NOTE PURCHASE AGREEMENT
This
Note
Purchase Agreement (the “Agreement”) is made and entered into on July 3, 2008,
by and between Knight Energy Corp., a Maryland corporation, with its principal
place of business located at 000 Xxxx Xxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx
00000 (the “Company”), and the party listed on the attached “Schedule of
Lenders” (the “Lender”).
Recitals
A.
The
Company and the Lender are executing and delivering this Agreement in reliance
upon the exemptions from securities registration afforded by (i) the provisions
of Regulation D (“Regulation D”) as promulgated by the United States Securities
and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended
(the “1933 Act”), and (ii) Section 4(2) under the 1933 Act.
B.
The
Lender desires to purchase from the Company, and the Company desires to sell
to
the Lender, upon the terms and conditions stated in this Agreement, the
Company’s $2,500,000 15% Senior Secured Promissory Note in the form attached as
Exhibit
A (the
“Note”). The Note shall be sold in a closing (the “Closing”) as specified
herein.
C.
Contemporaneously with the execution and delivery of this Agreement, the Company
is executing and delivering to the Lender an Amendment to Security Agreement
in
the form attached as Exhibit
B
(the
“Amendment”), pursuant to which the Company has agreed to secure its obligations
under the Note with a first-priority security interest in all existing and
hereafter acquired assets owned by the Company.
D.
As
additional security for the Company’s obligations under the Note,
contemporaneously with the execution and delivery of this Agreement, Xxxxxxx
Xxxx Drilling, Inc. (“CHD”), which is a wholly-owned subsidiary of the Company,
is executing and delivering an Amendment to Corporate Guaranty in the form
attached as Exhibit
C
(the
“Subsidiary Amendment”) pursuant to which CHD is guarantying payment of the Note
and securing its obligations under that guaranty with a first-priority security
interest in all of its existing and hereafter acquired assets. Contemporaneously
with the execution and delivery of the Subsidiary Amendment, CHD is also
executing and delivering to the Lender an amendment to the Deed of Trust,
Security Agreement, Assignment of Production and Financing Statement from CHD
to
J. Xxxxxxx Xxxxxx, Trustee, for the benefit of the Lender, dated May 20, 2008
(the “Deed of Trust”), such amendment to be in the form attached as Exhibit
D
(the
“Amendment to Deed of Trust”).
Agreements
NOW,
THEREFORE, in consideration of their respective promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and the Lender hereby agree as follows:
1.
Purchase
and Sale of the Note.
(a)
Purchase.
At the
Closing, the Lender agrees to purchase the Note from the Company, and the
Company agrees to sell the Note to the Lender. The purchase price for the Note
(the “Purchase Price”) shall be as set forth on the Schedule of Lenders. For the
Closing, out of the Purchase Price there shall be paid (i) to the Lender a
non-refundable origination fee in an amount equal to five percent (5%) of the
Purchase Price and (ii) such other amounts as may be included in the
Disbursement Instructions attached as Exhibit
E (the
“Disbursement Instructions”). The disbursements specified in the Disbursement
Instructions shall be made on the Closing Date (as defined below).
(b)
The
Closing.
The
date of the Closing (the “Closing Date”) shall be July 3, 2008, or such other
date as the parties may mutually agree in writing. On or before the Closing
Date, (i)
the
Lender shall have delivered the Purchase Price to the Escrow Agent (as defined
in the Escrow Agreement in the form attached as Exhibit
F (the
“Escrow Agreement”)) in the manner set forth in paragraph (c) below, (ii) the
Company shall have delivered to the Escrow Agent originals of (A) this
Agreement, (B) the Note, (C) the Amendment, (D) the Subsidiary Amendment, (E)
the Amendment to Deed of Trust, (F) the Disbursement Instructions, (G) the
Escrow Agreement and (H) such other items as may be required by this Agreement
or any of the other documents (collectively, the “Closing Documents”), each duly
authorized and executed by the Company and/or any other parties thereto (other
than the Lender) and (iii) the Lender shall have delivered to the Escrow Agent
executed originals of those Closing Documents which are to be signed by the
Lender.
(c)
Payment.
The
Lender shall pay the Purchase Price by wire transfer of immediately available
funds in United States Dollars, to be deposited into the Escrow Account (as
defined in the Escrow Agreement), against delivery to the Escrow Agent of the
Closing Documents by the Company. At the Closing, the Escrow Agent shall be
responsible for disbursement of the Purchase Price according to the Disbursement
Instructions and delivery of the Closing Documents to the Lender (with copies
of
the Closing Documents to the Company duly executed by the Lender, where
required), in each case in accordance with the terms of the Escrow Agreement.
2.
The
Lender’s Representations and Warranties.
As of
the Closing, the Lender represents and warrants to the Company, and agrees,
as
follows:
(a)
Investment
Purposes; Compliance With 1933 Act.
The
Lender is purchasing the Note for its own account for investment only and not
with a view towards, or in connection with, the public sale or distribution
thereof, except pursuant to sales registered, or exempt from registration,
under
the 1933 Act and applicable state securities laws. The Lender does not by its
representations in this Section 2(a) agree to hold the Note for any minimum
or
other specific term, and reserves the right to dispose of the Note at any time
in compliance with Section 5(a) below.
(b)
Accredited
Investor Status.
The
Lender is an “accredited investor,” as that term is defined in Rule 501(a) of
Regulation D. The Lender has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
investment made pursuant to this Agreement. The Lender is aware that it may
be
required to bear the economic risk of the investment made pursuant to this
Agreement for an indefinite period of time, and is able to bear such risk.
2
(c)
Reliance
on Exemptions.
The
Lender understands that the Note is being offered and sold to it in reliance
on
specific exemptions from the registration requirements of applicable federal
and
state securities laws, and that the Company is relying upon the truth and
accuracy of, and the Lender’s compliance with, the representations, warranties,
agreements and covenants of the Lender set forth herein in order to determine
the availability of such exemptions and the eligibility of the Lender to acquire
the Note.
(d)
Information.
The
Lender and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Note that have been requested by the Lender. The
Lender and its advisors, if any, have been afforded the opportunity to ask
all
questions of the Company as they have in their discretion deemed advisable.
