EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is executed this 26th day of August, 2000, by XXXXX X.
XXXXXX of Eufaula, Oklahoma, XXX and XXXXXX XXXXX of Oklahoma City, Oklahoma,
XXXXX X. XXXXXX of Oklahoma City, Oklahoma, XXXXXXX X. and XXXXXX X'XXXXXX of
McAlester, Oklahoma, XXXXX X. and XXXXXX XXXXX LIVING TRUST of Eufaula,
Oklahoma, XXXX and XXXXX XXXXXXX of Eufaula, Oklahoma, and XXXX X. XXX of
Dallas, Texas, herein referred to, individually, as "Seller" and, collectively,
as "Sellers", and ENERGAS RESOURCES INC., a British Columbia, Canada corporation
("Energas"), with Energas maintaining offices in Oklahoma City, Oklahoma.
RECITALS
(a) Sellers represent that they own 100% of the outstanding and issued
capital stock of FIRST NATURAL GAS, INC., an Oklahoma corporation ("the
Company"), said outstanding and issued shares being 1,660 shares ("Sellers'
Stock"). Each Seller represents that his share of Sellers' Stock is as follows:
Seller No. of Shares
------ -------------
Xxxxx X. Xxxxxx 1,075
Xxx and Xxxxxx Xxxxx 105
Xxxxx X. Xxxxxx 70
Xxxxxxx X. and Xxxxxx X'Xxxxxx 000
Xxxxx X. and XxXxxx Xxxxx Living Trust 225
Xxxx and Xxxxx Xxxxxxx 35
Xxxx X. Xxx 10
(b) By this Agreement, Seller is selling to Energas and Energas is
buying from Seller all of Seller's Stock.
(c) Sellers represent that, at closing, the only assets of the
Company will consist of the real and personal property described in the
schedule which is attached hereto and made a part hereof as Exhibit A, said
property described in Exhibit A being referred to herein as "the Assets".
(d) The sale and purchase of Seller's Stock will be consummated
pursuant to the following terms and conditions:
AGREEMENT
1. COMMITMENT TO SELL AND PURCHASE. Seller agrees to sell to Energas
and Energas agrees to buy from Seller all of Seller's Stock, subject to the
terms and conditions contained in the balance of this Agreement.
2. CONSIDERATION. The total consideration for the sale by Seller to
Energas of Seller's Stock is the following:
(a) Six hundred thousand dollars (U.S.) ($600,000 U.S.) to be
paid by Energas to Sellers pursuant to individual convertible promissory
notes to be signed by Energas in favor of each Seller ("the Convertible
Note"). The Convertible Note shall be in the principal amount in favor of
each Seller as follows:
SELLER AMOUNT OF NOTE
------ --------------
Xxxxx X. Xxxxxx $388,554
Xxx and Xxxxxx Xxxxx 37,950
Xxxxx X. Xxxxxx 25,302
Xxxxxxx X. and Xxxxxx X'Xxxxxx 50,604
Xxxxx X. and XxXxxx Xxxxx Living Trust 81,324
Xxxx and Xxxxx Xxxxxxx 12,648
Xxxx X. Xxx 3,618
Each note shall be payable twelve months from the date it is delivered to Seller
and it shall provide for interest on the principal amount of 10% per annum. The
promissory note shall also provide that
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the net income of the Company, calculated at the end of each calendar month,
shall be applied on the then interest due on the note with the balance of
said monthly net income to be deposited in a special bank account to be
opened with the escrow bank. The net income, after deducting the interest
payments, shall be held by the escrow bank and paid over either to Energas
with Seller's Stock pursuant to Paragraph 9(a) or to Seller pursuant to
Paragraph 9(b). The monthly interest payment out of net income shall be
applied to each Seller's note in the following proportions:
Seller Share of Net Income
------ -------------------
Xxxxx X. Xxxxxx 64.759%
Xxx and Xxxxxx Xxxxx 6.325%
Xxxxx X. Xxxxxx 4.217%
Xxxxxxx X. and Xxxxxx X'Xxxxxx 8.434%
Xxxxx X. and XxXxxx Xxxxx Living Trust 13.554%
Xxxx and Xxxxx Xxxxxxx 2.108%
Xxxx X. Xxx 0.603%
The net income shall be calculated according to reasonable and ordinary
accounting principles as applied by corporations in the same business. Seller
shall be responsible for furnishing Energas a written accounting each month
showing the manner in which the month's net income was calculated and the
manner in which said net income was applied to the interest due on the note.
