WAIVER AND AMENDMENT
Exhibit 10.3
THIS WAIVER AND AMENDMENT (this “Amendment”) is made as of August 9, 2006, among Infinity Energy
Resources, Inc., a Delaware corporation (including as successor to Infinity, Inc., “Infinity”),
HFTP Investment L.L.C. (“HFTP”), Gaia Offshore Master Fund, Ltd. (“Gaia”), AG Offshore
Convertibles, Ltd. (“AG Offshore”), Xxxxxxxx, L.P. (“Xxxxxxxx”) and Portside Growth & Opportunity
Fund (“Portside” and collectively with HFTP, Gaia and AG Offshore, the “Buyers”), and Consolidated
Oil Well Services, Inc., a Kansas corporation and wholly-owned subsidiary of Infinity
(“Consolidated”), CIS-Oklahoma, Inc., a Kansas corporation and wholly-owned subsidiary of Infinity
(“CIS”), Infinity Oil & Gas of Wyoming, Inc., a Wyoming corporation and wholly-owned subsidiary of
Infinity (“Infinity-Wyoming”), Infinity Oil & Gas of Kansas, a Kansas corporation and wholly-owned
subsidiary of Infinity (“Infinity-Kansas”), and Infinity Oil and Gas of Texas, Inc., a Delaware
corporation and wholly-owned subsidiary of Infinity (“Infinity-Texas,” and together with
Consolidated, CIS, Infinity-Wyoming, Infinity-Kansas and Infinity-Delaware, the “Subsidiaries).
Unless otherwise indicated or defined herein, capitalized terms used herein shall have the meanings
ascribed to them in the Securities Purchase Agreement (as defined below).
W I T N E S S E T H:
WHEREAS, Infinity, HFTP, AG Offshore and AG Domestic Convertibles, L.P. (“AG Domestic”)
entered into that certain Securities Purchase Agreement, dated as of January 13, 2005 (as amended,
restated, supplemented or otherwise modified and in effect from time to time, the “Securities
Purchase Agreement”);
WHEREAS, pursuant to the Securities Purchase Agreement, Infinity issued to HFTP, AG Domestic
and AG Offshore senior secured notes (such notes, together with any promissory notes issued in
exchange or substitution therefor or replacement thereof, and as any of the same may be amended,
restated, modified, supplemented or otherwise modified and in effect from time to time, the
“January 2005 Notes”), dated January 13, 2005, in an initial aggregate principal amount of
$30,000,000 and warrants (such warrants, together with any warrants or other securities issued in
exchange or substitution thereof or replacement thereof and as any of the same may be amended,
restated, supplemented or otherwise modified and in effect from time to time, the “January 2005
Warrants”), dated January 13, 2005, to purchase shares of the common stock, par value $0.0001 per
share (the “Common Stock”), of the Company;
WHEREAS, AG Domestic subsequently assigned to AG Offshore the January 2005 Notes and January
2005 Warrants held by AG Domestic and AG Domestic’s rights and obligations with respect to any and
all future sales of Additional Notes and Additional Warrants by the Company pursuant to the
Securities Purchase Agreement;
WHEREAS, Infinity, HFTP, Gaia, AG Offshore, the Subsidiaries and Agent entered into that
certain First Additional Closing Agreement, dated as of September 7, 2005 (the “First Additional
Closing Agreement”), pursuant to which, among things, the January 2005 Notes were amended and Gaia
was made a Buyer under the Securities Purchase Agreement;
WHEREAS, pursuant to the Securities Purchase Agreement and the First Closing Agreement, the
Company issued to HFTP, Gaia and AG Offshore senior secured notes (such notes, together with any
promissory notes issued in exchange or substitution therefor or replacement thereof, and as any of
the same may be amended, restated, modified, supplemented or otherwise modified and in effect from
time to time, the “September 2005 Notes”), dated September 7, 2005, in an initial aggregate
principal amount of $9,500,000 and warrants (such warrants, together with any warrants or other
securities issued in exchange or substitution thereof or replacement thereof and as any of the same
may be amended, restated, supplemented or otherwise modified and in effect from time to time, the
“September 2005 Warrants”), dated September 7, 2005, to purchase shares of Common Stock;