The
Lender understands that its investment in the Note involves a high degree of
risk. The Lender has sought such accounting, legal and tax advice as it has
considered necessary to an informed investment decision with respect to the
investment made pursuant to this Agreement.
(e)
No
Government Review.
The
Lender understands that no United States federal or state agency or any other
government or governmental agency has approved or made any recommendation or
endorsement of the Note or the fairness or suitability of the investment in
the
Note, nor have such authorities passed upon or endorsed the merits of the
offering of the Note.
(f)
Restrictions
on Transfer or Resale.
The
Lender understands that: (i) the Note has not been and is not being registered
under the 1933 Act or any state securities laws and may not be offered for
sale,
sold or otherwise transferred except as provided in Section 5(a) below and
(ii)
neither the Company nor any other person is under any obligation to register
the
Note under the 1933 Act or any state securities laws or to comply with the
terms
and conditions of any exemption thereunder.
(g)
Legend.
Subject
to Section 5(b) below, the Lender understands that the Note will bear a
restrictive legend (the “Legend”) in substantially the following form:
THIS
NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
LAWS
OF ANY STATE (COLLECTIVELY, THE “LAWS”). THIS NOTE MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER (I) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE NOTE UNDER THE APPLICABLE LAWS OR (II) AN OPINION
OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER,
TO
THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED DUE TO AN AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE APPLICABLE LAWS.
(h)
Authorization;
Enforcement.
The
Closing Documents to be signed by the Lender have been duly and validly
authorized, executed and delivered by the Lender and are each valid and binding
agreements of the Lender enforceable in accordance with their respective terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors’ rights generally.
3
3.
The
Company’s Representations and Warranties. As
of the
Closing, the Company represents and warrants to the Lender, and agrees, as
follows:
(a)
Organization
and Qualification.
The
Company is a corporation duly organized and existing in good standing under
the
laws of the State of Maryland, and has the requisite power to own its properties
and to carry on its business as now being conducted. CHD is a corporation duly
organized and existing in good standing under the laws of the State of Nevada,
and has the requisite power to own its properties and to carry on its business
as now being conducted. Both the Company and CHD are duly qualified as foreign
entities to do business and are in good standing in every other jurisdiction
in
which the nature of the business conducted by them makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. As used herein, “Material Adverse Effect” means any material and adverse
effect on (i) the assets, liabilities, sales, financial condition, business,
operations, affairs, circumstances or prospects of the Company and its
subsidiaries (taken as a whole) from those reflected in the SEC Documents (as
defined below) or from the facts represented or warranted in the Closing
Documents, (ii) the ability of the Company and its subsidiaries to carry out
their businesses as the same are being conducted or are proposed to be conducted
at the date of this Agreement or to meet their obligations under the Closing
Documents on a timely basis or (iii) the rights and remedies of the Lender
under
the Closing Documents.
(b)
Authorization;
Enforcement.
The
Company and CHD each have the requisite power and authority to enter into and
perform the Closing Documents to which each is a party. The Company has the
requisite power and authority to issue and sell the Note in accordance with
the
terms thereof, and to perform its obligations under the Note in accordance
with
their terms. The Company’s and CHD’s execution, delivery and performance of the
Closing Documents to which each is a party, and their consummation of the
transactions contemplated thereby, have been duly authorized by the Company’s
and CHD’s Board of Directors, and no further consent or authorization of the
Company or CHD, their shareholders, or any other person or entity, is required.
The Closing Documents to which the Company and CHD are parties (i) have been
duly and validly authorized, executed and (when issued) delivered by the Company
and/or CHD (as the case may be) and (ii) constitute valid and binding
obligations of the Company and/or CHD (as the case may be), enforceable against
the Company and/or CHD (as the case may be) in accordance with their respective
terms, subject as to enforceability to general principles of equity and to
bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors’ rights generally.
(c)
Capitalization.
As of
the Closing Date, the authorized capital stock of the Company consisted of
(i)
500,000,000 shares of $.0001 par value common stock, of which 31,145,785 shares
were issued and outstanding or issuable, and (ii) 50,000,000 shares of preferred
stock, of which -0-shares were issued and outstanding. All of such outstanding
shares have been validly issued and are fully paid and non-assessable. As of
the
Closing Date, except as disclosed in the attached Schedule
3(c),
(i)
there were no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever issued or agreed to by the
Company or CHD relating to, or securities or rights convertible into, any equity
interests of the Company or CHD, or arrangements by which the Company or CHD
is
or may become bound to issue additional equity interests and (ii) there
are
no outstanding debt securities of the Company or CHD. If requested by the
Lender, the Company has furnished to the Lender true and correct copies of
the
Company’s and CHD’s Articles of Incorporation, as in effect on the date hereof
(the “Articles of Incorporation”), and the Company’s and CHD’s Bylaws, as in
effect on the date hereof.
4
(d)
Acknowledgment
Regarding Lender’s Purchase of the Note.
Except
as disclosed on Schedule
3(d),
(i) the
Lender is not acting as a financial advisor to, or fiduciary of, the Company
or
CHD (or in any similar capacity) with respect to this Agreement or the
transactions contemplated hereby, (ii) this Agreement and the transactions
contemplated hereby, and the relationship between the Lender and the Company
and
CHD, are and will be considered “arms-length” notwithstanding any other or prior
agreements or nexus between the Lender and the Company and/or CHD, whether
or
not disclosed, and (iii) any statements made by the Lender, or any of its
representatives or agents, in connection with this Agreement and the
transactions contemplated hereby are not to be construed as advice or a
recommendation, are merely incidental to the Lender’s purchase of the Note and
have not been relied upon in any way by the Company or CHD or their respective
management. The Company’s decision to enter into this Agreement and the
transactions contemplated hereby have been based solely upon an independent
evaluation by the Company and its management.
(e)
No
Integrated Offering.
Neither
the Company nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security
or
solicited any offers to buy any security under circumstances which would prevent
the parties hereto from consummating the transactions contemplated hereby
pursuant to an exemption from registration under the 1933 Act and, specifically,
in accordance with the provisions of Regulation D.
The
transactions contemplated hereby are exempt from the registration requirements
of the 1933 Act, assuming the accuracy of the representations and warranties
of
the Lender contained herein.
