MERGER & ACQUISITION AGREEMENT
MERGER AND ACQUISITION AGREEMENT, dated as of March 20th, 2000, by and
among Power Exploration, a Nevada corporation (the "Company"), and J. Xxxx
Xxxxx, Art Xxxxx, Xxxx Xxxxx, Xxx Xxxx and Xxx Xxxxx (collectively the
"Seller").
WITNESSETH:
WHEREAS, Seller owns 50,000 shares of common stock, $ 1.00 par value per
share, of Xxxxx Oil Company, Inc., an Oklahoma corporation ("Xxxxx"), which
shares constitute 100% of the issued and outstanding shares of capital stock of
Xxxxx (the "Xxxxx Shares"); and
WHEREAS, the Company desires to acquire from the Seller, and the Seller
desires to sell to the Company, all of the Xxxxx Shares in exchange for the
issuance by the Company of an aggregate of two million five hundred thousand
(2,500,000) shares (the "Company Shares") of the Company's common stock, par
value $.02 per share .(the "Company Common Stock"), on the terms and conditions
set forth below.
These shares shall be restricted under Rule 144 of the Securities Acts.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and agreements set forth herein, the parties hereto
agree as follows:
ARTICLE I
EXCHANGE OF SHARES
1.1 Exchanize of Shares. Subject to the terms and conditions of this
Agreement, on the Closing Date (as hereinafter defined) (a) the Company shall
issue and deliver to Seller two million five hundred thousand (2,500,000) shares
of authorized but unissued shares of Company Common Stock, and (b) Seller agrees
to deliver to the Company, 50,000 Xxxxx Shares along with an appropriately
executed stock power endorsed in favor of the Company. The subject transaction
shall be accepted by all parties as a taxfree merger pursuant to Section 368 of
the Internal Revenue Code.
1.2 li@me and Place ofclosing. The closing of the transactions contemplated
hereby (the "Closing") shall take place at the oitices of The Kirshner Law Xxxx,
Suite 3360, Bank One Center, 000 Xxxxx Xxxxxxxx, Xxxxxxxx Xxxx, xx April 17th,
2000 (the "Closing Date") at 10:00 A.M., or at such other time and place as the
Company and the Seller may agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Seller that:
2.1 Due Orizanization and Oualification, Subsidiaries: Due Authorization.
(a) The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of formation, with full
corporate power and authority to own, lease
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and operate its respective business and properties and to carry on its
respective business in the places and in the manner as presently conducted or
proposed to be conducted. The Company is in good standing as a foreign
corporation in each jurisdiction in which the properties owned, leased or
operated, or the business conducted, by it requires such qualification except
for any such failure, which when taken together with all other failures, is not
likely to have a material adverse effect on the business of the Company taken as
a whole.
(b) The Company does not own, directly or indirectly, any capital stock,
equity or interest in any corporation, firm, partnership, joint venture or other
entity.
(c) The Company has all requisite corporate power and authority to execute
and deliver this Agreemen@ and to consummate the transactions contemplated
hereby and thereby. The Company has taken all corporate action necessary for the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and this Agreement constitutes the valid and
binding obligation of the Company, enforceable against the Company in accordance
with its respective terms, except as may be affected by bankruptcy, insolvency,
moratoria or other similar laws affecting the enforcement of creditors' rights
generally and subject to the qualification that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefor may be brought.
2.2 No Conflicts or Defaults. The execution and delivery of this Agreement
by the Company and the consummation of the transactions contemplated hereby do
not and shall not (a) contravene the Certificate of Incorporation or By-laws of
the Company or (b) with or without the giving of notice or the passage of time
and subject to obtaining such consents prior to the Closing as are set forth in
Item 2.2 of the Disclosure Schedule, (i) violate, conflict with, or result in a
breach of, or a default or loss of rights under, any material covenan@ agreemen@
mortgage, indenture, lease, instrument, permit or license to which the Company
is a party or by which the Company or any of their respective assets are bound,
or any judgment, order or decree, or any law, rule or regulation to which the
Company or any of their respective assets are subjec@ (ii) result in the
creation of, or give any party the right to create, any lien, charge,
encumbrance or any other right or adverse interest ("Liens") upo any of the
assets of the Company, (iii) terminate or give any party the right to terminate,
amend, abandon or refuse to perform, any material agreemen@ arrangement or
commitment to which the Company is a party or by which the Company or any of the
Subsidiaries or any of their respective assets are bound, or (iv) accelerate or
modify, or give any party the right to accelerate or modify, the time within
which, or the terms under which, the Company or any of the Subsidiaries is to
perform any duties or obligations or receive any rights or benefits under any
material agreement, arrangement or conunitinent to which it is a party.
2.3 Captitalization
(a) The authorized capital stock of the Company immediately prior to giving
effect to the transactions contemplated hereby consists of 50,000,000 shares of
Common Stock of which 1 1,83 0,000 shares are issued and outstanding as of the
date hereof and 10,000,000 shares of Preferred Stock of which zero (0) shares
are issued and outstanding as of the date hereof. All of the outstanding shares
of Common Stock are, and the Company Shares when issued in accordance with the
terms hereof, will be, duly authorized, validly issued, ftilly paid and
nonassessable, and have not been or, with respect to the Company Shares, will
not be issued in violation of any preemptive right of stockholders. All
outstanding shares of the Company capital stock were issued in compliance with
all applicable federal and state laws. The Company Shares are not subject to any
preemptive or subscription righ@ any voting trust agreement or other contract,
agreemen@ arrangement, option, warrant, call, commitment or other right of any
character obligating or entitling the Company to issue, sell, redeem or
repurchase any of its securities, and there is no outstanding
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security of any kind convertible into or exchangeable for Common Stock. The
offers and sales of all the Company's outstanding securities were at all
relevant times either registered under the Securities Act and the applicable
state securities or Blue Sky laws, or exempt from such registration pursuant to
the exemption claimed therefor.
