ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock currently trades on the OTC Bulletin Board under the
symbol "MVOG". The first reported trade in the Company's common stock occurred
on August 3, 2004. The following table sets forth the range of the high and low
bid prices per share of the Company's common stock for each of the calendar
quarters since the first reported trade, as reported by the OTC Bulletin Board.
These quotations represent inter-dealer prices, without retail mark-up, markdown
or commission, and may not represent actual transactions.
The last price of the Company's common stock as reported on the OTC Bulletin
Board on December 20, 2004 was $1.59 per share.
On June 15, 2004, the Company approved a 22 for 1 forward stock split with a
record date of June 24, 2004, effected in the form of a stock dividend.
HOLDERS
As of December 14, 2004 the number of stockholders of record of the Company's
common stock was 54.
12
DIVIDENDS
The Company has not paid any cash dividends on our common stock to date, and has
no intention of paying such cash dividends in the foreseeable future. The
declaration and payment of dividends is subject to the discretion of the
Company's Board of Directors and to certain limitations imposed under Delaware
corporate law. The timing, amount and form of dividends, if any, will depend on,
among other things, the Company's results of operations, financial condition,
cash requirements and other factors deemed relevant by the Company's Board of
Directors.
RECENT SALES OF UNREGISTERED SECURITIES
On November 18, 2004 we entered into a convertible note agreement with DDH
Resources II, Limited ("DDH") whereby DDH loaned us $1,000,000. The convertible
note matures on the earliest of six months or when we complete an equity raise
of at least $5,000,000. Interest accrues at 12% per annum. On the maturity date
or at the option of the lender, the note and accrued interest shall be
convertible into shares of our common stock at a conversion rate of $1.10. To
induce the loan, we issued 500,000 warrants to DDH exercisable for 3 years at
$2.00. The warrants were issued in a private placement exempt from the
registration requirements of the Securities Act of 1933, as amended, pursuant to
Sections 4(2) and Rule 506 of the Act, without payment of underwriting discounts
or commissions to any person.
In August 2004, we sold one million investment Units at $2.00 per Unit to
AltaFin, B.V., a Netherland Antilles corporation, with each Unit consisting of
two shares of our common stock and one warrant to purchase a share of our common
stock. The Units were sold in a private placement exempt from the registration
requirements of the Securities Act of 1933, as amended, pursuant to Sections
4(2) and Rule 506 of that Act, without payment of underwriting discounts or
commissions to any person.
In July 2004, we issued 200,000 of our warrants to purchase 200,000 shares of
our common stock at $1.00 per share to Trident Growth Fund, L.P. in connection
with a loan made by Trident to MBE. The warrants were issued in a private
placement exempt from the registration requirements of the Securities Act of
1933, as amended, pursuant to Sections 4(2) and Rule 506 of the Act, without
payment of underwriting discounts or commissions to any person.
ITEM 6. PLAN OF OPERATIONS
This Plan of Operations and other parts of this report contain forward-looking
statements that involve risks and uncertainties. All forward-looking statements
included in this report are based on information available to us on the date
hereof, and we assume no obligation to update any such forward-looking
statements. Our actual results could differ materially from those anticipated in
these forward-looking statements as a result of a number of factors, including
those set forth in the Section captioned "RISK FACTORS" in Item 1 and elsewhere
in this report. The following should be read in conjunction with our audited
financial statements and the related notes included elsewhere herein.
BACKGROUND
We were incorporated under the laws of the State of Nevada on June 18, 2002 as
Waterloo Ventures Inc. ("Waterloo"). From our inception through April 2004, we
were engaged in the acquisition and exploration of mineral properties. We
actively maintained an option to acquire an interest in the "East Red Rock"
mineral claim in Ontario, Canada. until April 2004, when, in conjunction with a
change of control, we elected to suspend all further payments and exploration
work needed to maintain the claim in good standing. Accordingly, as of April
2004, we suspended all mineral exploration activities, commenced our oil and gas
business, and, by virtue of a merger with a wholly owned subsidiary, changed our
name to Maverick Oil and Gas, Inc.
OVERVIEW
We seek to create shareholder value by building oil and gas reserves, production
revenues and operating cash flow. We believe that building oil and gas reserves
and production, on a cost-effective basis, are the most important indicators of
performance success for an independent oil and gas company such as Maverick Oil
and Gas, Inc. We seek to build oil and gas reserves, production and cash flow
through a balanced program of capital expenditures involving acquisition,
exploitation and exploration activities. We intend to place primary emphasis on
issuances of public and private debt and equity to finance our business.
Our ability to generate future revenues and operating cash flow will be
dependent on the successful development of our inventory of capital projects,
the volume and timing of our production, as well as commodity prices for oil and
gas. Such pricing factors are largely beyond our control, and may result in
fluctuations in our earnings.
RESULTS OF OPERATIONS
We did not earn any revenues from operations for the years ended August 31, 2004
and 2003, and we do not anticipate earning any revenues until such time as our
ongoing projects are able to develop commercial production of quantities of oil
and gas.
13
To date, our activities remain in the development stage. We have secured an
interest in three oil and gas projects, further described in ITEM 1 under
"DESCRIPTION OF BUSINESS." As of August 31, 2004, the Barnett Shale and Zapata
County projects remain in the exploration and investigation stage, with no
drilling efforts yet commenced and no reserves yet established. We have recently
commenced drilling operations in the Maverick Basin. However, our efforts are in
the preliminary stage with no level of reserves established with any certainty.
We incurred operating expenses of $160,519 during the year ended August 31,
2004. Our 2004 expenses were comprised of consulting fees of $18,075,
professional fees of $93,089, exploration expenditures of $8,038, officer's
salary of $10,000, amortization of loan costs of $14,688 and general and
administrative expenses of $16,629. This compares to $28,444 of operating
expenses incurred during the year ended August 31, 2003. Our 2003 expenses were
comprised of consulting fees of $10,000, professional fees of $9,330,
exploration expenditures on the East Rock Claims of $5,000, and general and
administrative expenses of $4,114.
LIQUIDITY AND CAPITAL RESOURCES
Our plan of operation for the twelve-month period following the date hereof is
to attempt to conduct oil and gas exploration, development and production.
As at August 31, 2004, we had working capital of $1,774,196. During the year, we
received cash from financings of $2 million when we completed a private
placement during August 2004 of one million investment Units at $2.00 per Unit
to AltaFin, B.V., a Netherland Antilles corporation. Each Unit consisted of two
shares of our common stock and one warrant to purchase a share of our common
stock. The Units were sold in a private placement exempt from the registration
requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2)
of that Act, without payment of underwriting discounts or commissions to any
person.
During the year ended August 31, 2004, we realized cash from borrowings when MBE
borrowed $2,050,000 from Trident Growth Fund, L.P on July 15, 2004. MBE utilized
those funds to commence drilling operations in the Maverick Basin. In connection
with the Trident loan in July 2004, we issued to Trident warrants to purchase
200,000 shares of our common stock at $1.00 per share. The Trident loan requires
monthly interest payments at the rate of 12% per annum, and is due to be repaid
on July 31, 2005. We were a guarantor of the loan.
During the first quarter of fiscal 2005, we realized additional cash from
borrowings in the aggregate amount of $1,600,000, of which $600,000 were demand
loans and $1,000,000 was a loan from DDH that is convertible into our shares at
$1.10 per share.
We expect to disburse an estimated $7,500,000 during the next 12-month period to
cover our existing subscriptions payable and anticipated capital call
requirements with respect to our various limited partnership and limited
liability company interests.
Our current financial resources are not sufficient to satisfy our anticipated
capital requirements, continue to pay for our operating expenses or to permit us
to acquire an interest in any additional properties. Therefore, in the absence
of generating significant revenues from operation, which are unlikely in the
short term, we will only be able to meet our capital obligations over the next
twelve months if we are able to raise capital from financing activities. This
may take the form of either debt based transactions, or through the sale of our
equity securities. We have no assurances that we will be able to access
financing in sufficient amounts to satisfy our existing funding obligations, or
to permit future growth and exploration.
If we do not secure additional financing to incur the required exploration
expenditures in our business plan, we may consider bringing in a joint venture
partner to provide the required funding. We have not, however, undertaken any
efforts at this time to locate a joint venture partner. In addition, we cannot
provide investors with any assurance that we will be able to locate a joint
venture partner who will assist us in funding our business plan.
We have not yet attained profitable operations and are dependent upon obtaining
financing to pursue exploration and development activities and to complete
paying subscriptions payable for our existing projects. For these reasons, our
auditors stated in their report that they have substantial doubt that we will be
able to continue as a going concern.
CRITICAL ACCOUNTING POLICIES
Our financial statements are prepared in accordance with accounting principles
generally accepted in the United States. The preparation of our financial
statements requires us to make estimates and judgments that affect the reported
amount of assets, liabilities, revenues and expenses. These estimates are based
14
on information that is currently available to us and on various other
assumptions that we believe to be reasonable under the circumstances. Actual
results could vary significantly from those estimates under different
assumptions and conditions.
Critical accounting policies are defined as those significant accounting
policies that are most critical to an understanding of a company's financial
condition and results of operation. We consider an accounting estimate or
judgment to be critical if (i) it requires assumptions to be made that were
uncertain at the time the estimate was made, and (ii) changes in the estimate or
different estimates that could have been selected could have a material impact
on our results of operations or financial condition.
Our recent entrance into the oil and gas business subjects us to new accounting
policies that we were not previously subject to. We believe that the following
significant accounting policies will be most critical to an evaluation of our
future financial condition and results of operations.
PROVED OIL AND NATURAL GAS RESERVES
Proved reserves are defined by the SEC as the estimated quantities of crude oil,
condensate, natural gas and natural gas liquids that geological and engineering
data demonstrate with reasonable certainty are recoverable in future years from
known reservoirs under existing economic and operating conditions. Prices
include consideration of changes in existing prices provided only by contractual
arrangements, but not on escalations based upon future conditions. Prices do not
include the effect of derivative instruments, if any, entered into by the
Company.
Proved developed reserves are those reserves expected to be recovered through
existing equipment and operating methods. Additional oil and gas expected to be
obtained through the application of fluid injection or other improved recovery
techniques for supplementing the natural forces and mechanisms of primary
recovery are included as proved developed reserves only after testing of a pilot
project or after the operation of an installed program has confirmed through
production response that increase recovery will be achieved.
Proved undeveloped oil and gas reserves are reserves that are expected to be
recovered from new wells on non-drilled acreage, or from existing wells where a
relatively major expenditure is required for re-completion. Reserves on
non-drilled acreage are limited to those drilling units offsetting productive
units that are reasonably certain of production when drilled. Proved reserves
for other non-drilled units are claimed only where it can be demonstrated with
certainty that there is continuity of production from the existing productive
formation.
Volumes of reserves are estimates that, by their nature, are subject to
revision. The estimates are made using all available geological and reservoir
data as well as production performance data. There are numerous uncertainties in
estimating crude oil and natural gas reserve quantities, projecting future
production rates and projecting the timing of future development expenditures.
Oil and gas reserve engineering must be recognized as a subjective process of
estimating underground accumulations of oil and gas that cannot be measured in
an exact way and estimates of engineers that we use may differ from those of
other engineers. The accuracy of any reserve estimate is a function of the
quantity of available data and of engineering and geological interpretation and
judgment. Accordingly, future estimates are subject to change as additional
information becomes available.
SUCCESSFUL EFFORTS ACCOUNTING
The Company intends to utilize the successful efforts method to account for our
crude oil and natural gas operations. Under this method of accounting, all costs
associated with oil and gas lease acquisition costs, successful exploratory
wells and all development wells are capitalized and amortized on a
unit-of-production basis over the remaining life of proved developed reserves
and proved reserves on a field basis. Unproved leasehold costs are capitalized
pending the results of exploration efforts. Exploration costs, including
geological and geophysical expenses, exploratory dry holes and delay rentals,
are charge to expense when incurred.
IMPAIRMENT OF PROPERTIES
We review our proved properties at the field level when management determines
that events or circumstances indicate that the recorded carrying value of the
properties may not be recoverable. Such events include a projection of future
15
oil and natural gas reserves that will be produced from a field, the timing of
this future production, future costs to produce the oil and natural gas, and
future inflation levels. If the carrying amount of an asset exceeds the sum of
the undiscounted estimated future net cash flows, we recognize impairment
expense equal to the difference between the carrying value and the fair value of
the asset which is estimated to be the expected present value of future net cash
flows from proved reserves, utilizing a risk-free rate of return. The Company
cannot predict the amount of impairment charges that may be recorded in the
future. Unproved leasehold costs are reviewed periodically and a loss is
recognized to the extent, if any, that the cost of the property has been
impaired.
PROPERTY RETIREMENT OBLIGATIONS
The Company is required to make estimates of the future costs of the retirement
obligations of its producing oil and gas properties. This requirement
necessitates the Company to make estimates of its property abandonment costs
that, in some cases, will not be incurred until a substantial number of years in
the future. Such cost estimates could be subject to significant revisions in
subsequent years due to changes in regulatory requirements, technological
advances and other factors that may be difficult to predict.
INCOME TAXES
The Company is subject to income and other related taxes in areas in which it
operates. When recording income tax expense, certain estimates are required by
management due to timing and the impact of future events on when income tax
expenses and benefits are recognized by the Company. The Company will
periodically evaluate its tax operating loss and other carryforwards to
determine whether a gross deferred tax asset, as well as a related valuation
allowance, should be recognized in its financial statements.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of Maverick Oil and Gas, Inc., including the notes
thereto and the report of the independent accountants therein, commence at
page F-1 of this Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
On December 10, 2004, the Board of Directors of the Company engaged Malone &
Bailey PC as its independent accountant and dismissed Morgan & Co., as its
independent accountant. During the fiscal years ended August 31, 2004 and 2003,
the Company did not consult Malone & Bailey PC regarding the application of
accounting principles to a specific completed or contemplated transaction or
regarding the type of audit opinion that might be rendered by Malone & Bailey PC
on the Company's financial statements, and Malone & Bailey PC did not provide
any written or oral advice that was an important factor considered by the
Company in reaching a decision as to any such accounting, auditing or financial
reporting issue.
ITEM 8A. CONTROLS AND PROCEDURES
An evaluation of the effectiveness of our "disclosure controls and procedures"
(as such term is defined in Rules 13a-15(e) or 15d-15(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) was carried out by us
under the supervision and with the participation of our Chief Executive Officer
("CEO") and Treasurer ("Treasurer"). Based upon that evaluation, our CEO and
Treasurer concluded that, as of the end of the period covered by this Annual
Report, our disclosure controls and procedures were effective to provide
reasonable assurance that information we are required to disclose in reports
that we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commission rules and forms. There has been no change in our internal control
over financial reporting identified in connection with that evaluation that
occurred during our most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.
16
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The following sets forth certain information about our sole director and
executive officer.
Name Age Positions Held
---- --- --------------
Michael Garland 41 Chief Executive Officer, Treasurer,
Secretary and Director
The following is a brief summary of Michael Garland's business experience:
Michael Garland has served as our Chairman and Chief Executive Officer,
Treasurer, and Secretary since July 27, 2004. Prior to joining our company, from
February 1998 to July 2004, Mr. Garland served as a founder and executive
officer of Star Energy Group, PLC, an oil and gas production company building
extensive gas storage projects in the United Kingdom. Prior thereto, from
November 1994 to January 1998, Mr. Garland was the Commercial Manager for Tullow
Oil plc, which is listed on the London Stock Exchange. Prior to then, Mr.
Garland held positions in investment banking and law. At Wood Gundy, Inc., a
U.K. based investment bank, Mr. Garland worked on early UK government
privatizations and set up an Australian desk to market products to Australian
companies. He also was previously involved in many aspects of the European and
North American capital markets including marketing capital-market products to
government and semi-government organizations. Mr. Garland has also been involved
in the structuring and financing of a number of natural resources and energy
projects, including initial public offerings.
OTHER SIGNIFICANT PERSONNEL
We have recently employed Carlo Seidel on an interim basis as a manager of our
treasury and accounting functions. Mr. Seidel has 15 years of operational and
advisory experience that includes mergers and buyouts, strategy and operations.
He has worked with industries ranging from industrial minerals and base metals
to consumer products and technology and, recently, oil and gas. From 2000 to
2004 he was a principal in Callido Limited, a networks applications business
with a successful management information product. He also worked as a senior
executive at Mars & Co. providing consulting services from 1990 to 2000, where
he advised a number of multinational corporations. Among these he advised on the
sale and subsequent $250 million merger of a large British Steel subsidiary, on
strategies and joint venture partners for PepsiCo's expansion in Eastern Europe,
and on the $1.2 billion acquisition of Christie's by Francois Pinault's Artemis.
He has also worked with Alcan, Bausch & Lomb and Unilever. Prior to his career
at Mars & Co., Carlo worked on the London fixed income desks of Hessische
Landesbank and Saudi International Bank. Carlo holds an MBA from Harvard
Business School and has a degree in Philosophy, Politics and Economics from
Christ Church.
DIRECTOR'S TERM OF OFFICE
Michael Garland was appointed as the sole member of the Board of Directors on
July 27, 2004, and will hold office until the next annual meeting of
shareholders and the election and qualification of his successor. Directors hold
office until the next annual meeting of shareholders and the election and
qualification of their successor. Officers are elected annually by the Board of
Directors and serve at the discretion of the Board.
17
AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT
Our Board of Directors acts as our audit committee. No member of our Board of
Directors is an "audit committee financial expert," as that term is defined in
Item 401(e) of Regulation S-B promulgated under the Securities Act.
To date, we have conducted limited operations and generated only minimal revenue
since inception. In light of the foregoing, and upon evaluating the Company's
internal controls, our Board of Directors determined that our internal controls
are adequate to insure that financial information is recorded, processed,
summarized and reported in a timely and accurate manner in accordance with
applicable rules and regulations of the Securities and Exchange Commission.
Accordingly, our Board of Directors concluded that the benefits of retaining an
individual who qualifies as an "audit committee financial expert" would be
outweighed by the costs of retaining such a person.
Section 16(a) of the U.S. Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), requires our officers and directors and persons who own more
than ten percent (10%) of our common stock to file with the SEC initial reports
of ownership and reports of changes in ownership of our common stock. Such
officers, directors and ten percent (10%) stockholders are also required by
applicable SEC rules to furnish the us copies of all forms filed with the SEC
pursuant to Section 16(a) of the Exchange Act. Based solely on our review of the
copies of such forms received by us or written representations from such persons
that no other reports were required for such persons, we believe that during the
fiscal year ended August 31, 2004, all Section 16(a) filing requirements
applicable to our officers, directors and ten percent (10%) stockholders were
satisfied in a timely fashion except that our director Mr. Garland has not yet
filed a Form 3, but intends to promptly do so.
CODE OF ETHICS
We have adopted a Code of Ethics that applies to our principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. Our Code of Ethics is
designed to deter wrongdoing and promote: (i) honest and ethical conduct,
including the ethical handling of actual or apparent conflicts of interest
between personal and professional relationships; (ii) full, fair, accurate,
timely and understandable disclosure in reports and documents that we file with,
or submit to, the SEC and in our other public communications; (iii) compliance
with applicable governmental laws, rules and regulations; (iv) the prompt
internal reporting of violations of the code to an appropriate person or persons
identified in the code; and (v) accountability for adherence to the code.
ITEM 10. EXECUTIVE COMPENSATION
LONG-TERM COMPENSATION
------------------------------------------
ANNUAL COMPENSATION SECURITIES
--------------------------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND YEAR COMPENSATION OPTIONS/ COMPENSATION
PRINCIPAL POSITION COMPENSATION SALARY ($) BONUS ($) ($) SARS (#) ($)(1)
-------------------- ------------ ---------- --------- ------------ ---------- ------------
Michael Garland .... 2004 $20,000 300,000
CEO
(1) Mr. Garland entered into an employment agreement with us on July 27, 2004.
The employment agreement provides for a base salary of $10,000 per month and
three year options to purchase 300,000 shares of our common stock at $1.50 per
share. The agreement also provides a payment of six month severance if he is
terminated without cause.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 14, 2004, information with
respect to the securities holdings of all persons which the Company, pursuant to
filings with the Securities and Exchange Commission, has reason to believe may
be deemed the beneficial owners of more than five percent (5%) of the Company's
outstanding common stock. The following table also sets forth, as of such date,
the beneficial ownership of the Company's common stock by all officers and
directors, individually and as a group.
18
Amount and Nature
of Beneficial Percentage
Name and Address of Beneficial Owner Ownership of Class
------------------------------------ ----------------- ------------
M.V. Oil & Gas Company 20,000,000 37.6%
Box 751, Providenciales
Turks & Caicos
Michael Garland 300,000(1) *
22 Park Crescent
London, United Kingdom W1B 1PE
All officers and directors as a group 300,000(1) *
(1 person)
*Less than 1%
(1) Reflects options at an exercise price of $1.50 per share
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Neither our sole director and executive officer nor any person who beneficially
owns, directly or indirectly, shares carrying more than 5% of our common stock,
nor any members of the immediate family (including spouse, parents, children,
siblings, and in-laws) of any of the foregoing persons, has any material
interest, direct or indirect, in any transaction that we have entered into since
our incorporation or any proposed transaction.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
2.1 Plan and Agreement of Merger between the Registrant and Waterloo
Ventures, Inc. (2)
3.1 Articles of Incorporation (1)
3.2 By-Laws (1)
10.1 Operating Agreement of Maverick Basin Exploration, LLC, dated
June 23, 2004(2)
10.2 Amendment to Operating Agreement of Maverick Basin Exploration, LLC,
dated July 14, 2004(2)
10.3 Amendment to Operating Agreement of Maverick Basin Exploration, LLC,
dated July 28, 2004(2)
10.4 Amendment to Operating Agreement of Maverick Basin Exploration, LLC,
dated August 6, 2004(2)
10.5 Amendment to Operating Agreement of Maverick Basin Exploration, LLC,
dated October 12, 2004(2)
19
10.6 Amendment to Operating Agreement of Maverick Basin Exploration, LLC,
dated November 30, 2004(2)
10.7 RBE LLC Operating Agreement dated August 2, 2004(2)
10.8 Amendment to RBE LLC Operating Agreement, dated August 8, 2004(2)
10.9 Amendment to RBE LLC Operating Agreement, dated December 1, 2004(2)
10.10 Employment Agreement with Michael Garland dated July 27, 2004(2)
10.11 Warrant Certificate between the Registrant and AltaFin B.V. dated
August 2, 2004(2)
10.12 Option Agreement between the Registrant and Michael Garland dated
July 27, 2004(2)
10.13 Subscription Agreement between the Registrant and PHT Resendez
Partners, L.P. dated October 5, 2004(2)
10.14 Warrant Certificate between the Registrant and Trident Growth Fund,
L.P. dated July 31, 2004(2)
10.15 Interest Purchase Agreement between the Registrant and Ferrell RBE
Holdings, LLC dated July 2004(2)
10.16 Interest Purchase Agreement between the Registrant and South Oil,
Inc. dated July 2004(2)
10.17 Promissory Note between the Registrant and Trident Growth Fund, LP
dated July 14, 2004(2)
10.18 Security Agreement between the Registrant and Trident Growth Fund,
LP dated July 14, 2004(2)
10.19 Guaranty between the Registrant and Trident Growth Fund, LP dated
July 14, 2004(2)
14.1 Code of Ethics(2)
31.1 Certification by principal executive officer and principal
financial and accounting officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section
302 of the Sarbanes - Oxley Act of 2002(2)
32.1 Certification by principal executive officer and principal
financial and accounting officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002(2)
(1) Incorporated by reference to our Registration Statement on Form SB-2 filed
with the Commission on October 14, 2002.
(2) Filed herewith
(b) Reports on Form 8-K.
On August 12, 2004, we filed a Current Report on Form 8-K to report our purchase
of a 74.25% Class A membership interest in Maverick Basin Exploration, LLC. We
filed no other reports on Form 8-K during the quarter ended August 31, 2004.
20
ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES
The following table presents fees for professional audit services performed by
Malone & Bailey PC for the audit of our annual financial statements for August
31, 2004 and fees billed for other services rendered by Malone & Bailey PC in
2004, and professional audit services performed by Morgan & Co. for the audit of
our annual financial statements for 2003 and fees billed for other services
rendered by Morgan & Co. in 2003.
Audit Fees consist of fees billed for professional services rendered for the
audit of our financial statements and review of the interim financial statements
included in quarterly reports and services that are normally provided by our
independent accountants in connection with statutory and regulatory filings or
engagements.
Audit-Related Fees consist of fees billed for assurance and related services
that are reasonably related to the performance of the audit or review of the
Company's consolidated financial statements and are not reported under "Audit
Fees."
Tax Fees consists of fees billed for professional services for tax compliance,
tax advice and tax planning. These services include assistance regarding federal
and state tax compliance, tax audit defense, customs and duties, and mergers and
acquisitions.
All Other Fees consist of fees billed for products and services provided by the
principal accountant, other than those services described above.
AUDIT COMMITTEE PRE-APPROVAL PROCEDURES
Our Board of Directors serves as our audit committee. Our Board of Directors
approves the engagement of our independent auditors, and meets with our
independent auditors to approve the annual scope of accounting services to be
performed and the related fee estimates. It also meets with our independent
auditors, on a quarterly basis, following completion of their quarterly reviews
and annual audit and prior to our earnings announcements, if any, to review the
results of their work. During the course of the year, our chairman has the
authority to pre-approve requests for services that were not approved in the
annual pre-approval process. The chairman reports any interim pre-approvals at
the following quarterly meeting. At each of the meetings, management and our
independent auditors update the Board of Directors with material changes to any
service engagement and related fee estimates as compared to amounts previously
approved. During 2003, all audit and non-audit services performed by our
independent accountants were pre-approved by the Board of Directors in
accordance with the foregoing procedures.
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MAVERICK OIL AND GAS, INC.
Date: December 23, 2004 /s/ Michael Garland
---------------------------------
Michael Garland
Chief Executive Officer and
Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities on the dates indicated.
SIGNATURE TITLE DATE
/s/ Michael Garland Chief Executive Officer, Treasurer December 23, 2004
-------------------- and Director (Principal Executive
Michael Garland Officer and Principal Financial and
Treasurer)
22
MAVERICK OIL AND GAS, INC.
(A DEVELOPMENT STAGE ENTITY)
INDEX TO THE FINANCIAL STATEMENTS
Report of Malone & Bailey, PC F-2
Report of Morgan & Company F-3
Consolidated Balance Sheets F-4
Consolidated Statements of Operations F-5
Consolidated Statements of Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-8
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Maverick Oil and Gas, Inc.
(formerly Waterloo Ventures, Inc.)
(A Development Stage Company)
Houston, Texas
We have audited the accompanying consolidated balance sheet of Maverick Oil and
Gas, Inc., as of August 31, 2004 and the related consolidated statements of
operations, changes in stockholders equity, and cash flows for the period from
June 18, 2002 (Inception) through August 31, 2004. These financial statements
are the responsibility of Maverick. Our responsibility is to express an opinion
on these financial statements based on our audit. We did not audit the financial
statements for the period June 18, 2002 (Inception) through August 31, 2003,
which statements reflect total assets and revenues of $31,627 and $0. Those
statements were audited by other auditors whose report has been furnished to us,
and our opinion on the statements of operations, stockholders' equity, and cash
flows for the period June 18, 2002 (Inception) through August 31, 2003, insofar
as it relates to the amounts for prior periods through August 31, 2003, is based
solely on the report of the other auditors.
We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Maverick Oil & Gas, Inc., as of
August 31, 2004, and the results of its operations and its cash flows for the
periods described in conformity with accounting principles generally accepted in
the United States of America.
The accompanying financial statements have been prepared assuming that Maverick
will continue as a going concern. As discussed in Note 2 to the financial
statements, Maverick has minimal operations, which raises substantial doubt
about its ability to continue as a going concern. Management's plans regarding
those matters also are described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Malone & Bailey, PC
MALONE & BAILEY, PC
www.malone-bailey.com
Houston, Texas
December 8, 2004
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
Maverick Oil and Gas, Inc.
(formerly Waterloo Ventures Inc.)
(A Development Stage Company)
We have audited the balance sheet of Maverick Oil and Gas, Inc. (a development
stage company) as at August 31, 2003, and the statements of loss, cash flows,
and shareholders' equity for the year ended August 31, 2003, and for the
cumulative period from June 18, 2002 (date of inception) to August 31, 2003.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at August 31, 2003 and 2002,
and the results of its operations and cash flows for the periods indicated in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company incurred a net loss of $48,573 since inception, has not
attained profitable operations and is dependent upon obtaining adequate
financing to fulfill its exploration activities. These factors raise substantial
doubt that the Company will be able to continue as a going concern. Management's
plans in regard to these matters are also discussed in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Morgan & Company
Vancouver, B.C. "Morgan & Company"
October 29, 2003 Chartered Accountants
F-3
MAVERICK OIL AND GAS, INC.
(formerly Waterloo Ventures, Inc.)
(A DEVELOPMENT STAGE ENTITY)
Consolidated Balance Sheets
ASSETS
August 31,
---------------------------------------------
2004 2003
---------------------- --------------------
Current Assets
Cash and cash equivalents $ 596,748 $ 31,627
Unamortized loan costs 102,812 -
---------------------- --------------------
Total Current Assets 699,560 31,627
Undeveloped oil and gas interests, using successful efforts 2,529,835 -
Leasehold acquisition option 1,000,000 -
---------------------- --------------------
$ 4,229,395 $ 31,627
====================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 100,987 $ 1,700
Payables for oil and gas interests 400,000 -
Notes payable 1,859,000 -
---------------------- --------------------
Total Current Liabilities 2,359,987 1,700
---------------------- --------------------
Commitments and Contingencies
Minority Interest 95,212 -
Stockholders' Equity
Preferred stock, $.001 par value authorized 10,000,000 shares; none
issued and outstanding as of August 31, 2004 and 2003 - -
Common stock, $.001 par value; authorized 100,000,000 shares;
60,520,000 and 58,520,000 shares issued and outstanding at
2004 and 2003, respectively 60,520 58,520
Additional paid-in capital 1,917,980 19,980
Deficit accumulated during development stage (204,304) (48,573)
---------------------- --------------------
Total Stockholders' Equity 1,774,196 29,927
---------------------- --------------------
$ 4,229,395 $ 31,627
====================== ====================
See accompanying summary of accounting policies and notes to financial statements.
F-4
MAVERICK OIL AND GAS, INC.
(formerly Waterloo Ventures, Inc.)
(A DEVELOPMENT STAGE ENTITY)
Consolidated Statements of Operations
For the Years June 18, 2002
Ended August 31, (Inception) to
--------------------------------------- August 31,
2004 2003 2004
------------------- ------------------- --------------------
Revenues $ - $ - $ -
------------------- ------------------- --------------------
Operating expenses
Exploration expenses 7,038 5,000 14,538
Mineral property option 1,000 - 8,500
General and administrative 152,481 23,444 186,054
------------------- ------------------- --------------------
Total operating expenses 160,519 28,444 209,092
------------------- ------------------- --------------------
Loss from operations before minority interest (160,519) (28,444) (209,092)
------------------- ------------------- --------------------
Minority interest 4,788 - 4,788
------------------- ------------------- --------------------
Net loss to common stockholders $ (155,731) $ (28,444) $
=================== ==================== ===================
Basic and diluted loss per common share $ (0.00) $ (0.00)
=================== ===================
Basic and diluted weighted average common shares outstanding 58,678,904 58,520,000
=================== ===================
See accompanying summary of accounting policies and notes to financial statements.
F-5
MAVERICK OIL AND GAS, INC.
(formerly Waterloo Ventures, Inc.)
(A DEVELOPMENT STAGE ENTITY)
Consolidated Statement of Stockholders' Equity
Deficit
Accumulated
Common Stock Additional During the Total
------------------------------ Paid-In Development Stockholders'
Shares Amount Capital Stage Equity
------------- ---------------- ------------- ----------------- ---------------
Balance, June 18, 2002 - $ - $ - $ - $ -
Common stock issued for cash,
June 2002 22,000,000 22,000 (21,000) - 1,000
July 2002 22,000,000 22,000 (12,000) - 10,000
August 2002 14,300,000 14,300 50,700 - 65,000
August 2002 220,000 220 2,280 - 2,500
Net Loss - - - (20,129) (20,129)
------------ ------------ ------------ ------------ -------------
Balance at August 31, 2002 58,520,000 58,520 19,980 (20,129) 58,371
Net Loss - - - (28,444) (28,444)
------------ ------------ ------------ ------------ -------------
Balance at August 31, 2003 58,520,000 58,520 19,980 (48,573) 29,927
Issuance of common stock for cash at
$1.00 per share during August 2004,
net of offering costs 2,000,000 2,000 1,898,000 - 1,900,000
Net Loss - - - (155,731) (155,731)
------------ ------------ ------------ ------------ -------------
Balance at August 31, 2004 60,520,000 $ 60,520 $1,917,980 $ (204,304) $1,774,196
============ ============ ============ ============ =============
See accompanying summary of accounting policies and notes to financial statements.
F-6
MAVERICK OIL AND GAS, INC.
(formerly Waterloo Ventures, Inc.)
(A DEVELOPMENT STAGE ENTITY)
Consolidated Statements of Cash Flows
For the Years June 18, 2002
Ended August 31, (Inception) to
------------------------------------------ August 31,
2004 2003 2004
-------------------- --------------------- ----------------------
Cash Flows from Operating Activities
Net loss $ (155,731) $ (28,444) $ (204,304)
Adjustments to reconcile net loss to
net cash used in operating activities
Minority interest 95,212 - 95,212
Amortization of note payable discount and loan costs 14,688 - 14,688
Changes in assets and liabilities
Prepaid expenses 2,500 (10,316)
Accounts payable and accrued expenses 90,796 700 102,812
------------------- ------------------ -------------------
Net Cash Used in Operating Activities 44,965 (25,244) (1,908)
------------------- ------------------ -------------------
Cash Flows from Investing Activities
Purchase of oil and gas interests (3,121,344) - (3,121,344)
------------------- ------------------ -------------------
Net Cash Used in Investing Activities (3,121,344) - (3,121,344)
------------------- ------------------ -------------------
Cash Flows from Financing Activities
Issuance of debt 1,951,500 - 1,951,500
Repayment of debt (210,000) - (210,000)
Issuance of common stock, net issuance costs 1,900,000 - 1,978,500
------------------- ------------------ -------------------
Net Cash Provided by Financing Activities 3,641,500 - 3,720,000
------------------- ------------------ -------------------
Net Increase in Cash and Cash Equivalents 565,121 (25,244) 596,748
Cash and Cash Equivalents, Beginning of Period 31,627 56,871 -
------------------- ------------------ -------------------
Cash and Cash Equivalents, End of Period $ 596,748 $ 31,627 $ 596,748
=================== ================== ====================
See accompanying summary of accounting policies and notes to financial statements
F-7
Maverick Oil and Gas, Inc.
(formerly Waterloo Ventures, Inc.)
(A Development Stage Entity)
Notes to Consolidated Financial Statements
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
Nature of Operations
Waterloo Ventures, Inc. ("Waterloo") was incorporated in Nevada on June 18, 2002
and was an inactive, publicly-quoted company in 2004. On June 23, 2004, a wholly
owned subsidiary was incorporated in the state of Nevada named "Maverick Oil and
Gas, Inc." On June 28, 2004, Waterloo was merged into that wholly owned
subsidiary and changed its name to "Maverick Oil and Gas, Inc." ("Maverick").
On April 1, 2004, Maverick experienced a change in management when all of its
directors and officers resigned from their positions and a new officer and
director was appointed. In April 2004, Maverick's new management implemented a
new business plan and became engaged in the business of acquiring, exploring,
and developing natural gas and oil properties.
Maverick is generally not involved as the operator of the projects in which it
participates. Instead, Maverick relies on third parties for drilling, delivering
any gas or oil reserves that are discovered, and assisting in the negotiation of
all sales contracts with such purchasing parties. With the assistance of such
third parties, Maverick plans to explore and develop these prospects and sell on
the open market any gas or oil that is discovered. Maverick does not own any
drilling rigs, and all of the drilling activities are conducted by independent
drilling contractors. Maverick's properties are primarily located in Texas.
Principles of Consolidation
The accompanying consolidated financial statements include all of the accounts
of Maverick Oil and Gas, Inc. and its two majority owned subsidiaries, Maverick
Basin Exploration, LLC (74.25%), a Delaware limited liability company formed in
June 2004 and RBE, LLC (50%), a Delaware limited liability company formed in
August 2004. All significant intercompany accounts and transactions have been
eliminated.
Oil and Gas Accounting
Maverick uses the successful efforts method of accounting for oil and gas
producing activities. Costs to acquire mineral interests in oil and gas
properties, to drill and equip exploratory wells that find proved reserves, and
to drill and equip development wells are capitalized. Costs to drill exploratory
wells that do not find proved reserves, geological and geophysical costs, and
costs of carrying and retaining unproved properties are expensed.
Unproved oil and gas properties that are individually significant are
periodically assessed for impairment of value, and a loss is recognized at the
time of impairment by providing an impairment allowance. Other unproved
properties are amortized based on Maverick's experience of successful drilling
and average holding period. Capitalized costs of producing oil and gas
properties, after considering estimated residual salvage values, are depreciated
and depleted by the unit-of-production method. Support equipment and other
property and equipment are depreciated over their estimated useful lives.
Upon the sale or retirement of a complete unit of a proved property, the cost
and related accumulated depreciation, depletion, and amortization are eliminated
from the property accounts, and the resultant gain or loss is recognized. Upon
the retirement or sale of a partial unit of proved property, the cost is charged
to accumulated depreciation, depletion, and amortization with a resulting gain
or loss recognized in income.
Upon the sale of an entire interest in an unproved property for cash or cash
equivalent, gain or loss on the sale is recognized, taking into consideration
the amount of any recorded impairment if the property had been assessed
individually. If a partial interest in an unproved property is sold, the amount
received is treated as a reduction of the cost of the interest retained.
Stock-Based Compensation Arrangements
Maverick applies the intrinsic value method of accounting prescribed by
Accounting Principles Board ("APB")
F-8
Opinion No. 25, "Accounting For Stock Issued To Employees," and related
interpretations, in accounting for its stock-based grants to employees. Under
the intrinsic value method of accounting, compensation expense is recorded on
the date of grant only if the current market price of the underlying stock
exceeds the exercise price. Maverick applies the disclosure provisions specified
in SFAS No. 148, "Accounting For Stock Based Compensation - Transition and
Disclosure - an Amendment of SFAS 123," The Company applies SFAS No. 123,
"Accounting for Stock-Based Compensation," in accounting for stock-based grants
to non-employees.
