Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
File by the Registrant [XX]
| ||||||
| Filed by a Party other than the Registrant [ ] Check the appropriate box: [XX] Preliminary Proxy Statement [ ] Confidential, for use of the Commission [ ] Definitive Proxy Statement only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Additional Materials [ ] | ||||||
| Soliciting Material Pursuant to Rule 14a-12 | ||||||
ASPEN EXPLORATION CORPORATION(Name
-----------------------------
(Name of Registrant as Specified In Its Charter)
__________________________________________________________(Name
----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate Box:)
[XX] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11:(1)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Denver, ColoradoCO 80224_________________________________________________________________________________April 29,
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October 9, 2009
Dear Stockholders:
You are cordially invited to attend the SpecialAnnual Meeting of Stockholders of
Aspen Exploration Corporation (“Aspen” or the “Company”("Aspen") on May 22,November 20, 2009, at 9:30 a.m.,______, local
time, at the Conference and Events Center, Room Plaza II, 6400 South Fiddlers Green Circle, Greenwood Village, Colorado 80111_____________________________ (the “Special Meeting”"Annual Meeting") to consider
a proposalvarious proposals. Proposal number one is for the approval of the election of
four directors to sell our real and personal property interests located in Colusa, Glenn, Solano, Sutter, Tehama, and Yolo Counties, California to Venoco, Inc., a Delaware corporation, pursuant to the terms set forthserve in the Purchaseclass so designated until their successors have
been elected and Sale Agreement, executed as of February 19, 2009, by and among Aspen, Venoco, Inc., and certain other persons (the “Proposal”). Accordingly, thequalified. The Board of Directors recommends that theall
stockholders vote for approval and ratificationeach of the Proposal.
persons nominated by the Board of Directors.
Proposal number two is for the approval of a resolution granting Aspen's
Board of Directors the authority, in its discretion, to dissolve the Company.
The Board of Directors did not agree with respect to whether the Board should
recommend that stockholders vote for, against, or abstain with respect to
Proposal number two. One member recommends that stockholders vote against this
resolution; and three members of the Board of Directors have agreed to forward
the resolution to the stockholders for consideration without making a
recommendation. The reasons that each member of our Board of Directors came to
their recommendation or did not make a recommendation either for or against the
proposal are described in the Proxy Statement.
Whether or not you planare able to attend the SpecialAnnual Meetingplease mark, sign, date, and return in person, it is
important that your proxy cardshares be represented. We have provided instructions on how
you may vote your shares in the enclosed envelopeNotice of Internet Availability of Proxy
Materials and in this Proxy Statement. Please vote as soon as possible. This will assure that your stock will be voted in accordance with the instructions you give in your proxy card whether or not you attend the Special Meeting. You may,
of course, attend the SpecialAnnual Meeting and vote in person even if you have
previously sent insubmitted voting instructions for your proxy card.shares. It is very important
that every stockholder vote.
PLEASE send in your proxy card in the enclosed return envelope.
Your support of each proposal is very important to the future success of
theyour Company.
Sincerely yours,
R.V. Bailey, Chief Executive Officer
Denver, CO 80224
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NOTICE OF SPECIALANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 22,November 20, 2009
April 29,
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October 9, 2009
TO THE STOCKHOLDERS OF ASPEN EXPLORATION CORPORATION:
The SpecialAnnual Meeting of Stockholders of ASPEN EXPLORATION CORPORATION, a
Delaware corporation, (“We”("We" or “Aspen”"Aspen") will be held on May 22,November 20, 2009
at 9:30 a.m.,at_______, local time, at the Conference and Events Center, Room Plaza II, 6400 South Fiddlers Green Circle, Greenwood Village, Colorado 80111__________________ (the “Meeting”"Annual Meeting"), to consider
and take action on a proposalon:
1. The election of four directors to approve the sale of our real and personal property interests located in Colusa, Glenn, Solano, Sutter, Tehama, and Yolo Counties, California to Venoco, Inc., a Delaware corporation (“Venoco”), pursuant to the terms set forthserve in the Purchaseclass so designated
until reelected at an annual meeting of stockholders and Sale Agreement, executeduntil their
successors have been elected and qualified.
2. Consideration of a resolution granting Aspen's Board of Directors the
authority to dissolve the Company. The Board must exercise that
authority on or before December 31, 2010 or the authority to dissolve
will be revoked. The Board may exercise or fail to exercise the
authority to dissolve the Company in its discretion.
3. Such other business as of February 19, 2009, by and among Aspen, Venoco, Inc., and certain other persons (“Purchase and Sale Agreement”).may properly come before the Annual Meeting, or
any adjournments, or postponements thereof.
The assets that we are proposing to sell to Venoco currently constitute substantially all of our non-current assets.
The foregoing discussion of the proposalproposals set forth above is intended only as a
summary and is qualified in its entirety by the information contained in the
accompanying Proxy Statement. Only holders of record of our common stock onMarch 23,
October 2, 2009(“ ("the Record Date”Date"), will be entitled to notice of and to vote
at this Annual Meeting, and any postponements or adjournments thereof.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON AND THE MANAGEMENT OF THE COMPANY HOPES THAT YOU WILL FIND IT CONVENIENT TO ATTEND.
Stockholders, whether or not they expect to be present at the meeting,Annual
Meeting, are requestedencouraged to vote their shares on the internet as instructed in
the Notice of Internet Availability of Proxy Materials, or if the Proxy
Materials were mailed to you, you may instead complete, sign, date and datereturn
the enclosed proxy and return it promptly in the envelope enclosed for that purpose.card. Any person giving a proxy has the power to revoke it at
any time by following the instructions provided in the Proxy Statement.
| By Order of the Board of Directors: | ||
| R.V. Bailey, Chief Executive Officer |
PLEASE DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE ANNUAL MEETING.
YOUR VOTE IS IMPORTANT
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Denver, ColoradoCO 80224
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PROXY STATEMENT
FOR THE SPECIALANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 22,November 20, 2009
April 29,
- --------------------------------------------------------------------------------
October 9, 2009
We are furnishing this Proxy Statement to stockholders of ASPEN EXPLORATION
CORPORATION (“We”("We" or “Aspen”"Aspen" or the “Company”"Company") in connection with the
solicitation of proxies by and on behalf of our board of directors (“("Board of
Directors”Directors" or the “Board”"Board") for use at our SpecialAnnual Meeting of Stockholders (the
“Special Meeting”"Annual Meeting") and at any adjournments or postponements thereof. We will hold
the SpecialAnnual Meeting on May 22,November 20, 2009, at______, at 9:_________________________.
The Annual Meeting is being held for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. This proxy statement
(including the Notice of Annual Meeting of Stockholders) and the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, a.m. at2009 ("Annual
Report"), including financial statements (collectively the Conference and Events Center, Room Plaza II, 6400 South Fiddlers Green Circle, Greenwood Village, Colorado 80111. We will"Proxy Materials")
are first mail this Proxy Statementbeing provided to stockholdersshareholders beginning on or beforeApril 29, 2009.
about October 9, 2009. A notice of the Internet Availability of the Proxy Materials ("Notice") will be mailed to certain shareholders on or about October 9, 2009. If you received a Notice by mail, you will not receive a printed copy of the Proxy Materials. Instead, the Notice will instruct you as to how you may access and review all of the information contained in the Proxy Materials. The Notice will also instruct you as to how you may submit your proxy on the Internet. If you would like to receive a printed copy of our Proxy Materials and proxy card, and have not previously requested a paper copy of these materials, you should follow the instructions for requesting such materials included in the Notice. VOTING SECURITIES
Holders of record of our common stock at the close of business on March 23,October
2, 2009 (the “Record Date”"Record Date") will be entitled to vote on all matters. On the
Record Date, we had 7,259,622 shares of common stock issued and outstanding. The
holders of shares of our common stock are each entitled to one vote per share.
Our voting securities include only our outstanding common stock. (When used
herein, the word “you”"you" refers to our stockholders.)
For the transaction of business at the SpecialAnnual Meeting a quorum must be
present. A quorum consists of a majority of the shares entitled to vote at the
meeting. The proposal submittedFor Proposal No. 1, the four nominees for our Board of Directors
receiving the greatest number of affirmative votes cast will be elected to our stockholders atserve
on the Special MeetingBoard of Directors. Proposal No. 2 must be approved by a majority of
shares outstanding and entitled to vote thereon. Cumulative voting shall not be
allowed in the election of directors or for any other purpose.
Abstentions and broker non-votes will be counted as present for purposes of
determining the existence of a quorum. Abstentions and broker non-votes will not
be counted for the purposes of determining the outcome of the vote on the
proposal4
We will bear the cost of soliciting proxies. In addition, we may reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation materials to beneficial owners.
Certain of our officers, directors and regular employees may solicit proxies
personally or by telephone or facsimile. We will not pay any officer, director,
or employee additional compensation for doing so. We have also retained The Altman Group, Inc.do not currently intend to
retain a professional solicitor to assist us within the solicitation of proxies. We will pay The Altman Group a fee of $6,500 plus expenses.
We may, in our discretion, seek an adjournment of the SpecialAnnual Meeting to a
specific time and place if a quorum is not present or if we have not received sufficient proxies to approve the proposal.
present.
The proposed corporate actionactions on which the stockholders are being asked to
vote isare not a corporate actionactions for which stockholders of a Delaware corporation
have the right to dissent under the Delaware General Corporation Law.
Law (the
"DGCL").
In accordance with the rules and regulations of the Securities and Exchange
Commission (the "SEC"), instead of mailing a printed copy of our Proxy Materials
and proxy card to each stockholder of record, the Company will furnish Proxy
Materials to our shareholders on the Internet. If you received a Notice by mail,
you will not receive a printed copy of the Proxy Materials. Instead, the Notice
will instruct you as to how you may access and review all of the information
contained in the Proxy Materials. The Notice will also instruct you as to how
you may submit your proxy on the Internet. If you would like to receive a
printed copy of our Proxy Materials and proxy card, and have not previously
requested a paper copy of these materials, you should follow the instructions
for requesting such materials included in the Notice.
If you are a stockholder of record, you may vote in person at the Annual
Meeting. We will give you a ballot when you arrive. If you do not wish to vote
in person or you will not be attending the Annual Meeting, you may vote by
proxy. If you received a printed copy of these Proxy Materials by mail, you may
vote by proxy using the enclosed proxy card or vote by proxy on the Internet. If
you received a Notice by mail, you may vote by proxy over the Internet. The
procedures for voting by proxy are as follows:
o To vote by proxy on the Internet, go to [____________________] to
complete an electronic proxy card.
o To vote by proxy using the enclosed proxy card (if you received a
printed copy of these Proxy Materials by mail), complete, sign and
date your proxy card and return it promptly in the envelope provided.
The giving of the enclosed proxy does not preclude the right to vote
in person should the shareholder giving the proxy so desire. A proxy
may be revoked at any time prior to its exercise by (i) providing
notice in writing to the Company that the proxy is revoked; (ii)
presenting to the Company a later-dated proxy; or (iii) attending the
Annual Meeting and voting in person.
We provide Internet proxy voting to you as a stockholder to vote your
shares on-line. The Internet proxy voting procedures have been designed to
ensure the authenticity and correctness of your proxy vote instructions.
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voted at the Special Meeting.voted. You may do so:
| o By giving notice to our corporate Secretary of your revocation; or o By filing another proxy with our corporate Secretary; or o By attending the Meeting and voting in person. |
The address of our corporate secretary is 2050 S. Oneida, Street, Suite 208,
Denver, ColoradoCO 80224. We will ensure that all properly executed and unrevoked
proxies received in time are voted in accordance with the instructions of the
beneficial owners.
This Proxy Statement and the proxy card are available on line at:www.aspenexploration.com/venoco.htm.
[Remainder of page intentionally left blank.]
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As further described in this Proxy Statement Aspen is seeking shareholder approval of the sale of our real and personal property interests located in Colusa, Glenn, Solano, Sutter, Tehama, and Yolo Counties, California to Venoco, Inc., a Delaware corporation, pursuant to the terms set forth in the Purchase and Sale Agreement, executed as of February 19, 2009, by and among Aspen, Venoco, Inc., and certain other persons (the “Proposal”). This summary highlights selected information that generally describes the terms of the proposed sale and is important for your consideration. To better understand the Asset Sale you should read this entire Proxy Statement and the Purchase and Sale Agreement. The Purchase and Sale Agreement is available for your review at www.aspenexploration.com/venoco.htm, and upon request to Aspen, we will send you a hard copy. Request may be made by e-mail to aecorp2@qwest office.net, by facsimile to 303-639-9863, or by mail to Suite 208, 2050 South Oneida Street, Denver, Colorado 80224. Page numbers in parentheses are intended to direct you to a more detailed description in this Proxy Statement of the topics presented in this summary.
The Parties (page 16)
The Purchase and Sale Agreement, became binding on the parties on February 19, 2009, is by and among Aspen Exploration Corporation, a Delaware corporation, (“We” “Aspen” or the “Company”), Venoco, Inc., a Delaware corporation, (“Venoco”), and certain other persons who own interests in the assets Aspen is selling (the “Other Sellers”) (the “Purchase and Sale Agreement”). The transaction contemplated by the Purchase and Sale Agreement is referred to in this Proxy Statement as the “Asset Sale.” It is important to note that Venoco’s obligations to complete the Asset Sale are not dependent on financing. Venoco has advised Aspen that it has sufficient financial capability to complete the Asset Sale. Venoco is a publicly reporting company, and information about Venoco can be obtained on its website, www.venocoinc.com.
Reasons for the Asset Sale (page 17)
After considering its strategic and business alternatives Aspen announced in September 2008 that our Board of Directors had decided to investigate strategic alternatives for Aspen, including the possibility of selling Aspen’s assets or considering another appropriate merger or acquisition transaction for several reasons, including:
6
However, Aspen did not conclusively determine that it would take any certain course of action. Instead, at that time, Aspen’s Board of Directors only decided to attempt to obtain the highest offered price for any assets Aspen may elect to sell, and that it was in the best interests of Aspen and its stockholders that a competitive bid process be initiated. Between September and November 2008, several interested parties reviewed certain information regarding Aspen and submitted bids for the Assets. After receiving several bids to purchase Aspen’s interests in the Assets (as defined below), and after considering other strategic alternatives, on December 9, 2008, Aspen’s Board of Directors determined that was is in Aspen’s and its stockholders’ best interest to further explore and negotiate the sale of the Assets to Venoco. In January 2009, after negotiating the terms of the Purc hase and Sale Agreement with Venoco our Board of Directors approved the terms of the agreement and proposed that the Asset Sale be submitted to our stockholders for approval. Following discussions and negotiations with certain of the Other Sellers, the Purchase and Sale Agreement was finalized on February 18, 2009 and became effective the next day.
Consideration and Proceeds from the Asset Sale (page 20)
Assuming all of the Other Sellers agree to sell their interests in the Assets, Venoco has agreed to pay a total purchase price of $25.0 million for the Assets, subject to certain adjustments as set forth in the Purchase and Sale Agreement. The purchase price will be allocated among Aspen and the Other Sellers based on each party’s respective interests in the Assets. Venoco will pay each Seller a portion of the total purchase price per the allocation terms in the Purchase and Sale Agreement. This Asset Sale will result in Aspen receiving approximately $8.425 million for its interest in the Assets, subject to any purchase price adjustments. As described elsewhere in this Proxy Statement our stockholders will not have the opportunity to vote on how Aspen will use the proceeds of the Asset Sale although, as noted elsewhere in this Proxy Statement, Aspen’s board of directors have expressed their intention to distribute substantially all of the net, after-tax, proceeds from the Asset Sale to the stockholders. Based on thepro formafinancial statements attached hereto, the net, after-tax proceeds are expected to be approximately $6,850,000 to Aspen.