The Convertible Note also shall provide that at any time after the expiration
of 90 days from the issuance of the note up to its due date, Seller shall
have the option to convert the note and all principal and interest then due
by Energas to Seller under said note into shares of Energas at an agreed
value of U.S. $2.00 per share. That is, in lieu of Seller's right to be paid
the then principal and interest owed to him, he shall receive a number of
shares of stock in Energas equal to the total principal and interest then
owed to him divided by U.S. $2.00. Immediately following either the full
payment of the note or the conversion of the note to stock, as authorized
herein, the then members of the Board
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of Directors of the Company and all officers of the Company shall resign and
the stockholders shall elect a new Board of Directors who shall elect new
officers of the Company.
3. REGULATORY APPROVAL. It is understood that this Agreement and,
particularly, the issuance of the Convertible Note is subject to obtaining
written approval from the Canadian Venture Exchange (CDNX). The Agreement may
also be subject to approval by the Oklahoma Corporation Commission. If such
approval has not been issued prior to October 1, 2000, this Agreement,
without the written consent of Seller and Energas, shall be void.
4. REPRESENTATIVES, WARRANTIES AND COVENANTS BY SELLER. Seller
represents and warrants unto, and covenants with, Energas as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Oklahoma. The Company has all requisite
corporate power and authority to own its properties
and to conduct its business as presently being
conducted by it. The Company has no subsidiaries. The
Company has not qualified to do business as a foreign
corporation in any jurisdiction.
(b) The authorized capital stock of the Company consists
of 2,000 shares of common stock, of which 1,660 shares
are issued and outstanding. All of the outstanding
shares have been duly authorized, and are validly
issued, fully paid and non-assessable. There are no
options, warrants, calls, conversion or other rights,
or any agreements or commitments of any nature which
obligate the Company to issue any additional shares
of capital stock or any securities convertible into
or exchangeable for any such shares of capital stock
and no authorization therefore has been given.
(c) True and complete copies of the Articles of
Incorporation and all amendments thereto, bylaws
(certified by the secretary of the Company), and the
minute book and stock record of the Company will be
delivered by Seller to Energas on or before August
18, 2000, for its review. The minute book of the
Company reflects minutes and records maintained by the
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Company regarding meetings heretofore held and consents
heretofore granted by the directors and shareholders of
the Company.
(d) All federal, state and local (city, township, county)
income, sales, use, franchise, employment, social
security and real and personal property tax returns
required to be filed by or on behalf of the Company
under applicable federal, state or local law have
been duly filed; all taxes, assessments and levies
required to be paid by the Company in respect to such
matters to the extent that such taxes, assessments
and levies have become due and payable, have been
paid; and adequate provision for the payment of taxes
reasonably estimated to become due in respect to such
tax matters have been made. Federal income tax
returns of the Company have not been examined by the
Internal Revenue Service or by the Oklahoma Tax
Commission for the fiscal years presently open under
applicable statutes of limitations, and no
assessments or deficiencies for the past fiscal years
of the Company have been made or are now owing. There
are in effect no waivers of the applicable statute of
limitations for federal or state taxes for any
period. On or before September 1, 2000, true and
complete copies of all federal and state income tax
returns of the Company for the then three past fiscal
years will be delivered to Energas. Such returns,
which will have been properly and accurately compiled
and completed, in accordance with applicable federal
and states income tax law, present fairly the
information purported to be shown thereby and reflect
all the tax liabilities of the Company with respect
to the matters reported therein regarding such tax
periods. Seller shall be responsible for all taxes,
penalties and interest of whatsoever nature which may
be payable by the Company for income up to October 2,
2000. In this connection, Seller shall file all short
period federal and state income tax returns covering
the period of time from the closing date of the
Company's last fiscal year up to October 2, 2000.
