EX-10 2 stockpurchaseagreementlwbcle.htm COMMON STOCK PURCHASE AGREEMENT COMMON STOCK PURCHASE AGREEMENT by and among M2 EQUITY PARTNERS, LLC (Purchaser) DALA PETROLEUM CORP. (Company) As of July 19, 2017 COMMON STOCK PURCHASE AGREEMENT
______________________________________________________________________________
COMMON STOCK PURCHASE AGREEMENT
by and among
M2 EQUITY PARTNERS, LLC
(Purchaser)
DALA PETROLEUM CORP.
(Company)
As of July 19, 2017
______________________________________________________________________________
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT, (together with all exhibits, schedules, supplements, amendments and modifications, collectively, this “Agreement”) is made as of July 19, 2017, by and between DALA PETROLEUM CORP., a Delaware corporation whose principal executive offices are located at 000 Xxxxx Xxx. X. #000, Xxxxxxx, XX 00000 (the “Company”); and M2 EQUITY PARTNERS LLC, a Minnesota limited liability company (the “Purchaser”). The Company and the Purchaser shall sometimes be referred to herein each as a “Party” and collectively as the “Parties.” All capitalized terms not defined elsewhere herein, shall have the meanings set forth in Section 1.1.
1.1
“Affiliate” or “affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144.
“Beneficial owner” or “beneficially owned” and similar phrases mean a Person’s ownership of securities in an entity as determined pursuant to Section 13(d) of the Exchange Act.
“Business Day” means any day except Saturday, Sunday and any day which is a federal legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
”Closing” means the closing of the purchase and sale of the Shares pursuant to Article II.
“Closing Date” means the Business Day on which all of the conditions set forth in Sections 5.1 and 5.2 hereof are satisfied, or such other date as the parties may agree.
“Commission” means the Securities and Exchange Commission, and sometimes referred to herein as the “SEC”.
“Common Stock” means the common stock of the Company, par value $0.001 per share, and any securities into which such common stock may hereafter be reclassified.
“Common Stock Equivalents” means any securities of the Company which entitle the holder thereof to acquire shares of Common Stock at any time, including without
2
limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible and/or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock or other securities that entitle the holder to receive, directly or indirectly, Common Stock.
“Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.
“Exchange Act” or “1934 Act” means the Securities Exchange Act of 1934, as amended.
“Indebtedness” means without duplication (a) all indebtedness for borrowed money, (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without limitation, “capital leases” in accordance with GAAP) (other than trade payables entered into in the ordinary course of business consistent with past practice), (c) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (f) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, consistently applied for the periods covered thereby, is classified as a capital lease, (g) all indebtedness referred to in clauses (a) through (f) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (h) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (g) above.
“Liens” means (i) any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease or license in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing and (ii) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.
“Material Adverse Effect” means any of (i) a material and adverse effect on the legality, validity or enforceability of this Agreement or any other Transaction Document, (ii) a material
3
and adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Company, or (iii) an adverse impairment to the Company’s ability to perform on a timely basis its obligations under this Agreement or any other Transaction Document.
“Person” shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, institution, entity, party or government (whether national, federal, state, county, city, municipal or otherwise including, without limitation, any instrumentality, division, agency, body or department thereof). As of the Closing Date, the Company has no Liens and/or any other restrictions on any of its assets.
“Preferred Stock” means the Series A 6% Convertible Preferred Stock of the Company, par value $0.01 per share, and any securities into which such common stock may hereafter be reclassified.
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
“Securities Act” or “1933 Act” means the Securities Act of 1933, as amended.
“Subsidiary” means, as to the Company, any “subsidiary” as defined in Rule 1-02(x) of the Regulation S-X promulgated by the Commission under the Exchange Act.
“Transaction Documents” means this Agreement, the Resignations (as defined below), the Share Cancellation Agreements, the Debt Cancellation Agreements, the original Common and Preferred Stock Certificates being cancelled and any related Stock Powers, the stock certificate for the Shares, the Flow of Funds Escrow Agreement (as defined below), the Escrow Release Letter (as defined below), all other Company Deliverables (as defined below), the 8-Ks (as defined below), and all schedules, exhibits and annexes to such items and any other documents or agreements executed in connection with the transactions contemplated hereunder including all Closing documents.