Maverick follows the provisions of SFAS No. 123. As permitted under SFAS No.
123, Maverick has continued to utilize APB 25 in accounting for its stock-based
compensation to employees. Had compensation expense for the years ended August
31, 2004 and 2003 been determined under the fair value provisions of SFAS No.
123, as amended by SFAS 148, Maverick's net loss and net loss per share would
have been:
2004 2003
------------------- ---------------------
Net income (loss), as reported $ (155,731) $ (28,444)
Add: Stock-based employee compensation expense included
in reported net income determined under APB No. 25,
net of related tax effects - -
Deduct: Total stock-based employee compensation expense
determined under fair-value-based method for all awards,
net of related tax effects (5,666) -
------------------- ---------------------
Pro forma net income (loss) $ (161,397) $ (28,444)
------------------- ---------------------
Earnings per share:
Basic - as reported $ (0.00) $ (0.00)
Basic - pro forma $ (0.00) $ (0.00)
These pro forma amounts may not be representative of future disclosures since
the estimated fair value of stock options is amortized to expense over the
vesting period and additional options may be issued in future years. The
estimated fair value of each option granted was calculated using the
Black-Scholes option pricing model. The following summarizes the weighted
average of the assumptions used in the model.
The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and investments in money market
funds. Maverick considers all highly-liquid instruments with an original
maturity of 90 days or less at the time of purchase to be cash equivalents.
Credit Risk
Financial instruments that potentially subject Maverick to concentrations of
credit risk consist principally of cash deposits at financial institutions. To
mitigate this risk, Maverick places its cash deposits only with high credit
quality institutions. At various times during the year, Maverick may exceed the
federally insured limits. Management believes the risk of loss is minimal.
F-9
Capitalized Interest
Maverick's policy is to capitalize interest on expenditures for significant
exploration and development projects while activities are in progress to bring
the assets to their intended use. There was capitalized interest of $29,836 and
$0 as of August 31, 2004 and 2003.
Income Taxes
Income taxes are recorded in the period in which the related transactions are
recognized in the financial statements, net of the valuation allowances which
have been recorded against deferred tax assets. Deferred tax assets and
liabilities are recorded for the expected future tax consequences of temporary
differences between the tax basis and the financial reporting of assets and
liabilities. Net deferred tax assets and liabilities, relating primarily to
federal and state net operating loss carryforwards that have been deferred for
tax purposes, have been offset by a valuation reserve because management has
determined that it is more likely than not the deferred tax assets will not be
realized.
Reclassifications
Certain reclassifications have been made to conform the prior year's data to the
current presentation. These reclassifications had no effect on reported
earnings.
Recent Accounting Pronouncements
Maverick does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on its results of operations,
financial position or cash flow.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared in accordance with U.S.
GAAP, which contemplates continuation of the Company as a going concern.
As shown in the accompanying financial statements, the Company has incurred a
net loss of $204,304 for the period from June 18, 2002 (inception) to August 31,
2004, and has no sales. Additionally, the Company will need significant funds to
meet its cash calls on its various interests in oil and gas prospects to
explore, produce, develop, and eventually sell the underlying natural gas and
oil products under its interests and to acquire additional properties. The
future of the Company is dependent upon its ability to obtain financing and upon
future profitable operations from the development of its oil and gas properties.
Management has plans to seek additional capital through a financing transaction
involving the sale of debt and/or equity securities. The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded assets, or the amounts of and classification of liabilities that might
be necessary in the event the Company cannot continue in existence or fails to
generate projected revenues. The Company will be required to raise funds through
additional offerings of its securities in order to have the funds necessary to
complete the development of its current projects and continue its operations.
NOTE 3 - UNDEVELOPED OIL AND GAS INTERESTS
On July 28, 2004, Maverick acquired a 74.25% Class A membership interest in MBE,
a Delaware limited liability company. MBE has three classes of ownership
interest: Class A, Class B, and Class C. Maverick acquired all of the Class A
interests for the assumption of an obligation to make capital contributions
totaling $4 million to MBE. As the sole Class A member, Maverick's interest
represents an initial interest of 74.25%. Maverick's first capital contribution
of $500,000 was made in August 2004. Additional payments of $625,000 have
subsequently been made and a balance of $2,875,000 is due on or before January
31, 2005.
The MBE operating agreement provides that cash distributions by MBE are to be
made in the following order of priority:
o to any members, as required to pay taxes on that member's share of profits
for any taxable year;
F-10
o then, to the Class A members until the aggregate distribution made to the
Class A members equals $1,500,000;
o then, to the Class A members and to the Class B members until the aggregate
distributions made to the Class A members equal 100% of the capital
contributions made by the Class A members; and
o then, 63.75% to the Class A members, 21.25% to the Class B members, and 15%
to the Class C members.
On July 15, 2004, MBE entered into an exploration agreement with Blue Star Oil &
Gas, LTD ("Blue Star"). The agreement covers 10,240 acres of land in Maverick
County, Texas ("prospect area"). The agreement calls for the drilling of four
obligatory wells for which MBE is responsible for 100% of the costs associated
with the completion of the first two wells. Once the wells start to produce,
both MBE and Blue Star shall split the production costs and revenue at 50% each.
The third and fourth wells will be drilled, provided that Blue Star and MBE
share in the drilling costs at 50% each. Any revenues that are generated from
the first two wells are to be applied to MBE's corresponding costs before being
proportionately split.
On June 27, 2004, MBE purchased the right to participate in the Blue Star
operating agreement described above. A $500,000 assignment fee was recorded on
the books as of August 31, 2004, for which only $100,000 has been paid. In
addition to the $500,000 fee, the assignor is to receive, at payout, a 25%
backin working interest.
In August 2004, Maverick funded $2,000,000 of the estimated $4,000,000 total
cost of the first two wells.
Maverick's investments and activity in oil and gas activities which consisted of
the following at November 30, 2004:
Total Cost of
Oil and Gas
Properties
---------------------
Unproved properties acquisition costs $ 2,500,000
Capitalized interest 29,835
---------------------
Net $ 2,529,835
=====================
NOTE 4 - LEASEHOLD ACQUISITION OPTION
On August 8, 2004 Maverick acquired a 50% membership interest in RBE, LLC
("RBE"), a newly formed Delaware limited liability company, which was formed to
explore for oil and gas in the Barnett Shale area of North Texas. Maverick
acquired its interest in RBE from Ferrell RBE Holdings, LLC ("Ferrell RBE") in
consideration for a total payment of $2 million, of which $1 million was paid in
respect of the purchase price of the interest and the balance represents
Maverick's assumption of Ferrell RBE's obligation to make a $1 million capital
contribution to RBE. Of this amount, $400,000 was paid in November 2004 and the
balance of $600,000 is due on January 31, 2005.
RBE has two separate classes of ownership interest, Class A and Class B, with
each Class owning 50% of RBE.
The RBE operating agreement provides that cash distributions by RBE are to be
made first to the Class A members until the aggregate distributions made to the
Class A members equals $1,000,000 and then to the Class A and Class B members in
the proportion to their ownership interests.
NOTE 5 - NOTES PAYABLE
Notes payable consisted of the following at August 31:
On July 14, 2004, MBE entered into a $2,050,000 12% senior secured note
obligation with Trident Growth Fund, L.P. ("Trident"). The note is due on July
31, 2005 and bears interest at 12% per annum. The note is secured by all the
assets of MBE. Loan costs of $117,500 were deducted from the proceeds of the
note. Interest payments are due on the last day of each month with principal
payments to be made at the discretion of MBE with full payment due by July 31,
2005. To induce Trident into making the loan to MBE, Maverick issued 200,000
warrants to purchase its common stock at an exercise price of $1 per share. The
warrants, fully vested, expire in 10 years
Other notes payable
Maverick borrowed $19,000 during June, July and August 2004 totaling $19,000,
with $10,000 in payments made on these 4 notes, leaving a net balance due of
$9,000 as of August 31, 2004.
NOTE 6 - INCOME TAXES
Income taxes are not due since Maverick has had losses since inception. As of
August 31, 2004, Maverick had approximately $160,000 in net operating losses,
which expire in 2024. Net losses accruing prior to their change in control
occurring April 2004 were eliminated under Internal Revenue Code Section 382.
The Company is subject to cash calls related to its various investments in oil
and gas prospects.
NOTE 8 - STOCKHOLDER'S EQUITY
On June 28, 2004, the number of outstanding shares of common stock were split
twenty-two-for-one. All share and per share amounts in the financial statements
reflect the stock split.
On June 24, 2002, Maverick issued 22,000,000 common shares to its directors for
$1,000.
On July 31, 2002, Maverick sold 22,000,000 common shares for $10,000.
On August 1, 2002, Maverick sold 14,300,000 common shares for $65,000.
On August 31, 2002, Maverick sold 220,000 common shares for $2,500.
On August 2, 2004, Maverick sold 2,000,000 shares of common stock and warrants
to purchase 1,000,000 shares in a private placement for $1 per share, net of
$100,000 in related offering costs.
F-12
NOTE 9 - STOCK WARRANTS AND OPTIONS
Stock Warrants
Maverick had the following outstanding common stock warrants to purchase its
securities at August 31:
2004 2003
--------------------------------- ----------------------------------
Number of Exercise Price Number of Exercise Price
Description of Series Warrants issued Per Share Warrants issued Per Share
----------------------- --------------- -------------- --------------- --------------
Expire August 2007 1,000,000 $ 2.00 - -
Expire July 2014 200,000 $ 1.00 - -
--------------- -------------- --------------- --------------
Common Stock 1,200,000 -
============== ===============
Stock Options
The following tables summarize Maverick's stock option activity and related
information during 2004 and 2003:
Number of Weighted-Average
Shares Exercise Price
-------------------- ----------------------
Balance at August 31, 2002 and 2003: - $ -
Granted 300,000 $ 1.50
Expired - -
-------------------- ----------------------
Balance at August 31, 2004 300,000 $ 1.50
==================== ======================
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------------ ------------------------------------
Number of Weighted Weighted Number Weighted
Range of Outstanding Shares Average Average Exercisable at Average
Exercise at August 31, Remaining Exercise August 31, Exercise
Prices 2004 Contract Life Price 2004 Price
-------------- ------------------- ------------------ --------------- ------------------ --------------
$ 1.50 300,000 2.9 $ 1.50 300,000 $ 1.50
F-13
NOTE 10 - SUBSEQUENT EVENTS
On October 4, 2004, RBE, LLC completed an acquisition of acreage in the Barnett
Shale from an unrelated third party through a membership subscription
arrangement whereas RBE Holdings, LLC agreed to assign its right to the acreage
in exchange for a 40% membership interest in RBE, LLC. RBE, LLC acquired a
working interest of between 50% and 100% of a series of oil and gas leases
located on approximately 12,082 acres of land in Wise County, Texas, resulting
in a net working interest on approximately 7,042 acres in the Barnett Shale. The
interests acquired are subject to a 25% royalty.
During October 2004, Maverick agreed to purchase a 9.9% partnership interest in
PHT Resendez, L.P. in exchange for a capital contribution of $500,000, which has
not been paid as of December 2, 2004. PHT Resendez, L.P. was formed to purchase
leasehold interests in certain oil and gas prospects on 1,248.2 acres located in
Zapata County, Texas.
On October 12, 2004, MBE borrowed $300,000 in exchange for a 3% promissory note
payable on demand to FEQ Gas, LLC.
On October 29, 2004, MBE borrowed $300,000 in exchange for a 3% promissory note
payable on demand to South Oil, Inc.
During September, October and November 2004, the Company paid a total of
$625,000 to MBE as partial payments of its committed funding.
On November 18, 2004, Maverick borrowed $1,000,000 in exchange for a convertible
note payable to DDH Resources II, Limited ("DDH"). The convertible note is due
at the earliest of six months or when Maverick completes an equity raise of at
least $5,000,000. Interest accrues at 12% per annum. At maturity date or at the
option of the lender, the note and accrued interest shall be convertible into
shares of common stock at a conversion rate of $1.10. To induce DDH into making
the loan, Maverick issued 500,000 warrants exercisable for 3 years at $2.00.
NOTE 11 - SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest expense and income taxes for 2004 and 2003 were as
follows:
2004 2003
------------ ------------
Interest (all of which was capitalized) $ 21,344 $ -
============ ============
Income taxes, net $ - $ -
============ ============
F-14
EXHIBIT INDEX
Exhibit
Number Description
2.1 Plan and Agreement of Merger between the Registrant and Waterloo
Ventures, Inc. (2)
3.1 Articles of Incorporation (1)
3.2 By-Laws (1)
10.1 Operating Agreement of Maverick Basin Exploration, LLC, dated
June 23, 2004(2)
10.2 Amendment to Operating Agreement of Maverick Basin Exploration, LLC,
dated July 14, 2004(2)
10.3 Amendment to Operating Agreement of Maverick Basin Exploration, LLC,
dated July 28, 2004(2)
10.4 Amendment to Operating Agreement of Maverick Basin Exploration, LLC,
dated August 6, 2004(2)
10.5 Amendment to Operating Agreement of Maverick Basin Exploration, LLC,
dated October 12, 2004(2)
10.6 Amendment to Operating Agreement of Maverick Basin Exploration, LLC,
dated November 30, 2004(2)
10.7 RBE LLC Operating Agreement dated August 2, 2004(2)
10.8 Amendment to RBE LLC Operating Agreement, dated August 8, 2004(2)
10.9 Amendment to RBE LLC Operating Agreement, dated December 1, 2004(2)
10.10 Employment Agreement with Michael Garland dated July 27, 2004(2)
10.11 Warrant Certificate between the Registrant and AltaFin B.V. dated
August 2, 2004(2)
10.12 Option Agreement between the Registrant and Michael Garland dated
July 27, 2004(2)
10.13 Subscription Agreement between the Registrant and PHT Resendez
Partners, L.P. dated October 5, 2004(2)
10.14 Warrant Certificate between the Registrant and Trident Growth Fund,
L.P. dated July 31, 2004(2)
10.15 Interest Purchase Agreement between the Registrant and Ferrell RBE
Holdings, LLC dated July 2004(2)
10.16 Interest Purchase Agreement between the Registrant and South Oil,
Inc. dated July 2004(2)
10.17 Promissory Note between the Registrant and Trident Growth Fund, LP
dated July 14, 2004(2)
10.18 Security Agreement between the Registrant and Trident Growth Fund,
LP dated July 14, 2004(2)
10.19 Guaranty between the Registrant and Trident Growth Fund, LP dated
July 14, 2004(2)
14.1 Code of Ethics(2)
31.1 Certification by principal executive officer and principal
financial and accounting officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section
302 of the Sarbanes - Oxley Act of 2002(2)
32.1 Certification by principal executive officer and principal
financial and accounting officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002(2)
(1) Incorporated by reference to our Registration Statement on Form SB-2 filed
with the Commission on October 14, 2002.
(2) Filed herewith
(b) Reports on Form 8-K.
Exhibit 2.1
PLAN AND AGREEMENT OF MERGER
OF MAVERICK OIL AND GAS, INC. WITH
AND INTO WATERLOO VENTURES, INC.
PLAN AND AGREEMENT OF MERGER, dated as of June 24, 2004, by and
between Waterloo Ventures, Inc., a Nevada corporation ("WVI" or the "Surviving
Corporation"), and, Maverick Oil and Gas, Inc., a Nevada corporation and
wholly-owned subsidiary of WVI ("Maverick"). WVI and Maverick are hereinafter
collectively referred to as the "Merging Corporations."
W I T N E S S E T H:
WHEREAS, WVI is a corporation duly organized and validly existing
under the laws of the State of Nevada, with its registered office at 50 W.
Liberty Street, Suite 880, Reno, Nevada 89501, and with its principal executive
offices at 111 Presidential Blvd., Bala Cynwyd, PA Suite 158, 19004; and
WHEREAS, the authorized capital stock of WVI consists of 100,000,000
shares of common stock, par value $.001 per share, of which at June 24, 2004,
2,660,000 shares were issued and outstanding and 10,000,000 shares of preferred
stock, of which at June 24, 2004 none were issued and outstanding; and
WHEREAS, Maverick is a corporation duly organized and validly
existing under the laws of the State of Nevada, with its registered office at
502 East John Street, Carson City, Nevada, 89706, and with its principal
executive offices at 111 Presidential Blvd., Bala Cynwyd, PA Suite 158, 19004;
and
WHEREAS, the authorized capital stock of Maverick consists of 1,000
shares of common stock, par value $0.001 per share, of which at June 24, 2004,
1,000 shares were issued and outstanding and owned by WVI; and
WHEREAS, the respective boards of directors of the Merging
Corporations deem it desirable and in the best interests of their respective
corporations to merge Maverick with and into WVI, pursuant to the provisions of
Section 92A.180 of the Nevada Revised Statutes and have proposed, declared
advisable, and approved such merger pursuant to this Plan and Agreement of
Merger (the "Agreement"), which Agreement has been duly approved by resolutions
of the respective boards of directors of the Merging Corporations.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, and in order to prescribe the terms
and conditions of the Merger, the mode of carrying the same into effect, and
such other details and provisions as are deemed necessary or proper, the parties
hereby agree as follows:
Article I
MERGER
1.1 Surviving Corporation. Subject to the conditions hereinafter set
forth, the Merging Corporations shall be, upon the effective time of the merger,
as defined in Section 1.2 hereof, merged into a single surviving corporation,
which shall be WVI, one of the Merging Corporations, which shall continue its
corporate existence and remain a Nevada corporation governed by and subject to
the laws of that state.
1.2 Effective Time. The Merger shall become effective at the date and
time designated in the Articles of Merger filed with the Secretary of State of
the State of Nevada and following its adoption, certification, execution, and
acknowledgment in accordance with Section 92A.200 of the Nevada Revised
Statutes. The date upon which the merger shall become effective, as defined by
this Section 1.2, is referred to in this Agreement as the "Effective Time."
Article II
CONTINUED CORPORATE EXISTENCE OF SURVIVING CORPORATION
2.1 Existence. The identity, existence, purposes, powers, objects,
franchises, rights, and immunities of WVI, the Surviving Corporation, shall
continue unaffected and unimpaired by the merger, and the corporate identity,
existence, purposes, powers, objects, franchises, rights, and immunities of the
Merging Corporations shall be wholly merged into WVI, the Surviving Corporation,
and WVI shall be fully vested therewith. Accordingly, at the Effective Time, the
separate existence of the Merging Corporations, except insofar as continued by
statute, shall cease.
Article III
GOVERNING LAW AND ARTICLES OF INCORPORATION OF SURVIVING CORPORATION
3.1 Nevada Law Governs and WVI's Articles of Incorporation Survive
Except for Name Change. The laws of Nevada shall continue to govern the
Surviving Corporation. At and after the Effective Time, the Articles of
Incorporation of WVI, as in effect at the Effective Time, shall be the Articles
of Incorporation of the Surviving Corporation, except that the name of WVI shall
be changed to "Maverick Oil and Gas, Inc." as permitted by Section 92A.180 of
the Nevada Revised Statutes.
Article IV
BYLAWS OF SURVIVING CORPORATION
4.1 WVI's Bylaws Survive. At and after the Effective Time, the Bylaws
of WVI as in effect at the Effective Time, shall be the Bylaws of the Surviving
Corporation until the same shall be altered, amended, or repealed, or until new
Bylaws shall be adopted in accordance with the provisions of law, the Articles
of Incorporation, and the Bylaws of the Surviving Corporation.
2
Article V
DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
5.1 Directors of Surviving Corporation. The incumbent directors of
WVI immediately prior to the Effective Time shall constitute the board of
directors of the Surviving Corporation from and after the Effective Time, and
such persons shall hold office until the first annual meeting of stockholders of
the Surviving Corporation next following the Effective Time, or until their
successors are, in accordance with the Bylaws of the Surviving Corporation,
elected and qualified.
5.2 Officers of Surviving Corporation. The incumbent officers of WVI
immediately prior to the Effective Time shall hold their respective offices in
the Surviving Corporation from and after the Effective Time and until the first
meeting of directors following the next annual meeting of stockholders thereof,
or until their successors are elected in accordance with the Bylaws of the
Surviving Corporation.
5.3 Vacancies. At or after the Effective Time, if a vacancy shall for
any reason exist in the board of directors or in any of the offices of the
Surviving Corporation, such vacancy shall be filled in the manner provided in
the Articles of Incorporation or Bylaws of the Surviving Corporation.
Article VI
CAPITAL STOCK OF SURVIVING CORPORATION
6.1 Capital Stock as in WVI's Articles of Incorporation. The
authorized number of shares of capital stock of the Surviving Corporation, the
par value, designations, preferences, rights, and limitations thereof, and the
express terms thereof, shall be as set forth in the Articles of Incorporation of
the Surviving Corporation as in effect at the Effective Time.
Article VII
CANCELLATION OF SECURITIES ON MERGER
7.1 Cancellation of Maverick's Common Stock. At the Effective Time,
each share of common stock, par value $0.01 per share, of Maverick then issued
and outstanding, without any action on the part of the holders thereof, shall be
automatically cancelled and cease to exist. Any and all Maverick shares of
capital stock held in the treasury of Maverick shall be automatically cancelled
and cease to exist.
7.2 Maverick's Transfer Books Closed. At the Effective Time, the
stock transfer books of Maverick shall be deemed closed, and no transfer of
capital stock of Maverick shall thereafter be made or consummated.
Article VIII
ASSETS AND LIABILITIES
8.1 Assets and Liabilities of Merging Corporations Become Those of
Surviving Corporation. At the Effective Time, all rights, privileges, powers,
immunities, and franchises of each of the Merging Corporations, both of a public
3
and private nature, and all property, real, personal, and mixed, and all debts
due on whatever account, as well as stock subscriptions and all other chooses or
things in action, and all and every other interest of or belonging to or due to
either of the Merging Corporations, shall be taken by and deemed to be
transferred to and shall be vested in the Surviving Corporation without further
act or deed, and all such rights, privileges, powers, immunities, franchises,
property, debts, chooses or things in action, and all and every other interest
of the Merging Corporations shall be thereafter as effectually the property of
the Surviving Corporation as they were of the respective Merging Corporations,
and the title to any real or other property, or any interest therein, whether
vested by deed or otherwise, in either of the Merging Corporations, shall not
revert or be in any way impaired by reason of the merger; provided, however,
that all rights of creditors and all liens upon any properties of each of the
Merging Corporations shall be preserved unimpaired, and all debts, liabilities,
restrictions obligations, and duties of the respective Merging Corporations,
including without limitation all obligations, liabilities, and duties as lessee
under any existing lease, shall thenceforth attach to the Surviving Corporation
and may be enforced against and by it to the same extent as if said debts,
liabilities, restrictions, obligations, and duties had been incurred or
contracted by it. Any action or proceeding pending by or against either of the
Merging Corporations may be prosecuted to judgment as if the merger had not
taken place, or the Surviving Corporation may be substituted in place of either
of the Merging Corporations.
8.2 Accounting Treatment. The assets and liabilities of the Merging
Corporations shall be taken up on the books of the Surviving Corporation in
accordance with generally accepted accounting principles, and the capital
surplus and retained earnings accounts of the Surviving Corporation shall be
determined, in accordance with generally accepted accounting principles, by the
board of directors of the Surviving Corporation. Nothing herein shall prevent
the board of directors of the Surviving Corporation from making any future
changes in its accounts in accordance with law.
8.3 Termination. This Agreement may be terminated at any time prior
to the Effective Time by mutual consent of the Merging Corporations, expressed
by action of their respective boards of directors.
8.4 Waiver of Mailing Requirements. WVI, as sole shareholder of the
common stock of Maverick, hereby waives the requirement of mailing a copy or
summary of this Agreement set forth in Section 92A.180 of the Nevada Revised
Statutes.
8.5 Counterparts. This Agreement may be executed in counterparts and
delivered via facsimile, each of which shall be deemed to be an original and
both of which together shall constitute one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed in their respective corporate names by their respective duly
authorized officers, all as of the day and year first above written.
WATERLOO VENTURES, INC.
By: /s/ Cecile T. Coady
--------------------------------
Cecile T. Coady
President
MAVERICK OIL AND GAS, INC.
By: /s/ Cecile T. Coady
--------------------------------
Cecile T. Coady
President
5
Exhibit 10.1
OPERATING AGREEMENT
OF
MAVERICK BASIN EXPLORATION, LLC
Dated June 23, 2004
OPERATING AGREEMENT
OF
MAVERICK BASIN EXPLORATION, LLC
THIS OPERATING AGREEMENT (this "Agreement"), dated June 23, 2004, is
entered into by and between Touchstone Resources USA, Inc., a Delaware
corporation ("Touchstone Resources"), as a Member and Manager, and PHT Gas, LLC,
a Delaware limited liability company ("PHT Gas"), as a Member.
RECITALS
WHEREAS, the Members desire to form a limited liability company under
the Act to engage in any lawful act or activity, either alone or with other
businesses or purposes, for which limited liability companies may be organized
under the Act; and
WHEREAS, the initial Members wish to provide for the administration of
the business and affairs of the Company and the rights and obligations of the
Members with respect thereto;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, mutually agree as follows:
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
definitions ascribed to them herein:
"Act" shall mean the Delaware Limited Liability Company Act, Ch. 18, Tit. 6,
Sec. 18-101, et seq. (the "Act") and any successor statutes, as amended.
"Additional Capital" shall have the meaning ascribed to such term in Section
3.4(b).
"Additional Member" shall have the meaning ascribed to such term in Section 2.3.
"Capital Account" shall mean the dollar amount of the Member's claim on the
capital of the Company (or, if the Member has a negative Capital Account, the
Company's claim on the capital of the Member).
"Capital Contributions" shall mean any contributions of cash, non-cash property
and services and the promises of cash, non-cash property and services, made to
the Company by a Member.
"Certificate" shall have the meaning ascribed to such term in Section 1.2.
"Class A Member" shall have the meaning ascribed to such term in Section 2.2.
"Class A Percentage Interest" shall mean the fraction (expressed as a
percentage), the numerator of which is the Percentage Interest of the applicable
Class A Member and the denominator of which is the aggregate Percentage Interest
of all Class A Members on the applicable date of computation.
"Class B Member" shall have the meaning ascribed to such term in Section 2.2.
"Class B Percentage Interest" shall mean the fraction (expressed as a
percentage), the numerator of which is the Percentage Interest of the applicable
Class B Member and the denominator of which is the aggregate Percentage Interest
of all Class B Members on the applicable date of computation.
"Class C Member" shall have the meaning ascribed to such term in Section 2.2.
"Class C Percentage Interest" shall mean the fraction (expressed as a
percentage), the numerator of which is the Percentage Interest of the applicable
Class C Member and the denominator of which is the aggregate Percentage Interest
of all Class C Members on the applicable date of computation.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean Maverick Basin Exploration, LLC, a Delaware limited
liability company.
"Confidential Information" shall mean the terms of this Agreement, information
that the Company maintains in confidence, information that the Managers know to
be proprietary to the Company, financial information relating to the Company and
to the Managers, information relating to Company marketing and business plans
and strategies, information concerning the design and manufacture of Company
products and concerning methods of providing Company services, information in
Company personnel files and similar files relating to Company Managers and
employees, information entrusted to the Company in confidence by third parties,
and information reasonably designated by the Managers as Confidential
Information
"Dissolution" shall mean the cessation of the Company's normal business
activities and the beginning of the process of winding up its business and
internal affairs and of liquidating it.
"Distributable Cash" shall mean amounts determined by the Manager, as being
available out of all cash received by the Company from all sources for
distribution to the Members after (1) all expenditures by the Company, including
capital expenditures, are paid, (2) all current debt is paid, and (3) there are
made such additions to the reserves of the Company for contingencies, working
capital or future expansion needs as the Manager may reasonably determine to be
necessary.
"Distribution" shall mean a transfer of Distributable Cash to a Member in the
Member's capacity as a member in cash, by check or otherwise. Payments
specifically identified in this Agreement as compensation to the Members for
services to or on behalf of the Company shall not be deemed to be Distributions
within the meaning of this Agreement.
"Effective Date" shall have the meaning ascribed to such term in Section 1.1.
"Incapacity" shall mean: (i) with respect to a natural Person, the bankruptcy,
death, disability or incompetency of such Person, and (ii) with respect to any
other Person, the bankruptcy, liquidation, dissolution or termination of such
Person.
"Management Rights" shall mean all rights of a Member as a member except the
Member's right to receive allocations of Company Profits and Losses and
Distributions of Company assets.
"Manager" or Managers" means any Person or Persons elected by the Members as a
manager of the Company as provided in this Agreement or appointed as such in
this Agreement, but does not include any Person who has ceased to be a Manager.
"Member" means any Person executing this Agreement as of the date of this
Agreement as a member or hereafter admitted to the Company as a member as
provided in this Agreement, but does not include any Person who has ceased to be
a member in the Company.
"Membership Interest" shall mean a Member's share of the Company's Profits and
Losses, and the Member's right to receive Distributions of the Company's assets.
"Membership Rights" shall have the meaning ascribed to such term in Section 2.5.
"Non-Contributing Member" shall have the meaning ascribed to such term in
Section 3.4(b).
"Percentage Interest" means, with respect to any Member, the Percentage Interest
set forth opposite such Member's name on Schedule A attached hereto.
"Person" means a natural person, partnership (whether general or limited),
limited liability company, trust, estate, association, corporation, custodian,
nominee, or any other individual or entity in its own or any representative
capacity.
"Proceeding" shall have the meaning ascribed to such term in Section 9.2.
"Profits" and "Losses" shall mean the taxable income and losses, respectively,
of the Company as determined for Federal income tax purposes in accordance with
the accounting method followed by the Company for such purposes, adjusted as
follows: (i) any expenditures of the Company described in Section 705(a)(2)(B)
of the Code, or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Treasury Regulation Section 1.704(b)(2)(iv)(i), shall be subtracted from such
taxable income or losses, and (ii) if property is reflected on the books of the
Company at a book value that differs from the adjusted tax basis of such
property, depreciation, amortization and gain or loss with respect to such
property shall be determined by reference to such book value.
"Substituted Member" shall mean a transferee of any economic and non-economic
rights of an existing Member.
"Unlawful Distribution" shall have the meaning ascribed to such term in Section
4.5.
SECTION 1
PRELIMINARY PROVISIONS
1.1 Intentionally Omitted
1.2 Acceptance of Certificate of Formation
Each initial Member hereby acknowledges that the initial Member has
carefully reviewed the Certificate of Formation of the Company (the
"Certificate") and that each of its provisions is acceptable to the initial
Member.
1.3 Amendment of Agreement and Certificate
Except as otherwise expressly provided in this Agreement, no amendment
of the Agreement or the Certificate shall be valid unless it is in writing and
signed by all of the Members.
1.4 Formation
On or promptly after the date of this Agreement, the initial Members
shall cause the Certificate to be filed with the Secretary of State of the State
of Delaware.
1.5 Entity Status
Upon its formation, the Company shall be a legal entity separate and
distinct from its Members.
1.6 Name
The name of the Company shall be "Maverick Basin Exploration, LLC."
1.7 Principal Office
The principal office of the Company shall be 111 Presidential
Boulevard, Suite 165, Bala Cynwyd, Pennsylvania 19004, or such place or places
as the Managers may designate from time to time. The Company may have such other
offices and places of business as the Managers may designate from time to time.
1.8 Registered Office; Registered Agent
The registered office of the Company required by the Act to be
maintained in the State of Delaware shall be the office of the initial
registered agent named in the Certificate or such other office (which need not
be a place of business of the Company) as the Managers may designate from time
to time in the manner provided by law. The registered agent of the Company in
the State of Delaware shall be the initial registered agent named in the
Certificate or such other Person or Persons as the Managers may designate from
time to time in the manner provided by law.
1.9 Purpose
The Company's principal purpose shall be to acquire, explore, drill and
develop domestic natural gas and oil properties, and to engage in any other
business activity that now or hereafter may be necessary, appropriate,
desirable, incidental, advisable or convenient to accomplish the foregoing
purpose (including obtaining financing therefor), and that is not forbidden by
the Act or the law of the jurisdiction in which the Company engages in business.
1.10 Powers
In pursuing its lawful purposes, the Company shall be empowered to do
all things that limited liability companies are permitted to do under the Act.
1.11 Foreign Qualifications
Prior to the Company conducting business in any jurisdiction other than
Delaware, the Managers shall cause the Company to comply, to the extent
procedures are available and those matters are reasonably within the control of
the Managers, with all requirements necessary to qualify the Company as a
foreign limited liability company in that jurisdiction. At the request of the
Managers, each Member shall execute, acknowledge, swear to, and deliver all
certificates and other instruments conforming with this Agreement that are
necessary or appropriate to qualify, continue, and terminate the Company as a
foreign limited liability company in all such jurisdictions in which the Company
may conduct business
1.12 Management Structure
The management of the business and internal affairs of the Company
shall be reserved to one or more Managers. Except as otherwise provided in this
Agreement, only the Managers may bind the Company and decide matters relating to
the Company's business and internal affairs, provided that the Members shall
have voting rights, information rights and dispute resolution rights provided in
this Agreement and by law. The Members may change the number of the Company's
Managers at any time upon the affirmative vote of Members holding a majority of
Member votes.
1.13 Limited Liability of Members and Managers
No Member or Manager shall be personally obligated to any third party
for any debt, obligation or liability of the Company solely by reason of being a
Member or Manager. Members and Managers shall be liable for their personal
conduct as provided by law.
1.14 Business Activities and Ventures of Members and Managers
Each Member, Manager and officer of the Company at any time and from
time to time may engage in and possess interests in other business activities
and ventures of any and every type and description, independently or with
others, including ones in competition with the Company, with no obligation to
offer to the Company or any other Member, Managers or officers the right to
participate therein, and neither the Company nor the other Members, Manager or
officers shall have any rights in such other business activities and ventures.
The Company may transact business with any Manager, Member, officer or affiliate
thereof, provided the terms of those transactions are no less favorable than
those the Company could obtain from unrelated third parties.
1.15 Annual Accounting Period
The Company's fiscal year for financial and tax purposes shall be the
calendar year.
1.16 Method of Accounting
The Company shall use the accrual method of accounting to compute its
taxable income.
1.17 Business Asset Protection
The Members intend that to the maximum extent permitted by the Act and
by other applicable law, the assets of the Company shall be unavailable to
satisfy obligations incurred by the Members in their personal capacity.
SECTION 2
MEMBERSHIP IN THE COMPANY;
TRANSFERS AND PLEDGES OF MEMBERSHIP RIGHTS;
MEMBERS' VOTING RIGHTS
2.1 Identity of Initial Members
The initial Members are as set forth on Schedule A attached hereto.
2.2 Classes of Members
The Company shall have three (3) classes of Members: Class A Members
("Class A Members"), Class B Members ("Class B Members") and Class C Members
("Class C Members"). The initial Class A Member and Class B Member shall be
Touchstone Resources. The initial Class C Member shall be PHT Gas. Except as
otherwise expressly provided in this Agreement, each Member shall have the same
rights, duties, privileges, authority and liabilities as each other Member.
2.3 Admission of Additional Members
The Members shall admit no Person as an additional Member of the
Company after the Company's formation (an "Additional Member") except upon the
affirmative vote of Members holding a majority of Member votes.
2.4 Execution of This Agreement by Substituted Member
No Person shall be admitted as an Additional or Substituted Member of
the Company until the Additional or Substituted Member signs this Agreement (as
it may be amended from time to time before the admission of the Additional or
Substituted Member).
2.5 Membership Rights
For purposes of this Agreement, the membership rights of a Member (the
"Membership Rights") shall mean the totality of a Member's rights as a member
under the Agreement and the Act, including both economic and non-economic
rights.
2.6 Lack of Authority
No Member shall have any power or authority, in his or her capacity as
a Member, to represent, act for, sign for, or bind the Managers or the Company,
or to do any act that would be binding on the Company, or to incur any
expenditures or obligations on behalf of the Company. Except when acting as a
Manager or an officer of the Company, or pursuant to separate service agreements
or other agreements or contracts between the Company and a Member, or as
otherwise specifically provided herein, the Members shall not participate in the
management or control of the Company business, nor shall the Members transact
any business for the Company. The Members hereby consent to the exercise by the
Managers of the powers conferred on the Managers by law and by this Agreement.
2.7 Forum; Remedies
Subject to any contrary provisions in Section 14, any claim against a
Member in the Member's capacity as a member shall be decided in arbitration
under Section 14, and in any such arbitration, the arbitrator may impose any
legal or equitable remedy that the arbitrator determines to be reasonable in the
circumstances.
2.8 Transfers or Pledges of Membership Rights to Substituted
Members
Except with the consent of a majority of the Managers, which consent
the Managers may not unreasonably withhold, no Member shall transfer all or any
part of the Member's rights as a member (whether these rights are economic or
non-economic) to any Substituted Member, including another Member, nor shall any
Member pledge all or any part of such Member's rights to any Person. In the
event that any Membership Interests are transferred in accordance with the
provisions of this Agreement, the transferees of such Membership Interests shall
succeed to the Percentage Interest of its transferor to the extent that it
relates to the transferred Membership Interest.
2.9 Transfers and Pledges in Breach of This Agreement
Transfers and pledges of Membership Rights in breach of the terms of
this Agreement shall be void and of no effect.
2.10 Right of First Refusal
Except as otherwise provided in this Agreement, the Company may require
a Member to promptly sell all or any part of the Member's Membership Interest to
the Company or to the other Members for its then fair value and upon other
reasonable purchase terms if the Member is dissociated from the Company under
Section 11, or an arbitrator orders such a sale under Section 14 on the ground
that it is fair and reasonable in the circumstances.
2.11 Election Under Code Section 754
Before any Member transfers any Membership rights to any Person, the
Members shall negotiate in good faith and shall agree whether to file an
election under Code Section 754 to adjust the basis of Company property in
connection with that transfer.