Assets and Liabilities (page 22)
Under the Purchase and Sale Agreement, Aspen and the Other Sellers will sell to Venoco real and personal property interests located in Colusa, Glenn, Solano, Sutter, Tehama, and Yolo Counties, California (the “Assets”), which include, but are not limited to: oil and gas leases, oil, gas, and other hydrocarbons produced from certain lands, certain agreements, declarations, and orders, tangible personal property, equipment and facilities, seismic and technical data, and warranties and indemnities in favor of Aspen (the “Asset Sale”). The Assets being sold to Venoco currently constitute substantially all of our non-current assets. Following the completion of the Asset Sale (if completed), our only remaining non-current asset will be our interest in a gold exploration prospect in Alaska which has no value on our balance sheet.
Upon closing Venoco will assume from the Sellers specified liabilities relating to the Assets, including all claims, costs, expenses, liabilities and obligations accruing or relating to the Assets after December 1, 2008, the “effective time” of the transaction, and certain environmental liabilities related to the Assets, including plugging and abandonment obligations related to the Assets.
Conditions to Completion of the Transaction (page 26)
Each party’s obligation to consummate the Asset Sale is subject to the prior satisfaction or waiver of a number of closing conditions, including but not limited to the following: the representations and
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warranties of the parties to the transaction shall be true and correct at closing in all material respects, each party shall have performed or complied with all of its covenants and obligations in all material respects and shall have executed the agreements required by the Purchase and Sale Agreement on or before the closing date, and Aspen shall have obtained shareholder approval.
Termination of the Purchase and Sale Agreement (page 27)
The Purchase and Sale Agreement may be terminated by the mutual written consent of Aspen and Venoco, or by either party if the closing shall not have occurred by August 31, 2009 (unless extended), if any governmental authority issues an order, decree or ruling, or other applicable law prohibiting the Asset Sale, or if our shareholders do not approve the Asset Sale. Either Aspen or Venoco may terminate the Purchase and Sale Agreement if the other party breaches a representation, warranty, or covenant, and certain other criteria are satisfied. The Purchase and Sale Agreement may also be terminated by Aspen in connection with certain circumstances relating to a “Superior Proposal” for Aspen or the Assets, or by Venoco in connection with certain environmental defects or casualty losses affecting the Assets. If the Asset Sale is terminated, we will be obligated to pay to Venoco a termination fee of $500,000, subject to certain conditions.
Nature of Business Following the Asset Sale (page 21)
Following the Asset Sale, we will continue to own our other corporate assets, however as a result of the sale of our Montana oil and gas interests in February 2009 we do not consider our remaining assets to be material. Should the sale of the Assets be completed, Aspen intends to distribute substantially all of the net, after-tax proceeds from the sale to our stockholders and then use our remaining resources to consider other opportunities in the natural resources industry, which may include an acquisition of assets or business operations or a merger or other business combination. As we do not intend to limit what types of business opportunities we may pursue after the Asset Sale, if we identify an appropriate business opportunity it may result in Aspen changing its line of business although Aspen intends to focus its search within the broad scope of the natural resources industry. We have also agree d to propose a resolution to consider the possibility of dissolution of Aspen to our stockholders at a meeting of stockholders that we intend to hold late October or November 2009 (subject to preparation of the necessary materials for the annual meeting and regulatory review). If Aspen were to dissolve, it would not enter into another business opportunity but would wind up its operations and distribute its remaining assets to stockholders.
Appraisal Rights (page 30)
Neither Delaware law nor Aspen’s Certificate of Incorporation or Bylaws provide for appraisal or other similar rights for dissenting shareholders in connection with the Asset Sale.
Vote Required and Recommendation (page 30)
Approval of the Asset Sale will require the affirmative vote of the holders of a majority of Aspen’s outstanding common stock. The Board of Directors recommends that you vote FOR the proposed Asset Sale.
8
THE ASSET SALE AND THIS PROXY STATEMENT
The following responses to certain questions does not purport to be a complete statement of the information in this Proxy Statement, and are qualified by the more complete information set forth hereinafter.
1. When and where will the SpecialAnnual Meeting be held?
As described in the notice, we will hold the SpecialAnnual Meeting at
the Conference and Events Center, Room Plaza II, 6400 South Fiddlers Green Circle, Greenwood Village, Colorado 80111._____________________. The SpecialAnnual Meeting is scheduled for May 22,November 20, 2009
at 9:30 a.m.,at_______, local time. If you expect to attend the SpecialAnnual Meeting in person,
please call Aspen at (303) 639-9860 to ensure that sufficient accommodations are
prepared.
2. Why is the SpecialAnnual Meeting being held?
The SpecialAnnual Meeting is being held for the purpose of askingfollowing purposes that are more
completely described elsewhere in this Proxy Statement (collectively, the
"Proposals"):
Proposal No. 1 asks our stockholders to approve the saleelection of our real and personal property interests located in Colusa, Glenn, Solano, Sutter, Tehama, and Yolo Counties, Californiafour
directors into three classes to Venoco pursuant to the terms set forth in the Purchase and Sale Agreement.
3. Will directors be reelectedserve until re-elected at the Special Meeting?
Typically, directors would be reelected at our annual meeting; however, we are not submitting our current directors for re-election at the Special Meeting. If our shareholders approve the Proposal at the Special Meeting, we intend to explore other business opportunities, which as described above will likely be in the broad scope of the natural resources industry, although it may not include operations like our existing oil and gas exploration and development operations. However, we have not definitively identified another business opportunity at this time. We believe that because our current directors have been actively involved in the Company’s business, and the proposed Asset Sale, following the completion of the Asset Sale it is in Company’s best interests to focus on its business opportunities and direction under the direction of the Company’s current directors. The Company current ly intends to hold itsan annual meeting
of shareholdersstockholders attributable to their class, and until their successors
have been elected and qualified.
Proposal No. 2 asks our stockholders to grant the Board of Directors the
authority to dissolve the Company. The Board must exercise that authority
on or before December 31, 2010 or the authority to dissolve will be
revoked. The Board may exercise the authority to dissolve in late October or November 2009 and plans to submit a slate of directors for election at that meeting, as well as other matters (including the possibility of dissolution of the Company). The meeting may be delayed beyond that date because of the need to prepare the necessary meeting materials and complete the regulatory review process.
4.its
discretion.
3. Who is asking for my vote?
The Board of Directors is sending or providing this Proxy Statement, the
attached Notice of SpecialAnnual Meeting of Stockholders, the Notice of Internet
Availability of Proxy Materials, and the encloseda proxy card to you and all other persons
who are stockholders of record of Aspen as of the close of business on March 23,October
2, 2009 (the “Record Date”"Record Date"). The Board of Directors is soliciting your vote for
our SpecialAnnual Meeting.
5.
4. Who is eligible to vote?
Stockholders of record who own shares of our common stock at the close of business on the Record Date are eligible to vote. Each share of common stock is entitled to one vote.
9
6.
5. Might the SpecialAnnual Meeting be adjourned?
We do not currently intend to seek adjournment of the Special Meeting unlessAnnual Meeting.
However, if we have insufficient votes to meet a quorum (which requires the
presence of at least a majority of the outstanding shares) or unless, we have insufficient votes to approvemay consider
adjourning the Proposal. If any of those circumstances exist, we will consider the advisability of proposing adjournmentAnnual Meeting to a specific time and place. Unless the Board of
Directors fixes a new record date, stockholders of record for an adjourned
meeting shall be as originally determined for the meeting from which the
7
ca lled.
7.called.
6. Why did you sendprovide me this booklet?
This booklet is a Proxy Statement. It provides you with information you
should review before voting on the ProposalProposals listed above and in the Notice of
SpecialAnnual Meeting of Stockholders. YouWe have also made our 2009 Annual Report on Form
10-K available to our stockholders. These proxy materials are receiving these proxy materialsbeing provided
because you have the right to vote on thisthese important ProposalProposals concerning your
investment in Aspen. Such proxy materials are also available on-line at
www.aspenexploration.com/venoco.htm.
8.www.__________________.
7. How do I vote?
Stockholders may vote by visiting www.___________________ and utilizing the
instructions provided on the Notice. Alternatively stockholders who received thisthe
hard copies of the Proxy Statement directlyMaterials from Aspen canmay vote by completing, signing,
and returning the enclosed proxy card promptly in the enclosed envelope or by
attending the SpecialAnnual Meeting in person and voting.
Joint owners must each sign the proxy card.
If you own your shares through a broker-dealer or other nominee, you must
vote your shares as instructed by that broker-dealer or other nominee. If you
own your shares through a broker-dealer or other nominee, you are not considered
to be a stockholder of record, and you will not be permitted to vote your shares
in person at the SpecialAnnual Meeting, unless you have obtained a proxy for those
shares from the person who holds your shares of record.
If a stockholder wishes to participate in the SpecialAnnual Meeting but does not
wish to give a proxy, the stockholder may attend and vote at the SpecialAnnual Meeting
in person. Should you require additional information regarding the SpecialAnnual
Meeting, please contact Aspen at (303) 639-9860.
9.
8. Why does my name not appear as a stockholder of record?
Many investors own their investment shares through a broker-dealer or other nominee. Broker-dealers frequently clear their transactions through other broker-dealers and may hold the actual certificates for shares in the name of securities depositories, such as CEDE & Co. (operated by Depository Trust Company of New York City). In such a case, only the ultimate certificate holder appears on our records as a stockholder even though that nominee may not have any economic interest in the shares that you actually own through your broker-dealer. You should contact your broker-dealer for more information about this process. You have the right to request that your broker-dealer deliver to you a certificate representing your shares.
10
10.
9. How does the boardBoard recommend that I vote?
vote with respect to the election of
directors?
The Board of Directors recommends that stockholders vote FOR each of the
Proposal describednominees named in this Proxy Statement.
8
This
We have included an annual report to stockholders with this Proxy Statement
isthat contains additional information about Aspen. Further, this Proxy Statement
and the annual report are available onlineon-line atwww.aspenexploration.com/venoco.htm. www._______________. In addition,
information is available on our website at www.aspenexploration.com and through
the EDGAR, electronic filings maintained by the Securities and Exchange Commission
at www.sec.gov.
12. Why are
13. If Proposal No. 2 is approved, does Aspen have immediate plans to dissolve
the Company?
Even if the stockholders being asked to vote on the Asset Sale?
We are proposing to sell to Venoco our interests in the Assets which consistsapprove Proposal No. 2, actual dissolution of
certain real and personal property interests located in Colusa, Glenn, Solano, Sutter, Tehama, and Yolo Counties, California, including, but not limited to: oil and gas leases, oil, gas, and other hydrocarbons produced from certain lands, certain agreements, declarations, and orders, tangible personal property, equipment and facilities, seismic and technical data, and warranties and indemnities in favor of the Sellers. Our interests in the Assets currently comprise substantially all of our assets (and all of our assets as reflected on our balance sheet). Accordingly, as requiredAspen would require further action by Delaware law we are seeking stockholder approval as a prerequisite to completing the Asset Sale.
13. Why does Aspen’sAspen's Board of Directors, believeand any such
action would be based on their business judgment based on the proposed Asset Sale iscircumstances as
they may exist in the best interest of Aspen’s stockholders?
The Board of Directors believes the Asset Sale will: (1) reduce Aspen’s general and administrative expenditures because there will be significantly fewer remaining assets to account for; (2) eliminate the volatility from Aspen’s operating results resulting from the significant volatility in national prices for natural gas; and (3) avoid the need to retain a staff of personnel to replace Aspen’s president who suffered a stroke in January 2008, which has prevented him from resuming his former role and responsibilities and from overseeing Aspen’s day-to-day operations. Further, Aspen believes that the market price of Aspen’s common stock does not adequately reflect the inherent value of Aspen’s producing oil and gas assets and undeveloped acreage, whereas the consideration being offered for the Assets reflects the Board of Directors’ estimation of the current fair mark et value of the Assets. After considering other offers for the Assets, and other strategic alternatives, the Board of Directors believes that the Asset Sale is in the best interests of Aspen and Aspen’s stockholders.
14. What will happen if the Asset Sale is approved and adopted by our stockholders?
If the Asset Sale is approved and adopted by our stockholders, we will sell all of our California oil and gas assets relating to our business to Venoco under the terms of the Purchase and Sale Agreement, as more fully described in this Proxy Statement. The Assets currently constitute substantially all of our non-current assets.
Following the Asset Sale, we will continue to own our interest in an Alaskan gold prospect, although we do not consider that to be significant and it is carried on our balance sheet at no value. Should the sale of the Assets be completed, Aspen intends to distribute substantially all of the net, after-tax proceeds from the sale to our stockholders and then use our remaining resources to consider other opportunities in the natural resources industry, which may include an acquisition of assets or business operations or a merger or other business combination. As we do not intend to limit what types of
11
business opportunities we may pursue in the broad scope of the natural resources industry after the Asset Sale, if we identify an appropriate business opportunity, it may result in Aspen changing its line of business. We have also agreed to propose a resolution to consider the possibility of dissolution of Aspen to our stockholders at a meeting of stockholders that we intend to hold late October or November 2009 (subject to preparation of the necessary materials for the annual meeting and regulatory review). Further, unless and until we complete the Asset Sale, Aspen will continue to carry on business operations with regard to all of our properties, although our agreement with Venoco limits the activities we can accomplish on our California oil and gas properties without Venoco’s consent.
The Asset Sale will not alter the rights, privileges, or nature of the outstanding shares of Aspen. A stockholder who owns shares of Aspen common stock immediately prior to the closing of the Asset Sale will continue to hold the same number of shares immediately following the closing.
15. What happens if the stockholders do not approve the Asset Sale?
We currently anticipate that if the stockholders do not approve the Asset Sale we will continue to conduct our business in the ordinary course and evaluate all available strategic alternatives, including, among other things, strategies to grow our businesses and operations through potential partnering, strategic alliances, or other strategic opportunities with other companies.
16. When is the Asset Sale expected to be completed?
If the Asset Sale is approved and adopted by our stockholders at the Special Meeting, we expect to complete the Asset Sale as soon as practicable after all of the conditions in the Purchase and Sale Agreement have been satisfied or waived. Aspen and Venoco are working toward satisfying the conditions to closing and completing the Asset Sale as soon as reasonably possible. We expect to be able to complete the Asset Sale within two to four weeks after stockholder approval.
17. What is the purchase price for the Aspen’s interests in the Assets and how was it determined?
Venoco’s $25.0 million offer was to acquire a 100% working interest in the Assets, which represented the highest offer Aspen received for the Assets. Venoco’s offer was accepted by Aspen after Aspen conducted a competitive bid process, and because Venoco submitted the highest bid for the Assets, its bid was used to determine the purchase price for the Assets. Because Aspen has only a small (25% to 40%) interest in those properties, Aspen’s share of the gross proceeds will be approximately $8.425 million. Aspen estimates that the transaction costs associated with the Asset Sale (including the cost of this stockholders’ meeting and approximately $253,000 in fees payable to the mineral broker) will be approximately $500,000. Under the Purchase and Sale Agreement the Other Sellers will pay directly or reimburse Aspen for their share of the fees payable to the mineral broker (calculate d at 3% of the gross purchase price) and will reimburse Aspen for other expenses incurred on their behalf (estimated at 0.4% of the gross purchase price payable to a working interest owner).
18. How did Aspen allocate value among the various properties?
Venoco initially assigned value to the various oil and gas properties included in the Assets based on its perception of relative value and reserve information provided by Aspen’s independent reserve engineer, Cecil Engineering, Inc. The Board of Directors reviewed these allocations and determined that they were fair and reasonable to Aspen and its stockholders. Aspen determined that it was inappropriate to further adjust the allocations because the properties identified in the allocation include all of Aspen’s properties that the Board determined had more than a nominal value. The Board determined that it was
12
inappropriate for Aspen to receive a disproportionate share of the value of the Assets at the cost of the working interest owners because when the working interest owners initially acquired their interests they paid Aspen a promotional value in excess of the costs attributable to the interests acquired and financed their share of exploration and development activities on the properties.
