oil and gas reserves are the estimated quantities of crude
oil, condensate, natural gas and natural gas liquids which
geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions.
Proved developed oil and gas reserves are those reserves expected
to be recovered through existing wells with existing equipment and
operating methods.
14
<PAGE> 29
CUMBERLAND COMPANIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8: OIL AND GAS PRODUCING ACTIVITIES - (continued)
Unaudited net quantities of proved reserves and proved developed
reserves of crude oil (including condensate) and natural gas (all of
which are located within the state of Texas) are as follows:
<TABLE>
<CAPTION>
Changes in Proved Reserves (Bbls) (MCF)
-------------------------- -------- ---------
<S> <C> <C>
Estimated quantity, December 31, 1994
Purchase of reserves 110,954 3,828,827
Production (879) (32,477)
------- ---------
Estimated quantity, December 31, 1995 110,075 3,796,350
======= =========
</TABLE>
Unaudited Standardized Measure
The following table presents a standardized measure of the discounted
future net cash flows attributable to the Company's proved oil and gas
reserves. Future cash inflows were computed by applying year end
prices of proved oil and gas reserves. The future production and
development costs represent the estimated future expenditures (based
on current costs) to be incurred in developing and producing the
proved reserves, assuming continuation of existing economic
conditions. Future income tax expenses were computed by applying
statutory income tax rates to the difference between pretax net cash
flows relating to the Company's proved oil and gas reserves and the
tax basis of proved oil and gas properties and available net operating
loss carry forwards. Discounting the future net cash inflows at an
arbitrary 10% is a method to measure the impact of the time value of
money.
<TABLE>
<CAPTION>
1995 1994
---- ----
(In thousands)
<S> <C> <C>
Future cash inflows $ 7,900 $
Future production costs (2,797)
Future development costs (1,222)
Future income tax expense (1,319)
------- ------
Future net cash flows 2,562
10% annual discount for estimated timing of
cash flows (875)
------- ------
Standardized measure of discounted future net
cash flows $1,687
======= ======
</TABLE>
15
<PAGE> 30
CUMBERLAND COMPANIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8: OIL AND GAS PRODUCING ACTIVITIES - (continued)
The following presents the principal sources of the changes in the
standardized measure of discounted future net cash flows for the years
ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
(In Thousands)
<S> <C> <C>
Standardized measure of discounted future
net cash flows, beginning of year $ $
Purchase of reserves in place 2,585
Sales and transfers of oil and gas produced,
net of production costs (20)
Net change in income taxes (869)
Other (9)
------ ------
Standardized measure of discounted future
net cash flows, end of year $1,687 $
====== ======
</TABLE>
NOTE 9: SUBSEQUENT EVENTS
On January 30, 1997, the Company entered into a letter of intent with
Energy Reclaim Refrigeration, Inc. (Energy) to acquire all of the
outstanding stock of Energy in exchange for 3,333,333 shares of the
Company's restricted common stock. The only assets of Energy currently
are various patents. The Company also agreed to enter into an
employment agreement with Calvin Cline, the sole shareholder of Energy.
The Company is to provide manufacturing facilities, working capital and
marketing services.
16
<PAGE> 31
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
2.1 Agreement dated as of April 10, 1995 between Cumberland
Petroleum, inc. And Quiescent Corporation, previously filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K dated May
19, 1995, and incorporated herein by reference.
2.2 Articles of Merger of Cumberland Companies, Inc. and Quiescent
Corporation, a Utah corporation.
3.1 Articles of Incorporation of the Company and amendments filed
with the Secretary of State of Nevada.
3.2 Bylaws of the Company
10.1 Oil and Gas Property Purchase Agreement between the Company and
Ford and Myrt Fullingim Trust dated September 18, 1995.
10.2 General Promissory Note by the Company to Ford and Myrt Fullingim
Trust dated September 15, 1995 in the original principal amount
of $89,643.
10.3 Oil and Gas Property Purchase Agreement between the Company and
O.O. Thompson and Bea Thompson dated September 18, 1995.
10.4 General Promissory Note by the Company to O.O. Thompson and Bea
Thompson dated September 15, 1995 in the original principal
amount of $ 104,198.
10.5 Oil and Gas Property Purchase Agreement between the Company and
Randy J. Mason dated September 18, 1995.
10.6 General Promissory Note by the Company to Randy J. Mason dated
September 15, 1995 in the original principal amount of $ 210,001.
10.7 Oil and Gas Property Purchase Agreement between the Company and
J. L. Keas dated September 18, 1995.
10.8 General Promissory Note by the Company to J.L. Keas dated
September 15, 1995 in the original principal amount of $ 17,143.
10.9 Oil and Gas Property Purchase Agreement between the Company and
Charles and Romana Hibbs dated September 18, 1995.
10.10 General Promissory Note by the Company to Charles and Romana
Hibbs dated September 15, 1995 in the original principal amount
of $ 55,357.
10.11 Oil and Gas Property Purchase Agreement between the Company and
J. L. Thompson dated September 18, 1995.
10.12 General Promissory Note by the Company to J.L. Thompson dated
September 15, 1995 in the original principal amount of $ 22,857.
16 Letter dated March [10], 1997 from Hollander, Gilbert & Co.,
Certified Public Accountants
21 List of Subsidiaries
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 2.2
ARTICLES OF MERGER
OF
CUMBERLAND COMPANIES, INC.
As provided for under Nevada Revised Statute Section 78.458,
Cumberland Companies, Inc. (name changed from Quiescent Corporation), a Nevada
corporation, as the surviving corporation of the planned merger herein submits
to the Secretary of State the following ARTICLES OF MERGER as acknowledged by
the President and the Secretary of the corporation.
1. Quiescent Corporation, a Utah corporation, is located at 3760 So.
Highland Drive, Suite 300, Salt Lake City, Utah 84106 and is being merged into
and survived by the Nevada corporation, as the acquiring corporation with its
registered place of business at 1800 E. Sahara, Suite 107, Las Vegas, Nevada
89104.
2. The plan of merger has been adopted by the board of directors of each
corporation.
3. Approval by the stockholders of the Nevada corporation was not required
as set forth in Section 78.454 inasmuch as the shares and rights of the
stockholders of the Nevada corporation will not change.
4. Approval by the stockholders of the Utah corporation was required, and
after approval by the board of directors, the plan was submitted to the
stockholders at a special meeting on December 30, 1993, with the voting as
follows: At the time of the meeting there were 1,000,000 shares outstanding and
entitled to vote, 844,800 shares were present in person or by proxy and that
844,800 shares voted in favor of the plan and no shares voted against the plan.
5. There are no amendments to the Articles of Incorporation of the
surviving corporation.
6. A copy of the Plan of Merger is attached.
<PAGE> 2
We, the undersigned, being the President and the Secretary, do
make and file these Articles of Merger, hereby declaring and certifying that
the facts herein stated are true, and accordingly have hereunto set our hand.
/s/ KRISTA CASTLETON
-----------------------------------
Krista Castleton, President
/s/ DAVID R. YEAMAN
- ------------------------------
David R. Yeaman, Secretary
STATE OF UTAH )
: ss
County of Salt Lake )
On this 30th day of December, 1993, before me, a notary public,
personally appeared Krista Castleton and David R. Yeaman, known to me to be the
persons whose names are subscribed to the within document, and acknowledge that
they executed the same.
/s/ PETER W. GUYON
- ------------------------------
Notary Public
[SEAL]
<PAGE> 3
PLAN OF MERGER
OF
CUMBERLAND COMPANIES, INC.
SUBJECT TO THE NEVADA REVISED STATUTES SECTION 78.451 THE NEVADA
CORPORATION HEREIN SUBMITS ITS PLAN OF MERGER AS APPROVED BY THE BOARD OF
DIRECTORS AND A MAJORITY OF THE STOCKHOLDERS.
1. NAME:
It is the intent of Quiescent Corporation, incorporated in the State of
Utah, to merge into and to be survived by the Nevada corporation, a corporation
organized under the laws of the State of Nevada, and to hence forth be known
and on record as Cumberland Companies, Inc. (name changed from Quiescent
Corporation).
2. TERMS AND CONDITIONS:
The terms and conditions of the merger, as negotiated by the board of
directors and approved by the majority of the stockholders, is as follows:
(a) That Quiescent Corporation, a Utah corporation, merge into
and be survived by the Nevada corporation, and that the stockholders of the
Utah corporation will now hold the same number of shares in the Nevada
corporation with identical designations, preferences, limitations, and relative
rights after the merger.
(b) That the stockholders in Quiescent Corporation, a Utah
corporation, will receive one share of the Nevada corporation, in exchange for
one share of the Utah corporation.
(c) Merger of the Utah corporation into the Nevada corporation
is permissible under Utah law Section 16-10A-1107(1)(a).
<PAGE> 4
(d) Subject to NRS Section 78.454, approval by the
stockholders of the Nevada corporation, is not required for the merger,
inasmuch as the articles of incorporation of the Nevada corporation will not
differ from its articles before the merger.
(e) Each stockholder in the Nevada corporation, whose shares
were outstanding immediately before the effective date of the merger, will hold
the same number of shares with identical designations, preferences,
limitations, and relative rights immediately after the merger.
(f) The number of voting shares outstanding immediately after
the merger, plus the number of voting shares issuable as a result of the merger
do not exceed more than twenty percent (20%) of the total number of voting
shares outstanding immediately before the merger.
(g) The number of participating shares outstanding immediately
after the merger, plus the number of participating shares issuable as a result
of the merger do not exceed more than twenty percent (20%) of the total number
of participating shares outstanding immediately before the merger.
QUIESCENT CORPORATION (Utah)
/s/ KRISTA CASTLETON
------------------------------------------
President
QUIESCENT CORPORATION (Nevada)
/s/ KRISTA CASTLETON
------------------------------------------
President
<PAGE> 5
CERTIFICATE OF MERGER
OF
QUIESCENT CORPORATION
Pursuant to Utah Code Ann. Section 16-10A-1107(1)(a), the merger of
Quiescent Corporation, a Utah corporation, into Quiescent Corporation, a Nevada
corporation, is permitted under Nevada Revised Statutes Section 78.461.
As required under Section 16-10A-1107(l)(c), the following corporation
complies with Utah Code Ann. Section 16-10A-1105 as is evidenced by the
accompanying documents attached hereto filed with the State of Nevada. Further,
in compliance with this section, the principal address of Quiescent Corporation,
the Nevada corporation is 1800 E. Sahara, Suite 107, Las Vegas, Nevada 89104.
In compliance with Section 16-10A-1107(2), Quiescent Corporation, the
Nevada corporation, herein provides to the State of Utah a registered agent
within the state to accept service in any proceeding at: 3760 So. Highland
Drive, Suite 300, Salt Lake City, Utah 84106.
Under penalties of perjury, I declare that this Certificate of Merger
has been examined by me and are, to the best of my knowledge and belief, true
and correct and complete.
Dated: December 30, 1993
By: /s/ KRISTA CASTLETON
------------------------------
Krista Castleton, President
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
QUIESCENT CORPORATION
Know all men by these presents;
That I, the undersigned, acting as incorporator for the purpose of
forming a corporation under and pursuant to the provisions of Nevada Revised
Statutes 78.010 to Nevada Revised Statutes 78.090 inclusive, as amended, and
certify that;
ARTICLE I
The name of this corporation is QUIESCENT CORPORATION.
The name and post office address of the incorporator signing the
Articles of Incorporation is: Krista Castleton, 3760 So. Highland Drive, Suite
300, Salt Lake City, Utah, 84106. The name and address of the first member of
the First Board of Directors is: Krista Castleton, 3760 So. Highland Drive,
Suite 300, Salt Lake City, Utah, 84106.
ARTICLE II
The Resident Agent of this corporation in Nevada shall be Nevada
Corporate Services located at 1800 E. Sahara, Suite 107, Las Vegas, Clark
County, Nevada, 89104. Offices for the transaction of any business of the
Corporation, and where meetings of the Board of Directors and of Stockholders
may be held, may be established and maintained in any other part of the State
of Nevada, or in any other state, territory or possession of the United States
of America, or in any foreign country as the Board of Directors may, from time
to time determine.
ARTICLE III
The nature of the business and the objects and purpose proposed to be
transacted, promoted or carried on by the Corporation is to conduct any lawful
activity in accordance with the Laws of the State of Nevada and
1
<PAGE> 2
the United States of America, including but not limited to inventing,
developing, marketing, and otherwise exploiting high technology electronic
communication systems, both hardware and software components, particularly
systems utilizing security coding and protective transmitting and receiving.
To do each and everything necessary, suitable or proper for the
accomplishment of any of the foregoing purposes or the attainment of any one or
more of the subjects hereinabove enumerated, or which may at any time appear
conducive to or expedient for the protection or benefit of this Corporation,
and to do such acts as fully and to the same extent as natural persons might,
or could do, in any part of the world as principals, agents, partners,
trustees, or otherwise, either alone or in conjunction with any other person,
association or corporation. The period of duration of this Corporation is
perpetual.
The foregoing clauses shall be construed as powers as well as objects
and purposes and the matters expressed in each clause shall, unless herein
otherwise expressly provided, be in no wise limited by reference to or
inference from the terms of any other clause shall be regarded as independent
objects, purposes and powers and the enumeration of specific objects, purposes
and powers shall not be construed to limit or restrict in any manner the
meaning of the general terms or the general powers of the Corporation nor shall
the expression of one thing be deemed to exclude another not expressed although
it be of like nature.
ARTICLE IV
The aggregate number of shares which the Corporation shall have
authority to issue is 100,000,000 shares, having a par value of $0.001 (one
mill) per share. The stock shall be designated as Class "A" voting common stock
and shall have the same rights and preferences. The stock of the Corporation
shall be nonassessable. Fully paid stock of this Corporation shall not be
liable for any further call or assessment. The total capitalization of the
Corporation shall be $100,000. The shares of Class "A" common stock shall not
be divided into classes and may not be issued in series.
ARTICLE V
No stockholder of the Corporation shall, because of his ownership of
stock, have a pre-emptive or other
2
<PAGE> 3
right to purchase, subscribe for or take part of any of the notes, debentures,
bonds or other securities convertible into or carrying options for warrants to
purchase stock of the Corporation issued, optioned or sold by it after its
incorporation, except as may be otherwise stated in these Article of
Incorporation. Any part of the capital stock and any part of the notes,
debentures, bonds, or other securities convertible into or carrying options or
warranties to purchase stock of the Corporation authorized by these Articles of
Incorporation or by an amended certificate duly filed may at any time be
issued, optioned for sale and sold or disposed of by the Corporation pursuant
to the resolution of its Board of Directors to such persons and upon such terms
as may to such Board of Directors seem proper, without first offering such
stock or securities or any part thereof to existing stockholders, except as
required in Article IV of these Articles of Incorporation.
ARTICLE VI
Each outstanding share of the class "A" common stock of the Corporation
shall be entitled to one vote on each matter submitted to a vote at a meeting
of the stockholders. Each shareholder shall be entitled to vote his or its
shares in person or by proxy, executed in writing by such shareholder or by its
duly authorized attorney in fact. At each election for directors, every
shareholder entitled to vote at such election shall have the right to vote in
person or by proxy, the number of shares owned by him or it for as many persons
as there are directors to be elected and for whose election he or it has the
right to vote, but the shareholder shall have no right, whatsoever, to
accumulate his or its votes with regard to such election.
ARTICLE VII
The members of the governing board of this corporation shall be called
directors. The Board of Directors shall consist of at least one (1) person. The
number of directors of this corporation may, from time to time, be increased or
decreased by an amendment to the By-Laws in that regard and without the
necessity of amending the Articles of Incorporation. A majority of the
Directors in office, present at any meeting of the Board of Directors, duly
called, whether regular or special, shall always constitute a quorum for the
transaction of business, unless the By-Laws otherwise provide. Directors need
not be residents of the State of Nevada or
3
<PAGE> 4
stockholders of the Corporation.
ARTICLE VIII
This Corporation shall have a president, a secretary, a treasurer, and a
resident agent, to be chosen by the Board of Directors, any person may hold two
or more offices.
ARTICLE IX
The capital stock of the Corporation, after the fixed consideration
thereof has been paid or performed, shall not be subject to assessment, and the
individual stockholders of this Corporation shall not be individually liable
for the debts and liabilities of the Corporation, and the Articles of
Incorporation shall never be amended as to the aforesaid provisions.
ARTICLE X
The Board of Directors is expressly authorized: (subject to the By-Laws,
if any, adopted by the Stockholders)
1) To make, alter or amend the By-Laws of the Corporation.
2) To fix the amount in cash or otherwise, to be reserved as working
capital.
3) To authorize and cause to be executed mortgages and liens upon
the property and franchises of the Corporation.
4) To by resolution or resolutions passed by a majority of the whole
board, designate one or more committees, each committee to consist of one or
more of the Directors of the Corporation, which, to the extent provided in the
resolution or resolutions or in the By-Laws of the Corporation, shall have and
may exercise the powers of the Board of Directors in the management of the
business and affairs of the Corporation, and may have power to authorize the
seal of the Corporation to be affixed to all papers on which the Corporation
desires to place a seal. Such committee or committees shall have such name or
names as may be stated in the ByLaws of the Corporation or as may be determined
from time to time by resolution adopted by the Board of
4
<PAGE> 5
Directors.
5) To sell, lease or exchange all of its property and assets,
including its goodwill and its corporate franchises, upon such terms and
conditions as the board deems expedient and for the best interests of the
Corporation, when and as authorized by the affirmative vote of the stockholders
holding stock in the Corporation entitling them to exercise at least a majority
of the voting power given at a stockholders meeting called for that purpose.
ARTICLE XI
In the absence of fraud, no contract or other transaction of the
Corporation shall be affected by the fact that any of the Directors are in any
way interested in, or connected with, any other party to such contract or
transaction, or are themselves, parties to such contract or transaction,
provided that this interest in any such contract or transaction of any such
director shall at any time be fully disclosed or otherwise known to the Board
of Directors, and each and every person who may become a director of the
Corporation is hereby relieved of any liability that might otherwise exist from
contracting with the Corporation for the benefit of himself or any firm,
association or corporation in which he may be in any way interested.
ARTICLE XII
No director or officer of the Corporation shall be personally liable to
the Corporation or any of its stockholders for damages for breach of fiduciary
duty as a director or officer involving any act or omission of any such
director or officer provided, however, that the foregoing provision shall not
eliminate or limit the liability of a director or officer for acts or omissions
which involve intentional misconduct, fraud or a knowing violation of law, or
the payment of dividends in violation of Section 78.300 of the Nevada Revised
Statutes. Any repeal or modification of this Article by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director or officer of the
Corporation for acts or omissions prior to such repeal or modification.
5
<PAGE> 6
I, the undersigned, being the incorporator hereinbefore named for the
purpose of forming a corporation pursuant to the general corporation law of the
State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand.
/s/ KRISTA CASTLETON
------------------------------
State of Utah )
) ss
County of Salt Lake )
On December 29, 1993 personally appeared before me, the undersigned, a
Notary Public, Krista Castleton, known to me the person whose name is
subscribed to the foregoing document and acknowledged to me that she executed
the same.
/s/ DAVID R. YEAMAN
------------------------------
Notary Public
[SEAL]
---------------------------------------
NOTARY PUBLIC
DAVID R. YEAMAN
8818 SOUTH RENEGADE ROAD
SANDY, UT 84093
My Commission Expires April 28, 1997
State of Utah
---------------------------------------
[SEAL]
----------------------------------------
STATE OF NEVADA
Department of
State
I hereby certify that this is a true and
complete copy of the document as
filed in this office.
DATE: DEC 30, 1993
----------------------------
/s/ CHERYL A. LAU
CHERYL A. LAU
Secretary of State
By /s/ BEVERLY J. DAVENPORT
------------------------------
----------------------------------------
6
<PAGE> 7
AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
QUIESCENT CORPORATION
(NAME CHANGED HEREIN TO CUMBERLAND HOLDINGS, INC.)
WHEREAS, there was issued by the Secretary of State a Charter as of
April 11, 1986, constituting and creating QUIESCENT CORPORATION, a corporation
now organized under the laws of this state with its principal place of business
in Las Vegas, Nevada, and a capital stock of One Hundred Thousand Dollars
($100,000.00), divided into One Hundred Million (100,000,000) shares of a par
value of one mill (1/10 cent) each, empowering it to engage in the business of
venture capital and investing in high risk enterprises.
The undersigned, being the President and also the Secretary of
QUIESCENT CORPORATION hereby certify that the special meeting of shareholders
was held on May 2, 1995. At the time of the meeting there were 6,000,000 shares
outstanding and entitled to vote, 5,844,800 shares present in person or by
proxy and that 5,844,800 shares voted in favor of, no shares voting against,
amending the Articles of Incorporation as follows:
That Article I, be amended and changed to read as follows:
Name: The name of the Corporation is CUMBERLAND HOLDINGS, INC.
WHEREFORE, they pray that the Articles of Incorporation of QUIESCENT
CORPORATION be so amended.
<PAGE> 8
DATED this 2nd day of May, 1995.
/s/ C.E. JUSTICE
- --------------------------------------
C.E. Justice, President and Secretary
STATE OF TEXAS )
: ss
County of )
On this 2nd day of May, 1995, before me, a notary public, personally
appeared C.E. Justice, known to me to be the person whose name is subscribed to
the within document, and acknowledge that he executed the same.
/s/ IDOMA S. BUSH
- --------------------------------------
Notary Public
(SEAL)
----------------------------
IDOMA S. BUSH
NOTARY PUBLIC
STATE OF TEXAS
Commission Expires 7-23-96
----------------------------
<PAGE> 9
THIS FORM SHOULD ACCOMPANY AMENDED AND RESTATED ARTICLES OF
INCORPORATION FOR A NEVADA CORPORATION
1) Name of Corporation Quiescent Corporation
2) Date of adoption of Amended or Restated Articles May 2, 1995
3) If the Articles were amended, please indicate what changes were made:
a) Was there a name change? Yes [x] No [ ] If yes, what is the
new name?
Cumberland Holdings, Inc.
----------------------------------
b) Did you change the Resident Agent? Yes [ ] No [x] If yes,
Please indicate the new Resident Agent and address
Nevada Corporate Services __________________________
1800 E. Sahara Suite 107 Las Vegas, NV 89104 _______
c) Did you change the purpose? Yes [ ] No [x] Did you add
Banking? [ ] Gaming? [ ] Insurance? [ ] None of these? [ ]
d) Did you change the capital stock? Yes [ ] No [x] If yes, what
is the new capital stock?
