NOTE AND COMMON STOCK PURCHASE AGREEMENT
This NOTE AND COMMON STOCK PURCHASE AGREEMENT
("Agreement") is entered into as of March 19, 1999, by and between BETA
OIL & GAS, INC., a Nevada corporation (the "Company"), with
headquarters located at 000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxxx Xxxxx,
Xxxxxxxxxx 00000 and Aztore Holdings, Inc. (the "Purchaser") an Arizona
Corporation with principal offices at 0000 X. Xxxx Xxxxx, Xxxxxxx, XX
00000 set forth on the execution pages hereof, with regard to the
following:
RECITALS
A. The Company and Purchaser are executing and
delivering this Agreement in reliance upon the exemption from
securities registration afforded by the provisions of Regulation D
("Regulation D"), as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933 as
amended (the "Securities Act").
B. Purchaser desires to purchase, upon the terms and
conditions stated in this Agreement, Secured Promissory Notes ("Notes")
and shares of the Company's Common Stock, $.001 par value (the "Common
Stock"). The shares of Common Stock issuable hereunder are referred to
herein as the Common Shares. The Notes and Common Shares are sometimes
referred to herein jointly as the "Securities."
C. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement in the form attached hereto as Exhibit A
(the "Registration Rights Agreement"), pursuant to which the Company
has agreed to provide certain registration rights under the Securities
Act, the rules and regulations promulgated thereunder and applicable
state securities laws and a Security Agreement in the form attached
hereto as Exhibit B (the "Security Agreement") and a Mortgage, Security
Agreement and Financing Statement ("Mortgage") pursuant to which the
Company has agreed and will agree to grant the Purchaser a security
interest in its assets (the "Collateral").
AGREEMENTS
NOW, THEREFORE, in consideration of their respective promises
contained herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and
Purchaser hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF NOTES AND COMMON STOCK
1.1 Purchase of Notes and Common Shares. Subject to the terms and
conditions of this Agreement, the issuance, sale and purchase of the
Notes and Common Shares shall be consummated in a "Closing". On the
date of the Closing ("Closing Date"), subject to the satisfaction or
waiver of the conditions set forth in Articles V and VII, the Company
shall issue and sell to Purchaser, and Purchaser agrees to purchase
from the Company, a Note of the Company in the amount set forth on the
signature page executed by Purchaser. The Note shall be in the form of
Exhibit C hereto.
1.2 Security Agreement. Concurrently with the sale of the Note, the
Company and the Purchaser shall execute the Security Agreement. In
addition, the Company shall take all action reasonably necessary to
cause a UCC Form 1 Financing Statement and similar documents to be
filed in all jurisdictions as necessary to cause Purchaser to have a
perfected security interest in the Collateral.
1.3 Mortgage, Security Agreement and Financing Statement. On
or before July 1, 1999 the Company shall deliver and cause to be
recorded a Mortgage, in form as approved by Purchaser, in such
jurisdiction as necessary to cause Purchaser to have a perfected
security interest in the producing oil and gas xxxxx and related
leasehold interests in the producing oil and gas xxxxx comprising the
Collateral and identified in Exhibit G hereto (the "Oil & Gas
Properties").
1.4 Issuance of Common Shares. Concurrently with the sale of the
Notes, the Company shall issue to each Purchaser Common Shares.
The Common Shares issuable shall be determined as provided herein.
A. Closing Date Common Shares. On the Closing Date, the
Company shall issue to Purchaser that number of Common Shares
determined by multiplying the amount of the Notes issued to Purchaser
by 10% (the "Coverage Percentage"). By way of example if Purchaser
invested $1,000,000 in Notes, Purchaser would be issued 100,000 Common
Shares ($1,000,000 x 10% = 100,000); if a Purchaser invested 250,000 in
Notes, such Purchaser would be issued 25,000 Common Shares
($250,000x10% = 25,000).
B. Additional Common Shares. If any portion of the principal
of the Note remains unpaid on the 30th, 60th, 90th, 120th, 160th,
180th, 210th, 240th, 270th, 300th, 330th and/or the 360th day following
the Closing Date, then on the day following any of such dates, the
Company shall issue to Purchaser, that number of Common Shares
determined by the above formula and a Coverage Percentage, in each
instance, of 1%. For examples, if $1,000,000 of principal remains
unpaid on the 30th day following the Closing Date, then on the
following day the Purchaser would be issued an additional 10,000 Common
Shares ($1,000,000 x 1%=10,000); if $250,000 of principal remains
unpaid on the 30th day following the Closing Date, then on the
following day the Purchaser would be issued an additional 2,500 Common
Shares ($250,000 x 1% = 2,500).
C. INTENTIONALLY LEFT BLANK.
1.4 Form of Payment. Each Purchaser shall pay the aggregate
Purchase Price for the Notes and Common Shares being purchased by such
Purchaser by wire transfer to the account designated by the Company.
1.5 Closing Date. Subject to the satisfaction (or waiver) of
the conditions set forth in Articles VI and VII below, the date and
time of the issuance, sale and purchase of the Notes and Common Shares
pursuant to this Agreement shall be at 10:00 a.m. California time, on
March 19, 1999 or when usable funds have been received by the Company,
whichever is later.
ARTICLE II
PURCHASER REPRESENTATIONS AND
WARRANTIES
Purchaser represents and warrants as of the date hereof and as
of the Closing to the Company as set forth in this Article II.
Purchaser makes bo other representations or warranties, express or
implied, to the Company in connection with the transactions
contemplated hereby and any and all prior representations and
warranties, if any, which may have been made by a Purchaser to the
Company in connection with the transactions contemplated hereby shall
be deemed to have been merged in this Agreement and any such prior
representations and warranties, if any, shall not survive the execution
and delivery of this Agreement.
2.1 Investment Purpose. Purchaser is purchasing the Securities for
Purchaser's own account for investment only and not with a view toward or
in connection with the public sale or distribution thereof. Purchaser will
not, directly or indirectly offer, sell, pledge (subject to Section 4.11)
or otherwise transfer its Securities or any interest therein except
pursuant to transactions that are exempt from the registration requirements
of the Securities Act and/or sales registered under the Securities Act.
Purchaser understands that Purchaser must bear the economic risk of this
investment indefinitely, unless the Securities are registered pursuant to
the Securities Act and any applicable state securities laws or an exemption
from such registration is available, and that the Company has no present
intention of registering any such Securities other than contemplated by the
Registration Rights Agreement. By making the representations in this
Section 2.1, Purchaser does not agree to hold the Securities for any
minimum or other specific term (except as otherwise provided herein) and
reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption from
registration under the Securities Act and any applicable state securities
laws.
2.2 Accredited Investor. Purchaser is an "Accredited Investor"
as that term is defined in Rule 501 (a) (3) of the Securities Act of
1933. Purchaser is a corporation with assets in excess of $5,000,000.
2.3 Reliance on Exemptions. Purchaser understands that the
Securities are being offered and sold to Purchaser in reliance upon
specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and Purchaser's compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of Purchaser to
acquire the Securities
2.4 Information. Purchaser or its counsel have been furnished
all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities
which have been specifically requested by Purchaser, including without
limitation the Company's Form S-1 Registration Statement Dated November
16, 1998 filed with the Securities and Exchange Commission ("SEC") on
December 4, 1998. Purchaser has been afforded the opportunity to ask
questions of the Company and has received what Purchaser believes to be
complete and satisfactory answers to any such inquiries. Purchaser
understands that Purchaser's investment in the Securities involves a
high degree of risk, including without limitation the risks and
uncertainties disclosed in the SEC Document.
2.5 Governmental Review. Purchaser understands that no United
States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Securities.
2.6 Transfer or Resale. Purchaser understands that (i) except as provided
in the Registration Rights Agreement, the Securities have not been and
are not being registered under the Securities and/or any state
securities laws, and may not be offered, sold, pledged (subject to
Section 4.11 of this Agreement) or otherwise transferred unless
subsequently registered thereunder or an exemption from such
registration is available (which exemption the Company expressly agrees
may be established as contemplated in clauses (b) and (c) of Section
5.1 hereof); (ii) any sale of such Securities made in reliance on Rule
144 under the Securities Act (or a successor rule) ("Rule 144") may be
made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of such Securities without
registration under the Securities Act under circumstances in which the
seller may be deemed to be an underwriter (as that term is defined in
the Securities Act) may require compliance with some other exemption
under the Securities Act or the rules and regulations of the SEC
thereunder in order for such resale to be allowed, and (iii) neither
the Company nor any other person is under any obligation to register
such Securities under the Securities Act or any state securities laws
or to comply with the terms and conditions of any exemption thereunder
(in each case, other than pursuant to this Agreement or the
Registration Rights Agreement).
2.7 Legends. Purchaser understands that, subject to Article V
hereof, until such time as the Securities have been registered under
the Securities Act as contemplated by the Registration Rights Agreement
or otherwise may be sold by Purchaser pursuant to Rule 144 (subject to
and in accordance with the procedures specified in Article V hereof)
the certificates for the Securities will bear a restrictive legend (the
"Legend") in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE
SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE
SECURITIES LAWS OR UNLESS OFFERED, SOLD OR TRANSFERRED
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS. THESE SECURITIES ARE ALSO SUBJECT
TO THE TERMS OF A NOTE AND COMMON STOCK PURCHASE AGREEMENT
DATED MARCH 19, 1999 A COPY OF WHICH IS AVAILABLE FROM BETA
OIL & GAS, INC.
2.8 Authorization: Enforcement. This Agreement, the Registration Rights
Agreement and the Security Agreement have been duly and validly authorized,
executed and delivered on behalf of Purchaser and are valid and binding
agreements of Purchaser enforceable in accordance with their respective terms,
except to the extent that such validity or enforceability may be subject to or
affected by any bankruptcy, insolvency, reorganization, moratorium, liquidation
or similar laws relating to, or affecting generally the enforcement of
creditors' rights or remedies of creditors generally or by other equitable
principles of general application.
2.9 Residency. Purchaser is a resident of the jurisdiction set forth under
Purchaser's name on the signature page hereto executed by Purchaser.
2.10 No Brokers. The Purchaser has taken no action which would give rise to any
claim by any person for brokerage commission, finder fees or similar payments
relating to this Agreement or the transaction contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser as of the date hereof and as of
the Closing that:
3.1 Organization and Qualification. Except as set forth on Schedule 3.1,
each of the Company and its subsidiaries is a corporation duly organized and
existing in good standing under the laws of the jurisdiction in which it is
incorporated, and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company and each of its
subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction where the failure so to qualify or be in
good standing would have a Material Adverse Effect. "Material Adverse Effect"
means any effect which, individually or in the aggregate with all other effects,
reasonably would be expected to be materially adverse to the business,
operations, properties, financial condition, operating results or prospects of
the Company and its subsidiaries, taken as a whole on a consolidated basis or on
the transactions contemplated hereby.
3.2 Authorization; Enforcement. (a) The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Note, the Registration Rights Agreement and the Security Agreement and the
Mortgage (collectively the "Loan Documents"), and to issue, sell and perform its
obligations with respect to the Securities in accordance with the terms hereof
and thereof; (b) the execution, delivery and performance of by the Company and
the consummation by it of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Securities) have been duly
authorized by all necessary corporate action and, no further consent or
authorization of the Company, its board of directors, or its shareholders or any
other person, body or agency is required with respect to any of the transactions
contemplated hereby or thereby (whether under rules of the Nasdaq National
Market, the Nasdaq Small Cap Market, the National Association of Securities
Dealers, Inc. ("NASD") or otherwise); (c) the Loan Documents and certificates
for the Common Shares have been duly executed and delivered by the Company; and
(d) this Agreement, the Registration Rights Agreement, and the Secured
Promissory Notes and Common Shares constitute legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except (i) to the extent that such validity or
enforceability may be subject to or affected by any bankruptcy, insolvency.