(b) Except as set forth on Schedule 2.3 of the Disclosure Schedule, there
is no commitment, plan, or arrangement to issue, and there is no outstanding
option, warrant, or other right calling for the issuance of, any share of
capital stock of the Company or its Subsidiaries or any security or other
instrument which by its terms is convertible into, exercisable for, or
exchangeable for capital stock of the Company or its Subsidiaries. No person has
any preemptive rights to purchase securities of the Company or its Subsidiaries.
No holder of any of the Company's or Subsidiaries' securities has any rights,
"demand," to piggyback" or otherwise, to have such securities registered or to
demand the filing of a registration statement.
2.4 (a) Financial Statements. Exhibit 1A to the Disclosure Schedule
contains the Company Form IO-QSB for the quarter ended December 31, 1999, (such
statements being the "Company Financial Statements"). The Financial Statements,
together with the notes thereto, have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent throughout all
periods presented, subject toauditadjustments,whicharenotexpectedtobematerial.
Suchstatementspresentfairiythefinancialposition of the Company as of the dates
and for the periods indicated. The books of account and other financial records
of the Company have been maintained in accordance with good business practices.
(b) Reserve Reports. Exhibit 1B, latest reserve reports on Company oil and
gas properties.
2.5 Further Financial Matters.
(a) The Company has no material liabilitie or obligations, whether secured
or unsecured, accrued, determined, absolute or contingent asserted or unasserted
or otherwise, which are required to be reflected or reserved in a balance sheet
or the notes thereto under generally accepted accounting principles, but which
are not reflected in the Financial Statements.
(b) Except as set forth in the Financial Statements, the Company does not
have any, direct or indirect, indebtedness, liability, claim, loss, damage,
deficiency, obligation or responsibility, fixed orunfixed, Xxxxxx or inchoate,
liquidated or unliquidated, secured orunsecured, accrued, absolute, contingent
or therwise.
2.6 Taxes. The Companyhas filed all United States federal, state, county,
local and foreign national, provincial and local returns and reports which were
required to be filed on or prior to the date hereof in respect ofall income,
withholding, franchise, payroll, excise, property, sales, use, value-added or
other taxes or levies, imposts, duties, license and registration fees, charges,
assessments or withholdings of any nature whatsoever (together, "Taxes"), and
has paid all Taxes (and any related penalties, fines and interest) which have
become due pursuant to such returns or reports or pursuant to any assessment
which has become payable, or, to the extent its liability for any Taxes (and any
related penalties, flnes and interest) has not been fully discharged, the same
have been properly reflected as a liability on the books and records of the
Company and adequate reserves therefor have been established. All such returns
and reports filed on or prior to the date hereof have been properly prepared and
are true, correct (and to the extent such returns reflectjudginents made by the
Company or a Subsidiary, as the case may be, suchjudgtnents were reasonable
under the circumstances) and complete in all material respects. No extension for
the filing of any such return or report is currently in effect. No tax return or
tax return liability of the Company or any Subsidiary has been audited or is
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presently under audit. All taxes and any penalties, fines and interest which
have been asserted to be payable as a result of any audits have been paid.
Except as indicated in Item 2.6 of the Disclosure Schedule, the Company has not
given or been requested to give waivers of any statute of limitations relating
to the payment of any Taxes (or any related penalties, fines and interest).
There are no claims pending or, to the knowledge of the Company, threatened,
against the Company for past due Taxes. All payments for withholding taxes,
unemployment insurance and other amounts required to be paid for periods prior
to the date hereof to any governmental authority in respect of employment
obligations of the Company including without limitation, amounts payable
pursuant to the Federal Insurance Contributions Act, have been paid or shall be
paid prior to the Closing and have been duly provided for on the books and
records of the Company and in the Financial Statements.
2.7 Indebtedness. Contracts. No Defaults
(a) Item 2.7 of the Disclosure Schedule sets forth a true, complete and
correct list of all material instruments, agreements, indentures, mortgages,
guarantees, notes, conunitments, accommodations, letters of credit or other
arrangements or understandings, whether written or oral, to which the Company is
a party (collectively, the "Operating Agreements"). An agreement shall not be
considered material for the purposes of this Section 2.7(a) if it provides for
expenditures or receipts of less than $5,000 and has been entered into by the
Company in the ordinary course of business. The Operating Agreements constitute
all of the contracts, agreements, understandings and arrangements required for
the operation of the business of the Company and the Subsidiaries or which have
a material effect thereon. Copies of all such material written Operating
Agreements have previously been delivered orotherwise made available to the
Seller and such copies are true, complete and correct as of the dat hereof.
(b) Neither the Company, nor, to the Companys knowledge, any other person
or entity is in breach in any material respect of, or in default in any material
respect under, any material contract agreemen@ arrangement commitment or plan to
which the Company is a party, and no event or action has occurred, is pending or
is threatened, which, after the giving of notice, passage of time or otherwise,
would constitute or result in such a material breach or material default by the
Company or, to the knowledge of the Company, any other person or entity. The
Company has not received any notice of default under any contract agreemen@
arrangement conunitment or plan to which it is a party, which default has not
been cured to the satisfaction of, or duly waived by, the party claiming such
default on or before the date hereol
2.8 Personal Property. The Company has good and marketable title to all of
its tangible personal property and assets, including, without limitation, all
ofthe assets reflected in the Financial Statements that have not been disposed
of in the ordinary course of business since December 31, 1999, free and clear of
all Liens or mortgages, except for any Lien for current taxes not yet due and
payable and such restrictions, if any, on the disposition of securities as may
be imposed by federal or applicable state securities laws.
2.9 Real Property. Item 2.9 of the Disclosure Schedule sets forth a true
and complete list of all real property owned by, or leased or subleased by or
to, the Company and its Subsidiaries (the "Company Real Property"). Each lease
to which the Company is a party is valid, binding and in fWl force and effect
with respect to the Company, as the case may be, and, to the knowledge of the
Company no notice of default or termination under any such lease is outstanding.