----------------------------------
e) Did you change the Directors? Yes [x] No [ ] If yes, indicate
the change:
C.E. Justice
----------------------------------
----------------------------------
f) Did you add the directors liability provision? Yes [ ] No [x]
g) Did you change the period of existence? Yes [ ] No [x]
If yes, what is the new existence?
----------------------------------
h) If none of the above apply, and you have amended or modified
the Articles of Incorporation, how did you change the Articles?
----------------------------------
----------------------------------
/s/ C.E. JUSTICE President/Secretary May 2, 1995
------------------------------------------------------------------------
Name and Title of Officer Date
------------------------------------------------------------------------
Name and Title of Officer Date
Acknowledgement
State of
County of
On personally appeared before me, a Notary Public, the above
signors, acknowledged they executed the above instrument on behalf of said
Corporation
/s/ IDOMA S. BUSH
----------------------------------------
NOTARY PUBLIC
(SEAL)
--------------------------
IDOMA S. BUSH
NOTARY PUBLIC
STATE OF TEXAS
Commission Expires 7-23-96
--------------------------
RECEIVED
MAY 02 1995
Secretary of State
<PAGE> 10
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(AFTER ISSUANCE OF STOCK)
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
AUG 17, 1995
1757393
CUMBERLAND HOLDINGS, INC.
-----------------------------------
Name of Corporation
We the undersigned C E Justice President and
C E Justice Secretary of
Cumberland Holdings, Inc. Corporation do hereby certify:
That the Board of Directors of said corporation at a meeting duly convened,
held Aug 14, 95 adopted a resolution to amend the original Articles of
Incorporation:
Article I
The Name of The Corporation is:
Cumberland Companies, Inc.
The number of shares outstanding and entitled to vote on an amendment of the
Articles of Incorporation is 10,000: that the said change(s) and amendment have
been consented to and approved by a majority of stockholders holding at least a
majority of each class of stock outstanding and entitled to vote thereon.
C. E. Justice
---------------------------
President
C. E. Justice
---------------------------
Secretary
ACKNOWLEDGMENT;
STATE OF
COUNTY OF
On 8/18/95 personally appeared before me, a Notary Public,
, acknowledged he executed the above instrument on behalf of said Corporation.
/s/ JANE ANN HOLDER
---------------------------
NOTARY PUBLIC
<PAGE> 11
THIS FORM SHOULD ACCOMPANY AMENDED AND RESTATED
ARTICLES OF INCORPORATION FOR A NEVADA CORPORATION
1) Name of Corporation Cumberland Holdings, Inc.
--------------------------------------------------
2) Date of adoption of Amended or Restated Articles Aug 14, 95
---------------------
3) If the Articles were amended, please indicate what changes were made:
a) Was there a name change? Yes [X] No [ ] If yes, what is the
new name?
Cumberland Companies, Inc.
--------------------------------------------------------------
b) Did you change the Resident Agent? Yes [ ] No [X] If yes,
Please indicate the new Resident Agent and address.
Nevada Corporate Services
--------------------------------------------
1800 E. Sahara Suite 107 Las Vegas, NV 89104
--------------------------------------------
c) Did you change the purpose? Yes [ ] No [X] Did you add
Banking? [ ] Gaming? [ ] Insurance? [ ] None of these? [ ]
d) Did you change the capital stock? Yes [ ] No [X] If yes,
what is the new capital stock?
--------------------------------------------
e) Did you change the Directors? Yes [ ] No [X] If yes, indicate
the change:
--------------------------------------------
--------------------------------------------
f) Did you add the directors liability provision? Yes [ ] No [X]
g) Did you change the period of existence? Yes [ ] No [X] If yes,
what is the new existence?
--------------------------------------------
h) If none of the above apply, and you have amended or modified the
Articles of Incorporation, how did you change the Articles?
--------------------------------------------
--------------------------------------------
/s/ C.E. JUSTICE President 8-15-95
----------------------------------------------------------------------
Name and Title of Officer Date
/s/ C.E. JUSTICE Secretary 8-15-95
----------------------------------------------------------------------
Name and Title of Officer Date
ACKNOWLEDGMENT,
STATE OF
COUNTY OF
On 8/18/95, personally appeared before me, a Notary Public,
, acknowledged he executed the above instrument on behalf of said Corporation.
/s/ JANE ANN HOLDER
-------------------------------
NOTARY PUBLIC
<PAGE> 12
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After issuance of Stock)
CUMBERLAND COMPANIES, INC.
-----------------------------------------------
Name of Corporation
We the undersigned C. E. JUSTICE, President and
-------------------------------------------
C. E. JUSTICE, Secretary of
- --------------------------------------------------------------
CUMBERLAND HOLDINGS, INC.
- --------------------------------------------------------------
do hereby certify:
That the Board of Directors of said corporation at a meeting duly convened,
held August 25, 1995 adopted a resolution to amend the original Articles of
Incorporation:
Amendment files on Aug 17, 1995
Set forth incorrect number of shares voting on Amendment
The correct number of shares is 6,222,000
The number of shares outstanding and entitled to vote on an amendment of the
Articles of Incorporation is 6,222,000 as of 6-30-95: that the said change(s)
and amendment have been consented to and approved by a majority of stockholders
holding at least a majority of each class of stock outstanding and entitled to
vote thereon.
/s/ C. E. JUSTICE
------------------------------------------------
C. E. JUSTICE
President
/s/ C. E. JUSTICE
------------------------------------------------
C. E. JUSTICE
Secretary
ACKNOWLEDGMENT,
STATE OF TEXAS
COUNTY OF DALLAS
On 8-25-95, personally appeared before me, a Notary Public, C. E. JUSTICE,
, acknowledged he executed the above instrument on behalf of said Corporation.
/s/ LISA C. COUNTRYMAN
-----------------------------
NOTARY PUBLIC
(SEAL)
- ----------------------------
LISA C. COUNTRYMAN
NOTARY PUBLIC
STATE OF TEXAS
Commission Expires 8-13-97
- ----------------------------
<PAGE> 13
INV. #112464
(Amendment by written consent of the stockholders
holding at least a majority of the voting power)
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
CUMBERLAND COMPANIES, INC., a corporation organized under the laws of
the State of Nevada, by its president (or vice-president) and secretary (or
assistant secretary) does hereby certify:
1. That the board of directors of said corporation at a meeting
duly convened and held on the 29th day of JANUARY, 1997, passed a resolution
declaring that the following change and amendment in the articles of
incorporation is advisable.
RESOLVED that article I of said articles of incorporation be amended to
read as follows: "THE NAME OF THE CORPORATION IS LONE STAR INTERNATIONAL ENERGY
INC."
2. That the number of shares of the corporation outstanding and
entitled to vote on an amendment to the articles of incorporation is 8 MILLION,
that the said change and amendment has been consented to and authorized by the
written consent of stockholders holding at least a majority* of each class of
stock outstanding and entitled to vote thereon.
(*A greater proportion may be required by the articles. If the amendment
changes any preference or any relative or other right given to any
class or series of outstanding stock, the amendment must also be
approved by the written consent of each class or series so affected by
the amendment. Different series of the same class are not considered
different classes for the purpose of voting by classes except when any
such series is adversely affected in a manner different than any other
series of the same class.)
(NEV. 1120 - 11/4/91) -1-
<PAGE> 14
IN WITNESS WHEREOF, the said BOARD OF DIRECTORS has caused this
certificate to be signed by its president (or vice-president) and its secretary
(or assistant secretary) and its corporate seal to be hereto affixed this 29th
day of JANUARY, 1997.
-----------------------------------
By /s/ C. JUSTICE
-----------------------------------
President (or Vice-President)
C.E. JUSTICE
* /s/ W.D. JOSSERAND JR.
-----------------------------------
Secretary (or Assistant Secretary)
* W.D. JOSSERAND JR.
-----------------------------------
(SEAL)
*(Names must be typed under signatures)
STATE OF TEXAS )
) ss:
COUNTY OF PARKER )
On 1/29/97 personally appeared before me, a Notary Public,
--------------------
(date)
W.D. JOSSERAND JR. and C.E. JUSTICE, who acknowledged that they executed
- ------------------ -------------
the above instrument.
/s/ MICHAEL D. HERRINGTON
----------------------------------
(Notary Public)
(SEAL)
----------------------------
MICHAEL D. HERRINGTON
NOTARY PUBLIC
State of Texas
Comm. Exp. 06-17-98
----------------------------
(NEV. 1120) -2-
<PAGE> 1
EXHIBIT 3.2
BYLAWS OF
QUIESCENT CORPORATION
ARTICLE I - STOCKHOLDER'S MEETINGS
A) ANNUAL MEETINGS shall be held on the 30th day of December of each year
beginning 1993, or at such other time as may be determined by the Board of
Directors of the President, for the purposes of electing directors, and
transacting such other business as may properly come before the meeting.
B) SPECIAL MEETINGS may be called at any time by the Board of Directors or
by the President, and shall be called by the President or the Secretary at the
written request of the holders of a majority of the shares then outstanding and
entitled to vote.
C) WRITTEN NOTICE stating the time and place of the meeting, signed by the
President or the Secretary, shall be served either personally or by mail, not
less than ten (10) nor more than sixty (60) days before the meeting upon each
Stockholder entitled to vote. Said notice shall state the purpose for which the
meeting is called, no other business may be transacted at said meeting, unless
by unanimous consent of all stockholders present, either in person or by proxy.
D) PLACE of all meetings shall be at the principal office of the
Corporation, or at such other place as the Board of Directors or the President
may designate.
E) A QUORUM necessary for the transaction of business at a stockholder's
meeting shall be a majority of the stock issued and outstanding, either in
person or by proxy. If a quorum is not present, the stockholders present may
adjourn to a future time, and notice of the future time must be served as
provided in Article I, C), if a quorum is present they may adjourn from day to
day without notice.
F) VOTING: Each stockholder shall have one vote for each share of stock
registered in his name on the books of the Corporation, a majority vote shall
authorize any Corporate action, except the election
1
<PAGE> 2
of the Directors, who shall be elected by a plurality of the votes cast.
G) PROXY: At any meeting of the stockholders any stockholder may be
represented and vote by a proxy, appointed in writing and signed. No proxy shall
be valid after the expiration of six (6) months from the date of its execution,
unless the person executing it specifies the length of time it is to continue
in force, which in no case shall exceed seven (7) years from its execution.
H) CONSENT: Any action, except election of Directors, which may be taken by
a vote of stockholders at a meeting, may be taken without a meeting if
authorized by a written consent of stockholders holding at least a majority of
the voting power.
ARTICLE II - BOARD OF DIRECTORS
A) OFFICE: At least one person chosen annually by the stockholders shall
constitute the Board of Directors. Additional Directors may be appointed by the
Board of Directors. The Director's term shall be for one year, and Directors
may be re-elected for successive annual terms.
B) DUTIES: The Board of Directors shall be responsible for the
control and management of the affairs, property and interests of the
Corporation and may exercise all powers of the Corporation, except as are in
the Articles of Incorporation or by statute expressly conferred upon or
reserved to the stockholders.
C) MEETINGS: Regular meetings of the Board of Directors shall be held
immediately following the annual meeting of the stockholders, at the place of
the annual meeting of the stockholders, or at such other time and place as the
Board of Directors shall by resolution establish. Notice of any regular meeting
shall not be required, unless the Board of Directors shall change the time and
place of the regular meeting at which change was made. Special meetings may be
called by the President or by one of the Directors at such time and place
specified in the notice or waiver of notice thereof. The notice of the special
meeting shall be mailed to each Director at least five (5) days before the
meeting day, or if the
2
<PAGE> 3
notice is delivered the day before the meeting. Special meetings may be called
without notice, provided a written waiver of notice is executed by a majority
of the Board of Directors.
D) CHAIRMAN: At all meetings of the Board of Directors, the Chairman shall
preside. If there is no Chairman one shall be chosen by the Directors.
E) QUORUM: A majority of the Board of Directors shall constitute a quorum.
F) VACANCIES: Any vacancy in the Board of Directors, unless the vacancy was
caused by a stockholder removal of a Director, shall be filled for the
unexpired term by a majority vote of the remaining Directors, though less than
a quorum, at any regular or special meeting of the Board of Directors called
for that purpose.
G) A RESOLUTION in writing signed by a majority of the Board of Directors,
shall constitute action by the Board, with the same force and effect as though
such resolution had been passed at a duly convened meeting. The Secretary shall
record each resolution in the minute book.
H) COMMITTEES may be appointed by a majority of the Board of Directors from
its number, by resolution, with such powers and authority to manage the business
as granted by the resolution.
I) SALARIES of the Corporate Officers shall be determined by the Board of
Directors.
ARTICLE III - OFFICERS
ARTICLE: This Corporation shall have a president, secretary, treasurer,
and such other officers as _____________. Any two or more offices may be held
by the same person. The officers shall be _____________ Board of Directors at
the regular meeting of the Board.
_____________ PRESIDENT SHALL:
_____________ executive officer of the Corporation.
______________ of the Directors and Stockholders.
_____________ Certificates, contracts and other instruments of the
Corporation as
3
<PAGE> 4
authorized by the Board of Directors and shall perform all such other
incidental duties.
1) Have charge of the corporate books, and be responsible to make
the necessary reports to the stockholders and the Board of Directors.
2) Prepare and disseminate notices, waivers, consents, proxies and
other material necessary for all meetings.
3) File the sixty (60) day list of officers, directors, name of the
resident agent and the filing fee to the Secretary of State.
4) File the designation of resident agent in the office of the
County Clerk in which the principal office of the Corporation in Nevada
is located.
5) File the annual list of officers, directors and designation of
resident agent along with the filing fee.
6) Be the custodian of the certified articles of incorporation,
bylaws and amendments thereto.
7) Supply to the Resident Agent or Principal Corporate Nevada Office
the name of the custodian of the stock ledger or duplicate stock ledger,
along with the complete Post Office address of the custodian, where such
stock ledger or duplicate stock ledger is kept.
THE TREASURER SHALL:
1) Have the custody of all monies and securities of the Corporation
and shall keep regular books of account.
2) Perform all duties incidental to his office as directed of him by
the Board of Directors and the President.
ARTICLE IV - STOCK
A) CERTIFICATES representing shares of the Corporation's stock shall be in
such form as shall be
4
<PAGE> 5
adopted by the Board of Directors, numbered and registered in the order issued.
The certificates shall bear the following; the holders name, the number of
shares of stock, the signature either of the Chairman of the Board of Directors
or the President, and either the Secretary of Treasurer.
B) NO CERTIFICATE shall be issued until the full amount of consideration
has been paid, except as otherwise provided by law.
C) EACH SHARE of stock shall entitle the holder to one vote.
ARTICLE V - DIVIDENDS
DIVIDENDS may be declared and paid out of any funds available therefor, as
often, in such amounts as the Board of Directors may determine, except as
limited by law.
ARTICLE VI - FISCAL YEAR
THE FISCAL YEAR of the Corporation shall be determined by the Board of
Directors.
ARTICLE VII - INDEMNIFICATION
PURSUANT TO N.R.S. 78.751 any person who is a Director, Officer, Employee, or
Agent of this Corporation, who becomes a party to an action is entitled to
indemnification against expenses including attorney fees, judgements, fines and
amounts paid in settlement, if he acted in good faith and he reasoned his
conduct or action to be in the best interest of the Corporation.
ARTICLE VIII - AMENDMENTS
A) STOCKHOLDERS shall have the authority to amend or repeal all the bylaws
of the Corporation and enact new bylaws, by affirmative vote of the majority of
the outstanding shares of stock entitled to vote.
B) THE BOARD OF DIRECTORS shall have the authority to amend, repeal, or
adopt new bylaws of the Corporation, but shall not alter or repeal any bylaws
adopted by the stockholders of the Corporation.
5
<PAGE> 1
EXHIBIT 10.1
OIL AND GAS PROPERTY PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 18th day of September,
1995, by and between CUMBERLAND COMPANIES, INC., (hereinafter referred to as
"CCI") a Nevada corporation, with its principal place of business at 4925
Greenville Avenue, Suite 1354, Dallas, Texas 75206, and FORD AND MYRT FULLINGIM
TRUST, having their principal place of business at 1130 Fort Worth Highway,
Weatherford, Texas 76086.
W I T N E S S E T H :
WHEREAS, FORD AND MYRT FULLINGIM TRUST have agreed to sell to CCI
certain interests in oil properties as set forth in Exhibit "A" attached
hereto.
1. Purchase Price.
In consideration for CCI purchasing the referenced property as
set forth in Exhibit "A", CCI shall pay the sum of Eight Hundred
Eleven Thousand, Eight Hundred Sixty-Four Dollars and Twenty-Four
Cents ($811,864.24). Effective date to be the date of this
Purchase and Sale Agreement. Said payment may be made in cash or
in common stock valued at Three Dollars ($3.00) per share, or a
combination of cash and stock. The common stock is to be Class A
Common Stock of CCI, subject to Rule 144 under the Securities Act
of 1933. Said shares shall have piggyback rights subject to terms
and conditions acceptable to an underwriter approved by the
management of CCI. Payment of the Eight Hundred Eleven Thousand,
Eight Hundred Sixty-Four Dollars and Twenty-Four Cents
($811,864.24) shall be made as follows:
1.1 Eighty-Nine Thousand Six Hundred Forty-Three Dollars and
Six Cents ($89,643.06) payable in notes. (See attached
Promissory Note), and
1.2 Seven Hundred Twenty-Two Thousand, Two Hundred Twenty-One
Dollars and Eighteen Cents ($722,221.18), payable in Two
hundred Forty Thousand Seven Hundred, Forty (240,740)
shares of Common Stock.
2. Closing.
The completion of the contemplated transactions is herein
designated as the Closing which shall take place on or before
September 30, 1995, or such other date as the parties shall
mutually agree upon.
3. Warranties and Representations of Cumberland Companies, Inc.
3.1. Corporate Organization.
CCI is a corporation duly organized, validly existing and
in good standing under the laws of Nevada and is duly
qualified to do business and has full power and authority
to carry on its current business and to purchase, own, and
sell its assets and properties.
3.2 Corporate Authority.
The execution and delivery of this Agreement to FORD AND
MYRT FULLINGIM TRUST and the carrying out of the
provisions hereof have been fully authorized by the Board
of Directors of CCI.
3.3 Binding Nature.
This Agreement shall be, when duly executed and delivered,
a legal and binding obligation of CCI, enforceable in
accordance with its terms.
3.4 Warranties and Representations.
No representation or warranty by CCI in this Agreement
contains, nor will it contain, any untrue statement or
omission, nor will it omit to state a material fact
necessary to make the statements contained herein not
misleading. All representations and warranties made by CCI
in this Agreement shall be true and correct as of the
Closing with the same force and effect as if they had
been made on and as of such date.
3.5 Litigation.
There are no pending, nor, to the best knowledge and
belief of CCI, threatened actions or proceedings
1
<PAGE> 2
before any court of administrative agency or other
authority which might or will materially or adversely
affect CCI's ability or right to perform all of CCI's
obligations hereunder.
4 Warranties and Representations of FORD AND MYRT FULLINGIM TRUST
4.1 Property Title.
FORD AND MYRT FULLINGIM TRUST hereby warrant and represent
that they have good and marketable title to the properties
and/or property interests, which are the subject to this
Agreement, and that the properties and/or property
interests are free and clear from any liens, or other
obligations, and that there is no litigation pending or
threatened against said properties and/or property
interests.
4.2 Authority to Sign.
FORD AND MYRT FULLINGIM TRUST warrant and represent that
they have full authority, as owners of the properties
and/or property interests, to enter into this Agreement
with CCI.
4.3 Binding Nature.
This Agreement shall be, when duly executed and delivered,
a legal and binding obligation of FORD AND MYRT FULLINGIM
TRUST, enforceable in accordance with its terms.
4.4 Warranties and Representations.
No representation or warranty by FORD AND MYRT FULLINGIM
in this Agreement contains, nor will it contain, any
untrue statement or omission, nor will it omit to state a
material fact necessary to make the statements contained
herein not misleading. All representations and warranties
made by FORD AND MYRT FULLINGIM TRUST in this Agreement
shall be true and correct as of the Closing with the same
force and effect as if they had been made on and as of
such date.
4.5 Litigation.
There are no pending, nor to the best knowledge and belief
of FORD AND MYRT FULLINGIM TRUST, threatened actions or
proceedings before any court or administrative agency or
other authority which might or will materially or
adversely affect FORD AND MYRT FULLINGIM TRUST'
obligations hereunder.
5. Miscellaneous
5.1 Brokerage.
Each party hereto represents and warrants to the other
that no broker or finder is entitled to any commission, or
similar fees, in connection with the making and carrying
out of this Agreement.
5.2 Sales Tax.
Any sales taxes which may be payable in connection with
the transfer of the assets described shall be borne solely
by FORD AND MYRT FULLINGIM TRUST.
5.3 Notices and Communications.
Any notice, payment request, instruction, or other
document to be delivered hereunder shall be deemed
sufficiently given if in writing and delivered personally
or mailed by Certified Mail, postage prepaid, if to CCI
addressed to CUMBERLAND COMPANIES, INC. at the address
first set forth above, and if addressed to FORD AND MYRT
FULLINGIM TRUST, at the address first set forth above,
unless in each case CCI or FORD AND MYRT FULLINGIM TRUST
shall have notified the other in writing of a different
address.
5.4 Non-Waiver.
No delay or failure on their part or either part in
exercising any right hereunder, and no partial or single
exercise thereof, will constitute a waiver of such right
or any other right hereunder.
2
<PAGE> 3
5.5 Headings.
Headings in this Agreement are for convenience only and
are not to be used for interpreting or construing any
provision hereof.
5.6 Governing Law.
This Agreement shall be construed in accordance with and
governed by the laws of the State of Nevada.
5.7 Counterparts.
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the
same instrument.
5.8 Binding Nature.
The provisions of this Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and
their respective successors and/or assigns.
5.9 Survival of Representations and Warranties.
Except as otherwise expressly provided in this Agreement
or the Exhibit "A" attached, the representations and
warranties of CCI and FORD AND MYRT FULLINGIM TRUST
extended hereunder shall survive the Closing. Each party
against whom liability is asserted under the provisions of
this Agreement shall be given the opportunity to
participate, directly or through its authorized
representative, at the cost and expense, in the conduct of
any negotiations relating to the statements of any
liability or any other proceeding instituted by any third
party against either CCI or FORD AND MYRT FULLINGIM TRUST,
as the case may be, giving rise to alleged breach.