2.12 Members' Voting Rights
Except as otherwise expressly provided herein or by law, the
Class A Members shall have the exclusive right to vote on those matters
pertaining to the Company with respect to which Members are entitled to vote,
either under this Agreement or by law, and each Class A Member shall be entitled
to cast that number of votes as shall equal the product of the Class A
Percentage Interest of such Member (expressed as a fraction) multiplied by one
hundred (100). Each matter voted on by the Class A Members shall be decided by
the affirmative vote of Class A Members holding a majority of Class A Member
votes. Except as otherwise expressly provided in this Agreement or by law, the
Class B Members and Class C Members shall not be entitled to any voting rights
on any matters pertaining to the Company.
2.13 Procedures for Member Voting
Members may vote on matters in person, by phone, by fax, by e-mail or
by any other reasonable means. Each Member shall have a reasonable opportunity
to be heard on each matter on which the Members vote. The Managers shall use
their best efforts to record each Member vote accurately and to circulate this
record among the Members promptly after the vote, provided that the failure of
the Managers to circulate this record with respect to any vote shall not be
evidence of the invalidity of the vote. If the chairman of any meeting of
Members appoints one or more inspectors for that meeting, those inspectors shall
perform the Managers' obligations under this Section 2.13.
2.14 Intentionally Omitted
2.15 Meetings
(a) A quorum shall be present at a meeting of Members if the
holders of a majority of Member votes are represented at the meeting in person
or by proxy. With respect to any matter, other than a matter for which the
affirmative vote of the holders of a specified portion of the Membership
Interests of all Members entitled to vote is required by the Act, the
affirmative vote of a majority of Member votes at a meeting of Members at which
a quorum is present shall be the act of the Members.
(b) All meetings of the Members shall be held at the principal
place of business of the Company or at such other place within or without the
State of Pennsylvania as shall be specified or fixed in the notices or waivers
of notice thereof, provided that any or all Members may participate in any such
meeting by means of conference telephone or similar communications equipment by
means of which all Persons participating in the meeting can hear each other.
(c) Notwithstanding the other provisions of the Certificate or
this Agreement, the chairman of the meeting or the holders of a majority of
Member votes shall have the power to adjourn such meeting from time to time,
without any notice other than announcement at the meeting of the time and place
of the holding of the adjourned meeting. If such meeting is adjourned by the
Members, such time and place shall be determined by a vote of the holders of a
majority of the Member votes. Upon the resumption of such adjourned meeting, any
business may be transacted that might have been transacted at the meeting as
originally called.
(d) Intentionally Omitted.
(e) Special meetings of the Members for any proper purpose or
purposes may be called at any time by the Managers or the holders of at least
ten percent (10%) of Member votes. If not otherwise stated in or fixed in
accordance with the remaining provisions hereof, the record date for determining
Members entitled to call a special meeting is the date any Member first signs
the notice of that meeting. Only business within the purpose or purposes
described in the notice (or waiver thereof) required by this Agreement may be
conducted at a special meeting of the Members.
(f) Written or printed notice stating the place, day and hour
of the meeting and, in the case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than ten (10) nor
more than sixty (60) days before the date of the meeting, either personally or
by mail, by or at the direction of the Managers or one or more Members calling
the meeting, to each Member. If mailed, any such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the Member,
with postage thereon prepaid.
(g) The date on which notice of a meeting of the Members is
mailed or the date on which the resolution of the Managers declaring a
Distribution is adopted, as the case may be, shall be the record date for the
determination of the Members entitled to notice of or to vote at such meeting,
including any adjournment thereof, or the Members entitled to receive such
Distribution.
(h) The right of Members to cumulative voting in the election
of Managers is expressly prohibited.
2.16 Voting List
The Managers shall make, at least ten (10) days before each meeting of
the Members, a complete list of the Members entitled to vote at such meeting or
any adjournment thereof, arranged in alphabetical order, with the address of and
the Membership Interests held by each, which list shall be kept on file at the
registered office or principal place of business of the Company and shall be
subject to inspection by any Member at any time during usual business hours.
Such list shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any Member during the whole
time of the meeting. The original membership records shall be prima-facie
evidence as to the identity of the Members entitled to examine such list or
transfer records or to vote at any meeting of Members. Failure to comply with
the requirements of this Section shall not affect the validity of any action
taken at the meeting.
2.17 Proxies
A Member may vote either in person or by proxy executed in writing by
the Member. A telegram, telex, cablegram or similar transmission by the Member,
or a photographic, photostatic, facsimile or similar reproduction of a writing
executed by the Member, shall be treated as an execution in writing for purposes
of this Section. Proxies for use at any meeting of Members or in connection with
the taking of any action by written consent shall be filed with the Managers,
before or at the time of the meeting or execution of the written consent, as the
case may be. All proxies shall be received and taken charge of and all ballots
shall be received and canvassed by the Managers, who shall decide all questions
touching upon the qualification of voters, the validity of the proxies, and the
acceptance or rejection of votes, unless an inspector or inspectors shall have
been appointed by the chairman of the meeting, in which event such inspector or
inspectors shall decide all such questions. No proxy shall be valid after twelve
(12) months from the date of its execution unless otherwise provided in the
proxy. A proxy shall be revocable unless the proxy form conspicuously states
that the proxy is irrevocable and the proxy is coupled with an interest. Should
a proxy designate two or more Persons to act as proxies, unless that instrument
shall provide to the contrary, a majority of such Persons present at any meeting
at which their powers thereunder are to be exercised shall have and may exercise
all the powers of voting or giving consents thereby conferred, or if only one be
present, then such powers may be exercised by that one; or, if an even number
attend and a majority do not agree on a particular issue, the Company shall not
be required to recognize such proxy with respect to such issue if such proxy
does not specify how the Membership Interests that are the subject of such proxy
are to be voted with respect to such issue.
2.18 Conduct of Meetings
All meetings of the Members shall be presided over by the chairman of
the meeting, who shall be a Manager (or representative thereof) designated by a
majority of the Managers. The chairman of any meeting of Members shall determine
the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seem to him
in order.
2.19 Action by Written Consent or Telephone Conference.
(a) Any action required or permitted to be taken at any annual
or special meeting of Members may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holder or holders of not less than
the minimum number of Member votes that would be necessary to take such action
at a meeting at which the holders of all Member votes entitled to vote on the
action were present and voted. Every written consent shall bear the date of
signature of each Member who signs the consent. No written consent shall be
effective to take the action that is the subject to the consent unless, within
sixty (60) days after the date of the earliest dated consent delivered to the
Company in the manner required by this Section, a consent or consents signed by
the holder or holders of not less than the minimum Member votes that would be
necessary to take the action that is the subject of the consent are delivered to
the Company by delivery to its registered office, its principal place of
business, or the Managers. Delivery shall be by hand or certified or registered
mail, return receipt requested. Delivery to the Company's principal place of
business shall be addressed to the Managers. A telegram, telex, cablegram or
similar transmission by a Member, or a photographic, photostatic, facsimile or
similar reproduction of a writing signed by a Member, shall be regarded as
signed by the Member for purposes of this Section. Prompt notice of the taking
of any action by Members without a meeting by less than unanimous written
consent shall be given to those Members who did not consent in writing to the
action.
(b) The record date for determining Members entitled to
consent to action in writing without a meeting shall be the first date on which
a signed written consent setting forth the action taken or proposed to be taken
is delivered to the Company by delivery to its registered office, its principal
place of business, or the Managers. Delivery shall be by hand or by certified or
registered mail, return receipt requested. Delivery to the Company's principal
place of business shall be addressed to the Managers.
(c) If any action by Members is taken by written consent, any
articles or documents filed with the Secretary of State of the State of Delaware
as a result of the taking of the action shall state, in lieu of any statement
required by the Act concerning any vote of Members, that written consent has
been given in accordance with the provisions of the Act and that any written
notice required by the Act has been given.
(d) Members may participate in and hold a meeting by means of
conference telephone or similar communications equipment by means of which all
Persons participating in the meeting can hear each other, and participation in
such meeting shall constitute attendance and presence in person at such meeting,
except where a Person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
SECTION 3
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
3.1 Initial Capital Contributions
The initial Members shall make initial Capital Contributions to the
Company in the amounts and at the dates set forth on Schedule A attached hereto
in exchange for their respective Membership Interests. Notwithstanding the dates
set forth on Schedule A, the Company may request that the Initial Capital
Contribution of a Member be made on an earlier date. Any such request shall be
made by written notice to such Member.
3.2 Establishment of Capital Accounts.
An individual Capital Account shall be established for each Member. The
Capital Account of each Member shall consist of its initial Capital Contribution
and shall be increased by: (i) any additional Capital Contributions by such
Member; (ii) such Member's share of any income or gains, including the Profits
allocated to such Member pursuant to this Agreement; and (iii) such Member's
share of any income or gain exempt from federal income tax (determined in the
same manner as Profits are allocated to such Members), and shall be decreased
by: (i) such Member's share of Losses allocated to such Member pursuant to this
Agreement; (ii) any Distribution to such Member of cash or the fair market value
of any other property (net of liabilities assumed by such Member and liabilities
to which such property is subject); and (iii) such Member's share of
expenditures of the Company described in Code Section 705(a)(2)(B) (determined
in the same manner as Losses are allocated to such Members).
3.3 Determination of Capital Accounts.
The Company shall compute the Capital Account of each Member on a
reasonably current basis. Except as otherwise provided herein, the Capital
Account of a Member shall be determined in all events solely in accordance with
the rules set forth in Treasury Regulation Section 1.704-1(b)(2)(iv) and other
applicable Treasury Regulations as the same may be amended or revised hereafter.
To the extent that any provision of this Agreement is inconsistent with the
requirements of Treasury Regulation Section 1.704(b)(2)(iv) as to the
calculation of a Member's Capital Account, such Treasury Regulation shall
control. Any references in this Agreement to the Capital Account of a Member
shall be deemed to refer to such Capital Account as the same may be credited or
debited from time to time as set forth above.
3.4 Additional Contributions
(a) Except as provided in this Agreement, no Member shall have
an obligation to make an additional Capital Contribution or loan to the Company.
If additional funds are advanced to the Company by the Members as provided in
this Agreement, such funds shall be additional Capital Contributions.
(b) The Company may request that the Members provide the
Company with such additional capital as the Managers may determine from time to
time in their sole discretion ("Additional Capital"). In the event the Company
requests Additional Capital from the Members, the Additional Capital shall be
contributed 75% by the Class A Members and 25% by the Class B Members. The Class
C Members will in no event be required to provide Additional Capital.
In the event the Company requests Additional Capital under this Section
3.4(b), the Company shall notify the applicable Members of the need for the
Additional Capital, which notice must include a statement in reasonable detail
of the proposed uses of the Additional Capital and a date before which each such
Member's share of the Additional Capital shall be delivered to the Company. If
one or more of the Members fails to contribute all or any portion of its share
of such requested Additional Capital ("Non-Contributing Members"), the
Percentage Interests of all Members shall be recalculated to reflect a
proportionate reduction in the Percentage Interests of the Non-Contributing
Members and an increase in the Percentage Interests of those Members that timely
complied with this Section 3.4(b).
3.5 Contributions and Compromises by Incapacitated Members
Each Member and such Member's representative or successor (as the case
may be) shall be obligated to perform any promise by the Member to make a
Capital Contribution to the Company even if the Member is prevented from doing
so because of any Incapacity.
3.6 Promises to Make Capital Contributions
No promise by a Member to make a Capital Contribution to the Company
shall be enforceable unless set forth in this Agreement or in another writing
signed by the Member. No promise by a Member to make a Capital Contribution to
the Company shall be compromised except by the affirmative vote of all of the
other Members.
3.7 No Interest on Contributions
The Members shall earn no interest on their Capital Contributions.
3.8 Adequacy of the Company's Capital
Each Member hereby acknowledges and agrees that in the Member's
considered opinion, the contributions provided for in this Section 3 are
reasonably sufficient to meet the initial capital needs of the Company.
3.9 Negative Capital Accounts.
No Member shall be required to pay to any other Member any deficit or
negative balance which may exist from time to time in such Member's Capital
Account. No Member shall be liable to the Company or any other Member or any
creditor of the Company solely because of the existence of a negative balance in
such Member's Capital Account.
3.10 Reimbursement of Expenses
If any Member or Manager incurs a reasonable expense on behalf of the
Company and reasonably documents this expense to the Company, the Company shall
reimburse the Member or Manager for this expense as promptly as reasonably
possible after receiving this documentation.
3.11 Member Representations and Warranties
Each Member hereby represents and warrants to and acknowledges to the
Company that the Membership Interests being acquired in connection herewith are
being acquired for such Member's own account for investment purposes only and
not with a view to, or with any present intention of, distributing or reselling
any of such Membership Interests. The Member acknowledges and agrees that the
Membership Interests have not been registered under the Securities Act or under
any state securities laws, and that the Membership Interests may not be,
directly or indirectly, sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of without registration under the Securities
Act and applicable state securities laws, except pursuant to an available
exemption from such registration. The Member also acknowledges and agrees that
neither the SEC nor any securities commission or other governmental authority
has (i) approved the transfer of the Membership Interests or passed upon or
endorsed the merits of the transfer of the Membership Interests, this Agreement
or the transactions contemplated hereby; or (ii) confirmed the accuracy of,
determined the adequacy of, or reviewed this Agreement. The Member has such
knowledge, sophistication and experience in financial, tax and business matters
in general, and investments in securities in particular, that it is capable of
evaluating the merits and risks of this investment in the Membership Interests,
and the Member has made such investigations in connection herewith as they
deemed necessary or desirable so as to make an informed investment decision
without relying upon the Company for legal or tax advice related to this
investment. The Member is an "accredited investor" within the meaning of Rule
501 promulgated under the Securities Act
SECTION 4
ALLOCATIONS AND DISTRIBUTIONS
4.1 Generally
Subject to Section 10.7, the Managers shall have sole discretion as to
the amounts and timing of Distributions to Members, subject to the retention of,
or payment to, third parties of such funds as it shall deem necessary with
respect to the reasonable business needs of the Company, which shall include the
payment or the making of provision for the payment when due of Company
obligations, including the payment of any management or administrative fees and
expenses or any other obligations.
4.2 Distributions
The Company shall make Distributions to the Members no later
than 60 days after the end of each fiscal year of the Company and may make
additional Distributions to the Members on such dates and in such amounts as the
Managers shall determine. All Distributions shall be made in the following
priority:
(a) as provided in Section 10.7;
(b) then, to the Class A Members until the aggregate
Distributions made to the Class A Members under this Section 4.2 equal
$1,500,000;
(c) then, 75% to the Class A Members and 25% to the Class B
Members until the aggregate Distributions made to the Class A Members under this
Section 4.2 equal 100% of the Capital Contribution made by the Class A Members;
and
(d) then, 63.75% to the Class A Members, 21.25% to the
Class B Members, and 15% to the Class C Members.
Distributions made to Class A Members shall be allocated among
the Class A Members in proportion to each Class A Member's respective Class A
Percentage Interest, Distributions made to Class B Members shall be allocated
among the Class B Members in proportion to each Class B Member's respective
Class B Percentage Interest, and Distributions made to Class C Members shall be
allocated among the Class C Members in proportion to each Class C Member's
respective Class C Percentage Interest.
4.3 Allocations of Profits and Losses
Profits and Losses and all items of Company income, gain or
loss for any fiscal year shall be allocated among the Members in the same manner
as Distributions are allocated among the Members under Section 4.2, provided
that:
(a) if a Member makes a Capital Contribution of non-cash
property to the Company, the Company shall allocate its income, gains,
deductions, losses and other tax items to the Member in respect of this Capital
Contribution in accordance with Code Section 704 (c) (1) (A) and the regulations
thereunder; and
(b) if the Company allocates any of its Profits and Losses to
a Member in a manner that is disproportionate to the Member's respective
Percentage Interest in the Company, the Company shall make this allocation in
compliance with the requirements of Code Section 704(b) and the regulations
thereunder.
For purposes of this Agreement: (i) an allocation of Profits to a Member shall
mean an apportionment of those Profits on the books of the Company for
distribution to the Member upon the satisfaction of the conditions for
Distributions set forth in this Agreement, and (ii) Capital Contributions shall
(except as otherwise expressly provided in this Agreement) include only the
value of Capital Contributions that the Company has actually received from the
Members and has not returned.
4.4 Distributions in Kind
If this Agreement or applicable law requires the Company to make a
Distribution to any Member, the Member may not require the Company to make this
Distribution except in the form of cash, and the Company may not compel a Member
to accept a Distribution except in the form of cash.
4.5 Unlawful Distributions
The Company shall not make any Unlawful Distributions of its assets to
any Member. Except as otherwise provided under the Act, a Distribution shall be
an "Unlawful Distribution" within the meaning of this Agreement if, immediately
after the Distribution, the aggregate value of the Company's liabilities would
exceed the aggregate value of its assets, or if, as a result of the
Distribution, the Company would be unable to pay its reasonably foreseeable
obligations as they become due.
4.6 Liability for Unlawful Distributions
Members and Managers who vote to authorize Unlawful Distributions and
Members that receive these Distributions shall be liable as provided in the Act.
4.7 Members as Creditors of the Company
With respect to Profits allocated to a Member under this Agreement, the
Member shall have the status of a creditor.
SECTION 5
MANAGEMENT OF THE COMPANY
5.1 Qualifications; Initial Manager
The Managers shall be Members of the Company. A Manager may be a
natural person or a legal entity. Managers need not be residents of the State of
Delaware. The Managers shall have such other qualifications as are determined
from time to time by the affirmative vote of Members holding a majority of
Member votes. The following Person is hereby appointed and elected by the
Members as the initial Manager, to serve in accordance with this Agreement,
until successors or additional Managers are appointed by the Members:
Touchstone Resources USA, Inc.
5.2 Titles
In performing management functions for the Company, Managers may use
the title "Manager" or such other title or titles as the Members may determine
from time to time by affirmative vote of Members holding a majority of Member
votes.
5.3 Voting
If there are two or more Managers, the prior affirmative vote of a
majority of all of the Managers shall be required for any action taken by any
one or more Managers on behalf of, or with respect to, the Company or its
business or affairs. Each Manager shall have one vote on each matter, and each
matter shall be decided by the affirmative vote of a majority of the Managers.
Each Manager shall have a reasonable opportunity to be heard on each matter on
which the Managers vote. Managers may vote in person, by telephone, by e-mail,
by fax or by any other reasonable means. The Managers shall appoint one of the
Managers to make a written record of each Manager vote and to circulate the
record among the Managers promptly after the vote, provided that the failure of
that Manager to make or circulate such a record shall not affect the validity of
any Manager vote.
5.4 Time Devoted By Managers
Each Manager shall devote to the Company such time and effort as may be
necessary for the proper performance of his, her or its duties hereunder.
5.5 General Responsibilities
Except for situations in which the approval of the Members is required
by this Agreement or by nonwaivable provisions of applicable law: (i) the powers
of the Company shall be exercised by or under the authority of, and the business
and affairs of the Company shall be managed under the direction of, the
Managers; and (ii) the Managers shall make all decisions and take all actions
regarding the business of the Company.
5.6 Authority
Without limiting the generality of Section 5.5 above, the Managers are
hereby authorized to do any of the following on behalf of the Company:
(a) execute any and all agreements, contracts, documents,
certifications and instruments necessary or convenient in connection with the
management of the Company;
(b) engage in any kind of activity and perform and carry out
contracts of any kind necessary to, in connection with or incidental to the
accomplishment of the purposes of the Company as may be lawfully carried on or
performed by a limited liability company under the laws of the State of Delaware
or of any other jurisdiction in which the Company conducts business;
(c) acquire by purchase, lease, option, capital contribution
or otherwise, any real, personal or mixed property or any interest therein,
which may be necessary, convenient, or incidental to the accomplishment of the
purposes of the Company;
(d) subject to Section 12.12, sell, assign, exchange or
otherwise transfer all or part of the Company property;
(e) subject to Section 2.3, issue or sell to Members,
affiliates of Members, or Persons other than Members or affiliates of any
Member: (i) additional Membership Interests (including other classes or series
of Membership Interests having different rights); (ii) obligations, evidences of
indebtedness or other securities convertible or exchangeable into Membership
Interests; and (iii) warrants, options or other rights to purchase or otherwise
acquire Membership Interests, and no Member shall have any preemptive rights in
any of the foregoing.
(f) borrow money required for the business and affairs of the
Company, and issue evidences of indebtedness necessary, convenient, or
incidental to the accomplishment of the purposes of the Company, and secure the
repayment of such borrowings by executing mortgages or deeds of trust, and
pledge or otherwise encumber or subject to security interests, all or any part
of the Company's property, and in connection with any such borrowing to confess
judgment, or authorize the confession of judgment, against the Company;
(g) lend the Company's funds or make guarantees of obligations
of others upon such terms as the Managers shall determine;
(h) invest the Capital Contributions of the Members and
reinvest the proceeds from the sale of any Company property in such investments
and upon such terms as the Managers shall determine;
(i) dissolve the Company;
(j) prepay in whole or in part, refinance, increase, modify or
extend any indebtedness or mortgage affecting the Company's property, and in
connection therewith to execute any extension or renewal of any indebtedness or
mortgage on any Company property;
(k) place record title to, or the right to use, Company
property in the name or names of a nominee or nominees for any purpose
convenient or beneficial to the Company;
(l) purchase contracts of liability, casualty, and other
insurance deemed necessary, appropriate, or convenient for the protection of the
property or affairs of the Company or for any purpose convenient or beneficial
to the Company;
(m) employ, engage and enter into contracts and agreements
with Persons, firms or companies, including entities in which any Member has an
interest, in the development, operation, and management of the Company's
property and business on such terms and for such compensation as the Managers
may determine;
(n) retain counsel, accountants, financial advisors and other
professional personnel;
(o) enter into, make and perform such contracts, agreements
and other undertakings, and do such other acts as the Managers may deem
necessary or advisable, or as may be incidental to or necessary for the conduct
of the business of the Company;
(p) file Federal, state and local tax returns on behalf of the
Company and make such elections as are required or permitted under Federal,
state, or local tax laws;
(q) designate the depository or depositories in which all bank
accounts of the Company shall be kept and the person or persons upon whose
signature or signatures withdrawals therefrom shall be made;
(r) prosecute, defend, settle, compromise or submit to
arbitration, any suits, actions, or claims at law or in equity to which the
Company is a party or by which the Company is affected, and satisfy out of
Company funds any judgment, decree, or decision of any court, board, agency, or
authority having jurisdiction, or any settlement of any suit, action, or claim;
and
(s) engage in such other activities and incur such other
expenses as may in the Managers' judgment be necessary or appropriate for the
furtherance of the Company's purposes, and to execute, acknowledge and deliver
any and all instruments necessary to the foregoing.
5.7 Actions by Managers; Committees; Delegation of Authority
and Duties
(a) In managing the business and affairs of the Company and
exercising its powers, the Managers shall act: (i) collectively through meetings
and written consents pursuant to this Section 5; (ii) through committees
pursuant to Section 5.7(b); and (iii) through Managers to whom authority and
duties have been delegated pursuant to Section 5.7(c).
(b) The Managers may, from time to time, designate one or more
committees, each of which shall be comprised of one or more Managers. Any such
committee, to the extent provided in such resolution, in the Certificate or this
Agreement, shall have and may exercise all of the authority of the Managers. At
every meeting of such committee, the presence of a majority of all the Managers
that are Members thereof shall constitute a quorum, and the affirmative vote of
a majority of the Managers present shall be necessary for the adoption of any
resolution. The Managers may dissolve any committee at any time, unless
otherwise provided in the Certificate or this Agreement.
(c) The Managers may, from time to time, delegate to one or
more Managers such authority and duties as the Managers may deem advisable. In
addition, the Managers may assign titles (including, without limitation,
president, vice president, secretary, assistant secretary, treasurer and
assistant treasurer) to any such Managers and delegate to such Managers certain
authority and duties. Any number of titles may be held by the same Manager. Any
delegation may be revoked at any time by the Managers, and no delegation shall
relieve the Managers of their management responsibility under Section 5 of this
Agreement, and any persons to whom the Managers delegate duties shall perform
them at the direction of the Managers.
5.8 Tax Identification Number, Insurance, Bank Accounts
Before or promptly after the Company begins its business activities,
the Managers shall (i) obtain for the Company a federal tax identification
number and any necessary state tax identification numbers, (ii) open any
necessary bank accounts for the Company, (iii) obtain on commercially reasonable
terms insurance policies covering all reasonably foreseeable Company business
risks, and (iv) do all other things necessary or useful in connection with the
commencement of the Company's business.
5.9 Number
The number of Managers of the Company shall be determined from time to
time by resolution of Members holding a majority of votes. If the Members make
no such determination, there shall be only one Manager. Each Manager shall hold
office until his successor shall have been elected and qualified, or until his
earlier death, resignation or removal.
5.10 Vacancies; Removal; Resignation
(a) Any Manager position to be filled by reason of an increase
in the number of Managers or by other reason may be filled by election at an
annual or special meeting of the Members called for that purpose, or by the
affirmative vote of a majority of the remaining Managers though less than a
quorum of the Managers.
(b) The Members may, without liability, remove a Manager at
any time with or without cause by affirmative vote of Members holding a majority
of Member votes.
(c) A Manager may resign as a manager upon giving thirty (30)
days' written notice to each Member. Except as otherwise provided in this
Agreement, the Manager shall have no liability to the Company or to the other
Members for any such resignation, provided, however, that the resignation shall
not absolve the Manager from any liabilities arising on or before effective date
of the resignation. The acceptance of a resignation shall not be necessary to
make it effective, unless expressly so provided in the resignation.
5.11 Meetings
(a) A majority of the total number of Managers fixed by or as
provided in this Agreement shall constitute a quorum for the transaction of
business of the Managers, and the act of a majority of the Managers present at a
meeting at which a quorum is present shall be the act of the Managers. A Manager
who is present at a meeting of the Managers at which action on any Company
matter is taken shall be presumed to have assented to the action unless his
dissent shall be entered in the minutes of the meeting or unless he shall file
his written dissent to such action with the Person acting as a secretary of the
meeting before the adjournment thereof or shall deliver such dissent to the
Company immediately after the adjournment of the meeting. Such right to dissent
shall not apply to a Manager who voted in favor of such action.
(b) Meetings of the Managers may be held at such place or
places as shall be determined from time to time by resolution of the Managers.
At all meetings of the Managers, business shall be transacted in such order as
shall from time to time be determined by resolution of the Managers. Attendance
of a Manager at a meeting shall constitute a waiver of notice of such meeting,
except where a Manager attends a meeting for the express purpose of objecting to
the transaction of any business on the ground that the meeting is not lawfully
called or convened.
(c) In connection with any annual meeting of Members at which
Managers were elected, the Managers may, if a quorum is present, hold its first
meeting for the transaction of business immediately after and at the same place
as such annual meeting of the Members. Notice of such meeting at such time and
place shall not be required.
(d) Regular meetings of the Managers shall be held at such
times and places as shall be designated from time to time by resolution of the
Managers. Notice of such meetings shall not be required.
(e) Special meetings of the Managers may be called by any
Manager on at least 24 hours' notice to each other Manager. Such notice need not
state the purpose or purposes of, nor the business to be transacted at, such
meeting, except as may otherwise be required by law or provided for in this
Agreement.
5.12 Approval or Ratification of Acts or Contracts by Members
The Managers in their discretion may submit any act or contract for
approval or ratification at any annual meeting of the Members, or at any special
meeting of the Members called for the purpose of considering any such act or
contract, and any act or contract that shall be approved or be ratified by
Members holding a majority of Class A Member votes shall be as valid and as
binding upon the Company and upon all the Members as if it shall have been
approved or ratified by every Member of the Company.
5.13 Action by Written Consent or Telephone Conference
Any action permitted or required by the Act, the Certificate or this
Agreement to be taken at a meeting of the Managers or any committee designated
by the Managers may be taken without a meeting if a consent in writing, setting
forth the action to be taken, is signed by a majority of the Managers or members
of such committee, as the case may be. Such consent shall have the same force
and effect as a unanimous vote at a meeting and may be stated as such in any
document or instrument filed with the Secretary of State of the State of
Delaware, and the execution of such consent shall constitute attendance or
presence in person at a meeting of the Managers or any such committee, as the
case may be. Subject to the requirements of the Act, the Certificate or this
Agreement for notice of meetings, unless otherwise restricted by the
Certificate, Managers or members of any committee designated by the Managers may
participate in and hold a meeting of the Managers or any committee of Managers,
as the case may be, by means of a conference telephone or similar communications
equipment by means of which all Persons participating in the meeting can hear
each other, and participation in such meeting shall constitute attendance and
presence in person at such meeting, except where a Person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
5.14 Compensation and Expenses
The Managers shall receive such compensation, if any, for their
services as may be designated from time to time by the Members. In addition, the
Managers shall be entitled to be reimbursed for out-of-pocket costs and expenses
incurred in the course of their service hereunder, including the portion of
their overhead reasonably allocable to Company activities.
5.15 Officers
(a) The Managers may, from time to time, designate one or more
Persons to be officers of the Company. No officer need be a resident of the
State of Delaware, a Member or a Manager. Any officers so designated shall have
such authority and perform such ministerial duties as the Managers may, from
time to time, delegate to them, subject to the authority of the Managers
provided in Section 5.7. The Managers may assign titles to particular officers.
Each officer shall hold office until his successor shall be duly designated and
shall qualify or until his death or until he shall resign or shall have been
removed in the manner hereinafter provided. Any number of offices may be held by
the same person. The salaries or other compensation, if any, of the officers and
agents of the Company shall be fixed from time to time by the Managers.
(b) Any officer may resign as such at any time. Such
resignation shall be made in writing and shall take effect at the time specified
therein, or if no time be specified, at the time of its receipt by the Managers.
The acceptance of a resignation shall not be necessary to make it effective,
unless expressly so provided in the resignation. Any officer may be removed as
such, either with or without cause, by the Managers whenever in their judgment
the best interests of the Company will be served thereby; provided, however,
that such removal shall be without prejudice to the contract rights, if any, of
the Person so removed. Designation of an officer shall not of itself create
contract rights. Any vacancy occurring in any office of the Company may be
filled by the Managers.
5.16 Compliance with Laws and Regulations
Before the Company conducts business in this State or in any other
state and at all times while it is conducting this business, the Managers shall
ensure that the Company is in compliance with all applicable federal, state and
local laws, regulations and ordinances, including federal and state tax and
securities laws, laws governing the registration and taxation of foreign
companies, and regulations governing specific professions, trades and
businesses. For purposes of this Agreement, "state" shall include the District
of Columbia.
5.17 Valuation of Capital Contributions
Whenever the Company admits a Person as a Member of the Company, the
Managers shall promptly determine in dollars a value for the Capital
Contribution of that Person in exchange for the Person's Membership Interest or
that there was no Capital Contribution, shall record this determination in the
records of the Company, and shall promptly notify all Members concerning the
determination. Thereafter, in the absence of fraud, the determination shall be
conclusive as to the value of the Capital Contribution or as to whether there
was a Capital Contribution.
5.18 Third Party Claims Against the Company
No Manager in the Manager's capacity as a Manager shall have personal
liability for any claim against the Company by any third party.
5.19 Intentionally Omitted.
5.20 Reliance on Company Information and Other Company Managers
No Manager in the Manager's capacity as a Manager shall be personally
liable to the Company or to the Members if, to the extent that, with respect to
the matter in question, the Manager acted in reasonable reliance on Company
records, other Company Managers, employees or officers of the Company, other
Persons whom, at the time of the action, the Manager reasonably believed to be
competent in the matter in question, or any provision of this Agreement.
5.21 Intentionally Omitted
5.22 Intentionally Omitted
5.23 Intentionally Omitted
5.24 Execution of This Agreement
As a condition to becoming Managers, the initial Manager and all
subsequent Managers shall sign this Agreement in their capacity as managers and
shall be bound by all provisions of the Agreement relating to managers.
SECTION 6
MANAGERS' REPRESENTATIONS AND WARRANTIES
6.1 Representations by All Managers
Each Manager warrants in the Manager's capacity as a Manager as
follows:
(a) The Manager is legally free to enter into this Agreement
and to perform the Manager's obligations under this Agreement in accordance with
its terms and is not prevented from doing so by order of any court or other
governmental authority, by any agreement with a third party (including an
employment agreement, non-competition agreement or nondisclosure agreement) or
by any other reason.
(b) In negotiating and entering into this Agreement, the
Manager has acted fairly and in good faith.
(c) Before accepting the terms of this Agreement, the Manager
has had every reasonable opportunity to consider these terms and to review them
with the Manager's personal attorney.
(d) The Manager has accepted the terms of this Agreement
knowingly and freely.
6.2 Representations by Corporate Manager
If a Manager is an entity, the Manager represents and warrants, in
addition to its representations and warranties under Section 6.1, that it is
duly formed, organized and existing under its state of incorporation, and has
full corporate authority and all necessary authorization to enter into this
Agreement and to perform its duties hereunder in accordance with the terms of
this Agreement.
SECTION 7
CONFIDENTIALITY OF COMPANY INFORMATION
7.1 Confidentiality of Company Information
The Managers shall use every reasonable means to maintain the
confidentiality of Confidential Information. Except as required in conducting
the business and internal affairs of the Company or by federal or state law, the
Managers shall not disclose Confidential Information to any third party.
Promptly after ceasing to be Managers, the Managers shall return to the Company
all documents and other media in their possession or control that contain
Confidential Information.
7.2 Exceptions to Duty of Confidentiality
For purposes of Section 7.1, the following types of information do not
constitute "Confidential Information":
(a) Information lawfully obtained by a Manager from another
source before receiving it from the Company.
(b) Information that is already in the public domain at the
time of its disclosure to a Manager or that thereafter enters the public domain
through no fault of the Manager.
(c) Information whose disclosure is permitted or required by
final order of a court of competent jurisdiction.
(d) Information whose disclosure is made on a confidential
basis to an arbitrator in an arbitration under Section 14; and
(e) Information the Company discloses without restriction to
any Person other than the Manager.
7.3 Binding Effect; Termination
This Section 7 shall bind each recipient even after the recipient
ceases to be a Manager, and shall terminate upon the termination of the legal
existence of the Company.
SECTION 8
COMPANY RECORDS, ETC.
8.1 Information and Records Maintained by the Company
The Company shall maintain at its principal place of business the
following types of records and information:
(a) Promptly after they become available, copies of its
federal, state and local income tax returns for each year;
(b) A current list of the name and last known business,
residence or mailing address of each Member;
(c) A copy of the Certificate and this Agreement and of all
amendments thereto, together with executed copies of any written powers of
attorney pursuant to which the Certificate and this Agreement and all amendments
thereto have been executed;
(d) True and full information regarding the amount of cash and
a description and statement of the agreed value of any other property or
services contributed by each Member to the Company and which each Member has
agreed to contribute in the future, and the date on which each Member became a
Member; and
(e) True and full information regarding the amount of cash and
a description and statement of the agreed value of any other property or
services contributed by each Member to the Company and which each Member has
agreed to contribute in the future, and the date on which each Member became a
Member; and
(f) Minutes of every annual and special meeting and any
written covenants for action taken by the Members or Managers without a meeting.
8.2 Books of Account
The Company shall maintain books of account concerning the business and
affairs of the Company that are accurate, reasonably current, and in compliance
with financial and other standards normally applicable to the records of
business organizations generally similar to the Company in size and business
activities.
8.3 Inspection of Records.
During normal business hours and after reasonable notice, each Member
shall be entitled, for any purpose reasonably related to the Member's membership
in the Company, to inspect and, at the Member's expense, to copy any documents
and other media in the Company's possession or control, including the documents
identified in Section 8.1, provided that all information available to the Member
under this Section 8 shall be subject to the provisions of Section 7, and all
applicable federal and state laws and regulations, including laws concerning the
privacy of employee medical information.
SECTION 9
EXCULPATION AND INDEMNIFICATION
9.1 Exculpation
No Manager shall be liable to any other Manager, any Member or the
Company for any loss suffered by the Company unless such loss is caused by the
Manager's gross negligence, willful misconduct, violation of law or material
breach of this Agreement. A Manager may consult with counsel and accountants in
respect of Company affairs and, provided the Manager acts in good faith reliance
upon the advice or opinion of such counsel or accountants, the Manager shall not
be liable for any loss suffered by the Company in reliance thereon.
9.2 Indemnification
Subject to the limitations and conditions as provided in this Section
9, each Person who was or is made a party to or is threatened to be made a party
to, or is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative (hereinafter a
"Proceeding"), or any appeal in such a Proceeding or any inquiry or
investigation that could lead to such a Proceeding, by reason of the fact that
he, she or it, or a Person of whom he, she or it is the legal representative, is
or was a Manager, officer, employee or agent of the Company or while a Manager,
officer, employee or agent of the Company is or was serving at the request of
the Company as a Manager, director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another foreign or domestic
limited liability company, corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise shall be
indemnified by the Company to the fullest extent permitted by the Act, as the
same exist or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment) against judgments, penalties (including excise and similar taxes
and punitive damages), fines, settlements and reasonable expenses (including,
without limitation, attorneys' fees) actually incurred by such Person in
connection with such Proceeding, and indemnification under this Section 9 shall
continue as to a Person who has ceased to serve in the capacity which initially
entitled such Person to indemnity hereunder. The rights granted pursuant to this
Section 9 shall be deemed contract rights, and no amendment, modification or
repeal of this Section 9 shall have the effect of limiting or denying any such
rights with respect to actions taken or Proceedings arising prior to any
amendment, modification or repeal. It is expressly acknowledged that the
indemnification provided in this Section 9 could involve indemnification for
negligence or under theories of strict liability.
9.3 Advance Payment
The right to indemnification conferred in this Section 9 shall include
the right to be paid or reimbursed by the Company for the reasonable expenses
incurred by a Person of the type entitled to be indemnified under Section 9.2
who was or is, or is threatened to be made, a named defendant or respondent in a
Proceeding in advance of the final disposition of the Proceeding and without any
determination as to the Person's ultimate entitlement to indemnification;
provided, however, that the payment of such expenses incurred by any such Person
in advance of the final disposition of a Proceeding shall be made only upon
delivery to the Company of a written affirmation by such Person of his, her or
its good faith belief that he, she or it has met the standard of conduct
necessary for indemnification under this Section 9 and a written undertaking, by
or on behalf of such Person, to repay all amounts so advanced if it shall
ultimately be determined that such indemnified Person is not entitled to be
indemnified under this Section 9 or otherwise.