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditor's rights or remedies of
creditors generally, or by other equitable principles of general application,
and (ii) as rights to indemnity and contribution under the Registration Rights
Agreement may be limited by Federal or state securities laws. The Company has
duly reserved all Common Shares from time to time issuable under the terms of
this agreement.
3.3 Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares reserved for issuance pursuant to the
Company's stock option plans, the number of shares reserved for issuance
pursuant to securities exercisable for, or convertible into or exchangeable for
any shares of Common Stock is set forth on Schedule 3.3. All of such outstanding
shares of capital stock have been, or upon issuance following full payment
therefor will be, validly issued, fully paid and nonassessable. No shares of
capital stock of the Company are subject to preemptive rights or any other
similar rights of the shareholders of the Company or any liens or encumbrances.
Except as disclosed in Schedule 3.3, as of the date of this Agreement, (i) there
are no outstanding options, warrants, scrip, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries, and (ii) issuance of the Common shares will
not trigger antidilution rights for any other outstanding or authorized
securities of the Company, and (iii) there are no agreements or arrangements
under which the Company or any of its subsidiaries is obligated to register the
sale of any of its or their securities under the Securities Act (except the
Registration Rights Agreement and what is set forth on Schedule 3.3). The
Company has furnished to Purchaser true and correct copies of the Company's
Articles of Incorporation as in effect on the date hereof ("Articles of
Incorporation"), and the Company's By-laws as in effect on the date hereof (the
"By-laws"). The Company has set forth on Schedule 3.3 all instruments and
agreements (other than the Certificate of Incorporation and By-laws) governing
securities convertible into or exercisable or exchangeable for Common Stock of
the Company (and the Company shall provide to Purchaser copies thereof upon the
request of Purchaser).
3.4 Issuance of Shares. The Common Shares to be issued to Purchaser
under the terms of this Agreement are duly authorized and reserved for issuance,
and following full payment therefor, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances imposed
or suffered by the Company and will not be subject to preemptive rights or other
similar rights of shareholders of the Company.
3.5 No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement and the Security Agreement by the
Company, and the consummation by the Company of transactions contemplated hereby
and thereby (including, without limitation, the issuance of the Securities) do
not and will not (a) result in a violation of the Articles of Incorporation or
By-laws or (b) conflict with, or constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of any
agreement indenture or instrument to which the Company or any of its
subsidiaries is a party, or to the best knowledge of the Company, result in a
violation of any law, rule, regulation, order, judgment or decree (including
U.S. federal and state securities laws and regulations and the rules and
regulations of NASDAQ) applicable to the Company or any of its subsidiaries, or
by which any property or asset of the Company or any of its subsidiaries, is
bound or affected (except for such possible conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect). Except as set
forth in Schedule 3.5, neither the Company nor any of its subsidiaries is in
violation of its Articles of Incorporation or other organizational documents,
and neither the Company nor any of its subsidiaries, is in default (and no event
has occurred which has not been waived which, with notice or lapse of time or
both, would put the Company or any of its subsidiaries in default) under, nor
has there occurred any event giving others (with notice or lapse of time or
both) any rights of termination, amendment, acceleration or cancellation of, any
agreements indenture or instrument to which the Company or any of its
subsidiaries is a party, except for possible violations, defaults or rights as
would not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its subsidiaries are not being conducted. and
shall not be conducted so long as purchaser owns any of the Securities, in
violation of any law, ordinance or regulation of any governmental entity, except
for possible violations the sanctions for which either individually or in the
aggregate would not have a Material Adverse Effect. Except as set forth on
Schedule 3.5, or except (A) such may be required under the Securities Act in
connection with the performance of the Company's obligations under the
Registration Rights Agreement, (B) filing of a Form D with the SEC, (C)
compliance with the state securities or Blue Sky laws of applicable
jurisdictions, and (D) as required by Nasdaq, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory agency in order for it to execute deliver or perform any of its
obligations under this Agreement or the Registration Rights Agreement or to
perform its obligations in accordance with the terms hereof or thereof.
3.6 SEC Documents. The Company is not presently subject to the reporting
requirements of the Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx"). The
Company has filed with the principal office of the Securities and Exchange
Commission (the "Commission") in Washington, DC, and a Registration Statement on
Form S-1 (the Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"). For purposes hereof, the term "Registration
Statement" means the original Registration Statement and any and all amendments
thereto. At such time that this Registration Statement becomes effective, the
Company intends to register under the Exchange Act. Upon effectiveness, the
Company will furnish its stockholders with annual reports containing financial
statements audited by independent certified public accountants and will file
with the Commission quarterly reports containing unaudited financial information
for each of the first three quarters of each fiscal year within 45 days
following the end of each such quarter. As of its date, the Registration
Statement complied in all material respects with the requirements of the
Securities Act and the rules and regulations of the SEC promulgated thereunder
applicable to the Registration Statement, and the Registration Statement, at the
time it was filed with the SEC, did not contain any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the statements
made in the Registration Statement which is required to be updated or amended
under applicable law has not been so updated or amended except for the
disclosures which will be required as a result of this Agreement, the Company's
joint exploration agreements with Cheniere Energy, Inc., "Plain English"
Disclosures required by the SEC and any SEC legal and accounting comments and
resultant changes which will be required by the SEC upon their review of the
Registration Statement. The financial statements of the Company included in the
Registration Statement have been prepared in accordance with U.S. generally
accepted accounting principles, consistently applied, and the rules and
regulations of the SEC during the periods involved except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they do not include
footnotes or are condensed or summary statements) and present accurately and
completely the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in a manner clearly evident to a sophisticated investor in the
financial statements or the notes thereto of the Company included in the
Registration Statement, the Company has no liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business
consistent with past practice subsequent to the date of such financial
statements and (ii) obligations under contracts and commitments incurred in the
ordinary course of business consistent with past practice and not required under
generally accepted accounting principles to be reflected in such financial
statements, in each case of clause (i) and (ii) next above which, individually
or in the aggregate, are not material to the financial condition, business,
operations, properties, operating results or prospects of the Company and its
subsidiaries. To the extent required by the rules of the SEC applicable thereto,
the Registration Statement contains a complete and accurate list of all material
undischarged written or oral contracts, agreements, leases or other instruments
to which the Company or any subsidiary is a party or by which the Company or any
subsidiary is bound or to which any of the properties or assets of the Company
or any subsidiary is subject (each a "Contract"). Except as set forth in
Schedule 3.6, none of the Company, its subsidiaries or, to the best knowledge of
the Company, any of the other parties thereto, is in breach or violation of any
Contract which breach or violation would have a Material Adverse Effect. No
event, occurrence or condition exists which, with the lapse of time, the giving
of notice, or both, would become a default by the Company or its subsidiaries
thereunder which would have a Material Adverse Effect. The Company has not
provided to any Purchaser any material non-public information or any other
information which, according to applicable law,
rule or regulation, should have been disclosed publicly by the Company but
which has not been so disclosed.
3.7 Absence of Certain Changes. Since September 30, 1998, there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, results of operations or
prospects of the Company, except as disclosed in Schedule 3.7 or clearly evident
to a sophisticated institutional investor from the Registration Statement.
3.8 Absence of Litigation. Except as disclosed in Schedule 3.8 or as
clearly evident to a sophisticated investor from the Registration Statement,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, or self-regulatory organization or body
pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company, any of its subsidiaries or any of
their respective directors or officers in their capacities as such, which could
reasonably be expected to result in an unfavorable decision, ruling or finding
which would have a Material Adverse Effect or would adversely affect the
transactions contemplated by this Agreement or any of the documents contemplated
hereby or which would adversely affect the validity or Enforceability of, or the
authority or ability of the Company to perform its obligations under, this
Agreement or any of such other documents. There are no facts known to the
Company which, if known by a potential claimant or governmental authority, could
reasonably be expected to give rise to a claim or proceeding which, if asserted
or conducted with results unfavorable to the Company or any of its subsidiaries,
could reasonably be expected to have a Material Adverse Effect.
3.9 Disclosure. No information relating to or concerning the Company set
forth in this Agreement contains an untrue statement of a material fact. No
information relating to or concerning the Company set forth in the Registration
Statement contains a statement of material fact that was untrue as of the date
the Registration Statement was filed with the SEC. The Company has not omitted
to state a material fact necessary in order to make the statements made herein
or herein, in light of the circumstances under which they were made, not
misleading. Except for the execution and performance of this Agreement and the
Company's joint exploration agreements with Cheniere Energy, Inc., no material
fact (within the meaning of the federal securities laws of the United States and
of applicable state securities laws) exists with respect to the Company which
has not been publicly disclosed which requires such disclosure.
3.10 Acknowledgment Regarding Purchaser's Purchase of the Securities.
The Company acknowledges and agrees that Purchaser is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement or the transactions contemplated hereby, that this Agreement and
the transaction contemplated hereby, and the relationship between each Purchaser
and the Company, are "arms-length", and that any statement made by Purchaser
(except as set forth in Article II), or any of its representatives or agents, in
connection with this Agreement and the transactions contemplated hereby is not
advice or a recommendation, is merely incidental to Purchaser's purchase of the
Securities and has not been relied upon as such in any way by the Company, its
officers or directors, The Company further represents to Purchaser that the
Company's decision to enter into this Agreement and the transactions
contemplated hereby have been based solely on an independent evaluation by the
Company and its representatives.
3.11 S-3 Registration. The Company is currently not eligible to
register the Common Shares on a registration statement on Form S-3 under the
Securities Act.
3.12 No General Solicitation. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as described in Rule 502(c) under
Regulation D, with respect to any of the Securities being offered hereby.
3.13 No Integrated Offerings. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would prevent the parties hereto from
consummating the transactions contemplated hereby pursuant to an exemption from
the registration under the Securities Act pursuant to the provisions of
Regulation D. The transactions contemplated hereby are exempt from the
registration requirements of the Securities Act, assuming the accuracy of the
representations and warranties herein contained of each Purchaser.
3.14 No Brokers. The Company and the Purchaser acknowledge that the
Company has taken no action which would give rise to any claim by any person for
brokerage commissions, finder's fees or similar payments relating to this
Agreement or the transactions contemplated hereby.
3.15 Ownership of Assets. The Company has good title to the assets comprising
the Collateral and the assets comprising the Collateral are free and clear of
liens, except for operator liens as provided for in operating agreements in the
normal course of business as disclosed in Exhibit G hereto or as clearly evident
to a sophisticated investor from the Registration Statement.
3.16 Key Employees. Each Key Employee as listed on Schedule 3.16 is
currently serving the Company in the capacity disclosed in Schedule 3.16. No Key
Employee, to the best of the knowledge of the Company and its subsidiaries, is,
or is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company or any of its subsidiaries to any liability with respect to any of the
foregoing matters. No Key Employee has, to the best of the knowledge of the
Company and its subsidiaries, any intention to terminate his employment with; or
services to, the Company or any of its subsidiaries.
3.17 Rights Plan. The Company does not have in effect a shareholders
rights plan or similar plan in the nature of a "poison pill" except what is
disclosed in the Registration Statement.
ARTICLE IV
COVENANTS
4.1 Best Efforts. The parties shall use their best efforts to timely
satisfy each of the conditions described in Articles VI and VII of this
Agreement.
