Exhibit 10a
AGREEMENT
This Agreement is made by, between and among:
ASTREX, INC., a Delaware Corporation ("ASTREX");
ENIGMA ENERGY COMPANY, a Texas limited liability company ("ENIGMA");
and
The MEMBERS (collectively the "MEMBERS" and singularly "MEMBER") whose
names and share interests in ENIGMA are set forth on Annex "A" hereto
and each of whom has signed an identical copy hereof;
and provides, in consideration of the mutual covenants and premises contained
herein, as follows:
ARTICLE I - INVESTMENT IN ENIGMA
--------------------
1.1 AGREEMENT TO PURCHASE THE SHARES. On and subject to the terms hereof,
ENIGMA covenants and agrees to issue, assign and transfer to ASTREX 435
shares (the "Shares") in ENIGMA, and ASTREX agrees to acquire the Shares
for the consideration (the "Purchase Price") set forth in 1.2 below.
1.2 PURCHASE PRICE. On the closing date (the "Closing Date") set forth in 1.4
below, ASTREX shall pay the Purchase Price of $300,000.00, and ENIGMA
shall issue and deliver to ASTREX such evidence of its ownership of the
Shares as it shall require.
1.3 OPTION TO ACQUIRE MEMBER SHARES. Under the terms set forth in Article II
below, the MEMBERS grant ASTREX an option to acquire the shares in ENIGMA
held by the MEMBERS, such shares being called hereinafter collectively
the "MEMBER Shares".
1.4 CLOSING DATE. The Closing Date shall be on or before July 16, 1998.
ARTICLE II - OPTION TO ACQUIRE MEMBER SHARES
-------------------------------
2.1 GRANT OF OPTION. As additional consideration for this Agreement and the
payment of the Purchase Price, each MEMBER hereby grants to ASTREX the
exclusive right and option to purchase all the shares in ENIGMA set forth
by his respective name in Annex "A" for the consideration (the "Exercise
Price") set forth in 2.2 below.
Astrex/Enigma Agreement Page 2
2.2 THE EXERCISE PRICE. The Exercise Price payable to a MEMBER for each share
in ENIGMA shall consist of a cash payment and a contingent payment as
follows:
2.2.1 cash equal to $240.00 payable at the First Option Closing as
defined below; and
2.2.2 rights to receive a contingent number of shares of Common Stock in
ASTREX (the "ASTREX Shares") in accordance with 2.3 below.
2.3 THE CONTINGENT PAYMENT. On or before the later in time of 210 days from
the First Option Closing Date or June 1, 1999, ASTREX will issue,
transfer and assign to each MEMBER a number of ASTREX Shares determined
for each MEMBER Share by dividing $560.00 by the book value (the "Book
Value") per share of the ASTREX Shares as defined in 2.3.4 below;
provided, however, that fifty percent (50%) or more of the MEMBERS or
ASTREX may request an independent appraisal of the ASTREX Shares. Such
request for an independent appraisal must be made by the requesting party
giving notice to the other party on or before the later in time of 190
days from the First Option Closing Date or May 15, 1999, and such request
properly given will cause the number of ASTREX Shares to be issued,
assigned and transferred to each MEMBER per MEMBER Share at the Second
Option Closing to be calculated and issued as follows:
2.3.1 On or before the later in time of 240 days from the First Option
Closing Date or July 1, 1999, ASTREX shall cause a reserve
report (the "Report") to be prepared by an independent
engineering firm agreed to by both ASTREX and more than half of
the MEMBERS evaluating the oil and gas reserves of ENIGMA in
accordance with the following parameters:
(a) the Report will cover all the oil and gas properties of
ASTREX which were held by ENIGMA as of the First Option
Closing Date hereinafter called the "Enigma Properties";
(b) for pricing purposes, the Report will utilize the average
price per Mcf of gas and per barrel of oil received during
the month of the First Option Closing;
(c) the Report shall be prepared using flat prices as
determined in (b) above and discounting to present value at
a rate of ten percent (10%) in order to determine a
Securities and Exchange Commission present value of all
proved reserves as of the close of the last month prior to
the date of the Report (the "Report Month");
(d) a value for the oil and gas reserves (the "Reserve Value")
shall then be determined by adding one hundred percent (100
%) of the value of the proved developed producing reserves
and ten percent (10%) of the value of the proved
undeveloped reserves, both as determined above;
(e) to the extent that ASTREX and more than half of the MEMBERS
cannot agree on an independent engineering firm, ASTREX
shall choose in its
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discretion either XxXxxxxx and XxXxxxxxxx or Netherland
Xxxxxx & Associates, Inc.
