STOCK PURCHASE AGREEMENT
STOCK PURCHASE
AGREEMENT
dated as
of December 23, 2005, by and between XXXXXX PETROLEUM, INC., a Tennessee
corporation (the "Company"),
WIND
CITY OIL & GAS, LLC, a Delaware limited liability company ("Buyer"),
and,
solely with respect to Section 6.3 hereof, Xxxxx Xxxxxx, an individual
(“Xxxxxx”).
W
I T N E S S E T H:
WHEREAS,
the
Company desires to issue to Buyer, and Buyer desires to purchase, 2,900,000
shares (the "Shares")
of
common stock, par value $0.0001 per share, of the Company ("Common
Stock");
and
WHEREAS,
simultaneously herewith, Buyer and/or an affiliate thereof are entering into
an
operating agreement with the Company pursuant to which the parties will jointly
drill and develop certain oil and gas properties (the "Operating
Agreement").
NOW
THEREFORE,
in
consideration of the promises and mutual covenants, agreements, representations
and warranties herein contained, the parties hereto agree as
follows:
1. Purchase
and Sale of Shares.
Subject
to the terms and conditions of this Agreement, the Company hereby agrees to
issue and sell to Buyer, and Buyer hereby agrees to purchase from the Company,
for and in consideration of the Purchase Price (as defined below), the
Shares.
2. Consideration.
The
purchase price for the purchase and sale of the Shares shall be an amount equal
to $4,350,000 (the “Purchase
Price”).
3. Closing.
3.1. Location
and Timing.
The
purchase and sale of the Shares shall take place at the offices of the Company
on the date hereof or on such other date or at such other location as the
parties hereto shall mutually agree upon (hereinafter referred to as the
"Closing"
or the
"Closing
Date").
3.2. Closing
Deliveries.
At the
Closing, (i) the Company shall issue, sell, transfer and deliver the Shares
to
Buyer and (ii) Buyer shall deliver the Purchase Price, by wire transfer of
immediately available funds, in the amounts, to the parties and to the accounts
as set forth on Schedule 3.1 annexed hereto.
4. Representations
and Warranties of the Company.
The
Company represents and warrants to Buyer as follows:
4.1. Organization.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of Tennessee.
The
Company has full power and authority to own, operate and occupy its properties
and to conduct its business as presently conducted, and is registered or
qualified to do business and is in good standing in each jurisdiction in which
it owns or leases property or transacts business except for such jurisdictions
in which the failure to be so registered, qualified or in good standing would
not be expected to have a material adverse effect on the Company’s business or
financial condition.
4.2. Due
Execution; Enforceability; Consents.
The
Company
has all requisite power and authority to execute, deliver and perform its
obligations under this Agreement, and the execution
and delivery of this Agreement, and the performance by the Company of its
obligations hereunder, have been duly authorized by all necessary action on
the
part of the Company (including,
without limitation, any required approval of the stockholders of the
Company).
This
Agreement has been duly executed and delivered by the Company and, assuming
the
due execution and delivery hereof by Buyer, this Agreement constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as such enforcement may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law). No
consent, approval, authorization or other order of, or registration,
qualification or filing with, any regulatory body, administrative agency,
self-regulatory organization, stock exchange or market, or other governmental
body is required in connection with the execution and delivery of this Agreement
and the valid issuance and sale of the Shares pursuant to the terms hereof,
except for any filings required to be made by the Company under the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”),
and
with respect to the registration of the Shares pursuant to Section 6.1
hereof.
4.3. No
Conflicts.
The
execution and delivery of this Agreement and the agreements and documents
contemplated hereby by the Company and the consummation of the transactions
contemplated hereby do not and will not (a) with or without the giving of notice
or the passage of time or both, violate, conflict with, result in the breach
or
termination of, constitute a default under, or result in the right to accelerate
or loss of rights under or the creation of any lien, encumbrance or charge
upon
any assets or property of the Company, pursuant to the terms or provisions
of
any contract, agreement, commitment, indenture, mortgage, deed of trust, pledge,
security agreement, note, lease, license, covenant, understanding or other
instrument or obligation to which the Company is a party or by which any of
the
Company's properties or assets may be bound or affected, except any such
conflicts, breaches, defaults, et al. that, individually or in the aggregate,
would
not
be expected to have a material adverse effect on the Company’s business or
financial condition,
(b)
violate any order, writ, injunction, judgment or decree of any court,
administrative agency or governmental body binding upon the Company or
any
Law (as hereinafter defined) applicable to the Company or any of its assets
or
properties, or (c) violate or conflict with any provision of the Company’s
charter or by-laws..