(f)
No
Conflicts.
Except
as set forth in the attached Schedule
3(f),
neither
the Company nor CHD (i) is in violation of its Articles of Incorporation and
(ii) is in default (and no event has occurred which, with notice or lapse of
time or both, would put the Company or CHD in default) under, nor has there
occurred any event giving others (with notice or lapse of time or both) any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, indenture or other instrument to which the Company or CHD is a party,
except for defaults or rights as would not, in the aggregate or individually,
have a Material Adverse Effect. The business of the Company and CHD is not
being
conducted and, so long as the Lender owns the Note, shall not be conducted,
in
violation of any law, ordinance or regulation of any governmental entity, except
for possible violations which neither singly nor in the aggregate would have
a
Material Adverse Effect. Except as specifically contemplated by this Agreement
or as required under the 1933 Act and any applicable state securities laws,
neither the Company nor CHD is required to obtain any consent, authorization
or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver and perform any of its obligations
under the Closing Documents in accordance with the terms thereof.
5
(g)
SEC
Documents; Financial Statements.
Except
as disclosed on Schedule
3(g) hereof,
the Company has timely filed all reports, schedules, forms, statements and
other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the “1934
Act”), with all of the foregoing that were filed prior to the date hereof and
all exhibits included therein and all financial statements and schedules thereto
and all documents (other than exhibits) incorporated by reference therein being
hereinafter referred to as the “SEC Documents.” The Company has delivered to the
Lender (to the extent requested by the Lender) true and complete copies of
the
SEC Documents. As of their respective dates, the SEC Documents complied in
all
material respects with the requirements of the 1934 Act and the applicable
rules
and regulations of the SEC promulgated thereunder, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to
be
stated therein in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their respective
dates, the financial statements of the Company included in the SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto. Such financial statements (i) have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved except (A) as may be otherwise indicated in such financial
statements or the notes thereto or (B) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements and (ii) fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of
its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments). No information
provided by or on behalf of the Company to any Lender contains any untrue
statement of a material fact or omits to state any material fact required to
be
stated therein in order to make the statements therein, in the light of the
circumstances under which they are or were made, not misleading. Except as
set
forth in the financial statements of the Company included in the SEC Documents,
the Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to the date
of such financial statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in such financial
statements, in each case of clauses (i) and (ii) above, which, individually
or
in the aggregate, are not material to the financial condition, business,
operations, properties, operating results or prospects of the Company. The
SEC
Documents contain a complete and accurate description of all written and oral
contracts, agreements, leases or other instruments to which the Company or
any
subsidiary is a party or by which the Company or any subsidiary is bound which
are required by the rules and regulations promulgated by the SEC to be disclosed
(each a “Contract”). None of the Company, its subsidiaries or, to the best of
the Company’s knowledge, any of the other parties thereto, is in breach or
violation of any Contract, which breach or violation would, or with the lapse
of
time, the giving of notice, or both, have a Material Adverse Effect.
(h)
Absence
of Certain Changes; Bankruptcy.
Since
December 31, 2007, there has been no Material Adverse Effect. Neither the
Company nor CHD has taken any steps, and neither currently has any reasonable
expectation of taking any steps, to seek protection pursuant to any bankruptcy
law, nor does the Company or CHD have any knowledge that its creditors intend
to
initiate involuntary bankruptcy proceedings.
(i)
Absence
of Litigation.
Except
as set forth in the attached Schedule
3(i),
there
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board or governmental body pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its subsidiaries, wherein
an unfavorable decision, ruling or finding would have a Material Adverse Effect
or which would materially and adversely affect the validity or enforceability
of, or the authority or ability of (i) the Company to perform its obligations
under this Agreement or any of the documents contemplated herein or (ii) CHD
to
perform its obligations under the Subsidiary Amendment.
6
(j)
Foreign
Corrupt Practices.
Neither
the Company nor any of its subsidiaries, nor any person acting on behalf of
the
Company or any subsidiary has, in the course of his, her or its actions for
or
on behalf of the Company, (i) used any of the Company’s funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity, (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from the Company’s funds,
(iii) violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended, or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
(k)
Brokers;
No General Solicitation.
Except
as set forth in Schedule
3(k),
neither
the Company nor any subsidiary has taken any action that would give rise to
any
claim by any person for brokerage commissions, finder’s fees or similar payments
relating to this Agreement and the transactions contemplated hereby other than
as set forth in the Disbursement Instructions. The Company acknowledges that,
except as set forth in Schedule
3(k),
no
broker or finder was involved with respect to the transactions contemplated
hereby other than as set forth in the Disbursement Instructions. Neither the
Company nor any other person or entity participating on the Company’s behalf in
the transactions contemplated hereby, nor any person or entity acting for the
Company or any such other person or entity, has conducted any “general
solicitation,” as described in Rule 502(c) under Regulation D, with respect to
the Note.
(l)
Status of Assets.
Except
as described on Schedule
3(l) and
except as arise by operation of law, the Company and its subsidiaries have
good
and marketable title to each of the assets that is material to its business,
free and clear of all liens, claims, restrictions and other encumbrances. All
of
the outstanding shares of CHD are owned by the Company.
4.
Covenants
of the Parties.
(a)
Best
Efforts.
Each
party shall use its best efforts to timely satisfy each of the conditions to
be
satisfied by it as provided in Sections 6 and 7 of this Agreement.
(b)
Securities
Laws.
The
Company shall timely file a Form D (and any other equivalent form or notice
required by applicable state law) with respect to the issuance of the Note
if
and as required under Regulation D and applicable state securities laws, and
shall, upon written request of the Lender, provide a copy thereof to the Lender
within five (5) days of such request. The Company shall, on or before the
Closing Date, take all action necessary in order to sell the Note to the Lender
in compliance with federal and applicable state securities laws, and shall
provide written evidence of such action to the Lender upon written request.
(c)
Intentional
Acts or Omissions.
No
party shall intentionally perform or fail to perform any act that, if performed
or omitted to be performed, would prevent or excuse the performance of this
Agreement or any of the transactions contemplated hereby.
7
(d)
Expense
Reimbursement.