2.1
Closing Subject to the terms and conditions set forth in this Agreement, at the Closing the Company shall issue and sell to the Purchaser, and the Purchaser shall purchase from the Company, the 12,100,000 Shares. The Closing shall take place at the offices of Xxxxxxx Xxxxxxxx & Xxxxx, PLLC, 000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx, Xxxx Xxxx Xxxx, Xxxx 00000, on the Closing Date or at such other location or time as the parties may agree.
4
2.2
(i)
a stock certificate, with a standard Securities Act restrictive legend thereon, evidencing the 12,100,000 Shares, registered in the name of the Purchaser;
(ii)
a shareholders list dated on or prior to the Closing Date certified by the Company’s Transfer Agent reflecting issued and outstanding only the 1,342,286 Existing Shares;
(iii)
an officer’s certificate to the effect that (A) each of the conditions specified in this Section 2.2(a) and in Section 5.1 hereof are satisfied in all respects, and (B) as of the Closing, the Company has no Indebtedness and/or other liabilities and no tangible assets;
(iv)
a certificate by the acting Secretary of Company attaching and certifying as to the accuracy of (A) its current Certificate of Incorporation and Bylaws, both as amended to the Closing Date, (B) resolutions adopted by the Board of Directors of the Company authorizing this Agreement and the transactions contemplated hereby and the other Transaction Documents, and (C) a Good Standing Certificate from the Secretary of State for the State of Delaware dated no later than two (2) Business Days from the Closing Date; and
(v)
all Company original minute book, corporate seal, all other original corporate documents and agreements and all other books and records of the Company;
(vi)
resignations and releases from and executed by each officer and director (except that Xxxxxx Xxxxxx shall continue to serve as a director) of the Company immediately prior to Closing set forth on Schedule 2.2(vi), such resignations and releases to be effective on the Closing Date, which form of resignation and release is attached hereto as Exhibit C (each a “Resignation” and collectively, the “Resignations”);
(vii)
fully executed copies of all documents, agreements and instruments related to the cancellation of (A) Indebtedness and/or liabilities of the Company owed to any Person, and (B) shares of Common Stock or Preferred Stock or other rights relating thereto;
(viii)
correct and complete copies of all federal and state income returns of the Company, from fiscal year 2011 through fiscal year 2016;
(ix)
(A) the Debt Cancellation Agreements from the Persons and in form and substance reasonably satisfactory to the Purchaser;
5
(x)
original stock certificates or warrant forms representing all of the Cancellation Shares and fully executed Stock Powers dated the Closing Date transferring the Cancellation Shares to the Company by each of the Cancelling Shareholders for cancellation pursuant to the Share Cancellation Agreements, with signatures “Medallion Guaranteed” (a notarized lost affidavit and indemnification resolution in agreed upon form will be acceptable from Chienn Consulting Company, LLC, regarding his eight shares of Preferred Stock and its 35,714 Warrants);
(xi)
Unanimous Written Consents of the Board of Directors of the Company (the “UWC”) authorizing and approving, among other items, the execution, delivery and performance of this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby including, but not limited to, the sale by the Company to the Purchaser of the 12,100,000 Shares, the acceptance of the Resignations and the appointment/election of the Purchaser’s nominees as a successor director and all officers of the Company;
(xii)
Fully executed copy of (A) a Flow of Funds Escrow Agreement between the Company and the Purchaser, with Xxxxxxx X. Xxxxxxxxxx, Esq., counsel to the Purchaser (in his capacity as escrow agent for the disbursement of certain funds hereunder), and Xxxxxxx Xxxxxxxx & Xxxxx, PLLC, counsel to the Company, through a member of such firm, Xxxxxx Xxxxxxx Xxxxx, Esq. (in her capacity as escrow agent for the disbursement of certain funds hereunder) (each an “Escrow Agent”), respectively executed by each Escrow Agent, the Company and the Purchaser, authorizing and outlining the release and payment of the $347,500 Purchase Price to the Persons and in the amounts specified in Schedule 3.1(c) and Schedule 4.6 (the “Escrow Release Letter”) dated at or prior to the Closing Date by and among the Purchaser, the Company and the Escrow Agents;
(xiii)
Bank account information and specimen signatures for the corporate accounts of the Company;
(xiv)
The Share Cancellation Agreements; and
(xv)
Such other documents, instruments and agreements and other items reasonably requested by the Purchaser.