4.2 Securities Laws. The Company agrees to file a Form D with respect to
the Securities with the SEC as required under Regulation D and to provide a copy
thereof to each Purchaser within fifteen (15) days after the date of Closing.
The Company shall, on or prior to the date of Closing, take such action as is
necessary to sell the Securities to Purchaser under applicable securities laws
of the states of the United States, and shall provide evidence of any such
action so taken to Purchaser on or prior to the date of the Closing.
4.3 Reporting Status. The Company is not presently subject to the reporting
requirements of the Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx"). The
Company has filed with the principal office of the Securities and Exchange
Commission (the "Commission") in Washington, DC, a Registration Statement on
Form S-1 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"). At such time that the Registration Statement
becomes effective, the Company intends to file for registration under the 1934
Exchange Act and will become subject to the reporting requirements of the
Exchange Act. For the period ending two (2) years from the Closing, (a) the
Company shall then timely file all reports required to be filed with the SEC
pursuant to the Exchange Act, and the Company shall not terminate its status as
an issuer required to file reports under the Exchange Act even if the Exchange
Act or the rules and regulations thereunder would permit such termination, and
(b) the Company will maintain its ability to register its Common Stock on Form
S-3 if, and at such time, the Company becomes eligible to use Form S-3.
4.4 INTENTIONALLY LEFT BLANK
4.5 INTENTIONALLY LEFT BLANK
4.6 Information. For the period ending two (2) years from the Closing, the
Company agrees to send the following reports to Purchaser until Purchaser
transfers, assigns or sells all of its Securities in transactions in which the
transferee is (unless such transferee is an affiliate of the Company) not
subject to securities law resale restrictions: (a) within ten (10) business days
after the filing with the SEC, a copy of its Annual Report on Form 10-K, its
Quarterly Reports on Form 10-Q, any proxy statements and any Current Reports on
Form 8-K; and (b) within one (1) business day after release, copies of all press
releases issued by the Company or any of its subsidiaries. The Company further
agrees to promptly provide to any Purchaser any information with respect to the
Company, its properties, or its business or Purchaser's investment as such
Purchaser may reasonably request; provided, however that the Company shall not
be required to give Purchaser any material nonpublic information. If any
information requested by Purchaser from the Company contains material nonpublic
information, the Company shall inform the Purchaser in writing that the
information requested contains material nonpublic information and shall in no
event provide such information to Purchaser without the express written consent
of Purchaser after being so informed.
4.7 Listing. For the period ending two (2) years from the Closing, the
Company shall use its reasonable best efforts to obtain and then continue the
uninterrupted quotation and trading of its Common Stock, including the shares to
be issued to Purchaser, on the Nasdaq SmallCap Market or the Nasdaq NMS; and, if
so quoted and traded, comply in all respects with the Company's reporting,
filing and other obligations under the By-laws or rules of the Nasdaq Small Cap
Market or the Nasdaq NMS, as applicable.
4.8 Prospectus Delivery Requirement. Each Purchaser understands that the
Securities Act may require delivery of a prospectus relating to the Common Stock
in connection with any sale thereof pursuant to a registration statement under
the Securities Act covering the resale by such Purchaser of the Common Stock
being sold, and each Purchaser shall comply with the applicable prospectus
delivery requirements of the Securities Act in connection with any such sale.
4.9 Corporate Existence. For the period ending two (2) years from the
Closing, the Company shall maintain its corporate existence, except in the event
of a merger, consolidation or sale of all or substantially all of the Company's
assets, as long as the surviving or successor entity in such transaction (i)
assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose common stock is listed for trading on the NASDAQ, the New York
Stock Exchange, the Pacific Stock Exchange or the American Stock Exchange.
4.10 INTENTIONALLY LEFT BLANK.
4.11 Pledging and Margining. Notwithstanding anything in this Agreement to
the contrary and assuming such Common Shares are eligible to be margined under
applicable regulations, Purchaser may pledge, margin or otherwise encumber the
Common Shares unless the result of any such activity would be that such Common
Shares would be available for lending and/or borrowing in connection with short
sales of the Common Stock by any third party.
4.12 INTENTIONALLY LEFT BLANK.
4.13 Use of Proceeds. The Company will use the proceeds of the sale of the
Securities for working capital or such other purposes as management of the
Company's Board of Directors shall determine.
4.14 INTENTIONALLY LEFT BLANK.
ARTICLE V
LEGEND REMOVAL, TRANSFER AND CERTAIN SALES
5.1 Removal of Legend. The Legend shall be removed and the Company shall
issue a certificate without such Legend to the holder of any Security upon which
it is stamped, and a certificate for a security shall be originally issued
without the Legend, if (a) the sale of such Security is registered under the
Securities Act, (b) such holder provides the Company with an opinion of counsel,
in form, substance and scope customary for opinions of counsel in comparable
transactions and reasonably satisfactory to the Company and its counsel (the
reasonable cost of which shall be borne by the Company if neither an effective
registration statement under the Securities Act nor Rule 144 is available in
connection with such sale) to the effect that a public sale or transfer of such
Security may be made without registration under the Securities Act pursuant to
an exemption from such registration requirements, (c) such Security can be sold
pursuant to Rule 144 and the holder provides the Company with reasonable
assurances that the Security can be so sold without restriction or (d) such
Security can be sold pursuant to Rule 144(k). Each Purchaser agrees to sell all
Securities, including those represented by a certificate(s) from which the
Legend has been removed, or which were originally issued without the Legend,
pursuant to an effective registration statement, in accordance with the manner
of distribution described in such registration statement and to deliver a
prospectus in connection with such sale, or in compliance with an exemption from
the registration requirements of the Securities Act. In the event the Legend is
removed from any Security or any Security is issued without the Legend and the
Security is to be disposed of other than pursuant to the registration statement
or pursuant to Rule 144, then prior to, and as a condition to, such disposition
such Security shall be relegended as provided herein in connection with any
disposition if the subsequent transfer thereof would be restricted under the
Securities Act. Also, in the event the Legend is removed from any Security or
any Security is issued without the Legend and thereafter the effectiveness of a
registration statement covering the resale of such Security is suspended or the
Company determines that a supplement or amendment thereto is required by
applicable securities laws, then upon reasonable advance notice to Purchaser
holding such Security, the Company may require that the Legend be placed on any
such Security that cannot then be sold pursuant to an effective registration
statement or Rule 144 or with respect to which the opinion referred to in clause
(b) next above has not been rendered, which Legend shall be removed when such
Security may be sold pursuant to an effective registration statement or Rule 144
or such holder provides the opinion with respect thereto described in clause (b)
next above.
5.2 Transfer Agent Instructions. The Company shall or shall instruct its
transfer agent to issue certificates, registered in the name of Purchaser or its
nominee, for the Securities. Such certificates shall bear the Legend only to the
extent provided by Section 5.1 above. The Company covenants that no instruction
other than such instructions referred to in the Article V, and stop transfer
instructions to give effect to Section 2.6 hereof in the case of the Securities
prior to registration of the Securities under the Securities Act, will be given
by the Company to its transfer agent and that the securities shall otherwise be
freely transferable on the books and records of the Company. Nothing in this
section shall affect in any way each Purchaser's obligations and agreement set
forth in Section 5.1 hereof to resell the Securities pursuant to an effective
registration statement and to deliver a prospectus in connection with such sale
or in compliance with an exemption from the registration requirements of
applicable securities laws. If (a) a Purchaser provides the Company with an
opinion of counsel in comparable transactions and reasonably satisfactory to the
Company and its counsel (the reasonable cost of which shall be borne by the
Company if neither an effective registration statement under the Securities Act
nor Rule 144 is available in connection with such sale), to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption form registration or (b) a Purchaser transfers Securities to an
affiliate which is an accredited investor (within the meaning of Regulation D
under the Securities Act) and which delivers to the Company in written form the
same representations, warranties and covenants made by Purchaser hereunder or
pursuant to Rule 144, the Company shall permit the transfer, and, in the case of
the Securities, issue or promptly instruct its transfer agent to issue one or
more certificates in such name and in such denomination as specified by such
Purchaser. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to a Purchaser by vitiating the intent and
purposes of the transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Article V will be inadequate and agrees in the event of a breach or threatened
breach by the Company of the provisions of this Article V, that a Purchaser
shall be entitled in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
5.3 INTENTIONALLY LEFT BLANK
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
6.1 Conditions to the Company's Obligation to Sell. The obligation of the
Company hereunder to issue and sell the Securities to Purchaser at the Closing
is subject to the satisfaction, as of the Closing Date and with respect to
Purchaser, of each of the following conditions thereto, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion:
(i) Purchaser shall have executed and delivered the signature page to
this Agreement, the Registration Rights Agreement and the Security
Agreement;
(ii) Purchaser shall have wired or otherwise delivered the Purchase
Price to the account designated by the Company;
(iii) The representations and warranties of Purchaser shall be true and
correct in all material respects as of the date when made and as of the
Closing as though made at that time (except for representations and
warranties that speak as of a specific date), and Purchaser shall have
performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be
performed. satisfied or complied with by the Purchaser at or prior to
the Closing;
(iv) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters
contemplated hereby which restricts or prohibits the consummation of
any of the transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE
7.1 The obligation of Purchaser hereunder to purchase the Securities to be
purchased by it on the Closing date is subject to the satisfaction of each of
the following conditions, provided that these conditions are for Purchaser's
sole benefit and may be waived by such Purchaser at any time in Purchaser's sole
discretion:
(i) The Company shall have executed and delivered the signature page to
this Agreement, the Registration Rights Agreement and the Security
Agreement.
(ii) The Company shall have immediately delivered to the Purchaser or
their counsel duly issued certificates for the Secured Promissory
Notes, and within 10 days delivered a copy of the instructions to the
Transfer Agent to issue Shares being so purchased by Purchaser at the
Closing.
(iii) INTENTIONALLY LEFT BLANK
(iv) The representations and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of
the Closing as though made at that time and the Company shall have
performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the
Closing.
(v) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement
(vi) Purchaser shall have received an opinion of Xxxxxxx & Beam,
counsel to the Company, dated as of the Closing, in the form attached
hereto as Exhibit F.
ARTICLE VIII
GOVERNING LAW; MISCELLANEOUS
8.1 Governing Law: Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona which would apply
if both parties were residents of California and this Agreement was made and
performed in Arizona. In any legal action involving this Agreement or the
parties' relationship, the Parties agree that the exclusive venue for any
lawsuit shall be in the state or federal court located within the County of
Orange, California. The parties agree to submit to the personal jurisdiction of
the state and federal courts located within Maricopa County, Arizona.
8.2 Counterparts. This Agreement may be executed in two or more
counterparts, including, without limitation, by facsimile transmission, all of
which counterparts shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered
to the other party. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall cause additional
original executed signature pages to be delivered to the other parties as soon
as practicable thereafter.
8.3Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
8.4Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction
8.5Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived other than by an instrument in writing signed by
the party to be charged with enforcement and no provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and
Purchaser.
8.6 Notice. Any notice herein required or permitted to be given shall be
in writing and may be personally served or delivered by nationally-recognizable
overnight courier or by facsimile machine confirmed telecopy, and shall be
deemed delivered at the time and date of receipt (which shall include telephone
line facsimile transmission). The addresses for such communications shall be:
If to the Company:
Beta Oil & Gas, Inc.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxx Xxxxx
Phone: (000) 000-0000 Facsimile: (949) 752- 5757
With a copy to:
Xxxxxxx & Beam
Two Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxx, Esq.