The
Company agrees to pay all reasonable fees and expenses (including reasonable
business, legal, appraisal and post-Closing monitoring fees and expenses)
incurred by the Lender in connection with this Agreement as the Lender may
reasonably request from time-to-time; provided, however, that in the absence
of
a default under any of the Closing Documents, the Lender shall not be entitled
to reimbursement for post-Closing monitoring fees more than two times per year.
Upon demand, the Company agrees to pay, or reimburse the Lender for, all such
fees and expenses, regardless of whether they are incurred before or after
the
date of this Agreement.
(e)
Status;
Taxes.
Until
the Note has been paid in full, the Company shall maintain its existence and
the
existence of CHD in good standing and shall pay all taxes, and shall cause
CHD
to pay all of its taxes, before they become delinquent, except for taxes that
are reasonably disputed or which, if not paid, would not have a Material Adverse
Effect.
(f)
Use
of
Proceeds.
The
Company shall use the Purchase Price only for (i) those disbursements listed
in
the Disbursement Instructions and (ii) the purchase and subsequent refurbishment
of the items described on the attached Schedule
4(f) (collectively,
the “Assets”). On the Closing Date, the net Purchase Price (after the
disbursements listed in the Disbursement Instructions) shall be deposited by
the
Company in a separate bank account (the “Account”) and the funds therein shall
not be drawn upon (i) except for use as provided in clause (ii) above and (ii)
until the Lender has provided its written consent to such draw down, which
shall
be provided within three (3)
days
after the Lender receives a copy of the purchase order or invoice for
refurbishment work (as applicable) with respect to such draw down. For
monitoring purposes, the Company shall either (i)
provide the Lender with online access to the Account (viewing only) or (ii)
provide the Lender with copies of all statements with respect the Account within
three (3) days after receipt by the Company.
(g)
No
Post-Closing Debt.
Until
the Note has been paid in full, unless otherwise agreed upon by the Lender
in
writing, in its sole discretion, neither the Company nor CHD shall incur any
debt for borrowed money after the Closing Date.
(h)
Monthly
Financial and Other Information.
Until
the Note has been paid in full, within thirty (30) days after the end of each
calendar month, the Company shall provide the Lender with a report,
electronically or in writing, that includes (i) a listing of all of the
Collateral (as defined below) as of the end of such calendar month, (ii) the
cash flow status of the Collateral as of the end of such calendar month, (iii)
unaudited consolidated financial statements for such calendar month (in
accordance with generally accepted accounting principles (“GAAP”)), (iv) a
description of any material change in the Company or any of its subsidiaries
during such calendar month, (v) a description of any material legal action
pending or threatened against the Company, any of its subsidiaries, or any
present or former officer or director of the Company or any of its subsidiaries,
during such calendar month and (vi) such other financial or business information
as the Lender may from time-to-time reasonably request, all in a format that
is
mutually agreeable to the Company and the Lender. The Company shall also furnish
to the Lender, from time-to-time, such reports in connection with the collateral
described in the Security Agreement (as defined in the Amendment), the
Subsidiary Security Agreement (as defined in the Subsidiary Amendment) and/or
the Deed of Trust as the Lender may reasonably request, all in reasonable
detail, including reports describing the equipment and as-extracted collateral,
specifying the locations of the equipment and as-extracted collateral, and
setting forth the then current location of the Company’s books pertaining to the
collateral described in the Security Agreement, the Subsidiary Security
Agreement and/or the Deed of Trust. In addition, unless otherwise notified
by
the Lender, during each calendar month the Company shall hold a monthly review
meeting (or teleconference) with the Lender at a mutually agreeable place and
time. To the extent reasonably requested by the Company, the Lender shall
execute a confidentiality agreement with respect any non-public information
disclosed pursuant to this Agreement.
8
(i)
Minimum
Cash and EBITDA.
Until
the Note has been paid in full, beginning on the first day of the month in
which
the Closing Date occurs and as of the first day of each calendar month
thereafter, the Company shall maintain its cash and cash equivalents and EBITDA
in excess of the minimum amounts set forth below for each date:
|
Calendar
Month
|
Cash and Equivalents
|
EBITDA
|
|||||
|
July
2008
|
$
|
150,000
|
$
|
27,291
|
|||
|
|
|||||||
|
August
2008
|
$
|
150,000
|
$
|
68,228
|
|||
|
|
|||||||
|
September
2008
|
$
|
150,000
|
$
|
86,422
|
|||
|
|
|||||||
|
October
2008
|
$
|
150,000
|
$
|
128,487
|
|||
|
|
|||||||
|
November
2008
|
$
|
150,000
|
$
|
179,881
|
|||
|
|
|||||||
|
December
2008
|
$
|
150,000
|
$
|
205,578
|
|||
|
|
|||||||
|
January
2009
|
$
|
150,000
|
$
|
213,035
|
|||
|
|
|||||||
|
February
2009
|
$
|
150,000
|
$
|
248,541
|
|||
|
|
|||||||
|
March
2009
|
$
|
150,000
|
$
|
248,541
|
|||
|
|
|||||||
|
April
2009
|
$
|
150,000
|
$
|
288,840
|
|||
|
|
|||||||
|
May
2009
|
$
|
150,000
|
$
|
288,840
|
|||
|
|
|||||||
|
June
2009
|
$
|
150,000
|
$
|
311,059
|
|||
|
|
|||||||
|
July
2009
|
$
|
150,000
|
$
|
339,698
|
|||
|
|
|||||||
|
August
2009
|
$
|
150,000
|
$
|
339,698
|
|||
|
|
|||||||
|
September
2009
|
$
|
150,000
|
$
|
365,829
|
|||
|
|
|||||||
|
October
2009
|
$
|
150,000
|
$
|
388,929
|
|||
|
|
|||||||
|
November
2009
|
$
|
150,000
|
$
|
388,929
|
|||
|
|
|||||||
|
December
2009 and thereafter
|
$
|
150,000
|
$
|
418,847
|
|||
9
(j)
Distributions
and Redemptions.
Until
the Note has been paid in full, neither the Company nor any subsidiary shall
(i)
purchase, redeem or otherwise acquire for value any of its equity securities
now
or hereafter outstanding or (ii) make any distribution of its assets to its
shareholders, other than distributions by CHD to the Company.
(k)
Sale
of Assets; Leasebacks; Management Fees.