(e) The Company has a defensible title to all of the
Assets and the Assets are free and clear of all
liens, mortgages or other encumbrances created or
allowed to be created by the Company.
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(f) All bank accounts, real estate, automobiles, trucks
and other vehicles and all other property presently
owned by the Company which are not specifically
described in Exhibit A as part of the Assets will be
assigned, conveyed and transferred by the Company to
Seller or other entities or parties prior to the
closing so that none of such property not part of the
Assets and none of the obligations relating to such
additional property shall be owned by the Company or
burden the Company at the time of closing.
(g) Policies of insurance, in accordance with oil and gas
industry standards, are currently maintained by the
Company with respect to the Assets and all such
policies are in full force and effect and will be
maintained until closing in accordance with the
present expiration date. If any policy expires prior
to closing, same shall be renewed for the same amount
of coverage and with the same, or an equivalently
sound, insurer.
(h) Except for the oil and gas leases, assignments of oil
and gas leases, pooling orders, farmout agreements,
joint operating agreements, gas sales contracts,
rights-of-way agreements, easements and gas gathering
contracts which relate to or affect the Assets, there
are no other written agreements, commitments,
options, employment contracts, consulting contracts,
loan agreements, bonuses, incentive compensation,
pension and profit sharing plans, employee benefit or
stock option plans or arrangements, which would
affect the Assets. Further, there is no material
default or claim of material default known by Seller
to be pending or asserted against the Company by any
party to any of the existing contracts or agreements
included among the Assets. Provided, however, if
there are currently any outstanding retirement,
pension or profit sharing plans of the Company in
force, prior to the date that the promissory note is
converted by Seller to Energas stock or prior to the
date that the promissory note has been paid in full,
any such plans will be completely removed as an
obligation of the Company, all to the satisfaction of
Energas and its counsel.
(i) There are no actions, suits, or proceedings pending
against the Company, its properties or business.
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(j) Seller owns Seller's Stock free and clear of all
liens, claims, encumbrances and restrictions
whatsoever. There are no outstanding options by any
third party to purchase Seller's Stock nor is there
any obligation by Seller to first offer to sell any
of Seller's Stock to the Company or to any third
party.
(k) There are no legal proceedings pending or threatened
against Seller which, if adversely determined, could,
in any respect, prevent or impair the ability of
Seller to perform his obligations under this
Agreement.
(l) No dividends have been or will be declared by the
Company or its Board of Directors which would
obligate the Company to pay dividends to Seller or
any third party subsequent to closing.
(m) Neither Seller nor the Company has been placed on
notice of any claims by the Oklahoma Corporation
Commission, the Oklahoma Water Resources Board or any
other federal or state agency or any third party for
damages or claims for damages to the surface or
sub-surface environment of the Assets.
(n) Seller agrees to defend Energas against all claims by
third parties which may be made in the future by
reason of the sale of Seller's Stock and if any claim
results in a final, unappealable judgment against
Energas, Seller shall pay said judgment.
(o) All of the foregoing representations, warranties and
covenants shall survive closing and shall be binding
upon Seller after closing.
5. COVENANTS OF SELLER PENDING CLOSING. Seller covenants with Energas
that between the date hereof and the closing (except as otherwise provided or
contemplated by this Agreement or as consented to by Energas in advance in
writing) Seller shall:
(a) Cause the Assets to be operated in the usual and
ordinary course thereof, as a prudent operator,
including producing the xxxxx at rates substantially
similar to the average daily rates which they have
been produced during the past 12 months,
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and prohibit and prevent the Company from entering
into any contract or commitment other than contracts
and commitments in the usual and ordinary course of
its business.
(b) Cause the Company to maintain its books of account
and records in the usual, regular and customary
manner, to prepare and file on or prior to the due
date thereof all the tax returns required by federal,
state and local tax authorities and to pay all taxes
(or estimates thereof) due from it to such
authorities in respect of its operations prior to the
closing.
(c) Prohibit and prevent the Company from amending its
Articles of Incorporation or bylaws or from entering
into any agreement of merger, consolidation or
reorganization, dissolving or entering into any plan
of liquidation or dissolution, or committing any of
the capital stock, of the Company for sale or
assignment to any third parties.
