SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 13, 2002
IMPERIAL PETROLEUM, INC.
(Exact name of registrant as specified in its charter)
NEVADA 0-9923 95-338601
(State or other (Commission File No.) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
11600 GERMAN PINES DRIVE, EVANSVILLE, IN 47725
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (812) - 867-1433
100 NW SECOND STREET, SUITE 312, EVANSVILLE, IN 47725
(Former name or former address, if changed since last report.)
ITEM 1. Changes in Control:
None.
ITEM 2. Acquisition or Disposition of Assets:
Registrant entered into and closed the acquisition of 29,484,572 shares of the
common stock of Warrior Resources, Inc. (formerly Comanche Energy, Inc.),
representing approximately 30.8% of the issued and outstanding shares of Warrior
on February 13, 2002 in connection with an Exchange Agreement (See "Exchange
Agreement" included herein) between Registrant and the management of Warrior,
Messers. Luther Henderson and John Bailey. In connection with the Exchange
Agreement, Registrant issued 2,266,457 shares of its restricted common stock to
Mr. Henderson, representing 12.9 % of the issued and outstanding shares of
Registrant in exchange for 22,664,572 shares of the common stock of Warrior and
682,000 shares of its restricted common stock to Mr. John Bailey, representing
3.9 % of the issued and outstanding shares of Registrant in exchange for
6,820,000 shares of the common stock of Warrior. Mr. Bailey and Mr. Henderson
resigned as officers and directors of Warrior and Mr. Jeffrey Wilson, president
of Registrant, was appointed president and sole director of Warrior.
Simultaneously with the closing of the Exchange Agreement with Messrs. Henderson
and Bailey and the change of control of Warrior, Registrant entered into an
Agreement and Plan of Merger (See "Agreement and Plan of Merger" included
herein), subject to certain conditions, to offer to acquire the remaining issued
and outstanding capital stock of Warrior through a subsequent offering to be
registered with the Securities & Exchange Commission. The terms of the proposed
exchange of shares with the remaining shareholders of Warrior is on the basis of
one share of Imperial common stock in exchange for ten shares of Warrior common
stock. Completion of the Agreement and Plan of Merger is subject to a number of
conditions, including the completion of audited financials for Warrior, approval
of the Warrior stockholders, the filing and effectiveness of a registration
statement by Registrant for the shares to be offered, the satisfactory
completion of due diligence and other customary closing conditions..
ITEM 7. Financial Statements and Exhibits:
The Company is preparing the necessary financial statements in U.S GAAP format
to accurately reflect the transactions described above, however, the required
financial statements are not completed at this time. The Company intends to file
the required financial statements under cover of Form 8 not later than 60 days
after the date this Current Report on Form 8-K is filed. Pending such filing,
the Company is filing the following financial statements:
(a.) Selected financial data for Warrior for each of the prior five years.
(b.) Unaudited financial statements for Warrior as of August 31, 2001.
(c.) Audited financial statements of Warrior as of August 31, 2000.
It is impractical for the Company to provide the pro forma financial statements
required with the initial filing of this Form 8-K. The Company is preparing
these statements in US GAAP form and intends to file the required statements
under cover of Form 8 not later than 60 days after the filing of this Current
Report on Form 8-K.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Imperial Petroleum, Inc.
By: ___________________
Jeffrey T. Wilson
President
Dated: February 28, 2002
Selected Financial Data
Year Ended August 31 August 31 Year Ended December 31
2001 2000 1999* 1998 1997
Operating Revenue $2,806,278 $2,462,200 $680,071 690,950 531,082
Income (loss) (172,876) 113,536 (1,122,832) (490,334) (309,253)
continuing operations
Net Income(loss) (2,307,641) 175,834 (1,122,832) (490,334) (309,253)
Net Income(loss) (0.024) 0.003 (0.02) (0.03) (0.02)
per share
Total Assets 36,968,982 22,733,401 19,175,307 3,819,652 3,540,805
Long-term debt 4,440,603 4,121,592 2,383,066 1,388,592 1,377,604
Shareholder's 30,593,948 16,867,810 15,577,307 2,009,574 1,653,969
Equity
*Eight months ended August 31, 1999
No dividends were declared during the periods presented.
WARRIOR RESOURCES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF 8/31/2001
UNAUDITED
8/31/01
Assets
Current Assets
Cash ($37,297)
A/R 113,931
Trade
A/R Related 447,072
Party
A/R McComb Field 74,373
Prepaid Items 11,315
Total Current 609,396
Assets
Property, Plant and
Equipment
Oil & Gas 34,975,118
Properties
Acquisition in Progress 191,026
Gas Gathering Systems & Pipeline 1,267,001
Drilling Rigs 175,335
Gas Liquid 396,084
Plants
Accrued Oil 458,766
Sales
Compressors 88,000
Leasehold Improvements 29,731
Less Accum Depr, Depl & ($1,413,693)
Amort
Net Property Plant and Equipment 36,167,370
Other Assets
Notes Receivable-Non 104,726
current
Deferred Loan Cost - 24,958
Foremost
Deffered Loan Cost - BOK 31,594
Investment in Energytec 20,580
Deposits 10,358
Total Other 192,216
Assets
Total Assets $36,968,982
WARRIOR RESOURCES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF AUGUST 31, 2001
(UNAUDITED)
8/31/01
Liabilities
Current
Liabilities
A/P - Trade $729,768
A/P - Related 325,307
Party
Clearing Accounts (87,744)
Revenue Payable 567,074
Accrued Salary/ Tax 5,406
Payable
Notes Payable- Current Maturities 252,694
Notes Payable- Current 141,925
Maturities-Shareholder
Total Current Liabilities 1,934,430
Long Term
Liabilities
Notes Payable - Put 177,236
Agreements
Note Payable - Bank Of Oklahoma 4,263,367
Total Long Term 4,440,603
Liabilities
Stockholder's
Equity
Common Stock 36,604,254
Treasury Stock (391,014)
Retained Earnings(Deficit) (5,619,292)
Total Shareholder's Equity 30,593,948
Total Liabilities and $36,968,981
Equity
WARRIOR RESOURCES, INC.
CONSOLIDATED INCOME STATEMENT
As Of August 31, 2001
Unaudited
12 Months
Revenue
Oil & Gas Revenue $2,465,682
Other Income 340,596
Total Revenue $2,806,278
Expenses
Oil & Gas
Expenses
Lease Operating 853,892
Production Tax 188,815
Depreciation, Depletion & 351,906
Amortization
Impairment of Long Lived 650
Assets
Interest 416,494
Bad Debt 12,099
General & Administrative 1,155,298
Total Expenses $2,979,154
Income(Loss) from ($172,876)
Operations
Gain(Loss) From Disposition of ($2,134,765)
Assets
Net Income ($2,307,641)
COMANCHE ENERGY, INC.
Independent Auditors' Report
and Consolidated Financial Statements
August 31, 2000
TABLE OF CONTENTS
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PAGE
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Loss 4
Statement of Changes in Shareholders' Equity 5
Statement of Cash Flows 6
Notes to Consolidated Financial Statements 8
Supplemental Information 18
- --------------------------------------------------------------------------------
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Hutton, Patterson & Company
A Professional Corporation
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders
Comanche Energy, Inc.
We have audited the accompanying consolidated balance sheet of Comanche Energy,
Inc. (a Utah corporation) as of August 31, 2000, and the related consolidated
statements of loss, changes in shareholders' equity, and cash flows for the
eight months then ended. 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 consolidated financial position of
Comanche Energy, Inc. as of August 31, 2000, and the consolidated results of its
operations and cash flows for the eight months then ended, in conformity with
generally accepted accounting principles.
December 5, 2000
Dallas, Texas
COMANCHE ENERGY, INC.
Consolidated Balance Sheet
August 31, 2000
ASSETS
CURRENT ASSETS
Cash 146,563
Accounts receivable, trade 326,003
Accounts receivable, related party 144,077
Revenue receivable 541,837
Notes receivable, current portion 102,500
Employee advances 1,155
Prepaid insurance 7,529
Inventory 1,221
------------
TOTAL CURRENT ASSETS 1,270,815
PROPERTY AND EQUIPMENT
Oil and gas properties (successful efforts) 20,517,034
Gas gathering systems and pipelines 1,267,001
Gas liquids plants 396,084
Compressors 88,000
Land 6,210
Leasehold improvements 8,611
Automobiles 56,394
Office equipment 17,844
22,357,178
Less accumulated depreciation,
Depletion and amortization 1,167,125
NET PROPERTY AND EQUIPMENT 21,190,053
OTHER ASSETS
Notes receivable, long-term,
net of current portion 104,726
Notes receivable, long-term, related party 66,022
Investment, at cost 20,580
Loan acquisition costs, net of accumulated
Amortization of $ 75,046 73,339
Deposits 7,866
Deferred tax assets, net of allowance of $937,620 -
TOTAL OTHER ASSETS 272,533
$22,733,401
COMANCHE ENERGY, INC.
Consolidated Statement of Changes in Shareholders' Equity
For the Year Ended August 31, 2000
Common Stock Subscribed Treasury Stock
----------------------- ---------- ---------------- Retained
Shares Value Stock Shares Cost Deficit TOTAL
BALANCE, September 1, 1999 58,452,007 18,993,307 6,458 - - $(3,422,698) 15,577,067
Common stock issued for cash 552,561 197,424 - - - - 197,424
Common stock issued for assets 2,612,910 903,519 - - - - 903,519
Common stock issued for settlement
of account payable 112,429 39,349 - - - - 39,349
Common stock issued for settlement
of related party payable 897,517 314,131 - - - - 314,131
Common stock issued for retirement
of debt 168,056 51,500 - - - - 51,500
Subscribed stock exchanged for
common stock 14,350 6,458 (6,458) - - - -
Acquisition of treasury stock - - - 633,221 (391,014) - (391,014)
Net income - - - - - 175,834 175,834
BALANCE, August 31, 2000 62,809,830 20,505,688 - 633,221 (391,014) (3,246,864) 16,867,810
The accompanying cotes are an integral part
Of these consolidated financial statements.
COMANCHE ENERGY, INC.
Consolidated Statement of Cash Flow
For the Year Ended August 31, 2000
CASH FLOW FROM OPERATING ACTIVITIES
Net Income 175,834
Adjustments to reconcile net income to net cash provided
By operating activities
Depreciation, depletion, and amortization 575,026
Bad debt expense 8,408
Gain on disposition of assets (62,298)
Changes in assets and liabilities
Increase in accounts receivable, trade (129,289)
Increase in accounts receivable, related party (94,007)
Increase in revenue receivable (347,268)
Increase in employee advances (1,155)
Increase in prepaid insurance (3,685)
Increase in inventory (1,221)
Increase in deposits (616)
Increase in accounts payable, trade 292,947
Decrease in accounts payable, related parties (224,856)
Increase in revenue payable 359,267
Decrease in accrued interest (7,840)
Increase in accrued expenses 5,292
-----------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 544,539
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (2,423,471)
Acquisition of investments (7,516)
Proceeds received from sale of assets 63,750
Payments for loan acquisition costs (13,000)
Principal advances on notes receivable (102,500)
Principal received on notes receivable 35,000
Principal received on notes receivable, related party 2,036
-----------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (2,445,701)
COMANCHE ENERGY, INC.
Consolidated Statement of Cash Flows (continued)
For the Year Ended August 31, 2000
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings, notes payable 38,810
Proceeds from borrowings, Bank of Oklahoma 3,778,367
Payments on notes payable (1,809,360)
Payments on capital lease payable (21,578)
Proceeds provided from sale of common stock 197,424
Payments for treasury stock (142,797)
-----------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES (2,040,866)
NET INCREASE IN CASH 139,704
CASH, BEGINNING 6,859
----------
CASH, ENDING 146,563
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
Cash paid for interest 391,064
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
Common stock issued for acquisition of assets 903,519
Common stock issued for retirement of debt 51,500
Common stock issued for settlement of account payable 39,349
Common stock issued for settlement of related party payable 314,131
Investment received through assumption of payable 13,064
Treasury stock received through assumption of payable 248,217
Related party note received on disposition of property 68,058
The accompanying notes are an integral part
Of these consolidated financial statements
COMANCHE ENERGY, INC.
Notes to Consolidated Financial Statements
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NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Organization
Comanche Energy, Inc. (the Company), a Utah corporation, was
incorporated in January 1980, as Quest Resources. Effective January
25, 1995, the Company changed its name to Comanche Energy, Inc.
Effective June 1, 1999, the Company acquired all of the outstanding
stock of Double Eagle Petroleum Corporation (Double Eagle). The
Company issued shares of its unregistered common stock for a 100%
interest in Double Eagle. The business combination was accounted for
as a purchase, with the Company designated as the purchasing entity.
Business Activity
The Company is principally engaged in the production of oil and gas.
The Company owns working interests and overriding royalty interest in
oil and gas properties located in the southern midcontinent region,
which includes Texas, Louisiana, and Oklahoma. The Company acts as
operator of the oil wells on two leases which constitute the bulk of
its working interests. The Company also devotes its efforts to the
purchase, transportation, and sale of natural gas produced by wells
located along its gas gathering systems and pipeline in Oklahoma
(Comanche Gas System, Nellie Gas System, and Cotton Gas System).
Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary, Double Eagle.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
(Continued)
Revenue Recognition
The Company recognizes revenue associated with sales of crude oil and
natural gas. Such revenue is recorded when title passes to the
customer. Revenue from the production of properties in which the
Company has an interest with other producers are recognized on the
basis of the Company's net working interest. Revenue receivable
represents 8/8ths of the interest in the production from the
properties. Revenue payable represents the portion of the 8/9ths
interest due to royalty and other working interest parties.
Inventory
---------
Inventory is stated at its costs.
Allowance for Doubtful accounts
-------------------------------
Due to the nature of the industry, the Company does not currently
carry a balance in allowance for doubtful accounts. Bad debt expense
for the year ended August 31, 2000, was $8,408.
Cash and Cash Equivalents
-------------------------
The Company considers certificate of deposits and other investments
with maturities of less than three months to be cash equivalents. The
Company currently holds no cash equivalents.
Earnings Per Share
------------------
Basic earnings per share was calculated by dividing net income
applicable to common stock by the weighted average number of common
shares outstanding during the year ended August 31, 2000. Outstanding
options to purchase approximately 3,243,308 shares at an average
exercise price of $0.70 were excluded from the diluted EPS calculation
because the exercise price was greater that the average market price
of the Company's common stock for the year ended August 31, 2000.
(Continued)
Oil and Gas Properties
----------------------
The Company follows the successful efforts method of accounting for
its oil and gas producing activities. Under the successful efforts
method, the Company capitalizes all oil and gas leasehold acquisition
costs. For unproved properties, leasehold impairment is recognized
based upon an individual property assessment and exploration
experience. Upon discovery of commercial reserves, such leasehold
costs are transferred to proved properties.
Geological and geophysical expenses, production costs, and overhead
are charged against income as incurred. Exploratory drilling costs are
capitalized when incurred. If exploratory wells are determined to be
unsuccessful (dry holes), applicable costs are expensed. Costs
incurred to drill and equip developmental wells, including
unsuccessful development wells, are capitalized.
Expenditures related to extensive well workover projects are
capitalized upon determining that the workover resulted in
significantly increased proved reserves. All other workover costs are
expensed as incurred. These costs include those for deepening existing
producing wells within the same producing formation when such
operations are conducted for the purpose of restoring efficient
operating conditions as well as other repairs, reconditioning, or
reworking costs of wells already drilled and operating.
Depreciation, depletion, and amortization of the cost of proved
producing oil and gas properties, including wells and related
equipment and facilities, are determined by the units-of-production
method based on quantities produced as a percent of estimated proved
recoverable reserves. Depreciation of the automobile and gas gathering
systems are provided for by the straight-line method over estimated
useful lives ranging from 5 to 15 years. Depreciation, depletion, and
amortization for the year ended August 31, 2000, was $550,716.
When complete units of depreciable property are retired or sold, the
asset cost and related accumulated depreciation and depletion are
eliminated with any gain or loss reflected in income.
(Continued)
Impairment of Long-Lived Assets
-------------------------------
The Company accounts for its long-lived assets under the provisions of
SFAS No. 121 which requires the Company to review its long-lived
assets to determine if the carrying amounts of its long-lived are
recoverable. The Company reviews its oil and gas properties for
impairment whenever events or changes in circumstances indicate that
the carrying amounts may not be recoverable. The Company uses the
future undiscounted cash flows from each oil and gas property to
evaluate the future undiscounted cash flows form each oil and gas
property to evaluate the future recoverability of the property's
carrying amount. If the carrying amount is not recoverable, an
impairment loss is recognized. Impairments for the year ended August
31, 2000, were $8,519.
Loan Acquisition Costs
----------------------
The loan acquisition costs are related to a revolving line of credit
loans obtained through various individuals and shareholders. Total
loan acquisition cost as of August 31, 2000, was $148,385. The cost is
being amortized from 36 to 60 months based on the remaining life of
the loan. Amortization of the loan acquisition cost for the eight
months ended August 31, 2000, was $24,310.
Federal Income Taxes
--------------------
The Company accounts for federal income taxes under the provisions of
SFAS No. 109 which requires the recognition of deferred tax assets and
liabilities for the future tax consequences attributable to
differences between financial statement carrying amounts of existing
assets and liabilities and their respective tax basis. In addition,
the recognition of future tax benefits, such as net operating loss
carryforwards, are required to the extent that realization of such
benefits are more likely.