Until
the Note has been paid in full, the Company shall not, and shall not permit
any
subsidiary to, enter into any arrangements, directly or indirectly, with any
person or entity, whereby any of them shall (i) sell or transfer any assets,
whether now owned or hereafter acquired, outside of the ordinary course of
business, (ii) rent or lease as lessee such assets (or any part thereof) or
any
other property which any of them intends to use for substantially the same
purpose or purposes as the property to be sold or transferred or (iii) pay
any
management fee or similar type of fee to any person or entity, except that
payments to Nortia Capital Partners, Inc. pursuant to an agreement that is
listed as an Exhibit to the Company’s Form 10-KSB for the fiscal year ended
December 31, 2007, shall be permitted. To the extent there is a sale of the
Assets in the ordinary course of business, the Company shall notify the Lender
of such sale in writing and shall offer to repay the outstanding principal
amount of the Note in an amount equal to the sale price (which offer may be
accepted or rejected by the Lender, in its sole discretion) unless (i) the
sale
price is less than $100,000 or (ii) within thirty (30) days of receipt, the
sale
proceeds are expended to purchase new Assets with a value comparable to the
ones
sold, in which case no repayment offer shall be required.
(l)
Collateral
Coverage Ratio.
Until
the Note has been paid in full, the Company shall not permit at any time its
“Collateral Coverage Ratio” to be less than 4.5x. For purposes of this
paragraph, “Collateral Coverage Ratio” shall mean, as of any date, an amount
equal to the ratio of (i) the sum of (A) the cash and cash equivalents plus
net
“Eligible Accounts Receivable” of the Company and its consolidated subsidiaries,
plus (B) 70% of the PV-10 of the Company’s proven developed reserves and 50% of
the PV-10 of the Company’s proven undeveloped reserves (with the reserve numbers
to be taken from a reserve report provided by an independent engineering firm
acceptable to the Lender, which shall be updated as required by the Lender,
but
no less than annually), plus (C) the orderly liquidation value of the Company’s
drilling rigs based on a third-party appraisal company acceptable to the Lender,
which shall be updated as required by the Lender, but no less than annually,
plus (D) 25% of the net book value of any fixed assets owned by the Company
and
not included in (B) or (C) above, all determined as of the end of each calendar
month in which the Note remains outstanding (beginning with June, 2008) on
a
consolidated basis in accordance with GAAP and reflected on the Company’s
consolidated balance sheet (collectively, the “Collateral”), to (ii) the unpaid
principal amount of the Note. For purposes of this paragraph, the term “Eligible
Accounts Receivable” shall mean accounts receivable that do not include (i)
accounts which are unpaid more than 90 days from the invoice date thereof,
or
that were not billed in the ordinary course of the Company’s or its
subsidiaries’ businesses (provided, however, that failure to xxxx on specific
dates as provided in customer terms and conditions or other instances where
the
Company’s or its subsidiaries’ actions are immaterially different from their
stated billing practices will not be deemed to be outside of the Company’s and
its subsidiaries’ ordinary course of business, (ii) any account for which there
exists a right of set-off, allowance, adjustment, defense or discount (except
regular discounts allowed in the ordinary course of business to promote prompt
payment (and for which no defense or counterclaim has been asserted)), solely
to
the extent of such set-off, allowance, adjustment, defense or discount, (iii)
any account arising from a “consignment,” (iv)
any
account which arises from the sale or lease to, or performance of services
for,
or represents an obligation of, an employee, partner, parent or subsidiary
of
the Company or any affiliate of the Company or subsidiary, (v) any account
arising from sales of goods or services in which the performance of the Company
or its subsidiary has been bonded by an issued performance bond, (vi) any
account which any manager of the Company or any subsidiary has knowledge that
the account debtor has claimed that such account is subject to set-off,
counterclaim, defense, allowance or adjustment, solely to the extent of such
set-off, counterclaim, defense, allowance or adjustment, (vii) any account
where
the account debtor is the subject of bankruptcy or insolvency proceedings and
(viii) any account generated by a subsidiary not domiciled in the United States
of America or where the account debtor is not domiciled in the United States
of
America, subject to an allowance for up to $200,000 of such accounts to be
included in Eligible Accounts Receivable.
10
(m)
Financial
Statements.
Until
the Note has been paid in full, (i) within forty-five (45) days after the end
of
each of the first three fiscal quarters (plus any filing extension to which
the
Company may be entitled based on a timely filing on Form 12b-25), the Company
shall provide the Lender with unaudited consolidated financial statements of
the
Company and its subsidiaries for such fiscal quarter and (ii) within ninety
(90)
days after the end of each fiscal year (plus any filing extension to which
the
Company may be entitled based on a timely filing on Form 12b-25), the Company
shall provide the Lender with audited consolidated financial statements of
the
Company and its subsidiaries for such fiscal year, in each case prepared by
an
accounting firm mutually acceptable to the Company and the Lender.
(n)
Subsidiaries.
In the
event that the Company has any subsidiary other than CHD in existence at any
time prior to the full payment of the Note, the Company shall cause each such
subsidiary to guaranty the repayment of the Note (and related expenses) and
secure such guaranty with a first-priority security interest in all of its
assets, in each case pursuant to documentation substantially in the same form
as
the Subsidiary Guaranty (as defined in the Subsidiary Amendment), the Subsidiary
Security Agreement and the Deed of Trust (if applicable).
(o)
Appraisal
of Assets.
At the
Company’s expense, within thirty (30) days after the Company completes the
acquisition of an Asset, the Company shall provide the Lender with an appraisal
of such Asset by an appraiser mutually acceptable to the Company and the Lender.
(p)
Indemnification.
Upon
demand, the Company shall indemnify the Lender and its affiliates for, and
shall
defend and hold the Lender and its affiliates harmless against, any loss,
damage, liability, cost or expense (including, but not limited to, reasonable
attorney’s fees and costs of investigation) arising out of or in connection with
any claim or cause of action that is brought or threatened against the Lender
and/or its affiliates by any person or entity (other than the Company) as a
result of the Lender entering into this Agreement or any of the other Closing
Documents and/or performing its obligations hereunder or thereunder, except
to
the extent such loss, damage, liability, cost or expense has resulted from
the
gross negligence or wilful misconduct of the Lender or its affiliates. The
obligations in this Section shall survive the termination of this Agreement
and
the repayment of the Note.