19. How did Aspen offer the properties and conduct the sale?
The Company actively sought purchasers for the Assets by assembling and operating a data room at which persons interested in acquiring Aspen’s assets or Aspen itself would be able to review a significant amount of information about Aspen and its properties. The data room was assembled and operated by an independent oil and gas broker and consulting geologist. After the data room closed the Board of Directors considered several proposals and the financial capabilities of the potential buyers, and their respective levels of interest. Additionally, the Board of Directors considered other alternatives for the Company including continuing its normal business operations. The purchase price for the Assets proposed to be sold to Venoco was ultimately negotiated between representatives of Aspen, including its directors, management and other advisors. After reviewing the offers for the Assets and the Comp any’s other alternatives the Board of Directors determined that Venoco’s offer provided the best value for the Company and its stockholders.
20. How does Aspen plan to use the net cash proceeds from the Asset Sale?
Following the Asset Sale, Aspen will have a significant amount of liquid assets and will not have any business operations (since Aspen is not conducting any operations on its Alaskan gold prospect). Aspen intends to distribute substantially all of the net, after-tax proceeds from the Asset Sale to our stockholders and then use our remaining resources to consider other opportunities in the natural resources industry, which may include an acquisition of assets or business operations, or a merger or other business combination. Although certain actions the Company may later consider (such as a merger) may require stockholder approval upon completion of the Asset Sale our stockholders will not have the opportunity to vote on how the proceeds of the Asset Sale are used. As discussed above, we will also propose to our stockholders the alternative of dissolution at our next stockholders’ meeting. If app roved by the stockholders, dissolution would result in the distribution of our remaining cash assets to Aspen’s stockholders after the winding up of its remaining business operations.
Although Aspen has engaged in preliminary discussions with third parties about various possibilities following the Asset Sale, none of these discussions have resulted in an agreement or any definitive steps toward the conclusion of any future relationship.future. If Aspen is unable to identify an appropriate
9
followingor transaction to complete, the Asset Sale,Board will likely act to
dissolve Aspen. If Aspen does identify a business opportunity or transaction
that a majority of the CompanyBoard determines is worth completing, the Board will
then evaluate its business direction and opportunities.
likely allow the authority to dissolve to expire. Even if Proposal No. 2 is
approved, the Board's authority to dissolve Aspen will expire December 31, 2010
unless a certificate of dissolution has been filed with the Delaware Secretary
of State before that date.
14. If Aspen might be dissolved why are the stockholders being asked to
re-elect directors at the Meeting?
If the stockholders approve Proposal No. 2 the Company does not intend to
be regulated as an investment company under the Investment Company Act of 1940 and, therefore, will be limited in the type of investments it may make with the proceeds expected to be received from the Asset Sale. The Investment Company Act of 1940 also has an exception for a transient or inadvertent investment company in SEC Rule 3a-2. That rule provides a one year exception for companies that might otherwise be considered an investment company where the company has, as does Aspen, abona fideintent to be engaged as soon as reasonably possible (but in any event, within one year), in a business other than that of investing, reinvesting, owning, holding or trading in securities.
13
21. What business opportunities might Aspen explore after completion of the Asset Sale?
Because Aspen will have no material operations remaining and a significant amount of liquid assets if the Asset Sale is consummated,immediately dissolve. Instead, Aspen intends to seek other business opportunities in industries in the natural resources industry. These business opportunities may include an acquisition of assets or business operations, or a merger or other business combination. Although Aspen has engaged in preliminary discussions with third parties about various possibilities following the Asset Sale,continue to date none of these discussions have resulted in an agreement or any definitive steps toward the conclusion of any future relationship. As Aspen does not intend to limit what types of business opportunities it may pursue after the Asset Sale, if Aspen identifies an appropriate business opportunity, it may result in Aspen changing its historical line of business (which has been the exploration for and development of oil and natural gas prospects, and the exploration for gold). Depending on the nature of theexplore potential
business opportunities and transactions, and the relatedBoard of Directors elected at
this meeting will determine the advisability of any potential business
opportunities and transactions versus the benefits of dissolution. Even if Aspen
does dissolve, the dissolution process requires the Company to continue for a
future business acquisition mayperiod of time to resolve matters such as current or may not require stockholder approval.potential legal disputes,
the disposition of property, and to collect and/or settle debt obligations. As
such it would be necessary for the process to be overseen by management and the
Board of Directors.
15. If Aspen's Board of Directors decides to dissolve the Company, what happens
next?
We will:
a. file a certificate of dissolution with the Delaware Secretary of
State;
b. adopt a plan of liquidation by Board action in compliance with
Delaware law;
c. conclude our negotiations with creditors and pay or adequately provide
for the payment of the Company's liabilities;
d. distribute any remaining proceeds to the public stockholders, less any
income or other tax obligations relating to the income from the
Company's assets; and
e. otherwise effectuate the Plan of Liquidation.
16. If the transaction does not require stockholder approval, the board of directorsCompany is dissolved, will I be entitled to accomplishany distributions?
Probably, however the transaction in its discretion, althoughamount of any distributions(s) will depend on a
number of factors, including, but not limited to, the board may (but would not be required to) seek an advisory voteaccounts payable and our
other liabilities existing on the date of the stockholders.
22. Am I entitledapproval and adoption of the plan
of liquidation, our operating expenses that accrue following approval and
adoption of the plan of liquidation and the amount of any claims that may be
asserted against us. The expenses of our operations will include professional
fees and other expenses of liquidation and could be substantial. The
distribution stockholders may receive as part of the dissolution would be
separate from the distribution the Company plans to appraisal or dissenters’ rights in connection withpay from the transaction?
No. Delaware law does not provide for stockholder appraisal or dissenters’ rights in connection withnet, after-tax
proceeds from the sale of our California assets (expected to be paid in or about
December 2009) and any dissolution distribution likely would be paid to
stockholders of record on the Company's assets. Other rights or actions may exist under federal law or state securities law fordate we file the certificate of dissolution with
the Delaware Secretary of State sometime after such filing takes place.
17. If the Company is dissolved and distributions are made, would the
distribution be taxable?
In general, if the Company is dissolved, our stockholders who are aggrieved by the proposed Asset Sale generally. Although the nature and extent of such rights or actions are uncertain and may vary depending upon facts or circumstances, stockholder challenges to corporate action in general are related to fiduciary responsibilities of corporate officers and directors and to the fairness of corporate transactions.
23. As a result of the Asset Sale, what tax consequences, if any, will I incur as a stockholder?
Although the Asset Sale will be taxable to Aspen, Aspen does not expect that the Asset Sale will result in any federal or state income tax consequences for its stockholders. Aspen will recognize
a taxable gain or loss based on the Asset Sale equal to the difference between the amount it realizes from the Asset Saleaggregate value of
distributions to such stockholders and the adjustedsuch stockholder's tax basis in the
common stock (See "Proposal No. 2: Approval to Grant the Board of Directors the
Authority to Dissolve the Company --"Material U.S. Federal Income Tax
Consequences of the assets sold. However,Plan of Liquidation" beginning on page 34 of this Proxy
Statement).
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distribution Aspen later makes to its stockholders mayamount distributed in excess of our current and
accumulated earnings and profits will be taxabletreated as capital gain from the sale
of our stock.
18. Does the dissolution of the Company involve any risk of liability to our
stockholders?
If the Company is dissolved, we are obligated to pay, or ordinary incomemake provision for
the payment of, our expenses and our fixed and contingent liabilities. Under
Delaware law, if we fail to make adequate provision for the payment of our
expenses and liabilities a stockholder could be held personally liable to any
remaining creditors for any deficiency to the recipient,extent of such stockholder's
previous distributions from us in liquidation. If a stockholder has paid taxes
on distributions previously received by the stockholder, a repayment of all or a
portion of the prior distribution could result in a stockholder incurring a net
tax cost if the stockholder's repayment of an amount previously distributed does
not cause a commensurate reduction in taxes payable by that stockholder. If we
fail to create an adequate contingency reserve for payment of our expenses and
liabilities, each case depending onof our stockholders could be held liable for payment to our
creditors for amounts owed to creditors in excess of the circumstances of each individual stockholder as well as Aspen’s earnings and profits as they may be calculated.
contingency reserve, up to the amount actually distributed to such stockholder. FORWARD LOOKING STATEMENTS
Because we want to provide you with more meaningful and useful information, this Proxy Statement contains certain "forward-looking statements" (as such term is defined in Section 21E of the Securities Exchange Act of 1934, as amended). These statements reflect our current expectations regarding our possible future results of operations, performance, and achievements. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, regulation of the Securities and Exchange Commission, and common law.
Wherever possible, we have tried to identify these forward-looking statements by using words such as "anticipate," "believe," "estimate," "expect," "plan," "intend," and similar expressions. These statements reflect our current beliefs and are based on information currently available to us. Accordingly, these statements are subject to certain risks, uncertainties, and contingencies, which could cause our
14
actual results, performance, or achievements to differ
materially from those expressed in, or implied by, such statements. These risks,
uncertainties and contingencies include, without limitation, the factors set
forth under "Item 6. Management's Discussion and Analysis of Financial Conditions or Plan of Operation – Factors that may affect future operating results"1A Risk Factors" of our Form 10-KSB10-K for the fiscal year endedending
June 30, 20082009 and in documents that we subsequently filed. We undertakehave no obligation
to update or revise any such forward-looking statements that may be made to
reflect events or circumstances after the date of this Proxy Statement.
INTERESTS OF ASPEN AFFILIATES IN THE ASSET SALE
The purchase price for the Assets was arrived at between Aspen and Venoco after Aspen conducted a competitive bid process for the Assets. Venoco’s final offer of $25.0 million is for 100% of the working interests in the Assets and represented the highest bid for the Assets. In addition to Aspen, various other persons have working interests in the Assets, including three of Aspen’s directors (Messrs. Bailey, Cohan and Imperato) who hold interests in the Assets outside of their capacities as Aspen directors. Mr. Hensman, a director of Aspen since 2006, has no interest in the Assets and approved the transaction and the allocation of value.
As part of its offer Venoco assigned values to the various oil and gas properties that comprise the Assets. Venoco initially assigned value to the various oil and gas properties included in the Assets based on its perception of relative value and reserve information provided by Aspen’s independent reserve engineer, Cecil Engineering, Inc. Aspen’s Board of Directors reviewed Venoco’s proposed allocations and determined that they were fair and reasonable to Aspen and its stockholders and determined that it was unnecessary to further adjust the allocations and did not do so. Thus, although Aspen’s Board of Directors as a whole was involved in the negotiation of the total purchase price for the Assets, Aspen and its Board of Directors did not engage in substantive negotiations as to how the total purchase price was allocated among the various oil and gas properties.
Each person that holds an interest in the Assets will receive their proportionate share of the total purchase price based on their respective interest in each given oil and gas property that is a part of the Assets. Accordingly, each interest owner, including Aspen and its directors who hold interests in the Assets, will be compensated on the same terms and in the same manner pursuant to a common mathematical formula based on their working interest. As a result of their outside working interests in the Assets, and subject to contractual adjustments (which will be applied proportionally to all sellers of the Assets), Messrs. Bailey, Cohan and Imperato would receive approximately $760,000, $397,000, and $98,000 respectively from the total purchase price for the Assets which reflects the amount mathematically due based on their respective working interests. Consequently, they will each receive proportio nally to their working interests, the same payment as received by all other sellers, including Aspen.
15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The number of shares outstanding of the Company’s common stock at March 23, 2009, was 7,259,622. The following table sets forth the beneficial ownership of the Company’s common stock as of March 23, 2009 by each director and each executive officer of the Company and by all directors and executive officers as a group.
| Amount and Nature of | Percent of | |||||||
| Beneficial Owner | Position Beneficial Ownership | Common Stock | ||||||
| ---------------- -------- -------------------- ------------ R.V. Bailey | Chief Executive | |||||||
| 1,391,336(i) 19.17% 2050 S. Oneida St. | Officer and | |||||||
| Director Suite 208 | ||||||||
| Denver, CO 80224 | ||||||||
| Robert A. Cohan | ||||||||
| President and 692,737(ii) 10.23% 2050 S. Oneida St. | ||||||||
| Director Suite 208 | ||||||||
| Denver, CO 80224 | ||||||||
| Kevan B. Hensman | Chief Financial | |||||||
| 28,120(iii) * 2050 S. Oneida St. | Officer and | |||||||
| Director Suite 208 | ||||||||
| Denver, CO 80224 | ||||||||
| Douglas P. Imperato | ||||||||
| Director 7,530(iv) * 2050 S. Oneida St. | ||||||||
| Suite 208 | ||||||||
| Denver, CO 80224 | ||||||||
| All current directors and | ||||||||
| 2,119,723(v) 30% executive officers as a group | ||||||||
| * Ownership of less than one percent. i | This number includes 1,241,776 shares of stock held of record in the name
of R. V. Bailey, and 16,320 shares of record in the name of Mieko Nakamura
Bailey, his spouse. Additionally, the number includes 32,000 shares of
common stock Aspen issued to the Aspen Exploration Profit Sharing Plan for
the benefit of R. V. Bailey as a corporation contribution to Mr. |
| ii | This number includes 527,644, shares of common stock. Additionally, Aspen issued 30,733 shares of common stock to the Aspen Exploration Profit Sharing Plan for the benefit of Robert A. |
| Cohan as a corporation
contribution to Mr. | |
16
The following table sets forth the beneficial ownership of the Company’sCompany's
Common Stock as of March 23, 2009the Record Date by each person (other than the directors and
executive officers of the Company) was known to own beneficially, more than 5%
of the outstanding voting shares of Common Stock.
| Stock based solely on filings made by
such persons.
Name and Address | ||||||||
| ||||||||
| ||||||||
17
Voting Agreements, each member of the Voting Group has agreed to vote his or her sharesAmount and Nature of AspenPercent of
Beneficial Owner Beneficial Ownership Common Stock, including shares of Common Stock acquired subsequent to the date of the Voting Agreement, in favor of the Asset Salestock
---------------- -------------------- ------------
Tymothi Tombar
2713 Crawford Street 421,929(i) 5.8%
Houston, Texas 77004
John Gibbs and against any alternative merger or other business combination transaction or other action that would impede or prevent the closing of the Asset Sale. The Voting Agreements also grant VenocoSusan Gibbs
P.O. Box 859
Ardmore, OK 73402 471,400(ii) 6.5%+
(i) Based solely on a proxy over all shares of Aspen Common Stock ownedSchedule 13D filed by members of the Voting Group to vote in favor of the Asset Sale and against any alternative transaction.
THE PROPOSAL
THE SALE TO VENOCO, INC. OF OUR REAL AND PERSONAL PROPERTYINTERESTS LOCATED IN COLUSA, GLENN, SOLANO, SUTTER,TEHAMA, AND YOLO COUNTIES, CALIFORNIA
The following is a description of the material aspects of the Asset Sale, including background information relating to the negotiation and proposed terms of the Purchase and Sale Agreement. While we believe that the following description covers the material terms of the Asset Sale, the Purchase and Sale Agreement and other arrangements between Venoco and us, the description may not contain all of the information that is important to you. In particular, the following summary of the Purchase and Sale Agreement is not complete and is qualified in its entirety by reference to the copy of the Purchase and Sale AgreementMr. Tombar on July 30, 2009 which is available on Aspen’s website at www.aspenexploration.com/venoco.htm, and incorporated by reference herein. You should carefully read this Proxy Statement and the other documents to which we refer, including the Purchase and Sale Agreement, for a complete understanding of the terms of the Asset Sale. Aspen will provide you a hard copy of the Purchase and Sale Agreement upon your written or telephonic request to Aspen at 2050 South Oneida Street, Suite 208, Denver, Colorado 80224; telephone: (303) 639-9860; facsimile: (303) 639-9863.
Information About Aspen
Aspen was incorporated under the laws of the State of Delaware on February 28, 1980 for the primary purpose of acquiring, exploring and developing oil and gas and other mineral properties. We are currently engaged primarily in the exploration, development and production of oil and gas properties in California. We have an interest in an inactive subsidiary: Aspen Gold Mining Co., a company that
has not been engaged in business since 1995. Aspen’s contact information is:
amended.