NOTE B - NOTES PAYABLE
Notes payable consisted of the following at August 31, 2000:
Note payable, Imperial Petroleum, Inc., interest
will begin to accrue and principal and interest
payments will be determined in the fourth year
of the note, with payment in full due September 1,
2006 161,200
Notes payable to various shareholders, interest
due quarterly at 12%, with principal due in full
at various maturity dates through 2001, unsecured 52,600
(Continued)
Notes payable to various individuals, interest
due quarterly at 12%, with principal due in full
at various maturity dates through 2001, unsecured 140,825
Notes payable to various individuals, quarterly
payments ranging from $4,423 to $22,722 including
interest ranging from 8% to 16%, maturing at
various dates through 2001, secured by various oil
and gas properties 173,878
Notes payable, bank, monthly payments of $733,
including interest of 8.24%, maturing October 5,
2004, secured by automobile 32,514
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561,017
Less current maturities 343,325
---------
$217,692
Aggregate maturities on long-term debt for the next five years are as
follows:
2001 343,325
2002 38,202
2003 8,038
2004 8,727
2005 1,525
Thereafter 161,200
------------
Total $ 561,017
==========
At August 31, 1999, the Company entered into a credit agreement with
the Bank of Oklahoma providing for a borrowing base of $3,800,000 with
monthly interest payments at prime plus one percent, secured by
certain Oil and gas properties and other assets of the Company.
Subsequent to year end, the Bank of Oklahoma increased the Company's
borrowing base to $4,300,ooo. Final maturity of this credit agreement
is September 2, 2001. At August 31, 2000, the Company owed $3,778,367
to the Bank of Oklahoma under this credit agreement.
(Continued)
NOTE C - LEASES PAYABLE
During the eight months ended August 31, 1999, the Company acquired
compressors totaling $73,000, which were financed through a capital
lease. Future minimum rental payments under this capital lease are as
follows for the years ended August 31:
2001 34,566
2002 14,403
---------
Total minimum lease payments 48,969
Amount representing interest (7,924)
----------
Present value of future lease
payments 41,044
Less current portion (27,482)
----------
$ 13,563
NOTE D - RELATED PARTY TRANSACTIONS
The Company has entered into several agreements with related parties
involving its operations as follows:
Frank W Cole, a shareholder and director of the Company, formerly
operated the Company's Texas oil and gas properties. During this
operation, Frank W Cole incurred expenses on behalf of the Company
amounting to $314,131. During the year ended August 31, 2000, the
Company issued 897,517 shares of its restricted common stock in
payment of this liability. During the current year, Frank W Cole
received advances from the Company totalinbg $38,823. At August 31,
2000, the Company had an account receivable balance from Frank W Cole
of $38,823. Subsequent to year end, the Company received 110,922
shares of its common stock in settlement of this receivable.
Forrest Germany, shareholder of the Company, received advances from
the Company during the current year. At August 31, 2000, the Company
had an account receivable balance from Forrest Germany in the amount
of $105,184.
M. L. Johnson, a shareholder of the Company, owns Crown Petroleum, an
Oklahoma partnership. Crown Petroleum is the operator for the
Company's Oklahoma oil and gas properties. Crown Petroleum pays the
direct operating expenses and acquisition costs of the gas systems and
in turn submits invoices to the Company for reimbursement. At August
31, 1999, the Company had an account payable balance to Crown
Petroleum of $23,357.
(Continued)
During the current year, the Company entered in to an agreement to
sell to Crown Petroleum certain of the Company's oil and gas
properties for a production payment totaling $100,000. The production
payment note was designed to be a non-interest bearing note to be paid
from the net oil and gas revenues from these properties. However, it
is necessary to impute a market rate of interest on this non-interest
bearing note in order to treat this transaction as an arms length
transaction. A total of $31,942 of interest was imputed over the life
of this note reducing the principal portion of this note to $68,058.
Due to the uncertainty of current production from these properties,
the note receivable is classified as long term. At August 31, 2000,
the Company had a note receivable balance from Crown Petroleum in the
amount of $66,022.
During the current year, the Company entered into an agreement with
certain shareholders, at each shareholder's discretion, to repurchase
a total of 663,221 of the Company's common stock for $411,594. The
repurchase agreement stated that the Company would repurchase these
shares at $.65 per share if the Company's stock did not maintain an
average bid price of $.65 per share for the ten days prior to May 1,
2000. Included in the repurchase agreement were 663,221 shares of
Energytec.com, Inc., common stock were received by the Company. Prior
to August 31, 2000, all of the affected shareholders had exercised
their option for the Company to repurchase their shares. The Company
allocated $391,014 of the total repurchase price to the Company's
repurchase common stock and $20,580 to the repurchase stock of
Energytec.com,Inc. The allocation was based upon the percentage of the
Company's assets which were disposed of during the prior year
spin-off. At August 31, 2000, the requirements had not been met.
The Company has entered into a consulting agreement with one of the
shareholders which provides for a payment of $30,000 each year for two
years beginning at the time the Company achieves cash flow
requirements set by the Board of Directors. As of August 31, 2000,
these requirements had not been met.
NOTE E - INVESTMENTS
The investment represents 663,221 shares of the outstanding common
stock of Energytec.com, Inc. These investments are stated at cost,
which approximates the fair market value and book value as of August
31, 2000.
(Continued)
NOTE F - INCOME TAXES
Due to operating losses, the Company currently has no liability for
state or federal income taxes. The Company has no significant
temporary differences between financial statement carrying amounts and
their respective tax basis resulting in deferred taxes. At August 31,
1999, the Company had net operating losses available to be carried
forward totaling $2,936,146. During the year ended August 31, 2000,
the Company utilized $178,441 of these net operating losses leaving
aggregate net operating loss carryforward of $2,757,705 at August 31,
2000. The majority of these net operating loss carryforwards will
begin to expire in 2011.
The Company has a deferred tax asset related to the net operating loss
carryforwards. Management has elected to provide a valuation allowance
against the entire deferred tax asset.
Deferred tax asset $937,620
Valuation allowance (937,620)
NET deferred tax asset $ -
The valuation activity for the eyar ended August 31, 2000, consisted
of the following:
Balance, beginning of year $998,289
Utilization of net operating loss (60,669)
Balance, end of year $937,620
NOTE F - COMMITMENTS AND CONTINGENCIES
The exploration, development, and production of oil and gas is subject
to various federal and state laws and regulations to protect the
environment. Various state and governmental agencies are considering
or have adopted laws and regulations regarding environmental control
which could adversely affect the business of the Company. Compliance
with such legislation and regulations, together with penalties
resulting from noncompliance therewith, will increase the cost of oil
and gas development and production. Some of these costs may ultimately
be borne by the Company.
(Continued)
On January 1, 1999, Double Eagle, the Subsidiary located in Tulsa,
Oklahoma, entered into an operating lease for office space. The
agreement provided for monthly rentals of $1,560 through December 31,
2000. On July 19, 1999, the Company increased the square footage of
the offices in Tulsa and the lease agreement was revised. Under the
new agreement, monthly rentals increased to $2,560 per month beginning
September 1, 1999, through January 31, 2002. During the current year
the Company entered into an operating lease for additional office
space located in Weatherford, Texas. This agreement provides for
monthly rentals of $1,000 through August 31, 2002. The Company expects
to renew both leases in the normal course of business. Rental expense
totaled $34,220 for the year ended August 31, 2000.
Future minimum lease payments under these agreements are as follows
for the years ending August 31:
2001 $42,720
2002 24,800
-------
67,520
During the prior years, the Company has issued stock warrants to
certain individuals and companies who advanced the Company money or
purchased the Company's common stock. The exercise prices of these
warrants range from $.50 to $1.00. These warrants expire on various
dates through February 2002. At August 31, 2000, the Company had
3,243,308 warrants outstanding.
NOTE H - ASSET DISPOSITIONS
During the year ended August 31, 2000, the Company entered into
various agreements to dispose of certain oil and gas properties for
$181,808. The oil and gas properties were valued at $119,510. The
Company recognized a gain on the disposition of $62,298.
NOTE I - CONCENTRATIONS
Three major customers accounted for approximately 29%, 20% and 10%
respectively, of the Company's oil and gas sales for the year ended
August 31, 2000.
The Company maintains operating cash accounts with various financial
institutions. At August 31, 2000, the total in these accounts in
excess of federally insured limits was $66,825. At any point in time,
the current balance exceeding the federally insured limits within each
financial institution could be at a risk in the event the institution
is unable to continue business.
(Continued)
NOTE J - SUBSEQUENT EVENTS
Subsequent to August 31, 2000, the Company entered into an agreemnt to
diapose of its gas gathering systems for $1,200,000. The agreement
states that the Company will receive $300,000 in cash and an eighteen
month convertible note in the amount of $900,000. This note is secured
by 300,000 shares of EMB Corporation stock. The Company has the right
to convert up to fifty percent of the note receivable into EMB
Corporation stock when this stock has a trading price of greater that
$3.00 per share.
The Company has also entered into informal discussions with an equity
investment group for the sale of a significant interest in the
Company. If the transaction is formalized and completed, there could
be significant changes within the capitalization and management of the
Company. Management believes such changes would have a positive impact
upon the value of the Company.
SUPPLEMENTAL INFORMATION
Hutton, Patterson & Company
A Professional Corproation
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
ON SUPPLEMENTAL INFORMATION
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders
Comanche Energy, Inc.
The supplemental information related to oil and gas producing activities,
reserves, and the standardized measure of discounted future net cash flows on
pages 20 through 22 is not a required part of the basic financial statements of
Comanche Energy, Inc., but is supplementary information required by the
Financial Accounting Standards Board. We have applied certain limited
procedures, which consisted principally of inquiries of management regarding the
methods of measurement and presentation of the supplemental information.
However, we did not audit the information and express no opinion on it.
December 5, 2000
Dallas, Texas
COMANCHE ENERGY, INC.
Supplemental Information (Unaudited)(Continued)
For the Eight Months Ended August 31, 1999
- --------------------------------------------------------------------------------
Capitalized Costs Relating to Oil and Gas Producing
Activities at August 31, 2000
Unproved oil and gas properties $ -
Proved oil and gas properties 20,517,034
Support equipment and facilities -
----------
20,517,034
Less accumulated depreciation, depletion and
Amortization and impairment 732,175
----------
NET capitalized costs 19,784,859
Costs Incurred in Oil and Gas Producing Activities for
The year Ended August 31, 2000
Property acquisition costs
Proves
Unproved 903,519
Exploration costs
Development costs 2,353,032
Amortixzation rate per equivalent barrel of production .00965
Results of Operations for Oil and Gas Producing Activities
For the Year Ended August 31, 2000
Oil and gas sales 2,216,037
Production cost (809,344)
Depreciation, depletion, and amortization (446,912
---------
959,781
Income tax expense
Results of operations for oil and gas
producing activities (excluding corporate --------
overhead and financing costs 959,781
(Continued)
COMANCHE ENERGY, INC.
Supplemental Information (Unaudited)(Continued)
For the Eight Months Ended August 31, 1999
- --------------------------------------------------------------------------------
Reserve Information
The following estimates of proved and unproved developed reserve quantities and
related standardized measure of discounted net cash flows are estimates only,
and do not purport to reflect realizable values or fair market values of the
Company's reserves. 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, these estimates are expected to
change as future information becomes available. All of the Company's reserves
are located in the United States.
Proved reserves are estimated reserves of crude oil (including condensate and
natural gas liquids) and natural gas that 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 reserves are those expected to be recovered through existing wells,
equipment, and operating methods.
The standardized measure of discounted future net cash flows is computed by
applying year-end prices of oil and gas (with consideration of price changes
only to the extent provided by contractual arrangements) to the estimated future
production of proved oil and gas reserves, less estimated future expenditures
(based on year-end costs) to be incurred in developing and producing the proved
reserves, less estimated future income tax expenses (based on year-end statutory
rates, with consideration of future tax rates already legislated) to be incurred
on pretax net cash flows less the tax basis of the properties and available
credits, and assuming continuation of existing economic conditions. The
estimated future net cash flows are then discounted using a rate of 10 percent a
year to reflect the estimated timing of the future cash flows.
TOTAL
-----------------------------------
Oil (Bbls) Gas (Mcf)
---------- ---------
Proved Developed and Undeveloped Reserves
Beginning of year 1,077,439 11,625,040
Revisions of previous estimates 260,929 43,775,044
Improved recovery - -
Purchases of minerals in place
Extensions and discoveries - -
Production (33,540) (404,814)
Sales of minerals in place - -
---------------------------------
End of year 1,304,828 54,995,270
========= ==========
Proved Developed Reserves
Beginning of year 648,678 4,871,377
======= =========
End of year 752,095 5,371,388
======= =========
(Continued)
Standardized Measures of Discounted Future
Net Cash Flows at August 31, 2000
Future cash flows $301,574,739
Future production costs (43,092,440)
Future development costs (21,331,330)
Future income tax expenses (83,002,839)
-------------
154,148,130
Future net cash flows
10% annual dscount for estimated timing of cahs flows (36,901,837)
Standardized measures of discounted future net cash flows
relating to proved oil and gas reserves $117,246,293
The following reconciles the change in the standardized
measures of discounted future net cash flows during the
year ended August 31, 2000:
Beginning of year 21,450,227
Sales of oil and gas produced, net of production costs (1,406,693)
Development costs incurred during the year which were
previously estimated -
Net change in estimated future development costs (19,996,889)
Revisions of previous quantity estimates 215,825,122
Net change from purchases and sales of minerals in place -
Accretion of discount (30,150,641)
Net change in income taxes (68,474,833)
Other -
------------
END OF YEAR $117,246,293
See independent auditors' report
on supplemental information
AGREEMENT AND PLAN OF MERGER
among
IMPERIAL PETROLEUM, INC.
and
WARRIOR RESOURCES, INC.
Dated as of February 13, 2002
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 13, 2002 (this
"Agreement"), among IMPERIAL PETROLEUM, INC., a Nevada corporation
("Purchaser"), WRI ACQUISITION, INC., an Oklahoma corporation and wholly owned
subsidiary of Purchaser to be formed on or before February 28, 2002
("MergerSub"), and WARRIOR RESOURCES, INC., an Oklahoma corporation (the
"Company").
RECITALS:
A. The respective Boards of Directors of Purchaser, MergerSub, and the
Company have approved the merger of MergerSub with and into the Company pursuant
and subject to the terms and conditions of this Agreement, whereby each issued
and outstanding share of common stock, par value $0.0001 per share, of the
Company (each a "Company Share") will be converted into the right to receive one
tenth of a share of common stock, $.006 par value per share, of Purchaser (each,
a "Purchaser Share"), subject to the rounding of fractional shares (the number
of Purchaser Shares being referred to as the "Per Share Amount"), upon the terms
and subject to the conditions of this Agreement;
B. The Boards of Directors of Purchaser, MergerSub, and the Company have
determined that it is advisable and in the best interests of the respective
stockholders of each company to enter into this Agreement and pursue the Merger
on the terms set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Purchaser and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS
1.01. Definitions.
(a) For purposes of this Agreement:
"Acquisition Proposal" means any offer from any third party to
acquire by any means all or any substantial part of the assets or the shares of
capital stock of the Company or of any Subsidiary.
"affiliate" of a specified person means a person who, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such specified person.
"beneficial owner," with respect to any Shares, has the meaning
ascribed to such term under Rule 13d-3(a) of the Exchange Act.
"business day" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings; or, in the case of
determining a date when any payment is due, any day (other than a Saturday or
Sunday) on which banks are not required or authorized to close in the City of
New York.
"control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or otherwise.
"Environmental Law" means any United States federal, state, local or
non-United States law relating to (i) releases or threatened releases of
Hazardous Substances or materials containing Hazardous Substances; (ii) the
manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Substances or materials containing Hazardous Substances; or (iii)
pollution or protection of the environment.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"ERISA Affiliate" means any trade or business (whether or not
incorporated)under common control with the Company or any Subsidiary and which,
together with the Company or any Subsidiary, is treated as a single employer
within the meaning of Section 414(b), (c), (m) or (o) of the Code.
"Hazardous Substances" means (i) those substances defined in or
regulated under the following United States federal statutes and their state
counterparts, and all regulations thereunder: the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal
Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (ii)
polychlorinated biphenyls, and (iii) any substance, material or waste regulated
by any Governmental Authority pursuant to any Environmental Law.
"knowledge of the Company" means the actual knowledge of any
director or officer of the Company.
"Liens" mean liens, security interests, charges, mortgages or other
encumbrances of any kind.
"Material Adverse Effect" means, when used in connection with the
Company or any Subsidiary, any event, circumstance, change or effect that is or
is reasonably likely to be materially adverse to the business or financial
condition of the Company and its Subsidiaries taken as a whole; provided that in
no event shall any of the following be deemed to constitute or be taken into
account in determining a Material Adverse Effect: any event, circumstance,
change or effect that results from (i) changes affecting the economy generally,
(ii) changes in the market price of natural gas or oil, (iii) the public
announcement or pendency of the Merger or the other transactions contemplated
hereby, or (iv) changes in the price of the Company's common stock.
"Merger Consideration" means, for each stockholder of the Company,
the aggregate number of Purchaser Shares to be exchanged for such holder's
Company Shares in the Merger.
"Nevada Law" means the General Corporation Law of the State of
Nevada.
"Oil and Gas Agreements" means the following types of agreements or
contracts to which the Company or a Subsidiary is a party, whether as an
original party, by succession or assignment or otherwise: oil and gas leases,
farm-in and farm-out agreements, agreements providing for an overriding royalty
interest, agreements providing for a royalty interest, agreements providing for
a net profits interest, crude oil or natural gas sales or purchase contracts,
joint operating agreements, unit operating agreements, unit agreements, field
equipment leases, and agreements restricting the Company or a Subsidiary's
ability to operate, obtain, explore for or develop interests in a particular
geographic area.