2.10 Compliance with Law.
(a) The Company is not conducting its respective business or affairs in
material violation of any applicable federal, state or local law, ordinance
rule, regulation, court or administrative order, decree
74
or process, or any requirement of insurance carriers. The Company has not
received any notice of violation or claimed violation of any such law,
ordinance, rule, regulation, order, decree, process or requirement.
(b) The Company is in compliance in all material respects with all
applicable federal, state, local and foreign laws and regulations relatitig to
the protection of the environment and human health. There are no claims,
notices, actions, suits, hearings, investigations, inquiries or proceedings
pending or, to the knowledge of the Company, threatened against the Company or
any of the Subsidiaries that are based on or related to any environmental
matters or the failure to have any required environmental permits, and there are
no past or present conditions that the Company has reason to believe are likely
to give rise to any material liability or other obligations of the Company under
any environmental laws.
2.11 Permits and Licenses. The Company has all certificates of occupancy
rights, permits, certificates, licenses, franchises, approvals and other
aufliorizations as are reasonably necessary to conduct its respective business
and to own, lease, use, operate and occupy its assets, at. the places and in the
manner now conducted and operated, except those the absence ofwhich would not
materially adversely affect its respective business. As of the date hereof, the
Company has not received any written or oral notice or claim pertaining to the
failure to obtain any material xxxxx@ certificate, license, approval or other
authorization required by any federal, state or local agency or other regulatory
body, the failure of which to obtain would materially and adversely affect its
business.
2.12 Ordinary Course. Since December 3l, 1999, the Company has conducted
its business, maintained its real property and equipment and kept its books of
accoun@ records and files, substantially in the same manner as previously
conducted, maintained or kept and solely in the ordinary course; it being
understood and acknowledged that the Company has not had any substantial
operations for some time.
2.13 No Adverse Changes. Since December 3l, 1999, there has not been (a)
any material adverse change in the business, prospects, the financial or other
condition, or the respective assets or liabilities ofthe Company as reflected in
the Financial Statements, (b) any material loss sustained by the Company or any
Subsidiary, including, but not limited to any loss on account of thef@ fird,
flood, explosion, accident or other calamity, whether or not insured, which has
materially and adversely interfered, or may materially and adversely interfere,
with the operation ofthe Company's business, or (c) to the best knowledge ofthe
Company, any even@ condition or state of facts, includin& without limitation,
the enactment, adoption or promulgation of any law, rule or regulation, the
occurrence of which materially and adversely does or would affect the results of
operations or the business or financial condition of the Company; it being
understood and acknowledged that the Company has not had any substantia
operations for some time.
2.14 Litigation. (a) There is no claim, dispute, action, sui@ proceeding or
investigation pending or, to the knowledge of the Company, threatened, against
or affecting the business of the Company, or challenging the validity or
propriety of the transactions contemplated by this Agreemen@ at law or in equity
or admiralty or before any federal, state, local, foreign or other govenunental
authority, board, agency, commission or instrumentality, nor to the knowledge of
the Company, has any such claim, dispute, action, suit proceeding or
investigation been pending or threatened, during the 12-month period preceding
the date hereof; (b) there is no outstandingjudgment order, wri@ ruli'ng,
injunction, stipulation or decree ofany court, arbitrator or federal, state,
local, foreign or other governmental authority, board, agency, commission or
instrumentality, against or materially affecting the business of the Company;
and (c) the Company has not received any written or verbal inquiry from any
federal, state,' local, foreign or other governmental authority, board, agency,
commission or instrumentality concerning the possible violation of any law, rule
or regulation or any matter disclosed in respect of its business.
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2.15 Certificate of Incorporation and By-laws, Minute Books. The copies of
the Certificate of Incorporation and By-laws (or similar governing documents) of
the Company, and all amendments to each are true, correct and complete. The
nlinute books of the Company contain true and complete records of all meetings
and consents in lieu of meetings of their respective Board of Directors (and any
committees thereof), or similar governing bodies, since the time of their
respective organization. ne stock books of the Company and each Subsidiary are
true, correct and complete.
2.16 Employee Benefit Plans. The Company does not maintain, nor has the
Company maintained in the pas@ any employee benefit plans ("as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"),or any plans, programs policies, practices, affangements or contracts
(whether group or individual) providing for payments, benefits or reimbursements
to employees of the Company, former employees, their beneficiaries and
dependents under which such employees, former employees, their beneficiaries and
dependents are covered through an employment relationship @ with the Company, or
any entity required to be aggregated in a controlled group or affiliated service
group with the Company for purposes of FRISA or the Internal Revenue Code of
1986 (the "Code") (including, without limitation, under Section 414(b)., (c),
(m) or (o) of the Code or Section 4001 of ERISA, at any relevant time ("Benefit
Plans").
2.17 Patents: Trademarks and Intellectual EMpMRigbts. The Companyowns
orpossesses sufficient legal rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, Internet web
site(s), proprietary rights and processes necessary for its business as now
conducted without any conflict with or infringement of the rights of others.
There are no outstanding options, licenses or agreements of any kind relating to
the foregoing, and neither the Company is bound by, or a party to, any options,
licenses or agreements ofany kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity.
2.18 Brokers. Except as set forth on Schedule 2.18, all negotiations
relative to this Agreement and the transactions contemplated hereby have been
carried out by the Company directly with the Seller without the intervention of
any Person on behalf of the Company in such a manner as to give rise to any
valid claim by any Person against any Seller for a findees fee, brokerage
commission or similar payment.
2.19 actions.
(a) Neither the Company nor any officer, director or employee of the
Company (or any of the relatives or Affiliates of any of the aforementioned
Persons) is a party to any agreement contract, commitment or transaction with
the Company or affecting the business of the Company, or has any interest in any
property, whether real, personal or mixed, or tangible or intangible, used in or
necessary to the Company which will subject the Seller to any liability or
obligation from and xxxxx the Closing Date.
(b) (i) The Company has no indebtedness due from its respective officers,
directors or stockholders or any oftheir respective relatives or affiliates, or
(ii) none ofthe officers, directors or stockholders of the Company or their
respective relatives or affiliates has any claim against the Company.