11
(q)
No
Changes to Certain Agreements.
Unless
consented to in writing by the Lender, until the Note has been paid in full,
the
Company shall not (i) materially modify any employment, consulting, advisory
or
other services agreement between the Company and any of its officers, directors
or Nortia Capital Partners, Inc. that exists as of the Closing Date (all of
which agreements are listed as Exhibits to the Company’s Form 10-KSB for the
fiscal year ended December 31, 2007) or (ii) enter into any new agreement with
any of its officers, directors or Nortia Capital Partners, Inc. or any of their
affiliates involving employment, consulting, advisory or other services or
providing for any compensation to such persons.
(r)
Limitation
on Payment of Legal Fees.
Unless
consented to in writing by the Lender, until the Note has been paid in full,
the
Company shall not directly or indirectly pay on behalf of any person, or
reimburse any person for, any legal fees incurred by such person in any matter
except one which relates solely to such person’s alleged acts or omissions on
behalf of the Company.
(s)
Listing
on the American Stock Exchange; Independent Board.
Company
shall use its best efforts to cause its common stock to be listed for trading
on
the American Stock Exchange (“AMEX”) by November 20, 2008. In addition, the
Company agrees that a majority of its Board of Directors shall be “independent”
according to AMEX standards (the “Independence Standard”) by November 20, 2008.
In the event that the Independence Standard is not met by the deadline, the
Note’s Rate (as defined in the Note) shall increase by two percent (2%) until
the Independence Standard is met.
(t)
Legal
Opinion.
Within
twenty-one (21) days after the Closing Date, the Company’s counsel shall have
provided an opinion that is reasonably satisfactory to the Lender with respect
to such matters as the Lender may designate.
5.
Transfer,
Legend and Related Matters.
(a)
Transfer
of a Note.
Subject
to the provisions of Section 8(g) below, if (i) the Note has been registered
under the 1933 Act and applicable state securities laws, (ii) the Lender shall
have delivered to the Company an opinion by counsel reasonably satisfactory
to
the Company, in form, scope and substance reasonably satisfactory to the
Company, to the effect that the Note or any interest therein may be sold or
transferred pursuant to an exemption from such registration or (iii) the Lender
notifies the Company in writing that it is transferring the Note or any interest
therein to an accredited investor then, in each instance, the Lender may
transfer the Note or interest, as the case may be, upon the reasonable consent
of the Company; provided, however, that the Lender may transfer the Note or
any
interest therein to HD Special-Situations Offshore Fund, Ltd. at any time
without consent upon written notice to the Company (with the Lender hereby
representing and warranting to the Company that HD Special-Situations Offshore
Fund, Ltd. is an accredited investor).
12
(b)
Removal
of Legend.
The
Legend shall be removed from the Note, if, unless otherwise required by state
securities laws, (i) the sale of the Note is registered under the 1933 Act
or
(ii) the holder of the Note provides the Company with an opinion by counsel
reasonably satisfactory to the Company, that is in form, substance and scope
reasonably satisfactory to the Company, to the effect that a public sale or
transfer of the Note may be made without registration under the 1933 Act.
(c)
Injunctive
Relief for Breach.
The
Company acknowledges that a breach of its obligations under Sections 5(a) and/or
5(b) above will cause irreparable harm to the Lender by vitiating the intent
and
purpose of the transactions contemplated hereby. Accordingly, the Company agrees
that the remedy at law for a breach of its obligations under such Sections
would
be inadequate and agrees that, in the event of a breach or threatened breach
by
the Company, the Lender shall be entitled, in addition to all other remedies
at
law or in equity, to an injunction restraining any breach and/or requiring
immediate appropriate action by the Company, without the necessity of showing
economic loss and without any bond or other security being required.
6.
Conditions
to the Company’s Obligation to Sell.
The
obligation of the Company hereunder to sell the Note to the Lender at the
Closing is subject to the satisfaction, on or before the Closing Date, of each
of the following conditions; provided, however, that these conditions are for
the Company’s sole benefit and may be waived in writing by the Company at any
time in its sole discretion:
(a)
The
Lender shall have (i) executed each of the Closing Documents to the extent
required thereby and (ii) delivered such documents or signature pages thereof
(via facsimile or as otherwise provided in the Escrow Agreement), together
with
such other items as may be required by this Agreement, to the Escrow Agent.
(b)
The
Lender shall have delivered to the Escrow Agent on behalf of the Company, and
the Company shall have received from the Escrow Agent pursuant to the terms
of
Escrow Agreement, the Purchase Price by wire transfer of immediately available
funds.
(c)
The
representations and warranties of the Lender in this Agreement shall be true
and
correct in all material respects as of the date made and as of the Closing
Date
as though made at that time (except for representations and warranties that
speak as of a specific date), and the Lender shall have performed, satisfied
and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Lender at or prior to the Closing Date.
(d)
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered or issued by any court or governmental authority
of
competent jurisdiction or any self-regulatory organization having authority
over
the matters contemplated hereby which restricts or prohibits the consummation
of
any of the transactions contemplated herein.
7.
Conditions
to the Lender’s Obligation to Purchase.
The
obligation of the Lender to purchase the Note at the Closing is subject to
the
satisfaction, on or before the Closing Date, of each of the following
conditions; provided, however, that these conditions are for the sole benefit
of
the Lender and may be waived by the Lender at any time in its sole discretion:
13
(a)
There
shall have been no Material Adverse Effect on the Company and the Company shall
have paid or caused the payment of all fees and expenses due to the Lender
and/or counsel for the Lender as required by this Agreement.
(b)
The
Company and each other person (other than the Lender) who is required to execute
the Closing Documents shall have (i) executed each of the Closing Documents
to
the extent required thereby and (ii) delivered such documents or signature
pages
thereof (via overnight delivery or as otherwise provided in the Escrow
Agreement), together with such other items as may be required by this Agreement,
to the Escrow Agent.
(c)
The
Company shall have issued and have duly executed by the authorized personnel
of
the Company and delivered to the Escrow Agent on behalf of the Lender, the
Lender’s original Note (via overnight delivery or as otherwise provided by the
Escrow Agreement).