9.4 Appearance as a Witness
Notwithstanding any other provision of this Section 9, the Company may
pay or reimburse expenses incurred by a Manager or officer in connection with
his appearance as a witness or other participation in a Proceeding at a time
when the Manager or officer is not a named defendant or respondent in the
Proceeding.
9.5 Insurance
The Company may purchase and maintain insurance, at its expense, to
protect itself and any Person who is or was serving as a Manager, officer, or
agent of the Company or is or was serving at the request of the Company as a
Manager, director, officer, partner, venturer, proprietor, trustee, employee,
agent or similar functionary of another foreign or domestic limited liability
company, corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise against any expense, liability or
loss, whether or not the Company would have the power to indemnify such Person
against such expense, liability or loss under this Section 9.
9.6 Nonexclusivity of Rights
The right to indemnification and the advancement and payment of
expenses conferred in this Section 9 shall not be exclusive of any other right
which a Manager or other Person indemnified pursuant to this Section 9 may have
or hereafter acquire under any law (common or statutory), provision of the
Certificate or this Agreement, agreement, vote of Members or Managers, or
otherwise.
9.7 Savings Clause
If this Section 9 or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify and hold harmless each Manager or any other Person
indemnified pursuant to this Section 9 as to costs, charges and expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
with respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative to the full extent permitted by any applicable
portion of this Section 9 that shall not have been invalidated and to the
fullest extent permitted by applicable law.
SECTION 10
TAX PLANNING AND COMPLIANCE
10.1 Taxation of the Company and Members
Under federal tax law and to the maximum extent possible under the tax
laws of each state and the District of Columbia, the Company and its Members
shall be taxable as a partnership and as partners. The provisions of this
Agreement shall be construed and applied in such a manner as to ensure full
compliance with the provisions of the Code applicable to partnerships and
partners and with the regulations thereunder.
10.2 Tax Management and Compliance
The parties acknowledge the importance to the Company and the Members
of competent tax planning for the Company and for the Members as Members, and
full compliance by the Company and by the Members with federal and state tax
requirements applicable to the Company and the Members in their capacity as
such.
10.3 Appointment and Replacement of Company Tax Adviser
In connection with its formation and on a continuing basis thereafter,
the Manager may appoint a tax adviser. This individual or firm shall have
expertise in all areas of tax practice relevant to the needs of the Company and
its Members in their capacities as such and in particular in the field of
federal partnership taxation. The Managers may replace the Company's tax adviser
from time to time upon the affirmative vote of a majority of the Managers.
10.4 Cooperation with Tax Adviser
The parties shall cooperate with the Company's tax adviser, if any, to
the maximum extent reasonable to ensure adequate Company tax planning and
compliance.
10.5 Tax Matters Partner
The Members by affirmative vote of Members holding a majority of Member
votes may appoint a Manager to serve as the Company's tax matters partner for
purposes of unified administrative and judicial federal tax proceedings under
Code Section 6231 (a) (1).
10.6 Planning of Individual Transactions
Before undertaking any major transaction involving the Company or any
Member in the Member's capacity as a Member, the Company and each affected
Member shall consult with one or more partnership tax experts concerning the tax
implications of the transaction, and the Company and affected Members shall make
any tax elections and shall take any other actions necessary or appropriate in
the circumstances to ensure tax compliance and maximum lawful tax avoidance. The
issue of the fairness of the transaction to the Company and to the Members shall
be subject to arbitration under Section 14.
10.7 Tax Distributions
If any Member requires a Distribution of all or any portion of the
Member's share of Profits in order to pay the Member's federal or other taxes on
the Member's share of these Profits for any taxable year, the Company shall, to
the extent that its financial condition reasonably permits, make this
Distribution to the Member on a timely basis, provided that as a condition for
the Distribution, the Company may, under reasonable conditions of
confidentiality, require the Member to disclose to the Company's tax adviser
relevant information concerning the Member's tax and financial affairs.
10.8 Tax Returns
The Company shall accurately complete and file its federal tax return
and all applicable state returns on a timely basis each year.
10.9 Provision of Tax Information to Members
As soon as reasonably possible after the close of each of its taxable
years, the Company shall provide each Member with completed federal and state
tax forms and with all other documents and information relevant to the federal
and state tax liabilities of the Member as a member of the Company, provided
that each Member shall have sole responsibility for preparing and timely filing
the Member's federal and state tax returns and for paying the Member's taxes,
and the Company shall have no responsibility or liability with respect to these
matters.
10.10 Computation and Recording of Members' Contributions
The Company shall maintain current and accurate records concerning each
Member's Capital Contributions and adjusted tax basis in the Member's Membership
Interest in accordance with applicable U.S. Treasury Department regulations and,
promptly after the request of any Member, shall make these records available to
the Member.
SECTION 11
MEMBER DISSOCIATIONS
11.1 Events of Dissociation
A Member shall be dissociated only if the Member dies (or, if the
Member is an entity, it incurs a dissolution or equivalent event), the Member
resigns in accordance with Section 11.4, the Member sells or otherwise transfers
all of the Member's Management Rights, or bankruptcy, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Member.
11.2 Certain Consequences of Dissociation
Except as otherwise expressly provided in this Agreement, a Member who
is dissociated from the Company shall immediately lose all of the Member's
Management Rights.
11.3 No Distributions to Dissociated Members
A Member's dissociation shall not entitle the Member to receive any
Distribution or to receive any payment for the Member's Membership Interest.
SECTION 12
DISSOLUTION; MERGERS, CONVERSIONS AND SALES OF ASSETS
12.1 Dissolution
The Company shall be dissolved upon the affirmative vote of Members
holding a majority of Member votes, upon the expiration of the period fixed for
the duration of the Company set forth in the Certificate, upon the issuance of
an order of dissolution by a court or by the Secretary of State of the State of
Delaware, or upon the issuance of an order of dissolution by an arbitrator under
Section 14.
12.2 Liquidation and Termination.
On dissolution of the Company, the Managers shall act as liquidator.
The Managers shall proceed diligently to wind up the affairs of the Company and
make final Distributions as provided herein and in the Act. The costs of
liquidation shall be borne as a Company expense. Until final Distribution, the
Managers shall continue to operate the Company properties with all of the power
and authority of the Managers. The steps to be accomplished by the Managers are
as follows:
(a) as promptly as possible after dissolution and again after
final liquidation, the Managers shall cause a proper accounting to be made by a
recognized firm of certified public accountants of the Company's assets,
liabilities, and operations through the last day of the calendar month in which
the dissolution occurs or the final liquidation is completed, as applicable;
(b) the Managers shall cause the notice described in Section
18-203 of the Act to be mailed to each known creditor of and claimant against
the Company in the manner described in such section;
(c) the Managers shall pay, satisfy or discharge from Company
funds all of the debts, liabilities and obligations of the Company (including,
without limitation, all expenses incurred in liquidation) or otherwise make
adequate provision for payment and discharge thereof (including, without
limitation, the establishment of a cash escrow fund for contingent liabilities
in such amount and for such term as the Managers may reasonably determine); and
(d) all remaining assets of the Company shall be distributed
to the Members as follows:
(i) the Managers may sell any or all Company
property, including to Members, and any resulting gain or loss
from each sale shall be computed and allocated to the Capital
Accounts of the Members;
(ii) with respect to all Company property that has
not been sold, the fair market value of that property shall be
determined and the Capital Accounts of the Members shall be
adjusted to reflect the manner in which the unrealized income,
gain, loss, and deduction inherent in property that has not
been reflected in the Capital Accounts previously would be
allocated among the Members if there were a taxable
disposition of that property for the fair market value of that
property on the date of Distribution; and
(iii) Company property shall be distributed among the
Members in accordance with the positive Capital Account
balances of the Members, as determined after taking into
account all Capital Account adjustments for the taxable year
of the Company during which the liquidation of the Company
occurs (other than those made by reason of this clause (iii));
and those Distributions shall be made by the end of the
taxable year of the Company during which the liquidation of
the Company occurs (or, if later, ninety (90) days after the
date of the liquidation).
All Distributions in kind to the Members shall be made subject to the liability
of each distributee for costs, expenses, and liabilities theretofore incurred or
for which the Company has committed prior to the date of termination and those
costs, expenses, and liabilities shall be allocated to the distributee pursuant
to this Section 12.2. The Distribution of cash and/or property to a Member in
accordance with the provisions of this Section 12.2 constitutes a complete
return to the Member of its Capital Contributions and a complete Distribution to
the Member of its interest in the Company and all the Company's property and
constitutes a compromise to which all Members have consented within the meaning
of the Act. To the extent that a Member returns funds to the Company, it has no
claim against any other Member for those funds.
12.3 Effective Date of Dissolution
The dissolution of an Company by vote of the Members shall be effective
on the date specified in that vote or, if the Members do not specify a date,
then on the date of completion of the vote.
12.4 Cessation of Company's Legal Existence
Unless a court or administrative authority duly and finally determines
otherwise, on completion of the Distribution of Company assets as provided
herein, the Company is terminated, and the Managers (or such other Person or
Persons as the Act may require or permit) shall file a certificate of
cancellation with the Secretary of State of the State of Delaware, cancel any
other filings made pursuant to this Agreement, and take such other actions as
may be necessary to terminate the Company.
12.5 Dissolution by Arbitrator
Upon petition by any Member, an arbitrator under Section 14 shall issue
an order dissolving the Company on one or more of the following grounds:
(a) the Company obtained its Certificate through fraud;
(b) the Company exceeded or abused the authority conferred
upon it by law;
(c) the Company conducted its business in a persistently
fraudulent or illegal manner;
(d) the Company abused its power contrary to the public policy
of this State;
(e) A deadlock exists on a matter involving Company management
which the Members are unable to resolve and which is causing or which threatens
to cause irreparable injury to the Company or which prevents it from conducting
its business or affairs to its advantage; or
(f) The dissolution of the Company is reasonable and fair in
the circumstances.
12.6 Exclusion of Certain Managers from Participation in
Wind-Up Process
Any Member may petition an arbitrator under Section 14 to exclude one
or more Managers from participating in the process of winding up and liquidating
the Company on the ground that, because of past wrongful conduct by the Manager
or Managers in question, their participation would be likely to affect that
process adversely.
12.7 Winding-Up of the Company
After the Company is dissolved, the Managers responsible for winding up
the Company shall as expeditiously as reasonably possible wind up its business
and internal affairs, and cause its liquidation. During the wind-up period, the
Company shall accept no new business except to the extent necessary to dispose
of existing inventory.
12.8 Liquidating Distributions by the Company
The Company shall make Distributions of its assets in connection with
its liquidation in accordance with the provisions of Section 4, provided that
the Company shall make no Distribution to Members or others in connection with
its liquidation until it has complied with all applicable laws and regulations
of this State (including tax laws and regulations) relating to its dissolution
and liquidation.
12.9 Deficit Capital Accounts.
Notwithstanding anything to the contrary contained in this Agreement,
to the extent that the deficit, if any, in the Capital Account of any Member
results from or is attributable to deductions and losses of the Company
(including non-cash items such as depreciation), or Distributions of money
pursuant to this Agreement to all Members in proportion to their respective
Membership Interests, upon dissolution of the Company such deficit shall not be
an asset of the Company and such Members shall not be obligated to contribute
such amount to the Company to bring the balance of such Member's Capital Account
to zero.
12.10 Disposition of Known and Unknown Claims Against Company
Promptly after the dissolution of the Company, the Company shall take
all reasonable measures under the laws of this State to dispose of (and, to the
extent reasonable, to bar) known and unknown claims against the Company.
12.11 Duty to Consult Tax Adviser in Connection With Company
Dissolution
Before the Members begin the wind-up and liquidation of the Company,
the Company and the Members shall consult with their respective tax advisers and
shall structure and implement the liquidation in a manner that is as fair as
possible to each Member from a tax viewpoint.
12.12 Mergers, Conversions and Sales of Assets
Except as otherwise provided in this Agreement, the Company shall not
participate in a merger, change its business organization form, or sell all or
substantially all of its assets outside the ordinary course of business except
with the consent of a majority of Class A Member votes.
SECTION 13
TERM AND TERMINATION OF AGREEMENT
13.1 Term and Termination
Subject to the provision of Sections 13.2 and 13.3, the term of this
Agreement shall begin on the date of this Agreement and, unless earlier
terminated by the parties, shall terminate as follows:
(a) If the Company is terminated by vote of the Members, it
shall terminate on the effective date of the certificate of cancellation of the
Certificate.
(b) If the Company is terminated by decree of a duly
authorized judicial or administrative authority or by an arbitrator, it shall
terminate on the date of termination of the Company's existence as determined by
that authority or arbitrator.
(c) If no clear date is established under Sections 13.1 (a) or
(b) and if the Members cannot agree on such a date, it shall terminate upon the
determination of an arbitrator under Section 14.
13.2 Survival of Accrued Rights
Rights, duties and liabilities accrued by the parties under this
Agreement before its termination shall continue in full force and effect after
its termination.
13.3 Arbitration of Matters Relating to Company's Winding-Up, Etc.
Notwithstanding the termination of this Agreement, any party may, after
that termination, initiate an arbitration under Section 14 to determine and
enforce rights and duties of the party relating to matters arising before and
during the Company's winding-up, the Company's liquidation, and matters arising
after the cancellation of the Company's Certificate.
SECTION 14
ARBITRATION OF COMPANY DISPUTES
14.1 Mandatory Arbitration of Certain Disputed Matters
Except as provided herein, any dispute between or among the parties
relating to arbitrable matters shall be exclusively and finally resolved in
arbitration by a single arbitrator without recourse to any court.
14.2 Intentionally Omitted
14.3 Rules Governing Arbitration
Except as otherwise provided in this Section, any arbitration under
this section shall be governed by the Rules of Commercial Arbitration of the
American Arbitration Association as in effect at the time of the arbitration.
14.4 Notice of Arbitration
Any Member may initiate an arbitration of any matter not subject to
arbitration under Section 14.2 above. The initiating Member shall do so by
providing written notice of the arbitration to the other Members. The notice
shall bear a current date, shall state the name of the initiating Member and
shall briefly state the matter to be arbitrated.
14.5 Selection of Arbitrator
If, within fifteen (15) business days after all the parties entitled to
notice of an arbitration have received that notice, the Members have not agreed
among themselves as to the identity of the arbitrator or the site of the
arbitration, the Company shall immediately refer these matters for resolution by
the American Arbitration Association office located in the city of Philadelphia.
That office may resolve these matters without liability and in its sole
discretion.
14.6 No Appeal
No Member shall appeal to any court an order of an arbitrator under
this Section 14. The Company or any Member may enter any such order in any court
of competent jurisdiction.
14.7 Allocations of Costs and Fees
The arbitrator may allocate among the Members the costs, fees and other
expenses relating to an arbitration in any manner that the arbitrator shall
determine to be appropriate in his or her absolute discretion, provided that if
the arbitrator determines that a party has initiated an arbitration without a
reasonable basis for doing so, the arbitrator shall assess against that party
the costs of the other parties relating to the arbitration, including the
reasonable attorneys' fees.
SECTION 15
GENERAL PROVISIONS
15.1 Entire Agreement
This Agreement contains the entire agreement among the parties
concerning its subject matter and replaces all other agreements among them,
whether written or oral, concerning this subject matter.
15.2 Conflicts between Agreement and Certificate
If there is any conflict between the provisions of this Agreement and
those of the Certificate, then, in any dispute among the Members, the provisions
of this Agreement shall prevail.
15.3 Effect of Act
Except as otherwise provided in this Agreement or by law, the business
and internal affairs of the Company shall be governed by the Act as in effect on
the date of this Agreement.
15.4 Changes of Law
If mandatory rules of the Act or other applicable law change in a
manner that provides material advantages or disadvantages to any Member not
contemplated by this Agreement, the Members shall equitably amend the Agreement
to minimize or eliminate these advantages and disadvantages.
15.5 Incorporation of Schedules
All schedules identified in the Agreement as schedules to the Agreement
are hereby incorporated into the Agreement and made integral parts of it.
15.6 Governing Law
This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of Delaware without giving effect to any
choice-of-law or conflict-of-law provision or rule (whether of the State of
Delaware or of any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware.
15.7 Intentionally Omitted
15.8 Intentionally Omitted
15.9 Captions
All captions in this Agreement are for convenience only and shall be
deemed irrelevant in construing any provision of the Agreement.
15.10 Notices
Except as expressly set forth to the contrary in this Agreement, all
notices, requests, or consents provided for or permitted to be given under this
Agreement must be in writing and must be given either by depositing the writing
in the United States mail, addressed to the recipient, postage paid, and
registered or certified with return receipt requested or by delivering that
writing to the recipient in person, by courier, or by facsimile transmission;
and a notice, request, or consent given under this Agreement is effective on
receipt by the Person to receive it. All notices, requests, and consents to be
sent to a Manager, or the Company must be given to the Managers or the Company,
as applicable, at the following address:
All notices, requests or consents to be sent to a Member must be given to such
Member to his, her or its address as set forth on the signature page hereto.
Whenever any notice is required to be given by law, the Certificate or this
Agreement, a written waiver thereof, signed by the Person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
15.11 Certain Meanings and Constructions
The terms "include" and similar terms as used in this Agreement shall
denote partial definitions. As the context shall require, the use of the
singular in this Agreement shall denote the plural and vice versa, and the use
of a particular gender shall denote another gender.
15.12 Waivers
No delay of or omission by a party in the exercise of any right, power
or remedy accruing to the party as a result of any breach or default by another
party under this Agreement shall impair any such right, power or remedy accruing
to the party, or shall be construed as a waiver of or acquiescence by the party
in any such breach or default or of any similar breach or default occurring
later. No waiver by a party of any single breach or default under this Agreement
shall be construed as a waiver by the party of any other breach or default
occurring before or after that waiver.
15.13 Separability of Provisions
Each provision of this Agreement shall be deemed separable. If any
provision or the application of any provision to any Person or circumstance
shall be held invalid or unenforceable in any jurisdiction, the provision shall
be ineffective only in that jurisdiction and only to the extent that it has been
expressly held to be invalid or unenforceable in that jurisdiction, without
invalidating any other provision of this Agreement or the application of the
provision itself to Persons or circumstances other than those to which it was
held invalid or unenforceable in the jurisdiction in question.
15.14 Counterparts
This Agreement may be executed in any number of counterparts and by
different parties to this Agreement in separate counterparts. Each of these
counterparts when so executed shall be deemed to be an original and all such
counterparts taken together shall constitute one and the same agreement.
15.15 Further Actions by the Parties
Each party, upon reasonable request by another party, shall furnish to
the other party any information reasonably requested by the other party, and
sign any documents and do any other things that the other party reasonably
requests for the purpose of carrying out the intent of this Agreement.
15.16 Adequacy of Consideration
Each party acknowledges and agrees that upon the effectiveness of this
Agreement, the party will be in receipt of valid and adequate consideration for
its undertakings under this Agreement.
15.17 Notice of Provisions of this Agreement and Certificate
By executing this Agreement, each Member acknowledges that it has
actual notice of all of the provisions of this Agreement, including, without
limitation (i) the restrictions on transfer of the Membership Interests set
forth in Section 3.11, and (ii) all of the provisions of the Certificate.
[Remainder of page intentionally left blank]
IN WITNESS WHREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CLASS A MEMBER:
TOUCHSTONE RESOURCES USA, INC.
By: /s/ Steven P. Harrington
------------------------------------
Steven P. Harrington
President
CLASS B MEMBER:
TOUCHSTONE RESOURCES USA, INC.
By: /s/ Steven P. Harrington
------------------------------------
Steven P. Harrington
President
CLASS C MEMBER:
PHT GAS, LLC
By: RMS Advisors, Inc., Manager
By: /s/ Howard M. Appel
------------------------------------
Howard M. Appel
President
Exhibit 10.2
AMENDMENT TO THE
OPERATING AGREEMENT
OF
MAVERICK BASIN EXPLORATION, LLC
DATED JUNE 23, 2004
July 14, 2004
AMENDMENT TO THE
OPERATING AGREEMENT OF
MAVERICK BASIN EXPLORATION, LLC
THIS AMENDMENT to the Operating Agreement of MAVERICK BASIN
EXPLORATION, LLC, a Delaware Limited Liability Company, ("Operating Agreement")
is entered into and shall be effective this 14th day of July, 2004, among
Touchstone Resources USA, Inc. ("Touchstone") (the "Withdrawing Class A Member"
and the "Initial Class B Member"), PHT Gas, LLC ("PHT") (the "Initial Class C
Member") and South Oil, Inc. ("South Oil") (the "Additional Class A Member")
(collectively the "Members").
W I T N E S S E T H:
WHEREAS, Touchstone, prior to making any membership contributions to
the Company, has withdrawn as a Class A Member; and
WHEREAS, South Oil has agreed to become an Additional Class A Member
and assume the capital contribution requirements of the Class A Member.
NOW, THEREFORE, intending to be legally bound, the Members hereby
approve the amendment to the Operating Agreement to admit South Oil as an
Additional Class A Member. The Ownership interest of Maverick Basin Exploration
LLC shall be amended to reflect those percentages listed on Exhibit A, attached.
WITHDRAWING CLASS A MEMBER
TOUCHSTONE RESOURCES USA, INC.
By: /s/ Stephen P. Harrington
------------------------------------
Stephen P. Harrington, President
ADDITIONAL CLASS A MEMBER
SOUTH OIL, INC.
By: /s/ Mark A. Bush
------------------------------------
Mark A. Bush, President
[Signatures Continued on Following Page]
CLASS B MEMBER
TOUCHSTONE RESOURCES USA, INC.
By: /s/ Stephen P. Harrington
------------------------------------
Stephen P. Harrington, President
CLASS C MEMBER
PHT GAS, LCC
By: RMS ADVISORS, INC., Manager
By: /s/ Howard M. Appel
------------------------------------
Howard M. Appel, President
Exhibit 10.3
AMENDMENT TO THE
OPERATING AGREEMENT
OF
MAVERICK BASIN EXPLORATION, LLC
DATED JUNE 23, 2004
July 28, 2004
AMENDMENT TO THE
OPERATING AGREEMENT OF
MAVERICK BASIN EXPLORATION, LLC
THIS AMENDMENT to the Operating Agreement of MAVERICK BASIN
EXPLORATION, LLC, a Delaware Limited Liability Company, ("Operating Agreement")
is entered into and shall be effective this 28th day of July, 2004, among South
Oil, Inc. ("South Oil") (the "Withdrawing Class A Member") Touchstone Resources
USA, Inc. ("Touchstone") (the "Class B Member"), PHT Gas, LLC ("PHT") (the
"Class C Member") and Maverick Oil and Gas, Inc. ("Maverick") (the "Additional
Class A Member") (collectively the "Members").
W I T N E S S E T H:
WHEREAS, pursuant to an Interest Purchase between South Oil and
Maverick of even date herewith, South Oil has assigned its Class A Membership
Interest in the Company to Maverick, a copy of which is attached to this
Amendment.
NOW, THEREFORE, intending to be legally bound, the Members hereby
approve the amendment to the Operating Agreement to admit Maverick as the
Additional Class A Member. The Ownership interest of Maverick Basin Exploration
LLC shall be amended to reflect those percentages listed on Exhibit A, attached.
WITHDRAWING CLASS A MEMBER
SOUTH OIL, INC.
By: /s/ Mark A. Bush
--------------------------------
Mark A. Bush, President
ADDITIONAL CLASS A MEMBER
MAVERICK OIL AND GAS, INC.
By: /s/ Michael Garland
--------------------------------
Michael Garland, President
[Signatures Continued on Following Page]
CLASS B MEMBER
TOUCHSTONE RESOURCES USA, INC.
By: /s/ Stephen P. Harrington
--------------------------------
Stephen P. Harrington, President
CLASS C MEMBER
PHT GAS, LCC
By: RMS ADVISORS, INC., Manager
By: /s/ Howard M. Appel
--------------------------------
Howard M. Appel, President
Exhibit 10.4
AMENDMENT TO THE
OPERATING AGREEMENT
OF
MAVERICK BASIN EXPLORATION, LLC
DATED JUNE 23, 2004
August 6, 2004
AMENDMENT TO THE
OPERATING AGREEMENT OF
MAVERICK BASIN EXPLORATION, LLC
THIS AMENDMENT to the Operating Agreement of MAVERICK BASIN
EXPLORATION, LLC, a Delaware Limited Liability Company, ("Operating Agreement")
is entered into and shall be effective this 6th day of August, 2004, among
Maverick Oil and Gas, Inc.("Maverick") (the "Class A Member"), Touchstone
Resources USA, Inc. ("Touchstone") (the "Class B Member"), and PHT Gas, LLC
("PHT") (the "Class C Member") (collectively the "Members").
W I T N E S S E T H:
WHEREAS, the Operating Agreement of Maverick Basin Exploration, LLC is
hereby amended to reflect the capital contribution scheduled of the Class A
Member as reflected on the schedule attached hereto.
NOW, THEREFORE, intending to be legally bound, the Members hereby
approve the amendment to the Operating Agreement. The Capital Contribution
Schedule of the Members of Maverick Basin Exploration LLC shall be amended to
reflect those percentages listed on Exhibit A, attached.
CLASS A MEMBER
MAVERICK OIL AND GAS, INC.
By: /s/ Michael Garland
---------------------------------
Michael Garland, President
[Signatures Continued on Following Page]
CLASS B MEMBER
TOUCHSTONE RESOURCES USA, INC.
By: /s/ Stephen P. Harrington
---------------------------------
Stephen P. Harrington, President
CLASS C MEMBER
PHT GAS, LCC
By: RMS ADVISORS, INC., Manager
By: /s/ Howard M. Appel
---------------------------------
Howard M. Appel, President
Exhibit 10.5
AMENDMENT TO THE
OPERATING AGREEMENT
OF
MAVERICK BASIN EXPLORATION, LLC
DATED JUNE 23, 2004
October 12, 2004
AMENDMENT TO THE
OPERATING AGREEMENT OF
MAVERICK BASIN EXPLORATION, LLC
THIS AMENDMENT to the Operating Agreement of MAVERICK BASIN
EXPLORATION, LLC, a Delaware Limited Liability Company, ("Operating Agreement")
is entered into and shall be effective this 12th day of October, 2004, among
Maverick Oil and Gas, Inc.("Maverick") (the "Class A Member"), Touchstone
Resources USA, Inc. ("Touchstone") (the "Class B Member"), and PHT Gas, LLC
("PHT") (the "Class C Member") (collectively the "Members").
W I T N E S S E T H:
WHEREAS, the Operating Agreement of Maverick Basin Exploration, LLC is
hereby amended to reflect the extension of the capital contribution schedule of
the Class A Member as reflected on the schedule attached hereto.
NOW, THEREFORE, intending to be legally bound, the Members hereby
approve the amendment to the Operating Agreement. The Capital Contribution
Schedule of the Members of Maverick Basin Exploration LLC shall be amended to
reflect those percentages listed on Exhibit A, attached.
CLASS A MEMBER
MAVERICK OIL AND GAS, INC.
By: /s/ Michael Garland
------------------------------
Michael Garland, President
[Signatures Continued on Following Page]
CLASS B MEMBER
TOUCHSTONE RESOURCES USA, INC.
By: /s/ Stephen P. Harrington
------------------------------
Stephen P. Harrington, President
CLASS C MEMBER
PHT GAS, LCC
By: RMS ADVISORS, INC., Manager
By: /s/ Howard M. Appel
------------------------------
Howard M. Appel, President
Exhibit 10.6
AMENDMENT TO THE
OPERATING AGREEMENT
OF
MAVERICK BASIN EXPLORATION, LLC
DATED JUNE 23, 2004
November 30, 2004
AMENDMENT TO THE
OPERATING AGREEMENT OF
MAVERICK BASIN EXPLORATION, LLC
THIS AMENDMENT to the Operating Agreement of MAVERICK BASIN
EXPLORATION, LLC, a Delaware Limited Liability Company, ("Operating Agreement")
is entered into and shall be effective this 30th day of November, 2004, among
Maverick Oil and Gas, Inc.("Maverick") (the "Class A Member"), Touchstone
Resources USA, Inc. ("Touchstone") (the "Class B Member"), and PHT Gas, LLC
("PHT") (the "Class C Member") (collectively the "Members").
W I T N E S S E T H:
WHEREAS, the Operating Agreement of Maverick Basin Exploration, LLC is
hereby amended to reflect the extension of the capital contribution schedule of
the Class A Member as reflected on the schedule attached hereto.
NOW, THEREFORE, intending to be legally bound, the Members hereby
approve the amendment to the Operating Agreement. The Capital Contribution
Schedule of the Members of Maverick Basin Exploration LLC shall be amended to
reflect those percentages listed on Exhibit A, attached.
CLASS A MEMBER
MAVERICK OIL AND GAS, INC.
By: /s/ Michael Garland
------------------------------------
Michael Garland, President
[Signatures Continued on Following Page]
CLASS B MEMBER
TOUCHSTONE RESOURCES USA, INC.
By: /s/ Stephen P. Harrington
------------------------------------
Stephen P. Harrington, President
CLASS C MEMBER
PHT GAS, LCC
By: RMS ADVISORS, INC., Manager
By: /s/ Howard M. Appel
------------------------------------
Howard M. Appel, President
Exhibit 10.7
OPERATING AGREEMENT
OF
RBE, LLC
(A Delaware Limited Liability Company)
OPERATING AGREEMENT
OF
RBE, LLC
(A Delaware Limited Liability Company)
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS.......................................................1
1.01 Definitions.......................................................1
1.02 Construction......................................................6
ARTICLE II - ORGANIZATION.....................................................6
2.01 Formation.........................................................6
2.02 Name..............................................................6
2.03 Registered Office; Principal Place of Business; Other Offices.....6
2.04 Purposes..........................................................6
2.05 Foreign Qualification.............................................6
2.06 Term..............................................................6
2.07 No State-Law Partnership..........................................7
ARTICLE III - MEMBERSHIP, DISPOSITIONS OF MEMBERSHIP INTERESTS................7
3.01 Initial Members...................................................7
3.02 Restrictions on the Disposition of an Interest....................7
3.03 Grant of Option...................................................7
3.04 Exercise of Option................................................7
3.05 Bona Fide Offer...................................................8
3.06 Transferee Bound by Agreement.....................................8
3.07 Retained Membership Interests.....................................8
3.08 Additional Members................................................9
3.09 Indemnity.........................................................9
3.10 Liability.........................................................9
3.11 Lack of Authority.................................................9
ARTICLE IV - CAPITAL CONTRIBUTIONS............................................9
4.01 Capital Contributions.............................................9
4.02 Return of Contributions..........................................10
4.03 Advances by Members..............................................10
4.04 Capital Account..................................................10
ARTICLE V - ALLOCATIONS OF PROFITS AND LOSSES................................11
5.01 Profits..........................................................11
5.02 Losses...........................................................11
5.03 Special Allocations..............................................11
5.04 Curative Allocations.............................................13
i
5.05 Tax Allocations..................................................13
5.06 Miscellaneous....................................................13
5.07 Establishment of Reserves........................................14
ARTICLE VI - DISTRIBUTIONS...................................................14
6.01 Distributions....................................................14
6.02 Definitions......................................................14
6.03 Tax Distributions................................................15
ARTICLE VII - MANAGERS.......................................................15
7.01 Number and Term of Office of Managers; Initial Managers..........15
7.02 Management by Managers...........................................15
7.03 Delegation.......................................................15
7.04 Vacancies; Removal; Resignation..................................16
7.05 Meetings.........................................................16
7.06 Action by Written or Telephone Conference........................17
7.07 Compensation of Managers.........................................17
7.08 Conflicts of Interest............................................17
7.09 Limitation of Liability..........................................17
ARTICLE VIII - MEMBERS.......................................................18
8.01 Voting...........................................................18
8.02 Meetings.........................................................18
8.03 Proxies..........................................................18
8.04 Conduct of Meetings..............................................19
8.05 Action by Written Consent or Telephone Conference................19
8.06 Liability of Members.............................................19
ARTICLE IX - INDEMNIFICATION.................................................19
9.01 Right to Indemnification.........................................19
9.02 Advance Payment..................................................20
9.03 Indemnification of Employees and Agents..........................20
9.04 Appearance as a Witness..........................................20
9.05 Nonexclusivity of Rights.........................................20
9.06 Insurance........................................................20
9.07 Savings Clause...................................................20
ARTICLE X - TAXES............................................................21
10.01 Tax Returns...................................................21
10.02 Tax Elections.................................................21
10.03 Tax Matters Partner...........................................21
ARTICLE XI - BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS......................22
11.01 Maintenance of Books..........................................22
11.02 Reports.......................................................22
ii
11.03 Accounts......................................................22
ARTICLE XII - DISSOLUTION, LIQUIDATION, AND TERMINATION......................22
12.01 Dissolution...................................................22
12.02 Liquidation and Termination...................................22
12.03 Deficit Capital Accounts......................................23
12.04 Certificate of Cancellation...................................24
ARTICLE XIII- MEMBERSHIP INTERESTS...........................................24
13.01 Membership Interests..........................................24
13.02 Reissuance....................................................24
ARTICLE XIV - GENERAL PROVISIONS.............................................24
14.01 Offset........................................................24
14.02 Notices.......................................................24
14.03 Entire Agreement..............................................25
14.04 Effect of Waiver or Consent...................................25
14.05 Amendment or Modification.....................................25
14.06 Arbitration...................................................25
14.07 Binding Act...................................................25
14.08 Governing Law; Severability...................................25
14.09 Further Assurances............................................25
14.10 No Third Party Benefit........................................26
14.11 Waiver of Certain Rights......................................26
14.12 Indemnification...............................................26
14.13 Counterparts..................................................26
iii
OPERATING AGREEMENT
OF
RBE HOLDINGS, LLC
(A Delaware Limited Liability Company)
This OPERATING AGREEMENT OF RBE, LLC (this "Agreement"), dated August
2, 2004, has been executed and adopted by all persons who were the Members (as
defined below) of the Company on that date. This Agreement, as it may be amended
from time to time shall be binding on any person who at the time is a Member
regardless of whether or not the person has executed this Agreement or any
amendment hereto.
ARTICLE I - DEFINITIONS
1.01 Definitions. As used in this Agreement, the following terms shall
have the following meanings set forth below.
"Act" means the Delaware Limited Liability Company Act, as
amended from time to time.
"Additional Capital" has the meaning set forth in Section
4.01(b) of the Agreement.
"Adjusted Capital Account Deficit" shall mean with respect to
any Member, the deficit balance, if any, in such Member's Capital
Account as of the end of the relevant fiscal year, after giving effect
to the following adjustments: (i) credit to such Capital Account any
amounts which such Member is obligated to restore or is deemed to be
obligated to restore pursuant to Treasury Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and (ii) debit to such Capital Account
the items described in Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d)
of the Regulations and shall be interpreted consistently therewith.
"Agreement" has the meaning given that term in the
introductory paragraph.
"Affiliate" of, or a Person, association, partnership or
corporation "affiliated" with, a specified Person, association,
partnership or corporation, is a Person, association, partnership or
corporation that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control
with, the specified Person, association, partnership or corporation.
"Bankrupt" means, with respect to any Person, a person (a)
that (i) makes a general assignment for the benefit of creditors; (ii)
files a voluntary bankruptcy petition; (iii) becomes the subject of an
order for relief or is declared insolvent in any federal or state
bankruptcy or insolvency proceedings; (iv) files a petition or answer
seeking for the person a reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any
law; (v) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the person
in a proceeding of the type described in subclauses (i) through (iv) of
1
this clause (a); or (vi) seeks, consents to, or acquiesces in the
appointment of a trustee, receiver, or liquidator of the Person's or of
all or any substantial part of the Person's properties; or (b) against
which, a proceeding seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any law
has been commenced and 120 days have expired without dismissal thereof
or with respect to which, without the person's consent or acquiescence,
a trustee, receiver, or liquidator of the Person or of all or any
substantial part of the Person's properties has been appointed and 90
days have expired without the appointment having been vacated and
stayed, or 90 days have expired after the date of expiration of a stay,
if the appointment has not previously been vacated.
"Business Day" means any day other than a Saturday, a Sunday,
or a holiday on which national banking associations in the State of
Delaware are closed.
"Capital Account(s)" shall mean the individual account(s)
maintained by the Company with respect to each Member as provided in
Section 4.04 of this Agreement.
"Capital Contribution(s)" shall mean the amount of cash or the
agreed value of the property or services (as determined by the Members
and the Company) contributed by each Member to the Company as provided
in Section 4.01 of this Agreement.
"Class A Member shall have the meaning ascribed to such term
in Sectin 2.2.
"Class A Percentage Interest: shall mean the fraction
(expressed as a percentage), the numerator of which is the Percentage
Intrest of the applicable Class A Member and the denominator of which
is the aggregate Percentage Interest of all Class A Members on the
applicable date of computation.
"Class B Member" shall have the meaning ascribed to such term
in Section 2.2.
"Class B Percentage Interest" shall mean the fraction
(expressed as a percentage), the numerator of which is the Percentage
Interest of the applicable Class B Member and the denominator of which
is the aggregate Percentage Interest of all Class B Members on the
applicable date of computation.
"Code" means the Internal Revenue Code of 1986 and any
successor statute, as amended from time to time.
"Company" means RBE, LLC., a Delaware limited liability
company.
"Company Minimum Gain" has the same meaning as "Partnership
Minimum Gain" set forth in Treasury Regulations Sections 1.704-2(b)(2)
and 1.704-2(d).
"Depreciation" shall mean for each fiscal year or other
period, an amount equal to the depreciation, amortization, or other
cost recovery deduction allowable with respect to an asset for such
year or other period, except that if the Gross Asset Value of an asset
differs from its adjusted basis for Federal income tax purposes at the
beginning of such year or other period, Depreciation shall be an amount
which bears the same ratio to such beginning Gross Asset Value as the
Federal income tax depreciation, amortization, or other cost recovery
2
deduction for such year or other period bears to such beginning
adjusted tax basis; provided, however, that if the Federal income tax
depreciation, amortization, or other cost recovery deduction for such
year is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the
Managers.
"Dispose", "Disposing" or "Disposition" means a sale,
assignment, transfer, exchange, mortgage, pledge, grant of a security
interest, gift or other disposition or encumbrance (including, without
limitation, by operation or law), or the acts thereof.