2.3.2 A transaction value (the "Transaction Value") shall be
calculated as follows:
(a) to the Reserve Value shall be added:
(i) the amount of cash on hand in ENIGMA as of the First
Option Closing Date; and
(ii) the amount of all cash payments for oil and gas
production received by ASTREX or accrued to ASTREX
from the ENIGMA Properties for the period beginning
with the First Option Closing Date and extending
through the Report Month; and
(iii) $25,000 representing the stipulated value of the
overriding royalty interest and reversionary rights
under the Xxxxxxx Unit.
(b) from the Reserve Value shall be subtracted:
(i) the total amount of all debt in ASTREX incurred for
the drilling or reworking of any producing or
abandoned well; and
(ii) the amount of all operating expenses relating to the
ENIGMA Properties and paid by ASTREX after the First
Option Closing Date.
(c) the value resulting from adding the amounts set forth in
(a) above to the Reserve Value and subtracting those
amounts set forth in (b) above from the Reserve Value shall
be the Transaction Value.
2.3.3 The number of ASTREX shares to be issued for each MEMBER Share
shall then be calculated as follows:
(a) if the Transaction Value is equal to or more than
$4,300,000 and less than $6,000,000, the number of ASTREX
Shares shall be determined by dividing $560.00 by the Book
Value;
(b) to the extent that the Transaction Value is less than
$4,300,000, the number of ASTREX Shares to be issued under
(a) above will be reduced by a fraction in the exact ratio
of the Transaction Value less $1,500,000 to $2,800,000;
provided, however, that no ASTREX Shares shall be issued if
the Transaction Value is less than $2,000,000; e.g., if the
Transaction Value is $3,000,000, the amount of ASTREX
Shares to be issued will be
$1,500,000 X $560
---------- ----------
$2,800,000 Book Value
Astrex/Enigma Agreement Page 4
(c) to the extent that the Transaction Value is equal to or
greater than $6,000,000, the number of ASTREX Shares to be
issued will be increased by a fraction, the numerator which
is the sum of $6,000,000 and $.30 per each dollar that the
Transaction Value exceeds $6,000,000 and the denominator of
which is $6,000,000; provided, however that for purposes of
this calculation, the Transaction Value shall be deemed not
to exceed $9,000,000, e.g., if the Transaction Value is
$8,000,000, the amount of ASTREX Shares to be issued will
be
$6,600,000 X $560
---------- ----------
$6,000,000 Book Value
(d) a fractional ASTREX Share resulting from this calculation
and owing to a MEMBER shall be eliminated by rounding up to
the nearest whole ASTREX Share.
2.3.4 For purposes hereof, the Book Value shall mean the lesser of the
book value per share of the ASTREX Shares on the First Option
Closing Date or Second Option Closing Date, determined in either
case in accordance with generally accepted accounting principles
and without respect to any adjustments for any of the
transactions provided for in this Agreement.
2.4 OPTION PERIOD. The option to purchase the Member Shares shall commence on
the date hereof and extend to the later in time of (i) September 21, 1998
or (ii) seventy-five (75) days after date of first production from or, in
the case the well is dry, the date of completion of ENIGMA's well
designated as the Xxxxxx #2, such period including any extension thereof,
herein called the "Option Period".
2.5 EXERCISE OF OPTION. ASTREX may exercise the option created hereunder by
providing notice of its intention to ENIGMA within the Option Period.
2.6 AUTOMATIC TERMINATION. If ASTREX fails to exercise the option in
accordance with the terms of this Agreement within the Option Period, the
option granted hereunder shall terminate automatically and immediately
without notice.
2.7 ASSIGNMENT OF OPTION. Other than to a wholly owned subsidiary, ASTREX may
not assign the Option or any of the rights created hereunder, and any
attempt to assign the Option is in violation of this 2.7 and shall result
in the automatic and immediate termination without notice of the option
granted hereunder.
2.8 CLOSING OF ACQUISITION OF THE MEMBER SHARES. The closing of the purchase
of the MEMBER Shares shall take place on or before the later in time of
(i) October 1, 1998, or (ii) fifteen (15) days after the exercise of the
option provided in 2.5 above, such closing being called hereinafter the
"First Option Closing" and the date thereof being called hereinafter the
"First Option Closing Date". For all matters occurring after the First
Option Closing Date, the term ASTREX shall include ENIGMA.