Phone: (000) 000-0000 Fax: (000) 000-0000
If to the Purchaser:
Attn: Aztore Holdings, Inc.
0000 Xx. 00xx Xx.
Xxxxx 000
Xxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
With a copy to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxxxxx & Xxxxxxx
0000 X. Xxxxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
8.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns. Each Purchaser
may assign its rights and obligations hereunder to any of its "affiliates," as
that term is defined under the Securities Act, without the consent of the
Company so long as such affiliate is an accredited investor (within the meaning
of Regulation D under the Securities Act) and agrees in writing to be bound by
this Agreement. This provision shall not limit Purchaser's right to transfer the
Securities pursuant to the terms of this Agreement or to assign Purchaser's
rights hereunder to any such transferee. In that regard, if Purchaser sells all
or part of its Securities to someone that acquires the Securities subject to
restrictions on transferability (other than restrictions, if any, arising out of
the transferee's status as an affiliate of the Company), Purchaser shall be
permitted to assign its rights hereunder, in whole or in part, to such
transferee.
8.8 Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
8.9 Survival. The representations and warranties of the Company and the
agreements and covenants shall survive the Closing hereunder notwithstanding any
due diligence investigation conducted by or on behalf of Purchaser. The Company
agrees to indemnify and hold harmless Purchaser and each of Purchaser's
officers, directors, employees, partners, agents and affiliates for loss or
damage arising as a result of or related to any breach or alleged breach by the
Company of any of its representations or covenants set forth herein. The
representations and warranties of Purchaser shall survive the Closing hereunder
and Purchaser shall indemnify and hold harmless the Company and each of its
officers, director, employees, partners, agents and affiliates for any loss or
damage arising as a result of the breach of such Purchaser's representations and
warranties.
8.10 INTENTIONALLY LEFT BLANK.
8.11 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
8.12 Remedies. No provision of this Agreement providing for any remedy to
a Purchaser shall limit any remedy which would otherwise be available to such
Purchaser at law or in equity. Nothing in this Agreement shall limit any rights
a Purchaser may have with any applicable federal or state securities laws with
respect to the investment contemplated hereby. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to
Purchaser. Accordingly, the Company acknowledges that the remedy at law for a
material breach of its obligations under this Agreement will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Agreement, that Purchaser shall be entitled, in addition to
all other available remedies, to an injunction restraining any breach and
requiring immediate compliance, without the necessity of showing economic loss
and without any bond or other security being required.
8.13 Final Agreement. This Agreement, the Note, the Registration Rights
Agreement, the Security Agreement and the Mortgage, when executed by the parties
hereof, shall constitute the final agreement between the parties and upon such
execution Purchaser and the Company accept the terms hereof and have no cause of
action against each other for prior negotiations preceding the execution of this
Agreement.
8.14 Expenses. Each of the Company and Purchaser shall be responsible for
its own expenses in connection with this Agreement; provided, however, that if
requested, the Company shall reimburse Purchaser, a sum not to exceed $5,000 in
connection with legal fees and expenses incurred by the Purchaser.
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused this
Agreement to be duly executed as of the date first above written.
"COMPANY":
Beta Oil & Gas, Inc.
by ______________________
/s/Xxxxx Xxxxx
Its: President and Director
"PURCHASER":
Aztore Holdings, Inc.
By: ______________________
Its:
SCHEDULES
TO NOTE AND COMMON STOCK PURCHASE AGREEMENT DATED
March 19, 1999
Schedule 3.1 - None.
Schedule 3.3 - Attached.
Schedule 3.5 - None.
Schedule 3.6 - None.
Schedule 3.7 - None.
Schedule 3.8 - None.
Schedule 3.16 - Attached.
SCHEDULE 3.3
TO NOTE AND COMMON STOCK PURCHASE AGREEMENT DATED
March 19, 1999
CAPITALIZATION OF BETA OIL & GAS, INC.
The following table sets forth as of September 30, 1998 (i) the actual
capitalization of the Company; (ii) the pro forma capitalization of the Company
that gives effect to the sale and issuance of 429,000 shares of Common Stock in
private placements completed subsequent to December 31, 1998; and (ii) the
capitalization of the Company on a pro forma basis as adjusted to give effect,
net of estimated offering costs, to the proposed sale by the Company of a
minimum of 600,000 shares and a maximum of 1,500,000 shares of Common Stock
being offered in the initial public offering.
As of December 31, 1998
-------------------------------------------------------------------------
Adjusted for Adjusted for
the Sale of the Sale of
Actual Pro Forma Minimum Offering Maximum
Offering
-------------- -------------- ----------------- -----------------
Shareholders' Equity
Common shares, $.001 par value;
50,000,000 shares authorized;
6,725,192 shares issued and outstanding actual;
7,358,492 shares pro forma;
8,058,492 shares (Minimum Offering) and
8,958,492 (Maximum Offering) pro forma as
adjusted at December 31, 1998(1) $ 6,725 $ 7,458 $ 8,058 $ 8,958
Additional paid-in capital 15,878,386 17,872,957 21,022,357 25,881,457
Accumulated deficit (2,586,073) (2,586,073) (2,586,073) (2,586,073)
============== ============== ================= =================
Total shareholders' equity $ 13,299,342 $ 15,294,342 $ 18,444,342 $ 23,304,342
============== ============== ================= =================
(1) Does not include 2,497,663 shares reserved for issuance on exercise of
outstanding Warrants to purchase Common Stock of the Company. All of the
presently outstanding shares of the Company and shares issuable upon
exercise of the 2,497,663 warrants have registration rights which will be
satisfied upon effectiveness of the current Registration Statement. This
does not include an additional number of shares reserved for issuance
underlying warrants equal to 10% of the number of shares sold in the
initial public offering ("underwriter's or selected dealer warrants"). In
addition, the minimum and the maximum number of shares sold in the initial
public offering may be changed at the discretion of Company's management.
Note: In addition, there may be an additional number of shares issuable pursuant
to common stock options in the event of termination without cause of Xxxxx
Xxxxx, President of the Company. This is pursuant to Xx. Xxxxx'x employment
contract with the Company.
SCHEDULE 3.16
TO NOTE AND COMMON STOCK PURCHASE AGREEMENT DATED
March 19, 1999
Key Employee
Xx. Xxxxx Xxxxx is serving the Company in the capacity of President and Chairman
of the Board. Neither the Company, nor any of its subsidiaries, is aware that
Xx. Xxxxx is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of Xx. Xxxxx does not subject
the Company or any of its subsidiaries to any liability with respect to any of
the foregoing matters. Xx. Xxxxx, to the best of the knowledge of the Company
and its subsidiaries, does not have any intention to terminate his employment
with the Company or any of its subsidiaries.
EXHIBIT A
TO NOTE AND COMMON STOCK PURCHASE AGREEMENT DATED
March 19, 1999
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT dated as of March 19, 1999
(the "Agreement") is made by and between Beta Oil & Gas, Inc., a Nevada
Corporation, 000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxxx Xxxxx, XX 00000 (the
Company"), and the undersigned investor (the "Initial Investor").
WITNESSETH:
WHEREAS, in connection with the Note and Common Stock Purchase
agreement dated March 19, 1999 among the Initial investor and the
Company the "Purchase Agreement"), the Company has agreed, upon the
terms and subject to the conditions of said Purchase Agreement, to
issue and sell to the Initial investor shares of Common Stock, $.001
par value, of the Company (the "Common Stock"). The shares of Common
Stock are referred to herein as the "Registrable Shares." In connection
with the sale of the Common Stock to the Initial investor (the
"Offering"), each of such investors will be entitled to registration
rights as set forth in this Agreement.
WHEREAS, to induce the Initial investor to execute and deliver
the Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and
the rules and regulations thereunder, or any similar successor statute
(collectively, the 'Securities Act"), and applicable state securities
laws with respect to the Registrable Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
Covenants contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged1 the
Company and the Initial investor hereby agree as follows:
1. Definitions. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings set forth
in the Purchase Agreement as used in this Agreement. The following
terms shall have the following meanings:
(a) "Holders" are shareholders of the Company who, by virtue
of agreements with the Company, are entitled to include
certain of their securities in certain Registration Statements
filed by the Company.
(b) "Investors" means the initial investor and any permitted
transferee or assignee of the initial investor who agrees to
become bound by the provisions of this Agreement in accordance
with Section 9 hereof.
(c) "Registrable Securities" means the Registrable Shares,
together with any shares of Common Stock or other securities
which may be issued as a dividend or other distribution or in
exchange for Registrable Shares or common shares issued or
which may be issued pursuant to paragraph 1.3B of the Purchase
Agreement which are required to be included in a Registration
Statement pursuant to Section 2(a) below.
(d) "Registration Period" means the period between the date of
this Agreement and the earlier of (i) the date on which all of
the Registrable Securities have been sold in transactions
where the transferee is not subject to securities law resale
restrictions (or is subject to securities law resale
restrictions solely because it is an "affiliate" of the
Company under the Securities Act and the Rules and Regulations
promulgated thereunder), or (ii) the date on which the
Registrable Securities (in the opinion of Investors' counsel)
may be immediately sold without registration and free of
restrictions on transfer.
(e) "Registration Statement" means a registration statement of
the Company filed with the Securities and Exchange Commission
(the "SEC") under the Securities Act.
(f) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a
Registration Statement in compliance with the Securities Act
and applicable rules and regulations thereunder and pursuant
to Rule 415 under the Securities Act, and the declaration or
ordering of effectiveness of such Registration Statement by
the SEC.
2. Registration.
(a) Mandatory Registration. Subject to Section 4, the Company will
prepare and file a Registration Statement with the SEC,
registering all of the Registrable Shares for resale promptly
following 180 days after the closing date of the Company's
initial public offering (the "Closing Date"). Notwithstanding the
foregoing right of registration, the Investors shall have the
right to include the Registrable Securities in any Registration
Statement filed by the Company subsequent to the Closing Date.
However, this does not include the registration statement filed
by the Company on December 4, 1998 or any amendments or
supplements thereto. To the extent allowable under the Securities
Act and the Rules promulgated thereunder, the Registration
Statement shall include the Registrable Shares. The Registration
Statement (and each amendment or supplement thereto) shall be
provided to and subject to the reasonable approval of, the
Initial investor and their counsel. The Company shall use its
best efforts to cause such Registration Statement to be declared
effective by the SEC as soon as practicable after filing. Such
best efforts shall include, but not be limited to, promptly
responding to all comments received from the staff of the SEC.
Should the Company receive notification from the SEC that the
Registration Statement will receive no action or no review from
the SEC, the Company shall cause such Registration Statement to
become effective within fifteen (15) business days of such SEC
notification. Once declared effective by the SEC. the Company
shall cause such Registration Statement to remain effective
throughout the Registration Period.
(b) INTENTIONALLY LEFT BLANK
(c) INTENTIONALLY LEFT BLANK
3. Additional Obligations of the Company. In connection with
the registration of the Registrable Securities, the Company shall
have the following additional obligations:
(a) The Company shall keep the Registration Statement
required by Section 2(a) hereof effective pursuant to
Rule 415 under the Securities Act at all times during
the Registration Period as defined
in Section 1(d) above.