(b)
At or prior to Closing, the Purchaser shall cause to be delivered to the Company the following (the “Purchaser Deliverables”):
(i)
A wire transfer to the Purchaser’s legal counsel’s escrow account in the amount of the $347,500 Purchase Price (less a prior $50,000 deposit to the Company’s legal counsel’s escrow account delivered under an executed Escrow Agreement dated June 6, 2017, between the Purchaser and legal counsel for the
6
Company as Escrow Agent, which was wired to the Company’s legal counsel prior to the Closing Date);
(ii)
A certificate executed by the Purchaser, attesting to the accuracy of the representations and warranties of the Purchaser made in this Agreement pursuant to Section 3.2;
(iii)
A list of all Persons to fill any executive officer positions and vacancies to the Company Board of Directors, provided, however, with the understanding that there will only be two directors, one of the current serving directors of the Company, Xxxxxx Xxxxxx, and a nominee of the Purchaser;
(iv)
An executed copy of this Agreement by the Purchaser; and
(v)
A copy of the Flow of Funds Escrow Agreement confirmed and executed by the Purchaser.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
3.1
(a)
The 12,100,000 Shares. The 12,100,000 shares of Common Stock when issued and paid for by the Purchaser pursuant to the terms of this Agreement shall be duly authorized, fully paid and non-assessable and vest in the Purchaser full and absolute title free and clear of any Lien, pledge, encumbrances or any other charge, except those limitations imposed on “restricted securities” issued under Section 4(a)(2) of the Securities Act and Rules 506 and 144 promulgated thereunder, and will not be issued in violations of any pre-emptive rights or similar rights including any rights of first refusal. Such Shares will be restricted securities (as defined in the Securities Act) and will be issued in compliance with and pursuant to exemptions from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder.
(b)
7
provided by Rule 12b-25 of the Exchange Act) all reports including all Current Reports on Form 8-K, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of Section 12(g) of the Exchange Act (all of the foregoing filed prior to the Closing Date, all exhibits included therein and financial statements including the Financial Statements, as defined below), notes and schedules thereto and documents incorporated by reference therein, all amendments thereto and all schedules and exhibits thereto and to any such amendments being hereinafter collectively, referred to as the “SEC Reports”). All of the SEC Reports required to be filed by the Company are available on the SEC’s XXXXX system. As of their respective filing dates, all of the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to each SEC Report and each SEC Report was properly filed with the SEC pursuant to all applicable laws and SEC rules and regulations. To the best knowledge of the Company, the Company’s registration statements filed by the Company with the SEC during the past three (3) years (and together with all amendments, schedules and exhibits thereto including the financial statements included therein and all notes and opinions related thereto collectively, referred to as the “SEC Registration Statements,” are available on the SEC’s XXXXX system, as of the respective filing dates with the SEC complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated thereunder. As of their respective filing dates with the SEC, none of the SEC Reports or the SEC Registration Statement contained 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 the light of the circumstances under which they were made, not misleading. As of their respective filing dates, the financial statements of the Company included in the SEC Reports and/or the SEC Registration Statements, including those incorporated by reference (collectively, 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. The 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).
(c)
Indebtedness; Liens. Other then (i) the $369,645 of Indebtedness and liabilities set forth on the Company’s balance sheet dated as of March 31, 2017, included in the unaudited financial statements of the Company in the Company’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2017 (the “03/31/16 10-Q”), and (ii) Indebtedness and liabilities of the Company set forth on Schedule 3.1(c) incurred following March 31, 2016, the Company has no Indebtedness and/or liabilities. The Company has no Liens on any of its assets and/or securities and the Company has not provided any guaranty for any Indebtedness of the Company and/or any other Person. All Indebtedness and other liabilities of the Company shall be paid in full at or prior to the Closing (as evidenced by the executed Debt Cancellation Agreements). The aggregate $347,500 of Company Indebtedness
8
and other liabilities outstanding immediately prior to the Closing is owed to the Persons and in the dollar amount per Person as set forth on Schedule 3.1(c) and Schedule 4.6.