2.20 Registration Rights. The Company agrees that in the event the Company
files a Registration Statementwith the United States Securities and Exchange
Commission ("SEC") wherein the Company registers any of its shares of common
stock, the Company shall cause to be registered as a part of the shares being
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registered pursuant to the said registration statement all shares of common
stock of the Company which are owned by the Sellers. The said shares of Sellers
shall be registered by the Company, as part of the Company's registration of
shares with the SEC, at no cost to Sellers.
2.21 No Regulatory Problems. The Company (i) has not filed a registration
statement which is the subject of any proceeding or examination under Section 8
of the Securities Act or is not the subject of any refusal order or stop order
thereunder; (ii) is not subject to any pending proceeding under Rule 258 of the
Securities Act or any similar rule adopted under Section 3(b) of the Securities
Ac4 or to an order entered thereunder; (iii) has not been convicted of any
felony or misdemeanor in connection with the purchase or sale of any security or
involving the making of any false filing with the Commission; (iv) is not
subject to any order, judgment or decree of any court of competentjurisdiction
temporarily, preliminary or permanently restraining or enjoining, the Company
from engaging in or continuing any conduct or practice in connection with the
purchase or sale of any security or involving the making of any false filing
with the Commission; and (v) is not subject to a United States Postal Service
false representation order entered under Section 3005 of Xxxxx 00, Xxxxxx Xxxxxx
Code; or a temporary restraining order or preliminary injunction entered under
Section 3007 of Title 39, United States Code, with respect to conduct alleged to
have violated Section 3005 of Xxxxx 00, Xxxxxx Xxxxxx Code. To its knowledge,
none of the Company's directors, officers, or beneficial owners of five percent
or more of any class of its equity securities (i) has been convicted of any
felony or misdemeanor in connection with the purchase or sale of any security,
involving the making ofa false filing with the Commission, or arising out of the
conduct of the business of an underwriter, broker, dealer, municipal securities
dealer, or investment advisor; (ii) is subject to any order, judgtnen4 or decree
of any court of competentjurisdiction temporarily or preliminary enjoining or
restraining, or is subject to any order, judgment or decree of any court of
competent jurisdiction, permanently enjoining or restraining such person from
engaging in, or continuing, any conduct or practice in connection with the
purchase or sale of any security involving the making of a false filing with the
Commission, (iii) is subject to an order ofthe Commission entered pursuant to
Section 15(b), 15B(a), or 15B(c) of the Securities Exchange Act of 1934, as
amended (" 1934 Act"), or is subject to an order of the Commission entered
pursuant to Section 203(e) or (f) of the Investment Advisers Act of 1940; (iv)
has been suspended or expelled from membership in, or suspended or barred from
association with a member of, an exchange registered as a national securities
exchange pursuant to Section 6 of the 1934 Ac4 an association registered as a
national securities association under Section 15A of the 1934 Ac4 or a Canadian
securities exchange or association for any act or omission to act constituting
conduct inconsistent with just and equitable principles oftrade; or (v) is
subject to a United States Postal Service false representation order entered
under Section 3005 of Xxxxx 00, Xxxxxx Xxxxxx Code; or is subject to a
restraining order or preliminary injunction entered under Section 3007 of Title
39, United States Code, with respect to conduct alleged to have violated Section
3005 of Title 39, United States Code.
2.22 Miscellaneous. The representations and warranties made by the Company
in this Agreement and the Additional Agreements and the statements made by or on
behalf of the Company in any certificate, document or exhibit furnished in
connection with the transactions contemplated hereby or thereby or in any public
filing with any regulatory agency, do not contain any untrue statement of a
material fact or omit to state any material fact necessary in orderto make such
representations or warranties or other such statements, in light of the
circumstances under, and at the time a4 which they were made, not false or
misleading.
ARTICLE III
REPRESEATIOINS AND WARRANTIES OF THE SELLER
Seller represents and warrants to the Company that:
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3.1 Due Organization and Qualification, Subsidiaries, Due Authorization.
(a) Xxxxx Oil Company, Inc. ("Xxxxx') is a corporation duly incorporated,
validly existing and in good standing under the laws of itsjurisdiction of
formation, with full corporate power and authority to own, lease and operate its
business and properties and to carry on its business in the places and in the
manner as presently conducted or proposed to be conducted. Xxxxx is in good
standing as a foreign corporation in each jurisdiction in which the properties
owned, leased or operated, or the business conducted, by it requires such
qualification except for any such failure, which when taken together with all
other failures, is not likely to have a material adverse effect on the business
of Xxxxx taken as a whole.
(b) Except for its wholly or partially owned subsidiaries and as may be set
forth in schedule 3. 1, Xxxxx does not own, directly or indirectly, any capital
stock, equity or interest in any corporation, firm, partnership, joint venture
or other entity.
(c) Xxxxx and the Seller each has all requisite power and authority to
execute and deliver this Agreemen@ and to consummate the transactions
contemplated hereby and thereby. Xxxxx and the Seller each has taken all
corporate action necessary for the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, and this Agreement
constitutes the valid and binding obligation of each of Xxxxx and the Seller,
enforceable against each of Xxxxx and the Seller in accordance with its
respective terms, except as may be affected by bankruptcy, insolvency, moratoria
or other similar laws affecting the enforcement of creditors' rights generally
and subject to the qualification that the availability of equitable remedies is
subject to the discretion ofthe court before which any proceeding thereformay be
brought.