5.10 Expenses.
Except as otherwise expressly provided herein, each party
shall pay all of its own expenses incidental to the
negotiations and preparation of the documentation relating
to this Agreement and for entering into and carrying out
the terms and conditions of this Agreement and
consummating the transactions, irrespective of whether the
transactions contemplated shall be consummated.
5.11 Payment of Taxes.
All fees, costs, charges, and expenses payable to any
federal, state, or municipal authority, including without
limitations, all filing fees, documentary stamps and
transfer, sales and other taxes required to be paid, or
imposed in connection with the transfer of any of FORD
AND MYRT FULLINGIM TRUST's assets pursuant to the terms of
this Agreement shall be paid by FORD AND MYRT FULLINGIM
TRUST.
5.12 Amendments, Successors and Assigns.
This Agreement may be amended only by an instrument signed
by the authorized representatives of the parties hereto.
Neither party may assign any of its rights, obligations,
or liabilities arising hereunder without the prior written
consent of the other, except as otherwise provided herein,
and any such assignment or attempted assignment shall be
null and void.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their authorized representatives as of the date first above
written.
CUMBERLAND COMPANIES, INC. FORD AND MYRT FULLINGIM TRUST
By: /s/ C. E. Justice /s/ FORD FULLINGIM
------------------------------ ----------------------------------------
C. E. Justice, President Ford Fullingim
Date: 9-18-95 /s/ MYRT FULLINGIM
---------------------------- ----------------------------------------
Myrt Fullingim
3
<PAGE> 4
E X H I B I T " A "
30-WELL PROJECT
WELL LISTING:
<TABLE>
<CAPTION>
WELLS WELL NO. LEASE NO.
- --------------------------------------------------------------------------------
<S> <C> <C>
Adams #1 Well 41-(10100) 41-001
Adams #2 Well 41-(10110) 41-001
E.R. Battle "A" Well 41-(10500) 41-002
J.C. Carr 499 #1 Well 41-(11110) 41-003
J.C. Carr 499 #3 Well 41-(11115) 41-003
Cook #1 Well 41-(11210) 41-004A,B,C,D,E,F
Docktor #1 Well 41-(11510) 41-005
Docktor #2 Well 41-(11515) 41-005
Docktor #3 Well 41-(11520) 41-005
Donaway Well 41-(11575) 41-006
Donaway Well 41-(11580) 41-006
Fleming #1 Well 41-(12500) 41-007
Isenhower A #1 Well 41-(14350) 41-008
Isenhower A #2 Well 41-(14355) 41-008
Isenhower A #3 Well 41-(14360) 41-008
Lawson #1 Well 41-(15505) 41-009
Lawson #2 Well 41-(15560) 41-009
Nan D. Ord #1 Well 41-(16750) 41-010
Nan D. Ord #2 Well 41-(16755) 41-010
Nan D. Ord #3 Well 41-(16760) 41-010
Nan D. Ord #4 Well 41-(16765) 41-010
C.C. Pippen A #1 Well 41-(17010) 41-011
C.C. Pippen A #2 Well 41-(17015) 41-011
R.W. Pruet #1 Well 41-(17250) 41-012A,B,C,D,E,F
Surles #1 Well 41-(18015) 41-013
Surles #1A Well 41-(18005) 41-014
Surles #2A Well 41-(18010) 41-015
Wallenburg 490 #1 Well 41-(19505) 41-016
Wallenburg 490 #2 Well 41-(19510) 41-016
Wallenburg 490 #3 Well 41-(19515) 41-016
Wilbanks #1 Well 41-(19650) 41-017
</TABLE>
LEASE LISTING:
LEASE NO. DESCRIPTION OF LEASE
- --------------------------------------------------------------------------------
41-001 Oil and Gas Lease dated September 20, 1977 from Roy A. Adams and
wife, Anna B. Adams, as Lessor, to F.B. Simpson, as Lessee,
recorded in Volume 664, Page 187, Deed Records of Eastland
County, Texas.
41-002 Oil, Gas and Mineral Lease dated December 7, 1983, from E. R.
Battle and Lillian Battle, as Lessor, to H.L.M. Oil Company, as
Lessee, recorded in Volume 512, Page 774, Deed Records of
Callahan County, Texas.
41-003 Oil, Gas and Mineral Lease dated January 11, 1975, from J. C.
Carr and wife, Dorothy Carr, as Lessor, to Hollensworth Oil
Company, as Lessee, recorded in Volume 626, Page 569, Deed
Records of Eastland County, Texas.
41-004A Oil, Gas and Mineral Lease dated September 11, 1974, from Nellie
Caraway, as Lessor, to West Artesia Transmission Co., as Lessee,
recorded in Volume 406, Page 29, Deed Records of Stephens County,
Texas.
41-004B Oil, Gas and Mineral Lease dated September 11, 1974, from Aquilla
Sudderth, as Lessor, to West Artesia Transmission Co., as Lessee,
recorded in Volume 406, Page 31, Deed Records of Stephens
County, Texas.
41-004C Oil, Gas and Mineral Lease dated September 18, 1974, from Charles
J. Katz & Meyer Katz, Executors of the Estates of Sid Katz and
Estelle M. Katz, and Meyer Katz, Individually, as Lessors, to
West Artesia Transmission Co., as Lessee, recorded in Volume 406,
Page 33, Deed Records of Stephens County, Texas.
41-004D Oil, Gas and Mineral Lease dated August 29, 1974, from A. Charles
Cook and Homer W. Feuchter, as Lessors, to West Artesia
Transmission Co., as Lessee, recorded in Volume 406, Page 52,
Deed Records of Stephens County, Texas.
41-004E Oil, Gas and Mineral Lease dated October 2, 1974, from Harold
Lobaugh, as Lessor, to West Artesia Transmission Co., as Lessee,
recorded in Volume 406, Page 399, Deed Records of Stephens
County, Texas.
41-004F Oil, Gas and Mineral Lease dated September 11, 1974, from Annie
Laurie Powell, W. T. Sudderth, John Sudderth, and Sue Lee, as
Lessors, to West Artesia Transmission Co., as Lessor, recorded in
Volume 406, Page 341, Deed Records of Stephens County, Texas.
41-005 Oil, Gas and Mineral Lease dated May 12, 1981, from Juaneva K.
Bellomy Docktor, dealing in her separate property and Mildred
Flodelle Bellomy Elliott, dealing in her separate property, as
Lessors, to B. J. Thurman, as Lessee, recorded in Volume 595,
Page 117, Deed Records of Young County, Texas.
41-006 Oil, Gas and Mineral Lease dated January 27, 1978, from Miss
Pearl Donaway, Gerald Travis Donaway and Boyce Eugene Donaway, as
Lessors, to Cal Michelson, as Lessee, recorded in Volume 671,
Page 628, Deed Records of Eastland County, Texas.
1
<PAGE> 5
41-007 Oil, Gas and Mineral Lease dated August 31, 1977, from W. D.
Fleming and wife, Ollie Mae Fleming, and Eugene Lawson, as
Lessors, to Cal Michelson, as Lessee, recorded in Volume 423,
Page 295, Deed Records of Callahan County, Texas.
41-008 Oil, Gas and Mineral Lease dated August 6, 1980, from Weldon
Isenhower, Wesley Isenhower, Mary Jo Johnson, Gerry Saum, Susie
Harris, Hal Saum, Dorothy Jackson, Geneva Fetterly, each dealing
in their separate property, as Lessors, to EnRe Corporation, as
Lessee, recorded in Volume 461, Page 374, Deed Records of
Callahan County, Texas.
41-009 Oil, Gas and Mineral Lease dated April 20, 1979, from W. D.
Fleming and Eugene Lawson, as Lessors, to Cal Michelson, as
Lessee, recorded in Volume 443, Page 492, Deed Records of
Callahan County, Texas.
41-010 Oil, Gas and Mineral Lease dated June 11, 1979, from R. A.
Murphy, Elizabeth Ord Groff and Nancy O. Jackson, as Lessors, to
Shawnee Investments, Inc., Montgomery First Corp. and Leland D.
Woodward, as Lessees, recorded in Volume 550, Page 767, Deed
Records of Young County, Texas.
41-011 Oil, Gas and Mineral Lease dated February 14, 1959, from
Clarence C. Pippen and wife, Jessie G. Pippen, and W. C. Pippen,
Individually, and as community administrator of the Estate of
himself and deceased wife, Pearl Pippen, as Lessors, to J. M.
Flournoy, as Lessor, recorded in Volume 520, Page 577, Deed
Records of Eastland County, Texas.
41-012A Oil, Gas and Mineral Lease dated May 1, 1980, from P.O.B.
Montgomery, Jr., M. D., as Lessor, to Jones Company, as Lessee,
recorded in Volume 474, Page 904, Deed Records of Callahan
County, Texas, and Volume 761, Page 689, Deed Records of
Eastland County, Texas.
41-012B Oil and Gas Lease dated May 1, 1980, from Marian Miller
Montgomery, Individually, and First National Bank in Dallas,
Trustee Under the Will of William S. Montgomery, Deceased, as
Lessor, to Jones Company and EnRe Corp., as Lessor, recorded in
Volume 475, Page 310, Deed Records of Callahan County, Texas, and
as corrected by instrument recorded in Volume 475, Page 315, Deed
Records of Callahan County, Texas.
41-012C Oil and Gas Lease dated May 1, 1980, from Frances Montgomery
Williams, as Lessor, to Jones Company, as Lessee, recorded in
Volume 476, Page 497, Deed Records of Callahan County, Texas.
41-012D Oil, Gas and Mineral Lease dated August 14, 1981, from Royce W.
Pruet and wife, Mary Fay Pruet, as Lessors, to EnRe Corporation,
as Lessee, recorded in Volume 81, Page 8528, Deed Records of
Eastland County, Texas, and in Volume 478, Page 662, Deed Records
of Callahan County, Texas.
41-012E Oil, Gas and Mineral Lease dated November 21, 1975, from Royce W.
Pruet and wife, Mary Fay Pruet, as Lessors, to Jones Company,
Ltd., as Lessee, recorded in Volume 405, Page 96, Deed Records of
Callahan County, Texas.
41-012F Oil, Gas and Mineral Lease dated August 14, 1981, from Royce W.
Pruet and wife, Mary Fay Pruet, as Lessors, to EnRe Corporation,
recorded in Volume 478, Page 658, Deed Records of Callahan
County, Texas.
41-013 Oil, Gas and Mineral Lease dated September 5, 1975, from Marston
Surles and wife, Helen Surles; Phillip C. Surles and wife, Joyce
A. Surles; and L. E. Surles and wife, Margaret Alice Surles, as
Lessors, to J. H. Greer, recorded in Volume 405, Page 409, Deed
Records of Callahan County, Texas.
41-014 Oil, Gas and Mineral Lease dated October 1, 1979, from Marston
Surles, as duly authorized agent and attorney in fact for Phillip
C. Surles, Joyce Ann Surles, L. E. Surles, and Margaret Alice
Surles, as Lessors, to Cal Michelson, as Lessee, recorded in
Volume 449, Page 286, Deed Records of Callahan County, Texas.
41-015 Oil, Gas and Mineral Lease dated October 1, 1979, from Marston
Surles, as duly authorized agent and attorney in fact for Phillip
C. Surles, Joyce Ann Surles, L. E. Surles and Margaret Alice
Surles, as Lessors, to Cal Michelson, as Lessee, recorded in
Volume 449, Page 283, Deed Records of Callahan County, Texas.
41-016 Order Granting Application to Lease Property for Mineral
Exploration and Development at Private Sale executed by Judge
Robert M. Burnet, Judge Presiding over the Guardianship of
Venice Luse Wallenberg, Person and Estate, NCM, in the Probate
Court No. 1 of Tarrant County, Texas, with Oil, Gas and Mineral
Lease dated March 10, 1983 being executed under such above-
described Order by Alwin F. Luse, Jr., temporary guardian of
Venice Luse Wallenberg, as Lessor, to EnRe Corporation, as
Lessee, recorded in Volume 829, Page 353, Deed Records of
Eastland County, Texas.
41-017 Oil, Gas and Mineral Lease dated March 15, 1979, from Fae
Wilbanks, Kale Franklin, Irene Beard, Geo Ross Miller, June Hay,
Jacqueline Dames, Pauline Low, Verba Montgomery, Johnnie Ruth
Webb, Gene McCort, Bryan Miller, and John B. Miller, as Lessors,
to Cal Michelson, as Lessee, recorded in Volume 443, Page 133,
Deed Records of Callahan County, Texas.
2
<PAGE> 6
E X H I B I T " A "
MALLORY - SLEMMONS PROJECT
WELL LISTING
<TABLE>
<CAPTION>
WELLS WELL NO. LEASE NO.
- --------------------------------------------------------------------------------
<S> <C> <C>
Willie Mae Slemmons 43-(037850) _____________
Mallory #1 Well 43-(036010) 43-001A,B,C,D
Mallory #2 Well 43-(036015) 43-001A,B,C,D
Mallory #3 Well 43-(036020) 43-001A,B,C,D
Bert Slemmons Well 43-(037855) 43-002 A - H
Harold Slemmons #1 Well 43-(037865) 43-003 A - Q
Harold Slemmons 2D Well 43-(______) 43-003 A - Q
Curtis Slemmons Well 43-(037860) 43-_________
</TABLE>
LEASE LISTING
LEASE NO. DESCRIPTION OF LEASES
- --------------------------------------------------------------------------------
43-001A Oil, Gas and Mineral Lease dated August 1, 1981, from William
Gross, as Lessor, to Mike Austin, as Lessee, recorded in Volume
572, Page 435, Deed Records of Palo Pinto County, Texas.
43-001B Oil, Gas and Mineral Lease dated August 1, 1981, from Robert
Gross, as Lessor, to Mike Austin, as Lessee, recorded in Volume
573, Page 733, Deed Records of Palo Pinto County, Texas.
43-001C Oil, Gas and Mineral Lease dated July 23, 1980, from Daube
Partnership, Ltd., an Oklahoma Limited Partnership, and The
Carol Sutton Trust, Carol Daube Sutton, Jack M. Newman and James
W. Williams, Trustees, as Lessors, to Mike Austin, as Lessee,
recorded in Volume 552, Page 629, Deed Records of Palo Pinto
County, Texas.
43-001D Oil, Gas and Mineral Lease dated July 31, 1980, from Westheimer-
Neustadt Corporation, a Delaware Corporation, as Lessor, to Mike
Austin, as Lessee, recorded in Volume 552, Page 626, Deed Records
of Palo Pinto County, Texas.
43-002A Oil, Gas and Mineral Lease dated January 2, 1984, from Tom A.
Myers, as Court appointed Receiver for Great Central Oil Company,
C. L. Garrett, W. A. Stagner, Olive E. Russell and J. E. Dement,
as Lessors, to Austex Energy, Inc., as Lessee, recorded in Volume
632, Page 580, Deed Records of Palo Pinto County, Texas.
43-002B Oil, Gas and Mineral Lease dated January 2, 1984, from Rosa L.
Boarman Truhe, as Lessor, to Austex Energy, Inc., as Lessee,
recorded in Volume 632, Page 582, Deed Records of Palo Pinto
County, Texas.
43-002C Oil, Gas and Mineral Lease dated January 21, 1984, from W. C.
Boarman, as Lessor, to Austex Energy, Inc., as Lessee, recorded
in Volume 632, Page 584, Deed Records of Palo Pinto County,
Texas.
43-002D Oil, Gas and Mineral Lease dated January 2, 1984, from Truma Sue
Kirkpatrick, as Lessor, to Austex Energy, Inc., as Lessee,
recorded in Volume 632, Page 588, Deed Records of Palo Pinto
County, Texas.
43-002E Oil, Gas and Mineral Lease dated January 17, 1984, from Marvin T.
Brown, as Lessor, to Austex Energy, Inc., as Lessee, recorded in
Volume 623, Page 112, Deed Records of Palo Pinto County, Texas.
43-002F Oil, Gas and Mineral Lease dated January 2, 1984, from Carolyn
Boarman Elliott, as Lessor, to Austex Energy, Inc., as Lessee,
recorded in Volume 632, Page 586, Deed Records of Palo Pinto
County, Texas.
43-002G Oil, Gas and Mineral Lease dated January 6, 1984, from Curtis
Slemmons and Margie Stoker, as Lessors, to Mike Austin, as
Lessee, recorded in Volume 617, Page 314, Deed Records of Palo
Pinto County, Texas.
43-002H Oil, Gas and Mineral Lease dated February 15, 1981, from Willie
Mae Slemmons, as Lessor, to Mike Austin, as Lessee, recorded in
Volume 562, Page 515, Deed Records of Palo Pinto County, Texas.
43-003A Oil, Gas and Mineral Lease dated January 6, 1982, from Carolyn
Boarman Elliott, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 584, Page 545, Deed Records of Palo Pinto County,
Texas.
43-003B Oil, Gas and Mineral Lease dated January 6, 1984, from W. C.
Boarman, as Lessor, to Mike Austin, as Lessee, recorded in Volume
584, Page 548, Deed Records of Palo Pinto County, Texas.
43-003C Oil, Gas and Mineral Lease dated June _, 1980, but executed as of
November 8, 1980, from Willie Mae Slemmons and Erby C. Slemmons,
as Lessor, to Mike Austin, as Lessee, recorded in Volume 559,
Page 212, Deed Records of Palo Pinto County, Texas.
<PAGE> 7
43-003D Oil, Gas and Mineral Lease dated November 25, 1980, from Harold
Slemmons and wife, Maxine Slemmons, as Lessors, to Mike Austin,
as Lessee, recorded in Volume 557, Page 965, Deed Records of Palo
Pinto County, Texas.
43-003E Oil, Gas and Mineral Lease dated August _, 1980, from David
Michael Boarman, Bonita Boarman Duck, Mary Boarman McCutchen,
Helen Jo Boarman Mata, Carolyn Boarman Elliott and W. C. Boarman,
as Lessors, to Mike Austin, as Lessee, recorded in Volume 571,
Page 362, Deed Records of Palo Pinto County, Texas.
43-003F Oil, Gas and Mineral Lease dated August _, 1980, from Ruby E.
Williams and R. H. Williams, as Lessors, to Mike Austin, as
Lessee, recorded in Volume 553, Page 554, Deed Records of Palo
Pinto County, Texas.
43-003G Oil, Gas and Mineral Lease dated July 1, 1980, from Marvin F.
Brown, Florence Boarman, Joseph R. Boarman (and Rhuben Johnston),
as Lessors, to Mike Austin, as Lessee, recorded in Volume 553,
Page 550, Deed Records of Palo Pinto County, Texas.
43-003H Oil, Gas and Mineral Lease dated August __, 1980, from Reuben L.
Boarman, Truma Sue Kirkpatrick, Rosa L. Truhe and Robert E.
Boarman, as Lessors, to Mike Austin, as Lessee, recorded in
Volume 553, Page 558, Deed Records of Palo Pinto County, Texas.
43-003I Oil, Gas and Mineral Lease dated August _, 1980, from Louise Brown
Blake, through her attorney-in-fact, Betty Blake White, as
Lessor, to Mike Austin, as Lessee, recorded in Volume 557, Page
961, Deed Records of Palo Pinto County, Texas.
43-003J Oil, Gas and Mineral Lease dated August 15, 1981, from Helen Jo
Boarman Mata, as Lessor, to Mike Austin, as Lessee, recorded in
Volume 572, Page 437, Deed Records of Palo Pinto County, Texas.
43-003K Oil, Gas and Mineral Lease dated September _, 1980, from Ruth
Jones, as Lessor, to Mike Austin, as Lessee, recorded in Volume
555, Page 888, Deed Records of Palo Pinto County, Texas.
43-003L Oil, Gas and Mineral Lease dated September _, 1980, from Allen F.
Disharoon, Jr., and wife, Rosa Disharoon, as Lessors, to Mike
Austin, as Lessee, recorded in Volume 555, Page 885, Deed Records
of Palo Pinto County, Texas.
43-003M Oil, Gas and Mineral Lease dated September _, 1980, from Col.
Jerry Disharoon, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 555, Page 882, Deed Records of Palo Pinto County, Texas.
43-003N Oil, Gas and Mineral Lease dated September _, 1980, from Terry
Lynn McCullough, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 557, Page 364, Deed Records of Palo Pinto County,
Texas.
43-003O Oil, Gas and Mineral Lease dated September _, 1980, from Jeanne
Margaret Johnston, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 557, Page 359, Deed Records of Palo Pinto County,
Texas.
43-003P Oil, Gas and Mineral Lease dated October 30, 1980, from A. D.
Crawford, and wife, Elizabeth Crawford, as Lessors, to Mike
Austin, as Lessee, recorded in Volume 557, Page 356, Deed Records
of Palo Pinto County, Texas.
43-003Q Oil, Gas and Mineral Lease dated June 15, 1981, from Margie
Slemmons Stoker, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 569, Page 480, Deed Records of Palo Pinto County,
Texas.
43-004A Oil, Gas and Mineral Lease dated November 25, 1980, from Harold
Slemmons and wife, Maxine Slemmons, as Lessors, to Mike Austin,
as Lessee, recorded in Volume 557, Page 965, Deed Records of Palo
Pinto County, Texas.
43-004B Oil, Gas and Mineral Lease dated July 31, 1980, from Westheimer-
Neustadt Corporation, a Delaware Corporation, as Lessor, to Mike
Austin, as Lessee, recorded in Volume 552, Page 623, Deed Records
of Palo Pinto County, Texas.
<PAGE> 1
EXHIBIT 10.2
GENERAL PROMISSORY NOTE
$89,643.06 WEATHERFORD, TEXAS SEPTEMBER 15, 1995
FOR VALUE RECEIVED, I, we, and each of us, the undersigned, jointly and
severally, promise to pay to FORD AND MYRT FULLINGIM TRUST, the sum of EIGHTY-
NINE THOUSAND, SIX HUNDRED, FORTY-THREE AND 06/100 DOLLARS ($89,643.06), with
interest from date to maturity at the rate of Seven Per Cent (7.0%) per annum,
both principal and interest payable at 1130 Fort Worth Highway, Weatherford,
Texas 76086.
This Note is payable as follows:
This is a term note (and may be renewed yearly), with all
principal due on September 15, 1996, the interest shall be
payable monthly with the first interest payment due on November
15, 1995, and continuing monthly until the principal is paid in
full. (See attached schedule.)
All sums past due under the terms of this note shall bear interest from
their maturity at the rate of eighteen per cent (18%) per annum.
This note is secured by a Deed of Trust of even date herewith, a copy of
which is attached for all purposes.