(ii) Based solely on a Schedule 13G/A filed by TriPower Resources, LLC, an
Oklahoma limited liability company, successor by conversion to TriPower
Resources, Inc., and John and Susan Gibbs on February 12, 2009 which has
not been amended.
13
Exploration Corporation 2050 South Oneida Street, Suite 208 Denver, CO 80224 (303) 639-9860
Information About Venoco
Venoco was incorporated under the laws of the State of Delaware and is an independent energy company primarily engaged in the
acquisition, exploration, exploitationclass so designated for a term of one to three years depending upon which class
each is appointed to serve, and development of oiluntil the election and natural gas properties. Since its founding in 1992, its core areas of focus have been offshore and onshore California. Its principal properties are located offshore southern California, onshore in California's Sacramento Basin and onshore along the Gulf Coast of Texas, and are characterized by long reserve lives, predictable production profiles and substantial opportunities for further exploitation and development. Venoco’s contact information is:
18
Information About the Initial Sellers and Additional Sellers
At the time that Aspen executed the Purchase and Sale Agreement, committing to sell its interest in the Assets to Venoco, a number of other persons who own a working interest in the California Assets executed a Joinder Agreement to do likewise. These people (the “Initial Sellers”), and a descriptionqualification of their
affiliationsuccessors:
Class Nominee(s)
- ----- ----------
Class I, for a term expiring at the annual meeting to Aspen (if any) are as follows:
Following the execution and announcement of the Purchase and Sale Agreement by Aspen, Venoco, and the Initial Sellers, Aspen and Venoco offered to include the interests of certain other persons who own interests in the Assets (the “Additional Sellers”) who executed Joinder Agreements following the date that the execution of the Purchase and Sale Agreement was publically announced. By executing Joinder Agreements each Initial Seller and each Additional Seller appointed Aspen to act as its representative with respect to certain issues and further negotiations that may arise under the Purchase and Sale Agreement. As of March 31, 2009, 64 Additional Sellers (none of whom are directly or indirectly affiliated with Aspen) accepted the offer to sell their working interests in the Assets to Venoco. As a result, Venoco will acquire in excess of 96% of the total working interest in the Assets and sub ject to any adjustments the purchase price for all of the Assets to be included in the Asset Sale will be in excess of $24.0 million.
19
Background
Over the years,incorporation divides our Board of Directors has periodically reviewedinto three
classes which, under Delaware law, must be as nearly equal in number as
possible. The members of each class are elected for three-year terms at each
successive annual meeting of stockholders and assessedunless that director is removed or
resigns, serve until reelected at the next annual meeting of stockholders at
which that director is standing for reelection. Because we have not held an
annual meeting of stockholders since 1994, all of our short-termdirectors are standing for
reelection at the Annual Meeting and long-term strategies, objectives and developmentsif elected shall serve in the marketsclass and for
the term designated above.
These persons will constitute the entire board of directors. The person
named in the proxy intends to vote for these four nominees, each of whom has
been recommended for election by the Board of Directors of Aspen, unless a
stockholder withholds authority to vote for any or all of the nominees. The four
nominees receiving the greatest number of affirmative votes will be elected as
directors. If any nominee is unable to serve or, for good cause, will not serve,
the person named in the proxy reserves the right to substitute another person of
his choice as nominee in his place. Each of the nominees has agreed to serve, if
elected.
Identification of Directors and Executive Officers
The following table sets forth the names and ages of all the Directors and
Executive Officers of Aspen, and the positions held by each such person as of
the Record Date. As described above, Aspen's certificate of incorporation
divides the Board of Directors into three classes which, under Delaware law,
must be as nearly equal in number as possible. Under Aspen's Restated
Certificate of Incorporation, members of each class are elected for three-year
terms at each successive meeting of stockholders and serve until their
successors are duly elected and qualified; officers are appointed by, and serve
at the Company operates, including, among other things, strategies to grow our businessespleasure of, the Board of Directors. Since we have not held an annual
meeting since February 25, 1994, each of the directors is standing for
reelection at the Annual Meeting.
14
operations through potential partnering, strategic alliances or other strategic opportunities with other companies. This review again took place following the January 2008 stroke that disabledBoard Chairman
Robert A. Cohan who52 President and Director 1998
Chief Financial Officer, 2006
Kevan B. Hensman 53 Vice President and
Director
Douglas P. Imperato 51 Director 2008
* As described above the class each director belongs to corresponds to when
such director is up for reelection.
+ Under Aspen's Restated Certificate of Incorporation, if any newly created
directorships are filled by the Board of Directors, such additional
directors shall not be classified until the next annual meeting of
stockholders and such directorships shall be apportioned among the three
classes of directors at the next annual meeting of stockholders so as to
make all such classes nearly equal in number as possible. Since we have not
held an annual meeting of stockholders since 1994, all directors are
standing for reelection and class designation.
No arrangement exists between any of the above officers and directors
pursuant to which any of those persons was thenelected to such office or position.
None of the directors are also directors of other companies filing reports under
the Securities Exchange Act of 1934.
Robert A. Cohan. Mr. Cohan currently serves as our President and as a
director. He served as our chief executive officer president, and chief financial officer. Initially we had hoped thatofficer
until January 2008 when he suffered a stroke and he has not been able to resume
full-time duties since then. Mr. Cohan would be able to return to his duties, but it became clear thatobtained a Bachelor of Science degree in
Geology from the State University College at Oneonta, NY in 1979. He has
approximately 28 years experience in oil and gas exploration and development,
including employment in Denver, CO with Western Geophysical, H. K. van Poollen &
Assoc., Inc., as a Reservoir Engineer and Geologist, Universal Oil & Gas, and as
a principal of Rio Oil Co., Denver, CO. Mr. Cohan served as Manager, Oil & Gas
Operations, Aspen Exploration Corporation, Denver, CO from 1989 to 1992. He was
employed as Vice President, Oil & Gas Operations, for Tri-Valley Oil & Gas Co.,
Bakersfield, CA. from 1992 to April 1995, at which time Mr. Cohan rejoined Aspen
Exploration Corporation as Vice President West Coast Division (now President),
opening an office in Bakersfield, CA. He is unlikelya member of the Society of Petroleum
Engineers (SPE) and the American Association of Petroleum Geologists (AAPG).
R. V. Bailey. Mr. Bailey served as our vice president until January 2008
when he was appointed as our chief executive officer as a result of Mr. Cohan's
stroke. Mr. Bailey obtained a Bachelor of Science degree in Geology from the
University of Wyoming in 1956. He has approximately 45 years experience in
exploration and development of mineral deposits, primarily gold, uranium, coal,
and oil and gas. His experience includes basic conception and execution of
15
do so.
After continuing discussions,Aspen's business.
Kevan B. Hensman became a director of Aspen Exploration Corporation on
September 11, 2006. As a result of Mr. Cohan's stroke, Mr. Hensman was appointed
as our chief financial officer in August 2008,January 2008. Since April 2002, except for a
one-year position as Manager of Paramount Citrus Association, Mr. Hensman has
served as an Analyst for Truxtun Radiology Medical Group, LP with the duties of
providing financial analysis; performing annual projects; and assisting the
Practice Administrator in performing various duties and assignments.
Additionally, Mr. Hensman has extensive experience in the oil and gas industry.
From November 1997 to May 1999 Mr. Hensman served as the Planner/Gas Analyst for
Texaco Exploration and Production Company. Mr. Hensman served as the Supervisor
of Fuel Supply and Acquisition Analyst from February 1991 to October 1997 for
Santa Fe Energy/Monterey Resources. In 1999, Mr. Hensman received a Bachelor of
Science degree in finance from California State University Bakersfield (CSUB).
Mr. Hensman is not a director of any other public company. As described below,
Mr. Hensman, in his capacity as chief financial officer, served and was paid as
a Company consultant.
Douglas P. Imperato. Mr. Imperato was appointed to our Board of Directors
convenedon December 9, 2008. Since 1996, Mr. Imperato has been a meeting to consider, among other things, Aspen’s shortself-employed geologist
in the oil and long-term prospectsgas exploration industry. Mr. Imperato served as a director for
Applied Earth Technology, Inc. from September 1985 through September 1989. As
described below, Mr. Imperato has also served and various strategic alternatives thewas paid as a Company
had been consideringconsultant on an on-going basis to maximize stockholder value, including growing Aspen’s business operations, seeking to grow Aspen through an acquisitionbasis.
Significant Employees and Family Relationships.
There are no family relationships between any director, executive officer,
or other strategic alternative, and possibly selling Aspen and/person nominated or certain of its assets. At the August 2008 Board of Directors meeting, the directors reviewed and discussed alternatives for the Company going forward and noted that several companies had previously inquired about acquiring Aspen or certain of its assets. The Board agreed that Aspen should explore a possible sale of Aspen or its assets. However, the Board of Directors did not, at that time, conclusively determine that it would take any particular course of action . Instead, the Board of Directors only decided to attempt to explore the options for a sale of its assets and solicit the highest offered price for certain Aspen assets. The Board also determined that, rather than negotiating with a single bidder, it would be in the best interest of Aspen and its stockholders that a competitive bid process be initiated.
On September 4, 2008, Aspen announced that its Board of Directors had decided to investigate strategic alternatives for Aspen, including the possibility of selling Aspen’s assets or considering another appropriate merger or acquisition transaction for several reasons, including:
Further, and as is evidenced by the price offered by Venoco for Aspen’s interest in the Assets (approximately $1.10 per share after deducting the estimated expenses of the sale, and prior to any adjustments to the purchase price), Aspen believes that the market price of Aspen’s common stock (which has consistently been below $1.00 per share since early November 2008) does not adequately reflect the inherent value of Aspen’s producing oil and gas assets and undeveloped acreage. Aspen believes that the consideration that Venoco offered for the Assets more accurately reflects the current market value of the Assets. After considering other offers for the Assets, and other strategic alternatives, the Board of Directors determined that the sale of the Assets to Venoco is in the best interests of Aspen and Aspen’s stockholders.
20
On November 21, 2008 Aspen closed the data room. After the closing of the data room the Company received several submissions of interest regarding the potential purchase of substantially all of the Company's California oil and gas properties and interests. After review of all offers, continued negotiations with certain parties, and after considering its other strategic alternatives including continuing its normal business operations, on December 9, 2008, because Venoco’s offer was the highest of several receivedchosen by the Company to become a director or executive
officer.
Involvement in Certain Legal Proceedings
During the Boardpast five years, no present director or executive officer of Directors decidedthe
Company has been the subject matter of any of the following legal proceedings:
(a) any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to pursuethat time; (b) any criminal convictions;
(c) any order, judgment, or decree permanently or temporarily enjoining,
barring, suspending or otherwise limiting his involvement in any type of
business, securities or banking activities; or (d) any finding by a court, the
sale of its Assets and found Venoco’s offerSEC or the CFTC to have violated a federal or state securities or commodities
law. Further, no such legal proceedings are believed to be the most appropriate, in the best interests of Aspen and its stockholders, and thus, decided to continue to explore and negotiate the Asset Sale with Venoco.
Aspen’s Board of Directors, in consultation with legal counsel, and other advisors negotiated the termscontemplated by
governmental authorities against any director or executive officer.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the PurchaseSecurities Exchange Act of 1934 (the "Exchange Act")
requires Aspen's directors and Sale Agreement from December 2008 through February 2009. Thereafter, Aspen’s directors, senior management,officers and legal advisors conferred regarding the termsany persons who own more than ten
percent of the proposed purchaseAspen's equity securities, to file reports of ownership and sale agreement, and on February 18, 2009, Aspen’s Board of Directors held a meeting to consider and take action on the proposed transaction. The Board unanimously approved the Asset Sale pursuant to the Purchase and Sale Agreement, and resolved to recommend that its stockholders vote to approve the Asset Sale.
On February 19, 2009, the parties executed the Purchase and Sale Agreement, and Aspen announced the transactionchanges
in a press release issued on February 20, 2009 and a Form 8-K filedownership with the Securities and Exchange Commission (the "SEC"). All
directors, officers and greater than ten-percent stockholders are required by
SEC regulation to furnish Aspen with copies of all Section 16(a) reports filed.
Based solely on February 19, 2009. The Form 8-K includes the Purchase and Sale Agreement as an exhibit, and the Form 8-K, the Purchase and Sale Agreement, and the press release are all available on Aspen’s website at www.aspenexploration.com/venoco.htm.
Following the closingour review of the data roomcopies of Forms 3, 4 and after receiptany amendments
thereto furnished to us during the fiscal year completed June 30, 2009 and
subsequently, we believe that during the period from July 1, 2009 through the
date of a written expressionthis Proxy Statement, all filing requirements applicable to our
officers, directors, and greater-than-ten-percent stockholders were complied
with.
16
interest from Venoco, but while Aspen was negotiating terms of the Purchase and Sale Agreement with Venoco, Aspen received an unsolicited bid from a party who was invited to, but chose not to participate in the data room review or subsequent bid process. That party made general inquiries and (among other things) said that he “would be thrilled to write Aspen a check for $7.0 million for your California gas wells in Sacramento and call it a good day.” Aspen exchanged some communications with this party. After further communication, inasmuch as this party had not participated in due diligence, was only willing to purchase a portion of Aspen’s California properties for a price less than Venoco offered, did not make a definitive offer, and was otherwise notAspen's directors are considered to be a serious bidder for the properti es, Aspen chose not to pursue this possibility. This party renewed his interest after Aspen signed the Purchase and Sale Agreement and, in accordance with the requirements of the Purchase and Sale Agreement advised Venoco of the subsequent communications, none of which amounted to an offer or “Acquisition Proposal”"independent" as defined by
the Purchase and Sale Agreement.
SummarySection 803A of the Asset Sale
21
Venoco agreed to pay a total purchase priceits wells:
Gross Wells Net Wells
Gas Gas
----------- ---------
As of $25.0 million for the Assets assuming all Additional Sellers become Sellers subject to certain adjustments set forthJune 30, 2008
Aspen Exploration 88 19.17
R. V. Bailey 67 2.14
R. A. Cohan 67 1.2
We did not grant any participatory rights in the Purchaseour Montana oil properties.
17
Sale Agreement. Venoco will pay each Seller, including Aspen, a portionWorking Interest Plan:
A discussion of the total purchase price per the allocation terms in the PurchaseAspen's Amended Royalty and Sale Agreement. The transaction will result in Aspen being paid approximately $8.425 million for its interest in the Assets subject to any purchase price adjustment. Aspen estimates that transaction costs associated with the Asset Sale, including the fee to the mineral broker, will be about $500,000, resulting in net proceeds to Aspen of about $7.925 million before any adjustments.
Each Other Seller will bear its proportionate share of the 3% fee to be paid to the mineral brokerWorking Interest Plant and the
approximately $100,000 cost associated withspecific royalties assigned to our executive officers is included in "Executive
Compensation" below.
Employment Agreements:
See the negotiationExecutive Compensation disclosure and completion of the Asset Sale. The Other Sellers will not bear any portion of the costs of calling or conducting the Special Meeting, the preparation ofdiscussion in this Proxy
Statement or Aspen’s other corporate activities.
A copy-- Employment contracts and termination of employment and change in
control arrangements, for a discussion of the Purchaseemployment contracts between Aspen
and Sale Agreement is available on Aspen’s websiteMessrs. Cohan and in the SecuritiesBailey.
Consulting Fees and Exchange Commission’s EDGAR database. You are encouragedOther Compensation Arrangements
Mr. Imperato. Mr. Imperato was appointed to read the agreement in its entirety because it is the legal document that governs the Asset Sale. Aspen will provide you a hard copy of the Purchase and Sale Agreement upon your written or telephonic request to Aspen at 2050 South Oneida Street, Suite 208, Denver, Colorado 80224; telephone: (303) 639-9860; facsimile: (303) 639-9863.