3.2 No Conflicts or Defaults. Except as set forth in schedule 3.2, the
execution and delivery of this Agreement by the Seller and the consummation of
the transactions contemplated hereby do not and shall not (a) contravene the
Certificate of Incorporation or By-laws of Xxxxx or the governing documents of
any Seller, if applicable, or (b) with or without the giving of notice or the
passage of time, (i) violate, conflict with, or result in a breach of, or a
default or loss of rights under, any material covenant, agreemen@ mortgage,
indenture, lease, instrument permit or license to which Xxxxx or any Seller is '
a party or by which Xxxxx or any Seller or any oftheir respective assets are
bound, or anyjudgment order or decree, or any law, rule orregulation to which
Xxxxx or any Seller or any of their respective assets are subject (ii) result in
the creation of, or give any party the right to create, any Lien upon any of the
assets of Xxxxx, (iii) terminate or give any party the right to terminate,
atnend, abandon or refuse to perform, any material agreement arrangement or
commitment to which Xxxxx is a party or by which Xxxxx or any of its assets are
bound, or (iv) accelerate or modify, or give any party the right to accelerate
or modify, the time within which, or t ' he terms under which, Xxxxx is to
perform any duties or obligations or receive any rights or benefits under any
material agreement arrangement or commitment to which it is a party.
3.3 Capitalization. The authorized capital stock of
Pepinimmediatelypriortogivingeffect to the transactions contemplated hereby
consists of 50,000 shares ofcommon Stock, $ 1.00 par value per share, of which
50,000 shares are issued and outstanding as of the date hereof. All of the
outstanding shares of Xxxxx Common Stock are, and Xxxxx Shares when transferred
in accordance.with the terms hereof, will be, duly authorized, validly issued,
fully paid and nonassessable, and have not been or, with respect to Xxxxx
Shares, will not be transferred in violation of any rights ofthird parties.
Except as set forth in schedule 3.3 the Xxxxx Shares are not subject to any
preemptive or subscription right, any voting trust agreement or other contract
agreement, arrangement option, warrant call, commitment or other right of any
character obligating or entitling Xxxxx to issue, sell, redeem or repurchase any
of its securities, and there is no outstanding security of any kind
78
convertible into or exchangeable for Common Stock.
3.4 Financial Statements. Exhibit 2 to the Disclosure Schedule contains
copies of Xxxxx'x financial statements for the year ended December 31, 1999,
(all such statements being the "Xxxxx Financial Statements"). Xxxxx'x Financial
Statements, together with the notes thereto, have been prepared in accordance
with good business practices on an exploration and production basis applied on a
basis consistent throughout all periods presented, subject to general ledger
adjustments, which are not expected to be material. Such statements present
fairly the financial position of the Company as of the dates and for the periods
indicated. The books of account and other financial records of the Company have
been maintained in accordance with good business practices.
3.5 Further Financial Matters. Except with reference to the "Oklahoma
Opportunity" described in Exhibit hereto, and other financial matters set forth
on Schedule 3.5 (to include at least but limited to (i) Xxxxx Distributing
Company, $400,000 (taken out in February, 2000); (ii) Xxxxx Distributing Company
$300,000 secured loan (iii) Secured Financial Guarantee under $100,000. Xxxxx
has no other material liabilities or obligations than as reflected on the
Financial Statements, whether secured or unsecured, accrued, determined,
absolute or contingent, asserted or unasserted or otherwise, which are required
to be reflected or reserved in a balance sheet or the notes thereto under
generally accepted accounting principles. The Oklahoma Opportunity consists of a
working interest in a number of central Oklahoma leaseholds, some of which now
produce or are under development. Xxxxx'x interest is subject to a loan from
Stillwater National Bank in the present amount of $3,900,000. Seller agrees to
provide necessary funding to continue in all desirable operations in the
Oklahoma Opportunity thru September 30, 2000 an amount up to $4,000,000
contingent upon shares of Company being accepted as collateral by the bank
lender under normal banking practices based upon 500le of Market Value of Rule
144 stock. Notwithstanding the foregoing, the Company undertakes the obligation
to pay offorprovide substituted collateral to StillwaterNational Bank, orother
lender, of the obligation(s) representing financing for the Joint Interest
Xxxxxxxx arising in the Oklahoma Opportunity. If, by December 31, 2000, the
Company has not caused the release and return of the Seller's shares, the
Company shall issue 2,500,000 new shares of authorized and unissued capital to
Sellers which Seller shall use to replace their shares at the bank. When the JIB
loans are fully paid or the substitute collateral is otherwise released, the new
shares shall be cancelled. At its election the Company may offer the bank any
other collateral which the Bank finds acceptable, but the Bank shall, at any
time, retain its liens on the Working Interest and proceeds thereof.
3.6 Taxes. Xxxxx has filed all United States federal, state, county, local
and foreign national, provincial and local tax returns and reports which were
required to be filed on or prior to the date hereof, and has paid all Taxes (and
any related penalties, fines and interest) which have become due pursuant to
such returns or reports or pursuant to any assessment which has become payable,
or, to the extent its liability for any Taxes (and any related penalties, fines
and interest) has not been fully discharged, the same have been properly
reflected as a liability on the books and records of Xxxxx and adequate reserves
therefor have been established. All such returns and reports filed on or prior
to the date hereof have been properly prepared and are true, correct (and to the
extent such returns reflect judgments made by Xxxxx, such 'udgtnents were
reasonable under the circumstances) and complete in all material respects.
Except as for 1999 year end, no extension for the filing of an such return or
report is currently in effect. Except for years through 1997, which was audited
with no chage, other than for J. Xxxx Xxxxx to take a $3000 per month salary, no
tax return or tax return liability of Xxxxx has been audited or, presently under
audit. All taxes and any penalties, fines and interest which have been asserted
to be payable as a result of any audits have been paid. Xxxxx has not given or
been requested to give waivers of any statute of limitations relating to the
payment of any Taxes (or any related penalties, fines and interest). There are
no claims pending or, to the knowledge of Xxxxx, threatened, against
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Xxxxx for past due Taxes. All payments for withholding taxes, unemployment
insurance and other amounts required to be paid for periods prior to the date
hereof to any governmental authority in respect of employment obligations of
Xxxxx, have been paid or shall be paid prior to the Closing and have been duly
provided for on the books and records of Xxxxx.
