PURCHASE AGREEMENT
THIS
PURCHASE AGREEMENT
(this
“Agreement”) dated August 17, 2007, is entered into between YA
GLOBAL INVESTMENTS, L.P.
(the
“Purchaser”) and DELEK
RESOURCES, INC.
(the
“Company”).
1. Purchase
and Sale.
Subject
to the terms and conditions set forth in this Agreement, the Purchaser shall
purchase from the Company and the Company shall issue to the Purchaser a Secured
Convertible Debenture in the form attached hereto as Exhibit A (the
“Convertible
Debenture,”
and
as
converted, the “Conversion
Shares”))
in
the face amount of $90,000.
2. Closing.
The
closing of the issuance of the Debenture shall occur within 1 business day
of
the satisfaction of all conditions precedent set forth in Section 6 hereof
at
the offices of the Purchaser (the “Closing”).
3. Closing
Procedure.
At the
Closing, the Company shall execute and deliver the Debenture and the Purchaser
shall pay the Purchase Price in accordance with the disbursement instructions
set forth on Schedule I attached hereto.
4. Representations,
Warranties, and Covenants of the Company. The
Company makes the following representations, warranties and agreements and
confirms the following understandings:
(a) Organization
and Qualification.
The
Company and its subsidiaries are corporations duly organized and validly
existing in good standing under the laws of the jurisdiction in which they
are
incorporated, and have the requisite corporate power to own their properties
and
to carry on their business as now being conducted. Each of the Company and
its
subsidiaries is duly qualified as a foreign corporation to do business and
is in
good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a
whole.
(b) SEC
Documents: Financial Statements.
Since
January 1, 2005, except as disclosed on the Disclosure Schedule attached hereto,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC under the Securities Exchange
Act of 1934, as amended (the “Exchange
Act”)
(all
of the foregoing filed prior to the date hereof or amended after the date hereof
and all exhibits included therein and financial statements and schedules thereto
and documents incorporated by reference therein, being hereinafter referred
to
as the “SEC
Documents”).
As of
their respective dates, the financial statements of the Company disclosed in
the
SEC Documents (the “Financial
Statements”)
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, 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 may exclude footnotes or may be condensed or
summary statements) and, fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Subscribers which
is
not included in the SEC Documents, including, without limitation, information
referred to in this Agreement, contains any untrue statement of a material
fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
1
(c) 10(b)-5.
The SEC
Documents do not include any untrue statements of material fact, nor do they
omit to state any material fact required to be stated therein necessary to
make
the statements made, in light of the circumstances under which they were made,
not misleading.
(d) Legal
and Other Proceedings. Except
as
set forth in the SEC Documents, neither the Company, nor any of its affiliates
or its executive officers or directors (in their capacity as executive officers
or directors), is a party to any pending or, to the best knowledge of the
Company, threatened, or unasserted but considered by it to be probable of
assertion, claim, action, suit, investigation, arbitration or proceeding, or
is
subject to any order, judgment or decree that is reasonably expected by
management of the Company to have, either individually or in the aggregate,
a
material adverse effect on the condition (financial or otherwise), earnings
or
results of operations of the Company. The Company is not, as of the date hereof,
a party to or subject to any enforcement action instituted by, or any agreement
or memorandum of understanding with, any federal or state regulatory authority
restricting its operations or requiring that actions be taken, and no such
regulatory authority has threatened any such action, memorandum or order against
the Company and the Company has not received any report of examination from
any
federal or state regulatory agency which requires that the Company address
any
problem or take any action which has not already been addressed or taken in
a
manner satisfactory to the regulatory agency.
(e) Authorization;
Conflict; Valid and Binding Obligation. When
issued in accordance herewith, the Convertible Debenture will be duly and
validly authorized by all requisite corporate action of the Company. The Company
has full right, power and capacity to execute, deliver and perform its
obligations under the Convertible Debenture. No governmental license, permit
or
authorization and no registration or filings with any court, governmental
authority or regulatory agency is required in connection with the Company's
execution, delivery and/or performance of the Convertible Debenture, other
than
any filings required by applicable federal and state securities laws. The
execution, delivery and performance of the Convertible Debenture, the
consummation of the transactions herein contemplated and the compliance with
the
terms of the Convertible Debenture by the Company will not violate or conflict
with any provision of the Articles of Incorporation, as amended or By-laws
of
the Company, or any agreement, instrument, law or regulation to which the
Company is a party or by which the Company may be bound. The Convertible
Debenture, upon execution and delivery by the Company, will represent the valid
and binding obligation of the Company enforceable in accordance with its
terms.