"Oklahoma Law" means the Oklahoma Business Corporation Act.
"person" means an individual (including, without limitation, a
"person" as defined in Section 13(d)(3) of the Exchange Act), corporation,
partnership, limited partnership, limited liability company, syndicate, trust,
association or entity or government, political subdivision, agency or
instrumentality of a government.
"SEC" means the Securities and Exchange Commission of the United
States.
"Securities Act" means the Securities Act of 1933, as amended.
"subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, or any other person means any and all corporations, partnerships,
joint ventures, associations, limited liability companies and other entities
controlled by such person, directly or indirectly, through one or more
intermediaries.
"Superior Proposal" means any Acquisition Proposal which the Board
determines, in its good faith judgment (after having received the advice of a
financial advisor), to be more favorable to the Company's stockholders than the
Merger and for which financing, to the extent required, is then committed.
"Suspension Event" means the occurrence of any of the following: (i)
any general suspension of trading in, or limitation on prices for, securities on
any national securities exchange, Nasdaq or in the over-the-counter market in
the United States, (ii) a declaration of a general banking moratorium or any
suspension of payments in respect of banks in the United States, or (iii) any
limitation (whether or not mandatory) by any Governmental Authority on, or other
event that materially and adversely affects, the extension of credit by banks or
other lending institutions.
"Tax" or "Taxes" shall mean any and all taxes, fees, levies, duties,
tariffs, imposts and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Authority or taxing authority,
including, without limitation: taxes or other charges on or with respect to
income, franchise, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes;
license, registration and documentation fees; and customers' duties, tariffs and
similar charges.
"Transactions" means the Merger and related actions contemplated
hereby.
(b) The following terms have the meaning set forth in the Sections
set forth below:
Defined Term Location of Definition
Action Section 4.09
AFE Section 6.01(j)
Agreement Preamble
Blue Sky Laws Section 4.05(b)
Certificate of Merger Section 3.02
Certificates Section 3.08(b)
Code Section 4.10(b)
Company Preamble
Company Preferred Stock Section 4.03
Company Share Recitals
Company's Oil and Gas Interests Section 4.16(a)
Confidentiality Agreement Section 7.04(b)
Disclosure Schedule Article IV
Dissenting Shares Section 3.08(a)
Effective Time Section 3.02
ERISA Section 4.10(a)
Exchange Agent Section 3.08(a)
Fairness Opinion Section 3.09(a)
Fee Section 9.03(a)
GAAP Section 4.07(b)
Good and Marketable Title Section 4.16(b)
Governmental Authority Section 4.05(b)
Hydrocarbons Section 4.13(b)
IRS Section 4.10(a)
Mailing Date Section 7.06
Material Contracts Section 4.23(a)
Material Subsidiary Section 4.01(c)
Merger Recitals
MergerSub Preamble
Multiemployer Plan Section 4.10(b)
Multiple Employer Plan Section 4.10(b)
Permits Section 4.06
Per Share Amount Recitals
Plans Section 4.10(a)
Proxy Statement Section 7.02
Purchaser Preamble
Purchaser Share Recitals
Recent Balance Sheet Section 4.07(c)
Registration Statement Section 7.03
Reserve Report Section 4.17
Stockholders' Meeting Section 7.01(a)
Subsidiary Section 4.01(a)
Surviving Corporation Section 3.03
ARTICLE II
[RESERVED]
ARTICLE III
THE MERGER
3.01. The Merger. At the Effective Time, upon the terms and subject to
the satisfaction or waiver of the conditions set forth in Article VIII, and in
accordance with Oklahoma Law, MergerSub shall be merged with and into the
Company.
3.02 Effective Time; Closing. As promptly as practicable (but not later
than two business days) after the satisfaction or, if permissible, waiver of the
conditions set forth in Article VIII, the parties hereto shall cause the Merger
to be consummated by filing this Agreement or a certificate of merger or
certificate of ownership and merger (in either case, the "Certificate of
Merger") with the Secretary of State of the State of Oklahoma, in such form as
is required by, and executed in accordance with, the relevant provisions of
Oklahoma Law (the date and time of such filing being the "Effective Time").
Prior to such filing, a closing shall be held at the offices of Purchaser or
such other place as the parties shall agree, for the purpose of confirming the
satisfaction or waiver, as the case may be, of the conditions set forth in
Article VIII.
3.03. Effect of the Merger. As a result of the Merger, the separate
corporate existence of MergerSub shall cease and the Company shall continue as
the surviving corporation of the Merger (the "Surviving Corporation"). At the
Effective Time, the effect of the Merger shall be as provided in the applicable
provisions of Oklahoma Law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of the Company shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
3.04 Certificate of Incorporation; By-laws.
(a) At the Effective Time, the Certificate of Incorporation of
MergerSub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation.
(b) Unless otherwise determined by Purchaser prior to the Effective
Time, and subject to Section 7.07(a), the By-laws of MergerSub, as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter amended as provided by law, the Certificate of
Incorporation of the Surviving Corporation and such By-laws.
3.05 Directors and Officers. The directors of MergerSub shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation, and the officers of MergerSub immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified or
until their earlier death, resignation or removal.
3.06 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Purchaser, MergerSub, the Company
or the holders of any of the following securities:
(a) each Company Share issued and outstanding immediately prior to
the Effective Time (other than any Shares to be canceled pursuant to Section
3.06(b) and any Dissenting Shares (as hereinafter defined)) shall be canceled
and shall be converted automatically into the right to receive an amount equal
to the Merger Consideration payable to the holder of such Company Share, upon
surrender, in the manner provided in Section 3.08, of the certificate that
formerly evidenced such Company Share;
(b) each Company Share held in the treasury of the Company
immediately prior to the Effective Time shall be canceled without any conversion
thereof and no payment or distribution shall be made with respect thereto;
(c) each Company Share of common stock of MergerSub outstanding
prior to the Merger will, by said occurrence and with no further action on the
part of the holder thereof, be transformed and converted into one Share of
common stock of the Surviving Corporation, so that thereafter Purchaser will be
the sole and exclusive owner of equity securities of the Surviving Corporation;
and
(d) the Surviving Corporation shall be the owner of all of the
business, assets, rights and other attributes of, or held by, either the Company
or MergerSub.
3.07 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
Company Shares that are outstanding immediately prior to the Effective Time and
that are held by stockholders who shall have neither voted in favor of the
Merger nor consented thereto in writing and who shall have demanded properly in
writing appraisal for such Company Shares in accordance with Section 1091 of
Oklahoma Law (collectively, the "Dissenting Shares") shall not be converted
into, or represent the right to receive, the Merger Consideration. Such
stockholders shall be entitled to receive payment of the appraised value of such
Company Shares held by them in accordance with the provisions of such Section
1091, except that all Dissenting Shares held by stockholders who shall have
failed to perfect or who effectively shall have withdrawn or lost their rights
to appraisal of such Company Shares under such Section 1091 shall thereupon be
deemed to have been converted into, and to have become exchangeable for, as of
the Effective Time, the right to receive the Merger Consideration, without any
interest thereon, upon surrender, in the manner provided in Section 3.08, of the
certificate or certificates that formerly evidenced such Company Shares.
(b) The Company shall give Purchaser (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of such demands, and
any other instruments served pursuant to Oklahoma Law and received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under Oklahoma Law. The Company shall not,
except with the prior written consent of Purchaser, make any payment with
respect to demands for appraisal or offer to settle or settle any such demands.
3.08. Surrender of Company Shares; Stock Transfer Books.
(a) Prior to the Effective Time, Purchaser shall designate Interwest
Transfer Company to act as agent (the "Exchange Agent") for the holders of
Company Shares to receive the Purchaser Shares to which holders of Company
Shares shall become entitled pursuant to Section 3.06(a) and Purchaser shall
deposit with the Exchange Agent a sufficient number of Purchaser Shares to
exchange all outstanding Company Shares in accordance with the terms hereof.
(b) Promptly after the Effective Time, Purchaser shall cause to be
mailed to each person who was, at the Effective Time, a holder of record of
Company Shares entitled to receive the Merger Consideration pursuant to Section
3.06(a) a form of letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the certificates evidencing such
Company Shares (the "Certificates") shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates pursuant to such letter of transmittal. Upon
surrender to the Exchange Agent of a Certificate, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
and Purchaser shall cause Exchange Agent to pay in exchange therefor the Merger
Consideration for each Share formerly evidenced by such Certificate, and such
Certificate shall then be canceled. If the payment equal to the Merger
Consideration is to be made to a person other than the person in whose name the
surrendered certificate formerly evidencing Company Shares is registered on the
stock transfer books of the Company, it shall be a condition of payment that the
certificate so surrendered shall be endorsed properly or otherwise be in proper
form for transfer and that the person requesting such payment shall have paid
all transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the certificate
surrendered, or shall have established to the satisfaction of Purchaser that
such taxes either have been paid or are not applicable. If any holder of Company
Shares is unable to surrender such holder's Certificates because such
Certificates have been lost, mutilated or destroyed, such holder may deliver in
lieu thereof an affidavit and indemnity bond in a reasonable amount in form and
substance and with surety reasonably satisfactory to Purchaser.
(c) At any time following the sixth (6th) month after the Effective
Time, Purchaser shall be entitled to require the Exchange Agent to deliver to it
any shares which had been made available to the Exchange Agent and not disbursed
to holders of Company Shares and, thereafter, such holders shall be entitled to
look to Purchaser (subject to abandoned property, escheat and other similar
laws) only as general creditors thereof with respect to any Merger Consideration
that may be payable upon due surrender of the Certificates held by them.
Notwithstanding the foregoing, neither Purchaser nor the Exchange Agent shall be
liable to any holder of a Company Share for any Merger Consideration delivered
in respect of such Company Share to a public official pursuant to any abandoned
property, escheat or other similar law.
(d) At the close of business on the day of the Effective Time, the
stock transfer books of the Company shall be closed and thereafter there shall
be no further registration of transfers of Company Shares on the records of the
Company. From and after the Effective Time, the holders of Company Shares
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Company Shares, except as otherwise provided herein
or by applicable law.
3.09. The Company may, at its option, seek an opinion that the
consideration to be received by the holders of Company Shares pursuant to the
Merger is fair to the holders of Company Shares from a financial point of view
(the "Fairness Opinion") within thirty (30) days of the execution of this
Agreement. The Company shall waive the Fairness Opinion if it fails to obtain
such Opinion within such period.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Purchaser to enter into this Agreement, the Company
hereby represents and warrants to Purchaser, subject to any disclosures set
forth in the Company's Disclosure Schedules (which shall apply regardless of
whether the representations and warranties below contain an express reference to
a particular schedule), as such "Disclosure Schedule" (herein so called) may be
completed or supplemented as provided in Section 7.12 hereof, that:
4.01. Organization and Qualification; Subsidiaries.
(a) Except as disclosed in Section 4.01 of the Disclosure Schedule,
each of the Company and each subsidiary of the Company (a "Subsidiary") is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. The Company and each Subsidiary is duly
qualified or licensed as a foreign corporation to do business and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except where such failure to be qualified or licensed
would not have a Material Adverse Effect.
(b) A true and complete list of all the Subsidiaries, together with
the jurisdiction of incorporation of each Subsidiary, the percentage of the
outstanding capital stock of each Subsidiary owned by the Company and each other
Subsidiary and the names of the directors and officers of each Subsidiary, is
set forth in Section 4.01(b) of the Disclosure Schedule. Except as disclosed in
Section 4.01(b) of the Disclosure Schedule, the Company does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
(c) All names by which the Company previously conducted business or
was known as are listed in Section 4.01(c) of the Disclosure Schedule.
4.02. Certificate of Incorporation and By-laws. The Company has heretofore
furnished to Purchaser a complete and correct copy of the Certificate of
Incorporation and the By-laws or equivalent organizational documents, each as
amended to date, of the Company and each Subsidiary. Such Certificates of
Incorporation, By-laws or equivalent organizational documents are in full force
and effect. Neither the Company nor any Subsidiary is in violation of any of the
provisions of its Certificate of Incorporation, By-laws or equivalent
organizational documents.
4.03. Capitalization. The authorized capital stock of the Company consists
of 220,000,000 shares of common stock, par value $0.0001 per share, and
5,000,000 shares of preferred stock, par value $0.0001 per share ("Company
Preferred Stock"). As of the date hereof, (a) [to be completed in Disclosure
Schedules] Company Shares were issued and outstanding, all of which are validly
issued, fully paid and non-assessable, (b) [to be completed in Disclosure
Schedules] Company Shares are held in the treasury of the Company, (c) no
Company Shares are held by the Subsidiaries, (d) [to be completed in Disclosure
Schedules] Company Shares are reserved for future issuance pursuant to
outstanding stock options or stock incentive rights granted pursuant to the
Company's stock option plans and (e) [to be completed in Disclosure Schedules]
Company Shares are reserved for future issuance pursuant to exercise of the
outstanding warrants. As of the date hereof, no shares of Company Preferred
Stock are issued and outstanding. Except as set forth in this Section 4.03 or in
Section 4.03 of the Disclosure Schedule, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of the Company or any Subsidiary or obligating
the Company or any Subsidiary to issue or sell any shares of capital stock of,
or other equity interests in, the Company or any Subsidiary. Section 4.03 of the
Disclosure Schedule sets forth the following information with respect to each
Company Stock Option and Warrant outstanding on the date of this Agreement: (i)
the name of the option or warrant holder; (ii) the particular plan pursuant to
which such Company stock option was granted; (iii) the number of Company Shares
subject to such Company stock option or warrant; (iv) the exercise price of such
Company stock option or warrant; (v) the date on which such Company stock option
or warrant was granted or issued; (vi) the applicable vesting schedule; (vii)
the date on which such Company stock option or warrant expires; and (viii)
whether the exercisability of such option or warrant will be accelerated in any
way by the transactions contemplated by this Agreement. All Company Shares
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and non-assessable. There are no
outstanding contractual obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any Company Shares or any capital stock
of any Subsidiary or to provide funds to, or make any investment (in the form of
a loan, capital contribution or otherwise) in, any Subsidiary or any other
person. Except as disclosed in Section 4.03 of the Disclosure Schedule, each
outstanding share of capital stock of each Subsidiary is duly authorized,
validly issued, fully paid and non-assessable, and each such share is owned by
the Company or another Subsidiary free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Company's or any Subsidiary's voting rights, charges and
other encumbrances of any nature whatsoever.
4.04. Authority Relative to This Agreement. The Company has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the Transactions. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the Transactions have been duly and validly authorized by all necessary
corporate action, and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the Transactions
(other than, with respect to the Merger, the approval and adoption of this
Agreement by the holders of a majority [confirm] of the then-outstanding Company
Shares, if and to the extent required by applicable law, and the filing and
recordation of appropriate merger documents as required by Oklahoma Law). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Purchaser, constitutes
a legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms. At a meeting duly called and held on
February 13, 2002, the Board approved this Agreement and the Transactions.
4.05. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will not, (i) conflict
with or violate the Certificate of Incorporation or By-laws or equivalent
organizational documents of the Company or any Subsidiary, (ii) assuming that
all consents, approvals, authorizations and other actions described in Section
4.05(b) have been obtained and all filings and obligations described in Section
4.05(b) have been made, conflict with or violate any United States or non-United
States national, state, provincial, municipal, county or local statute, law,
ordinance, regulation, rule, code, executive order, injunction, judgment, decree
or other order ("Law") applicable to the Company or any Subsidiary or by which
any property or asset of the Company or any Subsidiary is bound or affected, or
(iii) other than as described in Section 4.05(a) of the Disclosure Schedule,
result in any breach of or constitute a default (or an event which, with notice
or lapse of time or both, would become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of the
Company or any Subsidiary pursuant to or under, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, except, with respect to clause (ii) or (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would not prevent or
materially delay consummation of the Merger, or otherwise prevent or materially
delay the Company from performing its obligations under this Agreement and would
not have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any United States or non-United States national, state, provincial,
municipal, county or local government, governmental, regulatory or
administrative authority, agency, instrumentality or commission or any court,
tribunal, or judicial or arbitral body (a "Governmental Authority"), except (i)
for applicable requirements, if any, of the Exchange Act, state securities or
"blue sky" laws ("Blue Sky Laws") and state takeover laws, (ii) filing and
recordation of appropriate merger documents as required by Nevada Law or
Oklahoma Law, and (iii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or materially delay consummation of the Merger, or otherwise prevent or
materially delay the Company from performing its obligations under this
Agreement and would not have a Material Adverse Effect.
4.06. Permits; Compliance. Each of the Company and the Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Authority necessary for each of the Company or the
Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted, or as presently contemplated to be
conducted (the "Permits"), except where the failure to have, or the suspension
or cancellation of, any of the Permits would not prevent or materially delay
consummation of the Merger or otherwise prevent or materially delay the Company
from performing its obligations under this Agreement and would not have a
Material Adverse Effect. No suspension or cancellation of any of the Permits is
pending or, to the knowledge of the Company, threatened, which suspension or
cancellation would have a Material Adverse Effect. Neither the Company nor any
Subsidiary is in conflict with, or in default, breach or violation of, (a) any
Law applicable to the Company or any Subsidiary or by which any property or
asset of the Company or any Subsidiary is bound or affected, or (b) any note,
bond, mortgage, indenture, contract, agreement, lease, license, Permit,
franchise or other instrument or obligation to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any property
or asset of the Company or any Subsidiary is bound, except for any such
conflicts, defaults, breaches or violations that would not prevent or materially
delay consummation of the Merger or otherwise prevent or materially delay the
Company from performing its obligations under this Agreement and would not have
a Material Adverse Effect.