3.7 Indebtedness; Contracts; No Defaults.
(a) Item 3.6 of the Disclosure Schedule sets forth a true, complete and
correct list of all material instruments, agreements, indentures, mortgages,
guarantees, notes, commitments ' accommodations, letters of credit or other
arrangements or understandings, whether written or oral, to which Xxxxx is a
party (collectively, the "Xxxxx Operating Agreements"). An agreement shall not
be considered material for the purposes of this Section 3.7(a) if it provides
for expenditures or receipts of less than $ 1 0,000 and has been entered into by
Xxxxx in the ordinary course of business. The Xxxxx Operating Agreements
constitute all of the contracts, agreements, understandings and arrangements
required for the. operation of the business of Xxxxx or which have a material
effect thereon. Copies of all such material written Xxxxx Operating Agreements
have previously been delivered or otherwise made available to the Company and
such copies are true, complete and correct as of the date hereof.
(b) Except as disclosed in Item 3.6 of the Disclosure Schedule, neither
Xxxxx, nor, to PepiWs knowledge, any other person or entity is in breach in any
material respect of, or in default in any material respect under, any material
contrac@ agreement arrangement commitment or plan to which Xxxxx is a party, and
no event or action has occurred, is pending or is threatened, which, after the
giving of notice, passage of time or otherwise, would constitute or result in
such a material breach or material default by Xxxxx or, to the knowledge of
Xxxxx, any other person or entity. Xxxxx has not received any notice ofdefault
under any contrac@ agreemen@ arrangement, commitment or plan to which it is a
party, which default has not been cured to the satisfaction of, or duly waived
by, the party claiming such default on or before the date hereof.
3.8 Personal Property. Xxxxx has good and marketable title to all of its
tangible personal property and assets, free and clear of all Liens or mortgages,
except for any Lien for current taxes not yet due and payable and such
restrictions, if any, on the disposition of securities as may be imposed by
federal or applicable state securities laws. -
3.9 Real Property.
(a) Item 3.8 of the Disclosure Schedule sets forth a true and complete list
of all real property owned by, or leased or subleased by or to, Xxxxx (the
"Xxxxx Real Property").
(b) Except as set forth in Item 3.8 of the Disclosure Statemen@ each lease
to which Xxxxx is a party is valid, binding and in full force and effect with
respect to Xxxxx, and, to the knowledge of Xxxxx, all other parties thereto; no
notice of default or termination under any such lease is outstanding.
3.10 Compliance with Law.
(a) Xxxxx is not conducting its respective business or affairs in material
violation of any applicablefederal, state or local law, ordinance, rule,
regulation, courtoradministrative order, decree or process, or any requirement
of insurance carriers. Xxxxx has not received any notice of violation or claimed
violation of any such law, ordinance, rule, regulation, order, decree, process
or requirement.
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(b) Xxxxx is in compliance in all material respects with all applicable
federal, state, local and foreign laws and regulations relating to the
protection of the environment and human health. There are no claims, notices,
actions, suits, hearings, investigations, inquiries or proceedings pending or,
to the knowledge of Xxxxx, threatened against Xxxxx that are based on or related
to any environmental matters or the failure to have any required environmental
permits, and there are no past or present conditions that Xxxxx has reason to
believe are likely to give rise to any material liability or other obligations
of Xxxxx under any environmental laws.
3.11 Permits and Licenses. Except as set forth in Item 3.10 of the
Diselosure Schedule, Xxxxx has all certificates of occupancy, rights, pen-nits,
certificates, licenses, franchises, approvals and other authorizations as are
reasonably necessary to conduct its respective business and to own, lease, use,
operate and occupy its assets, at the places and in the manner now conducted and
operated, except those the absence of which would not materially adversely
affect its respective business. Except as set forth in Item 3. 1 0 of the
Disclosure Schedule, as ofthe date hereof, Xxxxx has not received any written or
oral notice or claim pertaining to the failure to obtain any material perini@
certificate, license, approval or other authorization required by any federal,
state or local agency or other regulatory body, the failure of which to obtain
would materially and adversely affect its business.
3.12 Since December 31, 1999, Xxxxx has conducted its business, maintained
its real property and equipment and kept its books of accoun@ records and files,
substantially in the same manner as previously conducted, maintained or kept and
solely in the ordinary course; it being understood and acknowledged that Xxxxx
has been substantially reducing its.operations for some time.
3.13 No Adverse Changes. Since December 31, 1999, there has not been (a)
any material adverse change in the business, prospects, the financial or other
condition, or the respective assets or liabilities of Xxxxx, (b) any material
loss sustained by Xxxxx, including, but not limited to any loss on account of
thek fire, flood, explosion, accident or other calamity, whether or not insured,
which has materially and adversely interfered, or may materially and adversely
interfere, with the operation of Xxxxx'x business, or (e) to the best knowledge
ofpepin, any even@ condition or state offacts, including, without limitation,
the enactmen@ adoption or promulgation of any law, rule or regulation, the
occurrence ofwhich materially and adversely does or would affect the results of
operations or the business or financial condition of Xxxxx.
3.14 Litigation. (a) There is no claim, dispute, action, suit proceeding or
investigation pending or, to the knowledge of Xxxxx, threatened, against or
affecting the business ofpepin, or challenging the validity or propriety of the
transactions contemplated by this Agreemen@ at law or in equity or admiralty or
before any federal, state, local, foreign or other governmental authority,
board, agency, commission or instrumentality, nor to the knowledge of Xxxxx, has
any such claim, dispute, action, suit proceeding or investigation been pending
or threatened, during the 12-month period preceding the date hereof; (b) there
is no outstanding judgment order, writ ruling, injunction, stipulation or decree
of any court, arbitrator or federal, state, local, foreign or other governmental
authority, board, agency, commission or instrumentality, against or materially
affecting the business ofpepin; and (c) Xxxxx has not received any written or
verbal inquiry from any federal, state, local, foreign or other governmental
authority, board, agency, commission or instrumentality concerning the possible
violation ofany law, rule or regulation or any matter disclosed in respect of
its business.
3.15 Insurance. Xxxxx maintains insurance against all risks customarily
insured against by companies in its industry. All such policies are in full
force and effect, and Xxxxx has not received any notice from any insurance
company suspending, revoking, modifying or canceling (or threatening such
action) any insurance policy issued to Xxxxx.
