NOTICE

Notice is hereby given to all persons interested in Gates Oil & Gas, Ltd. (“Gates”), Jasmine, Inc. (“Jasmine”), Oklahoma Energy Exchange, LLC (“OEE”), Harrisburg Prospect Lease Fund, LLC (“Harrisburg 1”), and/or Harrisburg 2 Prospect Lease Fund, LLC (“Harrisburg 2”) (collectively, the “Entities”), of the following:
Background and Appointment of Receiver

1. On November 8, 2012, Gates, OEE, and Jimmy Gray filed suit against Gregory Gray and First Bank & Trust Co., primarily as an intra-company dispute over missing and/or inappropriately used funds.
2. On or about March 14, 2013, J.D. “Butch” Whitten (the “Stephens County Receiver”) was appointed as receiver over OEE in the Stephens County case.
3. On September 9, 2013, the Oklahoma Department of Securities (“OKDS”) filed its Complaint in this case alleging that the Defendants hereto had committed violations of the Oklahoma Uniform Securities Act of 2004 (71 O.S. §§ 1-101, et seq.). The allegations included:

  • a. Sale of unregistered securities in violation of 71 O.S. § 1-301;
  • b. Transaction of business with unregistered agents and employment of unregistered agents in violation of 71 O.S. § 1-402;
  • c. Making untrue statements and/or omitting material facts in connection with the offer and sale of securities in violation of 71 O.S. § 1-501; and
  • d. Partaking in acts, practices, and/or courses of business operating as a fraud or deception in violation of 71 O.S. § 1-501.

4. On September 30, 2013 an Order was entered approving appointment of L. Vance Brown as Receiver (“Receiver”) over Gates, Jasmine, and Harrisburg 2.
5. On or about October 17, 2013, the proceedings in Stephens County described in Paragraph 1, supra, were consolidated with the above-captioned case, and on that same date, the Receiver was also appointed to manage OEE and Harrisburg 1, effectively removing the Stephens County Receiver and putting the Receiver in control of all five Entities.
6. The September 30, 2013 and October 17, 2013 Orders (the “Receivership Orders”) vested the Receiver with complete control of the Entities and their assets, including:

  • a. Take immediate custody, possession and control of any and all assets, monies, securities and properties, real and personal, tangible and intangible, of whatever kind and description, and wherever situated, belonging to the Entities, as well as any records or documents relating to the Receivership Assets including, but not limited to, leases, subscription agreements, bank statements, checkbooks, and invoices previously paid or currently owed;
  • b. Manage the Entities’ business activities and conserve, hold, and protect their assets, pending further Court action;
  • c. Receive and collect any and all sums of money due or owing to the Entities, and to make such payments and disbursements as may be necessary and advisable for the preservation of the assets and as may be necessary and advisable in discharging the Receiver’s duties;
  • d. Retain or dismiss any of the Entities’ employees as may be advisable or necessary;
  • e. Retain and employ attorneys, accountants, computer consultants and other persons as may be advisable or necessary to the exercise the Receiver’s duties;
  • f. Open and inspect any and all mail or deliveries addressed to the Entities to determine if same relate to the existence, location, identity or collection, preservation, maintenance or operation of assets, and to notify the United States Postal Service to effect the forward delivery of any mail addressed to any of the Entities; and
  • g. Institute, prosecute and defend, compromise, adjust, intervene in or become party to such actions or proceedings in any state court, federal court, or United States bankruptcy court as may, in the Receiver’s opinion, be necessary or proper for the protection, maintenance, or preservation of the assets, or the carrying out of the Court’s Order, and likewise to defend, compromise, adjust, or otherwise dispose of any or all actions or proceedings now pending in any court by or against any of the Entities where such prosecution, defense, or other disposition of such actions or proceedings is, in the judgment of the Receiver, advisable or proper for the protection of the assets.

7. The Receivership Orders further directed that:

  • a. All persons, companies, banks, etc. were to promptly deliver and surrender to the Receiver all assets of the Entities; all books and records of any kind pertaining or belonging to any of the Entities; and all items and information necessary to access any assets, books, and/or records;
  • b. All persons, companies, banks, etc. are to fully cooperate with and assist the Receiver and take no action, directly or indirectly, to hinder or obstruct the Receiver in the conduct of his duties or to interfere in any manner, directly or indirectly, with the custody, possession or control exercised by said Receiver; and
  • c. Except by leave of Court, during the pendency of the Receivership Orders, all creditors and other persons seeking money, damages, or other relief from the Entities were stayed and restrained from doing any act or thing whatsoever to interfere with the Receiver or to the possession of or management by the Receiver of the assets.

8. Individually, Jimmy W. Gray, Greg L. Gray, Michael K. Gray and Lance Bowman (the “Principals”) are not subject to the Receivership, although their control of the Entities has terminated. In addition, the Receiver is not responsible for initiating any type of criminal investigation against any of the Principals. However, this does not mean that the Receiver will not seek civil relief (monetary damages) against any of the individuals or otherwise attempt to recover dissipated assets of the Entities.
9. From and after entry of the Receivership Orders, the Receiver began investigating the Entities’ documents and records.
10. On November 27, 2013, Gates, OEE, Harrisburg and Harrisburg 2 each filed for Chapter 11 Bankruptcy relief under Title 11 of the United States Code in the United States Bankruptcy Court for the Western District of Oklahoma.
11. Due to the bankruptcy filing and the uncertain status it cast upon the Receiver and the Entities’ assets and creditors, essentially all of the Receiver’s operations halted. However, the Receiver did not relinquish control of the Entities’ assets.
12. On December 23, 2013, the OKDS filed a Motion to Dismiss all four of the Entities’ bankruptcy filings alleging that the bankruptcy Petitions were filed in bad faith and that the investor and creditor interests would be better served by dismissing the cases.
13. On January 29, 2014, three investors filed an Objection to OKDS’ Motion to Dismiss, asserting that the cases would be better served in the Bankruptcy Court.
14. On January 29, 2014, the Entities each filed an Objection to OKDS’ Motion to Dismiss.
15. On February 10, 2014, the Entities each withdrew their Objection to OKDS’ Motion to Dismiss, stating that the best interests of the investors and creditors would be best served through the Receivership.
16. On February 12, 2014, the Bankruptcy Judge Sarah A. Hall conducted a hearing on OKDS’ Motion to Dismiss. At the conclusion of the hearing, Judge Hall determined that cause existed to dismiss the Entities’ bankruptcy Petitions, that such dismissal was in the best interests of the creditors and estate. All four bankruptcy cases were dismissed by the Court.
17. Upon final issuance of Judge Hall’s Order on February 19, 2014, the Receiver was reinstated with control of the Entities and their various assets.
Information and Status
18. During the pendency of this Receivership, the Receiver will maintain custody and control of all assets belonging to the Entities, and has the sole right and obligation to conduct the business activities and affairs of said entities.
19. The Receiver is currently in the ongoing process of determining and investigating the nature, location, and value of all the assets of, and claims against, each of the Entities and/or their principals, control persons, insiders, and third parties.
20. As the process unfolds, the Receiver will finalize plans to maximize possible value for purposes of payment to creditors and return of capital to investors.
21. The Receiver has put in place certain interim measures as part of this effort and to preserve the value of the Receivership estates, including the transfer of all oil and gas operations.

© Gates Oil & Gas, LTD 2013