2.9 PAYMENT OF CONSIDERATION. At the First Option Closing, ASTREX shall
deliver to ENIGMA on behalf of the MEMBERS in accordance with 2.2 above
the appropriate
Astrex/Enigma Agreement Page 5
amount of cash for the MEMBER Shares to be acquired and the right to
receive a contingent number of ASTREX Shares in accordance with 2.3, and
the MEMBERS and ENIGMA shall deliver to ASTREX such evidence of the
transfer of ownership of the MEMBER Shares to ASTREX as ASTREX may
require. In the event that ASTREX experiences a delay in obtaining its
financing for the purchase of the MEMBER Shares, it may substitute sixty
(60) day promissory notes for cash providing for interest calculated at
an annual rate of fifteen percent (15%).
2.10 SECOND OPTION CLOSING DATE. The amount of ASTREX Shares as calculated
under 2.3 above as owing to the MEMBERS shall be delivered to the MEMBERS
by delivering certificates as evidence thereof to each of the MEMBERS
within fifteen (15) days of the date of the Report, such delivery called
herein the "Second Option Closing" and the date thereof called
hereinafter the "Second Option Closing Date".
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF ENIGMA
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3.1 ENIGMA covenants, represents and warrants as follows, and acknowledges
that ASTREX is relying upon such covenants, representations and
warranties in connection with its acquisition of the Shares and its
possible acquisition of the MEMBER Shares:
3.1.1 ENIGMA is now and will remain during the Term hereof a limited
liability company duly organized and validly existing under the
laws of the State of Texas, with the requisite power and
authority to carry on its business and to enter into and
perform all of its obligations under this Agreement.
3.1.2 This Agreement has been duly executed and delivered by ENIGMA
and the documents and instruments required hereunder to be
executed and delivered by ENIGMA shall have been duly executed
and delivered. This Agreement does, and such documents and
instruments will, constitute legal, valid and binding
obligations of ENIGMA enforceable in accordance with their
respective terms.
3.1.3 The execution, deliver and performance of this Agreement and
the transactions contemplated hereby have been duly and validly
authorized by all requisite action on the part of ENIGMA.
3.1.4 ENIGMA will transfer to ASTREX good and valid title to all of
the Shares, free and clear of all options, liens, mortgages,
charges, encumbrances, adverse claims and demands of other
third party interests of whatsoever nature and is entitled at
law in equity to issue, sell, assign and transfer good and
marketable title to the Shares pursuant to the provisions of
this Agreement.
3.1.5 There are no charges, claims, proceedings, actions, lawsuits or
governmental investigations including environmental claims or
actions, in existence or, to the best of ENIGMA's knowledge,
contemplated or threatened, against
Astrex/Enigma Agreement Page 6
ENIGMA or with respect to the assets of ENIGMA or the interests
of ENIGMA therein.
3.1.6 The consummation of the transactions contemplated herein will
not violate, or be in conflict with, any provision of ENIGMA's
regulations or any agreement or instrument to which ENIGMA is a
party or is bound, or any judgment, decree, order, statute,
rule or regulation applicable to ENIGMA.
3.1.7 ASTREX may hold and enjoy the Shares for its own use and
benefit without any lawful interruption of or by ENIGMA or any
other person whomsoever claiming or purporting to claim by,
through or under ENIGMA, and ENIGMA binds itself to warrant and
forever defend, at its sole cost and expense, all and singular
the Shares against all persons whomsoever claiming or
purporting to claim same or any part thereof or any interest
therein by, through or under ENIGMA.
3.1.8 ENIGMA has now and will have on the Closing Date and at the
Option Closing Date good and marketable title to its assets and
has no liabilities other than those arising in the ordinary
course of business or as disclosed in writing to ASTREX as of
the date of this Agreement.
3.1.9 Prior to the issuance of the Shares to ASTREX, the total number
of shares issued in ENIGMA will be 5,000, and, after such
issuance, the total number of shares issued in ENIGMA shall be
5,435 and such shares shall represent one hundred percent
(100%) of the ownership in ENIGMA.
3.1.10 From the time this Agreement is executed by ASTREX through the
First Option Closing Date, ENIGMA will give ASTREX complete
access to its records and operations.