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3.16 The copies of the Certificate of Incorporation and By-laws (or similar
governing documents) of Xxxxx, and all amendments to each are true, correct and
complete. The minute books of Xxxxx contain true and complete records of all
meetings and consents in lieu of meetings of their respective Board of Directors
(and any committees thereof), or similar governing bodies, since the time
oftheir respective organization. The stock books of Xxxxx are true, correct and
complete.
3.17 Employee Benefit Plans. Xxxxx does not maintain, nor has Xxxxx
maintained in the pas@ any employee benefit plans ("as defined in Section 3(3)
of the "ERISA"), or any plans, programs, policies, practices, arrangements or
contracts (whether group or individual) providing for payments, benefits or
reimbursements to employees ofpepin, former employees, their beneficiaries and
dependents under which such employees, former employees, their beneficiaries and
dependents are covered through an employment relationship with Xxxxx or any
entity required to be aggregated in a controlled group or affiliated service
group with Xxxxx for purposes of ERISA or the Internal Revenue Code of 1986 (the
"Code") (including, without limitation, under Section 414(b), (c), (m) or (o) of
the Code or Section 4001 of ERISA, at any relevant time ("Xxxxx Benefit Plans").
3.18 Patents, Trademarks and Intellectual Prope!V Ri2hts. Xxxxx owns or
possesses sufficient legal rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, infon-nation, Internet web
site(s) proprietary rights and processes necessary for its business as now
conducted without any conflict with or infringement of the rights of others.
'Mere are no outstanding options, licenses or agreements of any kind relating to
the foregoing, and Xxxxx is not bound by, or a party to, any options, licenses
or agreements ofany kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes of any other person or entity.
3.19 Brokers. Except as set out in Schedule 3.19, all negotiations relative
to this Agreement and the transactions contemplated hereby have been carried out
by Xxxxx directly with the Seller without the intervention of any Person on
behalf of Xxxxx in such a manner as to give rise to any valid claim by any
Person against any Seller for a findees fee, brokerage commission or similar
payment.
3.20 Subsidiaries. Except as listed in Schedule 3.20, Xxxxx has no
Subsidiaries.
3.21 Purchase for Investment
(a) Seller is acquiring the Company Shares for investment for Sellees own
account and not as a nominee or agen@ and not with a view to the resale or
distribution of any part thereof, and Seller has no present intention of
selling, granting any participation in, or otherwise distributing the same.
Except for 5% of shares to Xxxxx Xxxxxxxx, the Seller further represents that he
does not have any contract undertaking, agreement or arrangement with any person
to sell, transfer or grant a participation to such person or to any third
person, with respect to any of the Company Shares.
(b) Seller understands that the Company Shares are not registered under the
Act on the ground that the sale and the issuance of securities hereunder is
exempt from registration under the Act pursuant to Section 4(2) thereof, and
that the Company's reliance on such exemption is predicated on Sellees
representations set forth herein. Seller is an "accredited investor" as that
term is defined in Rule 501(a) of Regulation D under the Act.
3.22 Investment Experience. Seller acknowledges that he can bear the
economic risk of its
82
investment and has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the investment
in the Company Shares.
3.23 Information. The Seller has carefully reviewed such information as Sel
er deemed necessary to evaluate an investment in the Company Shares. To the full
satisfaction of Seller, he has been furnished all materials that he has
requested including Reserve Reports on current properties relating to the
Company and the issuance of the Company Shares hereunder, and Seller has been
afforded the opportunity to ask questions of representatives of the Company to
obtain any information necessary to verify the accuracy of any representations
or information made or given to the Seller. Notwithstanding the foregoin&
nothing herein shall derogate from or otherwise modify the representations and
warranties of the Company set forth in this Agreemen@ on which Seller has relied
in making an exchange of the Xxxxx Shares for the Company Shares.
3.24 Restricted Securities. Seller understands that the Company Shares may
not be sold, transferred, or otherwise disposed of without registration under
the Act or an exemption therefrom, and that in the absence ofan effective
registration statement covering the Company Shares orany available exemption
from registration under the Ac@ the Company Shares must be held indefinitely.
Seller is aware that the Company Shares may not be sold pursuant to Rule 144
promulgated under the Act unless all of the conditions ofthat Rule are met.
Among the conditions for use of Rule 144 may be the availability ofcuffent
information to the public about the Company. The Company will use its best
efforts to make available current public information to present the shares to be
sold pursuant to Rule 144.
3.25 Financial Condition The Seller agrees to produce within 45 days after
closing, Audited Financial Statements of Xxxxx for the year ended December 31,
1999, consistent with the Financial Statements attached as Exhibit . Should
Xxxxx, Inc. fail to produce such audited financial statements, Company may
instruct Company auditors at Xxxxx'x cost.
3.26 Issuance ofshares to Emplaees. Certain employees ofthe Company shall,
subsequent to the merger, be issued common shares, which issuance shall be
limited as follows:
(a) Such issuances, ifany, shall be agreed to by the board ofdirectors
ofthe company.
(b) J. Xxxx Xxxxx to be elected a a member ofboard of Directors for as long
as Sellers hold either 1,000,000 shares and/or has pledged shares at a financial
institution for benefit of Company.
(c) Anti-Dilution. Not more than 25% of cur-rent number of Company shares
may be issued without consent of Sellers up to December 31, 2000.
ARTICLE IV
INDEMNIFICATION
4.1 Indemnity of Seller. The Company agrees to defend, indemnify and hold
harmless Seller from and agains@ and to reimburse Seller with respect to, all
liabilities, losses, costs and expenses, including, without limitation,
reasonable attomeys'fees and disbursements, asserted againstor incurred by
Seller by reason of, arising out of, or in connection with any material breach
of any representation or warranty contained in this Agreement made by the
Company or in any document or certificate delivered by the Company pursuant to
the provisions of this Agreement or in connection with the transactions
contemplated thereby.