4.07. Financial Statements
(a) [Reserved]
(b) The financial statements of the Company to be included in
Purchaser's Registration Statement will be prepared in accordance with United
States generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods indicated (except as may be indicated in the notes
thereto) and each will fairly present, in all material respects, the
consolidated financial position, results of operations and cash flows of the
Company and its consolidated Subsidiaries as at the respective dates thereof and
for the respective periods indicated therein except as otherwise noted therein
and for normal, recurring year-end adjustments.
(c) Except as and to the extent set forth on the unaudited
consolidated balance sheet of the Company and the consolidated Subsidiaries as
at August 31, 2001 including the notes thereto (the "Most Recent Balance Sheet")
neither the Company nor any Subsidiary has any liability or obligation of any
nature (whether accrued, absolute, contingent or otherwise), except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since August 31, 2001.
4.08. Absence of Certain Changes or Events. Since August 31, 2001, except
as set forth in Section 4.08 of the Disclosure Schedule, or as expressly
contemplated by this Agreement (a) the Company and the Subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice, and (b) there has not been any Material Adverse
Effect.
4.09. Absence of Litigation. Except as set forth in Section 4.09 of the
Disclosure Schedule, there is no litigation, suit, claim, action, proceeding or
investigation (an "Action") pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary, or any property or asset of
the Company or any Subsidiary, before any Governmental Authority that would have
a Material Adverse Effect. Neither the Company nor any Subsidiary nor any
property or asset of the Company or any Subsidiary is subject to any continuing
order of, consent decree, settlement agreement or similar written agreement
with, or continuing investigation by, any Governmental Authority, or any order,
writ, judgment, injunction, decree, determination or award of any Governmental
Authority that would prevent or materially delay consummation of the Merger or
otherwise prevent or materially delay the Company from performing its
obligations under this Agreement or would have a Material Adverse Effect.
4.10. Employee Benefit Plans.
(a) Section 4.10(a) of the Disclosure Schedule lists (i) all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement, severance or other benefit
plans, programs or arrangements, and all employment, termination, severance or
other contracts or agreements, whether legally enforceable or not, to which the
Company or any Subsidiary is a party, with respect to which the Company, any
Subsidiary or any ERISA Affiliate has any obligation or which are maintained,
contributed to or sponsored by the Company or any Subsidiary for the benefit of
any current or former employee, officer or director of, or any current or former
consultant to, the Company or any Subsidiary, (ii) each employee benefit plan
for which the Company or any Subsidiary could incur liability under Section 4069
of ERISA in the event such plan has been or were to be terminated, (iii) any
plan in respect of which the Company or any Subsidiary could incur liability
under Section 4212(c) of ERISA, and (iv) any contracts, arrangements or
understandings between the Company or any Subsidiary and any employee of the
Company or any Subsidiary including, without limitation, any contracts,
arrangements or understandings relating in any way to a sale of the Company or
any Subsidiary (collectively, the "Plans"). Each Plan is in writing (or a
written summary exists) and the Company has made available to Purchaser a true
and complete copy of each Plan and has made available to Purchaser a true and
complete copy of each material document, if any, prepared in connection with
each such Plan, including, without limitation, (i) a copy of each trust or other
funding arrangement, if such a trust or funding arrangement exists, (ii) each
summary plan description and summary of material modifications thereto, (iii)
the most recent three years' Internal Revenue Service ("IRS") Forms 5500, if
applicable (iv) the most recently received IRS determination letter for each
such Plan, if applicable, and (v) the most recent three years' actuarial reports
and financial statements in connection with each such Plan, if applicable.
(b) None of the Plans is a multi-employer plan (within the meaning
of Section 3(37) or 4001(a)(3) of ERISA) (a "Multi-employer Plan") or a
single-employer plan (within the meaning of Section 4001(a)(15) of ERISA) for
which the Company or any Subsidiary could incur liability under Section 4063 or
4064 of ERISA (a "Multiple Employer Plan"). Except as listed in Section 4.10(a)
of the Disclosure Schedule, none of the Plans (i) provides for the payment of
separation, severance or similar-type benefits to any person, (ii) obligates the
Company or any Subsidiary to pay separation, severance or similar-type benefits
solely or partially as a result of any transaction contemplated by this
Agreement, or (iii) obligates the Company or any Subsidiary to make any payment
or provide any benefit as a result of a "change in control," within the meaning
of such term under Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"). Except as listed in Section 4.10(a) of the Disclosure Schedule,
none of the Plans provides for or promises retiree medical, disability or life
insurance benefits to any current or former employee, officer or director of the
Company or any Subsidiary.
(c) Each Plan is now and always has been operated in all material
respects in accordance with its terms and the requirements of all applicable
Laws including, without limitation, ERISA and the Code. The Company and the
Subsidiaries have performed all obligations required to be performed by them
under, are not in any material respect in default under or in violation of, and
have no knowledge of any material default or violation by any party to, any
Plan. No Action or any audit or investigation by any Governmental Authority is
pending or, to the knowledge of the Company, threatened with respect to any Plan
(other than claims for benefits in the ordinary course) and no fact or event
exists that could reasonably be expected to give rise to any such Action.
(d) Each Plan that is intended to be qualified under Section 401(a)
of the Code has timely received a favorable determination, opinion, advisory or
notification letter from the IRS that the Plan is so qualified and each trust
established in connection with any Plan which is intended to be exempt from
federal income taxation under Section 501(a) of the Code has received an
opinion, advisory or modification letter from the IRS that it is so exempt, and
no fact or event has occurred since the date of such letter or letters from the
IRS that could reasonably be expected to adversely affect the qualified status
of any such Plan or the exempt status of any such trust.
(e) There has not been to the best of Company's knowledge any
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Plan. Neither the Company nor any
Subsidiary has incurred any liability under, arising out of or by operation of
Title IV of ERISA (other than liability for premiums to the Pension Benefit
Guaranty Corporation arising in the ordinary course), including, without
limitation, any liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA, or
(ii) the withdrawal from any Multi-employer Plan or Multiple Employer Plan, and
no fact or event exists which could reasonably be expected to give rise to any
such liability.
(f) All contributions, premiums or payments required to be made with
respect to any Plan have been made on or before their due dates. All such
contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any Governmental Authority and no
fact or event exists to the best of Company's knowledge which could reasonably
be expected to give rise to any such challenge or disallowance.
(g) None of the Plans is subject to the laws of any country other
than the United States.
4.11. Labor and Employment Matters.
(a) Section 4.11 of the Disclosure Schedule sets forth a list of all
employees of the Company and any Subsidiary, together with their dates of hire,
and any employees currently on leave of absence, indicating the nature of and
length of such leave and whether such employees have employment agreements. The
Company has previously provided to Purchaser a schedule setting forth current
base salary and total wages paid in the prior year for all employees listed in
Section 4.11 of the Disclosure Schedule. Except as set forth in Section 4.11 of
the Disclosure Schedule, (i) there are no controversies pending or, to the
knowledge of the Company, threatened between the Company or any Subsidiary and
any of their respective employees; (ii) neither the Company nor any Subsidiary
is a party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Company or any Subsidiary, nor, to the
knowledge of the Company, are there any activities or proceedings of any labor
union to organize any such employees; (iii) there are no unfair labor practice
complaints pending against the Company or any Subsidiary before the National
Labor Relations Board or any current union representation questions involving
employees of the Company or any Subsidiary; (iv) there is no strike, slowdown,
work stoppage or lockout, or, to the knowledge of the Company, threat thereof,
by or with respect to any employees of the Company or any Subsidiary; and (v)
there are no currently effective agreements relating to severance or similar
payments or other benefits to be provided to directors, officers, employees,
consultants or former employees of the Company or any Subsidiary in connection
with or after termination of such director, officer, consultant or employee's
employment or other relationship with the Company or that may otherwise be owing
as a result of the Transactions.
(b) The Company and the Subsidiaries are in material compliance with
all applicable laws relating to the employment of labor, including those related
to wages, hours, collective bargaining and the payment and withholding of taxes
and other sums as required by the appropriate Governmental Authority, and have
withheld and paid to the appropriate Governmental Authority or are holding for
payment not yet due to such Governmental Authority all amounts required to be
withheld from employees of the Company or any Subsidiary and are not liable for
any arrears of wages, Taxes, penalties or other sums for failure to comply with
any of the foregoing. The Company and the Subsidiaries have paid in full to all
employees or adequately accrued for in accordance with GAAP consistently applied
all wages, salaries, commissions, bonuses, benefits and other compensation due
to or on behalf of such employees, and there is no claim with respect to payment
of wages, salary or overtime pay that has been asserted or is now pending or
threatened before any Governmental Authority with respect to any persons
currently or formerly employed by the Company or any Subsidiary. Neither the
Company nor any Subsidiary is a party to, or otherwise bound by, any consent
decree with, or citation by, any Governmental Authority relating to employees or
employment practices. There is no charge of discrimination in employment or
employment practices, for any reason, including, without limitation, age,
gender, race, religion or other legally protected category, which has been
asserted or is now pending or, to the knowledge of the Company, threatened
before the United States Equal Employment Opportunity Commission, or any other
Governmental Authority in any jurisdiction in which the Company or any
Subsidiary have employed or employ any person, except as would not have a
Material Adverse Effect.
(c) The Company and the Subsidiaries are in compliance with the
provisions of the WARN Act and any similar state laws. Section 4.11 of the
Disclosure Schedule lists all employees who have been terminated in the 90-day
period ending as of the date hereof.
4.12. Proxy/Registration Statement. None of the information supplied by
the Company for inclusion in the Company's Proxy Statement or Purchaser's
Registration Statement shall, at the times such documents or any amendments or
supplements thereto are filed with the SEC or are first published, sent or given
to stockholders of the Company, as the case may be, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to any
information supplied by Purchaser, or Purchaser's representatives for inclusion
in such documents.
4.13. Oil and Gas Operations. Except as set forth in Section 4.13 of the
Disclosure Schedule, proceeds from the sale of crude oil, natural gas liquids
and other hydrocarbons produced from crude oil or natural gas ("Hydrocarbons")
produced from the Company's Oil and Gas Interests are being received by the
Company and the Subsidiaries in a timely manner and are not being held in
suspense for any reason (except in the ordinary course of business or which
would not have a Material Adverse Effect).
4.14. Gas Imbalances. Except as set forth in Section 4.14 of the
Disclosure Schedule, none of the Company or the Subsidiaries has received any
material deficiency payment under any gas contract for which any person has a
right to take deficiency gas from the Company or a Subsidiary, nor has the
Company or any Subsidiary received any material payment for production which is
subject to refund or recoupment out of future production.
4.15. Oil and Gas Agreements. The Company has previously provided or made
available to Purchaser true and complete copies of all the Oil and Gas
Agreements together with all amendments, extensions and other modifications
thereof.
4.16. Properties.
(a) Except for items disclosed in Section 4.16 of the Disclosure
Schedule and goods and other property sold, used or otherwise disposed of since
August 31, 2001 in the ordinary course of business, the Company and the
Subsidiaries have Good and Marketable Title, for oil and gas purposes, in and to
all oil and gas properties set forth in the Reserve Report as owned by the
Company and the Subsidiaries (the "Company's Oil and Gas Interests"), and
defensible title for oil and gas purposes to all other properties, interests in
properties and assets, real and personal, reflected on the balance sheet of the
Company for the period ended August 31, 2001, as owned by the Company and the
Subsidiaries, free and clear of any Liens, except: (i) Liens associated with
obligations reflected in the Most Recent Balance Sheet; (ii) Liens for current
Taxes not yet due and payable, (iii) materialman's, mechanic's, repairman's,
employee's, contractors, operator's, and other similar liens, charges or
encumbrances arising in the ordinary course of business (A) if they have not
been perfected pursuant to law, (B) if perfected, they have not yet become due
and payable or payment is being withheld as provided by law, or (C) if their
validity is being contested in good faith by appropriate action, (iv) all rights
to consent by, required notices to, filings with, or other actions by
governmental entities in connection with the sale or conveyance of oil and gas
leases or interests if they are customarily obtained subsequent to the sale or
conveyance, and (v) such imperfections of title, easements and Liens which have
not had, or would not reasonably be expected to have, a Material Adverse Effect.
To the knowledge of the Company, all leases and other agreements pursuant to
which the Company or any of the Subsidiaries leases or otherwise acquires or
obtains operating rights affecting any real or personal property are in good
standing, valid and effective and all royalties, rentals and other payment due
by the Company to any lessor of any such oil and gas leases have been paid,
except in each case, as has not had, and would not reasonably be expected to
have, a Material Adverse Effect. All major items of operating equipment of the
Company and the Subsidiaries used in connection with the Company's Oil and Gas
Interests over which the Company has operating rights are in good operating
condition and in a state of reasonable maintenance and repair, ordinary wear and
tear excepted, except as has not had, and would not reasonably be expected to
have, a Material Adverse Effect.
(b) The term "Good and Marketable Title" will, for purposes of this
Section 4.16, with respect to the Company and the Subsidiaries, mean such title
that: (i) is deducible of record (from the records of the applicable parish or
county or (A) in the case of federal leases, from the records of the applicable
office of the Minerals Management Service or Bureau of Land Management, (B) in
the case of Indian leases, from the applicable office of the Bureau of Indian
Affairs, (C) in the case of state leases, from the records of the applicable
state land office) or is assignable to the Company or the Subsidiaries out of an
interest of record (as so defined) by reason of the performance by the Company
or the Subsidiaries of all operations required to earn an enforceable right to
such assignment; (ii) entitles the Company or the Subsidiaries to receive not
less than the interest set forth in the Reserve Report with respect to each
proved property evaluated therein under the caption "Net Revenue Interest" or
"NRI" without reduction during the life of such property except as stated in the
Reserve Report; (iii) obligates the Company or the Subsidiaries to pay costs and
expenses relating to each such proved property in an amount not greater than the
interest set forth under the caption "Working Interest" or "WI" in the Reserve
Report with respect to such property without increase over the life of such
property except as shown on the Reserve Report; and (iv) does not restrict the
ability of the Company or the Subsidiaries to utilize the properties as
currently intended; except in each case where deficiencies referenced in clauses
(i) through (iv) would reasonably be expected to have a Material Adverse Effect.
4.17. Oil and Gas Reserves. The Company has furnished Purchaser prior to
the date of this Agreement with the Company's estimates of its and the
Subsidiaries' oil and gas reserves as of September 01, 2001 (the "Reserve
Report"). To the knowledge of the Company, except as have not had, and would not
reasonably be expected to have, a Material Adverse Effect, the production
volumes and pressure data used to prepare the Reserve Report were accurate.
4.18. Take-or-Pay Deliveries. Except as would not reasonably be expected
to have a Material Adverse Effect, there are no calls (exclusive of market
calls) on the Company's oil or gas production and the Company has no obligation
to deliver oil or gas pursuant to any take-or-pay, prepayment or similar
arrangement without receiving full payment therefor, excluding gas imbalances
disclosed in Section 4.14 of the Disclosure Schedule.
4.19. Hedging. Section 4.19 of the Disclosure Schedule sets forth all
futures, hedge, swap, collar, put, call, floor, cap, option or other contracts
that are intended to benefit from, relate to or reduce or eliminate the risk of
fluctuations in the price of commodities, including Hydrocarbons or securities,
to which the Company or any of the Subsidiaries is bound.
4.20. Intellectual Property. The Company and the Subsidiaries own or
possess all necessary licenses or other valid rights to use all patents, patent
rights, trademarks, trademark rights and proprietary information used or held
for use in connection with their respective businesses as currently being
conducted, free and clear of Liens, and to the knowledge of the Company, there
are no assertions or claims challenging the validity of any of the foregoing
which would have, or would reasonably be expected to have, a Material Adverse
Effect. Except in the ordinary course of business, neither the Company nor any
of the Subsidiaries has granted to any other person any license to use any of
the foregoing. To the knowledge of the Company, the conduct of the Company's and
the Subsidiaries' respective businesses as currently conducted does not conflict
with any patents, patent rights, licenses, trademarks, trademark rights, trade
names, trade name rights or copyrights of others in a way which would have, or
would be reasonably expected to have, a Material Adverse Effect. To the
knowledge of the Company there is no infringement of any proprietary right owned
by the Company or any of the Subsidiaries in a way which would have, or would be
reasonably expected to have, a Material Adverse Effect.
4.21. Taxes.
(a) Each of the Company, the Subsidiaries and each affiliated,
consolidated, combined, unitary or similar group of which any such corporation
or entity is or was a member has (i) duly filed (or there has been filed on its
behalf) on a timely basis (taking into account any extensions of time to file
before the date hereof) with appropriate Governmental Authorities all Tax
returns, statements, reports, declarations, estimates and forms ("Returns")
required to be filed by or with respect to it, except to the extent that any
failure to file would not have, or reasonably be expected to have, a Material
Adverse Effect, and (ii) duly paid or deposited in full on a timely basis or
made adequate provisions in accordance with generally accepted accounting
principles (or there has been paid or deposited or adequate provision has been
made on its behalf) for the payment of all Taxes required to be paid by it other
than those being contested in good faith by the Company or a Subsidiary and
except to the extent that any failure to pay or deposit or make adequate
provision for the payment of such Taxes would not have, or reasonably be
expected to have, a Material Adverse Effect.
(b) Except to the extent set forth in Section 4.21 of the Disclosure
Schedule, (i) none of the federal income tax returns of the Company or any of
the Subsidiaries have been examined by the IRS for all periods; (ii) as of the
date hereof, neither the Company nor any of the Subsidiaries has granted any
requests, agreements, consents or waivers to extend the statutory period of
limitations applicable to the assessment of any Taxes with respect to any
Returns of the Company or any of the Subsidiaries that will be outstanding as of
the Effective Time; (iii) neither the Company nor any of the Subsidiaries is a
party to, is bound by or has any obligation under any Tax sharing, allocation or
indemnity agreement or any similar agreement or arrangement that would have, or
would reasonably be expected to have, a Material Adverse Effect; and (iv) there
are no Liens for Taxes on any assets of the Company or the Subsidiaries except
for Taxes not yet currently due, with respect to matters being contested by the
Company in good faith for which adequate reserves are reflected in the financial
statements and those which could not reasonably be expected to result in a
Material Adverse Effect.