3.1.11 From the date hereof through the First Option Closing Date,
ENIGMA will make no distributions of cash or property to the
MEMBERS and issue no additional shares in ENIGMA.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE MEMBERS
---------------------------------------------
4.1 Each MEMBER, with respect to his ownership in ENIGMA, covenants,
represents and warrants as follows, and acknowledges that ASTREX is
relying upon such covenants, representations and warranties in connection
with its acquisition of the Member Shares:
4.1.1 This Agreement has been duly executed and delivered by such
MEMBER, along with such other documents required to be executed
hereunder, and constitute legal and binding obligations of such
MEMBER.
4.1.2 The number of shares in ENIGMA set forth by such MEMBER'S name
on Annex "A" hereto is a correct statement of the total shares
in Enigma owned by such MEMBER.
Astrex/Enigma Agreement Page 7
4.1.3 Such MEMBER now has, and at the time of their transfer to ASTREX
will have, good and valid title to the Member Shares owed him,
free and clear of all options, liens, mortgages, charges,
encumbrances, adverse claims or other third party interests of
whatsoever nature, and is entitled at law and in equity to sell,
assign and transfer good and marketable title to the Member
Shares owned by him pursuant to this Agreement.
4.1.4 Such MEMBER has read this Agreement and with his signature
hereto consents to ENIGMA's entering into this Agreement and to
the actions to be performed by ENIGMA hereunder.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF ASTREX
----------------------------------------
5.1 ASTREX covenants, represents and warrants as follows, and acknowledges
that ENIGMA and the MEMBERS are relying upon such covenants,
representations and warranties in entering into this Agreement:
5.1.1 ASTREX is now and throughout the Term hereof will be a
corporation duly incorporated and validly existing under the
laws of the State of Delaware with the requisite corporate power
and authority to enter into and perform all of its obligations
under this Agreement.
5.1.2 The consummation of the transactions contemplated by this
Agreement will not violate, nor be in conflict with, any
provision of ASTREX's by-laws or charter, or any agreement or
instrument to which ASTREX is a party or is bound, or any
judgment, decree, order, statute, rule or regulation applicable
to ASTREX.
5.1.3 The execution, delivery, and performance of this Agreement and
the transactions contemplated hereby have been duly and validly
authorized by all requisite corporation action on the part of
ASTREX.
5.1.4 This Agreement has been duly executed and delivered by ASTREX
and the documents and instruments required hereunder to be
executed and delivered by ASTREX shall have been duly executed
and delivered. This Agreement does, and such documents and
instruments will, constitute legal, valid and binding
obligations of ASTREX in accordance with their respective terms.
5.1.5 As of the date hereof, the authorized capital of ASTREX consists
of 15,000,000 shares of Common Stock, 200,000 shares of Series A
Preferred Stock and 7,500,000 shares of Series B Preferred
Stock. There are no warrants or options authorized.
5.1.6 ASTREX has been supplied and read and understands the
Regulations of ENIGMA.
5.1.7 ASTREX has conducted an independent review of the properties
and oil and gas reserves of ENIGMA.
Astrex/Enigma Agreement Page 8
5.1.8 After the First Option Closing Date through the Second Option
Closing Date, ASTREX will operate the ENIGMA Properties
prudently and consistent with good oil and gas practices and
will dispose of none of the ENIGMA Properties.
ARTICLE VI - SURVIVAL OF REMEDIES
--------------------
6.1 Notwithstanding anything to the contrary herein, expressed or implied, it
is expressly agreed and understood that the foregoing covenants,
representations and warranties are true on the date hereof, and shall be
repeated at each closing as being true at such time and notwithstanding
closing and/or deliveries of covenants, representations and warranties in
any other agreements at closing, prior or subsequent thereto or
investigations by or on behalf of ENIGMA, ASTREX or the MEMBERS, the
foregoing representations and warranties shall survive closing and shall
continue and remain in full force and effect for the benefit of the
ENIGMA, ASTREX and the MEMBERS.
ARTICLE VII - ASTREX'S CONDITIONS OF CLOSING
------------------------------
7.1 CONDITIONS. The purchase of the Shares by ASTREX in accordance with this
Agreement is subject to and conditional upon the fulfillment and
performance by ENIGMA and the Members of the following conditions at or
before the Closing Date and before the First Option Closing Date;
7.1.1 ENIGMA and the Members shall have complied with all covenants
and agreements herein agreed to be performed.
7.1.2 All representations and warranties of ENIGMA and the MEMBERS set
forth herein shall be true and correct at each closing with the
same effect as if made again at such time.
7.1.3 Any restrictions on and all legal requirements pertaining to the
sale, transfer, and assignment of the Shares and the MEMBER
Shares shall be complied with.