(b) The Registration Statement (including any
amendments or supplements thereto and prospectuses
contained therein) filed by the Company shall not
contain any untrue statement of a material fact or
omit to state a material fact required to be stated
therein1 or necessary to make the statements therein,
in light of the circumstances in which they were
made, not misleading. The Company shall prepare and
file with the SEC such amendments (including
post-effective amendments) and supplements to the
Registration Statement and the prospectus used in
connection with the Registration Statement as may be
necessary to keep the Registration Statement
effective at all times during the Registration
Period1 and, during such period, shall comply with
the provisions of the Securities Act with respect to
the disposition of all Registrable Securities of the
Company covered by the Registration Statement until
such time as all of such Registrable Securities have
been disposed of in accordance with the intended
methods of disposition by the sellers thereof as set
forth in the Registration Statement in the event the
number of shares of Common Stock included in a
Registration Statement filed pursuant to this
Agreement is insufficient to cover all of the
Registrable Securities, the Company shall amend, if
permissible, the Registration Statement and/or file a
new Registration Statement so as to cover all of the
Registrable Securities as soon as practicable, but in
no event more than twenty (20) business days after
the Company first determines (or reasonably should
have determined) the need therefor, the Company shall
use its best efforts to cause such amendment and/or
new Registration Statement to become effective as
soon as practicable following the filing thereof.
(c) The Company shall furnish to each Investor whose
Registrable Securities are included in the
Registration Statement (i) promptly after the same is
prepared and publicly distributed, filed with the SEC
or received by the Company, one copy of the
Registration Statement and any amendment thereto;
each preliminary prospectus and final prospectus and
each amendment or supplement thereto; and, in the
case of the Registration Statement required under
Section 2(a) above, each letter written by or on
behalf of the Company to the SEC and each item of
correspondence from the SEC, in each case relating to
such Registration Statement (other than any portion
of any item thereof which contains information for
which the Company has sought confidential treatment);
and (ii) such number of copies of a prospectus,
including a preliminary prospectus, and all
amendments and supplements thereto, and such other
documents as such Investor may reasonably request in
order to facilitate the disposition of the
Registrable Securities owned by such Investor.
(d) The Company shall use its best efforts to (i)
register and qualify the Registrable Securities
covered by the Registration Statement under such
other securities or blue sky laws of such
jurisdictions as the Investors reasonably request,
(ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and
supplements to such registrations as may be necessary
to maintain the effectiveness thereof during the
Registration Period, (iii) take such other actions as
may be necessary to maintain such registrations and
qualifications in effect at all times during the
Registration Period, and (iv) take all other actions
reasonably necessary or advisable to qualify the
Registrable Securities for sale in such
jurisdictions. Notwithstanding the foregoing
provision, the Company shall not be required in
connection therewith or as a condition thereto to (i)
qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for
this Section 3(d), (ii) subject itself to general
taxation in any such jurisdiction, (iii) file a
general consent to service of process in any such
jurisdiction, (iv) provide any undertakings that
cause more than nominal expense or burden to the
Company, or (v) make any change in its charter or
bylaws, which in each case the Board of Directors of
the Company determines to be contrary to the best
interests of the Company and its shareholders.
(e) INTENTIONALLY LEFT BLANK
(f) The Company shall notify each Investor who holds
Registrable Securities being sold pursuant to a
Registration Statement of the happening of any event
of which the Company has knowledge as a result of
which the prospectus included in the Registration
Statement as then in effect includes an untrue
statement of a material fact or omits to state a
material fact required to be stated therein or
necessary to make the statements therein, in light of
the circumstances under which they were made not
misleading (a "Suspension Event") The Company shall
make such notification as promptly as practicable
after the Company becomes aware of such Suspension
Event, shall promptly, but in all events within five
(5) business days after becoming aware of such
Suspension Event1 use its best efforts to prepare a
supplement or amendment to the Registration Statement
to correct such untrue statement or omission and
shall deliver a number of copies of such supplement
or amendment to each Investor as such Investor may
reasonably request. Notwithstanding the foregoing
provision, the Company shall not be required to
maintain the effectiveness of the Registration
Statement or to amend or supplement the Registration
Statement for a period (a "Delay Period") expiring
upon the earlier to occur of (i) the date on which
such material information is disclosed to the public
or ceases to be material, (ii) the date on which the
Company is able to comply with its disclosure
obligations and SEC requirements related thereto, or
(iii) thirty (30) days after the occurrence of the
Suspension Event.
(g) The Company shall use its best efforts to prevent
the issuance of any stop order or other suspension of
effectiveness of a Registration Statement and, if
such an order is issued, shall use its best efforts
to obtain the withdrawal of such order at the
earliest possible time and to notify each Investor
who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing
underwriters) of the issuance of such order and the
resolution thereof.
(h) The Company shall permit a single firm of counsel
designated by the Investors who hold a majority in
interest of the Registrable Securities being sold
pursuant to such registration to review the
Registration Statement and all amendments and
supplements thereto (as well as all requests for
acceleration or effectiveness thereof) a reasonable
period of time prior to their filing with the SEC,
and shall not file any document in a form to which
such counsel reasonably objects. The Company shall
make generally available to its security holders as
soon as practical, but not later than ninety (90)
days after the close of the period covered thereby,
an earnings statement (in a form complying with the
provisions of Rule 155 under the Securities Act)
covering a twelve-month period beginning not later
than the first day of the Company's fiscal quarter
following the effective date of the Registration
Statement.
(i) At the request of any Investor who holds
Registrable Securities being sold pursuant to such
registration, the Company shall furnish on the date
that Registrable Securities are delivered to an
underwriter for sale in connection with the
Registration Statement (i) a letter, dated such date,
from the Company's independent certified public
accountants in form and substance as is customarily
given by independent certified public accountants to
underwriters in an underwritten public offering,
addressed to the investors; and (ii) an opinion,
dated such date, from counsel representing the
Company for purposes of such Registration Statement
in form and substance as is customarily given in an
underwritten public offering, addressed to the
underwriters and Investors.
(k) The Company shall make available for inspection by
any Investor whose Registrable Securities are being
sold pursuant to such registration, any underwriter
participating in any disposition pursuant to the
Registration Statement, and any attorney, accountant
or other agent retained by any such Investor or
underwriter (collectively, the "Inspectors"), all
pertinent financial and other records, pertinent
corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably
necessary to enable each Inspector to exercise its due
diligence responsibility. and use its best efforts to
cause the Company's officers, directors and employees
to supply all information which any Inspector may
reasonably request for purposes of such due diligence;
provided, however, that each Inspector shall hold in
confidence and shall not make any disclosure (except
to an Investor) of any Record or other information
which the Company determines in good faith to be
confidential, and of which determination the
Inspectors are so notified, unless (i) the disclosure
of such Records is necessary to avoid or correct a
material misstatement or material omission in any
Registration Statement, (ii) the release of such
Records is ordered pursuant to a subpoena or other
order from a court or government body of competent
jurisdiction. or such release is reasonably necessary
in connection with litigation or other legal process
or (iii) the information in such Records has been made
generally available to the public other than by
disclosure in violation of this or any other
agreement. The Company shall not be required to
disclose any confidential information in such Records
to any Inspector until and unless such Inspector shall
have entered into confidentiality agreements (in form
and substance satisfactory to the Company) with the
Company with respect thereto1 substantially in the
form of this Section 3(k). Each Investor agrees that
it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental
body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the
Company, at the Company's expense. to undertake
appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed
confidential. Nothing herein shall be deemed to limit
the Investor's ability to sell Registrable Securities
in a manner which is otherwise consistent with
applicable laws and regulations.
(l) The Company shall hold in confidence and shall
not make any disclosure of information concerning an
Investor provided to the Company pursuant hereto
unless (i) disclosure of such information is
necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or
omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a
subpoena or other order from a court or governmental
body of competent jurisdiction, or such release is
reasonably necessary in connection with litigation or
other legal process or (iv) such information has been
made generally available to the public other than by
disclosure in violation of this or any other
agreement. The Company agrees that it shall, upon
learning that disclosure of such information
concerning an Investor is sought in or by a court or
Governmental body of competent jurisdiction or
through other means, give prompt notice to such
Investor and allow such Investor, at its expense, to
undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, such
information.
(m) The Company shall use its best efforts to cause
all the Registrable Securities covered by the
Registration Statement to be listed on each national
securities exchange on which similar securities
issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then
permitted under the rules of such exchange.
(n) The Company shall provide a transfer agent and
registrar, which may be a single entity, for the
Registrable Securities not later than the effective
date of the Registration Statement.
(o) The Company shall cooperate with the Investors who hold
Registrable Securities being sold and the managing
underwriter or underwriters, if any, to facilitate the
timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities
to be sold pursuant to the Registration Statement and enable
such certificates to be in such denominations or amounts as
the case may be, and registered in such names as the
managing underwriter or underwriters if any. or the
Investors may reasonably request, and within three (3)
business days after a Registration Statement which includes
Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such
Registration Statement) instructions to the transfer agent
to issue new stock certificates without a legend and an
opinion of such counsel that the Registrable Shares have
been registered.
(p) The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the
Investor of the Registrable Securities pursuant to the
Registration Statement.
(q) At the request of any Investor, the Company shall promptly
prepare and file with the SEC such amendments (including
post effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with the
Registration Statement as may be necessary in order to
change the plan of distribution set forth in such
Registration Statement to conforming to written information
supplied to the Company by such investor for such purpose.
(r) The Company shall comply with all applicable laws related to
a Registration Statement and offering and sale of securities
and all applicable rules and regulations of governmental
authorities in connection therewith.
(s) INTENTIONALLY LEFT BLANK.
(t) INTENTIONALLY LEFT BLANK
4. Obligations of the Investors. In connection with
the registration of the Registrable Securities, the Investors
shall have the following obligations:
(a) it shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement with
respect to each Investor that such Investor shall furnish to
the Company such information regarding itself the number of
Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as
shall be reasonably required by rules of the SEC to effect
the registration of the Registrable Securities. The
information so provided by the Investor shall be included
without material alteration in the Registration Statement
and shall not be materially modified without such investors
written consent. At least ten (10) business days prior to
the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor
(the "Requested Information") if such Investor elects to
have any of such investor's Registrable Securities included
in the Registration Statement. If within five (5) business
days of such notice the Company has not received the
Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration
Statement without including Registrable Securities of such
Non-Responsive Investor. The Non-Responsive Investor shall
then have no continuing right to demand registration of
their unregistered Common Stock, but shall continue to have
the right to include the Registrable Securities in any
subsequent Registration Statement filed by the Company.
(b) Each Investor, by such Investors acceptance of the
Registrable Securities agrees to cooperate with the Company
as reasonably requested by the Company in connection with
the preparation and filing of the Registration Statement
hereunder, unless such Investor has notified the Company in
writing of such Investors election to exclude all of such
investor's Registrable Securities from the Registration
Statement.
(c) In the event Investors holding a majority in interest of the
Registrable Securities being registered determine to engage
the services of an underwriter, each Investor agrees to
enter into and perform such Investor's obligations under an
underwriting agreement in usual and customary form,
including, without limitation, customary indemnification and
contribution obligations, with the managing underwriter of
such offering and take such other actions as are reasonably
required in order to expedite or facilitate the disposition
of the Registrable Securities, unless such Investor has
notified the Company in writing of such Investor's election
to exclude all of such Investor's Registrable Securities
from the applicable Registration Statement. No Investor
shall be obligated to participate in any such underwriting.
(d) Each Investor agrees that upon receipt of any notice from
the Company of the happening of any event of the kind
described in Section 3(f) or 3(g), such Investor will
immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering
such Registrable Securities until such Investor's receipt of
the copies of the supplemented or amended prospectus
contemplated by Section 3(f) or 3(y) and, if so directed by
the Company, such Investor shall deliver to the Company (at
the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies, other than
file copies, in such Investor's possession, of the
prospectus covering such Registrable Securities current at
the time of receipt of such notice.