4.22. Environmental Matters.
(a) Except as would not have, or reasonably be expected to have, a
Material Adverse Effect, to the knowledge of the Company, there are not any
present or past conditions or circumstances at, or arising out of, any current
or former businesses, assets or properties of the Company or any Subsidiary,
including but not limited to, on-site or off-site disposal or release of any
Hazardous Substance, which constitute a violation under any Environmental Law or
could reasonably be expected to give rise to: (i) liabilities or obligations for
any notification, cleanup, remediation, disposal or corrective action under any
Environmental Law or (ii) claims arising for damage to natural resources.
(b) Except as would not have, or reasonably be expected to have, a
Material Adverse Effect, neither the Company nor any of the Subsidiaries has (i)
received any written notice of noncompliance with, violation of, or liability or
potential liability under any Environmental Law, (ii) received any written
notice regarding any existing, pending or threatened investigation or inquiry
related to alleged violations under any Environmental Law or regarding any
claims for remedial obligations or contribution under any Environmental Law or
(iii) entered into any consent decree or order or is subject to any order of any
court or governmental authority or tribunal under any Environmental Law or
relating to the cleanup of any Hazardous Substance.
(c) Except as would not have, or reasonably be expected to have, a
Material Adverse Effect, the Company and the Subsidiaries have in full force and
effect all permits, licenses, approvals and other authorizations required by
Environmental Laws to conduct their operations and to operate and use any of the
Company's or the Subsidiaries' assets for their current purposes and uses and
are operating in material compliance thereunder.
(d) Except as would not have or reasonably be expected to have a
Material Adverse Effect, the Company does not know of any reason that would
preclude it from renewing or obtaining a re-issuance or transfer of the permits,
licenses, approvals, or other authorizations required pursuant to any applicable
Environmental Law to conduct their operations and to operate and use any of the
Company's or the Subsidiaries' assets for their current purposes and uses.
4.23. Material Contracts.
(a) Other than the Oil and Gas Agreements, which have been
previously made available or provided to Purchaser, subsections (i) through
(xii) of Section 4.23 of the Disclosure Schedule contain a list of the following
types of contracts and agreements to which the Company or any Subsidiary is a
party (such contracts, agreements and arrangements as are required to be set
forth in Section 4.23(a) of the Disclosure Schedule, together with the Oil and
Gas Agreements, being the "Material Contracts"):
(i) each contract or agreement that contemplates an exchange
of consideration with a value of more than $50,000 net to the Company's
interest;
(ii) all management contracts (excluding contracts for
employment) and contracts with other consultants, including any contracts
involving the payment of royalties or other amounts calculated based upon the
revenues or income of the Company or any Subsidiary or income or revenues
related to any product of the Company or any Subsidiary, which require continued
payment thereunder and cannot be terminated by the Company or Subsidiary, as the
case may be, with 30-day notice;
(iii) all contracts and agreements evidencing indebtedness for
borrowed money of the Company;
(iv) all contracts and agreements with any Governmental
Authority, excluding state leases or other governmental mineral rights;
(v) all contracts and agreements providing for benefits under
any Plan, excluding individual stock option grant agreements and stock
subscription agreements;
(vi) all agreements related to professional services rendered
to the Company or any Subsidiary in connection with the Merger and this
Agreement;
(vii) all contracts providing for "earn-out" or similar
contingent payments in excess of $50,000 by the Company or any Subsidiary;
(viii) all joint venture, partnership, and similar
agreements;
(ix) all contracts for employment required to be listed in
Section 4.11 of the Disclosure Schedule;
(x) all contracts providing for indemnification of directors,
officers, employees, consultants or other persons other than normal course
indemnity provisions; and
(xi) all other contracts and agreements, whether or not made
in the ordinary course of business, which are material to the Company, any
Subsidiary or the conduct of their respective businesses, or the absence of
which would prevent or delay consummation of the Merger or otherwise prevent or
delay the Company from performing its obligations under this Agreement or would
have a Material Adverse Effect.
(b) Except as disclosed in Section 4.23(b) of the Disclosure
Schedule and except as would not prevent or delay consummation of the Merger or
otherwise prevent or delay the Company from performing its obligations under
this Agreement and would not have a Material Adverse Effect, (i) each Material
Contract is a legal, valid and binding agreement of the Company, and none of the
Material Contracts is in default by its terms or has been canceled by the other
party; (ii) to the Company's knowledge, no other party is in breach or violation
of, or default under, any Material Contract; and (iii) the Company and the
Subsidiaries are not in receipt of any claim of default under any such
agreement. The Company has furnished or made available to Purchaser true and
complete copies of all Material Contracts, including any amendments thereto.
4.24. Insurance.
(a) Section 4.24(a) of the Disclosure Schedule sets forth, with
respect to each insurance policy under which the Company or any Subsidiary is
insured (other than such policies contemplated in Section 4.10), a named insured
or otherwise the principal beneficiary of coverage which is currently in effect,
(i) the names of the insurer, the principal insured and each named insured, (ii)
the policy number, (iii) the period, scope and amount of coverage and (iv) the
premium charged.
(b) With respect to each such insurance policy: (i) the policy is
legal, valid, binding and enforceable against the Company in accordance with its
terms and, except for policies that have expired under their terms in the
ordinary course, is in full force and effect; (ii) neither the Company nor any
Subsidiary is in material breach or default (including any such breach or
default with respect to the payment of premiums or the giving of notice), and no
event has occurred which, with notice or the lapse of time, would constitute
such a breach or default, or permit termination or modification, under the
policy; and (iii) to the knowledge of the Company, no insurer on the policy has
been declared insolvent or placed in receivership, conservatorship or
liquidation.
4.25. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to the Company to enter into this Agreement, Purchaser
and MergerSub, jointly and severally, hereby represent and warrant to the
Company that:
5.01. Corporate Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada.
MergerSub is a corporation duly organized, validly existing and in good standing
under the laws of the State of Oklahoma. Each of Purchaser and MergerSub has the
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not prevent or materially delay
consummation of the Transactions, or otherwise prevent Purchaser or MergerSub
from performing its material obligations under this Agreement.
5.02. Authority Relative to This Agreement. Each of MergerSub and
Purchaser has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by Purchaser and
MergerSub and the consummation by Purchaser and MergerSub of the Transactions
have been duly and validly authorized by all necessary corporate action, and no
other corporate proceedings on the part of Purchaser or MergerSub are necessary
to authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, the filing and recordation of appropriate merger
documents as required by Oklahoma Law). This Agreement has been duly and validly
executed and delivered by Purchaser and MergerSub and, assuming due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of each of MergerSub and Purchaser enforceable against
such party in accordance with its terms. At a meeting duly called or by way of
unanimous written consent, the Boards of Directors of Purchaser and MergerSub
unanimously approved this Agreement and the Transactions.
5.03. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Purchaser or
MergerSub do not, and the performance of this Agreement by Purchaser or
MergerSub will not, (i) conflict with or violate the Articles of Incorporation
or the By-laws of Purchaser or MergerSub, (ii) assuming that all consents,
approvals, authorizations and other actions described in Section 5.03(b) have
been obtained and all filings and obligations described in Section 5.03(b) have
been made, conflict with or violate any Law applicable to Purchaser or
MergerSub, or by which any property or asset of Purchaser or MergerSub is bound
or affected, or (iii) result in any breach of, or constitute a default (or an
event which, with notice or lapse of time or both, would become a default)
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Purchaser or MergerSub pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Purchaser is a party or by which any
property or asset of Purchaser or MergerSub is bound or affected, except, with
respect to clause (ii) or (iii), for any such conflicts, violations, breaches,
defaults or other occurrences which would not prevent or materially delay
consummation of the Merger, or otherwise prevent or materially delay Purchaser
or MergerSub from performing its obligations under this Agreement.
(b) The execution and delivery of this Agreement by Purchaser or
MergerSub do not, and the performance of this Agreement by Purchaser or
MergerSub will not, require any consent, approval, authorization or permit of,
or filing with, or notification to, any Governmental Authority, except (i) for
applicable requirements, if any, of the Exchange Act, Blue Sky Laws and state
takeover laws, (ii) filing and recordation of appropriate merger documents as
required by Oklahoma Law, and (iii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or materially delay consummation of the Merger, or otherwise
prevent or materially delay Purchaser or MergerSub from performing its
obligations under this Agreement.
5.04. Registration Statement. The Registration Statement shall not, at the
time the Registration Statement is filed with the SEC, sent or given to
stockholders of the Company, as the case may be, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing, Purchaser makes no representation or warranty with respect to any
information supplied by the Company or any of its representatives for inclusion
in the prospectus contained with the Registration Statement. The Registration
Statement shall comply in all material respects as to form with the requirements
of the Securities Act and the rules and regulations thereunder.
5.05. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Purchaser.
5.06. Absence of Litigation. Neither Purchaser nor MergerSub is subject to
any continuing order of, consent decree, settlement agreement or similar written
agreement with, or continuing investigation by, any Governmental Authority, or
any order, writ, judgment, injunction, decree, determination or award of any
Governmental Authority that would prevent or materially delay consummation of
the Merger or otherwise prevent or materially delay Purchaser or MergerSub from
performing its obligations under this Agreement.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
6.01. Conduct of Business by the Company Pending the Merger. The Company
agrees that, between the date of this Agreement and the Effective Time, unless
Purchaser shall otherwise agree in writing and except for actions taken or
omitted for the purpose of complying with this Agreement, the businesses of the
Company and the Subsidiaries shall be conducted only in, and the Company and the
Subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice; and the Company shall
use its reasonable best efforts to preserve substantially intact the business
organization of the Company and the Subsidiaries and to preserve the current
relationships of the Company and the Subsidiaries with customers, suppliers and
other persons with which the Company or any Subsidiary has significant business
relations. By way of amplification and not limitation, except as expressly
contemplated by this Agreement and Section 6.01 of the Disclosure Schedule,
neither the Company nor any Subsidiary shall, between the date of this Agreement
and the Effective Time, directly or indirectly, do any of the following without
the prior written consent of Purchase:
(a) amend or otherwise change its Certificate of Incorporation or
By-laws or equivalent organizational documents;
(b) split, combine, reclassify, subdivide or redeem, or purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(c) issue (other than upon the exercise of options or warrants
previously granted to current or former officers, employees or directors of the
Company), purchase, redeem, sell, pledge, dispose of, grant, encumber, or
authorize the issuance, sale, pledge, disposition, grant or encumbrance of any
shares of any class of capital stock of the Company or any Subsidiary, or any
options, warrants, convertible or exchangeable securities or other rights of any
kind to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the Company
or any Subsidiary;
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock, except for dividends by any direct or indirect wholly
owned Subsidiary to the Company or any other Subsidiary;
(e) sell, transfer, assign, dispose of or encumber (except to the
extent that the Company's and the Subsidiaries' ability to so restrict their
right to encumber their assets is limited under the documentation related to the
indebtedness of the Company and certain Subsidiaries under its existing Amended
and Restated Credit Agreement between the Company, certain Subsidiaries, and the
lenders listed therein ("Credit Agreement") as may be amended, any assets of the
Company or any Subsidiary, excluding closing of the Company's office in Dallas,
Texas or enter into any agreement or commitment with respect to assets of the
Company or a Subsidiary, other than in the ordinary course consistent with past
good business practice and other than transfers between the Company and its
Subsidiaries;
(f) sell, transfer, assign, dispose of or encumber (except to the
extent that the Company's and the Subsidiaries' ability to so restrict their
right to encumber their assets is limited under the documentation related to the
any of the Company's Oil and Gas Interests represented in the Credit Agreement
in the Reserve Report or enter into any agreement or commitment with respect to
any such sale, transfer, assignment, disposition or encumbrance;
(g) other than in the ordinary course and consistent with past
business practice, incur or become contingently liable for any indebtedness or
guarantee any such indebtedness or redeem, purchase or acquire or offer to
redeem, purchase or acquire any debt;
(h) acquire or agree to acquire any assets other than in the
ordinary course and consistent with past business practice;
(i) modify or amend any existing agreement or enter into any new
agreement with the Company's financial advisors or other similar consultants;
(j) elect not to participate in any well to which proven reserves
(as identified in the Reserve Report) have been attributed in the Reserve Report
proposed pursuant to any existing net profits agreement or joint operating
agreement; notwithstanding the foregoing, if the applicable authorization for
expenditure ("AFE") exceeds $20,000 net to the Company's interest and Purchaser
fails to approve such expenditure as contemplated by Section 6.01(k)(iv) below,
the Company shall not be deemed to be in default of this Section 6.01(j) for its
failure to participate in such well;
(k) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets or any other business
combination) any corporation, partnership, other business organization or any
division thereof or any significant amount of assets, except for purchases of
inventory in the ordinary course of business consistent with past practice; (ii)
incur any indebtedness for borrowed money other than draws under the Company's
existing revolving credit facility or issue any debt securities or assume,
guarantee or endorse, or otherwise become responsible for, the obligations of
any person, or make any loans or advances; (iii) except as provided in Section
6.01(j), enter into any contract or agreement other than in the ordinary course
of business and consistent with past practice; (iv) issue any AFE or authorize
any other individual capital expenditure in excess of $20,000 net to the
Company's interest; or (v) except as provided in Section 6.01(j), enter into or
amend any contract, agreement, commitment or arrangement with respect to any
matter set forth in this Section 6.01(k);
(l) increase the compensation payable or to become payable or the
benefits provided to its directors, officers or employees, except for increases
in the ordinary course of business and consistent with past practice in salaries
or wages of employees of the Company or any Subsidiary who are not directors or
officers of the Company or any Material Subsidiary, or establish, adopt, enter
into or amend (except as may be required by law) any collective bargaining,
bonus, profit-sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the benefit of
any director, officer or employee;
(m) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect to
accounting policies or procedures;
(n) make any material Tax election or settle or compromise any
material Tax liability;
(o) discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business and
consistent with past practice, of liabilities reflected or reserved against in
the Recent Balance Sheet or subsequently incurred in the ordinary course of
business and consistent with past practice or liabilities or obligations owed to
the Company or its Subsidiaries;
(p) amend, modify or consent to the termination of any Material
Contract, or amend, waive, modify or consent to the termination of the Company's
or any Subsidiary's material rights thereunder;
(q) commence or settle any material Action, except as previously
agreed; or
(r) publicly announce an intention, enter into any formal or
informal agreement or otherwise make a commitment, to do any of the foregoing.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.01. Stockholders' Meeting. The Company, acting through the Board, shall,
in accordance with applicable law and the Company's Certificate of Incorporation
and By-laws, duly call, give notice of, convene and hold an annual or special
meeting of its stockholders as promptly as practicable after the Registration
Statement is declared effective by the SEC for the purpose of considering and
taking action on this Agreement and the Merger (the "Stockholders' Meeting") and
(a) include in the Proxy Statement, and not subsequently withdraw or modify in
any manner adverse to Purchaser, the recommendation of the Board that the
stockholders of the Company approve and adopt this Agreement and the
Transactions and (b) use its best efforts to obtain such approval and adoption.
At the Stockholders' Meeting, Purchaser shall cause all Company Shares then
owned by it and its subsidiaries to be voted in favor of the approval and
adoption of this Agreement and the Transactions.
7.02. Proxy Statement. The Company shall prepare as soon as practicable a
disclosure statement together with any appropriate amendments thereof or
supplements thereto (the "Proxy Statement"), in compliance with Oklahoma Law,
for distribution to the stockholders of the Company in connection with the
solicitation of proxies or consents to the Transactions contemplated by this
Agreement, including the Merger. The Company contemplates preparing the Proxy
Statement as a separate document designed to provide its stockholders with all
material information regarding the Company, and all material aspects of this
Agreement, the Merger and the Transactions contemplated hereby and thereby, and
further anticipate transmitting the Proxy Statement/Prospectus constituting a
part of the Registration Statement and the Company's Proxy Statement to the
Company's stockholders in connection with their approval of this Agreement and
the Transactions contemplated hereby. The Proxy Statement shall be in form and
substance reasonably satisfactory to Purchaser and shall comply with all
applicable laws relating thereto and the use thereof contemplated in this
Agreement. The Proxy Statement shall be delivered to Purchaser for filing by
Purchaser with the SEC, as a part of or in connection with the Registration
Statement. The Company shall make such modifications in the Proxy Statement as
Purchaser shall reasonably request at any time prior to the distribution thereof
to the Company's stockholders. When distributed to the stockholders, the Proxy
Statement shall be accompanied by such additional materials as Purchaser shall
reasonably require. Purchaser shall furnish the Company all information
concerning Purchaser required for use in the Proxy Statement, and Purchaser
shall take such other action as the Company may reasonably request in connection
with the preparation of the Proxy Statement. None of the information furnished
by or on behalf of Purchaser for use in the Proxy Statement shall contain any
material or misstatement of fact or omit to state a material fact or any fact
necessary to make these statements contained therein not misleading. The Proxy
Statement shall not contain any material or misstatement of fact or omit to
state a material fact or any fact necessary to make the statements contained
therein not misleading.