7.1.4 ENIGMA will continue its operations in the manner it has prior
to this Agreement and will proceed with the drilling of Xxxxxx
#2 well.
7.2 WAIVER. The foregoing conditions shall be for the benefit of ASTREX and
may, without prejudice to any of the rights of ASTREX hereunder
(including reliance on or enforcement of warranties or covenants which
are preserved dealing with or similar to the condition or conditions
waived) be waived by it in writing, in whole or in part, at any time.
ARTICLE VIII - CONDITIONS OF CLOSING BY ENIGMA AND MEMBERS
-------------------------------------------
Astrex/Enigma Agreement Page 9
8.1 CONDITIONS. The sale of the Shares by ENIGMA and the MEMBER Shares in
accordance with this Agreement is subject to and conditional upon the
fulfillment and performance by ASTREX of the following conditions at or
before the closing:
8.1.1 ASTREX shall have complied with all covenants and agreements
herein agreed to be performed by it:
8.1.2 All representations and warranties of ASTREX set forth herein
shall be true and correct at each closing with the same effect
as if made again at such time; and
8.1.3 Any restrictions on and all legal requirements pertaining to the
sale, transfer, assignment and the issuance of ASTREX Shares
shall be complied with, including the application for and
receipt by ASTREX, as the case may be, of all necessary
consents, approvals and authorizations from all applicable third
parties, including governmental bodies, duly constituted public
authorities and stock exchanges having jurisdiction over the
ASTREX Shares.
8.2 WAIVER. The foregoing conditions shall be for the benefit of ENIGMA and
the MEMBERS and may, without prejudice to any of the rights of ENIGMA or
the MEMBERS hereunder (including reliance on or enforcement of warranties
or covenants which are preserved dealing with or similar to the condition
or conditions waived) be waived, as applicable, by ENIGMA or seventy five
percent (75%) in interest of the MEMBERS in writing, in whole or in part,
at any time.
ARTICLE IX - INVESTMENT CONSIDERATIONS
-------------------------
9.1 INVESTMENT RISK. ASTREX SHARES BEING GIVEN AS CONSIDERATION HEREINUNDER
INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE ACCEPTED ONLY BE PERSONS WHO
CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
9.2 NO APPROVAL OR DISAPPROVAL. THE ISSUE AND TRANSFER OF THE ASTREX SHARES
TO THE MEMBERS HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR
ENDORSED THE MERITS OF THE OPTION OR CONSIDERATION THEREOF OR THE
ACCURACY OR ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
9.3 CONSTRUCTION. The MEMBERS are not to construe any of the contents of this
Agreement as legal, investment or tax advice and should consult their own
advisors as to all legal, investment, tax and related matters.
Astrex/Enigma Agreement Page 10
9.4 NO OFFER TO SELL OR SOLICITATION. No dealer, salesman or any other person
has been authorized to give any information or to make any representation
not contained herein in connection with the ASTREX Shares and, if given
or made, such information or representation must not be relied upon as
having been authorized by ASTREX. This Agreement does not constitute an
offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful
to make such an offer or solicitation in such jurisdiction. Neither the
delivery of this document nor any sale made hereunder shall under any
circumstances create any implication that there has been no change in the
affairs of ASTREX or that the information set forth herein is correct as
of any date subsequent to the date hereof.
9.5 LACK OF LIQUIDITY. The ASTREX offering will involve substantial risks and
should only be considered by investors who have no need for liquidity in
their investment.
9.6 ACCREDITED AND SOPHISTICATED INVESTORS. The ASTREX Shares are being
offered only to those MEMBERS who are either Accredited Investors or
Sophisticated Non-Accredited Investors.
9.7 VALUATION. The valuation of the ASTREX Shares at the Second Option
Closing is based on the lower of their book value at the First Option
Closing Date or immediately prior to the Second Option Closing Date as
adjusted to eliminate the effort of the purchase of the oil and gas
properties of ENIGMA and does not necessarily bear any relationship to
the assets, potential assets, potential reserve values, cash flows or
earnings, potential cash flows or earnings of ASTREX or any other
recognized criteria or value.
9.8 FINANCIAL DATA. Each MEMBER has received a copy of ASTREX's 10-KSB filing
made within thirty (30) days of the date hereof and which includes the
audited financial statements of ASTREX as of March 31, 1998 ("ASTREX's
10-KSB"). Each MEMBER will also receive a copy of ASTREX's most recent
financial filings prior to the Second Option Closing Date. Each MEMBER
may, if he or she so desires, make inquiries of appropriate members of
the management of ASTREX with respect to the business of ASTREX or any
other matters set forth herein, and may obtain any additional information
which such person deems to be necessary in order to verify the accuracy
of the information contained in this documents (to the extent that ASTREX
possesses such information or can acquire it without unreasonable effort
or expense).