(d)
Organization of Company. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. The Company is duly authorized to conduct business and is in good standing under the laws in every jurisdiction in which the ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. The Company has full corporate power and authority and all licenses, permits, and authorizations necessary to carry on its business. The Company was incorporated on June 24, 1986 (the “Incorporation Date”), and currently has one non-operating Nevada Subsidiary.
(e)
Capitalization; No Restrictive Agreements.
(i)
The Company’s authorized capital stock, as of the date of this Agreement, consists of (A) 50,000,000 shares of Common Stock, $0.001 par value per share, of which 2,926,486 shares are issued and outstanding as of the date hereof, and immediately prior to the Closing, and after giving effect to the Share Cancellation, 1,342,286 Existing Shares will be issued and outstanding on the Closing Date; and (B) 5,000,000 shares of Preferred Stock, $0.01 par value per share, 2025 of which have been designated and 2008 of which are issued and outstanding as of the date hereof and none of which shall be issued and outstanding on the Closing Date; and (C) 1,928,571 Warrants and none of which shall be outstanding on the Closing Date. The Company has no other securities (as defined in the Securities Act) issued and outstanding. The Company has not reserved any shares of its Common Stock for issuance upon the exercise of options, warrants or any other securities that are exercisable or exchangeable for, or convertible into, Common Stock, other than shares or other securities or obligations that shall be cancelled at the Closing Date. All of the issued and outstanding shares of Common Stock, Preferred Stock and Warrants (except for any exercise price payable regarding the Warrants) are validly issued, fully paid and non-assessable and have been issued in compliance with applicable laws, including, without limitation, applicable federal and state securities laws.
(ii)
There are no agreements relating to the voting, purchase or sale of capital stock between or among the Company and any of its stockholders or other Persons whatsoever. The Company is not a party to any agreement granting any stockholder of the Company the right to cause the Company to register shares of the capital stock of the Company held by such stockholder under the Securities Act, except as may be cancelled under the Share Cancellation Agreements.
9
(f)
Absence of Certain Changes. From the date hereof and except as disclosed in the SEC Reports, there has not been any event or condition of any character which has materially adversely affected, or may be expected to materially adversely affect, the Company’s business or prospects, including, but not limited to any material adverse change in the condition, assets, Indebtedness or business of the Company from that shown in the Financial Statements, and the Company has not declared or paid any dividends or sold any assets. The Company has not taken any steps to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact that would reasonably lead a creditor to do so.
(g)
(h)
(i)
Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other person or entity in connection with the execution, delivery and performance by the Company of this Agreement, as applicable, including the issuance, sale and/or reservation of the Shares other than: (i) disclosure filings required by the Commission and (ii) those that have been made or obtained prior to the date of this Agreement.
(j)
10
termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company is bound or affected; except in the case of clauses (ii) and (iii), such as could not, individually or in the aggregate, have or reasonably be expected to result in a material adverse effect on the Company.
(k)
(i)
The Company has filed all state and federal tax returns that was required to be filed and by it as of the date hereof. All such tax returns were correct and complete in all material respects. All taxes owed by the Company have been paid. The Company is not currently the beneficiary of any extension of time within which to file any tax return. No claim has ever been made by an authority in a jurisdiction where the Company does not file tax returns that it is or may be subject to taxation by that jurisdiction. There are no security interests or Liens on any of the assets of the Company that arose in connection with any failure (or alleged failure) to pay any tax.
(ii)
The Company has withheld and paid all taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party. The Company has delivered to the Purchaser correct and complete copies of all federal and state income and other material tax returns, examination reports, and statements of deficiencies assessed against or agreed to by the Company since inception.
(iii)
The Company has no reason to believe that any authority shall assess any additional taxes for any period for which tax returns have been filed. There is no dispute or claim concerning any Liability with respect to any taxes (a “Tax Liability”) of the Company either (A) claimed or raised by any authority in writing or (B) as to which the Company and the Sellers have knowledge based upon personal contact with any agent of such authority. No tax returns of the Company have ever been audited or are currently the subject of an audit.