2
(f)
The
Company is party to that certain Joint Operating Agreement (the “Joint
Agreement”)
dated
March 6, 2007, by and between Quantum Oil & Gas, L.L.C., as Operator, and
Touchstone Resources, LTD., the Company, and 0000000 B.C., LTD. as
non-Operators, as amended or assigned from time to time. Pursuant to the Joint
Agreement the Company has a 33.3333% working interest and a 24.999975% net
revenue interest (“NRI”)
in the
Xxxxxx 27-1 Well described in the Joint Agreement. The Company hereby
represents, warrants, and confirms that with the payments to be made to Baleen,
LLC and Sanjel USA, Inc. with the proceeds of the sale of the Convertible
Debentures, the Company will maintain its full working interest and net revenue
interests pursuant to the Operating Agreement.
(g) Overriding
Royalty Interest.
For
a
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company does hereby GRANT, BARGAIN, SELL, TRANSFER, ASSIGN,
CONVEY, WARRANT and DELIVER to the Purchaser an overriding royalty interest
in
and to the interests of the Company derived from the Joint Agreement equal
to
ten percent (10%) of the NRI allocable to the Company. The Company shall pay
to
the Purchaser all amounts owed pursuant to this section on a monthly basis.
5. Representations,
Warranties, and Covenants of the Purchaser. The
Purchaser makes the following representations, warranties and agreements and
confirms the following understandings:
(a) Investment
Purpose.
The
Purchaser is acquiring the Convertible Debentures and, upon conversion of
Convertible Debentures, the Purchaser will acquire the Conversion Shares then
issuable, for its own account for investment only and not with a view towards,
or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered or exempted under the Securities Act;
provided, however, that by making the representations herein, such Purchaser
reserves the right to dispose of the Conversion Shares at any time in accordance
with or pursuant to an effective registration statement covering such Conversion
Shares or an available exemption under the Securities Act.
(b) Accredited
Investor Status.
The
Purchaser is an “Accredited
Investor”
as
that
term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance
on Exemptions.
The
Purchaser understands that the Convertible Debentures are being offered and
sold
to it in reliance on specific exemptions from the registration requirements
of
United States federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and the Purchaser’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
the Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of such Purchaser to acquire such
securities.
3
(d) No
Governmental Review.
The
Purchaser understands that no United States federal or state agency or any
other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Convertible Debentures or the Conversion Shares, or the
fairness or suitability of the investment in the Convertible Debentures or
the
Conversion Shares, nor have such authorities passed upon or endorsed the merits
of the offering of the Convertible Debentures or the Conversion
Shares.
(e) Transfer
or Resale.
The
Purchaser understands that: (i) the Convertible Debentures have not been and
are
not being registered under the Securities Act or any state securities laws,
and
may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, or (B) the Purchaser shall have delivered
to
the Company an opinion of counsel, in a generally acceptable form, to the effect
that such securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration requirements;
(ii) any sale of such securities made in reliance on Rule 144 under the
Securities Act (or a successor rule thereto) (“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 under circumstances in which
the
seller (or the person through whom the sale is made) 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; 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.
(f) Legends.
The
Purchaser understands that the certificates or other instruments representing
the Convertible Debentures and or the Conversion Shares shall bear a restrictive
legend in substantially the following form (and a stop transfer order may be
placed against transfer of such stock certificates):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR
AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
4
The
legend set forth above shall be removed and the Company within two (2) business
days shall issue a certificate without such legend to the holder of the
Conversion Shares upon which it is stamped, if, unless otherwise required by
state securities laws, (i) in connection with a sale transaction, provided
the
Conversion Shares are registered under the Securities Act or (ii) in connection
with a sale transaction, after such holder provides the Company with an opinion
of counsel, which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Conversion Shares may be made without
registration under the Securities Act.