WHEREAS, Infinity, HFTP, Gaia, AG Domestic, AG Offshore, the Subsidiaries and Agent entered
into that certain Master Assumption and Reaffirmation of Transaction Documents dated as of
September 9, 2005, pursuant to which, among other things, Infinity assumed all of the obligations
of Infinity, Inc. under the Securities Purchase Agreement, the January 2005 Notes, the January 2005
Warrants, the September 2005 Notes, the September 2005 Warrants and the other Transaction
Documents;
WHEREAS, pursuant to the Securities Purchase Agreement, the Company issued to HFTP, Gaia and
AG Offshore senior secured notes (such notes, together with any promissory notes issued in exchange
or substitution therefor or replacement thereof, and as any of the same may be amended, restated,
modified, supplemented or otherwise modified and in effect from time to time, the “December 2005
Notes”), dated December 9, 2005, in an initial aggregate principal amount of $5,500,000 and
warrants (such warrants, together with any warrants or other securities issued in exchange or
substitution thereof or replacement thereof and as any of the same may be amended, restated,
supplemented or otherwise modified and in effect from time to time, the “December 2005 Warrants”),
dated December 9, 2005, to purchase shares of Common Stock;
WHEREAS, Infinity, HFTP, Gaia, AG Offshore, Xxxxxxxx the Subsidiaries and Agent entered into
that certain Third Additional Closing Agreement, dated as of March 17, 2006, (the “Third Additional
Closing Agreement”), pursuant to which, among other things, Xxxxxxxx was made a Buyer under the
Securities Purchase Agreement;
WHEREAS, pursuant to the Securities Purchase Agreement and the Third Additional Closing
Agreement, the Company issued to Gaia and Xxxxxxxx senior secured notes (such notes, together with
any promissory notes issued in exchange or substitution therefor or replacement thereof, and as any
of the same may be amended, restated, modified, supplemented or otherwise modified and in effect
from time to time, the “March 2006 Notes” and, collectively with the January 2005 Notes, the
September 2005 Notes and the December 2005 Notes, the “Notes”), dated March 17, 2006, in an initial
aggregate principal amount of $8,000,000 and warrants (such warrants, together with any warrants or
other securities issued in exchange or substitution thereof or replacement thereof and as any of
the same may be amended, restated, supplemented or otherwise modified and in effect from time to
time, the “March 2006 Warrants” and, collectively with the January 2005 Warrants, the September
2005 Warrants, and the December 2005 Warrants, the “Warrants”), dated March 17, 2006, to purchase
shares of Common Stock;
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WHEREAS, Portside currently holds a portion of the Notes and the Warrants; and
WHEREAS, the Company has incurred Indebtedness (as defined in the Notes) in the form of (i)
obligations issued, undertaken or assumed as the deferred purchase price of property or services
consisting of unsecured account trade payables (“Accounts Payable") in the oil and gas production
segment of the Company’s business (the Accounts Payable in such segment, the “O & G Accounts
Payable”) exceeding an aggregate among the Company and its Subsidiaries of $5,000,000 and (ii)
Accounts Payable unpaid in excess of 90 days beyond invoice due date (collectively, the “Accounts
Payable Default”), resulting in the breach of Section 4(n) of the Securities Purchase Agreement and
Section 12 of each of the Notes and the occurrence of a Triggering Event (as defined in the Notes)
under Sections 3(b)(vii) and 3(b)(viii) of each of the Notes and an Event of Default (as defined in
the Notes) under Section 11(a)(iii) of each of the Notes.
NOW, THEREFORE, in consideration of the agreements, provisions and covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each of the undersigned agrees as follows:
1. Company Alternative Conversion Notice.
a. For purposes of this Section 1, each capitalized term used herein, and not otherwise
defined, shall have the meaning ascribed thereto in the Notes.