2
4.4. Shares
Duly Issued.
The
Shares have been duly authorized and, when issued in accordance with the terms
and conditions of this Agreement, shall be validly issued, fully-paid and
non-assessable, free and clear of all liens.
4.5. Capitalization.
The
authorized capital stock of the Company consists of 500,000,000 shares of Common
Stock, of which _________
shares
are issued and outstanding. The current capitalization of the Company, on a
fully-diluted basis taking into account the issuance of the Shares as
contemplated hereby, has been previously provided to Buyer. Except as set forth
on Schedule 4.5 hereto, (i)
no
shares of the Company’s capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by
the
Company, (ii) there
are
no outstanding options, warrants, rights to acquire or subscribe to, or calls
or
commitments of any character whatsoever to which the Company is a party or
may
be bound, requiring the issuance or sale of shares of any class of capital
stock
or other equity securities of the Company or securities or rights convertible
into or exchangeable for such shares or other equity securities, (iii) there
are
no contracts, commitments, understandings or arrangements for which the Company
is or may become bound to issue additional shares of its capital stock or other
equity securities or options, warrants or rights to acquire or subscribe to
any
additional shares of any class of its capital stock or other equity securities
or securities convertible into or exchangeable for such shares or other equity
securities,
and
(iv) there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Shares.
4.6. SEC
Reports.
All
reports required to be filed by the Company with the Securities and Exchange
Commission (the “SEC”)
within
the last two fiscal years (“SEC
Reports”)
(i)
have been filed, (ii) comply in all material respects with the Exchange Act
and
the Securities Act of 1933, as amended (the “Act”),
as
applicable, and the rules and regulations of the SEC, and, to the knowledge
of
the Company, do not contain any
untrue
statement
of
material
fact
or
omit
to
state
a
material
fact
necessary
in order
to make the statements made, in light of the circumstances under which such
statements were made, not misleading. The SEC Reports and the financial
statements contained therein fairly present, in all material respects, the
business and financial condition of the Company as and at the dates
thereof.
4.7. No
Litigation.
There
are no actions, suits, proceedings, charges, complaints, inquiries, audits,
investigations or requests for information (each, a "Proceeding")
instituted by or against, or, to the knowledge of the Company, threatened
against the Company, whether at law or in equity, except for any such
Proceedings in the ordinary course of the Company’s business or Proceedings
which would not, individually or in the aggregate, result in a material adverse
effect on the Company’s business or financial condition.
4.8. Compliance
with Laws.
The
Company is in compliance with all (i) applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and
changes thereunder) of federal, state, local and foreign governments (and all
agencies thereof) (collectively, “Laws”),
asserting or claiming jurisdiction over it or over any part of its operations
and (ii) permits, certificates, licenses, approvals, registrations and
authorizations required by it in connection with the conduct of the business
of
the Company under all federal, state and local laws, rules and regulations
("Permits").
All
Permits are in full force and effect.
3
5. Representations
and Warranties of Buyer.
Buyer
represents and warrants to the Company as follows:
5.1. Due
Execution; Enforceability.
The
execution and delivery of this Agreement, and the performance by Buyer of its
obligations hereunder, have been duly authorized by all necessary action on
the
part of Buyer. This Agreement has been duly executed and delivered by Buyer
and,
assuming the due execution and delivery hereof by the Company, this Agreement
constitutes a valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms, except as such enforcement may be limited by
(i)
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
5.2. No
Conflicts.
The
execution and delivery of this Agreement and the agreements and documents
contemplated hereby by Buyer and the consummation of the transactions
contemplated hereby do not and will not (a) with or without the giving of notice
or the passage of time or both, violate, conflict with, result in the breach
or
termination of, constitute a default under, or result in the right to accelerate
or loss of rights under or the creation of any lien, encumbrance or charge
upon
any assets or property of Buyer, pursuant to the terms or provisions of any
contract, agreement, commitment, indenture, mortgage, deed of trust, pledge,
security agreement, note, lease, license, covenant, understanding or other
instrument or obligation to which Buyer is a party or by which any of Buyer's
properties or assets may be bound or affected, or (b) violate any order, writ,
injunction, judgment or decree of any court, administrative agency or
governmental body binding upon Buyer or
any
Law applicable to Buyer or any of its assets or properties.