9.9 ADDITIONAL CONSIDERATIONS. In evaluating ASTREX, each MEMBER should
consider all the information and financial statements contained in the
FORM 10-KSB accompanying this document and such other factors deemed
pertinent and including or in addition thereto, the following:
9.9.1 Lack of Possible Market for the Securities of the Company. Since
the late Spring of 1992 the Common Stock of ASTREX has traded on
only a very limited basis on the over-the-counter market.
Astrex/Enigma Agreement Page 11
9.9.2 Other Limitations. Further, investors may find it more difficult
to sell the ASTREX Shares than securities that are listed for
trading on the NASDAQ or a national securities exchange. In part
this is because securities that trade on the NASDAQ "electronic
bulletin board" or in the "Pink Sheets" are normally subject to
a rule that imposes additional sales practice requirements on
broker-dealers who sell such securities to persons other than to
accredited investors (generally defined as investors with net
worth's in excess of $1,000,000 or annual income exceeding
$200,000 [or $300,000 for a husband and wife]) or an established
customer. For transactions covered by this rule, the
broker-dealer must make a special suitability determination for
the purchaser and must receive the purchaser's written consent
to the transaction prior to the sales.
9.9.3 Xxxxx Stock Rules. In addition it is likely that ASTREX's Common
Stock is likely to be deemed "xxxxx stock" under regulations of
the Securities and Exchange Commission (subject to certain
exceptions, a "xxxxx stock" is any equity security that has a
market price of less than $5.00 per share). Subject to certain
exceptions, transactions involving "xxxxx stocks" require the
delivery, prior to the transaction, of a disclosure schedule
prepared by the Securities and Exchange Commission relating to
the xxxxx stock market; further the broker-dealer must disclose
the commissions payable to both the broker-dealer and the
registered representative, current quotations for the securities
and, if the broker-dealer is the sole market-maker, the
broker-dealer's presumed control over the market; and finally,
monthly statements must be sent disclosing the recent price
information for the xxxxx stock held in the account and
information on the limited market to xxxxx stocks.
9.9.4 Blue Sky Laws. A MEMBER may not be able to transfer or sell any
of your shares in all states or other jurisdictions, dependent
upon the "Blue Sky" securities laws of the State or other
jurisdiction in which you intend to sell.
9.9.5 Competition. The present business of ASTREX (principally the
value added sale of electronic connectors and switches) is
highly competitive. Many of ASTREX's competitors are larger in
size and possess significantly greater resources. Should ASTREX
exercise the Option herein it will also be engaged in the
business or producing and finding oil and gas, which business
presents similar and additional competitive risks.
9.10 PRIOR REORGANIZATION. In 1991, ASTREX faced with declining sales and
shrinking margins due principally to retrenchment in the defense industry
and substantial debenture debt, filed a petition for relief under Chapter
11 of the Federal Bankruptcy Code in order to restructure its business
and reduce its debt. ASTREX Plan of Reorganization was confirmed in March
1992. Following emergence from Chapter 11, ASTREX was intermittently
profitable and unprofitable but has been profitable for the past three
fiscal years and presently anticipates, but cannot guarantee, that it
will be so for the current fiscal year.
9.11 LACK OF EXPERTISE IN OIL AND GAS. If ASTREX exercises the Option, a
substantial part of its business will be the production and finding of
oil and natural gas.
Astrex/Enigma Agreement Page 12
ASTREX has no previous expertise or experience in the business of
producing or finding oil and gas, although two of its present directors
do have very limited previous experience and should the Option be
exercised it is anticipated that the present Manager, Xxxxxxx X. Xxxxxxx
of ENIGMA, will continue with ASTREX and three new directors with
substantial oil and gas expertise and experience will be added to
ASTREX's Board. The business of producing and finding oil and gas is
extremely competitive and extremely risky and in fact ASTREX presently
lacks the basic knowledge and experience to even begin to delineate or
quantify that competition and those risks.
9.12 THE COMPANY'S LINE OF CREDIT. Substantially all of the assets of ASTREX
are pledged as security for ASTREX's credit facility. Were ASTREX to
default on the same that event could materially adversely affect ASTREX,
it's pledged assets, and it's ability to continue in business.