It is agreed that in the event of failure to pay when due any
installment of principal or interest of this note, or in the event of failure
to keep and perform any of the covenants or agreements contained in the
aforementioned instrument, or in the event of the issuance of any writ of
garnishment, or writ of attachment, or writ of injunction, or summons against
the holder of this note in connection with any suit or controversy involving
any maker, surety, endorser, or guarantor of this note, or to which any maker,
surety, endorser, or guarantor of this note may be a party, or in any of said
events, all of the unpaid principal balance hereof, together with earned and
unpaid interest, shall, at the election of the holder hereof, and without
notice, immediately become due and payable.
Each maker, surety, endorser, and guarantor of this note hereby
severally waives demand and presentation for payment, notice of non-payment,
protest and notice of protest, and the diligence of bringing suit against any
party hereto and consents that time of payment may be extended from time to
time without notice thereof to him.
If this note is placed in the hands of an attorney for collection, or if
collected by suit, or through probate, bankruptcy, or other court proceedings,
the undersigned, jointly and severally, agree to pay fifteen per cent (15%)
additional on the principal and interest then due hereon as attorney's fees.
CUMBERLAND COMPANIES, INC.
ATTEST:
By: /s/ EDDYE DREYER BY: /s/ C. E. JUSTICE
-------------------------------- ------------------------------------
Eddye Dreyer, Assistant Secretary C. E. JUSTICE, PRESIDENT
SEPTEMBER 15, 1995
<PAGE> 2
2/21/95 Page 1
LOAN AMORTIZATION SCHEDULE
Loan Amortized At 7%
<TABLE>
<CAPTION>
PAYMENT PAYMENT PRINCIPAL
NUMBER AMOUNT PRINCIPAL INTEREST BALANCE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Opening Balance 89,643.06
1 522.92 0.00 522.92 89,643.06
2 522.92 0.00 522.92 89,643.06
3 522.92 0.00 522.92 89,643.06
4 522.92 0.00 522.92 89,643.06
5 522.92 0.00 522.92 89,643.06
6 522.92 0.00 522.92 89,643.06
7 522.92 0.00 522.92 89,643.06
8 522.92 0.00 522.92 89,643.06
9 522.92 0.00 522.92 89,643.06
10 522.92 0.00 522.92 89,643.06
11 522.92 0.00 522.92 89,643.06
12 90,165.98 89,643.06 522.92 0.00
GRAND TOTAL 95,918.10 89,643.06 6,275.04 0.00
===============================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.3
OIL AND GAS PROPERTY PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 18th day of September,
1995, by and between CUMBERLAND COMPANIES, INC., (hereinafter referred to as
"CCI") a Nevada corporation, with its principal place of business at 4925
Greenville Avenue, Suite 1354, Dallas, Texas 75206, and O.O. AND BEA THOMPSON,
having their principal place of business at 1305 Bois D' Arc, Weatherford,
Texas 76086.
W I T N E S S E T H :
WHEREAS, O.O. AND BEA THOMPSON have agreed to sell to CCI certain
interests in oil properties as set forth in Exhibit "A" attached hereto.
1. Purchase Price.
In consideration for CCI purchasing the referenced property as
set forth in Exhibit "A", CCI shall pay the sum of four Hundred
Sixty-One Thousand, Seven Hundred Twenty-Four Dollars and
Forty-One Cents ($461,724.41). Effective date to be the date of
this Purchase and Sale Agreement. Said payment may be made in
cash or in common stock valued at Three Dollars ($3.00) per
share, or a combination of cash and stock. The common stock is
to be Class A Common Stock of CCI, subject to Rule 144 under the
Securities Act of 1933. Said shares shall have piggyback rights
subject to terms and conditions acceptable to an underwriter
approved by the management of CCI. Payment of the Two Hundred
Seven Thousand, Five Hundred Fifteen Dollars and Fifty-Eight
Cents ($207,515.58) shall be made as follows:
1.1 One Hundred Four Thousand, Nine Hundred Ninety-Eight
Dollars and Thirty-Six Cents ($104,998.36) payable in
notes. (See attached Promissory Note), and
1.2 Three Hundred Fifty-Six Thousand, Seven Hundred Twenty-Six
Dollars and Five Cents ($356,726.05), payable in One
Hundred Eighteen Thousand, Nine Hundred and Nine (118,909)
shares of Common Stock.
2. Closing.
The completion of the contemplated transactions is herein
designated as the Closing which shall take place on or before
September 30, 1995, or such other date as the parties shall
mutually agree upon.
3. Warranties and Representations of Cumberland Companies, Inc.
3.1. Corporate Organization.
CCI is a corporation (duly organized, validly existing and
in good standing under the laws of Nevada and is duly
qualified to do business and has full power and authority
to carry on its current business and to purchase, own, and
sell its assets and properties.
3.2 Corporate Authority.
The execution and delivery of this Agreement to O.O. AND
BEA THOMPSON and the carrying out of the provisions hereof
have been fully authorized by the Board of Directors of
CCI.
3.3 Binding Nature.
This Agreement shall be, when duly executed and delivered,
a legal and binding obligation of CCI, enforceable in
accordance with its terms.
3.4 Warranties and Representations.
No representation or warranty by CCI in this Agreement
contains, nor will it contain, any untrue statement or
omission, nor will it omit to state a material fact
necessary to make the statements contained herein not
misleading. All representations and warranties made by CCI
in this Agreement shall be true and correct as of the
Closing with the same force and effect as if they had
been made on and as of such date.
3.5 Litigation.
There are no pending, nor, to the best knowledge and
belief of CCI, threatened actions or proceedings
1
<PAGE> 2
before any court of administrative agency or other
authority which might or will materially or adversely
affect CCI's ability or right to perform all of CCI's
obligations hereunder.
4 Warranties and Representations of O.O. AND BEA THOMPSON
4.1 Property Title.
O.O. AND BEA THOMPSON hereby warrant and represent
that they have good and marketable title to the properties
and/or property interests, which are the subject to this
Agreement, and that the properties and/or property
interests are free and clear from any liens, or other
obligations, and that there is no litigation pending or
threatened against said properties and/or property
interests.
4.2 Authority to Sign.
O.O. AND BEA THOMPSON warrant and represent that
they have full authority, as owners of the properties
and/or property interests, to enter into this Agreement
with CCI.
4.3 Binding Nature.
This Agreement shall be, when duly executed and delivered,
a legal and binding obligation of O.O. AND BEA THOMPSON,
enforceable in accordance with its terms.
4.4 Warranties and Representations.
No representation or warranty by O.O. AND BEA THOMPSON
in this Agreement contains, nor will it contain, any
untrue statement or omission, nor will it omit to state a
material fact necessary to make the statements contained
herein not misleading. All representations and warranties
made by O.O. AND BEA THOMPSON in this Agreement shall be
true and correct as of the Closing with the same force and
effect as if they had been made on and as of such date.
4.5 Litigation.
There are no pending, nor to the best knowledge and belief
of O.O. AND BEA THOMPSON threatened actions or proceedings
before any court or administrative agency or other
authority which might or will materially or adversely
affect O.O. AND BEA THOMPSON'S obligations hereunder.
5. Miscellaneous
5.1 Brokerage.
Each party hereto represents and warrants to the other
that no broker or finder is entitled to any commission, or
similar fees, in connection with the making and carrying
out of this Agreement.
5.2 Sales Tax.
Any sales taxes which may be payable in connection with
the transfer of the assets described shall be home solely
by O.O. AND BEA THOMPSON.
5.3 Notices and Communications.
Any notice, payment request, instruction, or other
document to be delivered hereunder shall be deemed
sufficiently given if in writing and delivered personally
or mailed by Certified Mail, postage prepaid, if to CCI
addressed to CUMBERLAND COMPANIES, INC. at the address
first set forth above, and if addressed to O.O. AND BEA
THOMPSON, at the address first set forth above, unless in
each case CCI or O.O. AND BEA THOMPSON shall have
notified the other in writing of a different address.
5.4 Non-Waiver.
No delay or failure on their part or either part in
exercising any right hereunder, and no partial or single
exercise thereof, will constitute a waiver of such right
or any other right hereunder.
2
<PAGE> 3
5.5 Headings.
Headings in this Agreement are for convenience only and
arc not to be used for interpreting or construing any
provision hereof.
5.6 Governing Law.
This Agreement shall be construed in accordance with and
governed by the laws of the State of Nevada.
5.7 Counterparts.
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the
same instrument.
5.8 Binding Nature.
The provisions of this Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and
their respective successors and/or assigns.
5.9 Survival of Representations and Warranties.
Except as otherwise expressly provided in this Agreement
or the Exhibit "A "attached, the representations and
warranties of CCI and O.O. AND BEA THOMPSON extended
hereunder shall survive the Closing. Each party
against whom liability is asserted under the provisions of
this Agreement shall be given the opportunity to
participate, directly or through its authorized
representative, at the cost and expense, in the conduct of
any negotiations relating to the statements of any
liability or any other proceeding instituted by any third
party against either CCI or O.O. AND BEA THOMPSON,
as the case may be, giving rise to alleged breach.
5.10 Expenses.
Except as otherwise expressly provided herein, each party
shall pay all of its own expenses incidental to the
negotiations and preparation of the documentation relating
to this Agreement and for entering into and carrying out
the terms and conditions of this Agreement and
consummating the transactions, irrespective of whether the
transactions contemplated shall be consummated.
5.11 Payment of Taxes.
All fees, costs, charges, and expenses payable to any
federal, state, or municipal authority, including without
limitations, all filing fees, documentary stamps and
transfer, sales and other taxes required to be paid, or
imposed in connection with the transfer of any of O.O. AND
BEA THOMPSON'S assets pursuant to the terms of this
Agreement shall be paid by O.O. AND BEA THOMPSON.
5.12 Amendments, Successors and Assigns.
This Agreement may be amended only by an instrument signed
by the authorized representatives of the parties hereto.
Neither party may assign any of its rights, obligations,
or liabilities arising hereunder without the prior written
consent of the other, except as otherwise provided herein,
and any such assignment or attempted assignment shall be
null and void.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their authorized representatives as of the date first above
written.
CUMBERLAND COMPANIES, INC. O.O. AND BEA THOMPSON
By: /s/ C. E. Justice /s/ O.O. THOMPSON
------------------------------ ----------------------------------------
C. E. Justice, President O.O. THOMPSON
Date: 9-18-95 /s/ BEA THOMPSON
---------------------------- ----------------------------------------
BEA THOMPSON
Date: 9-18-95
----------------------------------------
3
<PAGE> 4
E X H I B I T " A "
30-WELL PROJECT
WELL LISTING:
<TABLE>
<CAPTION>
WELLS WELL NO. LEASE NO.
- --------------------------------------------------------------------------------
<S> <C> <C>
Adams #1 Well 41-(10100) 41-001
Adams #2 Well 41-(10110) 41-001
E.R. Battle "A" Well 41-(10500) 41-002
J.C. Carr 499 #1 Well 41-(11110) 41-003
J.C. Carr 499 #3 Well 41-(11115) 41-003
Cook #1 Well 41-(11210) 41-004A,B,C,D,E,F
Docktor #1 Well 41-(11510) 41-005
Docktor #2 Well 41-(11515) 41-005
Docktor #3 Well 41-(11520) 41-005
Donaway Well 41-(11575) 41-006
Donaway Well 41-(11580) 41-006
Fleming #1 Well 41-(12500) 41-007
Isenhower A #1 Well 41-(14350) 41-008
Isenhower A #2 Well 41-(14355) 41-008
Isenhower A #3 Well 41-(14360) 41-008
Lawson #1 Well 41-(15505) 41-009
Lawson #2 Well 41-(15560) 41-009
Nan D. Ord #1 Well 41-(16750) 41-010
Nan D. Ord #2 Well 41-(16755) 41-010
Nan D. Ord #3 Well 41-(16760) 41-010
Nan D. Ord #4 Well 41-(16765) 41-010
C.C. Pippen A #1 Well 41-(17010) 41-011
C.C. Pippen A #2 Well 41-(17015) 41-011
R.W. Pruet #1 Well 41-(17250) 41-012A,B,C,D,E,F
Surles #1 Well 41-(18015) 41-013
Surles #1A Well 41-(18005) 41-014
Surles #2A Well 41-(18010) 41-015
Wallenburg 490 #1 Well 41-(19505) 41-016
Wallenburg 490 #2 Well 41-(19510) 41-016
Wallenburg 490 #3 Well 41-(19515) 41-016
Wilbanks #1 Well 41-(19650) 41-017
</TABLE>
LEASE LISTING:
LEASE NO. DESCRIPTION OF LEASE
- --------------------------------------------------------------------------------
41-001 Oil and Gas Lease dated September 20, 1977 from Roy A. Adams and
wife, Anna B. Adams, as Lessor, to F.B. Simpson, as Lessee,
recorded in Volume 664, Page 187, Deed Records of Eastland
County, Texas.
41-002 Oil, Gas and Mineral Lease dated December 7, 1983, from E. R.
Battle and Lillian Battle, as Lessor, to H.L.M. Oil Company, as
Lessee, recorded in Volume 512, Page 774, Deed Records of
Callahan County, Texas.
41-003 Oil, Gas and Mineral Lease dated January 11, 1975, from J. C.
Carr and wife, Dorothy Carr, as Lessor, to Hollensworth Oil
Company, as Lessee, recorded in Volume 626, Page 569, Deed
Records of Eastland County, Texas.
41-004A Oil, Gas and Mineral Lease dated September 11, 1974, from Nellie
Caraway, as Lessor, to West Artesia Transmission Co., as Lessee,
recorded in Volume 406, Page 29, Deed Records of Stephens County,
Texas.
41-004B Oil, Gas and Mineral Lease dated September 11, 1974, from Aquilla
Sudderth, as Lessor, to West Artesia Transmission Co., as Lessee,
recorded in Volume 406, Page 31, Deed Records of Stephens
County, Texas.
41-004C Oil, Gas and Mineral Lease dated September 18, 1974, from Charles
J. Katz & Meyer Katz, Executors of the Estates of Sid Katz and
Estelle M. Katz, and Meyer Katz, Individually, as Lessors, to
West Artesia Transmission Co., as Lessee, recorded in Volume 406,
Page 33, Deed Records of Stephens County, Texas.
41-004D Oil, Gas and Mineral Lease dated August 29, 1974, from A. Charles
Cook and Homer W. Feuchter, as Lessors, to West Artesia
Transmission Co., as Lessee, recorded in Volume 406, Page 52,
Deed Records of Stephens County, Texas.
41-004E Oil, Gas and Mineral Lease dated October 2, 1974, from Harold
Lobaugh, as Lessor, to West Artesia Transmission Co., as Lessee,
recorded in Volume 406, Page 399, Deed Records of Stephens
County, Texas.
41-004F Oil, Gas and Mineral Lease dated September 11, 1974, from Annie
Laurie Powell, W. T. Sudderth, John Sudderth, and Sue Lee, as
Lessors, to West Artesia Transmission Co., as Lessor, recorded in
Volume 406, Page 341, Deed Records of Stephens County, Texas.
41-005 Oil, Gas and Mineral Lease dated May 12, 1981, from Juaneva K.
Bellomy Docktor, dealing in her separate property and Mildred
Flodelle Bellomy Elliott, dealing in her separate property, as
Lessors, to B. J. Thurman, as Lessee, recorded in Volume 595,
Page 117, Deed Records of Young County, Texas.
41-006 Oil, Gas and Mineral Lease dated January 27, 1978, from Miss
Pearl Donaway, Gerald Travis Donaway and Boyce Eugene Donaway, as
Lessors, to Cal Michelson, as Lessee, recorded in Volume 671,
Page 628, Deed Records of Eastland County, Texas.
1
<PAGE> 5
41-007 Oil, Gas and Mineral Lease dated August 31, 1977, from W. D.
Fleming and wife, Ollie Mae Fleming, and Eugene Lawson, as
Lessors, to Cal Michelson, as Lessee, recorded in Volume 423,
Page 295, Deed Records of Callahan County, Texas.
41-008 Oil, Gas and Mineral Lease dated August 6, 1980, from Weldon
Isenhower, Wesley Isenhower, Mary Jo Johnson, Gerry Saum, Susie
Harris, Hal Saum, Dorothy Jackson, Geneva Fetterly, each dealing
in their separate property, as Lessors, to EnRe Corporation, as
Lessee, recorded in Volume 461, Page 374, Deed Records of
Callahan County, Texas.
41-009 Oil, Gas and Mineral Lease dated April 20, 1979, from W. D.
Fleming and Eugene Lawson, as Lessors, to Cal Michelson, as
Lessee, recorded in Volume 443, Page 492, Deed Records of
Callahan County, Texas.
41-010 Oil, Gas and Mineral Lease dated June 11, 1979, from R. A.
Murphy, Elizabeth Ord Groff and Nancy O. Jackson, as Lessors, to
Shawnee Investments, Inc., Montgomery First Corp. and Leland D.
Woodward, as Lessees, recorded in Volume 550, Page 767, Deed
Records of Young County, Texas.
41-011 Oil, Gas and Mineral Lease dated February 14, 1959, from
Clarence C. Pippen and wife, Jessie G. Pippen, and W. C. Pippen,
Individually, and as community administrator of the Estate of
himself and deceased wife, Pearl Pippen, as Lessors, to J. M.
Flournoy, as Lessor, recorded in Volume 520, Page 577, Deed
Records of Eastland County, Texas.
41-012A Oil, Gas and Mineral Lease dated May 1, 1980, from P.O.B.
Montgomery, Jr., M. D., as Lessor, to Jones Company, as Lessee,
recorded in Volume 474, Page 904, Deed Records of Callahan
County, Texas, and Volume 761, Page 689, Deed Records of
Eastland County, Texas.
41-012B Oil and Gas Lease dated May 1, 1980, from Marian Miller
Montgomery, Individually, and First National Bank in Dallas,
Trustee Under the Will of William S. Montgomery, Deceased, as
Lessor, to Jones Company and EnRe Corp., as Lessor, recorded in
Volume 475, Page 310, Deed Records of Callahan County, Texas, and
as corrected by instrument recorded in Volume 475, Page 315, Deed
Records of Callahan County, Texas.
41-012C Oil and Gas Lease dated May 1, 1980, from Frances Montgomery
Williams, as Lessor, to Jones Company, as Lessee, recorded in
Volume 476, Page 497, Deed Records of Callahan County, Texas.
41-012D Oil, Gas and Mineral Lease dated August 14, 1981, from Royce W.
Pruet and wife, Mary Fay Pruet, as Lessors, to EnRe Corporation,
as Lessee, recorded in Volume 81, Page 8528, Deed Records of
Eastland County, Texas, and in Volume 478, Page 662, Deed Records
of Callahan County, Texas.
41-012E Oil, Gas and Mineral Lease dated November 21, 1975, from Royce W.
Pruet and wife, Mary Fay Pruet, as Lessors, to Jones Company,
Ltd., as Lessee, recorded in Volume 405, Page 96, Deed Records of
Callahan County, Texas.
41-012F Oil, Gas and Mineral Lease dated August 14, 1981, from Royce W.
Pruet and wife, Mary Fay Pruet, as Lessors, to EnRe Corporation,
recorded in Volume 478, Page 658, Deed Records of Callahan
County, Texas.
41-013 Oil, Gas and Mineral Lease dated September 5, 1975, from Marston
Surles and wife, Helen Surles; Phillip C. Surles and wife, Joyce
A. Surles; and L. E. Surles and wife, Margaret Alice Surles, as
Lessors, to J. H. Greer, recorded in Volume 405, Page 409, Deed
Records of Callahan County, Texas.
41-014 Oil, Gas and Mineral Lease dated October 1, 1979, from Marston
Surles, as duly authorized agent and attorney in fact for Phillip
C. Surles, Joyce Ann Surles, L. E. Surles, and Margaret Alice
Surles, as Lessors, to Cal Michelson, as Lessee, recorded in
Volume 449, Page 286, Deed Records of Callahan County, Texas.
41-015 Oil, Gas and Mineral Lease dated October 1, 1979, from Marston
Surles, as duly authorized agent and attorney in fact for Phillip
C. Surles, Joyce Ann Surles, L. E. Surles and Margaret Alice
Surles, as Lessors, to Cal Michelson, as Lessee, recorded in
Volume 449, Page 283, Deed Records of Callahan County, Texas.
41-016 Order Granting Application to Lease Property for Mineral
Exploration and Development at Private Sale executed by Judge
Robert M. Burnet, Judge Presiding over the Guardianship of
Venice Luse Wallenberg, Person and Estate, NCM, in the Probate
Court No. 1 of Tarrant County, Texas, with Oil, Gas and Mineral
Lease dated March 10, 1983 being executed under such above-
described Order by Alwin F. Luse, Jr., temporary guardian of
Venice Luse Wallenberg, as Lessor, to EnRe Corporation, as
Lessee, recorded in Volume 829, Page 353, Deed Records of
Eastland County, Texas.
41-017 Oil, Gas and Mineral Lease dated March 15, 1979, from Fae
Wilbanks, Kale Franklin, Irene Beard, Geo Ross Miller, June Hay,
Jacqueline Dames, Pauline Low, Verba Montgomery, Johnnie Ruth
Webb, Gene McCort, Bryan Miller, and John B. Miller, as Lessors,
to Cal Michelson, as Lessee, recorded in Volume 443, Page 133,
Deed Records of Callahan County, Texas.
2
<PAGE> 6
E X H I B I T " A "
MALLORY - SLEMMONS PROJECT
WELL LISTING
<TABLE>
<CAPTION>
WELLS WELL NO. LEASE NO.
- --------------------------------------------------------------------------------
<S> <C> <C>
Willie Mae Slemmons 43-(037850) _____________
Mallory #1 Well 43-(036010) 43-001A,B,C,D
Mallory #2 Well 43-(036015) 43-001A,B,C,D
Mallory #3 Well 43-(036020) 43-001A,B,C,D
Bert Slemmons Well 43-(037855) 43-002 A - H
Harold Slemmons #1 Well 43-(037865) 43-003 A - Q
Harold Slemmons 2D Well 43-(______) 43-003 A - Q
Curtis Slemmons Well 43-(037860) 43-_________
</TABLE>
LEASE LISTING
LEASE NO. DESCRIPTION OF LEASES
- --------------------------------------------------------------------------------
43-001A Oil, Gas and Mineral Lease dated August 1, 1981, from William
Gross, as Lessor, to Mike Austin, as Lessee, recorded in Volume
572, Page 435, Deed Records of Palo Pinto County, Texas.