(g) Authorization,
Enforcement.
This
Agreement has been duly and validly authorized, executed and delivered on behalf
of the Purchaser and is a valid and binding agreement of the Purchaser
enforceable in accordance with its terms, except as such enforceability may
be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to,
or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.
6. Use
of Proceeds. The
Company shall use the net proceeds of the Convertible Debenture as follows:
(a)
$54,000 shall be used to pay Sanjel USA, Inc. to conduct tests in connection
with certain xxxxx, (b) $26,000 to pay Baleen, LLC for rig operations in
connection with certain xxxxx, and (c) to pay the fees and expenses of the
Purchaser set forth below.
7. Fees
and Expenses of Purchaser.
(a) The
Company shall pay to Yorkville Advisors, LLC (“Yorkville”)
$8,000
for monitoring and managing the investment by the Purchaser, pursuant to
Yorkville’s existing advisory obligations to the Purchaser.
(b) The
Company shall pay a structuring fee to Yorkville of $2,000.
(c) The
Company shall issue to the Purchaser a Warrant to purchase 500,000 shares of
the
Company’s Common Stock for a period of five (5) years at an exercise price
of $0.05. The shares of Common Stock issuable under the Warrant shall be
referred to as the “Warrant
Shares.”
8. Conditions
Precedent. The
obligations of the Purchaser to purchase the Convertible Debenture shall be
subject to the satisfaction by the Company or the following conditions
precedent:
|
a.
|
The
Company shall have executed and delivered to the Purchaser the Convertible
Debentures and the Warrants.
|
5
|
b.
|
The
Company shall have provided to the Purchaser a true copy of a certificate
of good standing evidencing the formation and good standing of the
Company
from the secretary of state (or comparable office) from the jurisdiction
in which the Company is incorporated, as of a date within 10 days
of the
Closing Date.
|
9. Adjustment
to Prior Warrants.
On the
date hereof the exercise price of the warrant to purchase 4,500,000 shares
of
Common Stock originally issued to the Purchaser on August 1, 2006 (Warrant
Number DLKR-1) shall be adjusted from $0.18 to $0.01 and the exercise price
of
the warrant to purchase 4,500,000 shares of Common Stock originally issued
to
the Purchaser on August 1, 2006 (Warrant Number DLKR-2) shall be adjusted from
$0.27 to $0.01.
10. Acknowledgement
Concerning Filing of the 10-KSB and amended SB-2.
The
Company covenants that it will file its Form 10-KSB for the period ended June
30, 2007 with the SEC in accordance with all rules and regulations of filing
thereunder no later than September 15, 2007. The Company acknowledges that
the
Purchaser is relying on the Company’s covenant related to the 10-KSB in
purchasing the Convertible Debenture hereunder and a breach of this covenant
shall be a default under this Agreement and the Debentures. The Company further
covenants that is shall re-file its Form SB-2 registration statement with the
SEC in accordance with all rules and regulations of filing thereunder no later
than September 30, 2007
REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
6
IN
WITNESS WHEREOF,
the
undersigned have executed this Purchase Agreement as of the date written
above.
|
PURCHASER:
YA
GLOBAL INVESTMENTS, L.P.
|
||
| By: Yorkville Advisors, LLC | ||
| Its: Investment Advisor | ||
| By: | ||
|
Name: Xxxx
Xxxxxx
|
||
|
Title: Portfolio
Manager
|
||
|
COMPANY:
|
||
| |
|
|
| By: | ||
|
Name: Xxxxxxx
Xxxxxxxxx
|
||
|
Title: Chief
Executive Officer
|
||
7
DISCLOSURE
SCHEDULE
8
EXHIBIT
A
FORM
OF CONVERTIBLE DEBENTURE
9
EXHIBIT
B
FORM
OF WARRANT
10
SCHEDULE
I
DISBURSEMENT
INSTRUCTIONS
| YA Global Investments, l.p. | |
| By: Yorkville Advisors, LLC | |
|
By:
|
Its: Investment
Manager
|
|
Name: Xxxxxxx
Xxxxxxxxx
|
By:
|
|
Its: Chief
Executive Officer
|
Name: Xxxx
Xxxxxx
|
|
Its: Portfolio
Manager
|