"Gross Asset Value" with respect to any asset shall mean the
asset's adjusted basis for Federal income tax purposes, except as
follows:
(i) The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the gross fair market
value of such asset, as determined by the contributing Member and the
Company;
(ii) The Gross Asset Values of all Company assets
shall be adjusted to equal their respective gross fair market values,
as determined by the Managers, as of the following times:
(a) the acquisition of an additional interest
in the Company by any new or existing Member in exchange for more than
a de minimis Capital Contribution;
(b) the distribution by the Company to a
Member of more than a de minimis amount of Company property other than
money, as consideration for an interest in the Company;
(c) the liquidation of the Company for
Federal income tax purposes within the meaning of Treasury Regulations
Section 1.704-1(b)(2)(ii)(g); provided, however, that the adjustments
pursuant to clauses (a) and (b) above shall be made only if the
Managers reasonably determine that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Members
in the Company;
(iii) The Gross Asset Value of any Company asset
distributed to any Member shall be the gross fair market value of such
asset on the date of distribution;
(iv) The Gross Asset Values of Company assets shall
be increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Regulations Section
1.704-1(b)(2)(iv)(m) and Section 4.06 hereof; provided, however, that
Gross Asset Values shall not be adjusted pursuant to this clause (iv)
to the extent the Managers determine that an adjustment pursuant to
clause (ii) hereof is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to
this clause (iv); and
(v) If the Gross Asset Value of an asset has been
determined pursuant to subparagraphs (i), (ii), or (iv) hereof, such
3
Gross Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes of computing
Profits and Losses.
"Initial Capital Contribution" means, subject in each case to
adjustments on account of Dispositions of Membership Interests
permitted by this Agreement, (a) in the case of a Member executing this
Agreement as of the date hereof or a person acquiring that Membership
Interest, the amount specified for that Member as its Initial Capital
Contribution on Exhibit A, and (b) in the case of a Membership Interest
issued pursuant to Section 3.08, the Initial Capital Contribution
established pursuant thereto and set forth on Exhibit A.
"Majority-In-Interest" means with respect to the Members whose
aggregate Percentage Interests exceed fifty percent (50%) of the
Percentage Interests of all Members in the Company who are entitled to
vote on, consent to, or approve a particular matter.
"Manager" means Ferrell RBE Holdings, LLC, a Delaware Limited
Liability Company and any Person hereafter elected or appointed as a
manager of the Company as provided in this Agreement, but does not
include any person who has ceased to be a manager of the Company.
"Member" means any Person executing this Agreement as of the
date of this Agreement as a Member or hereafter admitted to the Company
as a Member as provided in this Agreement, but does not include any
Person who has ceased to be a Member in the Company.
"Membership Interest" means the interest of a Member in the
Company, as more fully described herein and set forth on Exhibit A
attached hereto, as amended from time to time.
"Member Nonrecourse Debt" has the same meaning as "partner
nonrecourse debt" set forth in Sections 1.704-2(b)(4) and 1.704-2(i) of
the Treasury Regulations.
"Member Nonrecourse Debt Minimum Gain" shall have the same
meaning as "partner nonrecourse debt minimum gain" set forth in
Treasury Regulations Section 1.704-2(i) and shall be determined in
accordance with the principles of such Section of the Treasury
Regulations.
"Member Nonrecourse Deductions" has the same meaning as
"partner nonrecourse deductions" set forth in Sections 1.704-2(i)(1)
and 1.704-2(i)(2) of the Treasury Regulations.
"Nonrecourse Deductions" are deductions having the meaning set
forth in Sections 1.704-2(b)(1) and 1.704-2(c) of the Treasury
Regulations.
"Percentage Interest" shall mean the numerator of which is the
Member's Membership Interest and the denominator is the total of all
Membership Interests in the Company outstanding on the date of
computation as set forth on Exhibit A attached hereto and as amended
from time to time.
4
"Permanent Disability" means mental or physical incapacity
preventing the duties of the type performed by such Member immediately
prior to such disability for six (6) consecutive months, and such
disability shall be reasonably determined by the Company and shall be
deemed to occurred on the last day of such six (6) month period.
"Person" means natural persons, corporations, partnerships,
limited liability companies, trusts, or other entities.
"Prime Rate" means a rate per annum equal to a varying rate
per annum that is equal to the interest rate published by the Wall
Street Journal from time to time as the prime commercial or similar
reference interest rate, with adjustments in that varying rate to be
made on the same date as any change in that rate.
"Profits and Losses" shall mean for each fiscal year or other
period, except as otherwise provided herein, an amount equal to the
Company's taxable income or loss for such year or period, determined in
accordance with Code Section 703(a) (for these purposes, all items of
income, gain, loss, or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income
or loss), with the following adjustments:
(i) Any income of the Company that is exempt from
Federal income tax and not otherwise taken into account in computing
Profits or Losses pursuant to the foregoing shall be added to such
taxable income or loss;
(ii) Any expenditures of the Company described in
Code Section 705(a)(2)(B) or that are treated as Code Section
705(a)(2)(B) expenditures pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing
Profits or Losses pursuant to the foregoing shall be subtracted from
such taxable income or loss;
(iii) In the event the Gross Asset Value of any
Company asset is adjusted pursuant to clause (ii) of the definition of
Gross Asset Value, the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such asset for purposes
of computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of
Company property with respect to which gain or loss is recognized for
Federal income tax purposes shall be computed by reference to the Gross
Asset Value of the property disposed of, notwithstanding that the
adjusted tax basis of such property differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account Depreciation
for such fiscal year or other period, computed in accordance with the
definition of Depreciation under this Agreement; and
(vi) Notwithstanding the above, any items which are
specially allocated pursuant to Sections 5.03, 5.04 or 5.05 hereof
shall not be taken into account in computing Profits and Losses.
5
Other terms defined herein have the meanings so given them.
1.02 Construction. Whenever the context requires, the gender of all
words used in this Agreement includes the masculine, feminine, and neuter. All
references to articles and sections refer to articles and sections of this
Agreement, and all references to exhibits are to exhibits attached hereto, each
of which is made a part hereof for all purposes.
ARTICLE II - ORGANIZATION
2.01 Formation. The Company has heretofore been organized as a Delaware
limited liability company by the filing of a Certificate of Formation (the
"Certificate") with the Secretary of State of the State of Delaware under and
pursuant to the Act.
2.02 Name. The name of the Company is RBE, LLC, and all Company
business must be conducted in that name or such other names that comply with
applicable law as the Managers may select from time to time.
2.03 Registered Office; Principal Place of Business; Other Offices. The
registered office of the Company required by the Act to be maintained in the
State of Delaware shall be 1000 West Street, 17th Floor, Wilmington, DE 19801 or
such other office (which need not be a place of business of the Company) as the
Managers may designate from time to time in the manner provided by law. The
principal place of business of the Company shall be at 223 East College Street,
Grapevine, TX 76051, or at such other place as the Managers may designate from
time to time, which need not be in the State of Delaware, and the Company shall
maintain such records there as are set forth on Exhibit B hereto. The Company
may have such other offices as the Managers may designate from time to time.
2.04 Purposes. The Company's principal purpose shall be to acquire,
explore, drill and develop natural gas and oil properties, acquire ownership
interests in natural gas and oil properties, projects or entities engaged in the
acquisition, drilling or exploration of natural gas and oil properties or
projects, and to engage in any other business activity that now or hereafter may
be necessary, appropriate, desirable, incidental, advisable or convenient to
accomplish the foregoing purpose (including obtaining financing therefor), and
that is not forbidden by the Act or the law of the jurisdiction in which the
Company engages in business.
2.05 Foreign Qualification. Prior to the Company's conducting business
in any jurisdiction other than the State of Delaware, the Managers shall cause
the Company to comply, to the extent procedures are available and those matters
are reasonably within the control of the Managers, with all requirements
necessary to qualify the Company as a foreign limited liability company in that
jurisdiction. At the request of the Managers, each Member shall execute,
acknowledge, swear to, and deliver all certificates and other instruments
conforming with this Agreement that are necessary or appropriate to qualify,
continue, and terminate the Company as a foreign limited liability company in
all such jurisdictions in which the Company may conduct business.
2.06 Term. The Company commenced on the date the Certificate was filed
with the Department of the State of Delaware and shall continue until December
31, 2054 unless its existence is earlier terminated pursuant to this Agreement.
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2.07 No State-Law Partnership. The Members intend that the Company not
be a partnership (including, without limitation, a limited partnership) or joint
venture, and that no Member or Manager be a partner or joint venturer of any
other Member or Manager, for any purposes other than Federal tax purposes and,
to the extent permitted, state tax purposes, and this Agreement shall not be
construed to produce a contrary result.
ARTICLE III - MEMBERSHIP, DISPOSITIONS OF MEMBERSHIP INTERESTS
3.01 Initial Members. The Initial Members of the Company are the
persons executing this Agreement as of the date hereof as Members, each of which
is admitted to the Company as a Member as of the effective date of this
Agreement.
3.02 Restrictions on the Disposition of an Interest. Dispositions of
Membership Interests shall be subject to and made only in accordance with this
Article III and any purported Disposition to the contrary shall be null and void
ab initio and shall not be recognized by or binding upon the Company.
3.03 Grant of Option. Unless consented to by the Manager, any Member
for whom any of the events set forth in this Section 3.03 occurs hereby grants
to the Company, or any Person designated by the Company to purchase such
Membership Interest (a "Designated Person"), in consideration of the mutual
covenants herein contained, an option to purchase any and all of the Membership
Interests now owned or held, or hereafter acquired, by such Member, such option
to be exercisable upon the occurrence of any of the following events:
(a) Any attempt by such Member to sell, assign, transfer or in
any way dispose of any or all of such Membership Interests, or the beneficial
interest therein, to any Person who is not an Affiliate of such Member or a
Member; or
(b) Any pledge or the creation of any encumbrance on any or
all of the Membership Interests held by such Member; or
(c) Any other transfer of any or all of the Membership
Interests held by such Member, or the beneficial interest therein, whether
voluntary or involuntary, by operation of law or otherwise, including but not
limited to, all executions or legal processes (including, without limitation,
pursuant to the divorce code or law in any jurisdiction) attaching such
Membership Interests and all processes affecting the interest of any Member with
respect to such Membership Interests; or
(d) Such Member becoming Bankrupt;
(e) The receipt by such Member of a bona fide offer from a
third party to purchase all, but not less than all, of such Member's Membership
Interests (a "Bona Fide Offer"), which offer such Member desires to accept; or
(f) Such Member shall default with respect to any obligation
under Section 4.01(b).
3.04 Exercise of Option. Immediately upon the occurrence of any of the
events set forth in Section 3.03 hereof, the Members whose Membership Interests
7
are so affected shall send notice in writing to the Company of such fact. If
such Member desires to sell such Member's Membership Interests as a result of a
Bona Fide Offer, such notice in writing shall contain the name and address of
the Person who made the offer and the price and all of the terms of such offer.
During the period which shall begin with the occurrence of such event, and (a)
if the notice is given, shall end ninety (90) days after such notice is given,
or (b) if no notice is given, shall continue without end, the Company shall have
the right to exercise its option to purchase (or have a Designated Person
purchase) the Member's Membership Interests on the terms and conditions set
forth herein.
If the option becomes exercisable other than as a result of a Bona Fide
Offer, the Company (or Designated Person) shall have the right to purchase such
Member's Membership Interests at a purchase price equal to the Fair Market Value
of such Member's Membership Interests by providing written notice to such Member
within ninety (90) days after the occurrence of such event. The Purchase Price
shall be paid in equal monthly installments over a twelve (12) month period.
Fair Market Value shall mean the value determined by agreement between the
Member whose Membership Interests are being purchased and the Company or
Designated Person, as applicable. If the Member whose Membership Interests are
being purchased and the Company or Designated Person, as applicable, cannot
agree upon the Fair Market Value of such Membership Interests within thirty (30)
days, the Fair Market Value thereof shall be determined by appraisal, the
Company and the Member whose Membership Interests are being purchased each to
chose one appraiser and the two appraisers so chosen shall select a third
appraiser. The decision of the majority of the appraisers as to the Fair Market
Value of such Membership Interests shall be final and binding and may be
enforced by legal proceedings. The Member whose Membership Interests are being
purchased and the Company or Designated Person, as applicable, shall each
compensate the appraiser appointed by it and the compensation of the third
appraiser shall be borne equally be such parties.
3.05 Bona Fide Offer. In the event a Bona Fide Offer occurs pursuant to
which the Company (or Designated Person) may exercise its option to purchase and
the Company (or Designated Person) fails to so exercise its option to purchase
all of the Member's Membership Interests offered for sale within the allotted
time, said option to purchase with respect to such Bona Fide Offer shall
terminate; provided, however, in the event a proposed transfer or sale as a
result of a Bona Fide Offer is not consummated either (i) substantially in
accordance with the price and on the terms set forth in the notice sent to the
Company pursuant to Section 3.04 hereof or otherwise contained in a Bona Fide
Offer or (ii) within sixty (60) days of the date of said notice, such Member
shall not be entitled to sell such Member's Membership Interests unless
reoffered to the Company under the terms of this Agreement and at any lower
price and on any different terms.
3.06 Transferee Bound by Agreement. Any transferee of a Member shall
become bound by the terms of this Agreement as fully and effectively as if an
original signatory hereto. Such transferee shall only be entitled to the
benefits of being a Member hereunder if such transfer was completed in
accordance with the provisions of this Agreement and such transferee executes an
agreement, in form satisfactory to the Company, that such transferee is bound by
the terms hereof.
3.07 Retained Membership Interests. A Member may sell, pursuant to a
Bona Fide Offer, subject to the provisions of Section 3.03 above, less than all
of the Member's Membership Interests owned or held by him, provided that the
Member's Membership Interests not sold shall remain subject to the restrictions
contained in this Agreement and shall not thereafter be sold, pledged or
transferred except in compliance with the applicable provisions of this
Agreement.
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3.08 Additional Members. Additional persons may be admitted to the
Company as Members and Membership Interests may be created and issued to those
persons and to existing Members upon the consent of the Manager. The terms of
admission or issuance must specify the Percentage Interest and the Initial
Capital Contribution applicable thereto. Any such admission shall be effective
only after the new Member has executed and delivered to the Managers a document
including the new Member's notice address and its agreement to be bound by this
Agreement.
3.09 Indemnity. If a Member shall, or shall attempt to, sell, assign,
transfer, pledge, subject to any security interest, or otherwise Dispose of his
or her Membership Interest (except in a transaction with or consented to by the
other Members or permitted hereunder) without compliance with the requirements
of this Article III, such Member shall indemnify and hold harmless the other
Members and the Company against and from any and all liabilities, obligations,
costs and expenses the other Members or the Company may incur as a result of
such failure.
3.10 Liability. No Member or Manager shall be liable for the debts,
obligations or liabilities of the Company, including under a judgment decree or
order of a court.
3.11 Lack of Authority. No Member (other than a Member who is, and who
is acting in the capacity of, a Manager) has the authority or power to act for
or on behalf of the Company, to do any act that would be binding on the Company,
or to incur any expenditures on behalf of the Company.
ARTICLE IV - CAPITAL CONTRIBUTIONS
4.01 Capital Contributions.
(a) Initial Capital Contribution. Each Member has made or will
make the Initial Capital Contributions, in cash or property, described for that
Member in Exhibit "A".
(b) Additional Capital Contribution. Except as hereinafter
provided, no Member shall be required to make any additional Capital
Contributions to the Company not specifically agreed to in writing between the
Member and the Company. Notwithstanding the above, the Company may, from time to
time, as determined by the Manager, in order to meet the Company's operating and
capital needs, request that each Member provide the Company as determined by the
Manager, with his pro rata share (as determined in accordance with each Member's
Percentage Interest in the Company) of such capital needed by the Company (the
"Additional Capital"). In the event that the Company requests Additional Capital
from the Members in accordance with this Section 4.01(b): (i) the Company shall
notify each Member of the need for the Additional Capital, which notice must
include a statement in reasonable detail of the proposed uses of the Additional
Capital and a date (which date may be no earlier than thirty (30) days following
9
the delivery of such notice) before which each such Member's share of the
Additional Capital should be delivered to the Company, and (ii) if any one or
more of the Members fails to contribute all or any portion of his share of such
requested Additional Capital ("Non-Contributing Member(s)"), the Percentage
Interests (and Membership Interests) in the Company of all of the Members will
be recalculated pro rata to reflect a reduction in the Percentage Interests (and
Membership Interests) in the Company held by the Non-Contributing Member(s) and
an increase in the Percentage Interests (and Membership Interests) in the
Company held by those Members who timely complied with subsection (b)(i) of this
Section 4.01.
4.02 Return of Contributions. A Member is not entitled to the return of
any part of its Capital Contributions or to be paid interest in respect of
either its Capital Account or its Capital Contributions. An unrepaid Capital
Contribution is not a liability of the Company or of any Member. A Member is not
required to contribute or to lend any cash or property to the Company to enable
the Company to return any Member's Capital Contributions.
4.03 Advances by Members. If the Company does not have sufficient cash
to pay its obligations after making commercially reasonable attempts to borrow
such funds, no Member shall be required to make Advances to the Company.
However, any Member(s) that may agree to do so with the Managers' consent may
advance all or part of the needed funds to or on behalf of the Company. An
advance described in this Section 4.03 constitutes a loan from the Member to the
Company, bears interest at the Prime Rate from the date of the advance until the
date of payment, and is not a Capital Contribution.
4.04 Capital Account. A Capital Account shall be established and
maintained for each Member. Each Member's Capital Account (a) shall be increased
by (i) the amount of money contributed by that Member to the Company, (ii) the
fair market value of property contributed by that Member to the Company (net of
liabilities secured by the contributed property that the Company is considered
to assume or take subject to under Section 752 of the Code), and (iii)
allocations to that Member of Company income and gain (or items thereof),
including income and gain exempt from tax and income and gain described in
Treasury Regulations Section 1.704-1(b)(2)(iv)(g), but excluding income and gain
described in Treasury Regulations Section 1.704-1(b)(4)(i), and (b) shall be
decreased by (i) the amount of money distributed to that Member by the Company,
(ii) the fair market value of property distributed to that Member by the Company
(net of liabilities secured by the distributed property that the Member is
considered to assume or take subject to under Section 752 of the Code), (iii)
allocations to that Member of expenditures of the Company described in Section
705(a)(2)(B) of the Code, and (iv) allocations of Company loss and deduction (or
items thereof), including loss and deduction described in Treasury Regulations
Section 1.704-1(b)(2)(iv)(g), but excluding items described in clause (b)(iii)
above and loss of deduction described in Treasury Regulations Section
1.704-1(b)(4)(i) or 1.704-1(b)(4)(iii). The Members' Capital Accounts also shall
be maintained and adjusted as permitted by the provisions of Treasury
Regulations Section 1.704-1(b)(2)(iv)(f) and as required by the other provisions
of Treasury Regulations Section 1.704-1(b)(2)(iv) and ss.1.704-1(b)(4),
including adjustments to reflect the allocations to the Members of depreciation,
depletion, amortization, and gain or loss as computed for book purposes rather
than the allocation of the corresponding items as computed for tax purposes, as
required by Treasury Regulations Section 1.704-1(b)(2)(iv)(g). On the transfer
or all or part of a Membership Interest, the Capital Account of the transferor
that is attributable to the transferred Membership Interest or part thereof
shall carry over to the transferee Member in accordance with the provisions of
Treasury Regulations Section 1. 704-1(b)(2)(iv)(l).
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ARTICLE V - ALLOCATIONS OF PROFITS AND LOSSES
5.01 Profits. Profits and all items of Company income or gain for any
fiscal year shall be allocated among the Members as follows:
(a) First to take into account the allocations required by
Sections 5.03, 5.04 and 5.05; and
(b) Second, Profits, if any, in excess of those allocated
pursuant to subparagraph (a) shall be allocated to the Members in proportion to
their respective cash distribution percentages set forth in Section 6.01.
5.02 Losses.
(a) Losses, determined after giving effect to the special
allocations set forth in Sections 5.03, 5.04 and 5.05, shall be allocated among
the Members in proportion to their respective cash distribution percentages set
forth in Section 6.01.
(b) The Losses allocated pursuant to Section 5.02(a) hereof
shall not exceed the maximum amount of Losses that can be so allocated without
causing any Member to have an Adjusted Capital Account Deficit at the end of any
fiscal year. In the event some but not all of the Members would have Adjusted
Capital Account Deficits as a consequence of an allocation of Losses pursuant to
Section 5.02(a) hereof, the limitation set forth in this Section 5.02(b) shall
be applied on a Member by Member basis so as to allocate the maximum permissible
Losses to each Member under Section 1.704-1(b)(2)(ii)(d) of the Regulations.
5.03 Special Allocations. The following special allocations shall be
made in the following order:
(a) Minimum Gain Chargeback. Notwithstanding any other
provision of this Article V, if there is a net decrease in Company Minimum Gain
during any Company taxable year, each Member shall be specially allocated items
of Company income and gain for such year (and, if necessary, subsequent years)
in accordance with Treasury Regulations Section 1.704-2(f). Allocations pursuant
to the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Member pursuant thereto. This Section 5.03(a)
is intended to comply with the minimum gain chargeback requirement in such
Section of the Regulations and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Notwithstanding any other
provision of this Article V except Section 5.03(a), if there is a net decrease
in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse
Debt during any Company fiscal year, each Member who has a share of the Member
Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Treasury Regulations Section 1.704-2(i)(5), shall
be specially allocated items of Company income and gain for such year (and, if
necessary, subsequent years) in accordance with Treasury Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in accordance
with Section 1.704-2(i)(4) of the Treasury Regulations. This Section 5.03(b) is
intended to comply with the minimum gain chargeback requirement in such Section
of the Regulations and shall be interpreted consistently therewith.
11
(c) Qualified Income Offset. In the event any Member who is
not obligated (or treated as obligated) to restore a deficit balance in its
Capital Account unexpectedly receives any adjustments, allocations, or
distributions described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6), items of Company income and
gain shall be specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the Adjusted
Capital Account Deficit of such Member as quickly as possible, provided that an
allocation pursuant to this Section 5.03(c) shall be made if and only to the
extent that such Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article V have been tentatively made as
if this Section 5.03(b) were not in the Agreement.
(d) Gross Income Allocation. In the event any Member has a
deficit Capital Account at the end of any Company fiscal year that is in excess
of the sum of (i) the amount such Member is obligated to restore, and (ii) the
amount such Member is deemed to be obligated to restore pursuant to Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury Regulations, each such Member
shall be specially allocated items of Company income and gain in the amount of
such excess as quickly as possible, provided that an allocation pursuant to this
Section 5.03(d) shall be made if and only to the extent that such Member would
have a deficit Capital Account balance in excess of such sum after all other
allocations provided for in this Article V have been tentatively made as if
Section 5.03(c) hereof and this Section 5.03(d) were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
taxable year or other period shall be allocated among the Members in proportion
to their respective Percentage Interests.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any fiscal year or other period shall be specially allocated to
the Member who bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in
accordance with Treasury Regulations Section 1.704-2(i).
(g) Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Company asset is required pursuant to Code Section
734(b), Code Section 743(b) and Treasury Regulations Section
1.704-1(b)(2)(iv)(m), are to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be treated
as an item of gain (if the adjustment increases the basis of the asset) or loss
(if the adjustment decreases such basis) and such gain or loss shall be
specially allocated to the Members in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to such
Section of the Treasury Regulations.
(h) Allocations Relating to Taxable Issuance of Membership
Interests. Any income, gain, loss or deduction realized as a direct or indirect
result of the issuance of an interest by the Company to a Member (the "Issuance
Items") shall be allocated among the Members so that, to the extent possible,
the net amount of such Issuance Items, together with all other allocations under
this Agreement to each Member shall be equal to the net amount that would have
been allocated to each such Member if the Issuance Items had not been realized.
12
5.04 Curative Allocations. The allocations set forth in Section 5.02(b)
and in Section 5.03 hereof (the "Regulatory Allocations") are intended to comply
with certain requirements of Treasury Regulations Section 1.704-1(b).
Notwithstanding any other provisions of this Article V (other than the
Regulatory Allocations), the Regulatory Allocations shall be taken into account
in allocating Profits, Losses, and items of income, gain, loss, and deduction
among the Members so that, to the extent possible, the net amount of such
allocations of Profits, Losses and other items and the Regulatory Allocations to
each Member shall be equal to the net amount that would have been allocated to
each such Member if the Regulatory Allocations had not occurred. Notwithstanding
the preceding sentence, Regulatory Allocations relating to (a) Nonrecourse
Deductions shall not be taken into account except to the extent that there has
been a reduction in Company Minimum Gain, and (b) Member Nonrecourse Deductions
shall not be taken into account except to the extent that there would have been
a reduction in Member Minimum Gain if the loan to which such deductions are
attributable were not made or guaranteed by a Member within the meaning of
Treasury Regulations Sections 1.704-2(b)(4) and 1.704-2(i) or a person related
to a Member within the meaning of such sections of the Treasury Regulations.
5.05 Tax Allocations.
(a) In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its initial Gross Asset Value.
(b) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to clause (ii) of the definition of Gross Asset Value,
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Regulations thereunder.
(c) Any elections or other decisions relating to allocations
pursuant to this Section 5.05 shall be made by the Managers in any manner that
reasonably reflects the purpose and intention of this Agreement. Allocations
pursuant to this Section 5.05 are solely for purposes of Federal, state, and
local taxes and shall not affect, or in any way be taken into account in
computing, any Member's Capital Account or share of Profits, Losses, other
items, or distributions pursuant to any provision of this Agreement.
5.06 Miscellaneous.
(a) For purposes of determining the Profits, Losses or any
other items allocable to any period, Profits, Losses, and any such other items
shall be determined on a daily, monthly, or other basis, as determined by the
Managers using any permissible method under Code Section 706 and the Treasury
Regulations promulgated thereunder.
(d) Except as otherwise provided in this Agreement, all items
of Company income, gain, loss, deduction, and any other allocations not
otherwise provided for shall be divided among the Members in the same
proportions as they share Profits or Losses, as the case may be, for the year.
13
(e) For the purpose of determining each Member's share of
excess nonrecourse liabilities pursuant to Treasury Regulations Section
1.752-3(a)(3), and solely for such purpose, each Member's interest in Company
Profits is hereby specified to be such Member's Percentage Interest.
5.07 Establishment of Reserves. The Managers shall have the right to
establish reasonable reserves for anticipated and or contingent Company
obligations as the Managers may deem reasonably necessary or appropriate for
that purpose.
ARTICLE VI - DISTRIBUTIONS
6.01 Distributions.
(a) The time and amount of all distributions shall be as
determined by the Manager, in its sole discretion. Notwithstanding the forgoing,
the Manager shall endeavor to cause the Company to distribute Available Cash
Flow in the manner set forth in Section 6.01(b) below, subject however, to
limitations on distributions contained herein or in agreements with third
parties.
(b) "Available Cash Flow" (as such term is defined in Section
6.02(a) below) shall be applied and/or distributed in the following order of
priorities:
(i) First, to establish a reserve as the Manager may
believe reasonably necessary to meet anticipated and/or contingent Company
obligations, including any unpaid Operating Expenses;
(ii) then, to the Class A Members until the aggregate
Distributions made to the Class A Members under this Section 4.2 equal
$1,000,000;
(iii) then, 50% to the Class A Members and 50% to the
Class B Members.
Distributions made to Class A Members shall be allocated among the Class A
Members in proportion to each Class A Member's respective Class A Percentage
Interest and Distributions made to Class B Members shall be allocated among the
Class B Members in proportion to each Class B Member's respective Class B
Percentage Interest.
6.02 Definitions.
(a) "Available Cash Flow" shall mean, with respect to any
period, the sum of Gross Receipts, Reduction of Reserve and proceeds from the
sale of all or substantially all of the assets of the Company less (i) debt
service payments under all Company indebtedness and (ii) "Operating Expenses"
for such period.
(b) "Gross Receipts" shall mean all monies actually received
by the Company from any means.
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(d) "Operating Expenses" shall mean all expenses, outlays
advanced paid or otherwise incurred in the ordinary course of establishing and
maintaining the operations of the Company, including without limitation,
marketing, legal and accounting fees and expenses, fees for outside advisory
services and insurance.
(e) "Reduction of Reserve" shall mean any reduction in the
cash reserve established by the Company, in accordance with Section 6.01(b)(i)
hereof.
6.03 Tax Distributions. Notwithstanding the provisions of Section 6.01
above, the Managers shall, within ninety (90) days after the end of each fiscal
year, declare and pay to each Member owning a Membership Interest as of the last
day of that fiscal year, a distribution (the "Tax Distribution") equal to (a)
the maximum individual income tax rates for federal and state purposes
(expressed as a percentage) of each Member's share (in accordance with their
Percentage Interests) of the Company's Profit for such fiscal year, less (b) any
distributions made to such Member during the prior fiscal year excluding any Tax
Distribution relating to such prior fiscal year.
ARTICLE VII - MANAGERS
7.01 Number and Term of Office of Managers; Initial Manager. The number
of Managers of the Company shall be no less than one (1) and no greater than
three (3). The initial Manager shall be Ferrell RBE Holdings, LLC., a Delaware
Limited Liability Company. The initial Manager shall have the sole authority to
appoint up to two (2) additional Managers. Each Manager shall hold office until
his, her or its successor shall have been appointed or elected and qualified, or
until his, her or its earlier death, resignation or removal. Managers need not
be Members, and need not be residents of the State of Delaware.
7.02 Management by Managers.
(a) The management of the business and affairs of the Company
shall be the sole and complete responsibility of the Managers. No Member (other
than a Manager) shall take part in, or interfere in any manner with, the
management, conduct or control of the business and affairs of the Company. No
Member (other than a Manager or a Member specifically designated by the
Managers) shall have any right or authority to act for or bind the Company. If
there is more than one Manager, then each Manager shall have the right or
authority to act for or bind the Company only upon the consent of the majority
of the Managers. All of the Managers may designate any Manager to act for all of
the Managers.
(b) Whenever in this Agreement or elsewhere it is provided
that consent is required of, or a demand shall be made by, or an act or thing
shall be done by or at the direction of the Company, or whenever any words of
like import are used, all such consents, demands, acts and things are to be
made, given or done by the Managers, unless a contrary intention is expressly
indicated in this Agreement.
(c) The Managers may delegate the right, power and authority
to manage the day-to-day business, affairs, operations and activities of the
Company to any officer, employee or agent of any Manager or of the Company,
subject to the ultimate direction, control and supervision of the Managers.
15
(d) The Managers need not devote services to the Company on a
substantially full time basis and need only devote so much time to the Company's
activities as the Managers determine to be necessary for the efficient conduct
thereof.
7.03 Delegation.
The Managers may delegate the right, power and authority to manage the
day-to-day business, affairs, operations and activities of the Company to any
officer, employee or agent of any Member or of the Company, subject to the
ultimate direction, control and supervision of the Managers. If the Managers
appoint any officer of the Company with a title that is commonly used for
officers of a business corporation formed under the Delaware General Corporation
Law, the assignment of such title shall constitute the delegation of the
authority and duties that are normally associated with that office, subject to
any specific delegation of authority and duties made by the Managers. Any number
of offices may be held by the same Person. The salaries or other compensation,
if any, of the officers and agents of the Company shall be fixed from time to
time by the Managers.
7.04 Vacancies; Removal; Resignation. In the event of a vacancy
occurring in the Managers, the Members shall designate a Manager to fill such
vacancy by affirmative vote of a Majority-In- Interest of such Members. Any
Manager may be removed by the affirmative vote of a Majority-In-Interest of the
Members for any reason or no reason. Any Manager may be removed by affirmative
vote of a Majority-In-Interest of the Members, for gross negligence, willful
misconduct or embezzlement. Any Manager may resign at any time. Such resignation
shall be made in writing and shall take effect at the time specified therein, or
if no time be specified, at the time of its receipt by the remaining Managers.
The acceptance of a resignation shall not be necessary to make it effective,
unless expressly so provided in the resignation.
7.05 Meetings.
(e) Unless otherwise required by law or provided in the
Certificate or this Agreement, a majority of the total number of Managers fixed
by, or in the manner provided in, the Certificate or this Agreement shall
constitute a quorum for the transaction of business of the Managers, and the act
of a majority of the Managers present at a meeting at which a quorum is present
shall be the act of the Managers. A Manager who is present at a meeting of the
Managers at which action on any Company matter is taken shall be presumed to
have assented to the action unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent of such action with
the person acting as secretary of the meeting before the adjournment thereof or
shall deliver such dissent to the Company immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a Manager who voted in
favor of such action.
(f) Meetings of the Managers may be held at such place or
places as shall be determined from time to time by resolution of the Managers.
Attendance of a Manager at a meeting constitutes a waiver of notice of such
meeting, except where a Manager attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
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(g) Regular meetings of the Managers shall be held at such
times and places as shall be designated from time to time by resolution of the
Managers. Notice of such regular meetings shall not be required.
(h) Special meetings of the Managers may be called by any
Manager on at least 24 hours notice to each other Manager. Such notice need not
state the purpose or purposes of, nor the business to be transacted at, such
meeting, except as may otherwise be required by law or provided for by the
Articles or this Agreement.
7.06 Action by Written or Telephone Conference. Any action permitted or
required by the Act, the Certificate or this Agreement to be taken at a meeting
of the Managers or of any committee designated by the Managers may be taken
without a meeting if a consent in writing, setting forth the action to be taken,
is signed by all the Managers or members of such committee, as the case may be.
Such consent shall have the same force and effect as a unanimous vote at a
meeting and may be stated as such in any document or instrument filed with the
Secretary of the State of Delaware, and the execution of such consent shall
constitute attendance or presence in person at a meeting of the Managers or any
such committee, as the case may be. Subject to the requirements of the Act, the
Certificate or this Agreement for notice of meetings, Managers, or members of
any committee designated by the Managers, may participate in and hold a meeting
of the Managers or any committee of Managers, as the case may be, by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
such meeting shall constitute attendance and presence in person at such meeting,
except where a person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
7.07 Compensation of Managers. The Managers shall not be entitled to
compensation for their services rendered as Managers. The Managers shall be
entitled to be reimbursed for out-of-pocket costs and expenses incurred in the
course of their services hereunder. Notwithstanding the forgoing, a Manager may
receive compensation from the Company for providing services to the Company.
7.08 Conflicts of Interest. Subject to the other express provisions of
this Agreement, each Manager and Member of the Company at any time and from time
to time may invest in other business ventures of any and every type and
description, independently or with others, so long as same does not interfere
with their ability to perform his, her or its duties to the Company, with no
obligation to offer to the Company or any other Member or Manager the right to
participate, therein, unless otherwise herein provided. The Company may transact
business with any Manager, Member or affiliate thereof. Nothing in this
Agreement shall preclude transactions between the Company and any Member hereto,
Manager or an affiliate of any Member hereto or Manager acting in and for its
own account, provided that any services performed or products provided by the
Member, Manager or any such affiliate are services and/or products that the
Company reasonably believes, at the time of requesting such services and/or
products, to be in the best interests of Company.
7.09 Limitation of Liability. The Managers shall not be personally
liable, as such, for monetary damages (other than under criminal statutes and
under Federal, state and local laws imposing liability on managers for the
payment of taxes) for any action taken, or any failure to take any action,
unless the person's conduct constitutes willful misconduct or recklessness. No
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amendment or repeal of this Section shall apply to or have any effect on the
liability or alleged liability of any person who is or was the Manager of the
Company for or with respect to any acts or omissions of the Managers occurring
prior or the effective date of such amendment or repeal. If the Act is amended
to permit a Delaware limited liability company to provide greater protection
from personal liability for its managers than the express terms of this Section
this Section shall be construed to provide for such greater protection.
ARTICLE VIII - MEMBERS
8.01 Voting. The Members shall be entitled to cast that number of votes
on each action to be taken by vote of the Members as shall equal the Percentage
Interest of the Member multiplied by 100. (For example, a Member whose
Percentage Interest is 50% shall be entitled to cast 50 votes). Except as
otherwise set forth herein, the Members shall be entitled to vote on all matters
submitted to a vote of the Members.
8.02 Meetings.
(a) A quorum shall be present at a meeting of Members if
Members holding a majority of all Membership Interests entitled to vote at such
meeting are represented at the meeting in person or by proxy. Except as
otherwise provided in this Agreement, with respect to any matter, the
affirmative vote of a Majority-In-Interest of the Membership Interests, as
applicable, entitled to vote on, consent to, or approve a particular matter
represented at the meeting in which a quorum is present shall be the act of the
Members.
(b) All meetings of the Members shall be held at the principal
place of business of the Company or at such other place within or without the
State of Delaware as shall be specified or fixed in the notices or waivers of
notice thereof; provided that any or all Members may participate in any such
meeting by means of conference telephone or similar communications equipment
pursuant to Section 8.05.
(c) The chairman of the meeting or the holders of a majority
of the Percentage Interests of the Members entitled to vote and represented at a
meeting in which a quorum is present shall have the power to adjourn such
meeting from time to time, without any notice other than announcement at the
meeting of the time and place of the holding of the adjourned meeting.
(d) Special meetings of the Members for any proper purpose or
purposes may be called at any time by the Managers or the holders of at least
ten percent (10%) of the Percentage Interests of all Members entitled to vote at
such meeting. Only business within the purpose or purposes described in the
notice (or waiver thereof) required by this Agreement may be conducted at a
special meeting of the Members.
(e) Written or printed notice stating the place, day and hour
of the meeting and, in the case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than 5 nor more
than 30 days before the date of the meeting, either personally, or by mail, by
or at the direction of the Managers or person calling the meeting, to each
Member. If mailed, any such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the Member at such Member's
address provided for in Section 14.02, with postage thereon prepaid.
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8.03 Proxies. A Member may vote either in person or by proxy executed
in writing by the Member. A telegram, telex, cablegram or similar transmission
by the Member, or a photographic, photostatic, facsimile or similar reproduction
of a writing executed by the Member shall be treated as an execution in writing
for purposes of this Section. A proxy shall be revocable unless the proxy form
conspicuously states that the proxy is irrevocable.
8.04 Conduct of Meetings. All meetings of the Members shall be presided
over by the chairman of the meeting, who shall be a Manager (or representative
thereof) designated by a majority of the Managers. The chairman of any meeting
of Members shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seem to him or her in order.