7.03. Registration Statement. Purchaser shall prepare and file with the
SEC as soon as practicable a registration statement on Form S-4 or such other
SEC form as Purchaser deems appropriate to register the Purchaser Shares (the
"Registration Statement") with respect to the Purchaser Shares issuable in the
Merger, a portion of which shall also serve as a part of the Proxy
Statement/Prospectus with respect to the meetings of the stockholders of the
Company to approve this Agreement, the Merger and the Transactions relating
hereto and thereto, and shall use all reasonable efforts to have the
Registration Statement declared effective by the SEC as soon as practicable.
Purchaser shall also take prior to Closing any action required to be taken under
applicable Blue Sky or state securities laws in connection with the issuance of
the Purchaser Shares and the Merger. The Company shall furnish to Purchaser all
information concerning the Company as may be required for use in the
Registration Statement, and the Company shall take such other actions as
Purchaser may reasonably request in connection with the preparation of such
Registration Statement and the actions to be taken by the Company pursuant to
this Section 7.03. None of the information furnished by or on behalf of the
Company for use in the Registration Statement shall contain any material or
misstatement of fact or omit to state a material fact or any fact necessary to
make these statements contained therein not misleading.
7.04. Access to Information; Confidentiality.
(a) From the date hereof until the Effective Time, the Company
shall, and shall cause the Subsidiaries and the officers, directors, employees,
auditors and agents of the Company and the Subsidiaries to, afford the officers,
employees and agents of the Purchaser and persons providing or proposing to
provide Purchaser with financing for the Transactions complete access at all
reasonable times to the officers, employees, agents, properties, offices, plants
and other facilities, books and records of the Company and each Subsidiary, and
shall furnish Purchaser and persons providing or proposing to provide Purchaser
with financing for the Transactions with such financial, operating and other
data and information as Purchaser, through their officers, employees or agents,
may reasonably request.
(b) All information obtained by Purchaser pursuant to this Section
7.04 shall be kept confidential in accordance with the confidentiality agreement
(the "Confidentiality Agreement") previously executed between Purchaser and the
Company, and nothing herein shall limit or abrogate the terms of the
Confidentiality Agreement, except as set forth in Section 7.10.
(c) No investigation pursuant to this Section 7.04 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto or any condition to the
Merger.
7.05. No Solicitation of Transactions.
(a) Neither the Company nor any Subsidiary through any officer,
director, advisor or other person acting on its behalf shall, directly or
indirectly, solicit, initiate or encourage in any way any Acquisition Proposal;
provided, however, that the Company may furnish information to and negotiate
with a third party (a "Potential Acquirer") if the Potential Acquirer has, in
circumstances not involving any breach by the Company of the foregoing
provisions, made a tender or exchange offer for, or a proposal to the Board to
acquire 20% or more of the Company Shares, and (A) the Board determines in good
faith, based on the advice of outside counsel, that the failure to do so would
be reasonably likely to constitute a breach of its fiduciary duties to the
stockholders of the Company under applicable law, and (B) the Company's Board is
advised by its financial advisor that such Potential Acquirer has the financial
wherewithal to consummate the acquisition and such acquisition would be more
favorable to the stockholders of the Company than the Transactions contemplated
by this Agreement.
(b) Except as set forth in this Section 7.05(b), neither the Board
nor any committee thereof shall (i) withdraw or modify, or propose to withdraw
or modify, in a manner adverse to Purchaser, the approval or recommendation by
the Board or any such committee of this Agreement or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal or (iii)
enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, in the event that, prior to the Effective Time,
the Board determines in good faith that it is required to do so by its fiduciary
duties under applicable law after having received advice from outside legal
counsel, the Board may withdraw or modify its approval or recommendation of the
Merger, but only to terminate this Agreement in accordance with Section
9.01(d)(ii) (and, concurrently with such termination, cause the Company to enter
into an agreement with respect to a Superior Proposal).
(c) The Company shall, and shall direct or cause its directors,
officers, employees, representatives and agents to, immediately cease and cause
to be terminated any discussions or negotiations with third parties that may be
ongoing with respect to any Acquisition Proposal.
(d) The Company shall promptly advise Purchaser in writing (within
48 hours) of the material terms and conditions of such Acquisition Proposal.
7.06. Employee Matters. The Company and the Subsidiaries will cooperate
with Purchaser in making their employees available during regular business hours
for Purchaser to conduct interviews to determine the prospect of continuing
employment of such employees following the Effective Time. As soon as
practicable after the date hereof, and in any event not later than the date that
the Proxy Statement is distributed to the Company's stockholders (the "Mailing
Date"), Purchaser will provide to the Company a list of the employees whom it
intends to continue to employ, and a summary of the material terms of such
employment, which terms shall not be less favorable than such employee's current
employment terms. At any time after receipt of the list, the Company may
terminate any employees whose names are not on such list and shall pay any
severance to such employees to which they may be entitled under the terms of any
employment contract, termination agreement or policies in existence as of
October 31, 2001 or as described in Section 7.06 of the Disclosure Schedule.
Nothing contained in this Section 7.06 shall change the nature of the "at will"
employment relationship that exists between the Company, the Subsidiaries, and
their employees. After the Effective Date, Purchaser will cause the Company to
maintain welfare benefit plans with benefits no less favorable to the persons
covered thereby than the Company's existing welfare benefit plans for such
period of time as is necessary for the Company to fulfill its obligations under
the Company's existing contracts and policies. The previous sentence may not be
amended or waived without the consent of the persons for whom the Company is
obligated to provide coverage.
7.07. Directors' and Officers' Indemnification and Insurance.
(a) With respect to indemnification provisions, the Certificate of
Incorporation of the Company shall not be amended, repealed or otherwise
modified in any manner that would materially adversely affect the rights of
individuals who, at or prior to the Effective Time, were directors, officers,
employees, fiduciaries or agents of the Company, under which such individuals
shall be indemnified by the Company and Purchaser to the fullest extent
permitted under the law, unless such modification shall be required by law.
(b) Purchaser shall obtain and maintain directors' and officers'
("D&O") insurance that serves to reimburse persons currently covered by the
Company's indemnification in full force and effect for the continued benefit of
such persons for a continuous period of not less than two years from the
Effective Time.
(c) In the event the Company or Purchaser or any of their successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case, proper provision shall be made so
that the successors and assigns of the Company or Purchaser, as the case may be,
or at its option, Purchaser shall assume the obligations set forth in this
Section 7.07.
(d) Purchaser hereby guarantees the indemnification obligations of
the Company to its officers and directors arising under the Company's Bylaws or
Oklahoma Law.
(e) Notwithstanding anything to the contrary in this Agreement, the
provisions of this Section 7.07 shall survive the consummation of the Merger,
and the provisions of Section 7.07(d) shall continue whether or not the
Transactions are consummated.
(f) The parties acknowledge that the provisions of this Section 7.07
are in addition to and not in lieu of the indemnification obligations of the
Company set forth in the agreements listed in Section 4.23 of the Disclosure
Schedule.
7.08. Notification of Certain Matters. The Company shall give prompt
notice to Purchaser, and Purchaser shall give prompt notice to the Company, of
(a) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which reasonably could be expected to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect, (b) any failure of the Company or Purchaser,
as the case may be, to comply with or satisfy any covenant or agreement to be
complied with or satisfied by it hereunder, and (c) any other material adverse
development (other than changes in general economic conditions or changes in oil
or natural gas prices) relating to the business, prospects, financial condition
or results of operations of the Company and the Subsidiaries; provided, however,
that the delivery of any notice pursuant to this Section 7.08 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.09. Further Action; Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Transactions, including, without limitation,
using its reasonable best efforts to obtain all Permits, consents, approvals,
authorizations, qualifications and orders of Governmental Authorities and
parties to contracts with the Company and the Subsidiaries as are necessary for
the consummation of the Transactions and to fulfill the conditions to the
Merger; provided that Purchaser will not be required by this Section 7.09 to
take any action, including entering into any consent decree, hold separate
orders or other arrangements, that (a) requires the divestiture of any assets of
any of Purchaser the Company or any of their respective subsidiaries or (b)
limits Purchaser's ability to operate, the Company and the Subsidiaries or any
portion thereof or any of Purchaser's or its affiliates' other assets or
businesses in a manner consistent with past practice. In case, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement, the proper officers and directors of each party
to this Agreement shall use their reasonable best efforts to take all such
action.
(b) Each of the parties hereto agrees to cooperate and use its
reasonable best efforts to vigorously contest and resist any Action, including
administrative or judicial Action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and that restricts, prevents or
prohibits consummation of the Transactions, including, without limitation, by
vigorously pursuing all available avenues of administrative and judicial appeal.
(c) To the extent necessary to fund the on-going obligations of the
Company between the date of this Agreement and the consummation of the
Transactions, Purchaser will, at its sole discretion and judgement, make
available loans to the Company. The loans provided to the Company shall be
secured by a second mortgage against all of the oil and gas assets and
properties of the Company and will be documented in the form of Notes Payable as
provided in Exhibit "C" attached hereto. As an inducement to the Purchaser to
make such loans and in the event that this Agreement is terminated prior to
consummation of the Transactions contemplated herein, at the time the Agreement
is terminated, Purchaser shall receive restricted common stock of the Company in
an amount equal to the amount of the loans plus accrued interest thereon. The
number of shares so issued to Purchaser shall be the amount of the loan plus
accrued interest at 9% per annum divided by $0.02 per share. The issuance of the
shares provided herein shall be deemed payment for the loans.
7.10 Public Announcements. Purchaser and the Company agree that no public
release or announcement concerning the Transactions or the Merger shall be
issued by either party without the prior consent of the other party (which
consent shall not be unreasonably withheld), except as such release or
announcement may be required by Law or the rules or regulations of any United
States securities exchange or national market, in which case the party required
to make the release or announcement shall use its best efforts to allow the
other party reasonable time to comment on such release or announcement in
advance of such issuance.
7.11. Confidentiality Agreement. Upon the Effective Time, the
Confidentiality Agreement shall be deemed to have terminated without further
action by the parties thereto.
7.12 Disclosure Schedules. At any time on or before the thirtieth (30th)
day following the date hereof, the Company may add, complete, supplement or
substitute any Disclosure Schedule by delivery of the same to Purchaser, and
Purchaser shall have five (5) business days following the receipt of any such
updated Disclosure Schedule to review the same. If the disclosures in such
Disclosure Schedule, when considered with any other updated Disclosure Schedule,
would result in a Material Adverse Effect, then Purchaser may terminate this
Agreement upon written notice to the Company within such five-day business
period.
ARTICLE VIII
CONDITIONS TO THE MERGER
8.01. Conditions to the Merger. The obligations of each party to effect
the Merger shall be subject to the satisfaction, at or prior to the Effective
Time, of the following conditions:
(a) Stockholder Approval. If and to the extent required by
Oklahoma Law, this Agreement and the Transactions shall have been approved and
adopted by the affirmative vote of the stockholders of the Company;
(b) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Law (whether temporary, preliminary or
permanent) which is then in effect and has the effect of making the acquisition
of Company Shares by Purchaser or any affiliate of either of them illegal or
otherwise restricting, preventing or prohibiting consummation of the
Transactions; and
(c) Fairness Opinion. If the Company elects to obtain a Fairness
Opinion in accordance with Section 3.09, such opinion must be obtained within
thirty (30) days of the date of this Agreement.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.01. Termination. This Agreement may be terminated and the Merger and
the other Transactions may be abandoned at any time prior to the Effective Time,
notwithstanding any requisite approval and adoption of this Agreement and the
Transactions by the stockholders of the Company:
(a) by mutual written consent of each of Purchaser and the Company
duly authorized by the Boards of Directors of Purchaser and the Company; or
(b) by either Purchaser or the Company if (i) the Effective Time
shall not have occurred on or before June 30, 2002; provided, however, that the
right to terminate this Agreement under this Section 9.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date or (ii) any Governmental Authority shall
have enacted, issued, promulgated, enforced or entered any injunction, order,
decree or ruling which has become final and non-appealable and has the effect of
making consummation of the Merger illegal or otherwise preventing or prohibiting
consummation of the Merger; or
(c) by Purchaser if (i) due to an occurrence or circumstance that
would result in a failure to satisfy any condition set forth in Annex A hereto,
Purchaser shall have (a) failed to file the Registration Statement within 60
days following the date of this Agreement, (b) terminated the registration or
(c) failed to have the Registration Statement declared effective by the SEC
within 120 days following the date hereof (provided, however, that the
applicable time period specified in (a) and (c) above shall be extended until
June 30, 2002), unless such action or inaction under (a), (b) or (c) shall have
been caused by or resulted from the failure of Purchaser to perform, in any
material respect, any of their covenants or agreements contained in this
Agreement, or the material breach by Purchaser of any of its representations or
warranties contained in this Agreement; (ii) prior to the Mailing Date, the
Board or any committee thereof shall have withdrawn, modified or failed to make
in a manner adverse to Purchaser its approval or recommendation of this
Agreement or the Merger, or shall have recommended or approved any Acquisition
Proposal, or shall have resolved to do any of the foregoing; or (iii) Purchaser
exercises its termination right set forth in Section 7.12; or
(d) by the Company, upon approval of the Board, if (i) Purchaser
shall have (x) failed to file the Registration Statement within sixty (60) days
following the date of this Agreement, or (y) terminated the registration, unless
such action or inaction under (x) or (y) shall have been caused by or resulted
from the failure of the Company to perform, in any material respect, any of its
material covenants or agreements contained in this Agreement or the material
breach by the Company of any of its material representations or warranties
contained in this Agreement, (ii) the Registration Statement shall not have been
declared effective June 30, 2002 (but subject to the occurrence of a Suspension
Event), unless such failure of such effectiveness to occur shall have been
caused by or resulted from the failure of the Company to perform, in any
material respect, any of its material covenants or agreements contained in this
Agreement or the material breach by the Company of any of its material
representations or warranties contained in this Agreement, (iii) Purchaser shall
have committed a material breach of this Agreement, or (iv) prior to the Mailing
Date, the Board determines in good faith that it is required to do so by its
fiduciary duties under applicable law after having received advice from outside
legal counsel in order to enter into a definitive agreement with respect to a
Superior Proposal, upon two calendar days' prior written notice to Purchaser
setting forth in reasonable detail the identity of the person making, and the
final terms and conditions of, the Superior Proposal; provided, however, that
any termination of this Agreement pursuant to this Section 9.01(d)(iv) shall not
be effective until the Company has made full payment of all amounts provided
under Section 9.03; provided, however, that in each case, the time periods and
deadlines in subsection (c) and (d) of this Section 9.01 may be extended, at the
option of either party as reasonably necessitated by the occurrence of a
Suspension Event for such period of time as may be reasonably necessary (but not
to exceed five (5) business days) following the conclusion of a Suspension
Event, but in no event to exceed twenty (20) business days.
9.02. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 9.01, this Agreement shall forthwith become void,
and there shall be no liability on the part of any party hereto, except (a) as
set forth in Section 7.07(d) or (e), or Section 9.03 and (b) nothing herein
shall relieve any party from liability for any intentional breach hereof prior
to the date of such termination; provided, however, that the Confidentiality
Agreement shall survive any termination of this Agreement.
9.03. Fees.
(a) In the event this Agreement is terminated pursuant to Section
9.01(c)(ii) or 9.01(d)(iv), then, in any such event, the Company shall pay
Purchaser promptly (but in no event later than one business day after the first
of such events shall have occurred) a fee of $200,000 (the "Fee"), which amount
shall be payable in immediately available funds or in restricted common stock of
the Company valued at $0.02 per share.
(b) Except as set forth in this Section 9.03, all costs and expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such expenses, whether or not any Transaction is
consummated.
(c) In the event that the Company shall fail to pay the Fee it shall
also pay Purchaser interest on such unpaid Fee, commencing on the date that the
Fee became due, at a rate equal to the rate of interest publicly announced by
Citibank, N.A., from time to time, in the City of New York, as such bank's Base
Rate.
9.04. Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; provided, however, that, (a) Section 7.07 hereof
may not be amended without the consent of John R. Bailey and Luther Henderson,
and (b) after the approval and adoption of this Agreement and the Transactions
by the stockholders of the Company, no amendment may be made that would reduce
the amount or change the type of consideration into which each Share shall be
converted upon consummation of the Merger. This Agreement may not be amended
except by an instrument in writing signed by each of the parties hereto.
9.05. Waiver. At any time prior to the Effective Time, any party hereto
may (a) extend the time for the performance of any obligation or other act of
any other party hereto, (b) waive any inaccuracy in the representations and
warranties of any other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any agreement of any other party
or any condition to its own obligations contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby.
ARTICLE X
GENERAL PROVISIONS
10.01. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by overnight
courier or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 10.01):
if to Purchaser:
Imperial Petroleum, Inc.
11600 German Pines Dr.
Evansville, IN 47725
Attention: Jeffrey T. Wilson, President
if to the Company:
Warrior Resources, Inc.
4925 Greenville Avenue
Suite 1301
Dallas, Texas 75206
Attention: John Bailey, Vice Chairman
10.02. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the Transactions is not affected in any manner materially adverse to any party.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
Transactions be consummated as originally contemplated to the fullest extent
possible.
10.03. Entire Agreement; Assignment. This Agreement supercedes the letter
of intent dated January 16, 2002 between Purchaser and the Company and
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes, except as set forth in Sections 7.04(b) and 7.11,
all prior agreements and undertakings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof. This Agreement shall
not be assigned (whether pursuant to a merger, by operation of law or
otherwise), except that Purchaser may assign all or any of their rights and
obligations hereunder to any affiliate of Purchaser, provided that no such
assignment shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations.
10.04. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Sections 7.06 and 7.07 (which are intended to be for the
benefit of the persons identified therein and may be enforced by such persons).
10.05. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
10.06. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Nevada applicable to contracts
executed in and to be performed in that State. All actions and proceedings
arising out of or relating to this Agreement shall be heard and determined
exclusively in any Texas state or federal court sitting in Dallas County, Texas.