(d)
The
representations and warranties of the Company shall be true and correct in
all
material respects as of the date made and as of the Closing Date as though
made
at that time (except for representations and warranties that speak as of a
specific date), and the Company shall have performed, satisfied and complied
with the covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by the Company at or prior to the Closing
Date, including obtaining all consents and approvals required for it to enter
into and consummate the Closing Documents.
(e)
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, or issued by any court or governmental authority
of
competent jurisdiction or any self-regulatory organization having authority
over
the matters contemplated hereby which restricts or prohibits the consummation
of
any of the transactions contemplated herein.
8.
Governing
Law; Miscellaneous.
(a)
Governing
Law.
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of California as applied to contracts made and to be fully performed
in such state, without regard to the conflicts of laws provisions thereof.
Service of process in any civil action relating to or arising out of this
Agreement (including all Exhibits or Schedules or any addenda hereto) or the
transactions contemplated herein may be accomplished in any manner provided
by
law. The parties hereto agree that a final, non-appealable judgment in any
such
suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
(b)
Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and signature pages from such
counterparts have been delivered to the Escrow Agent.
14
(c)
Headings;
Interpretation.
The
headings of this Agreement are for convenience of reference and shall not form
a
part of, or affect the interpretation of this Agreement. As used herein, the
masculine shall refer to the feminine and neuter, and vice versa, as the context
may require. As used herein, unless the context clearly requires otherwise,
the
words “herein,” “hereunder” and “hereby,” shall refer to this entire Agreement
and not only to the Section or paragraph in which such word appears. If any
date
specified herein falls upon a Saturday, Sunday or public or legal holidays,
the
date shall be construed to mean the next business day following such Saturday,
Sunday or public or legal holiday. For purposes of this Agreement, a “business
day” is any day other than a Saturday, Sunday or public or legal holiday. Each
party intends that this Agreement be deemed and construed to have been jointly
prepared by the parties. As a result, the parties agree that any uncertainty
or
ambiguity existing herein shall not be interpreted against either of them.
(d)
Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e)
Entire
Agreement; Amendments.
This
Agreement and the documents referenced herein (which are incorporated herein
by
reference) contain the entire understanding of the parties with respect to
the
matters covered herein and supersede all prior agreements, negotiations and
understandings, written or oral, with respect to such subject matter. Except
as
specifically set forth herein, neither the Company nor the Lender makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement or the other Closing Documents shall be waived
or
amended other than by an instrument in writing signed by the Company and the
Lender. No delay or omission of any party hereto in exercising any right or
remedy hereunder shall constitute a waiver of such right or remedy, and no
waiver as to any obligation shall operate as a continuing waiver or as a waiver
of any subsequent breach.
(f)
Notices.
Any
notices required or permitted to be given under the terms of this Agreement
shall be in writing and sent by U. S. Mail or delivered personally or by
overnight courier or via facsimile (if via facsimile, to be followed within
one
(1) business day by an original of the notice document via overnight courier)
and shall be effective (i) five (5) days after being placed in the mail, if
mailed, certified or registered, return receipt requested, (ii) upon receipt,
if
delivered personally or (iii) one (1) day after facsimile transmission or
delivery to a courier service for overnight delivery, in each case properly
addressed to the party to receive the same. The addresses for such
communications shall be as follows:
|
If
to the Company:
|
Knight
Energy Corp., Attn.: President
000
Xxxx Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx,
Xxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
E-mail:
xxxxxxxxxxxxxxx@xxxxxxx.xxx
|
15
|
If
to the Lender:
|
HD
Special-Situations, LP
000
Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention:
Xxxx Xxxxxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
E-mail:
xxxx@xxxxx.xxx
|
Each
party shall provide written notice to the other parties of any change in
address.
(g)
Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the Lender. The Lender may assign any or all of its rights under
this
Agreement to any person or entity to whom the Lenderassigns or transfers the
Note pursuant to Section 5(a) above; provided, however, that such transferee
shall agree in writing to be bound by the provisions of the Closing Documents
that apply to the “Lender” with respect to the transferred Note. Notwithstanding
anything herein to the contrary, the Lender may pledge all or any part of the
Note as collateral for a bona fide loan pursuant to a security agreement with
a
third party lender which is an accredited investor, and such pledge shall not
be
considered an assignment in violation of this Agreement so long as (i) it is
made in compliance with all applicable laws and (ii) such third-party lender
shall assume the rights, and be bound by the obligations, of the Lender
specified in the Closing Documents.
(h)
No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
(i)
Survival.
Unless
this Agreement is terminated under Section 8(l) below, the representations,
warranties and agreements of the Company and the Lender contained herein shall
survive the Closing.
(j)
Publicity.
The
Company and the Lender shall have the right to review (but not the right to
approve), before issuance by the other, any press releases or other public
statements with respect to the transactions contemplated hereby, including
a
“tombstone” describing the financing provided pursuant to this Agreement.
(k)
Further
Assurance.
Each
party shall do and perform, or cause to be done and performed, at its expense,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
16
(l)
Termination.
In the
event that the Closing shall not have occurred on or before July 15, 2008,
this
Agreement may be terminated at any time thereafter by written notice from one
party to the others. Such termination shall not be the sole remedy for a breach
of this Agreement by the non-breaching party, and each party shall retain all
of
its rights hereunder at law or in equity. Notwithstanding anything herein to
the
contrary, a party whose breach of a covenant or representation and warranty
or
failure to satisfy a condition prevented the Closing shall not be entitled
to
terminate this Agreement.
(m)
Remedies.
No
provision of this Agreement providing for any specific remedy to a party shall
be construed to limit such party to the specific remedy described, and any
other
remedy that would otherwise be available to such party at law or in equity
shall
also be available. The parties also intend that the rights and remedies
hereunder be cumulative, so that exercise of any one or more of such rights
or
remedies shall not preclude the later or concurrent exercise of any other rights
or remedies.
(n)
Attorney’s
Fees.