8.05 Action by Written Consent or Telephone Conference.
(a) Any action required or permitted to be taken at any annual
or special meeting of Members may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holders of Percentage Interests
representing a Majority-In-Interest of those Members entitled to vote on the
action if a meeting were held.
(b) Members may participate in and hold a meeting by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
such meeting shall constitute attendance and presence in person at such meeting,
except where a person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
8.06 Liability of Members. The Members, as such, shall not be liable
for the debts, obligations or liabilities of the Company except to the extent
required by the Act.
ARTICLE IX - INDEMNIFICATION
9.01 Right to Indemnification. Subject to the limitations and
conditions as provided in this Article IX, each person who was or is made a
party or is threatened to be made a party to or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative (hereinafter a "Proceeding"), or
any appeal in such a Proceeding or any inquiry or investigation that could lead
to such a Proceeding, by reason of the fact that he or she, or a person of whom
he or she is the legal representative, is or was a Manager of the Company or
while a Manager of the Company is or was serving at the request of the Company
as a Manager, director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic limited
liability company, corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise, shall be indemnified by the
Company to the fullest extent permitted by the Act and the Delaware General
Corporation Law, as the same exist or may hereafter be amended, against
judgments, penalties (including excise and similar taxes and punitive damages),
fines, settlements and reasonable expenses (including, without limitation,
attorneys' fees) actually incurred by such person in connection with such
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proceeding, and indemnification under this Article IX shall continue as to a
person who has ceased to serve in the capacity which initially entitled such
person to indemnity hereunder. The rights granted pursuant to this Article IX
shall be deemed contract rights, and no amendment, modification or repeal of
this Article IX shall have the effect of limiting or denying any such rights
with respect to actions taken or proceedings arising prior to any such
amendment, modification or repeal. It is expressly acknowledged that the
indemnification provided in this Article IX could involve indemnification for
negligence or under theories of strict liability but may not extend to any
matter involving willful misconduct or recklessness.
9.02 Advance Payment. Upon the adoption of a resolution signed by all
of the Managers, the right to indemnification conferred in this Article IX may
include the right to be paid or reimbursed by the Company the reasonable
expenses incurred by a person of the type entitled to be indemnified under
Section 9.01 who was, is or is threatened to be made a named defendant or
respondent in a Proceeding and without any determination as to the person's
ultimate entitlement to indemnification; provided, however, that the payment of
such expenses incurred by any such person in advance of the final disposition of
a Proceedings, shall be made only upon delivery to the Company of a written
affirmation by such person of his or her good faith belief that he or she has
met the standard of conduct necessary for indemnification under this Article IX
and a written undertaking, by or on behalf of such person, to repay all amounts
so advanced if it shall ultimately be determined that such indemnified person is
not entitled to be indemnified under this Article IX or otherwise.
9.03 Indemnification of Employees and Agents. The Company, by adoption
of a resolution signed by all of the Managers, may indemnify and advance
expenses to an employee or agent of the Company to the same extent and subject
to the same conditions under which it may indemnify and advance expenses to
Managers under this Article IX; and the Company may indemnify and advance
expenses to persons who are not or were not Managers, employees or agents of the
Company but who are or were serving at the request of the Company as a Manager,
director, officer, partner, venturer, proprietor, trustee, employee, agent or
similar functionary of another foreign or domestic limited liability company,
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise against any liability asserted against him and
incurred by him in such a capacity or arising out of his status as such a person
to the same extent that it may indemnify and advance expenses to Managers under
this Article IX.
9.04 Appearance as a Witness. Notwithstanding any other provision of
this Article IX, the Company may pay or reimburse expenses incurred by a Manager
in connection with his or her appearance as a witness or other participation in
a Proceeding at a time when he or she is not a named defendant or respondent in
the Proceeding.
9.05 Nonexclusivity of Rights. The right to indemnification and the
advancement and payment of expenses conferred in this Article IX shall not be
exclusive of any other right which a Manager or other person indemnified
pursuant hereto may have or hereinafter acquire under any law (common or
statutory), agreement, provision of the Certificate or this Agreement, vote of
Members or disinterested Managers or otherwise.
9.06 Insurance. The Company may purchase and maintain insurance, at its
expense, to protect itself and any person who is or was serving as a Manager,
employee or agent of the Company or is or was serving at the request of the
Company as a Manager, director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic limited
liability company, corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise against any expense, liability
or loss, whether or not the Company would have the power to indemnify such
person against such expense, liability or loss under this Article IX.
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9.07 Savings Clause. If this Article IX or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless each Manager or any other
person indemnified pursuant to this Article IX as to costs, charges and expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
with respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative to the full extent permitted by any applicable
portion of this Article IX that shall not have been invalidated and to the
fullest extent permitted by applicable law.
ARTICLE X - TAXES
10.01 Tax Returns. The Managers shall cause to be prepared and filed
all necessary federal and state income tax returns for the Company, including
making the elections described in Section 10.02. Each Member shall furnish to
the Managers all pertinent information in its possession relating to Company
operations that is necessary to enable the Company's income tax returns to be
prepared and filed.
10.02 Tax Elections. To the extent permitted by applicable tax law, the
Company shall make the following elections on the appropriate tax returns:
(a) to adopt the calendar year as the Company's fiscal year;
(b) to adopt the cash method of accounting and to keep the
Company's books and records on the income-tax method;
(c) if a transfer of a Membership Interest as described in
Section 743 of the Code occurs, on written request of any transferee Member, or
if a distribution of Company property is made on which gain described in Section
734(b)(1)(A) of the Code is recognized or there is an excess of adjusted basis
as described in Section 734(b)(1)(B) of the Code, to elect, pursuant to Section
754 of the Code, to adjust the basis of Company properties;
(d) to elect to amortize the organizational expenses of the
Company and the start-up expenditures of the Company ratably over a period of 60
months as permitted by Sections 195 and 709(b) of the Code; and
(e) any other election the Managers may deem appropriate and
in the best interests of the Members.
Neither the Company nor any Manager or Member may make an election for
the Company to be excluded from the application of the provisions of subchapter
K of chapter 1 of subtitle A of the Code or any similar provisions of applicable
state law, and no provision of this Agreement shall be construed to sanction or
approve such an election.
10.03 Tax Matters Partner. A majority of the Managers shall designate
one Manager to be the "Tax Matters Partner" of the Company pursuant to Section
6231(a)(7) of the Code. Any Manager who is designated "Tax Matters Partner"
shall take such action as may be necessary to cause each Member to become a
"Notice Partner" within the meaning of Section 6223 of the Code. Any Manager who
is designated "Tax Matters Partner" shall inform each Member of all significant
matters that may come to its attention in its capacity as "Tax Matters Partner"
21
by giving notice thereof on or before the fifth Business Day after becoming
aware thereof and, within that time, shall forward to each Member copies of all
significant written communications it may receive in that capacity. Any Manager
who is designated "Tax Matters Partner" may not take any action contemplated by
Section 6222 through 6232 of the Code without the consent of a
Majority-In-Interest of the Members and a Majority-In-Interest of the Members,
but this sentence does not authorize such Manager (or any other Manager) to take
any action left to the determination of an individual Member under Sections 6222
through 6232 of the Code.
ARTICLE XI - BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
11.01 Maintenance of Books. The Company shall keep books and records of
accounts and shall keep minutes of the proceedings of its Members, its Managers
and each committee of the Managers. The Company shall also maintain the books
and records set forth on Exhibit B. The books of account for the Company shall
be maintained on a cash basis in accordance with the terms of this Agreement,
except that the Capital Accounts of the Members shall be maintained in
accordance with Section 4.04. The calendar year shall be the accounting year of
the Company.
11.02 Reports. On or before the 120th day following the end of each
fiscal year during the term of the Company, the Managers shall cause each Member
to be furnished with a balance sheet, an income statement, and a statement of
changes in Members' capital of the Company for, or as of the end of, that year,
such financial statements to be compiled by a firm of independent certified
public accountants selected by the Managers. The Managers also may cause to be
prepared or delivered such other reports as they may deem appropriate. The
Company shall bear the costs of all of these reports.
11.03 Accounts. The Managers shall establish and maintain one or more
separate bank and investment accounts in the Company name with financial
institutions and firms that the Managers determine. The Managers may not
commingle the Company's funds with the funds of any Member; however, Company
funds may be invested in a manner the same as or similar to the Managers'
investment of their own funds or investments by their affiliates.
ARTICLE XII - DISSOLUTION, LIQUIDATION, AND TERMINATION
12.01 Dissolution. The Company shall dissolve and its affairs shall be
wound up on the first to occur of the following:
(a) the written consent of a majority of the Managers or a
Majority-In-Interest of the Members;
(b) the sale of all or substantially all of the assets of the
Company;
(c) the expiration of the period (if any) fixed for the
duration of the Company in this Agreement; or
(d) entry of a decree of judicial dissolution of the Company
under Section 18-802 of the Act.
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12.02 Liquidation and Termination. On dissolution of the Company, the
Managers shall act as liquidator or may appoint one or more Members as
liquidator. The liquidator shall proceed diligently to wind up the affairs of
the Company and make final distributions as provided herein and in the Act. The
costs of liquidation shall be borne as a Company expense. Until final
distribution, the liquidator shall continue to operate the Company properties
with all of the power and authority of the Managers. The steps to be
accomplished by the liquidator are as follows:
(a) as promptly as possible after dissolution and again after
final liquidation, the liquidator shall cause a proper accounting to be made by
a recognized firm of certified public accountants of the Company's assets,
liabilities, and operations through the last day of the calendar month in which
the dissolution occurs or the final liquidation is completed, as applicable;
(b) the liquidator shall pay, satisfy or discharge from
Company funds all of the debts, liabilities and obligations of the Company
(including, without limitation, all debts owed to Members, and all expenses
incurred in liquidation and any advances described in Section 4.03) or otherwise
make adequate provision for payment and discharge thereof (including, without
limitation, the establishment of a cash escrow fund for contingent liabilities
in such amount and for such term as the liquidator may reasonably determine),
all in accordance with the provisions of the Act as may be applicable; and
(c) all remaining assets of the Company shall be distributed
to the Members as follows:
(i) the liquidator may sell any or all Company
property, including to Members, and any resulting gain or loss from each sale
shall be computed and allocated to the Capital Accounts of the Members;
(ii) with respect to all Company property that has
not been sold, the fair market value of that property shall be determined and
the Capital Account of the Members shall be adjusted to reflect the manner in
which the unrealized income, gain, loss, and deduction inherent in property that
has not been reflected in the Capital Accounts previously would be allocated
among the Members if there were a taxable disposition of that property for the
fair market value of that property on the date of distribution; and
(iii) To the Members in accordance with positive
Capital Account balances:
All distributions in kind to the Members shall be made subject to the liability
of each distributee for costs, expenses, and liabilities theretofore incurred or
for which the Company has committed prior to the date of termination and those
costs, expenses, and liabilities shall be allocated to the distributee pursuant
to this Section 12.02. The distribution of cash and/or property to a Member in
accordance with the provisions of this Section 12.02 constitutes a complete
return to the Member of its Capital Contributions and a complete distribution to
the Member of its Membership Interest and all the Company's property. To the
extent that a Member returns funds to the Company, it has no claim against any
other Member for those funds.
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12.03 Deficit Capital Accounts. Notwithstanding anything to the
contrary contained in this Agreement, and notwithstanding any custom or rule of
law to the contrary, to the extent that the deficit, if any, in the Capital
Account of any Member results from or is attributable to deductions and losses
of the Company (including non-cash items such as depreciation), or distributions
of money pursuant to this Agreement to all Members in proportion to their
respective Percentage Interests, upon dissolution of the Company such deficit
shall not be an asset of the Company and such Members shall not be obligated to
contribute such amount to the Company to bring the balance of such Member's
Capital Account to zero.
12.04 Certificate of Cancellation. On completion of the distribution of
Company assets as provided herein, the Company is terminated, and the Managers
(or such other person or persons as the Act may require or permit) shall file a
Certificate of Cancellation with the Secretary of State of the State of
Delaware, cancel any other filings made pursuant to Section 2.05, and take such
other actions as may be necessary to terminate the Company.
ARTICLE XIII - MEMBERSHIP INTERESTS
13.01 Membership Interests. The maximum number of Membership Interests
which the Company is authorized to have outstanding is One Hundred (100). The
Membership Interests shall have the powers, preferences and rights described in
this Agreement. The Company may, in its sole discretion, issue fractional
Membership Interests.
The number of Membership Interests held by each Member as of
the date of this Agreement is set forth in Exhibit A. The Managers may from time
to time issue authorized but unissued Membership Interests for such
consideration as the Managers determine to be in the best interests of the
Company. Any person acquiring Membership Interests shall become a member upon
(a) the payment to the Company of the consideration for which such Membership
Interests are being issued, and (b) the execution and delivery by such person of
a counterpart of this Agreement evidencing such person's agreement to be bound
by and comply with the terms and provisions hereof as if such person were an
original signatory to this Agreement and Exhibit A to this Agreement shall be
amended to reflect such person's name, and the consideration paid by such person
for such person's Membership Interests.
13.02 Reissuance. Membership Interests repurchased by the Company
pursuant to this Agreement may be reissued by the Company.
ARTICLE XIV - GENERAL PROVISIONS
14.01 Offset. Whenever the Company is to pay any sum to any Member, any
amounts that a Member owes the Company may be deducted from that sum before
payment.
14.02 Notices. Except as expressly set forth to the contrary in this
Agreement, all notices, requests, or consents provided for or permitted to be
given under this Agreement must be in writing and must be given either by
depositing that writing in the United States mail, addressed to the recipient,
postage paid, and registered or certified with return receipt requested or by
delivering that writing to the recipient in person, by courier, or by facsimile
transmission; and a notice, request, or consent given under this Agreement is
effective on receipt by the person to receive it. All notices, requests, and
consents to be sent to a Member must be sent to or made at the addresses given
24
for that Member on Exhibit A, or such other address as that Member may specify
by notice to the other Members. Any notice, request, or consent to the Company
must be given at the following address: 223 East College Street, Grapevine, TX
76051, any notice, request or consent to the Managers must be given to the
Managers at their addresses set forth on Exhibit A or such other address as the
Company or that Manager may specify by notice to the Company. Whenever any
notice is required to be given by law, the Certificate or this Agreement, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
14.03 Entire Agreement. This Agreement constitutes the entire agreement
of the Members and their affiliates relating to the Company and supersedes all
prior contracts or agreements with respect to the Company, whether oral or
written.
14.04 Effect of Waiver or Consent. A waiver or consent, express or
implied, to or of any breach or default by any person in the performance by that
person of its obligations with respect to the Company is not a consent or waiver
to or of any other breach or default in the performance by that person of the
same or any other obligations of that person with respect to the Company.
Failure on the part of a person to complain of any act of any person or to
declare any person in default with respect to the Company, irrespective of how
long that failure continues, does not constitute a waiver by that person of its
rights with respect to that default until the applicable statute-of-limitations
period has run.
14.05 Amendment or Modification. Except as otherwise specifically
provided herein, this Agreement may be amended or modified from time to time
only by a written instrument adopted by the Managers and the affirmative vote of
a Majority-In-Interest of the Members entitled to vote thereon.
14.06 Arbitration. Any dispute between the parties hereto arising out
of or relating to this Agreement shall be settled by arbitration conducted in
Philadelphia, Pennsylvania (or as close thereto as possible) in accordance with
the Commercial Arbitration Rules, as applicable, of the American Arbitration
Association, and judgment upon the award, which shall be binding and conclusive
and non-appealable upon the parties hereto, may be entered in any court having
jurisdiction thereof. Liability for related legal expenses and costs shall be
determined by the arbitrators, it being understood that it is the is the
intention of the parties hereto that any breaching party shall reimburse the
other party for all costs and expenses, including, without limitation,
attorneys' and experts' fees, and the costs of the arbitration and the
arbitrators incurred with respect to the enforcement of this Agreement.
14.07 Binding Act. Subject to the restrictions on Dispositions set
forth in this Agreement, this Agreement is binding on and inures to the benefit
of the Members and their respective heirs, legal representatives, successors,
and assigns.
14.08 Governing Law; Severability. THIS AGREEMENT IS GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE,
EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE
OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION. If any
provision of this Agreement or the application thereof to any person or
circumstance is held invalid or unenforceable to any extent, the remainder of
this Agreement and the application of that provision to other persons or
circumstances is not affected thereby and that provision shall be enforced to
the greatest extent permitted by law.
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14.09 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
14.10 No Third Party Benefit. The provisions hereof are solely for the
benefit of the Company and its Members and Managers and are not intended to, and
shall not be construed to, confer a right or benefit on any creditor of the
Company or any other person.
14.11 Waiver of Certain Rights. Each Member irrevocably waives any
right it may have to maintain any action for dissolution of the Company or for
partition of the property of the Company.
14.12 Indemnification. To the fullest extent permitted by law, each
Member shall indemnify the Company, each Manager and each other Member and hold
them harmless from and against all losses, cost, liabilities, damages, and
expenses (including, without limitation, costs of suit and attorney's fees) they
may incur on account of any breach by that Member of this Agreement.
14.13 Counterparts. This Agreement may be executed in any number of
counterparts and by facsimile signature with the same effect as if all signing
parties had signed the same document. All counterparts and facsimiles shall be
construed together and constitute the same instrument.
IN WITNESS WHEREOF, the initial Members and the Company have caused
this Operating Agreement to be executed as of the day and year first above
written.
THIS AMENDMENT to the Operating Agreement of RBE, LLC, a Delaware
Limited Liability Company, ("Operating Agreement") is entered into and shall be
effective this 8th day of August, 2004, among Ferrell RBE Holdings, LLC
("Ferrell"), as the Withdrawing Class A Member, Initial Class B Member and
Manager, and Maverick Oil and Gas, Inc.("Maverick") (collectively the
"Members").
W I T N E S S E T H:
WHEREAS, the Operating Agreement of RBE, LLC is hereby amended to
reflect the withdrawal of Ferrell as the Initial Class A Member and the
substitution of Maverick as the Class A Member, as well as the adjustment to the
Capital Contribution Schedule of the Members.
NOW, THEREFORE, intending to be legally bound, the Members hereby
approve the amendment to the Operating Agreement. The Capital Contribution
Schedule of the Members of RBE LLC shall be amended to reflect those percentages
listed on Exhibit A, attached.
THIS AMENDMENT to the Operating Agreement of RBE, LLC, a Delaware
Limited Liability Company, ("Operating Agreement") is entered into and shall be
effective this 1st day of December, 2004, among Maverick Oil and Gas, Inc., the
Class A Member ("Maverick"); Ferrell RBE Holdings, LLC ("Ferrell"), the Initial
Class B Member and Manager, and Bamco Gas, LLC, as an Additional Class B
Member.("Bamco") (collectively the "Members").
W I T N E S S E T H:
WHEREAS, the Operating Agreement of RBE, LLC is hereby amended to
reflect the transfer of a Percentage Interest of the Ferrell as the Class B
Member to Bamco and the admission of Bamco as an Additional Class B Member.
WHEREAS, the Operating Agreement of RBE, LLC is hereby amended to
reflect a change in the capital contribution schedule of the Class A Member.
NOW, THEREFORE, intending to be legally bound, the Members hereby
approve the amendment to the Operating Agreement. The Capital Contribution
Schedule of the Members of RBE LLC shall be amended to reflect those percentages
listed on Exhibit A, attached.
By: /s/ Ernest A. Bartlett
----------------------------------
Ernest A. Bartlett, President
Exhibit 10.10
MAVERICK OIL AND GAS, INC.
July 27, 2004
Mr. Michael Garland
22 Park Crescent
London W1B 1PE
United Kingdom
RE: Offer of Employment
Dear Mr. Garland:
Maverick Oil and Gas, Inc. (the "Company") is pleased to extend to you
an offer of employment with the Company. You will be employed as our President
and in that regard, will be assigned such duties and responsibilities as are
consistent with such position and as may be assigned to you by the Board of
Directors of the Company, from time to time. It is expected that your starting
date of employment will be as of the date of this Agreement.
1. Compensation.
As President, you would be employed at a base salary of $10,000 USD per
month, subject, of course to applicable tax withholdings and otherwise in
accordance with payroll practices adopted by the company from time to time. In
addition to your base salary, the Company has agreed to pay you a bonus of
$10,000 USD during November, 2004 (assuming you have not separated from the
service of the Company at that time), and the Company is prepared to offer you
additional incentive compensation in the form of participation in the Company's
stock option program in the following manner:
a. Stock Option Program. You will be granted 3 year options to
purchase 300,000 shares of the Company's Common Stock upon commencement of
employment (the "Options") at an exercise price of $1.50 USD per share.
b. Benefits. As an employee of the Company, you will also be
eligible to participate in the corporate benefits offered by the Company to its
employees, in general. You will be entitled to receive 2 weeks of paid vacation
in each calendar year, to be taken at times which do not unreasonably interfere
with the performance of your duties thereunder. Vacations of more than 7
consecutive days should not be scheduled during any three month period without
the prior written consent of the Board of Directors. You will also be reimbursed
for all reasonable expenses incurred by you in furtherance of your position with
the Company, including travel and entertainment expense, upon submission of the
appropriate documentation.
2. Employee-at-Will. This offer does not guarantee continued employment
for any specified period of time, nor does it require that a dismissal be based
on "cause". Your employment and compensation with the Company are "at will" in
that they can be terminated with or without cause, and with or without notice,
at any time, at the option of either the Company or yourself, except as provided
by law. The terms of this offer letter, therefore, do not and are not intended
to create either an express and/or implied contract of employment with the
Company. No manager or representative of the Company, other than an authorized
senior executive officer h s the authority to enter into any agreement for
employment for any specified period of time or to make any agreement or contract
to the foregoing, and any promises to the contrary may only be relied upon by
you if they are in writing and signed by an authorized senior executive officer.
22 PARK CRESCENT
LONDON W1B 1PE
UNITED KINGDOM
Michael Garland
July 27, 2004
Page 2
3. Full-Time Position. You agree that your employment hereunder will
generally be on a full-time basis, excluding non-competitive ventures that do
not adversely interfere with your with your duties to the Company or materially,
impede your full time duties hereunder, and you further agree during working
hours to generally devote your time, energy, knowledge, skill and ability
exclusively to the operation, transactions, and development of the Company's
interests unless otherwise in writing agreed. You will conscientiously and
diligently perform all required acts and duties to the best of y our ability,
and in a manner satisfactory to the Company. You will faithfully discharge all
responsibilities and duties entrusted to you. You will have the right to devote
a reasonable amount of time to (1) industry, community or charitable
organizations, (2) the management of personal investments, and (3) service on
the Boards of Directors of other organizations, as long as such service does not
create a conflict of interest with your services to the Company.
4. Termination Without Cause. Notwithstanding, anything in this Offer
of employment to the contrary, in the event you are terminated by the Company
without "Cause" (as hereafter defined), you will be entitled, at the discretion
of the Company, to either: (i) ninety (90) days notice of such date of
termination (the "Notice Period") with your salary and benefits to remain fixed
at then current levels during such Notice Period, or (ii) a severance package
upon your termination equal to the continuation of your present salary and
benefits for a period of ninety (90) days from the date of termination. For the
purposes hereof, you would be considered terminated for "Cause" if your
employment is terminated by the Company as a result of: (i) any violation of a
law, rule or regulation other than minor traffic violations; (ii) fraud,
dishonesty or other acts of misconduct in the rendering of services on behalf of
the Company or relating to the employee's employment; (iii) misconduct by the
employee which would cause the Company to violate any state or federal law
relating to sexual harassment or age, sex or other prohibited discrimination or
any violation of written policy of the Company or any other prohibited
discrimination or any violation of written policy of the Company or any
successor entity adopted in respect to such law; (iv) failure to follow Company
work rules, directives, or written policy statements; (v) any breach by you of
the terms of this Offer of Employment; or (vi) any violation of a
confidentiality or non-competition agreement or patent assignment agreement or
any agreement relating to the Company's protection of intellectual property
rights.
5. No Prior Agreement. In order to induce the Company to offer you this
position of employment, you are hereby confirming for us that you are not a
party to or otherwise subject to or bound by the terms of any contract,
agreement or understanding which in any manner would limit or otherwise effect
your ability to perform your obligations hereunder. You further represent and
warrant that your employment that your employment by the Company would not under
any circumstances required you to disclose or use any Confidential Information
belonging to third parties, or to engage in any conduct which may potentially
interfere with contractual, statutory or common-law rights of third parties.
Michael Garland
July 27, 2004
Page 3
If you agree to accept the terms of this offer of employment, would you
kindly sign on the line provided below.
We appreciate you have decided to be part of the Maverick team and look
forward to your continued success.
Sincerely,
MAVERICK OIL AND GAS, INC.
By: /s/ Cecile T. Coady
---------------------------------------
Cecile T. Coady, Resigning President
Acknowledged and Accepted
This 27th day of July, 2004
/s/ Michael Garland
-----------------------------
Michael Garland
Exhibit 10.11
WARRANT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
REPRESENTED HEREBY HAVE BEEN TAKEN BY THE REGISTERED OWNER FOR INVESTMENT, AND
WITHOUT A VIEW TO RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE SOLD,
TRANSFERRED OR DISPOSED OF WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER THAT SUCH TRANSFER OR DISPOSITION DOES NOT VIOLATE THE SECURITIES ACT OF
1933, AS AMENDED, THE RULES AND REGULATIONS THEREUNDER OR OTHER APPLICABLE
SECURITIES LAWS.
WARRANT TO PURCHASE
COMMON STOCK OF
MAVERICK OIL AND GAS, INC.
Void after 5:00 p.m. Eastern Standard Time on August 2, 2007
This warrant ("Warrant") is to verify that, FOR VALUE RECEIVED, AltaFin
B.V. ("Holder") is entitled to purchase, subject to the terms and conditions
hereof, from MAVERICK OIL AND GAS, INC., a Nevada corporation (the "Company"),
1,000,000 shares of common stock, $.001 par value per share, of the Company (the
"Common Stock"), at any time during the period commencing on the date of
issuance (the "Commencement Date") and ending at 5:00 p.m. Eastern Standard Time
on August 2, 2007 the "Termination Date"), at an exercise price (the "Exercise
Price") of $2.00 per share of Common Stock. The number of shares of Common Stock
purchasable upon exercise of this Warrant and the Exercise Price per share shall
be subject to adjustment from time to time upon the occurrence of certain events
as set forth below.
The shares of Common Stock or any other shares or other units of stock
or other securities or property, or any combination thereof, then receivable
upon exercise of this Warrant, as adjusted from time to time, are sometimes
referred to hereinafter as "Exercise Shares". The exercise price per share as
from time to time in effect is referred to hereinafter as the "Exercise Price".
1. Exercise of Warrant; Issuance of Exercise Shares.
(a) Exercise of Warrant. Subject to the terms hereof, the purchase
rights represented by this Warrant are exercisable by the Holder in whole or in
part, at any time, or from time to time, by the surrender of this Warrant and
the Notice of Exercise annexed hereto duly completed and executed on behalf of
the Holder, at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company) accompanied by payment of the
Exercise Price in full either (i) in cash or by bank or certified check for the
Exercise Shares with respect to which this Warrant is exercised; (ii) by
delivery to the Company of shares of the Company's Common Stock having a Fair
Market Value (as defined below) equal to the aggregate Exercise Price of the
Exercise Shares being purchased that Holder is the record and beneficial owner
of and that have been held by the Holder for at least six (6) months; (iii)
provided that the sale of the Exercise Shares are covered by an effective
registration statement, by delivering to the Company a Notice of Exercise
together with an irrevocable direction to a broker-dealer registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to sell a
sufficient portion of the Exercise Shares and deliver the sales proceeds
directly to the Company to pay the Exercise Price; or (iv) by any combination of
the procedures set forth in subsections (i), (ii) and (iii) of this Section
1(a). For the purposes of this Section 1(a), "Fair Market Value" shall be an
amount equal to the average of the Current Market Value (as defined below) for
the ten (10) days preceding the Company's receipt of the duly executed Notice of
Exercise form attached hereto as Appendix A.
In the event that this Warrant shall be duly exercised in part prior to
the Termination Date, the Company shall issue a new Warrant or Warrants of like
tenor evidencing the rights of the Holder thereof to purchase the balance of the
Exercise Shares purchasable under the Warrant so surrendered that shall not have
been purchased.
(b) Issuance of Exercise Shares: Delivery of Warrant Certificate. The
Company shall, within ten (10) business days or as soon thereafter as is
practicable of the exercise of this Warrant, issue in the name of and cause to
be delivered to the Holder one or more certificates representing the Exercise
Shares to which the Holder shall be entitled upon such exercise under the terms
hereof. Such certificate or certificates shall be deemed to have been issued and
the Holder shall be deemed to have become the record holder of the Exercise
Shares as of the date of the due exercise of this Warrant.
(c) Exercise Shares Fully Paid and Non-assessable. The Company agrees
and covenants that all Exercise Shares issuable upon the due exercise of the
Warrant represented by this Warrant certificate ("Warrant Certificate") will,
upon issuance and payment therefor in accordance with the terms hereof, be duly
authorized, validly issued, fully paid and non-assessable and free and clear of
all taxes (other than taxes which, pursuant to Section 2 hereof, the Company
shall not be obligated to pay) or liens, charges, and security interests created
by the Company with respect to the issuance thereof.
(d) Reservation of Exercise Shares. The Company covenants that during
the term that this Warrant is exercisable, the Company will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of the Exercise Shares upon the exercise of this Warrant, and
from time to time will take all steps necessary to amend its Certificate of
Incorporation to provide sufficient reserves of shares of Common Stock issuable
upon the exercise of the Warrant.
(e) Fractional Shares. The Company shall not be required to issue
fractional shares of capital stock upon the exercise of this Warrant or to
deliver Warrant Certificates that evidence fractional shares of capital stock.
In the event that any fraction of an Exercise Share would, except for the
provisions of this subsection (e), be issuable upon the exercise of this
Warrant, the Company shall pay to the Holder exercising the Warrant an amount in
2
cash equal to such fraction multiplied by the Current Market Value of the
Exercise Share on the last business day prior to the date on which this Warrant
is exercised. For purposes of this subsection (e), the "Current Market Value"
for any day shall be determined as follows:
(i) if the Exercise Shares are traded in the over-the-counter
market and not on any national securities exchange and not on the NASDAQ
National Market System or NASDAQ Small Cap Market (together, the "NASDAQ
Reporting System"), the average of the mean between the last bid and asked
prices per share, as reported by the National Quotation Bureau, Inc., or an
equivalent generally accepted reporting service, or if not so reported, the
average of the closing bid and asked prices for an Exercise Share as furnished
to the Company by any member of the National Association of Securities Dealers,
Inc., selected by the Company for that purpose; or
(ii) if the Exercise Shares are listed or traded on a national
securities exchange or the NASDAQ Reporting System, the closing price on the
principal national securities exchange on which they are so listed or traded, on
the NASDAQ Reporting System, as the case may be, on the last business day prior
to the date of the exercise of this Warrant. The closing price referred to in
this clause (ii) shall be the last reported sales price or, in case no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices, in either case on the national securities exchange on which
the Exercise Shares are then listed or in the NASDAQ Reporting System; or
(iii) if no such closing price or closing bid and asked prices
are available, as determined in any reasonable manner as may be prescribed by
the Board of Directors of the Company.
2. Payment of Taxes. The Company will pay all documentary stamp taxes, if any,
attributable to the initial issuance of Exercise Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue of any Warrant Certificates or any certificates for Exercise Shares in a
name other than that of the Holder of a Warrant Certificate surrendered upon the
exercise of a Warrant, and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
3. Mutilated or Missing Warrant Certificates. In case any Warrant shall be
mutilated, lost, stolen or destroyed, the Company may in its discretion issue,
in exchange and substitution for and upon cancellation of the mutilated Warrant,
or in lieu of and in substitution for the Warrant lost, stolen or destroyed, a
new Warrant or Warrants of like tenor and in the same aggregate denomination,
but only (i) in the case of loss, theft or destruction, upon receipt of evidence
satisfactory to the Company of such loss, theft or destruction of such Warrant
and indemnity or bond, if requested, also satisfactory to them and (ii) in the
case of mutilation, upon surrender of the mutilated Warrant. Applicants for such
substitute Warrants shall also comply with such other reasonable regulations and
pay such other reasonable charges as the Company or its counsel may prescribe.
3
4. Rights of Holder. The Holder shall not, by virtue of anything contained in
this Warrant or otherwise, be entitled to any right whatsoever, either in law or
equity, of a stockholder of the Company, including without limitation, the right
to receive dividends or to vote or to consent or to receive notice as a
shareholder in respect of the meetings of shareholders or the election of
directors of the Company or any other matter.
5. Registration of Transfers and Exchanges. The Warrant shall be transferable,
subject to the provisions of Section 7 hereof, only upon the books of the
Company, if any, to be maintained by it for that purpose, upon surrender of the
Warrant Certificate to the Company at its principal office accompanied (if so
required by the Company) by a written instrument or instruments of transfer in
form satisfactory to the Company and duly executed by the Holder thereof or by
the duly appointed legal representative thereof or by a duly authorized attorney
and upon payment of any necessary transfer tax or other governmental charge
imposed upon such transfer. In all cases of transfer by an attorney, the
original letter of attorney, duly approved, or an official copy thereof, duly
certified, shall be deposited and remain with the Company. In case of transfer
by executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and remain with the Company in its discretion. Upon any such
registration of transfer, a new Warrant shall be issued to the transferee named
in such instrument of transfer, and the surrendered Warrant shall be canceled by
the Company.
Any Warrant may be exchanged, at the option of the Holder thereof and
without change, when surrendered to the Company at its principal office, or at
the office of its transfer agent, if any, for another Warrant or other Warrants
of like tenor and representing in the aggregate the right to purchase from the
Company a like number and kind of Exercise Shares as the Warrant surrendered for
exchange or transfer, and the Warrant so surrendered shall be canceled by the
Company or transfer agent, as the case may be.
6. Adjustment of Exercise Shares and Exercise Price. The Exercise Price and the
number and kind of Exercise Shares purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of certain
events as hereinafter provided. The Exercise Price in effect at any time and the
number and kind of securities purchasable upon exercise of each Warrant shall be
subject to adjustment as follows:
(a) In case of any consolidation or merger of the Company with another
corporation (other than a merger with another corporation in which the Company
is the surviving corporation and which does not result in any reclassification
or change -- other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination -- of outstanding Common Stock issuable upon such exercise), the
rights of the Holder of this Warrant shall be adjusted in the manner described
below:
(i) In the event that the Company is the surviving
corporation, this Warrant shall, without payment of additional consideration
therefor, be deemed modified so as to provide that the Holder of this Warrant,
upon the exercise thereof, shall procure, in lieu of each share of Common Stock
theretofore issuable upon such exercise, the kind and amount of shares of stock,
other securities, money and property receivable upon such reclassification,
change, consolidation or merger by the holder of each share of Common Stock, had
4
exercise of this Warrant occurred immediately prior to such reclassification,
change, consolidation or merger. This Warrant (as adjusted) shall be deemed to
provide for further adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 6. The provisions of
this clause (i) shall similarly apply to successive reclassifications, changes,
consolidations and mergers.
(ii) In the event that the Company is not the surviving
corporation, Holder shall be given at least fifteen (15) days prior written
notice of such transaction and shall be permitted to exercise this Warrant, to
the extent it is exercisable as of the date of such notice, during this fifteen
(15) day period. Upon expiration of such fifteen (15) day period, this Warrant
and all of Holder's rights hereunder shall terminate.
(b) If the Company, at any time while this Warrant, or any portion
thereof, remains outstanding and unexpired, by reclassification of securities or
otherwise, shall change any of the securities as to which purchase rights under
this Warrant exist into the same or a different number of securities of any
other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Exercise Price therefor shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 6.
(c) In case the Company shall (i) pay a dividend or make a distribution
on its shares of Common Stock in shares of Common Stock, (ii) subdivide or
classify its outstanding Common Stock into a greater number of shares, or (iii)
combine or reclassify its outstanding Common Stock into a smaller number of
shares, the Exercise Price in effect at the time of the record date for such
dividend or distribution or of the effective date of such subdivision,
combination or reclassification, shall be proportionally adjusted so that the
Holder of this Warrant exercised after such date shall be entitled to receive
the aggregate number and kind of shares that, if this Warrant had been exercised
by such Holder immediately prior to such date, he would have owned upon such
exercise and been entitled to receive upon such dividend, subdivision,
combination or reclassification. For example, if the Company declares a 2 for 1
stock dividend or stock split and the Exercise Price immediately prior to such
event was $2.00 per share, the adjusted Exercise Price immediately after such
event would be $1.00 per share. Such adjustment shall be made successively
whenever any event listed above shall occur. Whenever the Exercise Price payable
upon exercise of each Warrant is adjusted pursuant to this subsection (c), the
number of Exercise Shares purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number of Exercise Shares
initially issuable upon exercise of this Warrant by the Exercise Price in effect
on the date hereof and dividing the product so obtained by the Exercise Price,
as adjusted.
(d) In the event that at any time, as a result of an adjustment made
pursuant to subsection (a), (b) or (c) above, the Holder of this Warrant
thereafter shall become entitled to receive any Exercise Shares of the Company,
other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of this Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in subsections (a), (b) or
(c) above.
5
(e) Irrespective of any adjustments in the Exercise Price or the number
or kind of Exercise Shares purchasable upon exercise of this Warrant, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Warrant
(f) Whenever the Exercise Price shall be adjusted as required by the
provisions of the foregoing Section 6, the Company shall forthwith file in the
custody of its Secretary or an Assistant Secretary at its principal office and
with its stock transfer agent, if any, an officer's certificate showing the
adjusted Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a statement of
the number of additional shares of Common Stock, if any, and such other facts as
shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the holder and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Holder.
(g) All calculations under this Section 6 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
7. Restrictions on Transferability: Restrictive Legend. Neither this Warrant nor
the Exercise Shares shall be transferable except in accordance with the
provisions of this Section.