9.13 THE COMPANY'S INVENTORY. Technological changes, manufacturer price
reductions, termination of the right to distribute a line, or cessation
by a manufacturer of manufacture of a line could reduce the value of
ASTREX's present inventory and ASTREX's borrowing power with respect to
the same.
9.14 NO LONG TERM CONTRACTS. Although a significant portion of ASTREX's
present business is done with long standing customers, none of whom
constitute more than 10% of its business, ASTREX does not have long term
contracts with these customers. To the extent several of ASTREX's
long-standing customers ceased to purchase from ASTREX, its business
could be materially adversely affected.
9.15 DEPENDENCE ON KEY PERSONNEL. In the past, ASTREX has relied in
substantial respect on the efforts of its Chief Executive Officer. The
loss of the services of that officer might have a material adverse effect
on ASTREX. In the event that ASTREX exercises the Option it will also be
relying in substantial respects upon the efforts of ENIGMA's manager and
three contemplated new Board Members presently associated with ENIGMA.
The loss of the services of any of those persons might have a material
adverse effect on the Company in the event it exercise the Option.
9.16 MANAGEMENT CONTROL OF THE COMPANY. The Directors and officers of ASTREX,
as a group, presently own approximately 57% of the voting shares of the
Company. Therefore, as a practical matter the current members of ASTREX's
management may have the voting power to approve all matters requiring a
simple majority stockholder vote, including the election of the Board of
Directors, and to generally direct the affairs of ASTREX. In the event
ASTREX exercises the Option the percentage indicated above may change
somewhat but it is doubtful that the control aspect will substantively
change.
9.17 ANTI-TAKEOVER PROVISIONS. ASTREX's Certificate of Incorporation and
By-Laws include certain provisions which may have the effect of
discouraging persons from pursuing non-negotiated takeover attempts.
These provisions include a classified board of directors, a limitation of
nine directors and the ability to specify and issue preferred stock
having characteristics that may increase the difficulty of non-negotiated
takeover attempts.
Astrex/Enigma Agreement Page 13
9.18 LIMITED DIVIDEND HISTORY. ASTREX has not declared or paid a dividend on
its capital stock since 1978 and does not anticipate a change in that
policy with respect to the Common Stock.
ARTICLE X - REPRESENTATIONS OF MEMBERS TO ASTREX IN CONNECTION WITH INVESTMENT
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CONSIDERATIONS AND RISKS
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10.1 Each Member represents to ASTREX that:
10.1.1 Such MEMBER has read this Agreement which sets forth the terms
of and some of the risks, has reviewed ASTREX's 10-KSB and that
any additional information on any aspect of ASTREX has been
answered to his or her satisfaction and all requests for
information necessary to verify the accuracy of the information
contained in this document or ASTREX 10-KSB have been
fulfilled.
10.1.2 Such MEMBER is knowledgeable and experienced in financial and
business matters and is capable of evaluating the merits and
risks of owner the ASTREX Shares.
10.1.3 Such MEMBER can bear the economic risks of participating in the
Offering.
10.1.4 Such MEMBER is accepting the ASTREX Shares for his own account
for investment and not with a view toward resale or
distribution.
10.1.5 Such MEMBER has adequate means of providing for his current
needs and possible personal contingencies, has no need for
liquidity of the investment and has no reason to anticipate any
change in personal circumstances, financial or otherwise, which
may cause or require any sale or distribution of such
securities.
10.1.6 Such MEMBER is familiar with the nature and risks incident to
investment, and has determined that acquiring the ASTREX Shares
is consistent with his investment objectives and income
prospects.
10.1.7 Such MEMBER is aware that there have only been a limited amount
of trades of ASTREX Common Stock over the past several years
and that there have been no representations of any sort from
ASTREX or anyone else that this situation may change in the
future.
10.1.8 The overall commitment to investments of such MEMBER which are
not readily marketable is not disproportionate to his net
worth, and his investment in the ASTREX Shares will not cause
such overall commitment to become excessive.
10.1.9 Such MEMBER realizes that since the ASTREX Share may not be
readily transferred, such MEMBER may not readily liquidate his
investment, and
Astrex/Enigma Agreement Page 14
must not accept the ASTREX Shares unless he or she has
sufficient liquid assets to assume himself that such purchase
will cause him no undue financial difficulties.