Purpose of the Asset Sale
After considering and exploring its strategic alternatives, Aspen’sour Board of Directors believesin
December 2008, and has served as a Company consultant on an on-going basis. In
the Asset Sale is in the Company’s best interest and accordingly soughtpast we paid Mr. Imperato consulting fees for services provided to structure the transaction in a manner to maximize the value received by the
Company, for its interestand have paid such fees during our 2009 fiscal year. These fees, paid
at the rate of $93.75 per hour during our 2009 fiscal year, amounted to $86,625
in the Assets. The Asset Sale will permit the Company to explore other alternatives aimed to maximize stockholder value. The consummationfiscal 2009.
Mr. Imperato also had working and royalty interests in certain of the
Asset Sale will provide Aspen additional financial resources for such activities. Additionally, Aspen plans to distribute substantially all of the net, after-tax proceeds of the Asset Sale to its stockholders.
Consideration and Proceeds from the Asset Sale
Assuming all Additional Sellers become sellers under the Purchase and Sale Agreement, Venoco has agreed to pay a total purchase price of $25.0 million for the Assets, subject to adjustments set forth in the Purchase and Sale Agreement to give economic effect of the sale as of December 1, 2008. Venoco will pay each Seller a portion of the total purchase price per the allocation set forth in the Purchase and Sale Agreement. The purchase price payable to each Seller (the “per Seller purchase price”), will be adjusted so as to give economic effect to the sale as of December 1, 2008 (the “effective time”), i.e., each Seller will receive a credit for expenses incurred in operating the Assets during the period between the effective time and the closing of the Asset Sale, and will be allocated a deduction for revenues received from the Assets during that period. Concurrently with the exec ution of the Purchase and Sale Agreement, Venoco wired Aspen $1.25 million to be held as a deposit on behalf of the Sellers, and an additional $1,151,100 upon execution of the Purchase and Sale Agreement by the Additional Sellers. The deposit will be applied to the purchase price, returned to Venoco with interest, or paid to Aspen and each Seller as specified below under the “Termination” provision of the Purchase and Sale Agreement.
22
Allocation of Purchase Price and Possible Conflicts of Interest
Aspen’s Board of Directors reviewed and approved the allocation of the purchase price between Aspen and each of the other Sellers in connection with their review of the Purchase and Sale Agreement. In completing this review, the directors understood that three of the four directors (Messrs. Bailey, Cohan and Imperato) were working interest owners and intended to be Initial Sellers under the Purchase and Sale Agreement. This led to the directors understanding that there may be a conflict of interest in their positions as directors and Initial Sellers since a greater allocation of the proceeds from the transaction to Aspen’s assets would reduce the allocation to the interests of the Initial Sellers and Additional Sellers. As a result of their outside working interests in the Assets, and subject to adjustments, Messrs. Bailey, Cohan and Imperato would receive approximately $760,000, $397,000, and $98,000 respectively from the total purchase price for the Assets.
In approving the allocation of value of the properties between Aspen and the working interest owners, the Board of Directors felt it was in the best interests of the stockholders to accept the valuations as assigned to each of theCalifornia oil and gas properties that constitutewere operated by the AssetsCompany prior to the
June 30, 2009 sale to Venoco. During the Company's fiscal year ended June 30,
2008 Mr. Imperato was paid $166,202 in royalties and $262,671 from his working
interests. During fiscal year ended June 30, 2009 Mr. Imperato was paid $93,400
in royalties and $98,856 from his working interests.
Mr. Imperato also entered into an agreement with Brian Wolf Oil & Gas
Properties ("Wolf"), who was engaged by Venoco based primarilythe Company to assemble and operate the
Company data room and to assist in the sale of Aspen's properties. The agreement
between Aspen and Wolf required that Aspen pay Wolf 3% of the gross purchase
price for the properties, and as a result, Aspen paid Wolf $671,733.57. Wolf had
agreed to share a portion of this commission with Mr. Imperato, and as a result
paid Mr. Imperato $331,134. Mr. Imperato disclosed this compensation arrangement
to the Company prior to his appointment to the Board of Directors, and it had
been negotiated between Wolf and Mr. Imperato several months before Mr. Imperato
was a director of Aspen.
Mr. Hensman. Mr. Hensman assumed the role of chief financial officer upon
Mr. Cohan's disability. In that role, Aspen has been paying him consulting fees
at $70 per hour as disclosed above in the notes to the Summary Compensation
Table in the Executive Compensation disclosure below.
Other Arrangements:
During the fiscal years 2009 and 2008, Aspen paid for various hospitality
functions and for travel, lodging and hospitality expenses for spouses who
occasionally accompanied directors when they were traveling on company business.
Management believes that the expenditures were to Aspen's benefit.
Meetings of the Board and Committees
The Board of directors held one formal meeting during the fiscal year ended
June 30, 2008 and six formal meetings during the fiscal year ended June 30,
2009. Each director attended all of the formal meetings either in person or by
telephone, without exception. In addition, regular communications were
maintained throughout the year among all of the officers and directors of the
Company and the directors acted by unanimous consent six times during fiscal
2008, four times during fiscal 2009, and three times subsequently.
18
workrecords of the Company, the stockholder must provide evidence that he
or she owns such shares (which evidence may include a current statement
from a brokerage house or other appropriate documentation);
3. Information from the stockholder regarding any intentions that he or she
may have to attempt to make a change of control or to influence the
direction of the Company, and other information regarding the stockholder
or any other persons associated with the stockholder that would be required
under Items 4 and 5 of SEC Schedule 14A were the stockholder or other
persons associated with the stockholder making a solicitation subject to
SEC Rule 14a-12(c);
4. Name, address, telephone number and other contact information of the
proposed nominee; and
5. All information required by Cecil Engineering, Inc.Item 7 of SEC Schedule 14A with respect to the
proposed nominee, in a form reasonably acceptable to the Company.
Any stockholder desiring to communicate directly with any officer or
director of Aspen may address correspondence to that person at our offices in
Denver, Colorado. Our office staff will forward such communications to the
addressee.
19
purchase price allocations for royalty under Aspen's "Royalty and Working Interest
Plan" for employees are based on each working interest owners’ percentage ownershipa determination by management whether there is
any "room" for royalties in a particular transaction. In some specific cases
management may believe that an oil or gas property or project is sufficiently
burdened with existing royalties so that no additional royalty burden can be
allocated to our employees for that property or project. In other situations a
determination may be made that there are royalty interests available for
assignment to our employees. The determination of whether royalty interests are
available and how much to assign to employees (usually less than 3%) is made on
a case-by-case basis by Robert A. Cohan, president, and R. V. Bailey, our chief
executive officer and vice president, both of whom benefit from royalty
interests assigned. We never granted any overriding royalty interests in our
Montana oil properties (which properties we sold in February 2009).
During fiscal year 2008, we assigned to employees royalties on certain of
our properties pursuant to our Amended Royalty and Working Interest Plan, as set
forth in the different properties and wells that are a partfollowing table. No assignments of overriding royalty interests
were made to employees during fiscal year 2009. At the time we assign these
overriding royalty interests, we considered the value of the Assets. Additionally,royalties assigned
to be nominal since the assignments are made while the properties are
undeveloped and unproved, and before any wells or drilled or significant
exploratory work has been performed. The overriding royalty interests in these
properties granted to our named officers and our one additional (non-executive)
employee were as follows:
R.V. Bailey R.A. Cohan J.L. Shelton
----------- ---------- ------------
Assigned during the
2009 fiscal year percent percent percent
-- -- --
Assigned during the
2008 fiscal year:
Johnson Unit 13 1.260000 1.260000 0.480000
SJDD 11-1 1.360000 2.000000 0.640000
Delta Farms 10 0.816000 1.200000 0.384000
Eastby 1-1 0.906661 1.333325 0.426664
The following table sets forth the payments received during the years
stated by our named executive officers.
Payments Received During
Fiscal Year Ended June 30,
--------------------------
2009 2008
---- ----
Mr. Cohan $59,114 $145,873
Mr. Bailey $43,234 $102,927
23
determinedof Directors each
year.
We adopted an Amendment to allocate a portionthe Profit-Sharing 401(k) Plan effective July 1,
2005 which states that Aspen will make matching contributions equal to 50% of
the estimated $100,000participant's elective deferrals. During fiscal 2008, we contributed $30,250
to the plan ($10,000 to R. V. Bailey's plan; $10,250 to Robert A. Cohan's plan;
$10,000 to Judith L. Shelton's plan). During fiscal 2009, we contributed $25,125
to the plan ($10,000 to R. V. Bailey's plan; $5,125 to Robert A. Cohan's plan;
$10,000 to Judith L. Shelton's plan). When amounts are contributed to Mr.
Bailey's and Mr. Cohan's accounts (which amounts are fully vested), these
amounts are also included in the column labeled "All Other Compensation" in the
Summary Compensation table, above.
For the fiscal years ended June 30, 2009 and 2008, the Company had a policy
of reimbursing employees for medical expenses incurred but not covered by the
paid medical insurance plan. Expenses reimbursed for fiscal 2009 and fiscal 2008
were $22,833 and $24,108, respectively. As of June 30, 2009 and 2008 there were
no accruals for reimbursement of medical expenses. Under the terms of Mr.
Bailey's current employment agreement, he is responsible for his own medical
insurance premiums and will no longer be reimbursed excess medical expenses.
During the 2008 fiscal year Aspen provided one vehicle each to Messrs.
Bailey and Cohan. In fiscal 2009, Messrs. Bailey and Cohan purchased the
vehicles from the Company. Mr. Cohan purchased his vehicle from Aspen at fair
market value as determined in the used car market. Pursuant to Mr. Bailey's
September 2004 employment agreement, he purchased his vehicle from Aspen for
$500, significantly below the fair market value of that vehicle. The difference
between the purchase price paid by Mr. Bailey when he acquired his vehicle from
Aspen for $500 (pursuant to his September 2004 employment agreement) and the
fair market value of that vehicle ($31,500) is also included in "Other
Compensation" for Mr. Bailey.
3. Expense Reimbursement.
We have agreed to reimburse our officers and directors for out-of-pocket
costs and expenses incurred on behalf of Aspen. Since this reimbursement is on a
fully-accountable basis, there is no portion treated as compensation.
4. Purchases of Working Interests
As described in Item 1, above, when Aspen was actively operating its
California natural gas properties, Aspen generally did not incur all of the
transaction toexpense and bear all of the working interest owners based on their proportionate interestrisk in the Assets.
Aspen’s Contemplated Activities Following the Asset Sale or Abandonment Thereof
Ifdrilling its wells. Aspen completesgenerally sought
other participants who were familiar with the sale of its interests in the Assets, Aspen will not have significant remaining business operations. Aspen sold its interests in certain oil and gas assets locatedindustry and the wells
24
Montanathese wells. When they did so, they purchased
working interests on the same basis as unaffiliated parties and bear their
proportionate share of Aspen's promotional interest. These investments by our
named executive officers are not considered to be compensatory since the named
executive officers are participating in Februarythe wells on the same basis as
unaffiliated parties.
5. Other
Mr. Cohan also served as a director during our fiscal year 2009 and Aspen’s Alaska gold propertieswas
compensated $4,000 for serving in that capacity. This amount is included in
"Other Compensation" above rather than added to the Director compensation table
below.
Employment Agreement with our Named Executive Officers. We have entered
into employment agreements with two of our named executive officers. The
material terms of these agreements are being heldsummarized as follows:
Mr. Cohan: Aspen and Robert A. Cohan entered into an employment agreement
dated January 1, 2003, as amended on April 22, 2005 (the "Agreement"). The
Agreement was for explorationan initial three year term, was amended in April 2005, and
development but, sinceexpired on December 31, 2008. Under the Agreement we paid Mr. Cohan an annual
salary of $160,000 and we offered Mr. Cohan health insurance, cost
reimbursement, and certain other benefits.
As reported in January 2008, Mr. Cohan suffered a stroke and was unable to
continue to perform his duties as chief executive officer and chief financial
officer of Aspen. As a result, these duties were assumed by Messrs. R.V. Bailey
and Kevan Hensman. As a result, on September 4, 2008, Aspen terminated its arrangementnotified Mr. Cohan
that his employment agreement would not be renewed when it expired on December
31, 2008.
Mr. Bailey: Effective May 1, 2003, and as amended September 21, 2004, we
entered into an employment agreement with Hemis in September 2008, there has been no activity on the gold properties. Aspen itself has not performed any activities on the gold properties other than minimal maintenance for more than ten years.
Following the completionR. V. Bailey (the "2003 Agreement").
The pertinent provisions of the Asset Sale, Aspen will have2003 Agreement included an employment period
ending May 1, 2009, the title of Vice President (although Mr. Bailey is now
serving as our chief executive officer) and an annual salary of $60,000 per year
from January 1, 2007, ending May 1, 2009. Effective as of January 1, 2009, and
as amended July 21, 2009, we entered into a significant amountnew employment agreement with Mr.
Bailey (the "2009 Agreement") pursuant to which both parties agreed that the
2003 Agreement was terminated as of liquid assets – estimated to be in excess of $9.0 million. Should the saleJanuary 1, 2009. The pertinent provisions of
the Assets2009 Agreement include an employment period ending December 31, 2009 with a
salary of $120,000 per year. The 2009 Agreement provides that Mr. Bailey is
eligible to participate in Aspen's stock options and royalty interest programs.
During the term of the agreement, and in lieu of health insurance, we have
agreed to pay Mr. Bailey a monthly allowance to cover such items as
prescriptions, medical and dental coverage for himself and his dependents and
other expenses not covered in the agreement. To the extent that Mr. Bailey does
not provide documentation accounting for the expenditure of this amount for
medical reimbursement purposes, it is treated as compensation to him. The
original monthly allowance was $1,700, but the agreement provided that it should
be completed,adjusted each June for inflation. Currently the monthly allowance is $1,966.
We may terminate the 2009 Agreement upon Mr. Bailey's death by paying his
estate all compensation that had or will accrue to the end of the year of his
death plus $75,000. Should Mr. Bailey become totally and permanently disabled,
we will pay Mr. Bailey one half of the salary and benefits set forth in our
agreement with him for the remainder of the term of the 2009 Agreement. Aspen
may not terminate the 2009 Agreement for other reasons. The 2003 Agreement
terminated Aspen's obligations under a previous agreement by which it was
obligated to repurchase Mr. Bailey's stock upon his death.
25
distribute substantially all of the net, after-tax proceeds from the salecontinue to
our stockholders and then use our remaining resources to consider otherexplore business opportunities in the natural resources industry, which may include an acquisition of assets or business operations or a merger or other business combination.with third parties. As we have not, and do not,
intend to limit what types of business opportunities we have or may pursue, after the Asset Sale, if
we identify an appropriate business opportunity it may result in Aspen changing
its historical line of business (the explorationalthough to date Aspen has, and intends, to focus its
search within the broad scope of the natural resources industry.
Reasons the Proposal for Possibly Dissolving the Company is Being Submitted for
Stockholder Approval
As a result of the sale of the Company's California and development ofMontana oil and natural gas
prospects,properties and explorationassets the Company currently has no material or revenue
generating operations. In order to gain approval for gold). We havethe sale of the California
properties, Aspen was required to seek stockholder approval. In complying with
the rules and regulations of the Securities and Exchange Commission relating to
the proxy statement process, one stockholder submitted a request that Aspen
request that its stockholders consider a dissolution proposal at the same time.
Although this had been discussed previously by Aspen's Board of Directors, the
Aspen Board was concerned about the complexity of such a lengthy proxy statement
and posed certain other objections to the inclusion of a dissolution proposal at
that time. Aspen also agreed to proposeadvised the stockholder that Aspen would submit a
resolution to consider the possibility of dissolu tion of Aspen to ourdissolution proposal for consideration by stockholders at a meeting scheduled to
be held later in 2009. At that time, the stockholder withdrew his proposal and
the SEC completed its review process. Subsequently one other stockholder stated
in a filing submitted to the Securities and Exchange Commission on July 30, 2009
that if Aspen does not submit a proposal for dissolution to its stockholders at
the Annual Meeting he may take action to try to cause a change of control at
Aspen.