(l)
Shell Company. The Company is not a “shell company” as defined in Rule 405 of the Securities Act or Rule 12b-2 of the Exchange Act.
(m)
11
omit to state any material fact necessary, in light of the circumstances under which it was or will be made, in order to make the statements herein or therein not misleading. The “WHEREAS” and “NOW THEREFORE” clauses appearing on pages 1 and 2 of this agreement are hereby expressly incorporated into and made a part of this Agreement as if directly contained in the body of this Agreement and are considered representation, warranties, agreements, acknowledgements and/or covenants of the Company.
(n)
(o)
(p)
(q)
(r)
Officers and Directors. Schedule 2.2(vi) sets forth a list of the names and titles of all officers and directors of the Company.
12
(s)
Absence of Certain Events. Since September 30, 2016, and except as set forth in the SEC Reports, the Company has conducted its business solely in the historic, usual and ordinary course. Without limiting the generality of the foregoing, the Company has not:
(a)
waived any right or rights of substantial value or paid, directly or indirectly, any Indebtedness and/or other liabilities before such Indebtedness became due in accordance with its terms;
(b)
other than in the ordinary and usual course of business, created any Indebtedness (whether absolute or contingent and whether or not currently due and payable), or entered into or assumed any contract, agreement, arrangement, lease (as lessor or lessee), license or other commitment; or
(c)
purchased, sold or transferred any assets of the Company; granted any security interest or other Lien or encumbrance affecting any of its assets or properties; or amended any agreement or contract to which the Company is a party or by which its assets and properties are bound.
(t)
(u)
(v)
13
(w)
(x)
(y)
(z)
Insurance. The Company has no insurance policies.
(aa)
Bad Actor. None of the Company, any of its predecessors, any of its controlling shareholders, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering contemplated hereby, any beneficial owner of 20% or more of the Company’ s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the 0000 Xxx) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the “ Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), if any, and has furnished to the Purchaser a copy of any disclosures provided thereunder.
(bb)
Prior Sale of Securities. All prior offers and sales of securities by the Company including, but not limited to, the offer and sale of shares of Common Stock pursuant to Rule 504 of Regulation D of the Securities Act conducted by the Company in 1999, were made pursuant to valid exemptions from the registration requirements of the Securities Act and state securities laws and complied with all Federal and State securities laws, rules and
14
regulations, any other applicable laws, rules and regulations as well as all rules and regulations of all applicable regulatory and self-regulatory bodies including FINRA and the OTC Markets.
(cc)
(dd)
3.2
(a)
Organization; Authority. The Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the Acquisition on the terms and conditions set forth in this Agreement and otherwise to carry out its express obligations hereunder. The execution and delivery of this Agreement and the consummation of the Acquisition by the Purchaser pursuant to the terms but subject to the conditions provided herein has been duly authorized by all necessary partnership action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser to consummate the Acquisition on the terms but subject to the conditions provided in this Agreement, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.
(b)
15
(c)
(d)
(e)
Legend. The Purchaser understands that all certificates representing the 12,100,000 Shares received by it pursuant to this Agreement shall bear the following legend, or one substantially similar thereto:
“The securities represented by this certificate have not been registered under the Securities Act of 1933. The shares have been acquired for investment and may not be sold, transferred or assigned in the absence of an effective registration statement for those shares under the Securities Act of 1933, as amended, or an opinion satisfactory to the Company’s counsel that registration is not required under said Act.”
(f)
No Misstatements or Omissions. No representation or warranty by the Purchaser contained in this Agreement, and no statement contained in any document, certificate or other instrument delivered or to be delivered by or on behalf of the Purchaser pursuant to this Agreement, contains or will contain any untrue statement of a material fact or omit or will omit to state any material fact necessary, in light of the circumstances under which it was or will be made, in order to make the statements herein or therein not misleading.
ARTICLE 4. OTHER AGREEMENTS OF THE PARTIES
4.1
4.2
16
communications of any kind is entitled to any brokerage, finder’s or placement fee or any similar compensation in connection with this Agreement or the transaction contemplated hereby. Any claim by any Person for any fee of any kind or nature that would violate this Section 4.2, shall be the sole responsibility of the Party(ies) who allegedly agreed to such fee including, but not limited to, all fees and expenses including legal fees (as and when incurred) incurred by any other Party as a result of such claim.