5.3. Taxes.
Any
obligation or liability for taxes (state, federal or otherwise) incurred by
Buyer in connection with this Agreement or the transactions contemplated hereby
shall be the responsibility of and be paid for by Buyer.
5.4. Accredited
Investor.
Buyer
is an Accredited Investor as that term is defined under Regulation D promulgated
under the Act. Buyer is able to bear the economic risks of this investment
and,
consequently, without limiting the generality of the foregoing, is able to
hold
the Shares for an indefinite period of time and has a sufficient net worth
to
sustain a loss of his entire investment in the Company in the event such loss
should occur.
5.5. Sophistication.
Buyer
acknowledges that he is a sophisticated investor, has such knowledge and
experience in financial and business matters in general and has full familiarity
with the current business and future business prospects of the Company and
the
financial and other affairs of the Company and acknowledges that he has had
access to and has received sufficient information about the Company, including
any and all such information requested by Buyer in order to make an informed
decision as to the sale of the Shares to Buyer and the transactions contemplated
hereby. In addition, Buyer acknowledges that he has had access to the officers,
directors and employees of the Company to discuss the business, affairs and
prospects of the Company and has had the opportunity to obtain additional
information necessary to evaluate the merits and the risks of engaging in the
transactions contemplated by this Agreement. Buyer has reached an independent
decision with respect to the advisability of the sale of the Shares and, in
arriving at such decision, (i) has considered both the value of the Shares
as
well as the present condition (both financial and otherwise) and future
prospects of the Company and (ii) is not relying on any materials (written
or
oral) provided to Buyer by the Company.
4
5.6. Own
Account.
Buyer
is acquiring the Shares for Buyer’s own account for investment and not with a
view to or for resale in connection with any distribution of the Shares,
provided that, subject to the lockup contained in Section 6.2 hereof, Buyer
shall be entitled to sell the Shares pursuant to an effective resale
registration statement under the Act or under
an
exemption from such registration and in compliance with all applicable federal
and state securities laws, rules and regulations.
Buyer
has not offered or sold any portion of the Shares and does not
have
any agreement, plan or understanding with any person to distribute any of the
Shares.
5.7. Restricted
Securities.
Buyer
understands and acknowledges that the sale of the Shares has not been registered
under the Act, the securities laws of any state or any analogous securities
laws
of any applicable foreign jurisdiction (collectively, "Applicable
Laws")
in
reliance upon an exemption from the Act for non-public or limited offerings.
Buyer understands that the Shares are "restricted securities" and must be held
indefinitely unless the sale or other transfer thereof is subsequently
registered pursuant to any Applicable Laws or an exemption from such
registration is available at that time, and Buyer agrees to comply with all
Applicable Laws in connection with listing or qualification of the Shares
thereunder.
5.8. No
Broker-Dealer.
Buyer
is neither a "broker-dealer" nor an "affiliate" of a broker-dealer as such
terms
are defined under the Act.
5.9. Legend.
Certificates for the Shares shall contain a restrictive legend substantially
in
the following form:
THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT”), OR ANY OTHER
APPLICABLE SECURITIES LAWS, INCLUDING THE SECURITIES LAWS OF ANY APPLICABLE
FOREIGN JURISDICTION, AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES
LAWS, IF APPLICABLE. NEITHER THESE SECURITIES NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH OTHER SECURITIES LAWS
OR
PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION REQUIREMENTS.
5
5.10. Consultation
with Counsel.
Buyer
acknowledges that he has been advised to consult with Buyer's own attorney
regarding legal matters concerning the Company and to consult with Buyer's
tax
advisor regarding the tax consequences of purchasing the Shares.
6. Covenants.
6.1 Registration
Rights.
(a) The
Company hereby agrees and covenants to use its commercially reasonable efforts
to (i) prepare
and file, within 60 days of the date hereof, a registration statement with
the
SEC on Form SB-2 or other applicable form covering the resale by Buyer of all
of
the Shares (together with any securities issued or issuable upon any stock
split, dividend or other distribution, the “Registrable
Securities”),
(ii)
cause such registration statement to be declared effective under the Act as
soon
as possible but, in any event, no later than 120 days after the date hereof,
and
(iii) list the Registrable Securities covered by such Registration Statement
on
the principal securities exchange and/or market on which the Common Stock is
then listed and prepare and file any required filings with such principal market
or exchange
(b) The
Company shall promptly notify Buyer of the happening of any event that would
cause the prospectus (including any amendments or supplements thereto) included
in any registration statement filed pursuant to this Agreement, as then in
effect, to contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and the
Company shall use commercially reasonable efforts to promptly update and/or
correct such prospectus.