As noted, the Aspen Board had considered the possibility of dissolution
even before the stockholder proposal was presented, recognizing that following
the sale of its California assets Aspen would only have liquid assets and
immaterial other assets. Certain of the directors recognized that as a
publicly-held corporation with liquid assets and no business operations, Aspen
may have a value greater than the value of the cash. Nevertheless, the directors
have recognized that if a majority of Aspen's stockholders approve Proposal No.
2 at the Annual Meeting, the Board should exercise its business judgment in
determining whether to dissolve the corporation or to consider possible business
opportunities. In any event, the Board must exercise its authority to dissolve
Aspen by filing a certificate of dissolution with the Delaware Secretary of
State on or before December 31, 2010, or the authority to dissolve will be
revoked.
The Board of Directors will likely consider exercising that authority if no
other appropriate business opportunities are then identified by the Company. The
Board of Directors may deem it advisable to dissolve the Company should no other
appropriate business opportunities be identified because of the lack of income
producing assets Aspen owns and the significant costs associated with
maintaining the limited business operations while complying with the regulations
governing public companies.
Delaware law requires that stockholders approve and authorize the
dissolution of a corporation. As such, and for the reasons outlined above, Aspen
is submitting Proposal No. 2 to the stockholders.
29
we intendthe Board of Directors have the authority to hold late October or November 2009 (subjectdissolve the Company, and
hereby adopts this resolution pursuant to preparationSection 275 of the necessary materials forDelaware
General Corporation Law (the "DGCL") and any other applicable
provisions therein, reserving the annual meetingright to the Board of Directors to
determine when and regulatory review). Ifif to complete the dissolution of the Company by
filing a certificate of dissolution with the Delaware Secretary of
State as required by the DGCL, and further reserving to the Board of
Directors in its discretion to abandon the dissolution of the Company,
with the understanding that if the dissolution of the Company has not
been completed by filing a certificate of dissolution with the
Delaware Secretary of State on or before December 31, 2010, the Board
will be deemed to have made the decision to abandon the dissolution of
the Company.
Board Recommendation
A majority of the Board of Directors did not reach a consensus on whether
the Board would recommend to the stockholders approval of Proposal No. 2. One of
Aspen's directors recommends that the stockholders vote against the proposal,
and three directors did not make any recommendation with regard to the proposal.
R.V. Bailey, the Company's Chairman and Chief Executive Officer believes
that the Company should continue to explore potential business opportunities.
Based on conversations with various advisors, and preliminary discussions with
third parties, Mr. Bailey believes that Aspen, wereas a company submitting reports
pursuant to dissolve, it would not enter into anotherthe Securities and Exchange Act of 1934 and with an existing
stockholder base, can offer value to third parties in potential business
opportunity but would wind up its operations and distribute its remaining assetstransactions. He believes this value may be enhanced because after the
distribution to stockholders.
If Aspen is unablebe made to completestockholders from the proceeds of the sale of the
Company's California assets Aspen will retain a portion of its existing cash and
cash equivalent assets. Public shell companies potentially have value in merger
and business combination transactions in excess of the value of their cash
assets. Mr. Bailey believes the Company can minimize its expenditures while
trying to identify an appropriate business opportunity or transaction. As such,
Mr. Bailey believes that Aspen likely will be able to identify a business
opportunity that will offer Aspen's stockholders potential long term value. Mr.
Bailey believes that this long term value has the potential to exceed the value
offered to stockholders through the dissolution process. Therefore, Mr. Bailey
believes that it is not in Aspen's or its stockholders' best interest to
dissolve the Company, he recommends stockholders vote against Proposal No. 2,
and has informed the Board of Directors that he intends to vote against Proposal
No. 2.
Messrs. Cohan (President and director), Hensman (Chief Financial Officer
and director) and Imperato (director) are continuing to evaluate whether they
believe the Company can identify and execute on a business opportunity that may
offer long term value to the Company's stockholders, and as such neither has yet
reached a conclusion on whether Proposal No. 2 should be submitted to the
stockholders with or without a recommendation. Although Messrs. Hensman,
Imperato, and Cohan do not believe the Company should engage in an open ended
search for a business opportunity or transaction, they believe that subject to
the Company's financial resources the Company in the near term should continue
to attempt to identify a business opportunity or transaction. As of the date of
this Proxy Statement Messrs. Hensman, Cohan and Imperato have not informed the
Company whether each intends to support or oppose Proposal No. 2.
30
either becauseIf the Company is dissolved, the Board of Directors has the authority to
sell all or substantially all our remaining assets following our dissolution.
Assuming we do not identify another business opportunity, our only remaining
assets will be cash, cash equivalents and investments, accounts receivable,
potential tax refunds, property, and equipment, and certain other assets.
From and after the Dissolution Date, sales of our remaining assets will be
made on such terms as are approved by our Board of Directors and may be
conducted by competitive bidding or privately negotiated sales. The prices at
which we will be able to sell our remaining various assets will depend largely
on factors beyond our control, including, but not limited to, the compatibility
of our intellectual property rights with the most likely purchasers of such
rights, the extent to which such intellectual property rights are viewed as
valuable by such companies and the condition of financial markets and the
availability of financing to prospective purchasers of assets. In addition, we
may not obtain as high a price for our remaining assets as we might secure if we
were not in liquidation.
Contingent Liabilities; Contingency Reserve
Under the DGCL, if we dissolve the Company, we are required to pay or
provide for payment of all of our liabilities and obligations. Following the
Dissolution Date, we will pay, to the extent of our funds and assets available,
all expenses and fixed and other known liabilities, or set aside as a
contingency reserve, assets which we believe to be adequate for payment thereof
(the "Contingency Reserve").
We are currently unable to obtain stockholder approval orestimate with precision the amount of any
Contingency Reserve that may be required, but any such amount will be deducted
before the determination of amounts available for distribution to stockholders.
The actual amount of any Contingency Reserve will be based upon estimates and
opinions of management and our Board of Directors and derived from review of our
estimated operating expenses, including, but not limited to, anticipated
compensation payments, estimated legal and accounting fees, rent, payroll and
other reasons, Aspen intends to retain competent, experienced personnel to advancetaxes payable, miscellaneous office expenses, other expenses accrued in
our financial statements, and continue its oil and gas operations in California and elsewhere.
contractual liability claims. There can be no
assurance that Aspenthe Contingency Reserve in fact will be ablesufficient. After the
liabilities, expenses and obligations for which the Contingency Reserve had been
established have been satisfied in full, we will distribute to completeour stockholders
any remaining portion of the Asset Sale, or that if it does so, itContingency Reserve. The remaining portion of the
Contingency Reserve will be able to enter into a business combination or acquire a business opportunity on reasonable terms
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following completion of the Asset Sale, or that any such business combination or business opportunity will be successful. There can also be no assurance that Aspen will be able to hire appropriate management regardless whether Aspen completes the Asset Sale.
Regardless of the course of Aspen’s business, we currently plan to continue to comply with the applicable reporting requirements of the Securities Exchange Act of 1934, as amended.
Overview of the Purchase and Sale Agreement
Aspen, Venoco, and the Initial Sellers entered into the Purchase and Sale Agreement effective as of February 19, 2009. The full text of the agreement is included on Aspen’s website, www.aspenexploration.com/venoco.htm. The agreement was also filed as an exhibitpaid to the Form 8-K reporting the executionholders of the agreement and is therefore availableshares of our common stock on
the SEC’s EDGAR website. Any person who desires a hard copy of the agreement can obtain one by callingpro rata basis.
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writing Aspen Exploration at Suite 208, 2050 South Oneida Street, Denver, Colorado 80224; telephone: (303) 639-9860; fax: (303) 639-9863. Aspen urges you to read the Purchase and Sale Agreement in its entirety for a more complete description of the terms and conditions of the Asset Sale and related matters.
The representations and warranties described below and included in the Purchase and Sale Agreement were made by the Sellers and Venoco to each other as of specific dates. The assertions embodied in those representations and warranties were made solely for purposes of the Purchase and Sale Agreement and maystate regulatory requirements must be subject to important qualifications and limitations agreed to by Aspen and Venococomplied
with or approvals obtained in connection with negotiatinga dissolution.
Absence of Appraisal Rights
Under Delaware law, our stockholders are not entitled to appraisal rights
for their shares of our common stock in connection with the termstransactions
contemplated by a dissolution or to any similar rights of dissenters under
Delaware law.
Potential Liability of Stockholders
Under the DGCL, in the event that we dissolve and we fail to create
adequate reserves for liabilities, or should such reserves be insufficient to
satisfy the aggregate amount ultimately found payable in respect of our expenses
and liabilities, each stockholder could be held liable for amounts due to
creditors to the extent of the Purchaseamounts that such stockholder received from us.
Each stockholder's exposure to liability is limited to his, her or its pro rata
portion of the amounts due to creditors and Sale Agreement. Moreover,is capped, in any event, at the
representations and warranties mayamount of the distribution actually received by such stockholder. In addition, a
creditor could seek an injunction to prevent us from making distributions, which
could delay and/or diminish distributions to stockholders.
Material U.S. Federal Income Tax Consequences
The following discussion is a general summary of the material U.S. Federal
income tax consequences of a dissolution of the Company or the receipt of
non-liquidating distributions, but does not purport to be subject to a contractual standardcomplete analysis of
materialityall the potential tax effects. EACH STOCKHOLDER IS ADVISED TO CONSULT HIS, HER
OR ITS TAX ADVISOR FOR ACTUAL TAX CONSEQUENCES TO HIM, HER OR IT OF THE PLAN OF
LIQUIDATION OR THE RECEIPT OF NON-LIQUIDATING DISTRIBUTIONS.
The discussion addresses neither the tax consequences that may be different from whatrelevant
to particular categories of investors subject to special treatment under certain
federal income tax laws (such as dealers in securities, banks, insurance
companies, tax-exempt organizations, and foreign individuals and entities) nor
any tax consequences arising under the laws of any state, local or foreign
jurisdiction. The discussion is based upon the Code, Treasury Regulations, the
IRS rulings and judicial decisions now in effect, all of which are subject to
change at any time; any such changes may be viewed as material to stockholders, or may have been used for the purpose of allocating risk between Aspen and Venoco rather than establishing matters as facts.applied retroactively. The Purchase and Sale Agreement is described in this Proxy Statement only to provide you with information regarding the terms and conditions o f the Asset Sale, and not to provide any other factual information regarding Aspen, Venoco, or their respective businesses. Accordingly, you should not relyfollowing
discussion has no binding effect on the representationsIRS or the courts. Distributions may
occur at various times and warranties in more than one tax year, and it is possible that no
distribution will be made. No assurances can be given that the Purchase and Sale Agreement as characterizationstax treatment
described herein will remain unchanged at the time of such distributions. No
ruling has been requested from the actual state of facts about Aspen or Venoco or any other third party, and you should read the information provided elsewhere in this Proxy Statement for information regarding Aspen and its business.
Assets & Liabilities
Under the Purchase and Sale Agreement Aspen and the Other Sellers have agreed to sell to Venoco their interests in the Assets which consist primarily of real and personal property interests located in Colusa, Glenn, Solano, Sutter, Tehama, and Yolo Counties, California, and including, but not limited to:
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Pursuant to the Purchase and Sale Agreement, Venoco has agreed to assume all claims, costs, expenses, liabilities and obligations accruing or relating to:
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Due Diligence and Related Matters
The Purchase and Sale Agreement contains provisions intended to permit Venoco to conduct a due diligence review of the Assets. Further, the Purchase and Sale Agreement sets forth certain terms and conditionsIRS with respect to any title deficiency issues and environmental matters identified after executionthe anticipated tax
treatment of the Purchasedissolution or the receipt of non-liquidating distributions,
and Sale Agreement. These terms and conditions include, but arewe will not limited to:
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Representations & Warranties
Under the termsseek an opinion of the Purchase and Sale Agreement, each Seller made certain customary representations and warranties to Venoco, including but not limited to representations and warranties related to:
Under the terms of the Purchase and Sale Agreement, Venoco has made certain customary representations and warranties to the Sellers, including representations and warranties related to:
Covenants
Under the terms of the Purchase and Sale Agreement, the Sellers and Venoco have agreed to certain customary covenants that apply from the execution of the Purchase and Sale Agreement through closing, including the following:
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Solicitation
In the Purchase and Sale Agreement, each Seller has agreed not to, and to use reasonable efforts to cause its directors, officers, employees and representatives not to, directly or indirectly:
Aspen may take the action listed in the second bullet point ofcounsel with respect to the anticipated tax
treatment. The failure to obtain a ruling from the IRS or an Acquisition Proposal if, at any time prior to obtainingopinion of counsel
results in less certainty that the approval of Aspen stockholders:
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Aspen also agreed to promptly notify Venoco of any request for information from a person that has made, or any Seller reasonably believes mayanticipated tax treatment summarized herein
will be contemplating, an Acquisition Proposal, or any Acquisition Proposal received by any Seller from any person, or any inquiry made or discussions or negotiations sought to be initiated or continued with respect to any Acquisition Proposal, and the material terms and conditions of such request, Acquisition Proposal, inquiry, discussions or negotiations. Further, Aspen is obligated to promptly provide Venoco copies of any written materials received by Seller or its representatives in connection withobtained. If any of the foregoingconclusions stated herein proves to be
incorrect, the result could be increased taxation at the Company and/or
stockholder level, thus reducing the benefit to our stockholders and any correspondence related thereto, andus from the
identity of the personliquidation or group making any such request, Acquisition Proposal or inquiry or with whom any discussions or negotiations are taking place. Finally, Aspen is obligated to keep Venoco full y and currently informed of the status of any Acquisition Proposals, including the identity of the parties and price involved and any material changes to any terms and conditions thereof.
Aspen also agreed, subjectfrom non-liquidating distributions.
Consequences to the exceptions specified below, that prior to the termination of the Purchase and Sale Agreement, its Board of Directors would not:
The Purchase and Sale Agreement provides that Aspen’s Board of Directors may withhold, withdraw Company. If, and/or modify its recommendation with respect to stockholder approval of the Asset Sale or approve or recommend any Superior Proposal if Aspen’s Board of Directors determines in good faith, after consultation with its outside legal counsel and receipt of a written opinion from an independent investment bank, that such Acquisition Proposal is superior to the Asset Sale and provides Venoco written notice that it is contemplating making an adverse recommendation change and specifying the facts for such opinion.
As used in the Purchase and Sale Agreement:
a. “Acquisition Proposal” means, subject to certain exceptions, any proposal or indication of interest (other than by Venoco or any of its subsidiaries), whether or not in writing, for the (i) merger, consolidation or other business combination of Aspen, (ii) a restructuring, recapitalization or liquidation of Aspen, (iii) an acquisition or disposition of any stock that would be equal to 5.0% of the total voting power of Aspen’s outstanding voting securities, or (iv) any transaction or series of related transactions involving the direct or indirect sale of a material part of the Assets from any Seller or to a person other than Venoco.
b. “Superior Proposal” generally means any bona fide written Acquisition Proposal with respect to Aspen that was not initiated, solicited or knowingly facilitated or encouraged in violation of the Purchase and Sale Agreement, made by a third party on terms which the majority ofwhen, the Board of Directors
approves a plan of Aspen determines (after consultation with its outside legal counselliquidation and having receiveduntil the written opinion an independent investment bank concluding that such Acquisition Proposal constitutes a “Superior Proposal”, a copyliquidation is complete, we will
continue to be subject to tax on our taxable income. We will generally recognize
34
which shall promptly be provided to Venoco) in good faith by resolution duly adopted (i) would result in a transaction that, if consummated, is more favorableour property or collection of claims pursuant
to the stockholders
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plan of Aspen (in their capacityliquidation. Upon any distribution of property to our
stockholders, we will generally recognize gain or loss as stockholders) from a financial point of view, than the Asset Sale, taking into account all the terms and conditions ofif such proposal and the Purchase and Sale Agreement, and (ii) is reasonably capable ofproperty was
being completed on the terms proposed, taking into account all financial, regulatory, legal and other aspects of such proposal.