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4.2 Indemnity of the Company. Seller agrees to defend, indemnify and hold
hartnless the Company from and agains@ and to reimburse the Company with respect
to, all liabilities, losses, costs and expenses, including, without limitation,
reasonable attorneys' fees and disbursements, asserted against or incurred by
the Company by reason of, arising out of, or in connection with any material
breach of any representation or warranty contained in this Agreement and made by
Seller or in any document or certificate delivered by Seller pursuant to the
provisions of this Agreement or in connection with the transactions contemplated
thereby.
4.3 Indemnification Procedure. A party (an "Indemnified Party")seeking
indemnirication shall give prompt notice to the other party (the "Indemnifying
Party) of any claim for indemnification arising under this Article 4. The
Indemnifying Party shall have the right to assume and to control the defense of
any such claim with counsel reasonably acceptable to such Indemnified Party, at
the Indemnifying Party's own cost and expense, including the cost and expense
ofreasonable attorneys fees and disbursements in connection with such defense,
in which event the Indemnifying Party shall not be obligated to pay the fees and
disbursements of separate counsel for such in such action. In the event however,
that such Indemnified Party's legal counsel shall determine that defenses may be
available to such Indemnified Party that are different from or in addition to
those available to the Indemnifying Party, in that there could reasonably be
expected to be a conflict of interest if such Indemnifying Party and the
Indemnified Party have common counsel in any such proceeding, or if the
Indemnified Party has not assumed the defense of the action or proceedings, then
such Indemnifying Party may employ separate counsel to represent or defend such
Indemnified Party, and the Indemnifying Party shall pay the reasonable fees and
disbursements of counsel for such Indemnified Party. No settlement of any such
claim or payment. in connection with any such settlement shall be made without
the prior consent of the Indemnifying Party which consent shall not be
unreasonably withheld.
MISCELLANEOUS
5.1 Survival of RepLesentations, Warranties and Am-eements. All
representations and warranties and statements made by a party to in this
Agreement or in any document or certificate delivered pursuant hereto shall
survive the Closing Date until one year from the Closing Date. -
5.2 Notice. All communications, notices, requests, consents or demands
given or required under this Agreement shall be in writing and shall be deemed
to have been duly given when delivered to, or received by prepaid registered or
certified mail or recognized overnight courier addressed to, or upon receipt of
a facsimile sent to, the party for whom intended, as follows, or to such other
address or facsimile number as may be furnished by such party by notice in the
manner provided herein:
If to the Company: Power Exploration
0000 Xxxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
If to the Seller: Xxxxx Oil Company
X.X. Xxx 0000
Xxxxxxxxxx, Xx
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5.3 Entire Agreement. This Agreement the Disclosure Schedule and any
instruments and agreements to be executed pursuant to this Agreement, sets forth
the entire understanding of the parties hereto with respect to its subject
matter, merges and supersedes all prior and contemporaneous understandings with
respect to its subject matter and may not be waived or modified, in whole or in
par@ except by a writing signed by each of the parties hereto. No waiver of any
provision of this Agreement in any instance shall be deemed to be a waiver of
the same or any other provision in any other instance. Failure of any party to
enforce any provision of this Agreement shall not be construed as a waiver of
its rights under such provision.
5.4 Successors and Assigns. This Agreement shall be binding upon,
enforceable against and inure to the benefit of, the parties hereto and their
respective heirs, administrators, executors, personal representatives,
successors and assigns, and nothing herein is intended to confer any righ@
remedy or benefit upon any other person. This Agreement may not be assigned by
any party hereto except with the prior written consent of the other parties,
which consent shall not be unreasonably withheld.
5.5 Governing Law. This Agreement will be construed and enforced in
accordance with and governed by the laws of the State of Nevada, except for
matters arising under the Act without reference to principles of conflicts of
law. Each of the parties consents to thejurisdiction of the federal courts whose
districts encompass any part ofthe State ofnevada in connection with any dispute
arising under this Agreement and hereby waives, to the maximum extent permitted
by law, any objection, including any objection based on forum non conveniens, to
the bringing of such proceeding in suchjurisdictions. Each party hereby agrees
that if another party to this Agreement obtains ajudgment against it in such a
proceeding, the party which obtained suchjudginent may enforce same by
sunnnaryjudginent in the courts of any country havingjurisdiction over the party
against whom such judgment was obtained, and each party hereby waives any
defenses available to it under local law and agrees to the enforcement of such
ajudgment. Each party to this Agreement irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to serve process in any other
manner permitted by law.
5.6 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
5.7 Construction. Headings contained in this Agreement are for convenience
only and shall not be used in the interpretation of this Agreement. References
herein to Articles, Sections and Exhibits are to the articles, sections and
exhibits, respectively, of this Agreement. The Disclosure Schedule is hereby
incorporated herein by reference and made a part of this Agreement. As used
herein, the singular includes the plural, and the masculine, feminine and neuter
gender each includes the others where the context so indicates.
5.8 Severabiliiy. Ifany provision ofthis Agreement is held to be invalid or
unenforceable by a court of competentjurisdiction, this Agreement shall be
interpreted and enforceable as if such provision were severed or limited, but
only to the extent necessary to render such provision and this Agreement
enforceable.
5.9 Good Faith and Fair Dealings: Company and Seller agree to deal fairly
with each other and to negotiate in good faith in connection with this
transaction, and the closing ofthis transaction. Company and Sellers mutually
represent that they have and will continue to deal with the other in good faith
in connection with all matters relating to this agreement.
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IN WITNESS WHEREOF each of the parties hereto has executed this
Agreement as of the date first set forth above.
Power Exploration Company
/s/ Xxx Xxxx Xxxxxxx
-----------------------
By:
Title: President
The Sellers of
Xxxxx Oil Company, Inc.
/s/ J. Xxxx Xxxxx
-----------------------
J. Xxxx Xxxxx
-----------------------
Art Xxxxx
-----------------------
Xxxx Xxxxx
-----------------------
Xxx Xxxx
-----------------------
Xxx Xxxxx
86