ARTICLE XI - SPECIAL PROVISIONS
------------------
11.1 PERFORMANCE OF XXXXXX #2 WELL. In the event the Xxxxxx $2 Well does not
perform in accordance with the expectations of ASTREX, ASTREX may
request to renegotiate the terms of this Agreement with ENIGMA and the
MEMBERS, and ENIGMA and the MEMBERS agree to renegotiate in good faith
with ASTREX.
11.2 ADDITIONAL WORK ON THE ENIGMA PROPERTIES. After the First Option Closing
Date and prior to the Report Month, ASTREX agrees consistent with good
operating practice and available credit (i) to proceed diligently with
the development of the oil and gas reserves of ENIGMA and (ii) by the
Report Month to drill at least one new well on the ENIGMA properties and
rework at least one additional well.
11.3 REGISTRATION OF ASTREX SHARES. Within ninety (90) days of the Second
Option Closing Date, ASTREX will use its best efforts to cause the
ASTREX Shares to be registered with the Securities and Exchange
Commission.
ARTICLE XII - MISCELLANEOUS
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12.1 ASSIGNABILITY. This Agreement shall not be assignable in whole or in
part by any party hereto without the prior written consent of the other
parties hereto.
12.2 BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their successors and permitted
assigns.
12.3 AMENDMENT. No amendment or variation of the terms, conditions,
warranties, covenants, agreements and undertakings set forth herein
shall be of any force or effect unless the same shall be reduced to
writing, duly executed by all parties hereto, in the same manner and in
the same formality as this Agreement is executed.
12.4 WAIVER. No provision of this Agreement shall be deemed to be waived
unless such waiver is in writing. Any waiver of any default committed by
any of the parties hereto in the observance or performance of any part
of this Agreement shall not extend to or be taken in any manner to
affect any other default.
12.5 SEVERABILITY OF PROVISIONS. If any provisions of this Agreement or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to other persons or circumstances shall
not be affected thereby and shall be enforced to the greatest extent
permitted by law.
12.6 FURTHER ASSURANCES. Each of the parties shall at any time, and from time
to time hereafter, take any and all steps, and execute, acknowledge and
deliver to the other
Astrex/Enigma Agreement Page 15
party, any and all further instruments and assurances that the other
party any reasonable require for the purpose of giving full force and
effect to the provisions of this Agreement.
12.7 TIME OF THE ESSENCE. Time shall be of the essence of this Agreement.
12.8 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original and all of which shall be
construed together as one agreement.
12.9 HEADINGS. Headings of the articles or sections hereof are inserted for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
12.10 GOVERNING LAW. This Agreement and all amendments, modifications,
alterations or supplements thereto shall, in all respects, be subject to
and interpreted, construed and enforced in accordance with the laws of
the State of Texas.
12.11 TERM. The term (the "Term") of this Agreement shall commence on the date
of execution set forth below and continue through the first to occur of
the termination of ASTREX's option to acquire the Member Shares or the
closing of the acquisition of the Member Shares by ASTREX.
12.12 NOTICE. Unless otherwise provided herein, any notice, tender or delivery
to be given hereunder by one party to another may be effected by (i)
personal delivery, (ii) registered mail (iii) facsimile transmission or
(in) overnight delivery and shall be effective when delivered to ASTREX
or ENIGMA at the address or facsimile number below or to the MEMBERS at
the address or facsimile number set forth by their signatures:
TO ASTREX:
ASTREX, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx XxXxxxx
Facsimile: (000) 000-0000
CC: Xxxx X. Xxxxxx
000 Xxxx Xxxxxx Xxxx Xxxx, Xxxxx X-0
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
TO ENIGMA OR THE MEMBERS;
Enigma Energy Company, L.L.C.
000 Xxxxxxx Xxxxxxx Xxxx
Astrex/Enigma Agreement Page 16
0000 Xxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the 16th day of June, 1998.
ASTREX, INC.
by /s/ Xxxxxxx XxXxxxx
Title /s/ President
ENIGMA ENERGY COMPANY, L.L.C.
by /s/ Xxxxxxx X. Xxxxxxx
Title /s/ Manager
MEMBER
/s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxxxx
X. Xxxxxxx Germany
Xxxxx X. Xxxxxx
Pirvest, Inc.
Xxxxx X. Xxxxxx
J. Xxxxxxx XxXxxxxxx
Xxx X. Xxxxxx
E. Xxxxx Xxxxxxxx
Xxxxxx X. Xxxxx
Xxxx X. Xxxxx
Address:
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Astrex/Enigma Agreement Page 17
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Facsimile:
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Astrex/Enigma Agreement Page 18