(c) The
Company shall promptly notify Buyer of the issuance by the SEC or any state
securities commission or agency of any stop order suspending the effectiveness
of any registration statement filed pursuant to this Agreement or the threat
or
initiation of any proceedings for that purpose. The Company shall use
commercially reasonable efforts to prevent the issuance of any stop order and,
if any stop order is issued, to obtain the lifting thereof at the earliest
possible time.
(d) The
Company shall permit Buyer’s counsel to review any registration statement
prepared pursuant to this Agreement and all amendments and supplements thereto
within a reasonable period of time prior to the filing of such registration
statement, amendment or supplement.
6
(e) All
registration and filing fees, printing expenses, and blue sky fees and expenses
shall be borne by the Company. Buyer shall be responsible for all transfer
taxes
applicable to the sale of Registrable Securities.
6.2 Lockup.
Notwithstanding anything contained herein to the contrary, including without
limitation, the Company’s agreement to register the Shares pursuant to Section
6.1 hereof, Buyer hereby unconditionally agrees and covenants not to sell,
transfer, assign, place a lien or encumbrance upon, or otherwise hypothecate
any
Shares for a period of six (6) months from the date of this
Agreement.
6.3 Board
Seat.
Xxxxxx
hereby agrees to vote all shares of Common Stock owned of record or beneficially
by him to (or to execute a written consent consenting to), and to take all
other
actions reasonably necessary (whether in his capacity as a stockholder, director
or officer of the Company) to, cause Buyer to
be
elected to the Board of Directors of the Company as soon as practicable
following the Closing and to cause
Buyer (or any successor thereto as may be agreed upon by the parties) to
thereafter
hold a position on the Board of Directors of the Company for so long as Buyer
shall continue to own at least fifteen percent
(15%)
of
the issued
and outstanding Common
Stock.
7. Closing
Condition.
Consummation of the purchase and sale of the Shares and the transactions
contemplated hereby shall be conditioned upon the execution and delivery by
the
parties of the Operating Agreement.
8. Unwind.
In the
event the Operating Agreement is terminated for any reason other than material
breach by Buyer during the period following the execution and delivery of this
Agreement until September 30, 2006 (the “Unwind
Period”),
Buyer
shall have the option, but not the obligation, to resell the Shares to the
Company for an amount equal to the Purchase Price (the “Resale
Purchase Price”).
Buyer
shall give the Company thirty (30) days advance written notice of its intention
to exercise its rights under this Section 8, whereupon the Company and Buyer
shall enter into a share purchase agreement substantially on the same terms
and
conditions as this Agreement, provided that,
the
Resale Purchase Price shall be payable by the Company to Buyer on the three
(3)
month anniversary of the date of such share purchase agreement (the
“Payment
Deadline”),
interest to accrue at the rate of one and one-half percent (1.5%) per annum
in
respect of any portion of the Resale Purchase Price paid after the Payment
Deadline. During the Unwind Period, the Company agrees not to incur additional
debt in excess of $500,000 required for working capital, without the prior
consent of Buyer, which consent shall not be unreasonably withheld.
9. Survival
of Representations, Warranties, Covenants and Agreements.
The
parties covenant and agree that their respective representations, warranties,
covenants and agreements contained in this Agreement shall survive the execution
and delivery of this Agreement for a period of one (1) year from the date
hereof.
7
10. Indemnification.
Each of
the Company and Buyer agrees to indemnify and hold harmless the other party
and
its respective officers, directors, employees, agents or control persons, as
applicable, who is or may be a party or is or may be threatened to be made
a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of or
arising from any breach of any of the representations, warranties, covenants
or
obligations of the party contained herein.