(e) No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such
Investors Registrable Securities on the basis provided in
any underwriting arrangements approved by the Investors
entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other
documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro
rata share of all underwriting discounts and commissions and
other fees and expenses of investment bankers and any
manager or managers of such underwriting and legal expenses
of the underwriter applicable with respect to its
Registrable Securities, in each case to the extent not
payable by the Company pursuant to the terms of this
Agreement.
5. Expenses of Registration. All expenses, other than
underwriting discounts and commissions and the fees and
disbursements of counsel selected by the Initial investor
pursuant to Section 3(e) hereof, incurred in connection with
registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees,
and the fees and disbursements of counsel for the Company,
shall be borne by the Company.
6. Indemnification. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Investor who holds
such Registrable Securities, the directors, if any,
of such Investor, the officers, if any, of such
Investor, each person, if any, who controls any
Investor within the meaning of the Securities Act or
the Exchange Act any underwriter (as defined in the
Securities Act) for the Investors, the directors, if
any. of such underwriter and the officers, if any, of
such underwriter, and each person, if any, who
controls any such underwriter within the meaning of
the Securities Act or the Exchange Act (each, an
"Indemnified Person"), against any losses, claims,
damages, expenses (including legal fees in compliance
with Section 6 (c)) or liabilities joint or several
(collectively "Claims") to which any of them become
subject under the Securities Act, the Exchange Act or
otherwise, insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any
of the following statements, omissions or violations
in the Registration Statement, or any post-effective
amendment thereof, or any prospectus included
therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the
Registration Statement or any post-effective
amendment thereof or the omission or alleged omission
to state therein a material fact required to be
stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or
alleged untrue statement of a material fact contained
in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or
contained in the final prospectus (as amended or
supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the
omission or alleged omission to state therein any
material fact necessary to make the statements made
therein, in light of the circumstances under which
the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the
Company of the Securities Act, the exchange Act or
any state securities law or any rule or regulation
(the matters in the foregoing clauses (i) through
(iii) being, collectively, 'Violations"). Subject to
the restrictions Set forth in Section 6(c) with
respect to the number of legal counsel, the Company
shall reimburse the Investors and each such
underwriter or controlling person for any legal fees
or other reasonable expenses incurred by them in
connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary
contained herein1 the indemnification agreement
contained in this Section 6(a): (A) shall not apply
to a Claim arising out of or based upon a Violation
which occurs in reliance upon and in conformity with
information furnished in writing to the Company by
any Indemnified Person or underwriter for such
Indemnified Person expressly for use in connection
with the preparation of the Registration Statement or
any such amendment thereof or supplement thereto1 if
the prospectus contained in such Registration
Statement was timely made available by the Company
pursuant to Section 3(c) hereof, (B) with respect to
any preliminary prospectus shall not inure to the
benefit of any such person from whom the person
asserting any such Claim purchased the Registrable
Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the
untrue statement or omission of material fact
contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented.
if a prospectus was timely made available by the
Company pursuant to Section 3(c) hereof, and (C)
shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the
prior written consent of the Company, which consent
shall not be unreasonably withheld. Such indemnity
shall remain in full force and effect regardless of
any investigation made by or on behalf of the
Indemnified Persons and shall survive the transfer of
the Registrable Securities by the Investors pursuant
to Section 9.
(b) In connection with any Registration Statement in
which an Investor is participating, each such
investor, severally and not jointly, agrees to
indemnify and hold harmless, to the same extent and
in the same manner set forth in Section 6(a), the
Company, each of its directors, each of its officers
who signs the Registration Statement, each person, if
any, who controls the Company within the meaning of
the Securities Act or the Exchange Act, its
attorneys, any underwriter and any other stockholder
selling securities pursuant to the Registration
Statement or any of its directors or officers or any
person who controls such stockholder or underwriter
within the meaning of the Securities Act or the
Exchange Act (collectively and together with an
Indemnified Person, an "Indemnified Party"), against
any Claim to which any of them may become subject,
under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent
(and only to the extent) that such Violation occurs
in reliance upon and in conformity with written
information furnished to the Company by such Investor
expressly for use in connection with such
Registration Statement and such Investor will
promptly reimburse any legal or other expenses
reasonably incurred by them in connection with
investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in
this Section 6(b) shall not apply to amounts paid in
settlement of any Claim if such settlement is
effected without the prior written consent of such
Investor which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force
and effect regardless of any investigation made by or
on behalf of such indemnified Party and shall survive
the transfer of the Registrable Securities by the
Investors pursuant to Section 9 Notwithstanding
anything to the contrary contained herein4 the
indemnification agreement contained in this Section
6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if
the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected
on a timely basis in the prospectus; as then amended
or supplemented.
(c) Promptly after receipt by an Indemnified Person
or Indemnified Party under this Section 6 of notice
of the commencement of any action (including any
governmental action)1 such Indemnified Person or
Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party
under this Section 6, deliver to the indemnifying
party a written notice of the Commencement thereof
and this indemnifying party shall have the right to
participate in) and, to the extent the indemnifying
party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to
the indemnifying parties; provided. however, that an
Indemnified Person or Indemnified Party shall have
the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by
the indemnifying party, the representation by such
counsel of the Indemnified Person or Indemnified
Party and the indemnifying party would be
inappropriate due to actual or potential differing
interests between such Indemnified Person or
Indemnified Party and other party represented by such
counsel in such proceeding. The Company shall pay for
only one separate legal counsel for the Investors;
such legal counsel shall be selected by the Investors
holding a majority in interest of the Registrable
Securities. The failure to deliver written notice to
the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve
such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying
party is prejudiced in its ability to defend such
action.
7. Contribution. If the indemnification provided for in
Section 6 herein is unavailable to the Indemnified Parties in respect
of any losses, claims, damages or liabilities referred to herein (other
than by reason of the exceptions provided therein), then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified
Party as a result of such losses, claims, damages or liabilities as
between the Company on the one hand and any Investor on the other, in
such proportion as is appropriate to reflect the relative fault of the
Company and of such Investor in connection with the statements or
Omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations,
The relative fault of the Company on the one hand and of any Investor
on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material tact or
omission or alleged omission to state a material fact relates to
information supplied by the Company or by such Investor,
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such
Indemnifying Party would have been obligated to pay by way of
indemnification if the indemnification provided for under Section 6(a)
or 6(b) hereof had been available under the circumstances.
The Company and the Investors agree that it would not be just
and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Investors or the
underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraphs. The
amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages and liabilities referred to in the immediately
preceding paragraphs shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably
incurred by such Indemnified Party in connection with investigating or
defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
8. Public Information. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act
or any other similar rule or regulation of the SEC that may at any time
permit the Investors to sell securities of the Company to the public
without registration ("Rule 144"), the Company agrees to:
(a) File with the SEC in a timely manner and make and keep
available all reports and other documents required of the
Company under the Exchange Act at such time that the Company
becomes subject to and so long as the Company remains subject
to, such requirements and the filing and availability of such
reports and other documents is required for the applicable
provisions of Rule 144; and
(b) Furnish to each Investor so long as such Investor holds
Registrable Securities promptly upon request, (i) a written
statement by the Company that it has complied with the
reporting requirements of Rule 144 and the Exchange Act (if
and when applicable), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and
documents so filed by the Company and (iii) such other
information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without
registration.
9. Assignment of Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement
shall be automatically assigned by the Investors to transferees or
assignees of all or any portion of such securities only if:
(i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such
transfer or assignment furnished with written notice
of the name and address of such transferee or
assignee and the securities with respect to which
such registration rights are being transferred or
assigned, (iii) following such transfer or assignment
the further disposition of such securities by the
transferee or assignee is restricted under the
Securities Act and applicable state securities laws,
(iv) at or before the time the Company received the
written notice contemplated by clause (ii) of this
sentence, the transferee or assignee agrees in
writing with the Company to be bound by all of the
provisions contained herein, (v) such transfer shall
have been made in accordance with the applicable
requirements of the Purchase Agreement and (vi) such
transferee shall be an "accredited investor" as that
term is defined in Rule 501 of Regulation D
promulgated under the Securities Act.
10. Amendment of Registration Rights Provisions of this
Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively
or prospectively) only with the written consent of the Company and
Investor's holding sixty-five percent of the Registerable Securities.
Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company.
11. Miscellaneous.
(a) Conflicting Instructions. A person or entity is deemed to
be a holder of Registrable Securities whenever such person or
entity owns of record such Registrable Securities. If the
Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to
the same Registrable Securities, the Company shall act upon
the basis of instructions, notice or election received from
the registered owner of such Registrable Securities.
(b) Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified
or registered mail (with return receipt requested) or
delivered personally or by courier (including a nationally
recognized overnight delivery service) or by facsimile
transmission. Any notice so given shall be deemed effective
upon receipt if delivered personally, by U.S. Mail or by
courier or facsimile transmission, in each case addressed to a
party at the following address or such other address as each
such party furnishes to the other in accordance with this
Section 11(b). and;
If to the Company:
Beta Oil & Gas, Inc.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: J. Xxxxx Xxxxxxxxxxx
Phone: (949) 752 -5212
Fax: (949) 752 -5757
With copy to:
Xxxxxxx & Beam
Two Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxx, Esq.
Phone: (000) 000-0000
Fax: (949) 453 - 9416
if to the Investors:
Attn: Aztore Holdings, Inc.
0000 Xx. 00xx Xx.
Xxxxx 000
Xxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
With a copy to:
Mr. Xxx Xxxxxx
Xxxxxxxx & Xxxxxxx
0000 X. Xxxxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
(c) Waiver. Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party
in exercising such right or remedy, shall not operate as a
waiver thereof
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
California which would apply if both parties were residents of
California and this Agreement was made and performed in
California. In any legal action involving this Agreement or
the parties' relationship, the parties agree that the
exclusive venue for any lawsuit shall be in the state or
federal court located within the County of Orange, California.
The parties agree to submit to the personal jurisdiction of
the state and federal courts located within Orange County,
California.
(e) Severability. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule
of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or
enforceability of any other provision hereof.
(f) Entire Agreement. This Agreement and the Purchase
Agreement (including all schedules and exhibits thereto)
constitute the entire agreement among the parties hereto with
respect to the subject matter hereof. There are no
restrictions1 promises, warranties or undertakings, other than
those set forth or referred to herein or therein. This
Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter
hereof.
(g) Successors and Assigns. Subject to the requirements of
Section 9 hereof, this Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the
parties hereto.
(h) Use of Pronouns. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or
plural, as the context may require.
(i) Headings. The headings and subheadings in the Agreement
are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.
(j) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement.
This Agreement once executed by a party, may be delivered to
the other party hereto by facsimile transmission, and
facsimile signatures shall be binding on the parties hereto.
(k) Further Acts. Each party shall do and perform1 or cause to
be done and performed, all such further acts and things1 and
shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party
may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation
of the transactions contemplated hereby.
(l) Remedies. No provision of this Agreement providing for any
remedy to a Investor shall limit any remedy which would
otherwise be available to such Investor at law or in equity.
Nothing in this Agreement shall limit any rights a Investor
nay have with any applicable federal or state securities laws
with respect to the investment contemplated hereby. The
Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to a Investor.
Accordingly, the Company acknowledges that the remedy at law
for a breach of its obligations under this Agreement will be
inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement,
that a Investor shall be entitled, in addition to all other
available remedies to an injunction restraining any breach and
requiring immediate compliance, without the necessity of
showing economic loss and without any bond or other security
being required.