4.3
4.4
4.5
4.6
Use of Proceeds. The $347,500 paid by the Purchaser for the Acquisition hereunder shall be used by the Company to pay all of the amounts set forth in Schedule 1 and Schedule 1(a) and the outstanding Indebtedness and/or liabilities set forth in Schedule 3.1(c), along with compromising and settling the Indebtedness and/or liabilities list in Schedule 4.6, after which and immediately following the Closing the Company shall have no outstanding Indebtedness and/or liabilities of any nature to any Person.
ARTICLE 5. CONDITIONS PRECEDENT TO CLOSING
5.1
Conditions Precedent to the Obligations of the Purchaser to Purchase Shares. The obligation of the Purchaser to purchase the Shares at the Closing is subject to the satisfaction or waiver by the Purchaser, at or before the Closing, of each of the following conditions:
17
(a)
Company Deliverables. The Company shall have delivered the Company Deliverables in accordance with Section 2.2(a);
(b)
Representations and Warranties. The representations and warranties of the Company and the Controlling Shareholders contained herein shall be true and correct in all material respects as of the date when made and as of the Closing as though made on and as of such date;
(c)
Performance. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by it at or prior to the Closing;
(d)
No Injunction. 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 that prohibits the consummation of any of the transactions contemplated by this Agreement;
(e)
Adverse Changes. Since the date of execution of this Agreement, no event or series of events shall have occurred that reasonably could have or result in a Material Adverse Effect;
(f)
No Suspensions of Trading in Common Stock. Trading in the Common Stock shall not have been suspended and/or halted by the Commission or any other regulatory body including the OTC Markets and/or FINRA at any time since the date of execution of this Agreement and none is reasonably anticipated to occur, and the Common Stock shall have been at all times since such date listed for trading on a trading market or quoted on an over-the-counter electronic quotation system and none is reasonably anticipated to occur;
(g)
Due Diligence Review. The Purchaser shall have completed its business, accounting and legal due diligence review of the Company, and the results thereof shall be satisfactory to the Purchaser;
(h)
Termination. This Agreement shall not have been terminated as to the Purchaser in accordance with Section 6.5; and
(i)
DTC. The Common Stock is DTC eligible; and there is no chill, freeze and/or related item thereon and/or reasonably anticipated to occur.
5.2
Conditions Precedent to the Obligations of the Company to Sell Shares. The obligation of the Company to sell Shares at the Closing is subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions:
(a)
Representations and Warranties. The representations and warranties of the Purchaser contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of such date;
(b)
Performance. The Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this
18
Agreement to be performed, satisfied or complied with by the Purchaser at or prior to the Closing;
(c)
No Injunction. 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 that prohibits the consummation of any of the transactions contemplated by this Agreement;
(d)
Termination. This Agreement shall not have been terminated as to the Purchaser in accordance with Section 6.5.
6.1
6.2
6.3
If to the Company prior to the Closing:
Dala Petroleum Corp.
000 Xxxxx Xxx. X. #000
Xxxxxxx, XX 00000
19
Telephone: (000) 000-0000
Email: xxxxxxxx0@xxxxx.xxx
With a copy to (which shall not constitute notice):
Xxxxxx Xxxxxxx Xxxxx, Esq.
Xxxxxxx Xxxxxxxx & Xxxxx, PLLC
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Telephone: (000) 000-0000
Email: xxxxxx@xxxxxx.xxx
If to the Purchaser at any time (or subsequent to the Closing):
Xxxx Xxxxxxxx, Managing Member
M2 Equity Partners, LLC
0000 Xxxxx Xxxxxx Xxxx XX
Xxxxxx, Xxxxxxxxx 00000
Telephone: 000-000-0000
Email: xxxx@xxxx0xxxxxxxxx.xxx
With a copy to (which shall not constitute notice):
Xxxxxxx X. Xxxxxxxxxx, Esq.
2150 South 0000 Xxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Telephone: 000-000-0000
Email: xxx@xxxxxxxxxx.xxx
or such other address as may be designated in writing hereafter, in the same manner, by such Person.