11. Notices.
Any
notice or other communication required or permitted to be given to any party
hereunder shall be in writing and shall be given to such party at such party’s
address set forth below or such other address as such party may hereafter
specify by notice in writing to the other party. Any such notice or other
communication shall be addressed as aforesaid and given by (a) certified mail,
return receipt requested, with first class postage prepaid, (b) hand delivery,
or (c) reputable overnight courier. Any notice or other communication will
be
deemed to have been duly given (i) on the fifth day after mailing, provided
receipt of delivery is confirmed, if mailed by certified mail, return receipt
requested, with first class postage prepaid, (ii) on the date of service if
served personally or (iii) on the business day after delivery to an overnight
courier service, provided receipt of delivery has been confirmed:
If
to the
Company:
Xxxxxx
Petroleum, Inc.
0000
Xxxxx Xxxxxxx
Xxxxxxxxxx,
Xxxxxxxxx 00000
Attention:
Xxxxx Xxxxxx, Chief Executive Officer
with
a
copy to:
Snow
Xxxxxx Xxxxxx P.C.
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxx Xxxxxx, Esq.
If
to
Buyer:
Wind
City
Oil & Gas, LLC
Xxxxxxxxx
Xxxxxx, Xxxxx 0000
000
Xxxxx
Xxxxxx Xxxxx
Xxxxx,
Xxxxxxx 00000-0000
with
a
copy to:
Xxxxx
X.
Xxxx, Esq.
00
Xxxxxx
Xxxx
Xxxxxxx,
Xxx Xxxxxxxxx 00000
8
12. Expenses.
Each of
the parties hereto shall pay the fees and expenses of its counsel, accountants
and other experts and all other expenses incurred by such party incident to
the
negotiation, preparation and execution of this Agreement.
13. Miscellaneous.
13.1. Partial
Invalidity.
If it
is found in a final judgment of a court of competent jurisdiction (not subject
to a further appeal) that any term or provision of this Agreement is invalid
or
unenforceable, (a) the remaining terms and provisions of this Agreement shall
be
unimpaired and shall remain in full force and effect and (b) the invalid or
unenforceable provision or term of this Agreement shall be replaced by a term
or
provision that is valid and enforceable and that comes closest to expressing
the
intention of the invalid or unenforceable term or provision.
13.2. Assignment.
Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assignable by any of the parties hereto without the prior written consent
of
the other party.
13.3. Counterparts;
Facsimile.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original, but all of which together shall constitute one and
the
same instrument. This Agreement may be executed via facsimile.
13.4. Successors
and Assigns.
The
benefits of this Agreement shall inure to the parties hereto, their respective
successors and assigns and to the indemnified parties hereunder and their
successors and representatives, and the obligations and liabilities assumed
in
this Agreement by the parties hereto shall be binding upon their respective
successors and assigns.
13.5. Governing
Law.
This
Agreement and the legal relations between the parties hereto shall be governed
by, and construed and enforced in accordance with, the laws of the State of
New
York without giving effect to principles of conflicts or choice of law
thereof.
13.6. Jurisdiction.
Each of
the parties hereto hereby irrevocably consents and submits to the exclusive
jurisdiction of the Supreme Court of the State of New York for the County of
New
York and the United States District Court for the Southern District of New
York
in connection with any Proceeding arising out of or relating to this Agreement
or the transactions contemplated hereby and waives any objection to venue in
New
York County, New York.
13.7. Headings.
Headings of the Sections in this Agreement are for reference purposes only
and
shall not be deemed to have any substantive effect.
13.8. Entire
Agreement; Amendments.
This
Agreement and any documents contemplated hereby contain, and are intended as,
a
complete statement of all the terms of the arrangements between the parties
with
respect to the matters provided for herein, and supersede any and all prior
agreements, arrangements and understandings between the parties with respect
to
the matters provided for herein. No alteration, waiver, amendment, change or
supplement hereto shall be binding or effective unless the same is set forth
in
writing, signed by the parties hereto or a duly authorized representative
thereof.
9
IN
WITNESS WHEREOF,
the
parties have hereunto executed this Agreement on the day and year first above
written.
|
XXXXXX
PETROLEUM, INC.
By:_____________________________________
Name:
Xxxxx
Xxxxxx
Title:
Chief
Executive Officer
WIND
CITY OIL & GAS, LLC
________________________________________
Name:
Xxxxx
X. Xxxxxx
Title:
President
Solely
with respect to Section 7:
________________________________________
Xxxxx
Xxxxxx
|
10
Schedule 3.1
Delivery
of Purchase Price
Delivery
of the Purchase Price shall be as follows:
See
attached payoff letter.