(a) Restrictions on Transfer; Indemnification. Neither this Warrant nor
any Exercise Share may be offered for sale or sold, or otherwise transferred or
sold in any transaction which would constitute a sale thereof within the meaning
of the Securities Act of 1933, as amended (the "1933 Act"), unless (i) such
security has been registered for sale under the 1933 Act and registered or
qualified under applicable state securities laws relating to the offer and sale
of securities, or (ii) exemptions from the registration requirements of the 1933
Act and the registration or qualification requirements of all such state
securities laws are available and the Company shall have received an opinion of
counsel satisfactory to the Company that the proposed sale or other disposition
of such securities may be effected without registration under the 1933 Act and
would not result in any violation of any applicable state securities laws
relating to the registration or qualification of securities for sale, such
counsel and such opinion to be satisfactory to the Company.
The Holder agrees to indemnify and hold harmless the Company against
any loss, damage, claim or liability arising from the disposition of this
Warrant or any Exercise Share held by such holder or any interest therein in
violation of the provisions of this Section 7.
(b) Restrictive Legends. Unless and until otherwise permitted by this
Section 7, this Warrant Certificate, each Warrant Certificate issued to the
Holder or to any transferee or assignee of this Warrant Certificate, and each
certificate representing Exercise Shares issued upon exercise of this Warrant or
to any transferee of the person to whom the Exercise Shares were issued, shall
bear a legend setting forth the requirements of subsection (a) of this Section
7, together with such other legend or legends as may otherwise be deemed
necessary or appropriate by counsel to the Company.
6
(c) Removal of Legend. The Company shall, at the request of any
registered holder of a Warrant or Exercise Share, exchange the certificate
representing such security for a certificate representing the same security not
bearing the restrictive legend required by subsection (b) if, in the opinion of
counsel acceptable to the Company, such restrictive legend is no longer
necessary.
8. Registration Rights. The Holder shall be entitled to the rights and subject
to the obligations set forth in Section 6 of that certain Securities Purchase
Agreement dated on or about the date hereof by and between the Company and the
Holder.
9. Notices. All notices or other communications under this Warrant shall be in
writing and shall be deemed to have been given on the day of delivery if
delivered by hand, on the fifth day after deposit in the mail if mailed by
certified mail, postage prepaid, return receipt requested, or on the next
business day after mailing if sent by a nationally recognized overnight courier
such as federal express, addressed as follows:
If to the Company:
Maverick Oil and Gas, Inc.
111 Presidential Boulevard
Suite 158A
Bala Cynwyd, PA 19004
Attention: President
with a copy to:
Duane Morris, LLP
51 Haddonfield Road, Suite 340
Cherry Hill, NJ 08002
Attention: Vincent A. Vietti, Esquire
and to the Holder at the address of the Holder appearing on
the books of the Company or the Company's transfer agent, if
any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Section 9.
10. Supplements and Amendments. The Company may from time to time supplement or
amend this Warrant without the approval of any holders of Warrants in order to
cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision, or to make any
other provisions in regard to matters or questions herein arising hereunder
which the Company may deem necessary or desirable and which shall not materially
adversely affect the interests of the Holder.
11. Successors and Assigns. This Warrant shall inure to the benefit of and be
binding on the respective successors, assigns and legal representatives of the
Holder and the Company.
7
12. Severability. If for any reason any provision, paragraph or terms of this
Warrant is held to be invalid or unenforceable, all other valid provisions
herein shall remain in full force and effect and all terms, provisions and
paragraphs of this Warrant shall be deemed to be severable.
13. Governing Law. This Warrant shall be deemed to be a contract made under the
laws of the State of Nevada and for all purposes shall be governed by and
construed in accordance with the laws of said jurisdiction without regard to
such jurisdiction's conflicts of laws provisions.
14. Headings. Section and subsection headings used herein are included herein
for convenience of reference only and shall not affect the construction of this
Warrant nor constitute a part of this Warrant for any other purpose.
IN WITNESS WHEREOF, the Company has caused these presents to be duly
executed as of the August 2, 2004.
MAVERICK OIL AND GAS, INC.
By: /s/ Michael Garland
----------------------------
Name: Michael Garland
Title: President
8
APPENDIX A
NOTICE OF EXERCISE
TO: Maverick Oil and Gas, Inc.
111 Presidential Boulevard
Suite 158A
Bala Cynwyd, PA 19004
Attention: President
(1) The undersigned hereby elects to purchase ____________ shares of
Common Stock (as defined in the attached Warrant) of MAVERICK OIL AND GAS, INC.
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the Exercise Price (as defined in the attached Warrant) for such shares in full
in the following manner (please check one of the following choices):
/ / In Cash
/ / Cashless exercise through a broker; or
/ / Delivery of previously owned shares of Common Stock.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion hereof
are being acquired solely for the account of the undersigned, not as a nominee
for any other party, and for investment purposes only (unless such shares are
subject to resale pursuant to an effective prospectus), and that the undersigned
will not offer, sell or otherwise dispose of any such shares of Common Stock
except under circumstances that will not result in a violation of the Securities
Act of 1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned.
HOLDER
(Date) (Signature)
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Exhibit 10.12
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE
SALE IS MADE IN ACCORDANCE WITH RULE 144, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES, REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
OPTION TO PURCHASE COMMON STOCK
OF
MAVERICK OIL AND GAS, INC.
Void after July 27, 2007
This certifies that, for value received, Michael Garland ("Holder"), is
entitled, subject to the terms set forth below, to purchase from Maverick Oil
and Gas, Inc., a Nevada corporation (the "Company"), shares of the common stock,
$.001 par value per share, of the Company ("Common Stock"), as constituted on
the date hereof (the "Option Issue Date"), with the Notice of Exercise attached
hereto duly executed, and simultaneous payment therefor in lawful money of the
United States or as otherwise provided in Section 3 hereof, at the Exercise
Price then in effect. The number, character and Exercise Price of the shares of
Common Stock issuable upon exercise hereof are subject to adjustment as provided
herein.
1. Term of Option. This Option shall be exercisable, in whole or in
part, during the term commencing on the Option Issue Date and ending at 5:00
p.m. EST on July 27, 2007 (the "Option Expiration Date") and shall be void
thereafter.
2. Number of Shares and Exercise Price.
2.1 Number of Shares. The number of shares of Common Stock
which may be purchased pursuant to this Option shall be 300,000 shares (the
"Shares"), subject, however, to adjustment pursuant to Section 11 hereof.
2.2 Exercise Price. The Exercise Price at which this Option,
or portion thereof, may be exercised shall be $1.50 per Share, subject, however,
to adjustment pursuant to Section 11 hereof.
3. Exercise of Option.
3.1 Payment of Exercise Price. Subject to the terms hereof,
the purchase rights represented by this Option are exercisable by the Holder in
whole or in part, at any time, or from time to time, by the surrender of this
Option and the Notice of Exercise annexed hereto duly completed and executed on
behalf of the Holder, at the office of the Company (or such other office or
agency of the Company as it may designate by notice in writing to the Holder at
the address of the Holder appearing on the books of the Company) accompanied by
payment of the Exercise Price in full either (i) in cash or by bank or certified
check for the Shares with respect to which this Option is exercised; (ii) by
delivery to the Company of shares of the Company's Common Stock having a Fair
Market Value (as defined below) equal to the aggregate Exercise Price of the
Shares being purchased which Holder is the record and beneficial owner of and
which have been held by the Holder for at least six (6) months; or (iii) by
delivering to the Company a Notice of Exercise together with an irrevocable
direction to a broker-dealer registered under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), to sell a sufficient portion of the
Shares and deliver the sales proceeds directly to the Company to pay the
Exercise Price; or (iv) by any combination of the procedures set forth in
subsections (i), (ii) and (iii) of this Section 3.1.
3.2 Fair Market Value. If previously owned shares of Common
Stock are tendered as payment of the Exercise Price, the value of such shares
shall be the "Fair Market Value" of such shares on the trading date immediately
preceding the date of exercise. For the purpose of this Agreement, the "Fair
Market Value" shall be:
(a) If the Common Stock is admitted to quotation on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ"), the Fair Market Value on any given date shall be the average of the
highest bid and lowest asked prices of the Common Stock as reported for such
date or, if no bid and asked prices were reported for such date, for the last
day preceding such date for which such prices were reported;
(b) If the Common Stock is admitted to trading on a
United States securities exchange or the NASDAQ National Market System, the Fair
Market Value on any date shall be the closing price reported for the Common
Stock on such exchange or system for such date or, if no sales were reported for
such date, for the last day preceding such date for which a sale was reported;
(c) If the Common Stock is traded in the
over-the-counter market and not on any national securities exchange nor in the
NASDAQ Reporting System, the Fair Market Value shall be the average of the mean
between the last bid and ask prices per share, as reported by the National
Quotation Bureau, Inc., or an equivalent generally accepted reporting service,
or if not so reported, the average of the closing bid and asked prices for a
share as furnished to the Company by any member of the National Association of
Securities Dealers, Inc., selected by the Company for that purpose; or
(d) If the Fair Market Value of the Common Stock
cannot be determined on the basis previously set forth in this definition on the
date that the Fair Market Value is to be determined, the Board of Directors of
the Company shall in good faith determine the Fair Market Value of the Common
Stock on such date.
2
If the tender of previously owned shares would result in an issuance of a whole
number of Shares and a fractional Share of Common Stock, the value of such
fractional share shall be paid to the Company in cash or by check by the Holder.
3.3 Termination of Status as a Director; Death.
(a) If Holder shall cease to serve as a member of the Board of
Directors of the Company, all Options to which Holder is then entitled to
exercise may be exercised only within ninety (90) days after such event and
prior to the Option Termination Date; provided, however, in the event that such
cessation shall be for cause, as determined by the Board of Directors of the
Company, then this Option shall forthwith terminate.
(b) If Holder shall die while serving as a member of the Board
of Directors of the Company and prior to the Option Termination Date, any
Options then exercisable may be exercised only within one (1) year after
Holder's death, prior to the Option Termination Date and only by the Holder's
personal representative or persons entitled thereto under the Holder's will or
the laws of descent and distribution.
(c) This Option may not be exercised for more Shares (subject
to adjustment as provided in Section 11 hereof) after Holder ceases to serve as
a member of the Board of Directors of the Company or death, as the case may be,
than the Holder was entitled to purchase thereunder at the time of the
termination of Holder's status as a member of the Board of Directors or death.
3.4 Exercise Date; Delivery of Certificates. This Option shall be
deemed to have been exercised immediately prior to the close of business on the
date of its surrender for exercise as provided above, and Holder shall be
treated for all purposes as the holder of record of such Shares as of the close
of business on such date. As promptly as practicable on or after such date and
in any event within ten (10) days thereafter, the Company at its expense shall
issue and deliver to the Holder a certificate or certificates for the number of
Shares issuable upon such exercise. In the event that this Option is exercised
in part, the Company at its expense will execute and deliver a new Option of
like tenor exercisable for the number of shares for which this Option may then
be exercised.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this Option.
5. Replacement of Option. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Option and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Option, the
Company at its expense shall execute and deliver, in lieu of this Option, a new
Option of like tenor and amount.
3
6. Rights of Stockholder. Except as otherwise contemplated herein, the
Holder shall not be entitled to vote or receive dividends or be deemed the
holder of Common Stock or any other securities of the Company that may at any
time be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the Holder, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value, or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until the Option shall have been exercised as
provided herein.
7. Transfer of Option.
7.1. Non-Transferability. This Option shall not be assigned,
transferred, pledged or hypothecated in any way, nor subject to execution,
attachment or similar process, otherwise than by will or by the laws of descent
and distribution. Any attempted assignment, transfer, pledge, hypothecation or
other disposition of this Option contrary to the provisions hereof, and the levy
of an execution, attachment, or similar process upon the Option, shall be null
and void and without effect.
7.2. Compliance with Securities Laws; Restrictions on
Transfers. In addition to restrictions on transfer of this Option and Shares set
forth in Section 7.1 above.
(a) The Holder of this Option, by acceptance hereof,
acknowledges that this Option and the Shares to be issued upon exercise hereof
are being acquired solely for the Holder's own account and not as a nominee for
any other party, and for investment (unless such shares are subject to resale
pursuant to an effective prospectus), and that the Holder will not offer, sell
or otherwise dispose of any Shares to be issued upon exercise hereof except
under circumstances that will not result in a violation of applicable federal
and state securities laws. Upon exercise of this Option, the Holder shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the Shares of Common Stock so purchased are being acquired solely
for the Holder's own account and not as a nominee for any other party, for
investment (unless such shares are subject to resale pursuant to an effective
prospectus), and not with a view toward distribution or resale.
(b) Neither this Option nor any share of Common Stock
issued upon exercise of this Option may be offered for sale or sold, or
otherwise transferred or sold in any transaction which would constitute a sale
thereof within the meaning of the 1933 Act, unless (i) such security has been
registered for sale under the 1933 Act and registered or qualified under
applicable state securities laws relating to the offer an sale of securities;
(ii) exemptions from the registration requirements of the 1933 Act and the
registration or qualification requirements of all such state securities laws are
available and the Company shall have received an opinion of counsel satisfactory
to the Company that the proposed sale or other disposition of such securities
may be effected without registration under the 1933 Act and would not result in
any violation of any applicable state securities laws relating to the
registration or qualification of securities for sale, such counsel and such
opinion to be satisfactory to the Company.
4
(c) All Shares issued upon exercise hereof shall be
stamped or imprinted with a legends in substantially the following form (in
addition to any legend required by state securities laws).
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE
SALE IS MADE IN ACCORDANCE WITH RULE 144, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES, REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
8. Reservation and Issuance of Stock; Payment of Taxes.
(a) The Company covenants that during the term that this
Option is exercisable, the Company will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
Shares upon the exercise of this Option, and from time to time will take all
steps necessary to amend its Certificate of Incorporation to provide sufficient
reserves of shares of Common Stock issuable upon the exercise of the Option.
(b) The Company further covenants that all shares of Common
Stock issuable upon the due exercise of this Option will be free and clear from
all taxes or liens, charges and security interests created by the Company with
respect to the issuance thereof, however, the Company shall not be obligated or
liable for the payment of any taxes, liens or charges of Holder, or any other
party contemplated by Section 7, incurred in connection with the issuance of
this Option or the Common Stock upon the due exercise of this Option. The
Company agrees that its issuance of this Option shall constitute full authority
to its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the shares of Common Stock upon
the exercise of this Option. The Common Stock issuable upon the due exercise of
this Option, will, upon issuance in accordance with the terms hereof, be duly
authorized, validly issued, fully paid and non-assessable.
(c) Upon exercise of the Option, the Company shall have the
right to require the Holder to remit to the Company an amount sufficient to
satisfy federal, state and local tax withholding requirements prior to the
delivery of any certificate for Shares of Common Stock purchased pursuant to the
Option, if in the opinion of counsel to the Company such withholding is required
under applicable tax laws.
(d) If Holder is obligated to pay the Company an amount
required to be withheld under applicable tax withholding requirements may pay
such amount (i) in cash; (ii) in the discretion of the Board of Directors of the
Company, through the delivery to the Company of previously-owned shares of
Common Stock having an aggregate Fair Market Value equal to the tax obligation
5
provided that the previously owned shares delivered in satisfaction of the
withholding obligations must have been held by the Holder for at least six (6)
months; (iii) in the discretion of the Board of Directors of the Company,
through the withholding of Shares of Common Stock otherwise issuable to the
Holder in connection with the Option exercise; or (iv) in the discretion of the
Board of Directors of the Company, through a combination of the procedures set
forth in subsections (i), (ii) and (iii) of this Section 8(d).
9. Notices.
(a) Whenever the Exercise Price or number of shares
purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the
Company shall issue a certificate signed by its Chief Financial Officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Exercise Price and number of shares purchasable hereunder after giving effect to
such adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Option.
(b) All notices, advices and communications under this Option
shall be deemed to have been given, (i) in the case of personal delivery, on the
date of such delivery and (ii) in the case of mailing, on the third business day
following the date of such mailing, addressed as follows:
If to the Company:
Maverick Oil and Gas, Inc.
22 Park Crescent
London W1B 1PE
United Kingdom
and to the Holder:
Michael Garland
22 Park Crescent
London W1B 1PE
United Kingdom
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 9.
6
10. Amendments.
(a) Any term of this Option may be amended with the written
consent of the Company and the Holder. Any amendment effected in accordance with
this Section 10 shall be binding upon the Holder, each future holder and the
Company.
(b) No waivers of, or exceptions to, any term, condition or
provision of this Option, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such term, condition or
provision.
11. Adjustments. The number of Shares of Common Stock purchasable
hereunder and the Exercise Price is subject to adjustment from time to time upon
the occurrence of certain events, as follows:
11.1. Reorganization, Merger or Sale of Assets. If at any time
while this Option, or any portion thereof, is outstanding and unexpired there
shall be (i) a reorganization (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein); or (ii) a
merger or consolidation of the Company in which the shares of the Company's
capital stock outstanding immediately prior to the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then, as a part of such reorganization, merger, or
consolidation, lawful provision shall be made so that the holder of this Option
shall upon such reorganization, merger, or consolidation, have the right by
exercising such Option, to purchase the kind and number of shares of Common
Stock or other securities or property (including cash) otherwise receivable upon
such reorganization, merger or consolidation by a holder of the number of shares
of Common Stock that might have been purchased upon exercise of such Option
immediately prior to such reorganization, merger or consolidation. The foregoing
provisions of this Section 11.1 shall similarly apply to successive
reorganizations, consolidations or mergers. If the per-share consideration
payable to the Holder hereof for shares in connection with any such transaction
is in a form other than cash or marketable securities, then the value of such
consideration shall be determined in good faith by the Company's Board of
Directors. In all events, appropriate adjustment (as determined in good faith by
the Company's Board of Directors) shall be made in the application of the
provisions of this Option with respect to the rights and interests of the Holder
after the transaction, to the end that the provisions of this Option shall be
applicable after that event, as near as reasonably may be, in relation to any
shares or other property deliverable after that event upon exercise of this
Option.
11.2. Reclassification. If the Company, at any time while this
Option, or any portion thereof, remains outstanding and unexpired, by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Option exist into the same or a different
number of securities of any other class or classes, this Option shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Option immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 11.
7
11.3. Split, Subdivision or Combination of Shares. If the
Company at any time while this Option, or any portion thereof, remains
outstanding and unexpired shall split, subdivide or combine the securities as to
which purchase rights under this Option exist, into a different number of
securities of the same class, the Exercise Price and the number of shares
issuable upon exercise of this Option shall be proportionately adjusted.
11.4. Adjustments for Dividends in Stock or Other Securities
or Property. If while this Option, or any portion hereof, remains outstanding
and unexpired the holders of the securities as to which purchase rights under
this Option exist at the time shall have received, or, on or after the record
date fixed for the determination of eligible Stockholders, shall have become
entitled to receive, without payment therefor, other or additional stock or
other securities or property (other than cash) of the Company by way of
dividend, then and in each case, this Option shall represent the right to
acquire, in addition to the number of shares of the security receivable upon
exercise of this Option, and without payment of any additional consideration
therefor, the amount of such other or additional stock or other securities or
property (other than cash) of the Company that such holder would hold on the
date of such exercise had it been the holder of record of the security
receivable upon exercise of this Option on the date hereof and had thereafter,
during the period from the date hereof to and including the date of such
exercise, retained such shares and/or all other additional stock, other
securities or property available by this Option as aforesaid during such period.
11.5 Good Faith. The Company will not, by any voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Company, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 11
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder of this Option against impairment.
12. Fundamental Transaction. For purposes of this Section 12, a
"Fundamental Transaction" shall mean (i) the dissolution or liquidation of the
Company; (ii) a merger, reorganization or consolidation in which the Company is
acquired by another person or entity (other than a holding company formed by the
Company); (iii) the sale of all or substantially all of the assets of the
Company to any person or persons; or (iv) the sale in a single transaction or a
series of related transactions of voting stock representing more than fifty
percent (50%) of the voting power of all outstanding shares of the Company to
any person or persons. In the event of a Fundamental Transaction, Holder shall
be given at least 15 days prior written notice of a Fundamental Transaction and
shall be permitted to exercise this Option during this 15 day period. In the
event of a Fundamental Transaction, any Options which are neither assumed or
substituted for in connection with the Fundamental Transaction nor exercised as
of the date of the Fundamental Transaction, shall terminate and cease to be
outstanding effective as of the date of the Fundamental Transaction, unless
otherwise provided by the Board of Directors of the Company.
13. Severability. Whenever possible, each provision of this Option
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Option is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this Option
8
in such jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this Option shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
14. Governing Law. The corporate law of the State of Nevada shall
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other questions concerning the construction, validity,
interpretation and enforceability of this Option and the exhibits and schedules
hereto shall be governed by, and construed in accordance with, the laws of the
State of Pennsylvania, without giving effect to any choice of law or conflict of
law rules or provisions (whether of the State of Pennsylvania or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Pennsylvania.
15. Jurisdiction. The Holder and the Company agree to submit to
personal jurisdiction and to waive any objection as to venue in the federal or
state courts of Pennsylvania. Service of process on the Company or the Holder in
any action arising out of or relating to this Option shall be effective if
mailed to such party at the address listed in Section 9 hereof.
16. Arbitration. If a dispute arises as to interpretation of this
Option, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by the Company, one by the Holder and the third by the said two
arbitrators, or, if they cannot agree, then the third arbitrator shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial. The decision of a majority of the
arbitrators shall be conclusively binding upon the parties and final, and such
decision shall be enforceable as a judgment in any court of competent
jurisdiction. Each party shall pay the fees and expenses of the arbitrator
appointed by it, its counsel and its witnesses. The parties shall share equally
the fees and expenses of the impartial arbitrator.
17. Corporate Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by the Company of this Option: (i) are
within the Company's corporate power; (ii) have been duly authorized by all
necessary or proper corporate action; (iii) are not in contravention of the
Company's certificate of incorporation or bylaws; (iv) will not violate in any
material respect, any law or regulation, including any and all Federal and state
securities laws, or any order or decree of any court or governmental
instrumentality; and (v) will not, in any material respect, conflict with or
result in the breach or termination of, or constitute a default under any
agreement or other material instrument to which the Company is a party or by
which the Company is bound.
18. Successors and Assigns. This Option shall inure to the benefit
of and be binding on the respective successors, assigns and legal
representatives of the Holder and the Company.
9
IN WITNESS WHEREOF, the Company and Holder have caused this Option to
be executed on this 27th day of July, 2004.
MAVERICK OIL AND GAS, INC.
By: /s/ Michael Garland
---------------------------------
Michael Garland
President
AGREED AND ACCEPTED:
MICHAEL GARLAND
/s/ Michael Garland
-----------------------------
Signature
10
NOTICE OF EXERCISE
TO: [_____________________________]
(1) The undersigned hereby elects to purchase _______ shares of Common
Stock of Maverick Oil and Gas, Inc. pursuant to the terms of the attached
Option, and tenders herewith payment of the purchase price for such shares in
full in the following manner (please check one of the following choices):
/ / In Cash
/ / Cashless exercise through a broker; or
/ / Delivery of previously owned Shares.
(2) In exercising this Option, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion
thereof are being acquired solely for the account of the undersigned and not as
a nominee for any other party, and for investment (unless such shares are
subject to resale pursuant to an effective prospectus), and that the undersigned
will not offer, sell or otherwise dispose of any such shares of Common Stock
except under circumstances that will not result in a violation of the Securities
Act of 1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned.
MICHAEL GARLAND
(Date) (Signature)
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Exhibit 10.13
SUBSCRIPTION AGREEMENT
THE INTERESTS SUBSCRIBED FOR BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS,
AND TRANSFER OF THE INTERESTS IS RESTRICTED BY THE TERMS OF THIS AGREEMENT AND
OF THE PARTNERSHIP AGREEMENT AND BY APPLICABLE LAW.
SUBSCRIPTION AGREEMENT
To: PHT RESENDEZ PARTNERS, L.P.
Gentlemen:
1. Subscription. The undersigned hereby subscribes for and agrees to purchase
Limited Partnership Interests ("Interests") in PHT Resendez Partners, L.P., a
Delaware limited partnership ("the Partnership"). The number of Interests which
the undersigned hereby subscribes for and agrees to purchase are set forth on
the Signature Page and Power of Attorney attached hereto.
2. Payment.
(a) At the time of delivery of these completed subscription materials
to the General Partner, a Purchaser must fund 100% of its initial Capital
Contribution (as defined in the Limited Partnership Agreement of the Partnership
(the "Partnership Agreement")) by wire transfer in accordance with the wire
transfer instructions included on the Instructions page.
(b) The undersigned understands that the amount funded by the
undersigned pursuant to this Paragraph 2 will be held until a closing on the
Interests has occurred. If the General Partner allocates fewer Interests to the
Purchaser than the Purchaser has subscribed for, or rejects the Purchaser's
subscription, that portion of the initial Capital Contribution in excess of the
final initial Capital Contribution will promptly be refunded with interest
earned thereon, if any.
3. Representations, Warranties and Covenants. By executing this Subscription
Agreement, the undersigned further:
(a) acknowledges that the undersigned has received, carefully read and
understands the Partnership Agreement and all exhibits thereto, and the
Disclosure Materials dated December 11, 2004 (collectively, the "Offering
Materials"), has based a decision to invest on the information contained in the
Offering Materials and has not been furnished with any other offering literature
or prospectus.
(b) represents and warrants that the undersigned is acquiring the
Interests for the account of the undersigned as principal for investment and not
with a view toward resale or distribution thereof, provided that the Interests
may be resold if registered under the Securities Act of 1933, as amended (the
"Securities Act") or pursuant to an applicable exemption therefrom.
- 1 -
(c) represents and warrants that the undersigned has, together with the
Purchaser Representative for the undersigned, if any, such knowledge and
experience in financial and business matters that he, she or its is capable of
evaluating the merits and risks of the investment in the Interests.
(d) represents and warrants that (i) if an individual, the undersigned
is at least twenty-one (21) years of age, (ii) the undersigned maintains his or
her domicile (and is not a transient or temporary resident) at the address shown
below, (iii) if an individual, the undersigned has adequate means of providing
for his or her current needs and personal contingencies, (iv) the undersigned
has no need for liquidity in his investment in the Interests, (v) all of the
undersigned's investments in and commitments to nonliquid investments are, and
after a purchase of the Interests will be, reasonable in relation to the
undersigned's net worth and current needs, (vi) the undersigned is able to bear
the economic risk of losing the entire investment in the Interests, and (vii)
the personal financial information provided by the undersigned accurately
reflects the undersigned's financial condition, with respect to which the
undersigned does not anticipate any material adverse changes.
(e) understands that the General Partner shall have the right, in its
sole discretion, to accept or reject this subscription, in whole or in part, at
any time prior to closing, or to allocate to the undersigned only part of the
Interests for which the undersigned has subscribed. The General Partner will
notify the undersigned whether this subscription is accepted or rejected. In the
event the subscription is rejected, the undersigned's payment will be returned
with interest earned thereon, if any, and all of the undersigned's obligations
hereunder shall terminate.
(f) understands that if the undersigned is in default pursuant to the
Partnership Agreement, the undersigned's Interests may be sold.
(g) understands that the Interests have not been registered under the
Securities Act, or the securities laws of any state and, as a result thereof,
are subject to substantial restrictions on transfer.
(h) agrees that the undersigned will not sell or otherwise transfer the
Interests or any interest therein except as permitted pursuant to Article VIII
of the Partnership Agreement.
(i) understands that (i) the Partnership has no obligation or intention
to register the Interests for resale under any federal or state securities laws,
or to take any action (including the filing of reports or the publication of
information required by Rule 144 under the Securities Act) which would make
available any exemption from the registration requirements of such laws, and
(ii) therefore, the undersigned may be precluded from selling or otherwise
transferring or disposing of the Interests or any portion thereof and may have
to bear the economic risk of investment in the Interests for the term of the
Partnership.
(j) understands that an investment in the Partnership involves certain
risks and has taken full cognizance of and understands all of the risk factors
relating to the purchase of Interests, including those set forth in the Risk
Factors discussion included in the Disclosure Materials.
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(k) understands that the Offering Materials and other information
furnished by the Partnership and the General Partner do not constitute
investment, accounting, legal or tax advice. The undersigned, in making this
investment, is relying, if at all, solely upon the advice of the undersigned's
personal tax advisers with respect to the federal and/or state tax aspects of an
investment in the Partnership, and neither the Partnership nor the General
Partner has made any representation regarding the tax consequences of investment
in the Interests.
(l) understands that no federal or state agency has approved or
disapproved the Interests, passed upon or endorsed the merits of the offering
thereof, or made any finding or determination as to the fairness of the
Interests for investment.
(m) acknowledges that the undersigned has had an opportunity to consult
with counsel and other advisers about an investment in the Interests and that
all material documents, records and books pertaining to this investment have, on
request, been made available to the undersigned and his or her advisers.
(n) acknowledges that by executing the Signature Page and Power of
Attorney attached hereto, the undersigned is appointing the General Partner (and
any additional or substitute general partner) to be the agent and
attorney-in-fact of the undersigned for certain purposes.
(o) acknowledges that, if the undersigned is purchasing the Interests
subscribed for hereby in a fiduciary capacity, the representations and
warranties in this Paragraph 3 shall be deemed to have been made on behalf of
the person or persons for whom the undersigned is so purchasing.
(p) acknowledges that the Partnership has made available to the
undersigned and his or her advisors and Purchaser Representative, if any, the
opportunity to ask questions of, and receive answers from, the Partnership
concerning the terms and conditions of the offering and to obtain any additional
information, to the extent that the Partnership possesses such information, or
can acquire it without unreasonable effort or expense, necessary to verify the
accuracy of the information given to him, her or them or otherwise make an
informed investment decision.
(q) acknowledges that, if the undersigned has used the services of a
Purchaser Representative in connection with an investment in the Partnership,
such Purchaser Representative has disclosed, by submitting to the undersigned a
Purchaser Representative Letter, in the form given to the undersigned by the
Partnership, any material relationship between such Purchaser Representative or
such Purchaser Representative's affiliates and the Partnership and its
affiliates, which now exists or mutually is understood to be contemplated or
which has existed at any time during the previous two (2) years, and further
setting forth any compensation received or to be received as a result of such
relationship.
(r) represents and warrants that, except as otherwise disclosed to the
Partnership in writing, the undersigned does not own, directly or indirectly
(within the meaning of the attribution rules set forth in Section 318 of the
Internal Revenue Code of 1986, as amended), any stock or other interests in the
General Partner or any member of its affiliated group, as that term is defined
in Section 1504(a) of the Internal Revenue Code of 1986, as amended.
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(s) understands that the Interests are being offered and sold in
reliance on specific exemptions from the registration requirements of federal
and state securities laws and that the Partnership, the General Partner and
controlling persons thereof are relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings set
forth herein in order to determine the applicability of such exemptions and the
suitability of the undersigned to acquire Interests.
(t) represents and warrants that the information set forth herein and
in the Confidential Purchaser Questionnaire concerning the undersigned is true
and correct.
(u) understands that the Partnership will not register as an investment
company under the Investment Company Act by virtue of an exemption pursuant to
Sections 3(b)(1), 3(c)(1) or 3(c)(7). Accordingly, the protections afforded by
the Investment Company Act will not be available to the undersigned in
connection with an investment in the Partnership. Further, in this regard, if
the undersigned is a corporation, trust, partnership or other organization, the
undersigned represents that it is not being organized for the sole purpose of
investing in the Partnership.
(v) covenants that, for so long as the undersigned is a Limited Partner
of the Partnership, the undersigned will not take any action or fail to take any
action that would cause any of the representations or warranties contained in
this Section 3 to be untrue.
4. Indemnification. The undersigned understands the meaning of the
representations made by the undersigned in this Subscription Agreement and
hereby agrees to indemnify and hold harmless the Partnership, the General
Partner, other Partners of the Partnership, and all persons deemed to be in
control of any of the foregoing, and to hold such persons and firms harmless
from and against, any and all loss, damage, liability or expense, including
costs and reasonable attorneys' fees, to which they may be put or which they may
incur by reason of, or in connection with (i) any misstatement,
misrepresentation or omission made by or on behalf of the undersigned with
respect to the matters about which representations and warranties are required
by the terms of this Subscription Agreement; or (ii) any breach of any such
warranties or any failure to fulfill any covenants or agreements set forth
herein or in the Partnership Agreement, including, but not limited to, any sale,
transfer or other disposition of all or any part of the Interests to or by the
undersigned in violation of the Securities Act or other applicable law. This
Subscription Agreement and the representations and warranties contained herein
and repeated in the Partnership Agreement shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. All such
representations shall survive the delivery of this Subscription Agreement and
the purchase by the undersigned of any Interests.
5. Binding Nature. Upon acceptance by the General Partner of the subscription of
the undersigned, the undersigned agrees to become a Limited Partner of the
Partnership and to be bound by the terms of the Partnership Agreement. The
undersigned acknowledges and agrees that this subscription shall survive: (i)
changes in the transactions, documents and instruments described in the Offering
Materials which, in the aggregate, are not material or which are contemplated by
the Offering Materials, and (ii) the death, disability or incapacity of the
undersigned, and may not be canceled, terminated, modified or revoked by the
undersigned unless not accepted by the General Partner.
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6. Miscellaneous. All pronouns contained herein and any variations thereof shall
be deemed to refer to the masculine, feminine or neuter, singular or plural, as
the case may be and as the context may require. This Subscription Agreement
constitutes the entire understanding of the parties with respect to the subject
matter hereof and supersedes all prior or contemporaneous agreements or
understandings of the parties related hereto. This Subscription Agreement may
only be modified or amended by an instrument in writing signed by all parties
hereto. All capitalized terms used but not defined in this Subscription
Agreement shall have the meanings set forth in the Offering Materials.
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PHT RESENDEZ PARTNERS, L.P.
SIGNATURE PAGE AND POWER OF ATTORNEY
The undersigned, desiring to become a Limited Partner of PHT Resendez
Partners, L.P. ("the Partnership"), by executing this Signature Page and Power
of Attorney, hereby executes, adopts and agrees to all terms, conditions and
representations of the Subscription Agreement and the Limited Partnership
Agreement of the Partnership (the "Partnership Agreement"). The undersigned
further constitutes and appoints the General Partner (and any additional or
substitute general partner), the Partners of the General Partner, and any
partner, member, officer or director thereof, the true and lawful
attorney-in-fact of the undersigned with full power of substitution, with such
attorney having full power and authority to act for the undersigned and, in the
undersigned's name, place and stead, (i) to execute, acknowledge, deliver, swear
to, certify, verify, publish, file and record any amendment or amendments to the
Partnership's Certificate of Limited Partnership for the purpose of adding the
undersigned and others as Limited Partners of the Partnership, as contemplated
by the Partnership Agreement (which amendments the undersigned hereby joins in
and executes), and of otherwise amending said Certificate and Partnership
Agreement, provided such actions are authorized in accordance with the
provisions of the Partnership Agreement; and (ii) to take any and all other
action on the undersigned's behalf as is authorized in said Partnership
Agreement. The power of attorney hereby granted shall be deemed to be coupled
with an interest, shall be irrevocable and shall survive the death or
incompetency of the undersigned.
Amount being funded as payment of initial Capital Contribution for Limited
Partnership Interests Purchased: $500,000
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SUBSCRIBER(S):
Individuals sign below:
---------------------------- -----------------------------
Signature Social Security Number
---------------------------- Date: ____________, 2004
Print Name
Partnerships, Corporations, Trusts and other entities sign below:
Name of Entity: Maverick Oil and Gas, Inc.
98-0377027
Taxpayer Identification Number
By: /Michael Garland/ Date: October 5, 2004
--------------------------------- -------------------
Name: Michael Garland
---------------------------
Title: Chief Executive Officer
---------------------------
All Subscribers, please complete the following:
Residence Address (Principal Place Mailing Address, if different from
of Business) Residence Address:
22 Park Crescent
---------------------------------------- ------------------------------------
London W1B 1PE United Kingdom
---------------------------------------- ------------------------------------
---------------------------------------- ------------------------------------
---------------------------------------- ------------------------------------
- 7 -
The foregoing subscription for PHT Resendez Partners, L.P. is hereby
accepted this _____ day of ______________, 2004
By: /s/ Howard M. Appel
-----------------------------------
Howard M. Appel, President
- 8 -
Exhibit 10.14
THE SECURITIES REPRESENTED BY THESE WARRANTS AND THE COMMON STOCK ISSUABLE
THEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW. THE SECURITIES
REPRESENTED BY THESE WARRANTS MAY NOT BE TRANSFERRED, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAWS.
WARRANTS
to Purchase Common Stock of
Maverick Oil and Gas, Inc.
Expiring on July 31, 2014
Warrant No. 2004-1
This Common Stock Purchase Warrant (the "Warrant") certifies that for
value received, Trident Growth Fund, L.P (the "Holder") or its assigns, is
entitled to subscribe for and purchase from the Company (as hereinafter
defined), in whole or in part, 200,000 shares of duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock (as hereinafter
defined) at an initial Exercise Price (as hereinafter defined) per share of
$1.00, subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. The number of Warrants (as hereinafter defined), the
number of shares of Common Stock purchasable hereunder, and the Exercise Price
therefore are subject to adjustment as hereinafter set forth. These Warrants and
all rights hereunder shall expire at 5:00 p.m., Houston, Texas time, July 31,
2014(the "Expiration Date").
ARTICLE I
Definitions
As used herein, the following terms shall have the meanings set forth
below:
I.1 "Company" shall mean Maverick Oil and Gas, Inc.., a _________
corporation, and shall also include any successor thereto with respect to the
obligations hereunder, by merger, consolidation or otherwise.
I.2 "Common Stock" shall mean and include the Company's common share,
authorized on the date of the original issue of these Warrants and shall also
include (i) in case of any reorganization, reclassification, consolidation,
merger, share exchange or sale, transfer or other disposition of assets, the
stock or other securities provided for herein, and (ii) any other shares of
common stock of the Company into which such shares of Common Stock may be
converted.
I.3 "Exercise Price" shall mean the initial purchase price of $1.00 per
share of Common Stock payable upon exercise of the Warrants, as adjusted from
time to time pursuant to the provisions hereof.
I.4 "Market Price" for any day, when used with reference to Common
Stock, shall mean the price of said Common Stock determined by reference to the
last reported sale price for the Common Stock on such day on the principal
securities exchange on which the Common Stock is listed or admitted to trading
or if no such sale takes place on such date, the average of the closing bid and
asked prices thereof as officially reported, or, if not so listed or admitted to
trading on any securities exchange, the last sale price for the Common Stock on
the National Association of Securities Dealers national market system on such
date, or, if there shall have been no trading on such date or if the Common
Stock shall not be listed on such system, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any NASD member firm
selected from time to time by the Company for such purpose or, if the Common
Stock is not traded, then such price as is reasonably determined by the
Company's Board of Directors.