(m) Consents. All consents and other determinations to be made
by the Investors pursuant to this Agreement shall be made by
investors holding sixty-five percent of the Registrable
Securities.
IN WITNESS WHEREOF, the parties have caused this
Registration Rights Agreement to be duly executed as of the date
first above written.
COMPANY:
Beta Oil & Gas, Inc.
By ______________________
/s/ Xxxxx Xxxxx
Its: President and Director
INVESTORS:
Aztore Holdings, Inc.
By: ______________________
Its:
EXHIBIT B
TO NOTE AND COMMON STOCK PURCHASE AGREEMENT DATED
March 19, 1999
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement') is made and entered into as of this
15th day of March, 1999, by and between Beta Oil & Gas, Inc., a Nevada
corporation ("Debtor") and Aztore Holdings, Inc. Aztore Holdings, Inc.
is referred to herein as the "Secured party".
RECITALS
A. Debtor and the Secured party are parties to that certain Note and Common
Stock Purchase Agreement dated of even date herewith (the "Purchase Agreement").
B. As security for Debtor's obligations to the Secured party under Those certain
Secured Promissory Notes dated of even date herewith issued to the Secured party
pursuant to the Purchase Agreement (the "Secured Promissory Notes"), Debtor has
agreed to execute this Agreement granting to Secured party a security interest
in all of the assets of Debtor.
AGREEMENT
In consideration of the foregoing recitals and the mutual covenants and
conditions contained herein, the parties, intending to be legally bound, agree
as follows:
1. Grant of Security Interest Debtor hereby grants to Secured party, along with
additional secured parties in other recent and current tranches of similar
financing in a combined amount not to exceed $3,000,000, to secure all of
Debtors obligations under the Secured Promissory Notes, a security interest in
all of the assets of Debtor, including, without limitation, all of Debtor's
presently existing or hereafter acquired right, title and interest in and to all
of Debtor's assets, tangible and intangible, including without limitation, the
following: All equipment, inventory, accounts, instruments, documents, oil and
gas leases, productive xxxxx, seismic data, chattel paper, general intangibles,
contracts, money and proceeds and products of the foregoing (collectively, the
"Collateral").
2. Use of Collateral in Absence of Default. Until a Default (as defined in
Section 3 below), Debtor may use the Collateral in any lawful manner not
inconsistent with this Agreement and may sell its inventory in the ordinary
course of business. Debtor will maintain the Collateral in good working order
and condition, normal wear and tear excepted, and will not cause or permit any
waste or unusual or unreasonable depreciation thereof.
3. Default by Debtor. A "Default" shall mean an Event of Default as defined in
the Secured Promissory Notes.
4. Remedies of Secured Party. Upon and after a Default, each Secured Party and
its respective assigns, shall have all of the rights and remedies of a secured
party under the Uniform Commercial Code or other applicable law in all relevant
jurisdictions, all of which rights and remedies shall be cumulative and
nonexclusive to the extent permitted by law.
5. Relationship of the Secured Parties The rights of the Secured Parties
hereunder shall rank pari passu and any action taken by any Secured Party
hereunder shall inure to the benefit of each other Secured Party, pro rata in
accordance with the aggregate amounts due and owing to such Secured Party under
the Secured Promissory Note held by such Secured Party.
6. Notice. Any notice required to be given by any Secured Party on a sale,
lease, other disposition of the Collateral or any other intended action and such
Secured Party, if given ten (10) business days prior to such proposed action,
shall constitute commercially reasonably fair notice thereof to Debtor.
7. Financing Statements. Debtor agrees to execute from time to time such
financing statements and such additional instruments as may be reasonably
required by the Secured party to preserve and perfect the security interests
created hereby.
8. Termination of Lien. Upon Debtor's payment in full of all amount:; due and
owing under the Secured Promissory Notes, the Secured party shall cause an
appropriate UCC termination statement or other instruments as required to be
filed with the appropriate government offices in all of the states, counties, or
otherwise in which financing statements or such other instruments were filed
pursuant to Section 7.
9. General Provisions
9.1 Choice of Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California, which would apply if both
parties were residents of California and this Agreement was made and performed
in California. In any legal action involving this Agreement or the parties'
relationship, the parties agree that the exclusive venue for any lawsuit shall
be in the state or federal court located within the County of Orange,
California. The parties agree to submit to the personal jurisdiction of the
state and federal courts located within Orange County, California.
9.2 Severability. Each provision of this Agreement is intended to be severable.
Should any provision of this Agreement or the application thereof be judicially
declared to be or becomes unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the party hereto. The parties further agree to replace such
unenforceable provision of this Agreement with an enforceable provision that
will achieve, to the extent possible, the economic, business and other purposes
of such unenforceable provision
9.3 Assignability. Except in connection with a change in control or sale of
substantially all of the assets of a party, neither this Agreement nor any
interest herein shall be assignable (voluntarily. involuntarily, by judicial
process or otherwise), in whole or in part, by any party to any other entity
without the prior written consent of the other party. Any attempt at such an
assignment without such consent shall be void.
9.4 Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Security Agreement, or to seek damages for a breach of any
provision hereof is validly asserted as a defense, the successful party shall be
entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
9.5 Successors and Assigns. Each of the terms, provisions and obligations of
this Agreement shall be binding upon, shall inure to the benefit of, and shall
be enforceable by the parties and their respective legal representatives,
successors and permitted assigns.
9.6 Notices. All notices, demands or other communications which are required or
are permitted to be given hereunder shall be in writing and shall be deemed to
have been sufficiently given in the manner set forth in the Purchase Agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of the
date first set forth above.
"DEBTOR":
Beta Oil & Gas, Inc.
a Nevada corporation
By: ____________________
/s/ Xxxxx Xxxxx
Its: President and Director
"SECURED PARTY":
Aztore Holdings, Inc.
By: ______________________
Its:
EXHIBIT C
TO NOTE AND COMMON STOCK PURCHASE AGREEMENT
DATED March 19, 1999
THIS SECURED PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN COMPLIANCE WITH THE ACT AND ALL APPLICABLE STATE
SECURITIES LAWS.
SECURED PROMISSORY NOTE
$ 1,000,000 Due March 19, 2000
FOR VALUE RECEIVED, the undersigned, Beta Oil & Gas, Inc., a Nevada corporation
("Maker"), promises to pay to Aztore Holdings, Inc., ("Payee"), the principal
sum of one million dollars ($1,000,000) (the "Principal Amount") before or at
maturity, together with Interest accruing on the unpaid portion of the Principal
Amount from the date hereof until maturity at the annual rate of ten percent
(10%) payable monthly in arrears.
This Secured Promissory Note (this '"Note") is being issued and delivered
pursuant to that certain Note and Common Stock Purchase Agreement dated of even
date herewith (the "Purchase Agreement") by and between Maker and Payee and is
made subject to the terms and Conditions of the Purchase Agreement. Unless
otherwise set forth herein, all capitalized terms used herein without definition
shall have the meanings given to such terms in the Purchase Agreement.
The Principal Amount and all accrued and unpaid interest thereon shall be due
and payable on the sooner to occur of 10 days from the close of the anticipated
Initial Public Offering or March 19, 2000 or the occurrence of an Event of
Default as hereafter defined (the "Maturity Date"). Maker may prepay. at any
time or from time to time prior to the Maturity Date, any portion or all of the
amount due hereunder without penalty; provided, however, that any such
prepayment shall be applied first to the Principal Amount and the balance to
accrued but unpaid interest, in which case, interest shall cease to accrue on
the amount of the Principal Amount so paid; and provided further that, unless
the holders of all of the Notes otherwise consent in writing, unless the full
principal amount of and all accrued and unpaid interest on all of the
outstanding Notes are prepaid in full at such time, any amount paid by Maker in
prepayment of any Note shall be allocated among all outstanding Notes prorated
in accordance with the respective principal amount of and accrued and unpaid
Interest on such Notes. The Maker agrees that the original principal amount of
the Note will be due and payable 10 days from the close of the initial public
offering for which Maker has filed an S-1 Registration Statement.
It shall constitute an event of default ("Event of Default") if any one or more
of the following shall occur for any reason:
(a) A failure by Maker to pay the principal of or interest on this Note
or any portion thereof when due; or
(b) A failure by Maker to perform or observe any term, covenant or
Agreement contained in the Note and Common Stock Purchase Agreement or
the Security Agreement on its part to be performed or observed and such
failure shall continue for more than fourteen (14) days after notice of
such failure is given by Payee to Maker; or
(c) Any representation or warranty in the Note and Common Stock
Purchase Agreement or in any certificate, agreement instrument or other
document made or delivered by Maker to Payee pursuant to the Note and
Common Stock Purchase Agreement proves to have been incorrect when
made; or
(d) Maker shall fall to pay when due (or within any stated grace
period), whether at the stated maturity, upon acceleration, by reason
of required prepayment or otherwise, the principal or any principal
installment of, or any interest on, any present or future indebtedness
of Maker; or
(e) Maker Is the subject of an order for relief by a bankruptcy court,
or is unable or admits in writing its inability to pay its debts as
they mature or makes an assignment for the benefit of creditors, or
applies for or consents to the appointment of any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar officer
for it or for all or any part of its business or Property; or any
receiver, trustee., custodian, conservator, liquidator, rehabilitator
or similar officer is appointed without the application or consent of
Maker and the appointment continues a undischarged or unstayed for
sixty (60) calendar days; or institutes or consents to any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt,
dissolution, custodianship, conservatorship, liquidation,
rehabilitation or similar proceeding relating to it or to all or any
part of its business or property under the laws of any jurisdiction; or
any similar proceeding is instituted without the consent of Maker
(including but not limited to any action taken by any Governmental
Agency that has a material adverse effect on the business, operations
or property of Maker) and continues undismissed or unstayed for sixty
(60) calendar days; or
(e) Any judgment, writ, warrant of attachment or execution or
similar process is issued or levied against all or any
part of the property of Maker end is not released,
vacated or fully bonded within sixty (60) calendar days
after its issue or levy.
Maker will reimburse Payee on demand for all costs of collection before and
after judgement and the costs of preservation and/or liquidation of any
collateral (including all fees and expenses of counsel to the Payee).
All payments hereunder shall be made in lawful currency of the United States of
America at such place as Holder shall designate in writing and shall be payable
by Maker by check or wire transfer.
Maker's obligations under this Note are secured pursuant to the terms of that
certain Security Agreement of even date herewith between Maker, Payee and
others, securing all of the assets of Maker, tangible and intangible, in favor
of Payee and others.
The validity. construction and performance of this Note, and any action or claim
arising out of or relating to this Note, shall be governed by the laws, without
regard to the laws as to choice or conflict of laws, of the State of California.
The forum for disputes is Orange County, California.
Each of the terms, provisions and obligations of this Note shall be binding
upon. shall inure to the benefit of, and shall be enforceable by the parties and
their respective legal representatives, successors and permitted assigns.
IN WITNESS WHEREOF, Maker has executed this Note in favor of Payee is of the
date first set forth above.
MAKER:
Beta Oil & Gas, Inc.
a Nevada corporation
By:__________________
/s/ Xxxxx Xxxxx
Its: President and Director
PAYEE:
Aztore Holdings, Inc.
By:__________________
Its:
EXHIBIT D
TO NOTE AND COMMON STOCK PURCHASE AGREEMENT DATED
March 19, 1999
There is no Exhibit D.
EXHIBIT E
TO NOTE AND COMMON STOCK PURCHASE AGREEMENT DATED
March 19, 1999
There is no Exhibit E.