43-001B Oil, Gas and Mineral Lease dated August 1, 1981, from Robert
Gross, as Lessor, to Mike Austin, as Lessee, recorded in Volume
573, Page 733, Deed Records of Palo Pinto County, Texas.
43-001C Oil, Gas and Mineral Lease dated July 23, 1980, from Daube
Partnership, Ltd., an Oklahoma Limited Partnership, and The
Carol Sutton Trust, Carol Daube Sutton, Jack M. Newman and James
W. Williams, Trustees, as Lessors, to Mike Austin, as Lessee,
recorded in Volume 552, Page 629, Deed Records of Palo Pinto
County, Texas.
43-001D Oil, Gas and Mineral Lease dated July 31, 1980, from Westheimer-
Neustadt Corporation, a Delaware Corporation, as Lessor, to Mike
Austin, as Lessee, recorded in Volume 552, Page 626, Deed Records
of Palo Pinto County, Texas.
43-002A Oil, Gas and Mineral Lease dated January 2, 1984, from Tom A.
Myers, as Court appointed Receiver for Great Central Oil Company,
C. L. Garrett, W. A. Stagner, Olive E. Russell and J. E. Dement,
as Lessors, to Austex Energy, Inc., as Lessee, recorded in Volume
632, Page 580, Deed Records of Palo Pinto County, Texas.
43-002B Oil, Gas and Mineral Lease dated January 2, 1984, from Rosa L.
Boarman Truhe, as Lessor, to Austex Energy, Inc., as Lessee,
recorded in Volume 632, Page 582, Deed Records of Palo Pinto
County, Texas.
43-002C Oil, Gas and Mineral Lease dated January 21, 1984, from W. C.
Boarman, as Lessor, to Austex Energy, Inc., as Lessee, recorded
in Volume 632, Page 584, Deed Records of Palo Pinto County,
Texas.
43-002D Oil, Gas and Mineral Lease dated January 2, 1984, from Truma Sue
Kirkpatrick, as Lessor, to Austex Energy, Inc., as Lessee,
recorded in Volume 632, Page 588, Deed Records of Palo Pinto
County, Texas.
43-002E Oil, Gas and Mineral Lease dated January 17, 1984, from Marvin T.
Brown, as Lessor, to Austex Energy, Inc., as Lessee, recorded in
Volume 623, Page 112, Deed Records of Palo Pinto County, Texas.
43-002F Oil, Gas and Mineral Lease dated January 2, 1984, from Carolyn
Boarman Elliott, as Lessor, to Austex Energy, Inc., as Lessee,
recorded in Volume 632, Page 586, Deed Records of Palo Pinto
County, Texas.
43-002G Oil, Gas and Mineral Lease dated January 6, 1984, from Curtis
Slemmons and Margie Stoker, as Lessors, to Mike Austin, as
Lessee, recorded in Volume 617, Page 314, Deed Records of Palo
Pinto County, Texas.
43-002H Oil, Gas and Mineral Lease dated February 15, 1981, from Willie
Mae Slemmons, as Lessor, to Mike Austin, as Lessee, recorded in
Volume 562, Page 515, Deed Records of Palo Pinto County, Texas.
43-003A Oil, Gas and Mineral Lease dated January 6, 1982, from Carolyn
Boarman Elliott, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 584, Page 545, Deed Records of Palo Pinto County,
Texas.
43-003B Oil, Gas and Mineral Lease dated January 6, 1984, from W. C.
Boarman, as Lessor, to Mike Austin, as Lessee, recorded in Volume
584, Page 548, Deed Records of Palo Pinto County, Texas.
43-003C Oil, Gas and Mineral Lease dated June _, 1980, but executed as of
November 8, 1980, from Willie Mae Slemmons and Erby C. Slemmons,
as Lessor, to Mike Austin, as Lessee, recorded in Volume 559,
Page 212, Deed Records of Palo Pinto County, Texas.
<PAGE> 7
43-003D Oil, Gas and Mineral Lease dated November 25, 1980, from Harold
Slemmons and wife, Maxine Slemmons, as Lessors, to Mike Austin,
as Lessee, recorded in Volume 557, Page 965, Deed Records of Palo
Pinto County, Texas.
43-003E Oil, Gas and Mineral Lease dated August _, 1980, from David
Michael Boarman, Bonita Boarman Duck, Mary Boarman McCutchen,
Helen Jo Boarman Mata, Carolyn Boarman Elliott and W. C. Boarman,
as Lessors, to Mike Austin, as Lessee, recorded in Volume 571,
Page 362, Deed Records of Palo Pinto County, Texas.
43-003F Oil, Gas and Mineral Lease dated August _, 1980, from Ruby E.
Williams and R. H. Williams, as Lessors, to Mike Austin, as
Lessee, recorded in Volume 553, Page 554, Deed Records of Palo
Pinto County, Texas.
43-003G Oil, Gas and Mineral Lease dated July 1, 1980, from Marvin F.
Brown, Florence Boarman, Joseph R. Boarman (and Rhuben Johnston),
as Lessors, to Mike Austin, as Lessee, recorded in Volume 553,
Page 550, Deed Records of Palo Pinto County, Texas.
43-003H Oil, Gas and Mineral Lease dated August __, 1980, from Reuben L.
Boarman, Truma Sue Kirkpatrick, Rosa L. Truhe and Robert E.
Boarman, as Lessors, to Mike Austin, as Lessee, recorded in
Volume 553, Page 558, Deed Records of Palo Pinto County, Texas.
43-003I Oil, Gas and Mineral Lease dated August _, 1980, from Louise Brown
Blake, through her attorney-in-fact, Betty Blake White, as
Lessor, to Mike Austin, as Lessee, recorded in Volume 557, Page
961, Deed Records of Palo Pinto County, Texas.
43-003J Oil, Gas and Mineral Lease dated August 15, 1981, from Helen Jo
Boarman Mata, as Lessor, to Mike Austin, as Lessee, recorded in
Volume 572, Page 437, Deed Records of Palo Pinto County, Texas.
43-003K Oil, Gas and Mineral Lease dated September _, 1980, from Ruth
Jones, as Lessor, to Mike Austin, as Lessee, recorded in Volume
555, Page 888, Deed Records of Palo Pinto County, Texas.
43-003L Oil, Gas and Mineral Lease dated September _, 1980, from Allen F.
Disharoon, Jr., and wife, Rosa Disharoon, as Lessors, to Mike
Austin, as Lessee, recorded in Volume 555, Page 885, Deed Records
of Palo Pinto County, Texas.
43-003M Oil, Gas and Mineral Lease dated September _, 1980, from Col.
Jerry Disharoon, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 555, Page 882, Deed Records of Palo Pinto County, Texas.
43-003N Oil, Gas and Mineral Lease dated September _, 1980, from Terry
Lynn McCullough, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 557, Page 364, Deed Records of Palo Pinto County,
Texas.
43-003O Oil, Gas and Mineral Lease dated September _, 1980, from Jeanne
Margaret Johnston, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 557, Page 359, Deed Records of Palo Pinto County,
Texas.
43-003P Oil, Gas and Mineral Lease dated October 30, 1980, from A. D.
Crawford, and wife, Elizabeth Crawford, as Lessors, to Mike
Austin, as Lessee, recorded in Volume 557, Page 356, Deed Records
of Palo Pinto County, Texas.
43-003Q Oil, Gas and Mineral Lease dated June 15, 1981, from Margie
Slemmons Stoker, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 569, Page 480, Deed Records of Palo Pinto County,
Texas.
43-004A Oil, Gas and Mineral Lease dated November 25, 1980, from Harold
Slemmons and wife, Maxine Slemmons, as Lessors, to Mike Austin,
as Lessee, recorded in Volume 557, Page 965, Deed Records of Palo
Pinto County, Texas.
43-004B Oil, Gas and Mineral Lease dated July 31, 1980, from Westheimer-
Neustadt Corporation, a Delaware Corporation, as Lessor, to Mike
Austin, as Lessee, recorded in Volume 552, Page 623, Deed Records
of Palo Pinto County, Texas.
<PAGE> 1
EXHIBIT 10.4
GENERAL PROMISSORY NOTE
$104,998.36 WEATHERFORD, TEXAS SEPTEMBER 15, 1995
FOR VALUE RECEIVED, I, we, and each of us, the undersigned, jointly and
severally, promise to pay to O. O. AND BEA THOMPSON, or order, the sum of ONE
HUNDRED FOUR THOUSAND, NINE HUNDRED, NINETY-EIGHT AND 36/100 DOLLARS
($104,998.36), with interest from date to maturity at the rate of Seven Per
Cent (7.0%) per annum, both principal and interest payable at 1305 Bois D'Arc,
Weatherford, Texas 76086.
This Note is payable as follows:
This is a term note (and may be renewed yearly), with all
principal due on September 15, 1996, the interest shall be
payable monthly with the first interest payment due on November
15, 1995, and continuing monthly until the principal is paid in
full. (See attached schedule.)
All sums past due under the terms of this note shall bear interest from
their maturity at the rate of eighteen per cent (18%) per annum.
This note is secured by a Deed of Trust of even date herewith, a copy of
which is attached for all purposes.
It is agreed that in the event of failure to pay when due any
installment of principal or interest of this note, or in the event of failure
to keep and perform any of the covenants or agreements contained in the
aforementioned instrument, or in the event of the issuance of any writ of
garnishment, or writ of attachment, or writ of injunction, or summons against
the holder of this note in connection with any suit or controversy involving
any maker, surety, endorser, or guarantor of this note, or to which any maker,
surety, endorser, or guarantor of this note may be a party, or in any of said
events, all of the unpaid principal balance hereof, together with earned and
unpaid interest, shall, at the election of the holder hereof, and without
notice, immediately become due and payable.
Each maker, surety, endorser, and guarantor of this note hereby
severally waives demand and presentation for payment, notice of non-payment,
protest and notice of protest, and the diligence of bringing suit against any
party hereto and consents that time of payment may be extended from time to
time without notice thereof to him.
If this note is placed in the hands of an attorney for collection, or if
collected by suit, or through probate, bankruptcy, or other court proceedings,
the undersigned, jointly and severally, agree to pay fifteen per cent (15%)
additional on the principal and interest then due hereon as attorney's fees.
CUMBERLAND COMPANIES, INC.
ATTEST:
By: /s/ EDDYE DREYER BY: /s/ C. E. JUSTICE
-------------------------------- ------------------------------------
Eddye Dreyer, Assistant Secretary C. E. JUSTICE, PRESIDENT
SEPTEMBER 15, 1995
<PAGE> 2
2/21/95 Page 1
LOAN AMORTIZATION SCHEDULE
Loan Amortized At 7%
<TABLE>
<CAPTION>
PAYMENT PAYMENT PRINCIPAL
NUMBER AMOUNT PRINCIPAL INTEREST BALANCE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Opening Balance 104,998.36
1 612.49 0.00 612.49 104,998.36
2 612.49 0.00 612.49 104,998.36
3 612.49 0.00 612.49 104,998.36
4 612.49 0.00 612.49 104,998.36
5 612.49 0.00 612.49 104,998.36
6 612.49 0.00 612.49 104,998.36
7 612.49 0.00 612.49 104,998.36
8 612.49 0.00 612.49 104,998.36
9 612.49 0.00 612.49 104,998.36
10 612.49 0.00 612.49 104,998.36
11 612.49 0.00 612.49 104,998.36
12 105,610.85 104,998.36 612.49 0.00
GRAND TOTAL 112,348.24 104,998.36 7,349.88 0.00
===============================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.5
OIL AND GAS PROPERTY PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 18th day of September,
1995, by and between CUMBERLAND COMPANIES, INC., (hereinafter referred to as
"CCI") a Nevada corporation, with its principal place of business at 4925
Greenville Avenue, Suite 1354, Dallas, Texas 75206, and RANDY J. MASON, having
his principal place of business at Box 1495, Springtown, Texas 76082.
W I T N E S S E T H :
WHEREAS, RANDY J. MASON has agreed to sell to CCI certain interests in
oil properties as set forth in Exhibit "A" attached hereto.
1. Purchase Price.
In consideration for CCI purchasing the referenced property as set
forth in Exhibit "A", CCI shall pay the sum of One Million, One
Hundred Eleven Thousand, Six Hundred Sixty Dollars and
Ninety-Seven Cents ($1,111,660.97). Effective date to be the date
of this Purchase and Sale Agreement. Said payment may be made in
cash or in common stock valued at Three Dollars ($3.00) per share,
or a combination of cash and stock. The common stock is to be
Class A Common Stock of CCI, subject to Rule 144 under the
Securities Act of 1933. Said shares shall have piggyback rights
subject to terms and conditions acceptable to an underwriter
approved by the management of CCI. Payment of the One Million, One
Hundred Eleven Thousand, Six Hundred Sixty Dollars and
Ninety-Seven Cents ($1,111,660.97) shall be made as follows:
1.1 Two Hundred Ten Thousand One Dollar and Twenty-Two Cents
($210,001.22) payable in notes. (See attached Promissory
Note), and
1.2 Nine Hundred One Thousand, Six Hundred Fifty-Nine Dollars
and Seventy-Five Cents ($901,659.75), payable in Three
Hundred Thousand Five Hundred Fifty-Three (300,553) shares
of Common Stock.
2. Closing.
The completion of the contemplated transactions is herein
designated as the Closing which shall take place on or before
September 30, 1995, or such other date as the parties shall
mutually agree upon.
3. Warranties and Representations of Cumberland Companies, Inc.
3.1. Corporate Organization.
CCI is a corporation duly organized, validly existing and
in good standing under the laws of Nevada and is duly
qualified to do business and has full power and authority
to carry on its current business and to purchase, own, and
sell its assets and properties.
3.2 Corporate Authority.
The execution and delivery of this Agreement to RANDY J.
MASON and the carrying out of the provisions hereof have
been fully authorized by the Board of Directors of CCI.
3.3 Binding Nature.
This Agreement shall be, when duly executed and delivered,
a legal and binding obligation of CCI, enforceable in
accordance with its terms.
3.4 Warranties and Representations.
No representation or warranty by CCI in this Agreement
contains, nor will it contain, any untrue statement or
omission, nor will it omit to state a material fact
necessary to make the statements contained herein not
misleading. All representations and warranties made by CCI
in this Agreement shall be true and correct as of the
Closing with the same force and effect as if they had
been made on and as of such date.
3.5 Litigation.
There are no pending, nor, to the best knowledge and
belief of CCI, threatened actions or proceedings
1
<PAGE> 2
before any court of administrative agency or other
authority which might or will materially or adversely
affect CCI's ability or right to perform all of CCI's
obligations hereunder.
4 Warranties and Representations of RANDY J. MASON
4.1 Property Title.
RANDY J. MASON hereby warrants and represents that he has
good and marketable title to the properties and/or property
interests, which are the subject to this Agreement, and
that the properties and/or property interests are free and
clear from any liens, or other obligations, and that there
is no litigation pending or threatened against said
properties and/or property interests.
4.2 Authority to Sign.
RANDY J. MASON warrants and represents that he has full
authority, as owners of the properties and/or property
interests, to enter into this Agreement with CCI.
4.3 Binding Nature.
This Agreement shall be, when duly executed and delivered,
a legal and binding obligation of RANDY J. MASON,
enforceable in accordance with its terms.
4.4 Warranties and Representations.
No representation or warranty by RANDY J. MASON in this
Agreement contains, nor will it contain, any untrue
statement or omission, nor will it omit to state a material
fact necessary to make the statements contained herein not
misleading. All representations and warranties made by
RANDY J. MASON in this Agreement shall be true and correct
as of the Closing with the same force and effect as if they
had been made on and as of such date.
4.5 Litigation.
There are no pending, nor to the best knowledge and belief
of RANDY J. MASON, threatened actions or proceedings before
any court or administrative agency or other authority which
might or will materially or adversely affect RANDY J.
MASON'S obligations hereunder.
5. Miscellaneous
5.1 Brokerage.
Each party hereto represents and warrants to the other
that no broker or finder is entitled to any commission, or
similar fees, in connection with the making and carrying
out of this Agreement.
5.2 Sales Tax.
Any sales taxes which may be payable in connection with
the transfer of the assets described shall be borne solely
by RANDY J. MASON.
5.3 Notices and Communications.
Any notice, payment request, instruction, or other document
to be delivered hereunder shall be deemed sufficiently
given if in writing and delivered personally or mailed by
Certified Mail, postage prepaid, if to CCI addressed to
CUMBERLAND COMPANIES, INC. at the address first set forth
above, and if addressed to RANDY J. MASON, at the address
first set forth above, unless in each case CCI or RANDY J.
MASON shall have notified the other in writing of a
different address.
5.4 Non-Waiver.
No delay or failure on their part or either part in
exercising any right hereunder, and no partial or single
exercise thereof, will constitute a waiver of such right
or any other right hereunder.
2
<PAGE> 3
5.5 Headings.
Headings in this Agreement are for convenience only and
are not to be used for interpreting or construing any
provision hereof.
5.6 Governing Law.
This Agreement shall be construed in accordance with and
governed by the laws of the State of Nevada.
5.7 Counterparts.
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the
same instrument.
5.8 Binding Nature.
The provisions of this Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and
their respective successors and/or assigns.
5.9 Survival of Representations and Warranties.
Except as otherwise expressly provided in this Agreement or
the Exhibit "A" attached, the representations and
warranties of CCI and RANDY J. MASON extended hereunder
shall survive the Closing. Each party against whom
liability is asserted under the provisions of this
Agreement shall be given the opportunity to participate,
directly or through its authorized representative, at the
cost and expense, in the conduct of any negotiations
relating to the statements of any liability or any other
proceeding instituted by any third party against either CCI
or RANDY J. MASON, as the case may be, giving rise to
alleged breach.
5.10 Expenses.
Except as otherwise expressly provided herein, each party
shall pay all of its own expenses incidental to the
negotiations and preparation of the documentation relating
to this Agreement and for entering into and carrying out
the terms and conditions of this Agreement and
consummating the transactions, irrespective of whether the
transactions contemplated shall be consummated.
5.11 Payment of Taxes.
All fees, costs, charges, and expenses payable to any
federal, state, or municipal authority, including without
limitations, all filing fees, documentary stamps and
transfer, sales and other taxes required to be paid, or
imposed in connection with the transfer of any of RANDY J.
MASON assets pursuant to the terms of this Agreement shall
be paid by RANDY J. MASON.
5.12 Amendments, Successors and Assigns.
This Agreement may be amended only by an instrument signed
by the authorized representatives of the parties hereto.
Neither party may assign any of its rights, obligations,
or liabilities arising hereunder without the prior written
consent of the other, except as otherwise provided herein,
and any such assignment or attempted assignment shall be
null and void.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their authorized representatives as of the date first above
written.
CUMBERLAND COMPANIES, INC.
By: /s/ C. E. Justice /s/ RANDY J. MASON
------------------------------ ----------------------------------------
C. E. Justice, President Randy J. Mason
Date: 9-18-95 Date: 9-18-95
---------------------------- -----------------------------------
3
<PAGE> 4
E X H I B I T " A "
30-WELL PROJECT
WELL LISTING:
<TABLE>
<CAPTION>
WELLS WELL NO. LEASE NO.
- --------------------------------------------------------------------------------
<S> <C> <C>
Adams #1 Well 41-(10100) 41-001
Adams #2 Well 41-(10110) 41-001
E.R. Battle "A" Well 41-(10500) 41-002
J.C. Carr 499 #1 Well 41-(11110) 41-003
J.C. Carr 499 #3 Well 41-(11115) 41-003
Cook #1 Well 41-(11210) 41-004A,B,C,D,E,F
Docktor #1 Well 41-(11510) 41-005
Docktor #2 Well 41-(11515) 41-005
Docktor #3 Well 41-(11520) 41-005
Donaway Well 41-(11575) 41-006
Donaway Well 41-(11580) 41-006
Fleming #1 Well 41-(12500) 41-007
Isenhower A #1 Well 41-(14350) 41-008
Isenhower A #2 Well 41-(14355) 41-008
Isenhower A #3 Well 41-(14360) 41-008
Lawson #1 Well 41-(15505) 41-009
Lawson #2 Well 41-(15560) 41-009
Nan D. Ord #1 Well 41-(16750) 41-010
Nan D. Ord #2 Well 41-(16755) 41-010
Nan D. Ord #3 Well 41-(16760) 41-010
Nan D. Ord #4 Well 41-(16765) 41-010
C.C. Pippen A #1 Well 41-(17010) 41-011
C.C. Pippen A #2 Well 41-(17015) 41-011
R.W. Pruet #1 Well 41-(17250) 41-012A,B,C,D,E,F
Surles #1 Well 41-(18015) 41-013
Surles #1A Well 41-(18005) 41-014
Surles #2A Well 41-(18010) 41-015
Wallenburg 490 #1 Well 41-(19505) 41-016
Wallenburg 490 #2 Well 41-(19510) 41-016
Wallenburg 490 #3 Well 41-(19515) 41-016
Wilbanks #1 Well 41-(19650) 41-017
</TABLE>
LEASE LISTING:
LEASE NO. DESCRIPTION OF LEASE
- --------------------------------------------------------------------------------
41-001 Oil and Gas Lease dated September 20, 1977 from Roy A. Adams and
wife, Anna B. Adams, as Lessor, to F.B. Simpson, as Lessee,
recorded in Volume 664, Page 187, Deed Records of Eastland
County, Texas.
41-002 Oil, Gas and Mineral Lease dated December 7, 1983, from E. R.
Battle and Lillian Battle, as Lessor, to H.L.M. Oil Company, as
Lessee, recorded in Volume 512, Page 774, Deed Records of
Callahan County, Texas.
41-003 Oil, Gas and Mineral Lease dated January 11, 1975, from J. C.
Carr and wife, Dorothy Carr, as Lessor, to Hollensworth Oil
Company, as Lessee, recorded in Volume 626, Page 569, Deed
Records of Eastland County, Texas.
41-004A Oil, Gas and Mineral Lease dated September 11, 1974, from Nellie
Caraway, as Lessor, to West Artesia Transmission Co., as Lessee,
recorded in Volume 406, Page 29, Deed Records of Stephens County,
Texas.
41-004B Oil, Gas and Mineral Lease dated September 11, 1974, from Aquilla
Sudderth, as Lessor, to West Artesia Transmission Co., as Lessee,
recorded in Volume 406, Page 31, Deed Records of Stephens
County, Texas.
41-004C Oil, Gas and Mineral Lease dated September 18, 1974, from Charles
J. Katz & Meyer Katz, Executors of the Estates of Sid Katz and
Estelle M. Katz, and Meyer Katz, Individually, as Lessors, to
West Artesia Transmission Co., as Lessee, recorded in Volume 406,
Page 33, Deed Records of Stephens County, Texas.