(d) Prohibit and prevent the Company from making any
change in the number of issued and outstanding shares
of its capital stock or granting any option or making
any commitment or agreement relating to its capital
stock, or acquiring or creating any subsidiary.
(e) Prohibit and prevent the Company from (i) incurring
any indebtedness for money borrowed in addition to
the withdrawal of funds as may be necessary in the
ordinary and normal course of its business under
existing lines of credit, (ii) incurring any
indebtedness or liability for money borrowed other
than as referenced under (i), contingent or
otherwise, except in the ordinary and normal course
of its business, (iii) mortgaging, pledging or
otherwise subjecting to lien or encumbrance upon any
of the Assets, (iv) making any modification or change
in any of the existing material contracts or material
agreements, except in the ordinary, normal course of
its business, (v) making any additions to the assets
or purchasing any machinery, equipment or other
property relating to the assets or selling or
otherwise disposing of any of the assets except in
the ordinary and normal course of business.
(f) Cause the Company to afford representatives of
Energas access during normal business hours and upon
reasonable
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notice to its offices, properties, records, files,
contracts, agreements, books of account, tax returns
and other documents, and to make and furnish Energas
with copies of such items as are reasonably
requested by Energas, and to furnish Energas with
all information with respect to financial and
operating data and all other information concerning
its business, operations and properties as Energas
may reasonably request. During the period of this
Agreement, Energas shall have the right, at its own
cost, peril and risk with no liability to be
incurred by the Company or Seller, to enter upon the
lands comprising the Assets for purposes of
inspection and the collection of other data as it
deems desirable.
(g) Refrain from and prohibit the Company from soliciting
any offer from (or negotiating with) any third party
for the direct or indirect acquisition of the
Company, or any portion thereof, or any of its stock
or any portion of the Assets.
(h) Seller shall maintain the Oklahoma Corporation
plugging agreement, with approved security in full
force.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF ENERGAS. All of the
obligations of Energas under this Agreement are, at its election, subject to the
satisfaction, prior to or at the closing, of the following conditions:
(a) The representations and warranties of Seller
contained in this Agreement will have been true and
correct in all material respects and Seller will have
performed or complied in all material respects with
all terms, agreements, and covenants required by this
Agreement to be performed by him on or prior to the
closing date.
(b) Seller shall have delivered to Energas certificates
of good standing issued by the Secretary of State for
the State of Oklahoma for the Company dated no
earlier than fifteen days prior to the closing date,
and reflecting that the Company is in existence and
good standing, has filed all required franchise tax
returns and has paid all required franchise taxes,
and reflecting all instruments filed of record with
respect to
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the Company through the date of such certificate in
the Secretary's office.
(c) No action or proceeding shall be threatened or be
pending against Seller or the Company by a third
party seeking to restrain or prohibit the performance
of, or to obtain damages or other relief in
conjunction with this agreement or any of the
transactions contemplated hereby.
(d) Since the effective date hereof, no material adverse
change shall have occurred in the aggregate with
respect to the financial condition or operations of
the Company as a whole.
(e) Energas is able to obtain approval from the Canadian
Venture Exchange (CDNX) and from the Oklahoma
Corporation Commission to this
Stock Purchase
Agreement.
Prior to closing, Energas may give Seller written notice that Energas is
refusing to consummate the purchase of Seller's Stock because any one or more of
the above conditions have not been met, in which case neither party shall have
any further obligation to the other in connection with this Agreement. If
closing occurs and all or portions of Seller's stock and/or the Assets are
burdened with liens, mortgages or other encumbrances, if any Seller timely
elects to convert his promissory note to Energas stock, prior to issuing said
stock to Seller, Energas shall have the right to sell so much of the Energas
stock to which the Seller is entitled necessary to pay Seller's share, pursuant
to the percentage set out after said Seller's name in Paragraph 2, of the total
amounts secured by all liens, mortgages and other encumbrances and pay the
proceeds of said sale to all lien holders, mortgagees and other encumbrances in
the proportion in which each creditor's debt bears to the total debt secured by
all such liens, mortgages and other encumbrances. As to any Seller who does not
elect to convert his note to Energas stock, prior to paying said note, Energas
shall have the right to withhold from said payment and pay such withheld amount
to all lien holders, mortgagees and
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encumbrances. The amount withheld from the note payment and the amount paid
over to the creditors shall be in the same ratio as set out above in
connection with the sale of Energas stock to which a note is converted and
payment of sales proceeds made to creditors.