b. The Company hereby elects to cause the conversion of an aggregate of $2,500,000 in
principal amount (the “Aggregate Conversion Amount”) of the Notes (together with the aggregate
Interest Amount with respect thereto), as if the Company had delivered a Company Alternative
Conversion Notice pursuant to each of the Notes with respect thereto, and this Section 1(b) shall
be deemed a Company Alternative Conversion Notice pursuant to Section 8(a) of each of the Notes
(which, for the avoidance of doubt, means each Note of each Series) and the conversion elected by
the foregoing shall be deemed a Company Alternative Conversion pursuant to Section 8 of each of the
Notes (the “August 2006 Company Conversion”). The August 2006 Company Conversion elected by the
Company pursuant to this Section 1(b) shall be irrevocable by the Company. With respect to each
Buyer, its aggregate Pro Rata Conversion Amount of the Aggregate Conversion Amount shall be as set
forth on Exhibit A attached hereto (such holder’s “Aggregate Conversion Amount”), and such
Aggregate Conversion Amount shall apply on an aggregate basis to the Notes held by such Buyer.
Each of the Buyers shall convert its Aggregate Pro Rata Conversion Amount with respect to the Notes
held by such Buyer, together with the Interest Amount with respect to the allocable portion of the
principal represented by such Aggregate Pro Rata Conversion Amount accruing through and including
the applicable Conversion Date, in accordance with, and subject to the terms and conditions of
Section 8 of each such Note (including the satisfaction (or waiver in writing by such Buyer) of the
Conditions to Company Alternative Conversion and the compliance with the provisions of Sections
8(d) and 8(e) thereof), with such Buyer selecting the one or more Notes (of any one or more Series)
held by such Buyer as to which the August 2006 Company Conversion shall apply.
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c. Each of the Buyers, severally and not jointly, hereby waives, solely with respect to the
August 2006 Company Conversion, the requirement that the Company Alternative
Conversion Notice deemed to be delivered pursuant to Section 1(b) be delivered at least five
(5) Business Days prior to the first Trading Day of the Company Alternative Conversion Period.
Notwithstanding anything to the contrary in the Notes, each of the Buyers, severally and not
jointly, hereby agrees with the Company that the Company Alternative Conversion Period with respect
to the August 2006 Company Conversion shall be the period commencing on and including August 10,
2006 through and including September 15, 2006.
d. In the event that any of a Buyer’s Aggregate Pro Rata Conversion Amount is not converted by
such Buyer due to a failure to satisfy the Conditions to Company Alternative Conversion (unless
waived in writing by such Buyer) or due to the provisions of Section 8(d) or 8(e) of the Notes
(each, a “Conversion Prohibition Event”), then, notwithstanding anything to the contrary in the
Notes, the August 2006 Company Conversion shall be null and void with respect to any such
unconverted Aggregate Pro Rata Conversion Amount, the Company shall be deemed to have given a
Company Alternative Redemption Notice with respect to such unconverted Aggregate Pro Rata
Conversion Amount (and, for purposes of Section 7(a) of the Notes held by such Buyer, shall be
entitled to give such Company Alternative Redemption Notice), and the principal represented by such
unconverted Aggregate Pro Rata Conversion Amount (together with the Interest Amount with respect
thereto) shall be redeemed by the Company in accordance with the terms of this Amendment and
Section 7 of the Notes by wire transfer of immediately available funds to such Buyer no later than
the first Business Day following such Conversion Prohibition Event (an “Unconverted Amount Company
Redemption”). Each of the Buyers, severally and not jointly, hereby waives, solely with respect to
the Unconverted Amount Company Redemption, (i) the requirement that the Company Alternative
Redemption Notice deemed to be delivered pursuant to this Section 1(d) be delivered at least five
(5) Business Days prior to the Company Alternative Redemption Date, and (ii) the Conditions to
Company Alternative Redemption.
2. Amendment to the Notes.
a. Each of the Buyers, severally and not jointly, hereby agrees with the Company that each of
the Notes held by such Buyer be amended by adding a new Section 6.1 thereto that shall read in its
entirety as follows:
“6.1 Installment Conversion or Redemption.