EXHIBIT F
TO NOTE AND COMMON STOCK PURCHASE AGREEMENT DATED
March 19, 1999
Attorney Letterhead (Xxxxxxx & Beam)
__________, 1999
Aztore Holdings, Inc.
0000 Xx. 00xx Xx.
Xxxxx 000
Xxxxx, XX 00000
Re: Beta Oil & Gas, Inc.
Ladies and Gentlemen:
We have acted as counsel to Beta Oil & Gas, Inc., a Nevada
corporation (the "Company"), in connection with (i) the execution and
delivery by the Company of the Note and Common Stock Purchase
Agreement, the Secured Promissory Note, the Security Agreement, the
Registration Rights Agreement, all dated as of March 19,1999
(collectively, the "Transaction Documents"), to which Aztore
Holdings, Inc., (the "Purchaser") and the Company are signatories and
(ii) the transactions contemplated to be consummated by the Company
under the Transaction Documents on the date hereof. We are rendering
this Opinion pursuant to Section 7.l (vii) of the Note and Common
Stock Purchase Agreement. Capitalized terms used and not otherwise
defined herein shall have the same meanings as are ascribed thereto
in the various Transaction Documents.
As counsel in this capacity, we have examined the following:
(i) each of the Transaction Documents, (ii) a copy of the Articles of
Incorporation and By-laws of the Company, including any amendments
thereto to date, (iii) records of the proceedings and actions of the
Company's board of directors, (iv) certificates of the Nevada
Secretary of State (dated October 23, 1998), (v) a certificate of an
executive officer of the Company (of even date herewith), and (vi)
such other documents, records, and items as we have deemed necessary
or relevant for purposes of the opinions hereinafter expressed.
For purposes of this opinion, we have also made the following
assumptions and have not made any factual, legal, or other inquiry or
investigation with respect thereto:
(i) that the Transaction Documents have been
duly authorized, executed, and delivered by
the Purchaser and each other party thereto
(other than the Company);
(ii) that all persons signing the Transaction
Documents on behalf of the Purchaser and each
other party thereto (other than the Company)
have the legal existence, power, authority,
and right so to sign;
(iii) that each of the agreements made by
each of the parties in each Transaction
Document executed by the Purchaser is
authorized by all appropriate corporate or
other actions of the Purchaser and each other
party thereto (other than the Company) arid
is in compliance with all applicable laws and
regulations affecting the Purchaser;
(iv) the genuineness of all signatures on
documents not signed in our presence (other
than those of the officers of the Company),
and the authenticity of all documents
submitted to us as originals and the
conformity with original documents of all
documents submitted to us as copies,
(v) that (x) each Transaction Document is
enforceable against the Purchaser and each
other party thereto (other than the Company);
(y) all actions required to be taken and all
conditions and requirements required to be
fulfilled under the Transaction Documents in
order to allow the Purchaser (other than
conditions and requirements to be fulfilled
by the Company) to enforce its rights
thereunder have been fully and effectively
taken and fulfilled; and (r) the Purchaser
has complied with all laws that may be
applicable to it with respect to the
execution and delivery of the Transaction
Documents, and purchasing the Notes and the
Common Shares, and other actions taken or
that may be taken by it thereunder;
(vi) that the representations and warranties
made by the Purchaser within the Transaction
Documents are true and complete in all
material in respects. and do not fail to
state any fact or information, the statement
of which is necessary to make than not
misleading in any material respect; and
(vii) that there are no documents other than
the Transaction Documents and no agreements
other than as contained in the Transaction
Documents between the Purchaser and the
Company or others that expand or otherwise
modify the obligations of the Company with
respect to the transactions contemplated by
the Transaction Documents and would have an
affect on the Opinions Set forth below.
For purposes of this opinion we have relied upon the accuracy
of: (i) the representations and warranties of each of the parties set
forth in the Transaction Documents, but only as to questions of fact,
(ii) the representations of an executive officer of the Company in a
certificate to us, and (iii) the certificates of public officials. In
addition to the assumptions set forth above, this opinion is subject
to the following qualifications and exceptions:
(a) enforcement may be limited by (i) applicable
bankruptcy, insolvency, fraudulent conveyance,
preference, reorganization, moratorium, or other
similar laws of general application affecting
creditors' rights (including equitable
subordination) and (ii) the application of the
rules of equity, including those respecting
availability of specific performance and general
principles of public policy (regardless of
whether enforcement is sought in equity or at
law);
(b) we express no opinion as to (i) the
enforceability of the choice of California law by
a federal court or by a state court outside the
State of California, (ii) conflicts of law
principles generally, (iii) the validity, binding
effect, or enforceability of any provision of the
Transaction Documents purporting to (A) prohibit
oral amendment or waiver of such documents or
limit the effect of a course of dealing between
the parties or (B) indemnify any pawn for its own
negligence, gross negligence, or willful
misconduct or release such person from the
consequences thereof, (iv) the enforceability of
any provision in the Transaction Documents
purporting to relate to delay by any party to the
Transaction Documents to exercise any right,
remedy, or option under the provisions thereof
not operating as a waiver, (v) the enforceability
of any provisions in the Transaction Documents,
as a whole, and in the Notes specifically, in
respect of interest to be charged to, or accrued
or paid by, the Company and whether any
provisions of any of the Transaction Documents,
individually or taken as a whole, if enforced,
would constitute a violation of any
Constitutional, statutory, administrative, or
case law regarding effective interest rates
(usury), and (vi) the priority of any liens or
security interests created by any or all of the
Transaction Documents in any of the Company's
property and whether, if applicable, the
Purchaser has possession of the collateral
described in any or all of the Transaction
Documents sufficient to perfect a security
interest therein;
(c) with respect to our opinions as to the good
standing and foreign qualification of the
Company, we have relied solely on the good
standing certificates referenced above and
delivered to us by public officials from the
State of Nevada; and
(d) the qualification that any right to
indemnification and contribution contained in the
Transaction Documents may be limited by United
States federal or state securities laws or the
policies underlying such laws.
We express no opinion as to the laws of any jurisdiction other
than (i) the laws of the State of California and (ii) the federal
laws of the United States of America to the extent specifically
referred to herein. We express no opinion as to any ordinances,
administrative decisions, or the rules and regulations of counties,
towns, municipalities, and special political subdivisions
As used herein, the term "knowledge" refers only to the actual
knowledge of our attorneys who participated in our representation of
the Company in connection with the negotiation, execution, and
delivery of the Transaction Documents. Unless otherwise expressly
indicated, the phrase "to our knowledge" does not imply any
investigation or inquiry on the part of our firm or any partner or
employee thereof. As used herein, the word "including" means
"including, without limitation."
Based upon and subject to the foregoing, we are of the opinion
that:
1. The Company is a corporation validly existing and
in good standing under the laws of the State of
Nevada, and is qualified as a foreign corporation in
California to own and operate its properties and
assets and to carry on its business as presently
conducted. The Company is not qualified as a foreign
corporation to do business in any other
jurisdictions.
2. The offer and sale of the Notes and Common Shares
in conformity with the terms of the Transaction
Documents will constitute transactions exempt from
the registration requirements of Section 5 of the
Securities Act.
3. No consent, approval, or authorization of or
designation, declaration, or filing with any court,
governmental authority, regulatory agency,
self-regulatory organization. stock exchange, or
market on the part of the Company is required in
connection with (i) the valid execution and delivery
of the Transaction Documents. (ii) the offer, sale,
or issuance of the Notes or the Common Shares, (iii)
the consummation of any other transaction
contemplated by the Transaction Documents, with the
exception of (A) the filing of one or more Notices
of Sale of Securities Pursuant to Regulation D (Form
D) with the SEC, (B) the filing of appropriate
notices with state securities commissioners (blue
sky authorities), and (C) the filing of a
Registration Statement pursuant to the Registration
Rights Agreement.
4. The Company has all requisite corporate power
and authority to execute and deliver the
Transaction Documents to carry out all of its
obligations thereunder, including the sale and
issuance of the Notes and the Common Shares, in
accordance with the terms of the Transaction
Documents.
5. Each of the Transaction Documents has been duly and
validly authorized by all necessary corporate
action, and has been executed and delivered by, and
constitutes a valid and binding agreement of, the
Company and is enforceable against the Company in
accordance with its terms
6. The authorized capital stock of the Company is as
stated in the Articles of incorporation of the
Company and in Schedule 3.3 of the Note and Common
Stock Purchase Agreement. To our knowledge, there
have not been any shares of the capital stock of
the Company issued that are not validly issued,
fully paid, and non-assessable. All issued and
outstanding shares of Common Stock of the Company
are free of any preemptive or similar rights
contained in the Articles of Incorporation or
Bylaws of the Company or, to our knowledge, in any
agreement by which the Company is bound.
7. Upon payment therefor, the Common Shares will be
validly issued, fully paid, and non-assessable, and
free of any preemptive or similar rights contained
in the Articles of incorporation or the By-laws of
the Company or, to our knowledge, of any agreement
by which the Company is bound.
8. The execution and delivery of, and compliance
with the terms of: the Transaction Documents,
including the issuance of the Common Shares, as
contemplated thereby, do not and will not conflict
with or result in a breach or default by the
Company of any of the terms or provisions of: (i)
the Articles of Incorporation or the By-laws of the
Company, (ii) to our knowledge, any existing
applicable decree, judgment, or order of any court,
federal or state regulatory body, administrative
agency, or other governmental body having
jurisdiction over the Company or any of its
properties or assets, (iii) to our knowledge,
conflict with, or constitute a default (or an event
which with notice or lapse of time or both would
become a default) under, or give to others any
rights of terminations, amendments, accelerations,
or cancellation of, any agreement, indenture, or
instrument to which the Company is a party (except
for such conflicts, defaults, termination,
amendments, accelerations, cancellations, arid
violations as would not, individually or in the
aggregate, have a Material Adverse Effect), or (iv)
federal or California State law. However, we
express no opinion on usury laws and encourage
purchaser to undertake its own investigation into
such laws.
9. To our knowledge, there is no litigation,
pending or threatened, that could or that would
impair the ability of the Company to issue and
deliver the Common Shares, or to comply with the
provisions of the Transaction Documents or
otherwise have a Material Adverse Effect.
This opinion is furnished to the Purchaser solely for its
benefit in connection with the sale and issuance of the Notes and the
Common Shares, as contemplated by the Transaction Documents, and may
not be relied upon by any other person (other than the Company) or
for any other purpose without our prior written consent. This opinion
is limited to matters expressly set forth herein and no opinion may
be inferred or implied beyond the matters expressly stated in this
opinion on the date hereof. We shall have no obligation to update any
of the matters set forth in this opinion.
We bring to your attention the fact that our legal opinions
are an expression of professional judgment and are not a guarantee of
a result.
Very truly yours,
XXXXXXX & BEAM
EXHIBIT G
TO NOTE AND COMMON STOCK PURCHASE AGREEMENT DATED
March 19, 1999
LIST OF COLLATERAL TO BE PLEDGED UNDER THIS AGREEMENT
1. All of the Company's right, title and interest in West Cameron Block 39,
offshore Louisiana, including, but not limited to, the OCS-G 13825 #1 Well,
the OCS-G 13825 #2 Well, and the Company's leasehold interest therein.
2. All of the Company's right, title and interest in the Pressly No. 1 Well
and the applicable spacing unit surrounding the well, Xxxxxxx County,
Texas.
3. All of the Company's right, title and interest in the Xxxxxxx No. 1 Well
and the applicable spacing unit surrounding the well, Xxxxxxx County,
Texas.