7. CLOSING AND CLOSING DATE. If, prior to the closing date, Energas
fails to give written notice of the rejection of the sale, as provided in
paragraph 6 above, the closing of the sale of Seller's Stock by Seller to
Energas shall occur at a mutually agreeable day and time on or before October
2, 2000 in the offices of Xxxxx & Xxxxxxx in Oklahoma City. At closing, the
following shall be accomplished:
(a) Seller shall endorse his stock certificates,
representing Seller's Stock, over to Energas and
entry shall be made in the stock record book of the
Company to show Energas as the record holder of
Seller's Stock, effective at 7:00 a.m. on the first
day of the calendar month when closing occurs.
(b) New stock certificates shall be issued in the name of
Energas showing it to be the owner of Seller's Stock.
(c) Energas, then, shall endorse its stock certificate,
representing its ownership of Seller's Stock, in
blank, and the endorsed stock certificate shall be
delivered to an authorized representative of a state
or federal banking institution, satisfactory to both
Seller and Energas, said banking institution to act
as the escrow agent to hold the endorsed stock
certificate in escrow pursuant to the terms of this
Agreement.
(d) Seller and Energas, along with a representative of
the escrow agent, shall execute such escrow agreement
as may be required by the escrow agent to protect it
and to set forth its obligations under the escrow
arrangement.
(e) Energas shall deliver to Seller the Convertible Note
described in paragraph 2(a) above, as possibly
modified pursuant to the final sentence of paragraph
6 above.
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(f) The original corporate minute books and stock
transfer ledgers shall be delivered to the escrow
agent to be held in escrow with the stock
certificate.
(g) Energas, as the owner of Seller's Stock, shall, in
writing, confirm that the present Board of Directors
of the Company and the present officers of the
Company shall continue in their present positions.
That is, until the Convertible Note has either been
paid in full or converted to Energas stock, as
provided for in paragraph 2(a) above, the current
management of the Company shall be retained.
Provided, however, Xxxxxx X. Xxxx, the President of
Energas, shall be elected to the current Board of
Directors.
8. RESTRICTIONS ON ENERGAS' OWNERSHIP AND THE COMPANY'S MANAGEMENT.
Until the promissory note has been paid in full or until it has been converted
to Energas stock, the following restrictions shall govern Energas' ownership of
Seller's Stock and the management of the Company:
(a) No sale, mortgage, security agreement, lien or
encumbrance shall be created, or cause to be created,
on any portion of the Assets. The foregoing shall not
prohibit a sale or assignment by Energas of a portion
of its interest in this agreement.
(b) No agreement shall be entered into which would
obligate Energas or the Company to sell, assign or
otherwise encumber any portion of Seller's shares
until the shares are delivered out of escrow to
Energas. The foregoing shall not prohibit a sale or
assignment by Energas of a portion of its interest in
this agreement.
(c) The Company shall produce, operate, develop and
manage the Assets as a reasonably prudent operator.
(d) No gas sales contract shall be executed by the
Company which would commit the Company to the sale of
natural gas from any of the xxxxx described in
Exhibit A for a term longer than 12 months.
(e) The covenants of Seller set forth in paragraph 5
shall continue to be binding upon Energas, the
Company and Seller.
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Except for the foregoing, Energas shall be considered as the
owner of Seller's Stock.
9. BASIC TERMS OF ESCROW; CONSEQUENCES OF DEFAULT. The escrow agent
shall hold Seller's Stock in escrow and shall only deliver said shares out of
escrow under the following circumstances:
(a) At such time as either the promissory note has been
paid in full, when due, or Seller has elected to
convert the promissory note to Energas stock, as
provided for above, the escrow agent shall insert
Energas' name in the endorsement on the stock
certificate and deliver the escrowed stock
certificate together with the original corporate
minute books and stock transfer ledgers to an
authorized representative of Energas.