Conditions
The parties’ obligationssold to consummate the Asset Sale are subjectour stockholders at its fair market value.
Consequences to the prior satisfaction, or waiver by the appropriate party, of the conditions set forth below:
The Purchase and Sale Agreement provides that any or all of the conditions described above may be waived, in whole or in part. Aspen’s Board of Directors is authorized in its discretion to waive any of the conditions to Aspen’s performance without the consent of Aspen’s stockholders to the extent allowed by law. Aspen does not currently expect to waive any material condition to the completion of the Asset Sale.
Termination
The Purchase and Sale Agreement may be terminated at any time prior to the closing (whether before or after stockholder approval) upon any of the following circumstances:
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Effect of Termination
our stockholders. If the Purchase and Sale AgreementCompany is properly terminated, all obligations of the parties thereto shall terminate, subject to certain exceptions. Aspen has agreed to pay Venocodissolved, a
termination fee in the amount of $500,000 if:
If Aspen terminates the Purchase and Sale Agreement due to a failure to complete the Asset Sale by the termination date and, at the time of the termination, all conditions had been satisfied by Venoco and Venoco is willing to consummate the Asset Sale, Venoco shall be entitled to specific performance or, at its option, the return of its deposit. Aspen and the Other Sellers shall be entitled to retain Venoco’s deposit if Aspen terminates the Purchase and Sale Agreement due to a material breach by Venoco or due to the failure to complete the Asset Sale by the termination date when all material conditions have been met by the Sellers and the Sellers are willing and able to consummate the Asset Sale.
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Indemnification
The Sellers, severally and not jointly, have agreed to defend, indemnify, and save and hold harmless Venoco from and against all losses which arise from or in connection with any liabilities retained by the Sellers, any material breach or representation or warranty made by the Sellers, any matter for which the Sellers have agreed to indemnify Venoco of under the Purchase and Sale Agreement, and any material breach by Sellers of any covenant under the Purchase and Sale Agreement. Venoco has agreed to defend, indemnify, and save and hold harmless the Sellers from and against all losses which arise from or in connection with any liabilities assumed by Venoco, any material breach or representation or warranty made by Venoco, any matter for which Venoco has agreed to indemnify the Sellers under the Purchase and Sale Agreement, and any material breach by Venoco of any covenant under the Purchase and Sale A greement, including indemnification of Aspen in actions relating to the environmental condition of the Assets created after closing. The parties’ indemnification obligations are subject to certain procedural requirements and other conditions.
Voting Agreements
Concurrently with the execution of the Purchase and Sale Agreement each of Aspen’s officers and directors and certain of their affiliates, executed voting agreements, in which he or she made certain covenants and representations that are applicable during the term of the voting agreement, including but not limited to:
Material United States Federal Income Tax Consequences of the Asset Sale
Aspenstockholder generally will recognize a taxable gain on the Asset Saleor loss equal to the difference
between (i) the amount realized from the Asset Sale and the adjusted tax basissum of the assets sold, or, if the adjusted tax basis of the Assets exceeds the amount realized, such excess will be recognized as a loss. For purposes of calculating the amount of Aspen’s gain or loss, the amount realized by Aspen will include the cash received from Venoco, the amount of Aspen’s indebtedness and other liabilities that are assumed by Venoco, and the fair market value of any
other property (otherdistributed to such stockholder, if any, less any known liabilities
assumed by the stockholder or to which the distributed property is subject, and
(ii) such stockholder's tax basis for his, her or its shares of our common
stock. A stockholder's tax basis in his or her shares will depend upon various
factors, including, but not limited to, the stockholder's cost and the amount
and nature of any distributions received with respect thereto. A stockholder's
gain or loss will be computed on a "per share" basis. We expect to make more
than cash) Aspen receives for its assets. Aspen expectsone liquidating distribution to have sufficient losses (including net operating loss carry forwards)our stockholders, each of which will be
allocated proportionately to offset the gain expected toeach share of our common stock owned by a
stockholder. The value of each liquidating distribution will be applied against
and reduce a stockholder's tax basis in his or her shares of our common stock.
Gain will be recognized by reason of a liquidating distribution only to the
extent that the aggregate value of such distributions received by a stockholder
with respect to a share exceeds his, her or its tax basis for that share. Any
loss will generally be recognized only when the final distribution from us has
been received and then only if the Asset Saleaggregate value of the liquidating
distributions with respect to a share is less than the stockholder's tax basis
for regularthat share. If a stockholder is required to return any distribution, any
payments by a stockholder in satisfaction of any liability not covered by the
Contingency Reserve, which is described in greater detail elsewhere in this
Proxy Statement, generally would produce a loss in the year paid, which loss
could fail to cause a reduction in taxes payable in an amount equal to the
amount of the taxes paid on amounts previously distributed. Gain or loss
recognized by a stockholder will generally be treated as capital gain or loss
provided the shares are held as capital assets. Such gain or loss will be
subject to tax at the short-term or long-term capital gain tax rate, depending
on the period for which such shares are held by the stockholder. Long-term
capital gain of non-corporate taxpayers may be subject to more favorable tax
rates than ordinary income or short-term capital gain. The deductibility of
capital losses is subject to various limitations. We will provide our
stockholders and the IRS with a statement each year of the amount of cash and
the fair market value of any property distributed to the stockholders during
that year, at such time and in such manner as required by the Treasury
Regulations.
Consequences of Non-Liquidating Distributions. If the Company is not
dissolved and we make a non-liquidating distribution to our stockholders, the
amount they receive will be treated as a dividend to the extent of the
stockholder's share of our current and accumulated earnings and profits, if any,
as determined under federal income tax purposes, thus subjecting Aspen onlyprinciples. Such a dividend would be
includible in the stockholder's gross income and no current loss would be
recognized. Currently, dividends are taxable at a maximum rate for individual
stockholders of 15% if certain holding period and other requirements are met. We
anticipate that any amount distributed in excess of our current earnings and
profits will be treated as capital gain from the sale of our stock.
To the extent that a corporate stockholder is treated as receiving a
dividend, as described above, it may be eligible for a dividends received
deduction (subject to applicable limitations). In addition, any amount received
by a corporate stockholder that is treated as a dividend may constitute an
"extraordinary dividend" under Section 1059 of the Code, thereby resulting in a
reduction of tax basis or possible gain recognition in an amount equal to the
non-taxed portion of the dividend. Corporate stockholders should consult their
own tax advisors as to the application of Section 1059 of the Code to the tax
consequences of a dividend.
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alternative minimum tax.
Aspen doesincome tax liability.
Taxation of Non-United States Stockholders. Foreign corporations or persons
who are not expect thatcitizens or residents of the Asset Sale will resultUnited States should consult their tax
advisors with respect to the U.S. and non-U.S. tax consequences of the
dissolution or the receipt of non-liquidating distributions.
State and Local Income Tax Consequences. Stockholders may also be subject
to liability for state and local taxes with respect to the receipt of
liquidating or non-liquidating distributions. State and local tax laws may
differ in anyvarious respects from federal income tax law. Stockholders should
consult their tax advisors with respect to the state and local tax consequences
of the dissolution or statethe receipt of non-liquidating distributions.
The foregoing summary of certain income tax consequences is included for
its stockholders since they willgeneral information only and does not receiveconstitute legal advice to any
direct proceedsstockholder. The tax consequences of a dissolution or the receipt of
non-liquidating distributions may vary depending upon the particular
circumstances of the Asset Sale.
Aspen could be subject tostockholder. We recommend that each stockholder consult
his, her or its own tax advisor regarding the accumulated earnings tax equal to 15% of its accumulated taxable income if earnings and profits of Aspen are allowed to accumulate within Aspen rather than being distributed or reinvested in the business operations of Aspen.
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Anticipated Accounting Treatment
For financial reporting purposes, Aspen will report a gain from the Asset Sale based upon the amount of net proceeds received by Aspen and the net book valueconsequences of the
assets sold.
For further information, seedissolution or the unaudited pro forma condensed financial information included in this proxy statement inAnnex A.
Past Contacts, Transactions, or Negotiations
Although Aspen and Venoco both operate and own certain oil and gas interests in California’s Sacramento Basin the parties have not previously had substantive discussions regarding a material transaction, business combination or any similar typereceipt of transaction between the two companies. Other than the Purchase and Sale Agreement, there have been no past negotiations, transactions, or material contacts during the past two years between Aspen and Venoco.
Regulatory Approvals
No regulatory approvals are required for this transaction.
Appraisal Rights
You will not experience any change in your rights as a stockholder as a result of the Asset Sale. Neither Delaware law nor Aspen’s Certificate of Incorporation or Bylaws provide for appraisal or other similar rights for dissenting stockholders in connection with the Asset Sale, and we do not intend to independently provide stockholders with any such right. Accordingly, you will have no right to dissent and obtain payment for your shares in connection with the Asset Sale.
non-liquidating distributions.
Vote Required and Recommended
Approval of the Asset Sale will requireBoard Recommendation
Proposal 2 must be approved by the affirmative vote of the holders of a
majority of Aspen’sAspen's outstanding common stock.
R.V. Bailey, Robert Cohan, Douglas Imperato, Kevan HensmanAs described above, the Board of Directors did not reach an agreement as to
whether it recommends stockholders vote For, Against or Abstain from voting on
the proposal to grant Aspen's Board of Directors the authority, in its
discretion, to dissolve the Company, as such the proposal is being submitted
without a recommendation from the Board as a whole.
INDEPENDENT PUBLIC ACCOUNTANTS
Effective November 3, 2008 Gordon, Hughes, & Banks, LLP ("GH&B") resigned
as the independent registered accounting firm for Aspen. GH&B recently entered
into an agreement with Eide Bailly LLP ("Eide Bailly"), pursuant to which Eide
Bailly acquired the operations of GH&B. Certain of the professional staff and
Mieko Bailey (the spouseshareholders of R.V. Bailey) beneficial holdersGH&B joined Eide Bailly either as employees or partners of 1,851,473 sharesEide
Bailly and will continue to practice as members of Eide Bailly. On November 3,
2008, the Company's Board of Directors approved the engagement of Eide Bailly as
the Company's independent registered public accounting firm.
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common stock, have agreed to vote their shares FOR approvalannual financial statements, review of the
Asset Sale.
financial statements included in our report on 10-Q and other services typically
provided by an accountant in connection with statutory and regulatory filings or
engagements for those fiscal years.
(b) Audit-Related Fees.
GH&B billed us aggregate fees in the amount of $0 and $515 for the fiscal
years ended June 30, 2009 and 2008 for assurance and related services that were
reasonably related to the performance of the audit or review of our financial
statements.
Eide Bailly billed us aggregate fees in the amount of $0 for the fiscal
year ended June 30, 2009 for assurance and related services that were reasonably
related to the performance of the audit or review of our financial statements.
(c) Tax Fees.
GH&B billed us aggregate fees in the amount of approximately $0 for the
fiscal year ended June 30, 2009, and $7,395 for the fiscal year ended June 30,
2008, for tax compliance services.
Eide Bailly billed us aggregate fees in the amount of approximately $7,640
for the fiscal year ended June 30, 2009, for tax compliance services.
(d) All Other Fees.
GH&B billed us aggregate fees in the amount of $0 for the fiscal years
ended June 30, 2009 and 2008 for other fees.
Eide Bailly billed us aggregate fees in the amount of $0 for the fiscal
years ended June 30, 2009 for other fees.
(e) Audit Committee's Pre-Approval Practice.
Inasmuch as Aspen does not have an audit committee, Aspen's board of
directors performs the functions of its audit committee. Section 10A(i) of the
Securities Exchange Act of 1934 prohibits our auditors from performing audit
services for us as well as any services not considered to be "audit services"
unless such services are pre-approved by the board of directors (in lieu of the
audit committee) or unless the services meet certain de minimis standards.
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Aspen recommendsthe Securities Exchange Act of 1934 (as amended by
the Sarbanes-Oxley Act of 2002).
Preapprove all non-audit services (other than certain de minimis services
described in ss.10A(i)(1)(B) of the Securities Exchange Act of 1934 (as
amended by the Sarbanes-Oxley Act of 2002) that stockholders vote FOR the proposalauditors propose to
sell allprovide to us or any of Aspen’s interestsits subsidiaries.
The board of directors considers at each of its meetings whether to approve any
audit services or non-audit services. In some cases, management may present the
request; in other cases, the auditors may present the request. The board of
directors has approved Gordon, Hughes & Banks, LLP and Eide Bailly, LLP
performing our audit and tax services for the 2008 and 2009 fiscal years.
The percentage of the fees for audit, audit-related, tax and other services
were as set forth in the Assets to Venoco.
following table:
Eide Bailly, LLP Gordon Hughes & Banks LLP
Fiscal Year Ended June 30, Fiscal Year Ended June 30,
2009 2008 2009 2008
---------- ---------- ---------- ----------
Audit fees 61% 0% 100% 86%
Audit-related fees 0% 0% 0% 1%
Tax fees 39% 0% 0% 13%
All other fees 0% 0% 0% 0%
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Only one Notice, and if applicable one Proxy Statement and annual report is
being delivered to stockholders sharing an address unless we have received
contrary instructions from one or more of the stockholders. Upon the written or
oral request of a stockholder, we will deliver promptly a separate Notice, and
if applicable a separate copy of the proxy statement and annual report to a
stockholder at a shared address to which a single copy was delivered.
Stockholders desiring to receive a separate copy in the future may contact us
through our offices at 2050 South Oneida Street, Suite 208, Denver, ColoradoCO 80224, or
by telephone: (303) 639-9860.
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Stockholders who share an address but are receiving multiple copies of the
proxy statement and/or annual report may contact us through our offices at 2050
South Oneida Street, Suite 208, Denver, ColoradoCO 80224, or by telephone: (303)
639-9860 to request that a single copy be delivered.
PROPOSALS FROM STOCKHOLDERS
Aspen expects to hold anits next annual meeting of shareholders (the “Annual Meeting”"2010
Meeting") on or about November 15, 2009.20, 2010. If this date is advanced or delayed by
more than 30 days, Aspen will, as required by Rule 14a-5(f), inform shareholders
of the change by including a notice under Item 5 of its next quarterly report on
Form 10-Q or, if impracticable, another means reasonably calculated to inform
shareholders.
Proposals from stockholders intended to be present at the Annual2010 Meeting
should be addressed to Aspen Exploration Corporation, Attention: Corporate
Secretary, 2050 South Oneida Street, Suite 208, Denver, ColoradoCO 80224, and we must
receive the proposals by September 3, 2009.June 10, 2010. Upon receipt of any such proposal, we
shall determine whether or not to include any such proposal in the Proxy
Statement and proxy in accordance with applicable law. It is suggested that
stockholders forward such proposals by Certified Mail-Return Receipt Requested.
After September 3, 2009,June 10, 2010, any stockholder proposal submitted outside the process of
Rule 14a-8 will be considered to be untimely.
ANNUAL REPORT TO STOCKHOLDERS This proxy statement is being accompanied by our Annual Report to stockholders on Form 10-K for the year ended June 30, 2009. The annual report to stockholders includes our audited financial statements. Our Annual Report on Form 10-K for the year ended June 30, 2009, and other reports filed under the Securities Exchange Act of 1934, are available to any stockholder at no cost upon request to our offices at 2050 South Oneida Street, Suite 208, Denver, CO 80224, or by telephone: (303) 639-9860, or through the Internet at www.sec.gov. INCORPORATION OF INFORMATION BY REFERENCE
The following information is incorporated by reference into this proxy
statement from our annual report on Form 10-KSB10-K for the year ended June 30, 2008.
| 10-K (included in our annual report to stockholders that accompanies this Proxy Statement). OTHER MATTERS |
Management does not know of any other matters to be brought before the meeting. Should any other matter requiring a vote of stockholders arise at the meeting, the persons named in the proxy will vote the proxies in accordance with their best judgment.
| By Order | ||
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Notes to Unaudited Pro Forma Financial Statement Information
The following unaudited pro forma balance sheet as of December 31, 2008 presents the financial position of Aspen Exploration Corporation (“the Company”) assuming the sales in February 2009 of oil and gas producing assets of the Company had been completed on that date. However, if the asset sale is completed the effective dateBoard of the transaction will be December 1, 2008, meaning that the economic effect of the transaction would be as of that date.