I.5 "Warrant" shall mean the right upon exercise to purchase one
Warrant Share.
I.6 "Warrant Shares" shall mean the shares of Common Stock purchased or
purchasable by the holder hereof upon the exercise of the Warrants.
ARTICLE II
Exercise of Warrants
II.1 Method of Exercise. The Warrants represented hereby may be
exercised by the holder hereof, in whole or in part, at any time and from time
to time on or after the date hereof until 5:00 p.m., Houston, Texas time, on the
Expiration Date. To exercise the Warrants, the holder hereof shall deliver to
the Company, at the Warrant Office designated herein, (i) a written notice in
the form of the Subscription Notice attached as an exhibit hereto, stating
therein the election of such holder to exercise the Warrants in the manner
provided in the Subscription Notice; (ii) payment in full of the Exercise Price
(A) in cash or by bank check for all Warrant Shares purchased hereunder, or (B)
through a "cashless" or "net-issue" exercise of each such Warrant ("Cashless
Exercise"); the holder shall exchange each Warrant subject to a Cashless
Exercise for that number of Warrant Shares determined by multiplying the number
of Warrant Shares issuable hereunder by a fraction, the numerator of which shall
be the difference between (x) the Market Price and (y) the Exercise Price for
each such Warrant, and the denominator of which shall be the Market Price; the
Subscription Notice shall set forth the calculation upon which the Cashless
Exercise is based, or (C) a combination of (A) and (B) above; and (iii) these
Warrants. The Warrants shall be deemed to be exercised on the date of receipt by
the Company of the Subscription Notice, accompanied by payment for the Warrant
2
Shares and surrender of these Warrants, as aforesaid, and such date is referred
to herein as the "Exercise Date". Upon such exercise, the Company shall, as
promptly as practicable and in any event within five business days, issue and
deliver to such holder a certificate or certificates for the full number of the
Warrant Shares purchased by such holder hereunder, and shall, unless the
Warrants have expired, deliver to the holder hereof a new Warrant representing
the number of Warrants, if any, that shall not have been exercised, in all other
respects identical to these Warrants. As permitted by applicable law, the person
in whose name the certificates for Common Stock are to be issued shall be deemed
to have become a holder of record of such Common Stock on the Exercise Date and
shall be entitled to all of the benefits of such holder on the Exercise Date,
including without limitation the right to receive dividends and other
distributions for which the record date falls on or after the Exercise Date and
to exercise voting rights.
II.2 Expenses and Taxes. The Company shall pay all expenses and taxes
(including, without limitation, all documentary, stamp, transfer or other
transactional taxes) other than income taxes attributable to the preparation,
issuance or delivery of the Warrants and of the shares of Common Stock issuable
upon exercise of the Warrants.
II.3 Reservation of Shares. The Company shall reserve at all times so
long as the Warrants remain outstanding, free from preemptive rights, out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the exercise of the Warrants, a sufficient number of shares of Common
Stock to provide for the exercise of the Warrants.
II.4 Valid Issuance. All shares of Common Stock that may be issued upon
exercise of the Warrants will, upon issuance by the Company, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof and, without limiting the generality of the
foregoing, the Company shall take no action or fail to take any action which
will cause a contrary result (including, without limitation, any action that
would cause the Exercise Price to be less than the par value, if any, of the
Common Stock).
II.5 Loan Agreement. The Warrants represented hereby were issued on
conjunction with a Loan Agreement dated around July 15, 2004 as amended from
time to time (the "Loan Agreement") between the Company and the Holder. The
Holder shall be entitled to the rights to registration under the Securities Act
and any applicable state securities or blue sky laws to the extent set forth in
the registration rights provision found in the Loan Agreement. The terms of the
registration rights provisions are hereby incorporated herein for all purposes
and shall be considered a part of this Warrant as if they had been fully set
forth herein.
II.6 Acknowledgment of Rights. At the time of the exercise of the
Warrants in accordance with the terms hereof and upon the written request of the
holder hereof, the Company will acknowledge in writing its continuing obligation
to afford to such holder any rights (including, without limitation, any right to
registration of the Warrant Shares) to which such holder shall continue to be
entitled after such exercise in accordance with the provisions of these
Warrants; provided, however, that if the Holder hereof shall fail to make any
such request, such failure shall not affect the continuing obligation of the
Company to afford to such Holder any such rights.
3
II.7 No Fractional Shares. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of these Warrants. If more
than one Warrant shall be presented for exercise at the same time by the same
holder, the number of full shares of Common Stock which shall be issuable upon
such exercise shall be computed on the basis of the aggregate number of whole
shares of Common Stock purchasable on exercise of the Warrants so presented. If
any fraction of a share of Common Stock would, except for the provisions of this
Section, be issuable on the exercise of this Warrant, the Company shall pay an
amount in cash calculated by it to be equal to the Market Price of one share of
Common Stock at the time of such exercise multiplied by such fraction computed
to the nearest whole cent.
ARTICLE III
Transfer
III.1 Warrant Office. The Company shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's offices ________________________________ and may subsequently
be such other office of the Company or of any transfer agent of the Common Stock
in the continental United States as to which written notice has previously been
given to the Holder. The Company shall maintain, at the Warrant Office, a
register for the Warrants in which the Company shall record the name and address
of the Person in whose name these Warrants has been issued, as well as the name
and address of each permitted assignee of the rights of the registered owner
hereof.
III.2 Ownership of Warrants. The Company may deem and treat the Person
in whose name the Warrants are registered as the holder and owner hereof until
provided with notice to the contrary. The Warrants may be exercised by an
assignee for the purchase of Warrant Shares without having new Warrants issued.
III.3 Restrictions on Transfer of Warrants. These Warrants may be
transferred, in whole or in part, by the Holder. The Company agrees to maintain
at the Warrant Office books for the registration and transfer of the Warrants.
The Company, from time to time, shall register the transfer of the Warrants in
such books upon surrender of this Warrant at the Warrant Office properly
endorsed or accompanied by appropriate instruments of transfer and written
instructions for transfer. Upon any such transfer and upon payment by the holder
or its transferee of any applicable transfer taxes, new Warrants shall be issued
to the transferee and the transferor (as their respective interests may appear)
and the surrendered Warrants shall be cancelled by the Company. The Company
shall pay all taxes (other than securities transfer taxes or income taxes) and
all other expenses and charges payable in connection with the transfer of the
Warrants pursuant to this Section.
III.4 Compliance with Securities Laws. Subject to the terms of the
Registration Rights Agreement and notwithstanding any other provisions contained
in these Warrants, the Holder understands and agrees that the following
restrictions and limitations shall be applicable to all Warrant Shares and to
all resales or other transfers thereof pursuant to the Securities Act:
4
III.4.1 The holder hereof agrees that the Warrant Shares may
not be sold or otherwise transferred unless the Warrant Shares are registered
under the Securities Act and applicable state securities or blue sky laws or are
exempt therefrom.
III.4.2 A legend in substantially the following form will be
placed on the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND,
ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
RESOLD, PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAWS."
ARTICLE IV
Anti-Dilution
IV.1 If and whenever any Additional Common Stock (as herein
defined) shares shall be issued by the Company (the "Stock Issue Date") for a
consideration per share less than the Exercise Price, then in each such case the
initial Exercise Price shall be reduced to a new Exercise Price in an amount
equal to the consideration per share received by the Company for the additional
shares of Common Stock then issued and the number of shares issuable to Holder
upon conversion shall be proportionately increased; and, in the case of shares
issued without consideration, the initial Exercise Price shall be reduced in
amount and the number of shares issued upon conversion shall be increased in an
amount so as to maintain for the Holder the right to exercise into shares equal
in amount to the same percentage interest in the Common Stock of the Company as
existed for the Holder immediately preceding the Stock Issue Date.
IV.2 Sale of Shares: In case of the issuance of Additional
Common Stock for a consideration part or all of which shall be cash, the amount
of the cash consideration therefore shall be deemed to be the amount of the cash
received by Company for such shares, after any compensation or discount in the
sale, underwriting or purchase thereof by underwriters or dealers or others
performing similar services or for any expenses incurred in connection
therewith. In case of the issuance of any shares of Additional Common Stock for
a consideration part or all of which shall be other than cash, the amount of the
consideration therefore, other than cash, shall be deemed to be the then fair
market value of the property received as determined by an investment banking
firm selected by Lender.
5
IV.3 Reclassification of Shares: In case of the
reclassification of securities into shares of Common Stock, the shares of Common
Stock issued in such reclassification shall be deemed to have been issued for a
consideration other than cash. Shares of Additional Common Stock issued by way
of dividend or other distribution on any class of stock of the Company shall be
deemed to have been issued without consideration.
IV.4 Split up or Combination of Shares: In case issued and
outstanding shares of Common Stock shall be subdivided or split up into a
greater number of shares of the Common Stock, the Exercise Price shall be
proportionately decreased, and in case issued and outstanding shares of Common
Stock shall be combined into a smaller number of shares of Common Stock, the
Exercise Price shall be proportionately increased, such increase or decrease, as
the case may be, becoming effective at the time of record of the split-up or
combination, as the case may be.
IV.5 Exceptions: The term "Additional Common Stock" herein
shall mean in the most broadest sense all shares of Common Stock hereafter
issued by the Company (including, but not limited to Common Stock held in the
treasury of the Company and common stock purchasable via derivative security or
option on the date of such grant ), except Common Stock issued upon the exercise
of this warrant or the Convertible Notes.
IV.6 In the event of distribution to all Common Stock holders
of any stock, indebtedness of the Company or assets or other rights to purchase
securities or assets, then, after such event, the Exercise Price reduced to so
as to entitle the Holder to the economic interest he had immediately prior to
the occurrence of such event.
IV.7 In case of any capital reorganization, reclassification
of the stock of the Company (other than a change in par value or as a result of
a stock dividend, subdivision, split up or combination of shares), the Exercise
Price reduced to so as to entitle the Holder to the economic interest he had
immediately prior to the occurrence of such event. The provisions of these
foregoing sentence shall similarly apply to successive reorganizations,
reclassifications, consolidations, exchanges, leases, transfers or other
dispositions or other share exchanges.
IV.8 Notice of Adjustment. (A) In the event the Company shall
propose to take any action which shall result in an adjustment in the Exercise
Price, the Company shall give notice to the Holder, which notice shall specify
the record date, if any, with respect to such action and the date on which such
action is to take place. Such notice shall be given on or before the earlier of
10 days before the record date or the date which such action shall be taken.
Such notice shall also set forth all facts (to the extent known) material to the
effect of such action on the Exercise Price and the number, kind or class of
shares or other securities or property which shall be deliverable or purchasable
upon the occurrence of such action or deliverable upon exercise of this warrant
(B) Following completion of an event wherein the Exercise Price shall be
adjusted, the Company shall furnish to the Holder a statement, signed by an
authorized officer of the Company of the facts creating such adjustment and
specifying the resultant adjusted Exercise Price then in effect.
6
ARTICLE V
Miscellaneous
V.1 Entire Agreement. These Warrants, together wit the Loan Agreement,
contain the entire agreement between the holder hereof and the Company with
respect to the Warrant Shares purchasable upon exercise hereof and the related
transactions and supersedes all prior arrangements or understandings with
respect thereto.
V.2 Governing Law. This warrant shall be governed by and construed in
accordance with the laws of the State of Texas in the courts located in Dallas,
Texas.
V.3 Waiver and Amendment. Any term or provision of these Warrants may
be waived at any time by the party which is entitled to the benefits thereof and
any term or provision of these Warrants may be amended or supplemented at any
time by agreement of the holder hereof and the Company, except that any waiver
of any term or condition, or any amendment or supplementation, of these Warrants
shall be in writing. A waiver of any breach or failure to enforce any of the
terms or conditions of these Warrants shall not in any way effect, limit or
waive a party's rights hereunder at any time to enforce strict compliance
thereafter with every term or condition of these Warrants.
V.4 Illegality. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of these Warrants shall not, at the election of the party for whom
the benefit of the provision exists, be in any way impaired.
V.5 Copy of Warrant. A copy of these Warrants shall be filed among the
records of the Company.
V.6 Notice. Any notice or other document required or permitted to be
given or delivered to the holder hereof shall be in writing and delivered at, or
sent by certified or registered mail to such holder at, the last address shown
on the books of the Company maintained at the Warrant Office for the
registration of these Warrants or at any more recent address of which the holder
hereof shall have notified the Company in writing.
V.7 Limitation of Liability; Not Stockholders. No provision of these
Warrants shall be construed as conferring upon the holder hereof the right to
vote, consent, receive dividends or receive notices (other than as herein
expressly provided) in respect of meetings of stockholders for the election of
directors of the Company or any other matter whatsoever as a stockholder of the
Company. No provision hereof, in the absence of affirmative action by the holder
hereof to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such holder for the purchase price of any shares of Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
7
V.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, mutilation
or destruction of these Warrants, and in the case of any such loss, theft or
destruction upon delivery of an appropriate affidavit in such form as shall be
reasonably satisfactory to the Company and include reasonable indemnification of
the Company, or in the event of such mutilation upon surrender and cancellation
of these Warrants, the Company will make and deliver new Warrants of like tenor,
in lieu of such lost, stolen, destroyed or mutilated Warrants. Any Warrants
issued under the provisions of this Section in lieu of any Warrants alleged to
be lost, destroyed or stolen, or in lieu of any mutilated Warrants, shall
constitute an original contractual obligation on the part of the Company. These
Warrants shall be promptly canceled by the Company upon the surrender hereof in
connection with any exchange or replacement. The Company shall pay all taxes
(other than securities transfer taxes or income taxes) and all other expenses
and charges payable in connection with the preparation, execution and delivery
of Warrants pursuant to this Section.
V.9 Headings. The Article and Section and other headings herein are for
convenience only and are not a part of this Warrant and shall not affect the
interpretation thereof.
8
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its name
dated July 14, 2004
Maverick Oil and Gas, Inc.
/s/ Cecile T. Coady
------------------------------------------------
Title: President
Witness
SUBSCRIPTION NOTICE
The undersigned, the holder of the foregoing Warrants, hereby elects to
exercise purchase rights represented thereby for, and to purchase thereunder,
_______________ shares of the Common Stock covered by such Warrants, and
herewith makes payment in full for such shares, and requests (a) that
certificates for such shares (and any other securities or other property
issuable upon such exercise) be issued in the name of, and delivered to, and
(b), if such shares shall not include all of the shares issuable as provided in
such Warrants, that new Warrants of like tenor and date for the balance of the
shares issuable thereunder be delivered to the undersigned.
Date:
ASSIGNMENT
For value received,_________________, hereby sells, assigns and
transfers unto __________________ these Warrants, together with all rights,
title and interest therein, and does irrevocably constitute and appoint
_____________________ attorney, to transfer such Warrants on the books of the
Company, with full power of substitution.
Date:
Exhibit 10.15
INTEREST PURCHASE AGREEMENT
THIS INTEREST PURCHASE AGREEMENT (the "Agreement") is made and entered
into this ___ day of July, 2004, by and among FERRELL RBE HOLDINGS, LLC, a
Delaware corporation ("Ferrell"), and MAVERICK OIL AND GAS, INC., a Nevada
corporation ("Maverick").
Recitals
WHEREAS, Ferrell and Maverick deem it advisable and in the best
interests of their respective companies to consummate, the transaction
contemplated hereby upon the terms set forth in this Agreement; and
WHEREAS, RBE, LLC, has been duly organized as limited liability company
under the Delaware Limited Liability Company Act (the "Company"); and
WHEREAS, Ferrell owns all of the Company's issued and outstanding Class
A membership interests (the "Interests"), representing a 50% equity interest in
the Company; and
WHEREAS, Ferrell wishes to sell to Maverick, and Maverick wishes to
purchase from Ferrell, the Interests.
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE I
THE PURCHASE AND SALE
1.1. The Purchase and Sale
Upon the terms and subject to the conditions set forth in this
Agreement, on the Closing Date, Ferrell hereby sells to Maverick, and Maverick
hereby purchases, the Interests from Ferrell, representing a 50% equity interest
in the Company and 100% of the Class A membership interests of the Company, in
consideration for which Maverick shall pay Two Million Dollars ($2,000,000) (the
"Purchase Price"), of which One Million Dollars ($1,000,000) is payable to
Ferrell upon execution of this Agreement and the balance of which is payable to
the Company as a Class A Member capital contribution on or before October 15,
2004 (the "Transaction").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF FERRELL
Ferrell hereby makes the following representations and
warranties to Maverick:
2.1. Organization and Qualification
Ferrell and the Company are duly organized, validly existing
and in good standing under the laws of their respective jurisdictions of
organization, with the corporate power and authority to own and operate their
respective businesses as presently conducted, except where the failure to be or
have any of the foregoing would not have a Material Adverse Effect. Ferrell and
the Company are duly qualified as foreign corporations to do business and are in
good standing in each jurisdiction where the character of their respective
properties owned or held under lease or the nature of their respective
activities makes such qualification necessary, except for such failures to be so
qualified or in good standing as would not, individually or in the aggregate,
have a Material Adverse Effect. A copy of the Company's Articles of Organization
and Operating Agreement, both as currently in effect, have been provided to
Maverick.
2.2. Authorization; Validity and Effect of Agreement
Ferrell has the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the Transaction. The execution and delivery of this Agreement by
Ferrell and the performance by Ferrell of its obligations hereunder and the
consummation of the Transactions have been duly authorized by its board of
directors and all other necessary corporate action on the part of Ferrell, and
no other corporate proceedings on the part of Ferrell are necessary to authorize
this Agreement and the Transaction. This Agreement has been duly and validly
executed and delivered by Ferrell and, assuming that it has been duly
authorized, executed and delivered by the other parties hereto, constitutes a
legal, valid and binding obligation of Ferrell, enforceable against it in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
2.3. No Conflict; Required Filings and Consents
Neither the execution and delivery of this Agreement by
Ferrell nor the performance by Ferrell of its obligations hereunder, nor the
consummation of the Transaction, will: (i) conflict with Ferrell's articles of
organization or operating agreement; (ii) violate any statute, law, ordinance,
rule or regulation applicable to Ferrell or any of its properties or assets; or
(iii) violate, breach, be in conflict with or constitute a default (or an event
that, with notice or lapse of time or both, would constitute a default) under,
or permit the termination of any provision of, or result in the termination of,
the acceleration of the maturity of, or the acceleration of the performance of
any obligation of Ferrell under, or result in the creation or imposition of any
Liens upon any properties, assets or business of Ferrell under, any material
contract or any order, judgment or decree to which Ferrell is a party or by
which Ferrell or any of its assets or properties is bound or encumbered except,
in the case of clauses (ii) and (iii), for such violations, breaches, conflicts,
defaults or other occurrences that, individually or in the aggregate, would not
have a Material Adverse Effect.
2
2.4. Title to the Interests
Ferrell has good and marketable title to the Interests, and
the Interests are owned of record and beneficially by Ferrell, free and clear of
any Liens. Except for this Agreement, there are no outstanding options,
warrants, agreements, conversion rights, preemptive rights, or other rights to
subscribe for, purchase or otherwise acquire the Interests. There are no voting
trusts or other agreements or understandings to which Ferrell or any of its
subsidiaries is a party with respect to the voting of the Interests, and there
is no indebtedness of Ferrell or its subsidiaries issued and outstanding that
has general voting rights with respect to the Interests. Except for this
Agreement, there are no outstanding obligations of any Person to repurchase,
redeem or otherwise acquire any of the Interests.
2.5. Brokers and Finders Fees
Neither Ferrell or any of its subsidiaries, nor any of their
respective officers, directors, employees or managers, has employed any broker
or finder or incurred any liability for any investment banking fees, brokerage
fees, commissions or finders fees in connection with the Transaction for which
Ferrell or any of its subsidiaries has or could have any liability.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MAVERICK
Maverick hereby makes the following representations and
warranties to Ferrell:
3.1. Organization and Qualification
Maverick is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, with the corporate
power and authority to own and operate its business as presently conducted,
except where the failure to be or have any of the foregoing would not have a
Material Adverse Effect.
3.2. Authorization; Validity and Effect of Agreement
Maverick has the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the Transaction. The execution and delivery of this Agreement by
Maverick and the performance by Maverick of its obligations hereunder have been
duly authorized by its board of directors and all other necessary corporate
action on the part of Maverick, and no other corporate proceedings on the part
of Maverick is necessary to authorize this Agreement and the Transaction. This
Agreement has been duly and validly executed and delivered by Maverick and,
assuming that it has been duly authorized, executed and delivered by the other
parties hereto, constitutes a legal, valid and binding obligation of Maverick,
enforceable against it in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
3
3.3. No Conflict; Required Filings and Consents
Neither the execution and delivery of this Agreement by
Maverick nor the performance by Maverick of its obligations hereunder, nor the
consummation of the Transactions, will: (i) conflict with Maverick's articles of
incorporation or bylaws; (ii) violate any statute, law, ordinance, rule or
regulation applicable to Maverick or any of its properties or assets; or (iii)
violate, breach, be in conflict with or constitute a default (or an event that,
with notice or lapse of time or both, would constitute a default) under, or
permit the termination of any provision of, or result in the termination of, the
acceleration of the maturity of, or the acceleration of the performance of any
obligation of Maverick under, or result in the creation or imposition of any
Liens upon any properties, assets or business of Maverick under, any material
contract or any order, judgment or decree to which Maverick is a party or by
which Maverick or any of its assets or properties is bound or encumbered except,
in the case of clauses (ii) and (iii), for such violations, breaches, conflicts,
defaults or other occurrences that, individually or in the aggregate, would not
have a Material Adverse Effect.
3.4. Investment Intent
The Interests are being acquired for Maverick's own account
for investment purposes only and not with a view to, or with any present
intention of, distributing or reselling any of the Interests. Maverick
acknowledges and agrees that the Interests have not been registered under the
Securities Act or under any state securities laws, and that the Interests may
not be, directly or indirectly, sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of without registration under the Securities
Act and applicable state securities laws, except pursuant to an available
exemption from such registration. Maverick also acknowledges and agrees that
neither the SEC nor any securities commission or other Governmental Authority
has (a) approved the transfer of the Interests or passed upon or endorsed the
merits of the transfer of the Interests, this Agreement or the Transactions; or
(b) confirmed the accuracy of, determined the adequacy of, or reviewed this
Agreement. Maverick has such knowledge, sophistication and experience in
financial, tax and business matters in general, and investments in securities in
particular, that it is capable of evaluating the merits and risks of this
investment in the Interests, and Maverick has made such investigations in
connection herewith as they deemed necessary or desirable so as to make an
informed investment decision without relying upon Ferrell for legal or tax
advice related to this investment. Maverick is an "accredited investor" within
the meaning of Rule 501 promulgated under the Securities Act.
3.5 Brokers and Finders.
Neither Maverick, nor any of its officers, directors,
employees or managers, has employed any broker or finder or incurred any
liability for any investment banking fees, brokerage fees, commissions or
finders' fees in connection with the Transaction for which Maverick has or could
have any liability.
4
ARTICLE IV
CERTAIN COVENANTS
4.1. Confidentiality
Ferrell shall not without the prior written consent of
Maverick reveal or make accessible to any Person any confidential information
relating to the Company. For purposes of this Section 4.1, the term
"confidential information" does not include information that is already
available to the public or becomes available to the public other than by means
of a breach of this Section 4.1.
4.2. Public Announcements
Ferrell and Maverick shall consult with each other before
issuing any press release or otherwise making any public statements with respect
to the Transactions or this Agreement, and shall not issue any other press
release or make any other public statement without prior consent of the other
parties, except (i) as may be required by law, or (ii) with respect to their
respective obligations pursuant to rules or regulations of the Exchange Act, the
Securities Act, any rule or regulation promulgated thereunder or any rule or
regulation of the National Association of Securities Dealers.
4.3. Prohibition on Trading in Securities
Ferrell and Maverick each hereby acknowledge that information
concerning the matters that are the subject matter of this Agreement may
constitute material non-public information under United States federal
securities laws, and that United States federal securities laws prohibit any
Person who has received material non-public information relating to Ferrell or
Maverick from purchasing or selling securities of Ferrell or Maverick, as the
case may be, or from communicating such information to any Person under
circumstances in which it is reasonably foreseeable that such Person is likely
to purchase or sell securities of Ferrell or Maverick, as the case may be.
Accordingly, until such time as any such non-public information has been
adequately disseminated to the public, Ferrell shall not purchase or sell any
securities of Maverick, or communicate such information to any other Person, and
Maverick shall not purchase or sell any securities of Ferrell, or communicate
such information to any other Person.
4.4. Further Assurances
Each of the parties hereto agrees to use its reasonable best
efforts to take or cause to be taken all action, to do or cause to be done, and
to assist and cooperate with the other party hereto in doing, all things
necessary, proper or advisable under applicable laws to consummate and make
effective, in the most expeditious manner practicable, the Transaction,
including, but not limited to: (i) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the performance of the obligations hereunder; and (ii) the execution and
delivery of such instruments, and the taking of such other actions, as the other
party hereto may reasonably require in order to carry out the intent of this
Agreement.
5
4.5. Notification of Certain Matters
Each party hereto shall promptly notify the other party in writing of
any events, facts or occurrences that would result in any breach of any
representation or warranty or breach of any covenant by such party contained in
this Agreement.
ARTICLE V
MISCELLANEOUS
5.1. Entire Agreement
This Agreement and the schedules and exhibits hereto contain
the entire agreement between the parties and supercede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
5.2. Amendment and Modifications
This Agreement may not be amended, modified or supplemented
except by an instrument or instruments in writing signed by the party against
whom enforcement of any such amendment, modification or supplement is sought.
5.3. Successors and Assigns
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, provided,
however, that no party hereto may assign its rights or delegate its obligations
under this Agreement without the express prior written consent of the other
party hereto. Nothing in this Agreement is intended to confer upon any person
not a party hereto (and their successors and assigns) any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
5.4. Survival of Representations, Warranties and Covenants
The representations and warranties contained herein shall
survive the Closing and shall thereupon terminate eighteen (18) months after the
date, except that the representations contained in Sections 2.1, 2.2, 2.4, 3.1,
3.2 and 3.4 shall survive indefinitely. All covenants and agreements contained
herein which by their terms contemplate actions following the date of this
Agreement shall remain in full force and effect in accordance with their terms.
6
5.5. Headings; Definitions
The Section and Article headings contained in this Agreement
are inserted for convenience of reference only and will not affect the meaning
or interpretation of this Agreement. All references to Sections or Articles
contained herein mean Sections or Articles of this Agreement unless otherwise
stated. All capitalized terms defined herein are equally applicable to both the
singular and plural forms of such terms.
5.6. Severability
If any provision of this Agreement or the application thereof
to any Person or circumstance is held to be invalid or unenforceable to any
extent, the remainder of this Agreement shall remain in full force and effect
and shall be reformed to render the Agreement valid and enforceable while
reflecting to the greatest extent permissible the intent of the parties.
5.7. Expenses
Except as otherwise expressly set forth herein, all legal and
other costs and expenses incurred in connection with the Transaction shall be
paid by the party incurring such expenses.
5.8. Notices
All notices hereunder shall be sufficiently given for all
purposes hereunder if in writing and delivered personally, sent by documented
overnight delivery service or, to the extent receipt is confirmed, telecopy,
telefax or other electronic transmission service to the appropriate address or
number of the party to whom the notice is being sent.
5.9. Governing Law
This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof, except to the extent that the Nevada General Corporation Law shall
apply to the internal corporate governance of Maverick.
5.10. Arbitration
If a dispute arises as to the interpretation of this
Agreement, it shall be decided in an arbitration proceeding conforming to the
Rules of the American Arbitration Association applicable to commercial
arbitration then in effect at the time of the dispute. The arbitration shall
take place in the Commonwealth of Pennsylvania. The decision of the Arbitrators
shall be conclusively binding upon the parties and final, and such decision
shall be enforceable as a judgment in any court of competent jurisdiction. The
parties shall share equally the costs of the arbitration.
7
5.11. Counterparts
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement.
5.12. Certain Definitions
As used herein:
(a) "Affiliate" shall have the meanings ascribed to such term
in Rule 12b-2 of the Exchange Act;
(b) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended;
(c) "Governmental Authority" shall mean any nation or
government, any state, municipality or other political subdivision thereof and
any entity, body, agency, commission or court, whether domestic, foreign or
multinational, exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any executive
official thereof;
(d) "Liens" shall mean liens, pledges, charges, claims,
security interests, purchase agreements, options, title defects, restrictions on
transfer or other encumbrances, or any agreements (other than this Agreement or
the Company's Operating Agreement) to do any of the foregoing, of any nature
whatsoever, whether consensual, statutory or otherwise;
(e) "Material Adverse Effect" shall mean any adverse effect on
the business, condition (financial or otherwise) or results of operation of (i)
in the case of Ferrell, Ferrell and its subsidiaries, if any, that is material
to Ferrell and its subsidiaries, if any, taken as a whole, or (ii) in the case
of Maverick, Maverick and its subsidiaries, if any, that is material to Maverick
and its subsidiaries, if any, taken as a whole;
(f) "Person" shall mean any individual, corporation,
partnership, association, trust or other entity or organization, including a
governmental or political subdivision or any agency or institution thereof;
(g) "SEC" shall mean the Securities and Exchange Commission;
and
(h) "Securities Act" shall mean the Securities Act of 1933, as
amended.
[Remainder of page intentionally left blank]
8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BY: /s/ Michael Garland
-------------------------------------
Michael Garland
President
9
Exhibit 10.16
INTEREST PURCHASE AGREEMENT
THIS INTEREST PURCHASE AGREEMENT (the "Agreement") is made and entered
into this ___ day of July, 2004, by and among SOUTH OIL, INC., a Texas
corporation (the "South Oil"), and MAVERICK OIL AND GAS, INC., a Nevada
corporation ("Maverick").
Recitals
WHEREAS, the Board of Directors of South Oil and Maverick have
approved, and deem it advisable and in the best interests of their respective
companies and stockholders to consummate, the transactions contemplated hereby
upon the terms and subject to the conditions set forth in this Agreement; and
WHEREAS, Maverick Basin Exploration, LLC, has been duly organized as
limited liability company under the Delaware Limited Liability Company Act (the
"Company"); and
WHEREAS, South Oil owns all of the Company's issued and outstanding
Class A limited liability company membership interests (the "Class A
Interests"), representing a 74.25% ownership interest in the Company; and
WHEREAS, South Oil wishes to sell to Maverick, and Maverick wishes to
purchase from South Oil, all of the Class A Interests from South Oil.
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE I
THE PURCHASE AND SALE
1.1 The Purchase and Sale.
Upon the terms and subject to the conditions set forth in this
Agreement, on the Closing Date, South Oil shall sell to Maverick, and Maverick
shall purchase from South Oil, one hundred percent (100%) of the Class A
Interests owned by South Oil, in consideration for which Maverick shall assume
all of the liabilities and obligations of South Oil as the sole Class A member
(the "Transaction").
1.2 Closing Date.
The closing of the Transactions (the "Closing") shall take
place at a time and on a date to be specified by the parties (the "Closing
Date") at the offices of Duane Morris LLP, 51 Haddonfield Road, Suite 340,
Cherry Hill, NJ 08002, or at such other place as may be mutually agreed upon in
writing by the parties hereto. At the Closing: (i) South Oil shall deliver or
cause to be delivered to Maverick any and all documents necessary to effect the
transfer to Maverick of all of the Class A Interests owned by South Oil; (ii)
Maverick shall deliver or cause to be delivered to South Oil any and all
documents necessary to effect the assumption by Maverick of all of the
liabilities and obligations of South Oil as the sole Class A member of the
Company; and (iii) each of the parties to this Agreement shall have executed any
and all additional documents and agreements, provided any and all additional
consents and approvals, and taken all such other actions as are required under
this Agreement to complete the transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SOUTH OIL
South Oil hereby makes the following representations and
warranties to Maverick:
2.1 Organization and Qualification.
South Oil and the Company are duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of organization, with the corporate power and authority to own and operate their
respective businesses as presently conducted, except where the failure to be or
have any of the foregoing would not have a Material Adverse Effect. South Oil
and the Company are duly qualified as foreign corporations to do business and
are in good standing in each jurisdiction where the character of their
respective properties owned or held under lease or the nature of their
respective activities makes such qualification necessary, except for such
failures to be so qualified or in good standing as would not, individually or in
the aggregate, have a Material Adverse Effect. A copy of the Company's Articles
of Organization and Operating Agreement have been provided to Maverick.
2.2 Authorization; Validity and Effect of Agreement.
South Oil has the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the Transactions. The execution and delivery of this Agreement by
South Oil and the performance by South Oil of its obligations hereunder and the
consummation of the Transactions have been duly authorized by its board of
directors and all other necessary corporate action on the part of South Oil, and
no other corporate proceedings on the part of South Oil are necessary to
authorize this Agreement and the Transactions. This Agreement has been duly and
validly executed and delivered by South Oil and, assuming that it has been duly
authorized, executed and delivered by the other parties hereto, constitutes a
legal, valid and binding obligation of South Oil, enforceable against it in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
2
2.3 No Conflict; Required Filings and Consents.
Neither the execution and delivery of this Agreement by South
Oil nor the performance by South Oil of its obligations hereunder, nor the
consummation of the Transactions, will: (i) conflict with South Oil's
certificate of incorporation or bylaws; (ii) violate any statute, law,
ordinance, rule or regulation applicable to South Oil or any of its properties
or assets; or (iii) violate, breach, be in conflict with or constitute a default
(or an event that, with notice or lapse of time or both, would constitute a
default) under, or permit the termination of any provision of, or result in the
termination of, the acceleration of the maturity of, or the acceleration of the
performance of any obligation of South Oil under, or result in the creation or
imposition of any Liens upon any properties, assets or business of South Oil
under, any material contract or any order, judgment or decree to which South Oil
is a party or by which South Oil or any of its assets or properties is bound or
encumbered except, in the case of clauses (ii) and (iii), for such violations,
breaches, conflicts, defaults or other occurrences that, individually or in the
aggregate, would not have a Material Adverse Effect.
2.4 Title to the Interests.
South Oil has good and marketable title to the Class A
Interests, and the Class A Interests are owned of record and beneficially by
South Oil, free and clear of any Liens. Except for this Agreement, there are no
outstanding options, warrants, agreements, conversion rights, preemptive rights,
or other rights to subscribe for, purchase or otherwise acquire the Class A
Interests. There are no voting trusts or other agreements or understandings to
which South Oil or any of its subsidiaries is a party with respect to the voting
of the Class A Interests, and there is no indebtedness of South Oil or its
subsidiaries issued and outstanding that has general voting rights with respect
to the Class A Interests. Except for this Agreement, there are no outstanding
obligations of any Person to repurchase, redeem or otherwise acquire any of the
Class A Interests.
2.5 Brokers and Finders Fees.
Neither South Oil or any of its subsidiaries, nor any of their
respective officers, directors, employees or managers, has employed any broker
or finder or incurred any liability for any investment banking fees, brokerage
fees, commissions or finders fees in connection with the Transactions for which
South Oil or any of its subsidiaries has or could have any liability.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SOUTH OIL
Maverick hereby make the following representations and warranties to
South Oil:
3.1 Organization and Qualification.
Maverick is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, with the corporate
power and authority to own and operate its business as presently conducted,
except where the failure to be or have any of the foregoing would not have a
3
Material Adverse Effect. Maverick is duly qualified as a foreign corporation to
do business and is in good standing in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except for such failures to be so qualified or in
good standing as would not, individually or in the aggregate, have a Material
Adverse Effect.
3.2 Authorization; Validity and Effect of Agreement.
Maverick has the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the Transactions. The execution and delivery of this Agreement by
Maverick and the performance by Maverick of its obligations hereunder and to
consummate the Transactions have been duly authorized by its board of directors
and all other necessary corporate action on the part of Maverick, and no other
corporate proceedings on the part of Maverick is necessary to authorize this
Agreement and the Transactions. This Agreement has been duly and validly
executed and delivered by Maverick and, assuming that it has been duly
authorized, executed and delivered by the other parties hereto, constitutes a
legal, valid and binding obligation of Maverick, enforceable against it in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
3.3 No Conflict; Required Filings and Consents.
Neither the execution and delivery of this Agreement by
Maverick nor the performance by Maverick of its obligations hereunder, nor the
consummation of the Transactions, will: (i) conflict with Maverick's articles of
incorporation or bylaws; (ii) violate any statute, law, ordinance, rule or
regulation applicable to Maverick or any of its properties or assets; or (iii)
violate, breach, be in conflict with or constitute a default (or an event that,
with notice or lapse of time or both, would constitute a default) under, or
permit the termination of any provision of, or result in the termination of, the
acceleration of the maturity of, or the acceleration of the performance of any
obligation of Maverick under, or result in the creation or imposition of any
Liens upon any properties, assets or business of Maverick under, any material
contract or any order, judgment or decree to which Maverick is a party or by
which Maverick or any of its assets or properties is bound or encumbered except,
in the case of clauses (ii) and (iii), for such violations, breaches, conflicts,
defaults or other occurrences that, individually or in the aggregate, would not
have a Material Adverse Effect.
3.4 Investment Intent.
The Class A Interests are being acquired for Maverick's own
account for investment purposes only and not with a view to, or with any present
intention of, distributing or reselling any of the Class A Interests. Maverick
acknowledges and agrees that the Class A Interests have not been registered
under the Securities Act or under any state securities laws, and that the Class
A Interests may not be, directly or indirectly, sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of without registration under
the Securities Act and applicable state securities laws, except pursuant to an
available exemption from such registration. Maverick also acknowledges and
4
agrees that neither the SEC nor any securities commission or other Governmental
Authority has (a) approved the transfer of the Class A Interests or passed upon
or endorsed the merits of the transfer of the Class A Interests, this Agreement
or the Transactions; or (b) confirmed the accuracy of, determined the adequacy
of, or reviewed this Agreement. Maverick has such knowledge, sophistication and
experience in financial, tax and business matters in general, and investments in
securities in particular, that it is capable of evaluating the merits and risks
of this investment in the Class A Interests, and Maverick has made such
investigations in connection herewith as they deemed necessary or desirable so
as
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