41-004D Oil, Gas and Mineral Lease dated August 29, 1974, from A. Charles
Cook and Homer W. Feuchter, as Lessors, to West Artesia
Transmission Co., as Lessee, recorded in Volume 406, Page 52,
Deed Records of Stephens County, Texas.
41-004E Oil, Gas and Mineral Lease dated October 2, 1974, from Harold
Lobaugh, as Lessor, to West Artesia Transmission Co., as Lessee,
recorded in Volume 406, Page 399, Deed Records of Stephens
County, Texas.
41-004F Oil, Gas and Mineral Lease dated September 11, 1974, from Annie
Laurie Powell, W. T. Sudderth, John Sudderth, and Sue Lee, as
Lessors, to West Artesia Transmission Co., as Lessor, recorded in
Volume 406, Page 341, Deed Records of Stephens County, Texas.
41-005 Oil, Gas and Mineral Lease dated May 12, 1981, from Juaneva K.
Bellomy Docktor, dealing in her separate property and Mildred
Flodelle Bellomy Elliott, dealing in her separate property, as
Lessors, to B. J. Thurman, as Lessee, recorded in Volume 595,
Page 117, Deed Records of Young County, Texas.
41-006 Oil, Gas and Mineral Lease dated January 27, 1978, from Miss
Pearl Donaway, Gerald Travis Donaway and Boyce Eugene Donaway, as
Lessors, to Cal Michelson, as Lessee, recorded in Volume 671,
Page 628, Deed Records of Eastland County, Texas.
1
<PAGE> 5
41-007 Oil, Gas and Mineral Lease dated August 31, 1977, from W. D.
Fleming and wife, Ollie Mae Fleming, and Eugene Lawson, as
Lessors, to Cal Michelson, as Lessee, recorded in Volume 423,
Page 295, Deed Records of Callahan County, Texas.
41-008 Oil, Gas and Mineral Lease dated August 6, 1980, from Weldon
Isenhower, Wesley Isenhower, Mary Jo Johnson, Gerry Saum, Susie
Harris, Hal Saum, Dorothy Jackson, Geneva Fetterly, each dealing
in their separate property, as Lessors, to EnRe Corporation, as
Lessee, recorded in Volume 461, Page 374, Deed Records of
Callahan County, Texas.
41-009 Oil, Gas and Mineral Lease dated April 20, 1979, from W. D.
Fleming and Eugene Lawson, as Lessors, to Cal Michelson, as
Lessee, recorded in Volume 443, Page 492, Deed Records of
Callahan County, Texas.
41-010 Oil, Gas and Mineral Lease dated June 11, 1979, from R. A.
Murphy, Elizabeth Ord Groff and Nancy O. Jackson, as Lessors, to
Shawnee Investments, Inc., Montgomery First Corp. and Leland D.
Woodward, as Lessees, recorded in Volume 550, Page 767, Deed
Records of Young County, Texas.
41-011 Oil, Gas and Mineral Lease dated February 14, 1959, from
Clarence C. Pippen and wife, Jessie G. Pippen, and W. C. Pippen,
Individually, and as community administrator of the Estate of
himself and deceased wife, Pearl Pippen, as Lessors, to J. M.
Flournoy, as Lessor, recorded in Volume 520, Page 577, Deed
Records of Eastland County, Texas.
41-012A Oil, Gas and Mineral Lease dated May 1, 1980, from P.O.B.
Montgomery, Jr., M. D., as Lessor, to Jones Company, as Lessee,
recorded in Volume 474, Page 904, Deed Records of Callahan
County, Texas, and Volume 761, Page 689, Deed Records of
Eastland County, Texas.
41-012B Oil and Gas Lease dated May 1, 1980, from Marian Miller
Montgomery, Individually, and First National Bank in Dallas,
Trustee Under the Will of William S. Montgomery, Deceased, as
Lessor, to Jones Company and EnRe Corp., as Lessor, recorded in
Volume 475, Page 310, Deed Records of Callahan County, Texas, and
as corrected by instrument recorded in Volume 475, Page 315, Deed
Records of Callahan County, Texas.
41-012C Oil and Gas Lease dated May 1, 1980, from Frances Montgomery
Williams, as Lessor, to Jones Company, as Lessee, recorded in
Volume 476, Page 497, Deed Records of Callahan County, Texas.
41-012D Oil, Gas and Mineral Lease dated August 14, 1981, from Royce W.
Pruet and wife, Mary Fay Pruet, as Lessors, to EnRe Corporation,
as Lessee, recorded in Volume 81, Page 8528, Deed Records of
Eastland County, Texas, and in Volume 478, Page 662, Deed Records
of Callahan County, Texas.
41-012E Oil, Gas and Mineral Lease dated November 21, 1975, from Royce W.
Pruet and wife, Mary Fay Pruet, as Lessors, to Jones Company,
Ltd., as Lessee, recorded in Volume 405, Page 96, Deed Records of
Callahan County, Texas.
41-012F Oil, Gas and Mineral Lease dated August 14, 1981, from Royce W.
Pruet and wife, Mary Fay Pruet, as Lessors, to EnRe Corporation,
recorded in Volume 478, Page 658, Deed Records of Callahan
County, Texas.
41-013 Oil, Gas and Mineral Lease dated September 5, 1975, from Marston
Surles and wife, Helen Surles; Phillip C. Surles and wife, Joyce
A. Surles; and L. E. Surles and wife, Margaret Alice Surles, as
Lessors, to J. H. Greer, recorded in Volume 405, Page 409, Deed
Records of Callahan County, Texas.
41-014 Oil, Gas and Mineral Lease dated October 1, 1979, from Marston
Surles, as duly authorized agent and attorney in fact for Phillip
C. Surles, Joyce Ann Surles, L. E. Surles, and Margaret Alice
Surles, as Lessors, to Cal Michelson, as Lessee, recorded in
Volume 449, Page 286, Deed Records of Callahan County, Texas.
41-015 Oil, Gas and Mineral Lease dated October 1, 1979, from Marston
Surles, as duly authorized agent and attorney in fact for Phillip
C. Surles, Joyce Ann Surles, L. E. Surles and Margaret Alice
Surles, as Lessors, to Cal Michelson, as Lessee, recorded in
Volume 449, Page 283, Deed Records of Callahan County, Texas.
41-016 Order Granting Application to Lease Property for Mineral
Exploration and Development at Private Sale executed by Judge
Robert M. Burnet, Judge Presiding over the Guardianship of
Venice Luse Wallenberg, Person and Estate, NCM, in the Probate
Court No. 1 of Tarrant County, Texas, with Oil, Gas and Mineral
Lease dated March 10, 1983 being executed under such above-
described Order by Alwin F. Luse, Jr., temporary guardian of
Venice Luse Wallenberg, as Lessor, to EnRe Corporation, as
Lessee, recorded in Volume 829, Page 353, Deed Records of
Eastland County, Texas.
41-017 Oil, Gas and Mineral Lease dated March 15, 1979, from Fae
Wilbanks, Kale Franklin, Irene Beard, Geo Ross Miller, June Hay,
Jacqueline Dames, Pauline Low, Verba Montgomery, Johnnie Ruth
Webb, Gene McCort, Bryan Miller, and John B. Miller, as Lessors,
to Cal Michelson, as Lessee, recorded in Volume 443, Page 133,
Deed Records of Callahan County, Texas.
2
<PAGE> 6
E X H I B I T " A "
MALLORY - SLEMMONS PROJECT
WELL LISTING
<TABLE>
<CAPTION>
WELLS WELL NO. LEASE NO.
- --------------------------------------------------------------------------------
<S> <C> <C>
Willie Mae Slemmons 43-(037850) _____________
Mallory #1 Well 43-(036010) 43-001A,B,C,D
Mallory #2 Well 43-(036015) 43-001A,B,C,D
Mallory #3 Well 43-(036020) 43-001A,B,C,D
Bert Slemmons Well 43-(037855) 43-002 A - H
Harold Slemmons #1 Well 43-(037865) 43-003 A - Q
Harold Slemmons 2D Well 43-(______) 43-003 A - Q
Curtis Slemmons Well 43-(037860) 43-_________
</TABLE>
LEASE LISTING
LEASE NO. DESCRIPTION OF LEASES
- --------------------------------------------------------------------------------
43-001A Oil, Gas and Mineral Lease dated August 1, 1981, from William
Gross, as Lessor, to Mike Austin, as Lessee, recorded in Volume
572, Page 435, Deed Records of Palo Pinto County, Texas.
43-001B Oil, Gas and Mineral Lease dated August 1, 1981, from Robert
Gross, as Lessor, to Mike Austin, as Lessee, recorded in Volume
573, Page 733, Deed Records of Palo Pinto County, Texas.
43-001C Oil, Gas and Mineral Lease dated July 23, 1980, from Daube
Partnership, Ltd., an Oklahoma Limited Partnership, and The
Carol Sutton Trust, Carol Daube Sutton, Jack M. Newman and James
W. Williams, Trustees, as Lessors, to Mike Austin, as Lessee,
recorded in Volume 552, Page 629, Deed Records of Palo Pinto
County, Texas.
43-001D Oil, Gas and Mineral Lease dated July 31, 1980, from Westheimer-
Neustadt Corporation, a Delaware Corporation, as Lessor, to Mike
Austin, as Lessee, recorded in Volume 552, Page 626, Deed Records
of Palo Pinto County, Texas.
43-002A Oil, Gas and Mineral Lease dated January 2, 1984, from Tom A.
Myers, as Court appointed Receiver for Great Central Oil Company,
C. L. Garrett, W. A. Stagner, Olive E. Russell and J. E. Dement,
as Lessors, to Austex Energy, Inc., as Lessee, recorded in Volume
632, Page 580, Deed Records of Palo Pinto County, Texas.
43-002B Oil, Gas and Mineral Lease dated January 2, 1984, from Rosa L.
Boarman Truhe, as Lessor, to Austex Energy, Inc., as Lessee,
recorded in Volume 632, Page 582, Deed Records of Palo Pinto
County, Texas.
43-002C Oil, Gas and Mineral Lease dated January 21, 1984, from W. C.
Boarman, as Lessor, to Austex Energy, Inc., as Lessee, recorded
in Volume 632, Page 584, Deed Records of Palo Pinto County,
Texas.
43-002D Oil, Gas and Mineral Lease dated January 2, 1984, from Truma Sue
Kirkpatrick, as Lessor, to Austex Energy, Inc., as Lessee,
recorded in Volume 632, Page 588, Deed Records of Palo Pinto
County, Texas.
43-002E Oil, Gas and Mineral Lease dated January 17, 1984, from Marvin T.
Brown, as Lessor, to Austex Energy, Inc., as Lessee, recorded in
Volume 623, Page 112, Deed Records of Palo Pinto County, Texas.
43-002F Oil, Gas and Mineral Lease dated January 2, 1984, from Carolyn
Boarman Elliott, as Lessor, to Austex Energy, Inc., as Lessee,
recorded in Volume 632, Page 586, Deed Records of Palo Pinto
County, Texas.
43-002G Oil, Gas and Mineral Lease dated January 6, 1984, from Curtis
Slemmons and Margie Stoker, as Lessors, to Mike Austin, as
Lessee, recorded in Volume 617, Page 314, Deed Records of Palo
Pinto County, Texas.
43-002H Oil, Gas and Mineral Lease dated February 15, 1981, from Willie
Mae Slemmons, as Lessor, to Mike Austin, as Lessee, recorded in
Volume 562, Page 515, Deed Records of Palo Pinto County, Texas.
43-003A Oil, Gas and Mineral Lease dated January 6, 1982, from Carolyn
Boarman Elliott, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 584, Page 545, Deed Records of Palo Pinto County,
Texas.
43-003B Oil, Gas and Mineral Lease dated January 6, 1984, from W. C.
Boarman, as Lessor, to Mike Austin, as Lessee, recorded in Volume
584, Page 548, Deed Records of Palo Pinto County, Texas.
43-003C Oil, Gas and Mineral Lease dated June _, 1980, but executed as of
November 8, 1980, from Willie Mae Slemmons and Erby C. Slemmons,
as Lessor, to Mike Austin, as Lessee, recorded in Volume 559,
Page 212, Deed Records of Palo Pinto County, Texas.
<PAGE> 7
43-003D Oil, Gas and Mineral Lease dated November 25, 1980, from Harold
Slemmons and wife, Maxine Slemmons, as Lessors, to Mike Austin,
as Lessee, recorded in Volume 557, Page 965, Deed Records of Palo
Pinto County, Texas.
43-003E Oil, Gas and Mineral Lease dated August _, 1980, from David
Michael Boarman, Bonita Boarman Duck, Mary Boarman McCutchen,
Helen Jo Boarman Mata, Carolyn Boarman Elliott and W. C. Boarman,
as Lessors, to Mike Austin, as Lessee, recorded in Volume 571,
Page 362, Deed Records of Palo Pinto County, Texas.
43-003F Oil, Gas and Mineral Lease dated August _, 1980, from Ruby E.
Williams and R. H. Williams, as Lessors, to Mike Austin, as
Lessee, recorded in Volume 553, Page 554, Deed Records of Palo
Pinto County, Texas.
43-003G Oil, Gas and Mineral Lease dated July 1, 1980, from Marvin F.
Brown, Florence Boarman, Joseph R. Boarman (and Rhuben Johnston),
as Lessors, to Mike Austin, as Lessee, recorded in Volume 553,
Page 550, Deed Records of Palo Pinto County, Texas.
43-003H Oil, Gas and Mineral Lease dated August __, 1980, from Reuben L.
Boarman, Truma Sue Kirkpatrick, Rosa L. Truhe and Robert E.
Boarman, as Lessors, to Mike Austin, as Lessee, recorded in
Volume 553, Page 558, Deed Records of Palo Pinto County, Texas.
43-003I Oil, Gas and Mineral Lease dated August _, 1980, from Louise Brown
Blake, through her attorney-in-fact, Betty Blake White, as
Lessor, to Mike Austin, as Lessee, recorded in Volume 557, Page
961, Deed Records of Palo Pinto County, Texas.
43-003J Oil, Gas and Mineral Lease dated August 15, 1981, from Helen Jo
Boarman Mata, as Lessor, to Mike Austin, as Lessee, recorded in
Volume 572, Page 437, Deed Records of Palo Pinto County, Texas.
43-003K Oil, Gas and Mineral Lease dated September _, 1980, from Ruth
Jones, as Lessor, to Mike Austin, as Lessee, recorded in Volume
555, Page 888, Deed Records of Palo Pinto County, Texas.
43-003L Oil, Gas and Mineral Lease dated September _, 1980, from Allen F.
Disharoon, Jr., and wife, Rosa Disharoon, as Lessors, to Mike
Austin, as Lessee, recorded in Volume 555, Page 885, Deed Records
of Palo Pinto County, Texas.
43-003M Oil, Gas and Mineral Lease dated September _, 1980, from Col.
Jerry Disharoon, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 555, Page 882, Deed Records of Palo Pinto County, Texas.
43-003N Oil, Gas and Mineral Lease dated September _, 1980, from Terry
Lynn McCullough, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 557, Page 364, Deed Records of Palo Pinto County,
Texas.
43-003O Oil, Gas and Mineral Lease dated September _, 1980, from Jeanne
Margaret Johnston, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 557, Page 359, Deed Records of Palo Pinto County,
Texas.
43-003P Oil, Gas and Mineral Lease dated October 30, 1980, from A. D.
Crawford, and wife, Elizabeth Crawford, as Lessors, to Mike
Austin, as Lessee, recorded in Volume 557, Page 356, Deed Records
of Palo Pinto County, Texas.
43-003Q Oil, Gas and Mineral Lease dated June 15, 1981, from Margie
Slemmons Stoker, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 569, Page 480, Deed Records of Palo Pinto County,
Texas.
43-004A Oil, Gas and Mineral Lease dated November 25, 1980, from Harold
Slemmons and wife, Maxine Slemmons, as Lessors, to Mike Austin,
as Lessee, recorded in Volume 557, Page 965, Deed Records of Palo
Pinto County, Texas.
43-004B Oil, Gas and Mineral Lease dated July 31, 1980, from Westheimer-
Neustadt Corporation, a Delaware Corporation, as Lessor, to Mike
Austin, as Lessee, recorded in Volume 552, Page 623, Deed Records
of Palo Pinto County, Texas.
<PAGE> 1
EXHIBIT 10.6
GENERAL PROMISSORY NOTE
$210,001.22 WEATHERFORD, TEXAS SEPTEMBER 15, 1995
FOR VALUE RECEIVED, I, we, and each of us, the undersigned, jointly and
severally, promise to pay to RANDY J. MASON, or order, the sum of TWO HUNDRED
TEN THOUSAND, ONE AND 22/100 DOLLARS ($210,001.22), with interest from date to
maturity at the rate of Seven Per Cent (7.0%) per annum, both principal and
interest payable at P. O. Box 14951, Springtown, Texas 76082.
This Note is payable as follows:
This is a term note (and may be renewed yearly), with all
principal due on September 15, 1996, the interest shall be
payable monthly with the first interest payment due on November
15, 1995, and continuing monthly until the principal is paid in
full. (See attached schedule.)
All sums past due under the terms of this note shall bear interest from
their maturity at the rate of eighteen per cent (18%) per annum.
This note is secured by a Deed of Trust of even date herewith, a copy of
which is attached for all purposes.
It is agreed that in the event of failure to pay when due any
installment of principal or interest of this note, or in the event of failure
to keep and perform any of the covenants or agreements contained in the
aforementioned instrument, or in the event of the issuance of any writ of
garnishment, or writ of attachment, or writ of injunction, or summons against
the holder of this note in connection with any suit or controversy involving
any maker, surety, endorser, or guarantor of this note, or to which any maker,
surety, endorser, or guarantor of this note may be a party, or in any of said
events, all of the unpaid principal balance hereof, together with earned and
unpaid interest, shall, at the election of the holder hereof, and without
notice, immediately become due and payable.
Each maker, surety, endorser, and guarantor of this note hereby
severally waives demand and presentation for payment, notice of non-payment,
protest and notice of protest, and the diligence of bringing suit against any
party hereto and consents that time of payment may be extended from time to
time without notice thereof to him.
If this note is placed in the hands of an attorney for collection, or if
collected by suit, or through probate, bankruptcy, or other court proceedings,
the undersigned, jointly and severally, agree to pay fifteen per cent (15%)
additional on the principal and interest then due hereon as attorney's fees.
CUMBERLAND COMPANIES, INC.
ATTEST:
By: /s/ EDDYE DREYER BY: /s/ C. E. JUSTICE
-------------------------------- ------------------------------------
Assistant Secretary C. E. JUSTICE, PRESIDENT
SEPTEMBER 15, 1995
<PAGE> 2
2/21/95 Page 1
LOAN AMORTIZATION SCHEDULE
Loan Amortized At 7%
<TABLE>
<CAPTION>
PAYMENT PAYMENT PRINCIPAL
NUMBER AMOUNT PRINCIPAL INTEREST BALANCE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Opening Balance 210,001.22
1 1,225.01 0.00 1,225.01 210,001.22
2 1,225.01 0.00 1,225.01 210,001.22
3 1,225.01 0.00 1,225.01 210,001.22
4 1,225.01 0.00 1,225.01 210,001.22
5 1,225.01 0.00 1,225.01 210,001.22
6 1,225.01 0.00 1,225.01 210,001.22
7 1,225.01 0.00 1,225.01 210,001.22
8 1,225.01 0.00 1,225.01 210,001.22
9 1,225.01 0.00 1,225.01 210,001.22
10 1,225.01 0.00 1,225.01 210,001.22
11 1,225.01 0.00 1,225.01 210,001.22
12 211,226.23 210,001.22 1,225.01 0.00
GRAND TOTAL 224,701.34 210,001.22 14,700.12 0.00
===============================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.7
OIL AND GAS PROPERTY PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 18th day of September, 1995,
by and between CUMBERLAND COMPANIES, INC., (hereinafter referred to as "CCI") a
Nevada corporation, with its principal place of business at 4925 Greenville
Avenue, Suite 1354, Dallas, Texas 75206, and J. L. KEAS, having his principal
place of business at Route 1, Box 38, Abbott, Texas 76621.
W I T N E S S E T H :
WHEREAS, J. L. KEAS has agreed to sell to CCI certain interests in oil
properties as set forth in Exhibit "A" attached hereto.
1. Purchase Price.
In consideration for CCI purchasing the referenced property as set
forth in Exhibit "A", CCI shall pay the sum of Sixty-Seven
Thousand, Three Hundred, Eighty-Six Dollars and Thirty-Six Cents
($67,386.36). Effective date to be the date of this Purchase and
Sale Agreement. Said payment may be made in cash or in common
stock valued at Three Dollars ($3.00) per share, or a combination
of cash and stock. The common stock is to be Class A Common Stock
of CCI, subject to Rule 144 under the Securities Act of 1933. Said
shares shall have piggyback rights subject to terms and conditions
acceptable to an underwriter approved by the management of CCI.
Payment of the Sixty-Seven Thousand, Three Hundred, Eighty-Six
Dollars and Thirty-Six Cents ($67,386.36) shall be made as
follows:
1.1 Seventeen Thousand, One Hundred Forty-Two Dollars and
Ninety-Two Cents ($17,142.92) payable in notes. (See
attached Promissory Note), and
1.2 Fifty Thousand, Two Hundred Forty-Three Dollars and
Forty-Four Cents ($50,243.44), payable in Sixteen Thousand,
Seven Hundred Forty-Eight (16,748) shares of Common Stock.
2. Closing.
The completion of the contemplated transactions is herein
designated as the Closing which shall take place on or before
September 30, 1995, or such other date as the parties shall
mutually agree upon.
3. Warranties and Representations of Cumberland Companies, Inc.
3.1. Corporate Organization.
CCI is a corporation duly organized, validly existing and
in good standing under the laws of Nevada and is duly
qualified to do business and has full power and authority
to carry on its current business and to purchase, own, and
sell its assets and properties.
3.2 Corporate Authority.
The execution and delivery of this Agreement to J. L. KEAS
and the carrying out of the provisions hereof have been
fully authorized by the Board of Directors of CCI.
3.3 Binding Nature.
This Agreement shall be, when duly executed and delivered,
a legal and binding obligation of CCI, enforceable in
accordance with its terms.
3.4 Warranties and Representations.
No representation or warranty by CCI in this Agreement
contains, nor will it contain, any untrue statement or
omission, nor will it omit to state a material fact
necessary to make the statements contained herein not
misleading. All representations and warranties made by CCI
in this Agreement shall be true and correct as of the
Closing with the same force and effect as if they had
been made on and as of such date.