If any
party to this Agreement shall bring any action for relief against the other
arising out of or in connection with this Agreement, in addition to all other
remedies to which the prevailing party may be entitled, the losing party shall
be required to pay to the prevailing party a reasonable sum for attorney’s fees
and costs incurred in bringing such action and/or enforcing any judgment granted
therein, all of which shall be deemed to have accrued upon the commencement
of
such action and shall be paid whether or not such action is prosecuted to
judgment. Any judgment or order entered in such action shall contain a specific
provision providing for the recovery of attorney’s fees and costs incurred in
enforcing such judgment. For the purposes of this Section, attorney’s fees shall
include, without limitation, fees incurred with respect to the following: (i)
post-judgment motions, (ii) contempt proceedings, (iii) garnishment, levy and
debtor and third party examinations, (iv) discovery and (v) bankruptcy
litigation.
IN
WITNESS WHEREOF, the Lender and the Company have caused this Agreement to be
duly executed by their respective authorized persons on the date first written
above.
|
|
The
Company:
|
||
|
|
|
||
|
|
|||
|
|
|
||
|
|
By:
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
The
Lender:
|
||
|
|
|
|
|
|
|
HD
SPECIAL-SITUATIONS, LP
|
||
|
By:
|
|||
|
Title:
|
|||
17
LIST
OF EXHIBITS AND SCHEDULES
Schedule
of Lenders
|
Exhibit
A
|
Form
of 15% Senior Secured Promissory Note
|
|
Exhibit
B
|
Amendment
to Security Agreement
|
|
Exhibit
C
|
Amendment
to Corporate Guaranty
|
|
Exhibit
D
|
Amendment
to Deed of Trust, Security Agreement, Assignment of Production
and Financing Statement
|
|
Exhibit
E
|
Disbursement
Instructions
|
|
Exhibit
F
|
Escrow
Agreement
|
Schedule
3(c)
Schedule
3(d)
Schedule
3(f)
Schedule
3(g)
Schedule
3(i)
Schedule
3(k)
Schedule
3(l)
Schedule
4(f)
SCHEDULE
OF LENDERS
|
Purchase Price and Note Principal
|
||||
|
HD
Special-Situations, LP
|
$
|
2,500,000
|
||
18
SCHEDULE
3(c)
The
Company currently has 5,300,000 warrants outstanding as follows:
|
Nortia
Capital Partners, Inc.:
|
2,500,000;
1,250,000 at $.50 and 1,250,000 at $1.00 expiring Xxxxx 00, 0000
|
|
Xxxx
Xxxxxxx XX:
|
2,500,000;
1,250,000 at $.50 and 1,250,000 at $1.00 expiring
March 10, 2010
|
|
Com-Advise:
|
300,000
at $3.00 expiring October 1, 2008
|
SCHEDULE
3(d)
None
SCHEDULE
3(f)
None
SCHEDULE
3(g)
None
19
SCHEDULE
3(i)
None
SCHEDULE
3(k)
None
SCHEDULE
3(l)
None
20
SCHEDULE
4(f)
DRILLING
RIG #1
Inventory:
102’
Xxx
X. Xxxxx Xxxxxxx
T-20
National Draworks-powered by rebuilt 12V92 Detroit
9’
H
x
40’ L x 16’ W substructure-
150
ton
Ideal Blocks – 4 sheave W/B5 Hook
Top
Doghouse w/water tank
Roughneck
Doghouse (bottom)
2000
gal
& 3000 gal diesel tanks
5000’
4
½” drill pipe
16
drill
collars 6 ¼”
150
KW
light plant w/ 292 Xxxxxxx
X
X XXX
00” 12V92
C-250
15”
powered by 8V71 Detroit
Xxxxxxxx
150 ton swivel
Xxxxx
& Bushings
17
½
Emsco table
2
Pipe
Baskets
2
sets
pipe racks
Reagon
BOP w/new bladder
Hydraulic
hand pump
Tongs
Subs
New
Lights
Hand
Tools
Catwalk
Stairways
V-Door
New
Xxxxx
Hose
Auto
Driller – rebuilt
Recorder-rebuilt
Straight
Hole
21
Deviation
spool w/ new line
Jets
– new hoses
Rebuilt
Air Compressor
Mud
Xxxxxx
Two
(2)
300 bbl. steel mud pits (optional)
HORSEPOWER
IS 750
DRILLING
RIG #2
Inventory:
Xxx
X.
Xxxxx 102’ Derrick SN #T2702 with 4 sheaves
11’
Substructure
(2)
12V92
Detroit Engines compounded, SN #00XX0000000000000
& SN
#12VF0755281237B00,
re-manufactured
Ideco
H-40 Draw Works 800 HP w/ new Brakes complete w/air controls, 1” line
Ideal
000
Xxx Xxxxx/Xxxx
Xxxxxxxx
6200
Top
Doghouse 18’ X 8’ with knowledge box, bench and lockers.
Bottom
Doghouse 20’ X 8’ with lockers, heater and parts bin
3000
Gallon Fuel Tank
6
Pipe
Racks (3 sets)
Catwalk
45’ X 4’ X 4’
#1
Pump -
16V71 Detroit Engine on National 20P Pump w/20” Stroke SN #30056
#2
Pump –
Xxxxxx Xxxxxx 14” pump powered by rebuilt 3406
175
KVW
Light Plant Powered By 671 Detroit Engine (Rebuilt)
45’
Xxxxx
w/Bushing and Hose
Xxxxxx
BOP w/Xxxxxx Hydraulic Pump unit
Geolograph
Recorder (3264) L-3485
Auto
Drill – SN #5072
Loading
ramp 9’ X 20’ X 5’
Xxxxxxxx
17 ½” Rotary Table (Just Rebuilt)
Geolograph
Weight Indicator
Tools
–
(2) Tongs, Slips, 4 ½” Elevators, 8’ Xxxxx
22
300
Barrel Water Tank w/Tool Shed Combination
2000
Gallon Diesel Tank
(2)
Pipe
Baskets
Misc.
Others
Xxxxxx
makeup and breakout catheads
450
HP
twin disc torque converters
Screen
type shale shaker – new manufactured
(14)
Collars-5 7/8” 4” Full hole w/subs
NO
DEVIATION SURVEY TOOLS
ONLY
ONE
STEEL PIT, BARE NEEDS TO BE REWORKED
NO
DRILL
PIPE
BRAND
NEW
STRING OF 6 ½” DRILL COLLARS
23