The parties hereto hereby (a) submit to the exclusive jurisdiction of any state
or federal court sitting in the Dallas County, Texas for the purpose of any
Action arising out of or relating to this Agreement brought by any party hereto,
and (b) irrevocably waive, and agree not to assert by way of motion, defense, or
otherwise, in any such Action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that the Action is brought in an
inconvenient forum, that the venue of the Action is improper, or that this
Agreement or the Transactions may not be enforced in or by any of the above-
named courts.
10.07. Waiver of Jury Trial. Each of the parties hereto hereby waives to
the fullest extent permitted by applicable law any right it may have to a trial
by jury with respect to any litigation directly or indirectly arising out of,
under or in connection with this Agreement or the Transactions.
10.08. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
10.09. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
[signature page follows]
IN WITNESS WHEREOF, Purchaser and the Company have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
IMPERIAL PETROLEUM, INC.
By:
--------------------------------
Jeffrey T. Wilson, President
WARRIOR RESOURCES, INC.
By:
-------------------------------
John Bailey, Vice Chairman
Annex A
Conditions to the Merger
Notwithstanding any other provision of the Merger, Purchaser shall not be
required to consummate the Merger, if at any time on or after the date of this
Agreement and prior to the Effective Time, any of the following conditions shall
exist:
(a) the Company is unable or unwilling to provide audited financial
information as of August 31, 2001 and for any interim periods required for
inclusion in the Registration Statement to be filed by Purchaser to register the
shares to be exchanged as part of this Agreement;
(b) the Purchaser is unable, after due effort and diligence, to obtain a
declaration from the SEC that the Registration Statement to be filed by
Purchaser is effective;
(c) there shall have been instituted or be pending any Action by any
Governmental Authority (i) challenging or seeking to make illegal, delay, or
otherwise, directly or indirectly, restrain or prohibit or make materially more
costly, the consummation of the Merger or any other Transaction, or seeking to
obtain damages in connection with any Transaction; (ii) seeking to prohibit or
limit the ownership or operation by the Company, Purchaser or any of their
subsidiaries of all or any of the business or assets of the Company, Purchaser
or any of their subsidiaries or to compel the Company, Purchaser or any of their
subsidiaries, as a result of the Transactions, to dispose of or to hold separate
all or any portion of the business or assets of the Company, Purchaser or any of
their subsidiaries; (iii) seeking to impose or confirm any limitation on the
ability of Purchaser or any other affiliate of Purchaser to exercise effectively
full rights of ownership of any Company Shares; (iv) seeking to require
divestiture by Purchaser or any other affiliate of Purchaser of any Company
Shares; or (v) that otherwise is likely to materially and adversely affect
Purchaser or have a Material Adverse Effect;
(d) any Governmental Authority or court of competent jurisdiction shall
have issued an order, decree, injunction or ruling or taken any other action (i)
permanently restraining, enjoining or otherwise prohibiting or preventing the
Transactions and such order, decree, injunction, ruling or other action shall
have become final and non-appealable, or (ii) that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in clause
(i) through (v) of paragraph (a) above;
(e) there shall have been any statute, rule, regulation, legislation or
interpretation enacted, promulgated, amended, issued or deemed applicable to (i)
Purchaser, the Company or any subsidiary or affiliate of Purchaser or the
Company or (ii) any Transaction, by any United States legislative body or
Governmental Authority with appropriate jurisdiction, that is reasonably likely
to result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of paragraph (a) above;
(f) (i) the Board, or any committee thereof, shall have withdrawn or
modified, in a manner adverse to Purchaser, the approval or recommendation of
the Merger, the Agreement, or approved or recommended any Acquisition Proposal
or any other acquisition of Company Shares other than the Merger or (ii) the
Board, or any committee thereof, shall have resolved to do any of the foregoing;
(g) (i) any representation or warranty of the Company in the Agreement that
is qualified as to Material Adverse Effect shall not be true and correct as so
qualified or (ii) any representation or warranty that is not so qualified shall
not be true and correct (except where the failure to be true and correct would
not have a Material Adverse Effect), in each case as if such representation or
warranty was made as of such time on or after the date of this Agreement (except
as to any representation or warranty made as of a specified date);
(h) the Company shall have failed to perform, in any material respect, any
obligation or to comply, in any material respect, with any agreement or covenant
of the Company to be performed or complied with by it under the Agreement; or
(i) the Company shall have failed to deliver to Purchaser evidence
reasonably satisfactory to Purchaser that, upon the Effective Time, any
outstanding options or warrants to acquire shares of the Company will either (a)
have been exercised or terminated, or (b) will automatically convert into the
right to acquire Purchaser Shares in accordance with the terms of such security.
(j) the Agreement shall have been terminated in accordance with its terms.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to any such
condition or may be waived by Purchaser, in whole or in part at any time and
from time to time in their sole discretion. The failure by Purchaser at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT ("this Agreement") is entered into this 13th day of
February 2002 by and between IMPERIAL PETROLEUM, INC., a Nevada corporation
("Imperial"); JOHN R. BAILEY, an individual ("Bailey"); and LUTHER HENDERSON, an
individual ("Henderson"). Bailey and Henderson are referred herein collectively
as the "Warrior Stockholders."
WHEREAS, Imperial and Warrior Resources, Inc., an Oklahoma corporation
("Warrior") formerly known as Comanche Energy, Inc., have signed a Memorandum of
Understanding dated January 11, 2002 in relation to the acquisition of Warrior
by Imperial through a registered tender offer pursuant to Section 14(d)1 of the
Securities Act of 1934; and
WHEREAS, as a condition to the Tender Offer, Imperial has required that
Bailey and Henderson (a) execute this Agreement, (b) resign as officers and
directors of Warrior, and (c) appoint Imperial's nominees as directors of
Imperial; and
WHEREAS, as a condition to Bailey's and Henderson's execution of this
Agreement and resignation as directors Warrior, Bailey and Henderson have
required Imperial (a) to agree to make the loans contemplated by the Note (as
defined herein), and (b) to offer to purchase all other shares of Warrior on the
same terms as the exchange contemplated hereby; and
WHEREAS, in connection with the proposed Tender Offer, Bailey, Henderson,
and Imperial deem it advisable and in the best interests of Warrior and Imperial
to enter into this Agreement to facilitate the acquisition of Warrior and a
timely transition of management; and
WHEREAS, Bailey and Henderson are each Accredited Investors as that term is
defined by the Securities Act of 1933 as amended; and
WHEREAS, the Board of Directors of Imperial deems it advisable and in the
best interests of Imperial to approve the transactions contemplated herein;
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements, provisions and covenants herein contained, the parties hereto agree
as follows.
1.01 Exchange. Subject to the terms and conditions herein set forth, at the
time of closing set forth in Section 1.02 hereof, Imperial hereby agrees to
issue or cause to be issued and deliver at closing a total of 2,948,457 shares
(par value $0.006) of the restricted common stock of Imperial as follows:
(a) 682,000 shares shall be issued to Bailey in exchange for the
assignment of 6,820,000 shares of the common stock of Warrior to Imperial
and the cancellation of 1,000,000 shares to be issued under that certain
Option Agreement on behalf of Bailey.
(b) 2,266,457 shares shall be issued to Henderson in exchange for the
assignment of 22,664,572 shares of the common stock of Warrior to Imperial.
(c) Bailey and Henderson shall have "demand registration rights" and
"piggyback registration rights" with respect to the shares to be received
hereunder, in accordance with the terms of the Registration Rights
Agreement attached hereto as Exhibit "A" (the "Registration Rights
Agreement").
(d) In connection with the exchange of shares as herein contemplated
and as a further inducement to Bailey and Henderson to complete the
transactions herein contemplated, Imperial shall provide certain loans to
Warrior to assist Warrior in meeting its financial obligations during the
course of completing the Tender Offer based upon the schedule attached
hereto as Exhibit "B." Bailey and Henderson shall cause Warrior to execute
a Promissory Note for the total loans provided by Imperial in the form as
attached hereto as Exhibit "C." In the event that Imperial does not provide
the loan funds to Warrior as indicated on Exhibit "B," within 10 business
days of the indicated schedule, Bailey and Henderson shall each be issued
Additional Compensation Shares in the form of Imperial restricted common
stock equal to the number of shares shown on the attached Exhibit "D." The
Additional Compensation Shares shall be reduced by the proportionate amount
of the loans advanced by Imperial at the expiration of 10 business days
after each due date and the amount of the indebtedness discharged or
reduced by Imperial or Warrior through other means. The total number of
Additional Compensation Shares that Imperial may be required to issue to
Bailey and Henderson combined shall not exceed 1,540,000.
(e) Promptly following the execution of this Agreement, Bailey and
Henderson shall resign as officers and directors of Warrior and shall use
their reasonable best efforts to appoint Imperial's nominees as directors
of Warrior.
1.02 Closing. Subject to the terms and provisions of this Agreement, the
closing of the exchange transaction will be at 10:00 a.m. at the offices of
Imperial Petroleum, Inc., 11600 German Pines Drive, Evansville, IN 47725 on or
before February 12, 2002, or at such earlier or later date or such other place
as shall be mutually agreed upon by Imperial and Bailey and Henderson, such date
and time sometimes being referred to herein as the "Closing" or "Closing Date."
2. Representations and Warranties of the Warrior Stockholders.
Each of the Warrior Stockholders severally, and not jointly, represents and
warrants to Imperial that, with respect to the Warrior shares owned by such
Warrior Stockholder as set forth on Exhibit "E" attached hereto, the statements
contained in this Section 2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date as though made
then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 2.
2.01 Authorization. The Warrior Stockholder has full power and authority to
execute and deliver this Agreement and to perform his obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Warrior Stockholder, enforceable in accordance with its terms and conditions.
The Warrior Stockholder need not give any notice to, make any filing with, or
obtain any authorization, consent or approval of any government, governmental
agency, or other person in order to consummate the transactions contemplated by
this Agreement.
2.02 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which the Warrior Stockholder is subject, or conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, security interest, or other arrangement to which the
Warrior Stockholder is a party or by which he is bound or to which any of his
assets are subject.
2.03 Ownership. The Warrior Stockholder holds of record or owns
beneficially the number of Warrior Shares set forth opposite his name as set
forth on Exhibit "E" attached hereto. The Warrior Stockholder holds his Warrior
Shares free and clear of any restrictions on transfer (other than restrictions
under federal and state securities laws), claims, taxes, security interests,
options, warrants, rights, contracts, calls, commitments, equities and demands.
Except for shares covered by those certain Option Agreements and those certain
Put Agreements as indicated on the attached Exhibit "E", the Warrior Stockholder
is not a party to any option, warrant, contract, call, put or other agreement or
commitment providing for the disposition or acquisition of any capital stock of
Warrior (other than this Agreement). The Warrior Stockholder is not a party to
any voting trust, proxy or other agreement or understanding with respect to the
voting of any capital stock of Warrior.
2.04 Speculative Nature and Risk. The Warrior Stockholders each understand
and acknowledge the speculative nature of and substantial risk of loss
associated with an investment in the Imperial Shares which may be subject to
substantial dilution. The Warrior Stockholders each represent and warrant that
the Imperial Shares constitute an investment which is suitable and consistent
with their respective financial conditions and that they are each able to bear
the risks of this investment for an indefinite period of time, which may include
the total loss of their investment in Imperial. The Warrior Stockholders each
further represent that they have adequate means of providing for their
respective current financial needs and corporate and personal contingencies and
no need for liquidity in their investment in Warrior and that they each have
sufficient financial and business experience to evaluate the merits and risks of
an investment in Warrior.
2.05 Federal or State Securities Laws. The Warrior Stockholders each
understand and acknowledge that the Imperial Shares have not been, and will not
be, registered under the Securities Act of 1933, as amended (the "1933 Act"), or
applicable state securities laws, and the Warrior Stockholders are each aware
that no federal or state agency has made any review, finding or determination
regarding the terms of their acquisition of the Imperial Shares nor any
recommendation or endorsement of the Imperial Shares as an investment, and the
Warrior Stockholders must each forego the security, if any, that such a review
would provide.
2.06 Acquisition for Own Account. The Warrior Stockholders each understand
and acknowledge that the Imperial Shares are being offered and sold under
exemptions from registration provided by the 1933 Act and exemptions provided by
applicable state securities laws and the Warrior Stockholders each warrant and
represent that the Imperial Shares are being acquired by them solely for their
own account, for investment purposes only, and not with a view to or for the
resale, distribution, subdivision or fractionalization thereof. The Warrior
Stockholders each represent and warrant that they have no agreement or other
arrangement, formal or informal, with any person to sell, transfer or pledge any
part of the Imperial Shares or which would guarantee them any profit or protect
them against any loss with respect to the Imperial Shares. Further, the Warrior
Stockholders have no plans to enter into any such agreement or arrangement, and,
consequently, they must each bear the economic risk of an investment in the
Imperial Shares for an indefinite period of time.
2.07 Limitations on Resale or Transfer. The Warrior Stockholders each
understand and acknowledge that the Imperial Shares will be "restricted" as
defined in Rule 144 under the 1933 Act and that therefore they cannot offer to
sell or otherwise transfer or distribute the Imperial Shares without
registration thereof, under both the 1933 Act and any applicable state
securities laws, or unless an exemption is, in the opinion of Imperial's
counsel, available to them under the 1933 Act and any applicable state
securities laws. Such exemption is not now available and it is not anticipated
that any such exemption will become available in the future. The Warrior
Stockholders each further understand and acknowledge that the restrictions on
the transfer of the Imperial Shares will be noted on the books of Imperial and
that the stock certificate representing the Imperial Shares will bear a written
legend setting forth the restriction on the transferability of the Imperial
Shares in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION OF THEM UNDER THE SECURITIES ACT OF
1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT.
2.08 Independent Investigation of Imperial. The Warrior Stockholders
confirm that they have received, reviewed, understand and have fully considered
(including, without limitation, the financial statements contained therein) for
purposes of their acquisition of the Imperial Shares, the business prospects and
leases of Imperial. The Warrior Stockholders acknowledge that (i) Imperial has
limited financial resources and will need additional sources of capital to
implement its current business plan, the availability of which is uncertain and
cannot be assured, and (ii) the Imperial Shares are a highly speculative
investment with a high degree of risk of loss by the Warrior Stockholders of
their investment therein. The Warrior Stockholders represent and warrant that in
making the decision to acquire the Imperial Shares, they have relied upon their
own independent investigation of Imperial and the independent investigations by
their representatives, including their own professional legal, tax and business
advisors, and that the Warrior Stockholders and their representatives have been
given the opportunity to examine all relevant documents and to ask questions of
and to receive answers from Imperial, or person(s) acting on its behalf,
concerning the terms and conditions of acquisition by the Warrior Stockholders
of the Imperial Shares and any other matters concerning an investment in
Imperial, and to obtain any additional information the Warrior Stockholders deem
necessary to verify the accuracy of the information provided.
2.09 Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. Representations and Warranties of Imperial
Imperial represents and warrants to the Warrior Stockholders that the
statements contained in this Section 3 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date.
3.01 Organization, Qualification and Corporate Power. Imperial is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. Imperial is duly authorized to conduct business and is
in good standing under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires such
qualification. Imperial has full corporate power and authority to carry on the
business in which it is engaged and to own and use the properties owned and used
by it. Imperial has made available for inspection by the Warrior Stockholders
correct and complete copies of the Certificate of Incorporation and Bylaws of
Imperial (as amended to date). The minute books containing the records of
meetings of the stockholders, the Board of Directors and any committees of the
Board of Directors, the stock certificate books and the stock record books of
Imperial are correct and complete. Imperial is not in default under or in
violation of any provision of its Certificate of Incorporation or Bylaws.
3.02 Capitalization. The entire authorized capital stock of Imperial
consists of (i) 50,000,000 shares of common stock, par value $0.006 per share,
of which 14,647,498 shares are issued and outstanding and 116,667 shares are
held in treasury. All of the issued and outstanding shares have been duly
authorized, are validly issued, fully paid, and non-assessable and are held of
record by the respective Imperial shareholders as set forth in Imperial's stock
record books. There are no outstanding or authorized options, warrants, rights,
contracts, calls, puts, rights to subscribe, conversion rights or other
agreements or commitments to which Imperial is a party or which are binding upon
Imperial providing for the issuance, disposition or acquisition of any of its
capital stock, except as disclosed in the Company's filings with the SEC and its
most recent annual and quarterly reports. There are no outstanding or authorized
stock appreciation, phantom stock or similar rights with respect to Imperial.
There are no voting trusts, proxies or any other agreements or understandings
with respect to the voting of the capital stock of Imperial. Upon issuance, the
Imperial Shares to be issued to the Warrior Stockholders pursuant to this
Agreement will be duly authorized, validly issued, fully paid and
non-assessable.
3.03 Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which the Imperial is subject or any provision of its Certificate of
Incorporation or Bylaws of Imperial or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which Imperial is a
party or by which it is bound or to which any of its assets is subject or result
in the imposition of any security interest upon any of its assets. Imperial is
not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government, governmental agency or
other person in order for Imperial to consummate the transactions contemplated
by this Agreement.