The following unaudited pro forma statements of operations for the six-months ended December 31, 2008 and for the fiscal year ended June 30, 2008, present the Company’s results of operations assuming that the transactions had been completed on July 1, 2007, the first day of the fiscal year ended June 30, 2008. In the opinion of management, these statements include all material adjustments necessary to reflect, on a pro forma basis, the impact of the transactions on the historical financial information of the company. The adjustments set forth in the “Pro Forma Adjustments” column are described in the Notes to Unaudited Pro Forma Financial Statements.
The sale of the Company’s oil and gas assets is expected to provide approximately $8,140,000 in cash (net of fees related to the sale) from the sale of its California assets. In addition, the Company received approximately $918,000 in cash, a note receivable of $75,000, and was relieved of approximately $225,000 of debt on the sale of its Montana assets, which was completed on February 27, 2009. The sales are expected to result in a loss of approximately $53,000.
The unaudited pro forma financial statements for the periods presented do not purport to present what the Company’s results of operations or financial position actually would have been had the transactions occurred on the dates noted above, or to project the Company’s results of operations for any future periods. The pro forma adjustments are based upon available information and certain assumptions that the Company believes are reasonable under the circumstances. Actual amounts could differ materially from these estimates. The pro forma results should be read in conjunction with the financial statements and notes thereto in the Company’s Annual Report on Form 10-KSB for the year ended June 30, 2008 and quarterly report 10-Q for the six months ended December 31, 2008.
Directors:
ASPEN EXPLORATION CORPORATIONUNAUDITED PRO FORMA CONDENSED BALANCE SHEETS
| As Reported | Pro Forma | Pro Forma | ||||||||||||
| December 31, 2008 | Adjustments | Footnote | December 31, 2008 | |||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 2,160,610 | $ | 9,034,900 | A | $ | 11,195,510 | |||||||
| Marketable securities | 164,260 | - | 164,260 | |||||||||||
| Accounts and trade receivables | 1,348,474 | (1,348,474 | ) | B | - | |||||||||
| Note receivable | - | 75,000 | A | 75,000 | ||||||||||
| Other current assets | 40,229 | - | 40,229 | |||||||||||
| Total current assets | 3,713,573 | 7,761,426 | 11,474,999 | |||||||||||
| Property and equipment | ||||||||||||||
| Oil and gas property | 23,775,119 | (23,775,119 | ) | - | ||||||||||
| Support equipment | 183,374 | - | 183,374 | |||||||||||
| 23,958,493 | (23,775,119 | ) | 183,374 | |||||||||||
| Accumulated depletion and impairment - full cost pool | (13,736,066 | ) | 13,736,066 | - | ||||||||||
| Accumulated depreciation - support equipment | (81,208 | ) | - | (81,208 | ) | |||||||||
| Net property and equipment | 10,141,219 | (10,039,053 | ) | A | 102,166 | |||||||||
| Other assets: | ||||||||||||||
| Deposits | 263,650 | - | 263,650 | |||||||||||
| Deferred income taxes | - | 230,384 | C | 230,384 | ||||||||||
| Total other assets | 263,650 | 230,384 | 494,034 | |||||||||||
| Total assets | $ | 14,118,442 | $ | (2,047,243 | ) | $ | 12,071,199 | |||||||
R.V. Bailey, Chief Executive Officer
40
UNAUDITED PRO FORMA CONDENSED BALANCE SHEETS (Continued)
| December 31, | December 31, | December 31, | ||||||||||||
| 2008 | 2008 | 2008 | ||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 1,051,351 | $ | (745,245 | ) | B | $ | 306,106 | ||||||
| Other current liabilities and accrued expenses | 461,398 | (461,398 | ) | B | - | |||||||||
| Income tax payable | - | 1,300,000 | C | 1,300,000 | ||||||||||
| Notes payable - current portion | 446,770 | (230,100 | ) | A | 216,670 | |||||||||
| Asset retirement obligation, current portion | 40,200 | (40,200 | ) | A | - | |||||||||
| Total current liabilities | 1,999,719 | (176,943 | ) | 1,822,776 | ||||||||||
| Long-term liabilities | ||||||||||||||
| Asset retirement obligation, net of current portion | 605,800 | (605,800 | ) | A | - | |||||||||
| Deferred income taxes | 1,326,500 | (1,326,500 | ) | C | - | |||||||||
| Total long-term liabilities | 1,932,300 | (1,932,300 | ) | - | ||||||||||
| Stockholders' equity: | ||||||||||||||
| Common stock, $.005 par value: | ||||||||||||||
| Authorized: 50,000,000 shares | ||||||||||||||
| Issued and outstanding: At December 31, 2008, | ||||||||||||||
| and June 30, 2008, 7,259,622 shares | 36,298 | - | 36,298 | |||||||||||
| Capital in excess of par value | 7,676,458 | - | 7,676,458 | |||||||||||
| Accumulated other comprehensive loss | (558,623 | ) | - | (558,623 | ) | |||||||||
| Retained earnings | 3,032,290 | 62,000 | A, B, C | 3,094,290 | ||||||||||
| Total stockholders' equity | 10,186,423 | 62,000 | 10,248,423 | |||||||||||
| Total liabilities and stockholders' equity | $ | 14,118,442 | $ | (2,047,243 | ) | $ | 12,071,199 | |||||||
ASPEN EXPLORATION CORPORATIONUNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
| As Reported | Pro Forma | |||||||||||||
| Six Months Ended | Pro Forma | Six Months Ended | ||||||||||||
| December 31, 2008 | Adjustments | Footnote | December 31, 2008 | |||||||||||
| Revenues: | ||||||||||||||
| Oil and gas sales | $ | 2,153,880 | $ | (2,153,880 | ) | D | $ | - | ||||||
| Operating expenses: | ||||||||||||||
| Oil and gas production | 705,696 | (705,696 | ) | D | - | |||||||||
| Accretion, and depreciation, | ||||||||||||||
| depletion and amortization | 1,041,238 | (1,030,600 | ) | D | 10,638 | |||||||||
| Additional depletion/impairment of full cost pool assets | 2,250,000 | (2,250,000 | ) | D | - | |||||||||
| Selling, general and administrative | 366,348 | 267,059 | D | 633,407 | ||||||||||
| Total operating expenses | 4,363,282 | (3,719,237 | ) | 644,045 | ||||||||||
| Income (loss) from operations | (2,209,402 | ) | 1,565,357 | (644,045 | ) | |||||||||
| Other income (expenses) | ||||||||||||||
| Interest and other income | 13,693 | - | 13,693 | |||||||||||
| Interest and other (expenses) | (25,738 | ) | 11,600 | D | (14,138 | ) | ||||||||
| Gain on investments | 12,050 | - | 12,050 | |||||||||||
| Gain (loss) on sale of assets | - | (53,000 | ) | D | (53,000 | ) | ||||||||
| Total other income (expenses) | 5 | (41,400 | ) | (41,395 | ) | |||||||||
| Income (loss) before income taxes | (2,209,397 | ) | 1,523,957 | (685,440 | ) | |||||||||
| Provision for income taxes | 970,798 | (713,914 | ) | C | 256,884 | |||||||||
| Net income (loss) | $ | (1,238,599 | ) | $ | 810,043 | $ | (428,556 | ) | ||||||
| Basic net income (loss) per share | $ | (0.17 | ) | $ | 0.11 | $ | (0.06 | ) | ||||||
| Diluted net income (loss) per share | $ | (0.17 | ) | $ | 0.11 | $ | (0.06 | ) | ||||||
| Weighted average number of common shares outstanding | ||||||||||||||
| used to calculate basic net income (loss) per share : | 7,259,622 | 7,259,622 | 7,259,622 | |||||||||||
| Effect of dilutive securities: | ||||||||||||||
| Equity based compensation | - | - | - | |||||||||||
| Weighted average number of common shares outstanding | ||||||||||||||
| used to calculate diluted net income (loss) per share : | 7,259,622 | 7,259,622 | 7,259,622 | |||||||||||
ASPEN EXPLORATION CORPORATIONUNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
| As Reported | Proforma | |||||||||||||
| Year Ended | Pro Forma | Year Ended | ||||||||||||
| June 30, 2008 | Adjustments | Footnote | June 30, 2008 | |||||||||||
| Revenues: | ||||||||||||||
| Oil and gas sales | $ | 5,390,367 | $ | (5,390,367 | ) | D | $ | - | ||||||
| Operating expenses: | ||||||||||||||
| Oil and gas production | 1,463,415 | (1,463,415 | ) | D | - | |||||||||
| Accretion, and depreciation, | - | |||||||||||||
| depletion and amortization | 2,451,417 | (2,430,151 | ) | D | 21,266 | |||||||||
| Selling, general and administrative | 621,463 | 607,269 | D | 1,228,732 | ||||||||||
| Total operating expenses | 4,536,295 | (3,286,297 | ) | 1,249,998 | ||||||||||
| Income (loss) from operations | 854,072 | (2,104,070 | ) | (1,249,998 | ) | |||||||||
| Other income (expenses) | ||||||||||||||
| Interest and other income | 117,354 | - | 117,354 | |||||||||||
| Interest and other (expenses) | (63,678 | ) | 28,406 | D | (35,272 | ) | ||||||||
| Gain on investments | 4,834 | - | 4,834 | |||||||||||
| Gain (Loss) on sale of assets | - | (3,080,634 | ) | D | (3,080,634 | ) | ||||||||
| Total other income (expenses) | 58,510 | (3,052,228 | ) | (2,993,718 | ) | |||||||||
| Income (loss) before income taxes | 912,582 | (5,156,298 | ) | (4,243,716 | ) | |||||||||
| Provision for income taxes | (109,779 | ) | 1,152,779 | C | 1,043,000 | |||||||||
| Net income (loss) | $ | 802,803 | $ | (4,003,519 | ) | $ | (3,200,716 | ) | ||||||
| Basic net income (loss) per share | $ | 0.11 | $ | (0.55 | ) | $ | (0.44 | ) | ||||||
| Diluted net income (loss) per share | $ | 0.11 | $ | (0.54 | ) | $ | (0.43 | ) | ||||||
| Weighted average number of common shares outstanding | ||||||||||||||
| used to calculate basic net income (loss) per share : | 7,259,622 | 7,259,622 | 7,259,622 | |||||||||||
| Effect of dilutive securities: | ||||||||||||||
| Equity based compensation | 113,455 | 113,455 | 113,455 | |||||||||||
| Weighted average number of common shares outstanding | ||||||||||||||
| used to calculate diluted net income (loss) per share : | 7,373,077 | 7,373,077 | 7,373,077 | |||||||||||
| NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS | ||||||||||
| OF ASPEN EXPLORATION CORPORATION | ||||||||||
| A. | The asset allocation of the sale of the Company’s oil and gas assets: | |||||||||
| Six-Months Ended | Fiscal Year Ended | |||||||||
| December 31, 2008 | June 30, 2008 | |||||||||
| Purchase Price - Cash | $ | 9,034,900 | $ | 9,034,900 | ||||||
| Purchase Price - Note Receivable | 75,000 | 75,000 | ||||||||
| Note Payable | 230,100 | 275,000 | ||||||||
| Oil & Gas Property, Net | (10,039,000 | ) | (13,197,889 | ) | ||||||
| Asset Retirement Obligations | 646,000 | 732,355 | ||||||||
| Gain on Sale | $ | (53,000 | ) | $ | (3,080,634 | ) | ||||
| B. | To eliminate accrued assets and liabilities related to oil & gas operations assuming the sales were completed asof December 31, 2008: | |||||||||
| Accounts and Trade Receivables | $ | (1,348,474 | ) | |||||||
| Accounts Payable | 745,245 | |||||||||
| Other Current and Accrued Liabilities | 461,398 | |||||||||
| $ | (141,831 | ) | ||||||||
| C. | To reverse deferred tax liabilities and assets and record the tax provision for the gain on the sales: | |||||||||
| Six-Months Ended | Fiscal Year Ended | |||||||||
| December 31, 2008 | June 30, 2008 | |||||||||
| Deferred TaxAssets | $ | 230,384 | $ | 123,000 | ||||||
| Income Tax Payable | (1,300,000 | ) | (1,300,000 | ) | ||||||
| Deferred TaxLiability | 1,326,500 | 134,000 | ||||||||
| Current Tax Provision | (1,300,000 | ) | (1,300,000 | ) | ||||||
| Deferred TaxProvision | 1,556,884 | 2,343,000 | ||||||||
| $ | 256,884 | $ | 1,043,000 | |||||||
| D. | To eliminate operating revenue, costs, and expenses assuming the sale was consummated on July 1, 2007: | |||||||||
| Six-Months Ended | Fiscal Year Ended | |||||||||
| December 31, 2008 | June 30, 2008 | |||||||||
| Oil and Gas Sales | $ | (2,153,880 | ) | $ | (5,390,367 | ) | ||||
| Oil and Gas Production | (705,696 | ) | (1,463,415 | ) | ||||||
| Accretion, Depletion and Amortization | (1,030,600 | ) | (2,430,151 | ) | ||||||
| Additional Depletion/Impairment of Full Cost Pool Assets | (2,250,000 | ) | - | |||||||
| Selling, General, and Administrative | 267,059 | 607,269 | ||||||||
| (3,719,237 | ) | (3,286,297 | ) | |||||||
| Operating Income (Loss) | 1,565,357 | (2,104,070 | ) | |||||||
| Other income (Expense), Net | (41,400 | ) | (3,052,228 | ) | ||||||
| Income (Loss) Before Tax | 1,523,957 | (5,156,298 | ) | |||||||
| Income Tax Provision | (713,914 | ) | 1,535,779 | |||||||
| Net Income (Loss) | $ | 810,043 | $ | (3,620,519 | ) | |||||
2050 South Oneida Street, Suite 208 Denver, CO 80224 PROXYThis Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints R.V. Bailey and Robert Cohan,Kevan B. Hensman, or either
one of them, as Proxy, each with the power to appoint his substitute, and hereby
authorizes them to vote, as designated below, all of the shares of Common Stock
of ASPEN EXPLORATION CORPORATION held of record by the undersigned on March 23,October 2,
2009, at the SpecialAnnual Meeting of ShareholdersStockholders to be held on May 22,November 20, 2009, and
at any adjournments or postponements thereof.
| |||
1. ELECTION OF DIRECTORS
FOR all nominees listed below ___ WITHHOLD AUTHORITY ____ or (Except as
marked to the contrary below) to vote for all nominees listed below:
(INSTRUCTION: To withhold authority to vote for any individual nominee mark
the box next to the nominee's name below.)
R.V. Bailey ___
Robert A. Cohan ___
Kevan B. Hensman ___
Douglas P. Imperato ___
2. APPROVAL OF RESOLUTION GRANTING THE BOARD OF DIRECTORS THE AUTHORITY IN ITS
SOLE DISCRETION TO DISSOLVE ASPEN EXPLORATION CORPORATION, BUT SUCH
DISCRETION MUST BE EXERCISED WITHIN TWELVE MONTHS.
FOR: _______ AGAINST: _______ ABSTAIN: _______
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will vote
FOR each of the directors and abstain from voting on the proposal.
proposal no. 2 (dissolution). Please sign exactly as name appears below. When shares are held by joint tenants, both should sign. When signing as attorney, as executor, administrator, trustee, or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.