3.5 Litigation.
There are no pending, nor, to the best knowledge and
belief of CCI, threatened actions or proceedings
1
<PAGE> 2
before any court of administrative agency or other
authority which might or will materially or adversely
affect CCI's ability or right to perform all of CCI's
obligations hereunder.
4 Warranties and Representations of J. L. KEAS
4.1 Property Title.
J. L. KEAS hereby warrants and represents that he has good
and marketable title to the properties and/or property
interests, which are the subject to this Agreement, and
that the properties and/or property interests are free and
clear from any liens, or other obligations, and that there
is no litigation pending or threatened against said
properties and/or property interests.
4.2 Authority to Sign.
J. L. KEAS warrants and represent that he has full
authority, as owner of the properties and/or property
interests, to enter into this Agreement with CCI.
4.3 Binding Nature.
This Agreement shall be, when duly executed and delivered,
a legal and binding obligation of J. L. KEAS, enforceable
in accordance with its terms.
4.4 Warranties and Representations.
No representation or warranty by J. L. KEAS in this
Agreement contains, nor will it contain, any untrue
statement or omission, nor will it omit to state a material
fact necessary to make the statements contained herein not
misleading. All representations and warranties made by J.
L. KEAS in this Agreement shall be true and correct as of
the Closing with the same force and effect as if they had
been made on and as of such date.
4.5 Litigation.
There are no pending, nor to the best knowledge and belief
of J. L. KEAS, threatened actions or proceedings before any
court or administrative agency or other authority which
might or will materially or adversely affect J. L. KEAS'
obligations hereunder.
5. Miscellaneous
5.1 Brokerage.
Each party hereto represents and warrants to the other
that no broker or finder is entitled to any commission, or
similar fees, in connection with the making and carrying
out of this Agreement.
5.2 Sales Tax.
Any sales taxes which may be payable in connection with
the transfer of the assets described shall be borne solely
by J. L. KEAS.
5.3 Notices and Communications.
Any notice, payment request, instruction, or other document
to be delivered hereunder shall be deemed sufficiently
given if in writing and delivered personally or mailed by
Certified Mail, postage prepaid, if to CCI addressed to
CUMBERLAND COMPANIES, INC. at the address first set forth
above, and if addressed to J. L. KEAS, at the address first
set forth above, unless in each case CCI or J. L. KEAS
shall have notified the other in writing of a different
address.
5.4 Non-Waiver.
No delay or failure on their part or either part in
exercising any right hereunder, and no partial or single
exercise thereof, will constitute a waiver of such right
or any other right hereunder.
2
<PAGE> 3
5.5 Headings.
Headings in this Agreement are for convenience only and
are not to be used for interpreting or construing any
provision hereof.
5.6 Governing Law.
This Agreement shall be construed in accordance with and
governed by the laws of the State of Nevada.
5.7 Counterparts.
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the
same instrument.
5.8 Binding Nature.
The provisions of this Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and
their respective successors and/or assigns.
5.9 Survival of Representations and Warranties.
Except as otherwise expressly provided in this Agreement or
the Exhibit "A" attached, the representations and
warranties of CCI and J. L. KEAS extended hereunder shall
survive the Closing. Each party against whom liability is
asserted under the provisions of this Agreement shall be
given the opportunity to participate, directly or through
its authorized representative, at the cost and expense, in
the conduct of any negotiations relating to the statements
of any liability or any other proceeding instituted by any
third party against either CCI or J. L. KEAS, as the case
may be, giving rise to alleged breach.
5.10 Expenses.
Except as otherwise expressly provided herein, each party
shall pay all of its own expenses incidental to the
negotiations and preparation of the documentation relating
to this Agreement and for entering into and carrying out
the terms and conditions of this Agreement and
consummating the transactions, irrespective of whether the
transactions contemplated shall be consummated.
5.11 Payment of Taxes.
All fees, costs, charges, and expenses payable to any
federal, state, or municipal authority, including without
limitations, all filing fees, documentary stamps and
transfer, sales and other taxes required to be paid, or
imposed in connection with the transfer of any of J. L.
KEAS' assets pursuant to the terms of this Agreement shall
be paid by J. L. KEAS.
5.12 Amendments, Successors and Assigns.
This Agreement may be amended only by an instrument signed
by the authorized representatives of the parties hereto.
Neither party may assign any of its rights, obligations,
or liabilities arising hereunder without the prior written
consent of the other, except as otherwise provided herein,
and any such assignment or attempted assignment shall be
null and void.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their authorized representatives as of the date first above
written.
CUMBERLAND COMPANIES, INC.
By: /s/ C. E. Justice /s/ J. L. Keas
------------------------------ ----------------------------------------
C. E. Justice, President J. L. KEAS
Date: 9/22/95 Date: 9/18/95
---------------------------- ----------------------------------
Attest:
By: /s/ Eddye Dreyer
----------------------------------
Eddye Dreyer, Assistant Secretary
----------------------------------
3
<PAGE> 4
E X H I B I T " A "
{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}
MALLORY NO.1 WELL Well No. 43-(036010)
- -----------------
LEASE LISTING
LEASE NO. DESCRIPTION OF LEASES
- --------------------------------------------------------------------------------
43-001A Oil, Gas and Mineral Lease dated August 1, 1981, from William
Gross, as Lessor, to Mike Austin, as Lessee, recorded in Volume
572, Page 435, Deed Records of Palo Pinto County, Texas.
43-001B Oil, Gas and Mineral Lease dated August 1, 1981, from Robert
Gross, as Lessor, to Mike Austin, as Lessee, recorded in Volume
573, Page 733, Deed Records of Palo Pinto County, Texas.
43-001C Oil, Gas and Mineral Lease dated July 23, 1980, from Daube
Partnership, Ltd., an Oklahoma Limited Partnership, and The Carol
Sutton Trust, Carol Daube Sutton, Jack M. Newman and James W.
Williams, Trustees, as Lessors, to Mike Austin, as Lessee,
recorded in Volume 552, Page 629, Deed Records of Palo Pinto
County, Texas.
43-001D Oil, Gas and Mineral Lease dated July 31, 1980, from Westheimer-
Neustadt Corporation, a Delaware Corporation, as Lessor, to Mike
Austin, as Lessee, recorded in Volume 552, Page 626, Deed Records
of Palo Pinto County, Texas.
--0--
<PAGE> 1
EXHIBIT 10.8
GENERAL PROMISSORY NOTE
$17,142.92 WEATHERFORD, TEXAS SEPTEMBER 15, 1995
FOR VALUE RECEIVED, I, we, and each of us, the undersigned, jointly and
severally, promise to pay to J. L. KEAS, or order, the sum of SEVENTEEN
THOUSAND, ONE HUNDRED, FORTY-TWO AND 92/100 DOLLARS ($17,142.92), with interest
from date to maturity at the rate of Seven Per Cent (7.0%) per annum, both
principal and interest payable at Route 1, Box 38, Abbott, Texas 76621.
This Note is payable as follows:
This is a term note (and may be renewed yearly), with all
principal due on September 15, 1996, the interest shall be
payable monthly with the first interest payment due on November
15, 1995, and continuing monthly until the principal is paid in
full. (See attached schedule.)
All sums past due under the terms of this note shall bear interest from
their maturity at the rate of eighteen per cent (18%) per annum.
This note is secured by a Deed of Trust of even date herewith, a copy of
which is attached for all purposes.
It is agreed that in the event of failure to pay when due any
installment of principal or interest of this note, or in the event of failure
to keep and perform any of the covenants or agreements contained in the
aforementioned instrument, or in the event of the issuance of any writ of
garnishment, or writ of attachment, or writ of injunction, or summons against
the holder of this note in connection with any suit or controversy involving
any maker, surety, endorser, or guarantor of this note, or to which any maker,
surety, endorser, or guarantor of this note may be a party, or in any of said
events, all of the unpaid principal balance hereof, together with earned and
unpaid interest, shall, at the election of the holder hereof, and without
notice, immediately become due and payable.
Each maker, surety, endorser, and guarantor of this note hereby
severally waives demand and presentation for payment, notice of non-payment,
protest and notice of protest, and the diligence of bringing suit against any
party hereto and consents that time of payment may be extended from time to
time without notice thereof to him.
If this note is placed in the hands of an attorney for collection, or if
collected by suit, or through probate, bankruptcy, or other court proceedings,
the undersigned, jointly and severally, agree to pay fifteen per cent (15%)
additional on the principal and interest then due hereon as attorney's fees.
CUMBERLAND COMPANIES, INC.
ATTEST:
By: /s/ EDDYE DREYER BY: /s/ C. E. JUSTICE
-------------------------------- ------------------------------------
Eddye Dreyer, Assistant Secretary C. E. JUSTICE, PRESIDENT
SEPTEMBER 15, 1995
<PAGE> 2
2/21/95 Page 1
LOAN AMORTIZATION SCHEDULE
Loan Amortized At 7%
<TABLE>
<CAPTION>
PAYMENT PAYMENT PRINCIPAL
NUMBER AMOUNT PRINCIPAL INTEREST BALANCE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Opening Balance 17,142.92
1 100.00 0.00 100.00 17,142.92
2 100.00 0.00 100.00 17,142.92
3 100.00 0.00 100.00 17,142.92
4 100.00 0.00 100.00 17,142.92
5 100.00 0.00 100.00 17,142.92
6 100.00 0.00 100.00 17,142.92
7 100.00 0.00 100.00 17,142.92
8 100.00 0.00 100.00 17,142.92
9 100.00 0.00 100.00 17,142.92
10 100.00 0.00 100.00 17,142.92
11 100.00 0.00 100.00 17,142.92
12 17,242.92 17,142.92 100.00 0.00
GRAND TOTAL 18,342.92 17,142.92 1,200.00 0.00
===============================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.9
OIL AND GAS PROPERTY PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 15th day of September,
1995, by and between CUMBERLAND COMPANIES, INC., (hereinafter referred to as
"CCI") a Nevada corporation, with its principal place of business at 4925
Greenville Avenue, Suite 1354, Dallas, Texas 75206, and CHARLES AND ROMANA
HIBBS, having their principal place of business at 924 Panoramic, Silt,
Colorado 81652.
W I T N E S S E T H :
WHEREAS, CHARLES AND ROMANA HIBBS have agreed to sell to CCI
certain interests in oil properties as set forth in Exhibit "A" attached
hereto.
1. Purchase Price.
In consideration for CCI purchasing the referenced property as
set forth in Exhibit "A", CCI shall pay the sum of Two Hundred
Seven Thousand, Five Hundred Fifteen Dollars and Fifty-Eight
Cents ($207,515.58). Effective date to be the date of this
Purchase and Sale Agreement. Said payment may be made in cash or
in common stock valued at Three Dollars ($3.00) per share, or a
combination of cash and stock. The common stock is to be Class A
Common Stock of CCI, subject to Rule 144 under the Securities Act
of 1933. Said shares shall have piggyback rights subject to terms
and conditions acceptable to an underwriter approved by the
management of CCI. Payment of the Two Hundred
Seven Thousand, Five Hundred Fifteen Dollars and Fifty-Eight
Cents ($207,515.58) shall be made as follows:
1.1 Fifty-Five Thousand Three Hundred Fifty-Seven Dollars and
Twenty-Two Cents ($55,357.22) payable in notes. (See
attached Promissory Note), and
1.2 One Hundred Fifty-Two Thousand, One Hundred Fifty-Eight
Dollars and Thirty-Six Cents ($152,158.36), payable in
Fifty Thousand Seven Hundred, Twenty (50,720) shares of
Common Stock.
2. Closing.
The completion of the contemplated transactions is herein
designated as the Closing which shall take place on or before
September 30, 1995, or such other date as the parties shall
mutually agree upon.
3. Warranties and Representations of Cumberland Companies, Inc.
3.1. Corporate Organization.
CCI is a corporation duly organized, validly existing and
in good standing under the laws of Nevada and is duly
qualified to do business and has full power and authority
to carry on its current business and to purchase, own, and
sell its assets and properties.
3.2 Corporate Authority.
The execution and delivery of this Agreement to CHARLES
AND ROMANA HIBBS and the carrying out of the
provisions hereof have been fully authorized by the Board
of Directors of CCI.
3.3 Binding Nature.
This Agreement shall be, when duly executed and delivered,
a legal and binding obligation of CCI, enforceable in
accordance with its terms.
3.4 Warranties and Representations.
No representation or warranty by CCI in this Agreement
contains, nor will it contain, any untrue statement or
omission, nor will it omit to state a material fact
necessary to make the statements contained herein not
misleading. All representations and warranties made by CCI
in this Agreement shall be true and correct as of the
Closing with the same force and effect as if they had
been made on and as of such date.
3.5 Litigation.
There are no pending, nor, to the best knowledge and
belief of CCI, threatened actions or proceedings
1
<PAGE> 2
before any court of administrative agency or other
authority which might or will materially or adversely
affect CCI's ability or right to perform all of CCI's
obligations hereunder.
4. Warranties and Representations of CHARLES AND ROMANA HIBBS
4.1 Property Title.
CHARLES AND ROMANA HIBBS hereby warrant and represent
that they have good and marketable title to the properties
and/or property interests, which are the subject to this
Agreement, and that the properties and/or property
interests are free and clear from any liens, or other
obligations, and that there is no litigation pending or
threatened against said properties and/or property
interests.
4.2 Authority to Sign.
CHARLES AND ROMANA HIBBS warrant and represent that
they have full authority, as owners of the properties
and/or property interests, to enter into this Agreement
with CCI.
4.3 Binding Nature.
This Agreement shall be, when duly executed and delivered,
a legal and binding obligation of CHARLES AND ROMANA HIBBS,
enforceable in accordance with its terms.
4.4 Warranties and Representations.
No representation or warranty by CHARLES AND ROMANA HIBBS
in this Agreement contains, nor will it contain, any
untrue statement or omission, nor will it omit to state a
material fact necessary to make the statements contained
herein not misleading. All representations and warranties
made by CHARLES AND ROMANA HIBBS in this Agreement shall
be true and correct as of the Closing with the same force
and effect as if they had been made on and as of such date.
4.5 Litigation.
There are no pending, nor to the best knowledge and belief
of CHARLES AND ROMANA HIBBS, threatened actions or
proceedings before any court or administrative agency or
other authority which might or will materially or
adversely affect CHARLES AND ROMANA HIBBS' obligations
hereunder.
5. Miscellaneous
5.1 Brokerage.
Each party hereto represents and warrants to the other
that no broker or finder is entitled to any commission, or
similar fees, in connection with the making and carrying
out of this Agreement.
5.2 Sales Tax.
Any sales taxes which may be payable in connection with
the transfer of the assets described shall be borne solely
by CHARLES AND ROMANA HIBBS.
5.3 Notices and Communications.
Any notice, payment request, instruction, or other
document to be delivered hereunder shall be deemed
sufficiently given if in writing and delivered personally
or mailed by Certified Mail, postage prepaid, if to CCI
addressed to CUMBERLAND COMPANIES, INC. at the address
first set forth above, and if addressed to CHARLES AND
ROMANA HIBBS, at the address first set forth above,
unless in each case CCI or CHARLES AND ROMANA HIBBS
shall have notified the other in writing of a different
address.
5.4 Non-Waiver.
No delay or failure on their part or either part in
exercising any right hereunder, and no partial or single
exercise thereof, will constitute a waiver of such right
or any other right hereunder.
2
<PAGE> 3
5.5 Headings.
Headings in this Agreement are for convenience only and
are not to be used for interpreting or construing any
provision hereof.
5.6 Governing Law.
This Agreement shall be construed in accordance with and
governed by the laws of the State of Nevada.
5.7 Counterparts.
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the
same instrument.
5.8 Binding Nature.
The provisions of this Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and
their respective successors and/or assigns.
5.9 Survival of Representations and Warranties.
Except as otherwise expressly provided in this Agreement or
the Exhibit "A" attached, the representations and
warranties of CCI and CHARLES AND ROMANA HIBBS extended
hereunder shall survive the Closing. Each party against
whom liability is asserted under the provisions of this
Agreement shall be given the opportunity to participate,
directly or through its authorized representative, at the
cost and expense, in the conduct of any negotiations
relating to the statements of any liability or any other
proceeding instituted by any third party against either CCI
or CHARLES AND ROMANA HIBBS, as the case may be, giving
rise to alleged breach.
5.10 Expenses.
Except as otherwise expressly provided herein, each party
shall pay all of its own expenses incidental to the
negotiations and preparation of the documentation relating
to this Agreement and for entering into and carrying out
the terms and conditions of this Agreement and
consummating the transactions, irrespective of whether the
transactions contemplated shall be consummated.
5.11 Payment of Taxes.
All fees, costs, charges, and expenses payable to any
federal, state, or municipal authority, including without
limitations, all filing fees, documentary stamps and
transfer, sales and other taxes required to be paid, or
imposed in connection with the transfer of any of CHARLES
AND ROMANA HIBBS' assets pursuant to the terms of this
Agreement shall be paid by CHARLES AND ROMANA HIBBS.
5.12 Amendments, Successors and Assigns.
This Agreement may be amended only by an instrument signed
by the authorized representatives of the parties hereto.
Neither party may assign any of its rights, obligations,
or liabilities arising hereunder without the prior written
consent of the other, except as otherwise provided herein,
and any such assignment or attempted assignment shall be
null and void.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their authorized representatives as of the date first above
written.
CUMBERLAND COMPANIES, INC.
By: /s/ C. E. JUSTICE /s/ CHARLES HIBBS
------------------------------ ----------------------------------------
C. E. Justice, President Charles Hibbs
Date: September 22, 1995 /s/ ROMANA HIBBS
---------------------------- ----------------------------------------
Romana Hibbs
Date: September 21, 1995
-----------------------------------
ATTEST: [SEAL]
By: /s/ EDDYE DREYER 3 State of Colorado
------------------------------ County of Montrose
Eddye Dreyer, Assistant Secretary
Subscribed and sworn to before me this
21st day of September, 1995, by Charles
Hibbs and Romana Hibbs.
/s/ DEBRA L. ENSLEY
-------------------------
Notary Public
MY COMMISSION EXPIRES 3/27/99
3
<PAGE> 4
E X H I B I T " A "
MALLORY - SLEMMONS PROJECT
WELL LISTING
<TABLE>
<CAPTION>
WELLS WELL NO. LEASE NO.
- --------------------------------------------------------------------------------
<S> <C> <C>
Willie Mae Slemmons 43-(037850) _____________
Mallory #1 Well 43-(036010) 43-001A,B,C,D
Mallory #2 Well 43-(036015) 43-001A,B,C,D
Mallory #3 Well 43-(036020) 43-001A,B,C,D
Bert Slemmons Well 43-(037855) 43-002 A - H
Harold Slemmons #1 Well 43-(037865) 43-003 A - Q
Harold Slemmons 2D Well 43-(______) 43-003 A - Q
Curtis Slemmons Well 43-(037860) 43-_________
</TABLE>
LEASE LISTING
LEASE NO. DESCRIPTION OF LEASES
- --------------------------------------------------------------------------------
43-001A Oil, Gas and Mineral Lease dated August 1, 1981, from William
Gross, as Lessor, to Mike Austin, as Lessee, recorded in Volume
572, Page 435, Deed Records of Palo Pinto County, Texas.
43-001B Oil, Gas and Mineral Lease dated August 1, 1981, from Robert
Gross, as Lessor, to Mike Austin, as Lessee, recorded in Volume
573, Page 733, Deed Records of Palo Pinto County, Texas.
43-001C Oil, Gas and Mineral Lease dated July 23, 1980, from Daube
Partnership, Ltd., an Oklahoma Limited Partnership, and The
Carol Sutton Trust, Carol Daube Sutton, Jack M. Newman and James
W. Williams, Trustees, as Lessors, to Mike Austin, as Lessee,
recorded in Volume 552, Page 629, Deed Records of Palo Pinto
County, Texas.
43-001D Oil, Gas and Mineral Lease dated July 31, 1980, from Westheimer-
Neustadt Corporation, a Delaware Corporation, as Lessor, to Mike
Austin, as Lessee, recorded in Volume 552, Page 626, Deed Records
of Palo Pinto County, Texas.
43-002A Oil, Gas and Mineral Lease dated January 2, 1984, from Tom A.
Myers, as Court appointed Receiver for Great Central Oil Company,
C. L. Garrett, W. A. Stagner, Olive E. Russell and J. E. Dement,
as Lessors, to Austex Energy, Inc., as Lessee, recorded in Volume
632, Page 580, Deed Records of Palo Pinto County, Texas.
43-002B Oil, Gas and Mineral Lease dated January 2, 1984, from Rosa L.
Boarman Truhe, as Lessor, to Austex Energy, Inc., as Lessee,
recorded in Volume 632, Page 582, Deed Records of Palo Pinto
County, Texas.
43-002C Oil, Gas and Mineral Lease dated January 21, 1984, from W. C.
Boarman, as Lessor, to Austex Energy, Inc., as Lessee, recorded
in Volume 632, Page 584, Deed Records of Palo Pinto County,
Texas.
43-002D Oil, Gas and Mineral Lease dated January 2, 1984, from Truma Sue
Kirkpatrick, as Lessor, to Austex Energy, Inc., as Lessee,
recorded in Volume 632, Page 588, Deed Records of Palo Pinto
County, Texas.
43-002E Oil, Gas and Mineral Lease dated January 17, 1984, from Marvin T.
Brown, as Lessor, to Austex Energy, Inc., as Lessee, recorded in
Volume 623, Page 112, Deed Records of Palo Pinto County, Texas.
43-002F Oil, Gas and Mineral Lease dated January 2, 1984, from Carolyn
Boarman Elliott, as Lessor, to Austex Energy, Inc., as Lessee,
recorded in Volume 632, Page 586, Deed Records of Palo Pinto
County, Texas.
43-002G Oil, Gas and Mineral Lease dated January 6, 1984, from Curtis
Slemmons and Margie Stoker, as Lessors, to Mike Austin, as
Lessee, recorded in Volume 617, Page 314, Deed Records of Palo
Pinto County, Texas.
43-002H Oil, Gas and Mineral Lease dated February 15, 1981, from Willie
Mae Slemmons, as Lessor, to Mike Austin, as Lessee, recorded in
Volume 562, Page 515, Deed Records of Palo Pinto County, Texas.
43-003A Oil, Gas and Mineral Lease dated January 6, 1982, from Carolyn
Boarman Elliott, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 584, Page 545, Deed Records of Palo Pinto County,
Texas.