6.4
6.5
Termination. This Agreement may be terminated prior to Closing:
(a)
by written agreement of the Purchaser and the Company; and
(b)
by the Company or the Purchaser upon written notice to the other, if the Closing shall not have taken place by 6:30 p.m. Central time on the July 20, 2017 (the “Outside Date”); provided, that the right to terminate this Agreement under this
20
Section 6.5(b) shall not be available to any Person whose failure to comply with its obligations under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such time; and if such failure to close is a result of the failure of any Person presently associated with the Company that was required to deliver Common Stock, Preferred Stock or Warrants for cancellation under Share Cancellation Agreements or Debt Cancellations Agreements as provided herein, then the balance of the $50,000 paid by the Purchaser to Xxxxxx X. Xxxxx, Esq. under an Escrow Agreement dated June 6, 2017, shall be returned to the Purchaser, less the amount paid therefrom to reinstate the Company in the State of Delaware, which amount paid to the State of Delaware shall become an account payable of the Company to the Purchaser.
In the event of a termination pursuant to this Section 6.5, the Company shall promptly notify the Purchaser. Upon a termination in accordance with this Section 6.5, the Company and the terminating Purchaser(s) shall not have any further obligation or liability (including as arising from such termination) to the other and no Purchaser will have any liability to any other Purchaser under this Agreement as a result therefrom.
6.6
6.7
6.8
6.9
Governing Law. This Agreement and the terms and conditions set forth herein, shall be governed by and construed solely and exclusively in accordance with the internal laws of the State of Delaware without regard to the conflicts of laws principles thereof.
6.10
21
obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.
6.11
6.12
6.13
6.14
6.15
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOLLOW]
22
[SIGNATURE PAGE]
IN WITNESS WHEREOF, the Parties hereto have caused this Common Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
COMPANY:
DALA PETROLEUM CORP.
By: /s/Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: CEO
INVESTOR:
M2 EQUITY PARTNERS, LLC
By: /s/ Xxxx Xxxxxxxx
Name: Xxxx Xxxxxxxx
Title: Managing Member
[END OF SIGNATURE PAGE]
LIST OF SCHEDULES AND EXHIBITS
A.
Schedules
1.
Schedule 1 – Cancelling Common Stock Shareholder Information
2.
Schedule 1(a) – Cancelling Preferred Stock and Warrant Shareholder Information
3.
Schedule 2.2(vi) - Names of officer and directors of the Company resigning effective at time of Closing
4.
Schedule 3.1(c) - Indebtedness, Liabilities, Etc. immediately prior to Closing
5.
Schedule 3.1(w) – Agreements, Etc.
6.
Schedule 4.2 – Brokers
7.
Schedule 4.6 Outstanding Indebtedness and liabilities
B.
Exhibits
1.
Exhibit A - Form of Share Cancellation Agreement
2.
Exhibit B – Form of Debt Cancellation Agreement
3.
Exhibit C - Form of Resignations
4.
Exhibit D - Articles of Incorporation and By-laws of the Company and each amendment thereto since the Date of Incorporation
SCHEDULE 1
Cancelling Common Stock Shareholder Information
Names, Title and address of Cancelling Shareholder | Number of Shares owned beneficially or otherwise by such Person prior to Share Cancellation and other pre-Closing transactions | Number of Shares owned beneficially or otherwise to be cancelled by such Person in Share Cancellation at Closing | Cancellation Payment Amount | Remaining number of Shares owned beneficially or otherwise by such Person following Share Cancellation and other pre-Closing transactions and Closing |
Xxxxxxx Xxxxxxx Xxxx XX | 890,000 | 890,000 | $8,900 | -0- |
Xxxxxxx Xxxxxxxx & Xxxxx PLLC | 410,000 | 410,000 | $4,100 | -0- |