3.04 Common Stock Trading Market. The common stock of Imperial is eligible
for quotation and is quoted on the National Association of Securities Dealers
("NASD") OTC Bulletin Board in accordance with the applicable rules of the NASD
and Securities and Exchange Commission ("SEC") and is in compliance with
applicable NASD and SEC rules for continuing quotation on the NASD Bulletin
Board. There are a number of broker-dealers which are market-makers in the
common stock of Imperial and a complete list is available at the web site for
the OTC Bulletin Board ("Market-Makers"). Imperial has furnished each
Market-Maker and each other broker-dealer effecting transactions in the
Company's common stock with all information required by SEC Rule 15c2-11 as
required. Imperial, its officers, directors and affiliates have fully complied
with any and all requests for information by the Market-Makers and all other
broker-dealers, whether or not acting in the capacity of a market-maker,
pursuant to SEC Rule 15c2-11. Any and all information provided by Imperial to
the Market-Makers and all other broker-dealers, whether or not acting in the
capacity of a market-maker, was, at the time if was furnished, accurate in all
material respects.
3.05 Speculative Nature and Risk. Imperial understands and acknowledges the
speculative nature of and substantial risk of loss associated with an investment
in the Warrior Shares which may be subject to substantial dilution. Imperial
represents and warrants that the Warrior Shares constitute an investment which
is suitable and consistent with its financial conditions and that it is able to
bear the risks of this investment for an indefinite period of time, which may
include the total loss of its investment in Warrior. Imperial further represents
that it has adequate means of providing for its respective current financial
needs and corporate and personal contingencies and no need for liquidity in its
investment in Warrior and that it has sufficient financial and business
experience to evaluate the merits and risks of an investment in Warrior.
3.06 Federal or State Securities Laws. Imperial understands and
acknowledges that the Warrior Shares have not been, and will not be, registered
under the 1933 Act, or applicable state securities laws and Imperial is aware
that no federal or state agency has made any review, finding or determination
regarding the terms of their acquisition of the Warrior Shares nor any
recommendation or endorsement of the Warrior Shares as an investment, and
Imperial must forego the security, if any, that such a review would provide.
3.07 Acquisition for Own Account. Imperial understands and acknowledges
that the Warrior Shares are being offered and sold under exemptions from
registration provided by the 1933 Act and exemptions provided by applicable
state securities laws and Imperial warrants and represents that the Warrior
Shares are being acquired by it solely for its own account, for investment
purposes only, and not with a view to or for the resale, distribution,
subdivision or fractionalization thereof. Imperial represents and warrants that
it has no agreement or other arrangement, formal or informal, with any person to
sell, transfer or pledge any part of the Warrior Shares or which would guarantee
them any profit or protect them against any loss with respect to the Warrior
Shares. Further, Imperial has no plans to enter into any such agreement or
arrangement, and, consequently, it must bear the economic risk of an investment
in the Warrior Shares for an indefinite period of time.
3.08 Limitations on Resale or Transfer. Imperial understands and
acknowledges that the Warrior Shares will be "restricted" as defined in Rule 144
under the 1933 Act and that therefore it cannot offer to sell or otherwise
transfer or distribute the Warrior Shares without registration thereof, which
Warrior is not obligated to do, under both the 1933 Act and any applicable state
securities laws, or unless an exemption is, in the opinion of Warrior's counsel,
available to them under the 1933 Act and any applicable state securities laws.
Such exemption is not now available and it is not anticipated that any such
exemption will become available in the future. Imperial further understands and
acknowledges that the restrictions on the transfer of the Warrior Shares will be
noted on the books of Warrior and that the stock certificate representing the
Warrior Shares will bear a written legend setting forth the restriction on the
transferability of the Warrior Shares in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION OF THEM UNDER THE SECURITIES ACT OF
1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT.
3.09 Independent Investigation of Warrior. Imperial confirms that it has
received, reviewed, understands and has fully considered (including, without
limitation, the financial statements contained therein) for purposes of its
acquisition of the Warrior Shares, the business prospects and leases of Warrior.
Imperial acknowledges that (i) Warrior has limited financial resources and will
need additional sources of capital to implement its current business plan, the
availability of which is uncertain and cannot be assured, and (ii) the Warrior
Shares are a highly speculative investment with a high degree of risk of loss by
Imperial of its investment therein. Imperial represents and warrants that in
making the decision to acquire the Warrior Shares, it has relied upon its own
independent investigation of Warrior and the independent investigations by its
representatives, including its own professional legal, tax and business
advisors, and that Imperial and its representatives have been given the
opportunity to examine all relevant documents and to ask questions of and to
receive answers from Warrior, or person(s) acting on its behalf, concerning the
terms and conditions of acquisition by Imperial of the Warrior Shares and any
other matters concerning an investment in Warrior, and to obtain any additional
information Imperial deems necessary to verify the accuracy of the information
provided.
3.10 Disclosure. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 3 not misleading.
4. Survival.
All of the representations and warranties of the parties contained in this
Agreement shall expire at the Closing Date.
5. Consents.
Prior to Closing, the Warrior Stockholders and Imperial shall each use his
or its respective reasonable efforts to obtain the consent or approval of each
person whose consent or approval shall be required in order to permit the
Warrior Stockholders or Imperial, as the case may be, to consummate the
transaction.
6. Conditions to Closing.
6.01 General Conditions. The obligations of the parties to effect the
Closing shall be subject to the following conditions:
(a) The Board of Directors of Imperial shall have approved this
Agreement in accordance with applicable provisions of state law.
(b) No action, suit or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, filing or charge
would (i) prevent consummation of any of the transactions contemplated by
this Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (iii) affect adversely
the right of Imperial to acquire and own the Warrior Shares, (iv) affect
adversely the right of the Warrior Stockholders to acquire and own the
Imperial Shares; or (v) affect adversely the right of either Imperial or
Warrior to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling or charge shall be in effect).
(c) All governmental approvals, the absence of which would have a
materially adverse effect on Imperial or Warrior, respectively, on a
consolidated basis, after the Closing Date, shall have been received.
6.02 Conditions of Obligations of Imperial. The obligation of Imperial to
proceed with the Closing on the Closing Date shall at all times be subject to
the following conditions precedent, any of which may be waived by Imperial in
writing:
(a) (i) The representations and warranties of the Warrior Stockholders
contained herein shall be true and correct in all material respects at the
Closing Date with the same effect as though made at such time, and (ii) the
Warrior Stockholders shall have each performed all material obligations and
complied with all material covenants required by this Agreement to be
performed or complied with by him or it prior to the Closing Date.
(b) The Warrior Stockholders shall have each obtained and delivered to
Imperial any consents to the transactions contemplated by this Agreement
from the parties to all material contracts which require such consent.
(c) There shall not have occurred (i) any material adverse change,
since the most recent Warrior fiscal year end, in the business, properties,
results of operations or financial condition of Warrior, or (ii) any loss
or damage to any of the properties or assets (whether or not covered by
insurance) of Warrior which will materially affect or impair the ability of
Warrior to conduct the business now being conducted by Warrior.
(d) All statutory requirements for the valid consummation by the
Warrior Stockholders of the transactions contemplated by this Agreement
shall have been fulfilled and all authorizations, consents and approvals of
all federal, state or local governmental agencies and authorities required
to be obtained in order to permit consummation by the Warrior Stockholders
of the transactions contemplated by this Agreement and to permit the
business presently carried on by Warrior to continue unimpaired to any
material degree immediately following the Closing Date shall have been
obtained. Between the date of this Agreement and the Closing Date, no
governmental agency, whether federal, state or local, shall have instituted
(or threatened to institute in a writing directed to the Warrior
Stockholders, Warrior, Imperial or any of their subsidiaries or affiliates)
an investigation which is pending at the Closing Date relating to the
Closing and between the date of this Agreement and the Closing Date no
action or proceeding shall have been instituted or, to the knowledge of the
Warrior Stockholders, shall have been threatened by any party (public or
private) before a court or other governmental body to restrain or prohibit
the transactions contemplated by this Agreement or to obtain damages in
respect thereof.
(e) The Warrior Stockholders shall have each acknowledged to Imperial
in writing (i) that the shares of Imperial common stock to be issued to
them pursuant to the Closing will be issued without registration under the
1933 Act, or the securities laws of any state in reliance upon available
exemptions from the registration requirements thereof; (ii) that all such
shares of Imperial common stock will be subject to restrictions on
transferability and may not be offered for sale, sold or otherwise
transferred unless subsequently registered under the 1933 Act and all other
applicable securities laws or unless exemptions from the registration
requirements of the 1933 Act and all other applicable securities laws are
available, as established to the satisfaction of Imperial, and (iii) the
certificates evidencing such Imperial common stock will bear an appropriate
legend evidencing the above referenced restrictions on transferability.
(f) The Warrior Stockholders shall have furnished Imperial with a
certificate, dated the Closing Date, stating that the respective
representations and warranties of the Warrior Stockholders contained in
Section 2 are true and correct on the Closing Date in all material respects
as if then made.
(g) All papers, documents, agreements and other items required to be
delivered at Closing pursuant to Section 7.03 shall be delivered at
Closing.
6.03 Conditions of Obligation of the Warrior Stockholders. The obligation
of the Warrior Stockholders to proceed with the Closing on the Closing Date
shall at all times be subject to the following conditions precedent, any of
which may be waived by the Warrior Stockholders in writing:
(a) Imperial shall have furnished the Warrior Stockholders with (i)
certified copies of resolutions duly adopted by its Board of Directors
authorizing all necessary and proper corporate action to enable Imperial to
comply with terms of this Agreement and approving the execution, delivery
and performance of this Agreement, including the issuance of the Imperial
Shares, and (ii) an Incumbency Certificate for the appropriate officers of
Imperial.
(b) (i) the representations and warranties of Imperial herein shall be
true in all material respects at the Closing Date with the same effect as
though made at such time; and (ii) Imperial shall have performed all
material obligations and complied with all material covenants required by
this Agreement to be performed or complied with by it prior to the Closing
Date.
(c) Imperial shall have obtained and delivered to the Warrior
Stockholders any consents to the transactions contemplated by this
Agreement from the parties to all material contracts which require such
consent.
(d) There shall not have occurred (i) any material adverse change
since the most recent Imperial fiscal year end in the business, properties,
results of operations or financial condition of Imperial, or (ii) any loss
or damage to any of the properties or assets (whether or not covered by
insurance) of Imperial which will materially affect or impair the ability
of Imperial to conduct the business now being conducted by Imperial.
(e) All statutory requirements for the valid consummation by Imperial
of the transactions contemplated by this Agreement shall have been
fulfilled and all authorizations, consents and approvals of all federal,
state, local and foreign governmental agencies and authorities required to
be obtained in order to permit consummation by Imperial of the transactions
contemplated by this Agreement shall have been obtained. Between the date
of this Agreement and the Closing Date, no governmental agency, whether
federal, state or local, shall have instituted (or threatened to institute
in writing directed to the Warrior Stockholders, Warrior, Imperial or any
of their subsidiaries or affiliates) an investigation which is pending at
the Closing Date relating to the Closing and between the date of this
Agreement and the Closing Date no action or proceeding shall have been
instituted or, to the knowledge of Imperial shall have been threatened by
any party (public or private) before a court or other governmental body to
restrain or prohibit the transaction contemplated by this Agreement or to
obtain the damages in respect thereof..
(f) Imperial shall have furnished the Warrior Stockholders with a
certificate, dated the Closing Date, stating that the representations and
warranties of Imperial contained in Section 3 are true and correct on the
Closing Date in all material respects as if then made.
(g) All papers, documents, agreements and other items required to be
delivered at Closing pursuant to Section 7.02 shall have been delivered at
Closing.
7. Actions at Closing.
7.01 Actions at the Closing. At the Closing, Imperial and the Warrior
Stockholders will each deliver, or cause to be delivered to the other, the
securities to be exchanged in accordance with Section 1.01 of this Agreement,
and each party shall pay any and all federal and state taxes required to be paid
in connection with the issuance of delivery of their own securities.
Certificates representing the Imperial Shares shall be issued and delivered as
set forth on Exhibit "F" attached hereto. Certificates representing the Warrior
Shares shall be duly endorsed by each of the Warrior Stockholder for transfer to
Imperial or in blank, or have appropriately executed powers of attorney
attached, and signatures shall be witnessed.
7.02 Deliveries by Imperial. At Closing, Imperial will deliver to the
Warrior Stockholders:
(a) certificates for the Imperial Shares as provided by Section 7.01
hereof;
(b) the Registration Rights Agreement in the form attached as Exhibit
"A;" and
(c) certified copies of corporate resolutions and other corporate
proceedings taken by Imperial to authorize the execution, delivery and
performance of this Agreement;
7.03 Deliveries by the Warrior Stockholders. At Closing, the Warrior
Stockholders shall deliver to Imperial (a) certificates for the Warrior Shares
as provided by Section 7.01 hereof, and (b) the Note, executed on behalf of
Warrior.
8. Termination.
8.01 Termination of the Agreement. The parties may terminate this Agreement
as provided below:
(a) Imperial and the Warrior Stockholders may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(b) Either party may terminate this Agreement by giving written notice
to the other party on or before the Closing Date if either party is not
satisfied with the results of their continuing business, legal and
accounting due diligence regarding each other;
(c) The Warrior Stockholders may terminate this Agreement by giving
written notice to Imperial at any time prior to the Closing (i) in the
event Imperial has breached any representation, warranty or covenant
contained in this Agreement in any material respect, the Warrior
Stockholders has notified Imperial of the breach and the breach has
continued without cure for a period of 10 days after the notice of breach,
or (ii) if the Closing shall not have occurred on or before February 12,
2002, or such later date as may be agreed to in writing by the Warrior
Stockholders and Imperial, by reason of the failure of any condition
precedent under Section 6.01 or Section 6.03 hereof (unless the failure
results primarily from the Warrior Stockholders themselves breaching any
representation, warranty or covenant contained in this Agreement); and
(d) Imperial may terminate this Agreement by giving written notice to
the Warrior Stockholders at any time prior to the Closing (i) in the event
the Warrior Stockholders have breached any representation, warranty or
covenant contained in this Agreement in any material respect, Imperial has
notified Warrior and the Warrior Stockholders of the breach and the breach
has continued without cure for a period of 10 days after the notice of
breach or (ii) if the Closing shall not have occurred on or before February
12, 2002, or such later date as may be agreed to in writing by the Warrior
Stockholders and Imperial, by reason of the failure of any condition
precedent under Section 6.01 or Section 6.02 hereof (unless the failure
results primarily from Imperial itself breaching any representation,
warranty or covenant contained in this Agreement).
8.02 Effect of Termination. If either Warrior Stockholder or Imperial
terminates this Agreement pursuant to Section 8.01 above, all rights and
obligations of the parties hereunder shall terminate without any liability of
any party to any other party.
9. General.
9.01 Brokers and Finders. Each Party hereto represents that no broker,
agent, finder or other party has been retained by either Party, and no brokerage
or finder's fees or agent's commissions or other like payment has been agreed to
be paid by him or it in connection with this Agreement or on account of the
transactions contemplated by this Agreement. Each Party agrees to indemnify and
hold harmless the other parties from and against any and every claim arising by
breach of the aforesaid representation and warranty and all costs and expenses,
legal or otherwise, which any such party may incur as the result of any such
claim.
9.02 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other parties;
provided, however, that any Party may make any public disclosure it believes in
good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing Party
will use its reasonable efforts to advise the other Party prior to making the
disclosure.)
9.04 Survival of Covenants, Representations and Warranties. Except as
otherwise specifically provided, the covenants, representations and warranties
contained herein shall expire and be terminated and extinguished at the Closing
Date.
9.05 Governing Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Nevada.
9.06 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by registered mail or certified
mail, postage prepaid if addressed as follows:
If to Imperial:
Imperial Petroleum, Inc.
11600 German Pines Drive
Evansville, IN 47725
Attn: Mr. Jeffrey T. Wilson
President
If to the Warrior Stockholders:
Warrior Resources, Inc.
4925 Greenville Avenue, Suite 1301
Dallas, TX 75206
Attn: Mr. John R. Bailey
Vice Chairman
9.07 No Assignment. This Agreement may not be assigned by operation of law
or otherwise, without the express written consent of each party hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
IMPERIAL PETROLEUM, INC.
By:
---------------------------------------
Jeffrey T. Wilson, President
JOHN R. BAILEY, an individual
LUTHER HENDERSON, an individual
Exhibit "A"
Form of Registration Rights Agreement
[attached]
Exhibit "B"
Scheduled Date of Advance Scheduled Advance Amount ($)
2/20/02 150,000
3/15/02 150,000
3/15/02 25,000
3/15/02 62,000
3/15/02 25,000
3/15/02 13,000
3/15/02 90,000
3/15/02 6,000
3/15/02 8,000
3/15/02 9,000
3/15/02 42,000
4/1/02 72,000
4/1/02 25,000
* 68,000
* 15,000
* 500,000
* 740,000
* Advance to be made at closing of Tender Offer.
Exhibit "C"
Form of Note
[attached]
Exhibit "D"
Additional Compensation Shares
Scheduled Date Of Total # Of
Loan* Total Amount Of Loan Due Imperial Shares Due**
Henderson Bailey Combined
2/20/02 $150,000 88,875 26,625 115,500
3/15/02 430,000 254,781 76,319 331,100
4/1/02 97,000 57,474 17,216 74,690
Closing of Tender 1,240,000 783,897 234,813 1,018,710
Offer
Total 2,000,000 1,185,027 354,973 1,540,000
*Shares are not due and payable until 10 business days after schedule loan date,
if funds are not loaned as planned.
**Proportionately reduced by any indebtedness eliminated or reduced or otherwise
discharged by Imperial or Warrior.
Exhibit "E"
Name of Warrior # of Imperial
Shareholder # of Shares # of Options* Shares To Be Issued
Luther Henderson 22,664,572 none 2,266,457
John R. Bailey 6,820,000 1,000,000 682,000
Total 29,484,572 1,000,000 2,948,457
*Mr. Henderson has granted "put" rights governing an additional 6,317,149 shares
to 11 individuals at a price of $0.10 per share on or about May 1, 2004.