43-003B Oil, Gas and Mineral Lease dated January 6, 1984, from W. C.
Boarman, as Lessor, to Mike Austin, as Lessee, recorded in Volume
584, Page 548, Deed Records of Palo Pinto County, Texas.
43-003C Oil, Gas and Mineral Lease dated June _, 1980, but executed as of
November 8, 1980, from Willie Mae Slemmons and Erby C. Slemmons,
as Lessor, to Mike Austin, as Lessee, recorded in Volume 559,
Page 212, Deed Records of Palo Pinto County, Texas.
<PAGE> 5
43-003D Oil, Gas and Mineral Lease dated November 25, 1980, from Harold
Slemmons and wife, Maxine Slemmons, as Lessors, to Mike Austin,
as Lessee, recorded in Volume 557, Page 965, Deed Records of Palo
Pinto County, Texas.
43-003E Oil, Gas and Mineral Lease dated August _, 1980, from David
Michael Boarman, Bonita Boarman Duck, Mary Boarman McCutchen,
Helen Jo Boarman Mata, Carolyn Boarman Elliott and W. C. Boarman,
as Lessors, to Mike Austin, as Lessee, recorded in Volume 571,
Page 362, Deed Records of Palo Pinto County, Texas.
43-003F Oil, Gas and Mineral Lease dated August _, 1980, from Ruby E.
Williams and R. H. Williams, as Lessors, to Mike Austin, as
Lessee, recorded in Volume 553, Page 554, Deed Records of Palo
Pinto County, Texas.
43-003G Oil, Gas and Mineral Lease dated July 1, 1980, from Marvin F.
Brown, Florence Boarman, Joseph R. Boarman (and Rhuben Johnston),
as Lessors, to Mike Austin, as Lessee, recorded in Volume 553,
Page 550, Deed Records of Palo Pinto County, Texas.
43-003H Oil, Gas and Mineral Lease dated August __, 1980, from Reuben L.
Boarman, Truma Sue Kirkpatrick, Rosa L. Truhe and Robert E.
Boarman, as Lessors, to Mike Austin, as Lessee, recorded in
Volume 553, Page 558, Deed Records of Palo Pinto County, Texas.
43-003I Oil, Gas and Mineral Lease dated August _, 1980, from Louise Brown
Blake, through her attorney-in-fact, Betty Blake White, as
Lessor, to Mike Austin, as Lessee, recorded in Volume 557, Page
961, Deed Records of Palo Pinto County, Texas.
43-003J Oil, Gas and Mineral Lease dated August 15, 1981, from Helen Jo
Boarman Mata, as Lessor, to Mike Austin, as Lessee, recorded in
Volume 572, Page 437, Deed Records of Palo Pinto County, Texas.
43-003K Oil, Gas and Mineral Lease dated September _, 1980, from Ruth
Jones, as Lessor, to Mike Austin, as Lessee, recorded in Volume
555, Page 888, Deed Records of Palo Pinto County, Texas.
43-003L Oil, Gas and Mineral Lease dated September _, 1980, from Allen F.
Disharoon, Jr., and wife, Rosa Disharoon, as Lessors, to Mike
Austin, as Lessee, recorded in Volume 555, Page 885, Deed Records
of Palo Pinto County, Texas.
43-003M Oil, Gas and Mineral Lease dated September _, 1980, from Col.
Jerry Disharoon, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 555, Page 882, Deed Records of Palo Pinto County, Texas.
43-003N Oil, Gas and Mineral Lease dated September _, 1980, from Terry
Lynn McCullough, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 557, Page 364, Deed Records of Palo Pinto County,
Texas.
43-003O Oil, Gas and Mineral Lease dated September _, 1980, from Jeanne
Margaret Johnston, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 557, Page 359, Deed Records of Palo Pinto County,
Texas.
43-003P Oil, Gas and Mineral Lease dated October 30, 1980, from A. D.
Crawford, and wife, Elizabeth Crawford, as Lessors, to Mike
Austin, as Lessee, recorded in Volume 557, Page 356, Deed Records
of Palo Pinto County, Texas.
43-003Q Oil, Gas and Mineral Lease dated June 15, 1981, from Margie
Slemmons Stoker, as Lessor, to Mike Austin, as Lessee, recorded
in Volume 569, Page 480, Deed Records of Palo Pinto County,
Texas.
43-004A Oil, Gas and Mineral Lease dated November 25, 1980, from Harold
Slemmons and wife, Maxine Slemmons, as Lessors, to Mike Austin,
as Lessee, recorded in Volume 557, Page 965, Deed Records of Palo
Pinto County, Texas.
43-004B Oil, Gas and Mineral Lease dated July 31, 1980, from Westheimer-
Neustadt Corporation, a Delaware Corporation, as Lessor, to Mike
Austin, as Lessee, recorded in Volume 552, Page 623, Deed Records
of Palo Pinto County, Texas.
<PAGE> 1
EXHIBIT 10.10
GENERAL PROMISSORY NOTE
$55,357.22 WEATHERFORD, TEXAS SEPTEMBER 15, 1995
FOR VALUE RECEIVED, I, we, and each of us, the undersigned, jointly and
severally, promise to pay to CHARLES AND ROMANA HIBBS, or order, the sum of
FIFTY-FIVE THOUSAND, THREE HUNDRED, FIFTY-SEVEN AND 22/100 DOLLARS
($55,357.22), with interest from date to maturity at the rate of Seven Per Cent
(7.0%) per annum, both principal and interest payable at 024 Panoramic Drive,
Silt, Colorado 81652.
This Note is payable as follows:
This is a term note (and may be renewed yearly), with all
principal due on September 15, 1996, the interest shall be
payable monthly with the first interest payment due on November
15, 1995, and continuing monthly until the principal is paid in
full. (See attached schedule.)
All sums past due under the terms of this note shall bear interest from
their maturity at the rate of eighteen per cent (18%) per annum.
This note is secured by a Deed of Trust of even date herewith, a copy of
which is attached for all purposes.
It is agreed that in the event of failure to pay when due any
installment of principal or interest of this note, or in the event of failure
to keep and perform any of the covenants or agreements contained in the
aforementioned instrument, or in the event of the issuance of any writ of
garnishment, or writ of attachment, or writ of injunction, or summons against
the holder of this note in connection with any suit or controversy involving
any maker, surety, endorser, or guarantor of this note, or to which any maker,
surety, endorser, or guarantor of this note may be a party, or in any of said
events, all of the unpaid principal balance hereof, together with earned and
unpaid interest, shall, at the election of the holder hereof, and without
notice, immediately become due and payable.
Each maker, surety, endorser, and guarantor of this note hereby
severally waives demand and presentation for payment, notice of non-payment,
protest and notice of protest, and the diligence of bringing suit against any
party hereto and consents that time of payment may be extended from time to
time without notice thereof to him.
If this note is placed in the hands of an attorney for collection, or if
collected by suit, or through probate, bankruptcy, or other court proceedings,
the undersigned, jointly and severally, agree to pay fifteen per cent (15%)
additional on the principal and interest then due hereon as attorney's fees.
CUMBERLAND COMPANIES, INC.
ATTEST:
By: /s/ EDDYE DREYER BY: /s/ C. E. JUSTICE
-------------------------------- ------------------------------------
Eddye Dreyer, Assistant Secretary C. E. JUSTICE, PRESIDENT
SEPTEMBER 15, 1995
<PAGE> 2
2/21/95 Page 1
LOAN AMORTIZATION SCHEDULE
Loan Amortized At 7%
<TABLE>
<CAPTION>
PAYMENT PAYMENT PRINCIPAL
NUMBER AMOUNT PRINCIPAL INTEREST BALANCE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Opening Balance 55,357.22
1 322.92 0.00 322.92 55,357.22
2 322.92 0.00 322.92 55,357.22
3 322.92 0.00 322.92 55,357.22
4 322.92 0.00 322.92 55,357.22
5 322.92 0.00 322.92 55,357.22
6 322.92 0.00 322.92 55,357.22
7 322.92 0.00 322.92 55,357.22
8 322.92 0.00 322.92 55,357.22
9 322.92 0.00 322.92 55,357.22
10 322.92 0.00 322.92 55,357.22
11 322.92 0.00 322.92 55,357.22
12 55,680.14 55,357.22 322.92 0.00
GRAND TOTAL 59,232.26 55,357.22 3,875.04 0.00
===============================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.11
OIL AND GAS PROPERTY PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 18th day of September,
1995, by and between CUMBERLAND COMPANIES, INC., (hereinafter referred to as
"CCI") a Nevada corporation, with its principal place of business at 4925
Greenville Avenue, Suite 1354, Dallas, Texas 75206, and J. L. THOMPSON, having
his principal place of business at 1409 2nd Avenue N.E., Jamestown, North
Dakota 58401.
W I T N E S S E T H :
WHEREAS, J. L. THOMPSON have agreed to sell to CCI certain interests in
oil properties as set forth in Exhibit "A" attached hereto.
1. Purchase Price.
In consideration for CCI purchasing the referenced property as set
forth in Exhibit "A", CCI shall pay the sum of Eighty-Nine
Thousand, Eight Hundred Forty-Eight Dollars and Forty-Four Cents
($89,848.44). Effective date to be the date of this Purchase and
Sale Agreement. Said payment may be made in cash or in common
stock valued at Three Dollars ($3.00) per share, or a combination
of cash and stock. The common stock is to be Class A Common Stock
of CCI, subject to Rule 144 under the Securities Act of 1933. Said
shares shall have piggyback rights subject to terms and conditions
acceptable to an underwriter approved by the management of CCI.
Payment of the Eighty-Nine Thousand, Eight Hundred Forty-Eight
Dollars and Forty-Four Cents ($89,848.44) shall be made as
follows:
1.1 Twenty Two Thousand, Eight Hundred Fifty-Seven Dollars and
Twenty-Two Cents ($22,857.22) payable in notes. (See
attached Promissory Note), and
1.2 Sixty-Six Thousand, Nine Hundred Ninety-One Dollars and
Twenty-Two Cents ($66,991.22) payable in Twenty-Two
Thousand, Three Hundred Thirty (22,330) shares of Common
Stock.
2. Closing.
The completion of the contemplated transactions is herein
designated as the Closing which shall take place on or before
September 30, 1995, or such other date as the parties shall
mutually agree upon.
3. Warranties and Representations of Cumberland Companies, Inc.
3.1. Corporate Organization.
CCI is a corporation (duly organized, validly existing and
in good standing under the laws of Nevada and is duly
qualified to do business and has full power and authority
to carry on its current business and to purchase, own, and
sell its assets and properties.
3.2 Corporate Authority.
The execution and delivery of this Agreement to J.L.
THOMPSON and the carrying out of the provisions hereof have
been fully authorized by the Board of Directors of CCI.
3.3 Binding Nature.
This Agreement shall be, when duly executed and delivered,
a legal and binding obligation of CCI, enforceable in
accordance with its terms.
3.4 Warranties and Representations.
No representation or warranty by CCI in this Agreement
contains, nor will it contain, any untrue statement or
omission, nor will it omit to state a material fact
necessary to make the statements contained herein not
misleading. All representations and warranties made by CCI
in this Agreement shall be true and correct as of the
Closing with the same force and effect as if they had
been made on and as of such date.
3.5 Litigation.
There are no pending, nor, to the best knowledge and
belief of CCI, threatened actions or proceedings
1
<PAGE> 2
before any court of administrative agency or other
authority which might or will materially or adversely
affect CCI's ability or right to perform all of CCI's
obligations hereunder.
4. Warranties and Representations of J. L. THOMPSON
4.1 Property Title.
J. L. THOMPSON hereby warrants and represents that he has
good and marketable title to the properties and/or property
interests, which are the subject to this Agreement, and
that the properties and/or property interests are free and
clear from any liens, or other obligations, and that there
is no litigation pending or threatened against said
properties and/or property interests.
4.2 Authority to Sign.
J. L. THOMPSON warrants and represents that he has full
authority, as owner of the properties and/or property
interests, to enter into this Agreement with CCI.
4.3 Binding Nature.
This Agreement shall be, when duly executed and delivered,
a legal and binding obligation of J. L. THOMPSON,
enforceable in accordance with its terms.
4.4 Warranties and Representations.
No representation or warranty by J. L. THOMPSON in this
Agreement contains, nor will it contain, any untrue
statement or omission, nor will it omit to state a material
fact necessary to make the statements contained herein not
misleading. All representations and warranties made by
J. L. THOMPSON in this Agreement shall be true and correct
as of the Closing with the same force and effect as if they
had been made on and as of such date.
4.5 Litigation.
There are no pending, nor to the best knowledge and belief
of J. L. THOMPSON, threatened actions or proceedings before
any court or administrative agency or other authority which
might or will materially or adversely affect J. L.
THOMPSON's obligations hereunder.
5. Miscellaneous
5.1 Brokerage.
Each party hereto represents and warrants to the other
that no broker or finder is entitled to any commission, or
similar fees, in connection with the making and carrying
out of this Agreement.
5.2 Sales Tax.
Any sales taxes which may be payable in connection with
the transfer of the assets described shall be borne solely
by J. L. THOMPSON.
5.3 Notices and Communications.
Any notice, payment request, instruction, or other document
to be delivered hereunder shall be deemed sufficiently
given if in writing and delivered personally or mailed by
Certified Mail, postage prepaid, if to CCI addressed to
CUMBERLAND COMPANIES, INC. at the address first set forth
above, and if addressed to J. L. THOMPSON, at the address
first set forth above, unless in each case CCI or J. L.
THOMPSON shall have notified the other in writing of a
different address.
5.4 Non-Waiver.
No delay or failure on their part or either part in
exercising any right hereunder, and no partial or single
exercise thereof, will constitute a waiver of such right
or any other right hereunder.
2
<PAGE> 3
5.5 Headings.
Headings in this Agreement are for convenience only and
are not to be used for interpreting or construing any
provision hereof.
5.6 Governing Law.
This Agreement shall be construed in accordance with and
governed by the laws of the State of Nevada.
5.7 Counterparts.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
5.8 Binding Nature.
The provisions of this Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and
their respective successors and/or assigns.
5.9 Survival of Representations and Warranties.
Except as otherwise expressly provided in this Agreement or
the Exhibit "A" attached, the representations and
warranties of CCI and J. L. THOMPSON extended hereunder
shall survive the Closing. Each party against whom
liability is asserted under the provisions of this
Agreement shall be given the opportunity to participate,
directly or through its authorized representative, at the
cost and expense, in the conduct of any negotiations
relating to the statements of any liability or any other
proceeding instituted by any third party against either CCI
or J. L. THOMPSON, as the case may be, giving rise to
alleged breach.
5.10 Expenses.
Except as otherwise expressly provided herein, each party
shall pay all of its own expenses incidental to the
negotiations and preparation of the documentation relating
to this Agreement and for entering into and carrying out
the terms and conditions of this Agreement and consummating
the transactions, irrespective of whether the transactions
contemplated shall be consummated.
5.11 Payment of Taxes.
All fees, costs, charges, and expenses payable to any
federal, state, or municipal authority, including without
limitations, all filing fees, documentary stamps and
transfer, sales and other taxes required to be paid, or
imposed in connection with the transfer of any of J. L.
THOMPSON'S assets pursuant to the terms of this Agreement
shall be paid by J. L. THOMPSON.
5.12 Amendments, Successors and Assigns.
This Agreement may be amended only by an instrument signed
by the authorized representatives of the parties hereto.
Neither party may assign any of its rights, obligations,
or liabilities arising hereunder without the prior written
consent of the other, except as otherwise provided herein,
and any such assignment or attempted assignment shall be
null and void.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their authorized representatives as of the date first above
written.
CUMBERLAND COMPANIES, INC. J. L. THOMPSON
By: /s/ C. E. Justice /s/ J. L. THOMPSON
------------------------------ ----------------------------------------
C. E. Justice, President J. L. Thompson
Date: 9-18-95
----------------------------
3
<PAGE> 4
E X H I B I T " A "
{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}{}
MALLORY NO.1 WELL Well No. 43-(036010)
- -----------------
LEASE LISTING
LEASE NO. DESCRIPTION OF LEASES
- --------------------------------------------------------------------------------
43-001A Oil, Gas and Mineral Lease dated August 1, 1981, from William
Gross, as Lessor, to Mike Austin, as Lessee, recorded in Volume
572, Page 435, Deed Records of Palo Pinto County, Texas.
43-001B Oil, Gas and Mineral Lease dated August 1, 1981, from Robert
Gross, as Lessor, to Mike Austin, as Lessee, recorded in Volume
573, Page 733, Deed Records of Palo Pinto County, Texas.
43-001C Oil, Gas and Mineral Lease dated July 23, 1980, from Daube
Partnership, Ltd., an Oklahoma Limited Partnership, and The Carol
Sutton Trust, Carol Daube Sutton, Jack M. Newman and James W.
Williams, Trustees, as Lessors, to Mike Austin, as Lessee,
recorded in Volume 552, Page 629, Deed Records of Palo Pinto
County, Texas.
43-001D Oil, Gas and Mineral Lease dated July 31, 1980, from Westheimer-
Neustadt Corporation, a Delaware Corporation, as Lessor, to Mike
Austin, as Lessee, recorded in Volume 552, Page 626, Deed Records
of Palo Pinto County, Texas.
--0--
<PAGE> 1
EXHIBIT 10.12
GENERAL PROMISSORY NOTE
$22,857.22 WEATHERFORD, TEXAS SEPTEMBER 15, 1995
FOR VALUE RECEIVED, I, we, and each of us, the undersigned, jointly and
severally, promise to pay to J. L. THOMPSON, or order, the sum of TWENTY-TWO
THOUSAND, EIGHT HUNDRED, FIFTY-SEVEN AND 22/100 DOLLARS ($22,857.22) with
interest from date to maturity at the rate of Seven Per Cent (7.0%) per annum,
both principal and interest payable at 1409 2nd Avenue N.E., Jamestown, North
Dakota 58401.
This Note is payable as follows:
This is a term note (and may be renewed yearly), with all
principal due on September 15, 1996, the interest shall be
payable monthly with the first interest payment due on November
15, 1995, and continuing monthly until the principal is paid in
full. (See attached schedule.)
All sums past due under the terms of this note shall bear interest from
their maturity at the rate of eighteen per cent (18%) per annum.
This note is secured by a Deed of Trust of even date herewith, a copy of
which is attached for all purposes.
It is agreed that in the event of failure to pay when due any
installment of principal or interest of this note, or in the event of failure
to keep and perform any of the covenants or agreements contained in the
aforementioned instrument, or in the event of the issuance of any writ of
garnishment, or writ of attachment, or writ of injunction, or summons against
the holder of this note in connection with any suit or controversy involving
any maker, surety, endorser, or guarantor of this note, or to which any maker,
surety, endorser, or guarantor of this note may be a party, or in any of said
events, all of the unpaid principal balance hereof, together with earned and
unpaid interest, shall, at the election of the holder hereof, and without
notice, immediately become due and payable.
Each maker, surety, endorser, and guarantor of this note hereby
severally waives demand and presentation for payment, notice of non-payment,
protest and notice of protest, and the diligence of bringing suit against any
party hereto and consents that time of payment may be extended from time to
time without notice thereof to him.
If this note is placed in the hands of an attorney for collection, or if
collected by suit, or through probate, bankruptcy, or other court proceedings,
the undersigned, jointly and severally, agree to pay fifteen per cent (15%)
additional on the principal and interest then due hereon as attorney's fees.
CUMBERLAND COMPANIES, INC.
ATTEST:
By: /s/ EDDYE DREYER BY: /s/ C. E. JUSTICE
-------------------------------- ------------------------------------
Eddye Dreyer, Assistant Secretary C. E. JUSTICE, PRESIDENT
(Printed Name and Title)
SEPTEMBER 15, 1995
<PAGE> 2
2/21/95 Page 1
LOAN AMORTIZATION SCHEDULE
Loan Amortized At 7%
<TABLE>
<CAPTION>
PAYMENT PAYMENT PRINCIPAL
NUMBER AMOUNT PRINCIPAL INTEREST BALANCE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Opening Balance 22,857.22
1 133.33 0.00 133.33 22,857.22
2 133.33 0.00 133.33 22,857.22
3 133.33 0.00 133.33 22,857.22
4 133.33 0.00 133.33 22,857.22
5 133.33 0.00 133.33 22,857.22
6 133.33 0.00 133.33 22,857.22
7 133.33 0.00 133.33 22,857.22
8 133.33 0.00 133.33 22,857.22
9 133.33 0.00 133.33 22,857.22
10 133.33 0.00 133.33 22,857.22
11 133.33 0.00 133.33 22,857.22
12 22,990.55 22,857.22 133.33 0.00
GRAND TOTAL 24,457.18 22,857.22 1,599.96 0.00
===============================================================================
</TABLE>
<PAGE> 1
EXHIBIT 16
HOLLANDER, GILBERT & CO.
CERTIFIED PUBLIC ACCOUNTANTS
19540 VENTURA BOULEVARD, SUITE 940
SHERMAN OAKS, CALIFORNIA 91403
TELEPHONE (818) 769-8113
FAX (818) 760-0480
March 10, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
We have read Item 8 a ii and v(A-D) of Cumberland Companies, Inc. of Form
10-KSB for the period ended December 31, 1995 which was required by Item 4 of
the Current Report on Form 8-K which was effective as of March 10, 1997, and we
agree with the statement contained therein insofar as they relate to our firm.
Very truly yours,
/s/ HOLLANDER, GILBERT & CO.
Hollander, Gilbert & Co.
<PAGE> 1
Exhibit 21
List of Subsidiaries
Cumberland Petroleum, Inc. a Texas corporation
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH 1995 FORM 10-KSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 348,596
<ALLOWANCES> 20,500
<INVENTORY> 0
<CURRENT-ASSETS> 328,096
<PP&E> 1,631,706
<DEPRECIATION> 26,624
<TOTAL-ASSETS> 1,933,403
<CURRENT-LIABILITIES> 743,181
<BONDS> 0
<COMMON> 7,796
0
0
<OTHER-SE> 1,182,426
<TOTAL-LIABILITY-AND-EQUITY> 1,933,403
<SALES> 173,703
<TOTAL-REVENUES> 173,703
<CGS> 0
<TOTAL-COSTS> 147,380
<OTHER-EXPENSES> 569,550
<LOSS-PROVISION> 20,500
<INTEREST-EXPENSE> 16,817
<INCOME-PRETAX> (580,544)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (580,544)
<EPS-PRIMARY> (0.087)
<EPS-DILUTED> 0
</TABLE>