Clearline Ventures, LLC | 184,200 | 184,200 | $1,842 | -0- |
Xxxxxx X. Xxxxxxx | 100,000 | 100,000 | $1,000 | -0- |
Totals: | 1,584,200 | 1,584,200 | $15,842 | -0- |
2
SCHEDULE 1(a)
Cancelling Preferred Stock and Warrant Shareholder Information
Names, Title and address of Cancelling Shareholder | Number of Shares owned beneficially or otherwise by such Person prior to Share Cancellation and other pre-Closing transactions | Number of Shares owned beneficially or otherwise to be cancelled by such Person in Share Cancellation at Closing | Number of Warrants owned beneficially or otherwise to be cancelled by such Person in Share Cancellation at Closing | Cancellation Payment Amount | Remaining number of Shares owned beneficially or otherwise by such Person following Share and Warrant Cancellation and other pre-Closing transactions and Closing |
Alpha Capital Anstalt | 750 | 750 | 1,071,429 | $20,110.04 | -0- |
Lane Ventures Inc. | 275 | 275 | 71,429 | $7,373.68 | -0- |
Mill City Ventures III, Ltd. | 000 | 000 | 000,286 | $19,439.71 | -0- |
Clearline Ventures, Inc. | 225 | 225 | -0- | $6,033.01 | -0- |
Chienn Consulting Company LLC | 8 | 8 | 35,714 | $214.51 | -0- |
Xxxxxxx Holdings, LLC | 25 | 25 | 35,714 | $670.33 | -0- |
Totals: | 2,008 | 2,008 | 1,928,572 | $53,841.28 | -0- |
* $4,700 of the Purchase Price shall be retained in the Trust Account of Xxxxxxx X. Xxxxxxxxxx, Esq., legal counsel for the Purchaser, for payment of any miscellaneous obligations or liabilities of the Company that come to light within thirty (30) days of the Closing Date, and the balance, if any, after payment of any such obligations or liabilities, shall be distributed to the foregoing entities by check from such Trust Account, pro rata, based upon the percentage the amount due to each represents of the aggregate total amount payable above.
3
SCHEDULE 2.2(vi)
Officers and Directors of the Company
Name | Position |
Xxxxxx X. Xxxxxxx | Chief Executive Officer, Chief Financial Officer and Director |
Xxxxxx Xxxxxx | Director |
4
SCHEDULE 3.1(c)
Indebtedness, Etc.
Name of Person or Entity owed Indebtedness and/or other liability by the Company to such Person or Entity | Aggregate dollar amount owed at Closing to such Person or Entity |
1. Xxxxxx Financial Services* | $5,000 |
2. American Registrar & Transfer Co.* | $2,600 |
3. Xxxxxxx Xxxxxxxx & Xxxxx PLLC* | $1,250 |
4. Broadridge Financial Solutions, Inc. | $211.43 |
5. Corporation Service Company | $688.00 |
6. State of Delaware | $5,300.50 |
7. Deluxe Business Services | $142.54 |
8. Fausset & Associates Inc. | $675.00 |
9. Flatiron Capital | $10 |
10. Lakeport Business Services, Inc.* | $1,390.11 |
11. NRAI Corporate Services* | $1,512 |
Total: | $18,779.58 |
* Debt Cancellation Agreements/Pay-Off Letters Required.
5
SCHEDULE 3.1(w)
Agreements, Etc.
In addition to all agreements outlined in the List of Schedules and Exhibits, those agreement consisting of oil and gas leases owned by the Company, which are included in the SEC Reports.
6
SCHEDULE 4.2
Brokers
An Introduction fee of $25,000 is payable by the Purchaser to M2 Capital Advisors, Inc., a Minnesota corporation wholly owned by one of the founding members of the Purchaser; and the Company shall have no liability whatsoever for such Introduction Fee.
7
SCHEDULE 4.6
Indebtedness, Liabilities
A.
Schedule 4.6(i)
Notes Payable:
Lane Ventures Inc.
3,631.13
Alpha Capital Anstalt
123,739.07
Mill City Ventures III, Ltd.
106,216.94
Total:
$233,587.14
B.
Schedule 4.6(ii)
Payable to Officers and Directors:
Xxxxxx X. Xxxxxxx
5,000.00
Xxxxxx Xxxxxx
5,000.00
Total:
$10,000.00
8
EXHIBIT A
Form of Share Cancellation Agreement
9
EXHIBIT B
Debt Cancellation Agreement/Pay-Off Letter
10
EXHIBIT C
Form of Resignation
11
EXHIBIT D
Articles of Incorporation and By-laws of the Company and each amendment thereto
since Date of Incorporation
12