(b) In the event Seller has not timely elected to convert
the promissory note to Energas stock and in the event
the promissory note is not paid, in full, when due,
the escrow agent, upon being satisfied of Energas'
default, shall deliver the endorsed stock certificate
to Seller at which time Energas shall own no further
interest in the Company, Seller shall retain all
payments theretofore made on the promissory note and
neither Seller, the Company, nor Energas shall have
any further obligation to each other, and this
Agreement, thereafter, shall be void. The escrow
agent, at the same time, shall deliver the original
corporate minute books and stock transfer ledgers to
Seller.
The parties acknowledge that neither this Agreement nor the
escrow arrangement creates a lender-borrower or debtor-creditor relationship
between the parties. The escrow arrangement is being utilized for efficient
and expeditious transfer of Seller's Stock to Energas in the event Seller
converts the promissory note to Energas stock or in the event the promissory
note is timely paid in full, or to Seller in the event Energas elects not to
pay the promissory note in full if it has not been converted by Seller to
Energas stock.
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10. GOVERNING LAW. This Agreement shall be construed pursuant to the
federal laws of the United States and the laws of the State of Oklahoma.
Provided, however, any laws relating to the approval of this Agreement by the
CDNX shall be governed pursuant to British Columbia and Canadian law.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the respective successors and assigns of Seller
and Energas.
12. EXECUTION IN COUNTERPART. This Agreement may be executed by the
parties in individual counterpart copies and if each party executes a
counterpart copy, it shall have the same effect as if all parties had
executed the same copy. Provided, however, until all parties have signed a
counterpart copy, there shall be no agreement.
Dated and executed as of the day, month and year first shown above.
ENERGAS RESOURCES INC.
/s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxx
---------------------------------- ------------------------------------
Xxxxx X. Xxxxxx Xxxxxx X. Xxxx, President
Xx. 0, Xxx 00 Xxx Xxx Xxxxxx
Xxxxxxx, XX 00000 0000 X.X. Xxxxxxxxxx, Xxxxx 0000-X
Xxxxxxxx Xxxx, XX 00000
/s/ Xxx Xxxxx
----------------------------------
Xxx Xxxxx
0000 X.X. 000xx Xxxxxx
Xxxxxxxx Xxxx, XX 00000-0000
/s/ Xxxxxx Xxxxx
----------------------------------
Xxxxxx Xxxxx
0000 X.X. 000xx Xxxxxx
Xxxxxxxx Xxxx, XX 00000-0000
/s/ Xxxxx X. Xxxxxx
----------------------------------
Xxxxx X. Xxxxxx
0000 X. Xxx, Xx. 000
Xxxxxxxx Xxxx, XX 00000
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/s/ Xxxxxxx X. X'Xxxxxx
----------------------------------
Xxxxxxx X. X'Xxxxxx
000 X. Xxxxxxx
XxXxxxxxx, XX 00000
/s/ Xxxxxx X'XXXXXX
----------------------------------
Xxxxxx X'XXXXXX
000 X. Xxxxxxx
XxXxxxxxx, XX 00000
Xxxxx X. and XxXxxx Xxxxx Living Trust
By: /s/ Xxxxx X. Xxxxx
-------------------------------
Xxxxx X. Xxxxx, Trustee
and
By: /s/ XxXxxx Xxxxx
-------------------------------
XxXxxx Xxxxx, Trustee
Xx. 0, Xxx 000X
Xxxxxxx, XX 00000
/s/ Xxxx Xxxxxxx
----------------------------------
Xxxx Xxxxxxx
000 Xxxxxx
Xxxxxxx, XX 00000
/s/ Xxxxx Xxxxxxx
----------------------------------
Xxxxx Xxxxxxx
000 Xxxxxx
Xxxxxxx, XX 00000
/s/ Xxxx X. Xxx
----------------------------------
Xxxx X. Xxx
0000 Xxxxxxxx
Xxxxxx, XX 00000
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