(a) Convertible Installment. With respect to each Convertible
Installment Date (as defined in Section 6.1(c)), the Company shall either (i)
require conversion of the Convertible Installment Amount (as defined in Section
6.1(c)), in whole or in part, in accordance with this Section 6.1 and Section 8 and
the corresponding sections of the Other Notes held by the Holder, at the applicable
Conversion Price, and subject to the satisfaction of the Conditions to Company
Alternative Conversion (as defined in Section 8(c)) (a “Convertible Installment
Conversion”), or (ii) redeem the Convertible Installment Amount, in whole or in
part, in accordance with this Section 6.1 and Section 7 and the corresponding
provisions of the Other Notes held by the Holder (a “Convertible Installment
Redemption”); provided that all of the outstanding Convertible Installment Amount
must be converted or redeemed by the Company, subject to
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the provisions of this Section 6.1 and the corresponding provisions of the Other
Notes held by the Holder; and provided further that the Company may elect more than
one of the Convertible Installment Conversion and the Convertible Installment
Redemption, if each such election is with respect to at least $500,000 of the
aggregate principal amount of the Notes comprising the aggregate Convertible
Installment Amount with respect to all of the Notes. At least five (5) Business
Days prior to each Convertible Installment Date, the Company shall deliver to the
Holder written notice (each a “Convertible Installment Notice”), which Convertible
Installment Notice shall state (i) the portion, if any, of the applicable
Convertible Installment Amount which the Company elects to convert pursuant to a
Convertible Installment Conversion (the “Convertible Installment Conversion
Amount”), (ii) the portion, if any, of the applicable Convertible Installment Amount
which the Company elects to redeem pursuant to a Convertible Installment Redemption
(the “Convertible Installment Redemption Amount”), and which amount when added to
the Convertible Installment Conversion Amount must equal the Convertible Installment
Amount, and (iii) if the Company has elected, in whole or in part, a Convertible
Installment Conversion, then the Convertible Installment Notice shall certify that
the Conditions to Company Alternative Conversion are satisfied as of the date of the
Convertible Installment Notice (except to the extent waived in writing by the
Holder); provided that, notwithstanding anything to the contrary in Section 8, the
Condition to Company Alternative Conversion set forth in Section 8(c)(iv) shall not
apply to any Convertible Installment Conversion pursuant to this Section 6.1. If
the Company does not deliver a Convertible Installment Notice in accordance with
this Section 6.1(a) in connection with any Convertible Installment Date, then the
Convertible Installment Redemption Amount shall mean the Convertible Installment
Amount with respect to such Convertible Installment Date and the Company shall be
deemed to have given a Company Alternative Redemption Notice with respect to the
Convertible Installment Amount (and, for purposes of Section 7(a), shall be entitled
to give such Company Alternative Redemption Notice). Each Convertible Installment
Notice shall be irrevocable. The Company shall elect to redeem and convert the
Convertible Installment Amount of this Note pursuant to this Section 6.1(a) and the
corresponding Convertible Installment Amounts of the Other Notes pursuant to the
corresponding provisions of the Other Notes in the same ratio of principal amount
being redeemed and principal amount being converted, and each holder shall elect the
one or more Notes (of this or any other Series) held by such holder to which such
Convertible Installment Redemption and/or Convertible Installment Conversion shall
apply. That portion of the Principal of this Note and the Other Notes held by the
Holder constituting the Convertible Installment Conversion Amount shall be converted
in accordance with the provisions of this Section 6.1(a) and Sections 2 and 8 and
the corresponding provisions of the Other Notes held by the Holder at the applicable
Conversion Rate. That portion of the Principal of this Note and the Other Notes
held by the Holder constituting the Convertible Installment Redemption Amount
(whether set forth in the Convertible Installment Notice or by operation of this
Section 6.1(a)) shall be redeemed in accordance with the provisions of this
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Section 6.1 and Section 7 at the applicable Company Alternative Redemption Rate.
For purposes of this Section 6.1(a) and notwithstanding anything to the contrary
contained in Section 8(a), (A) a Convertible Installment Conversion shall constitute
a Company Alternative Conversion; (B) a Convertible Installment Notice containing a
Convertible Installment Conversion Amount shall constitute a Company Alternative
Conversion Notice; (C) the Pro Rata Conversion Amount with respect to a Convertible
Installment Conversion shall be the Convertible Installment Conversion Amount; (D)
the Company Alternative Conversion Period (as defined in Section 8(a)) with respect
to a Convertible Installment Conversion shall be all of the Trading Days of the
month containing the applicable Convertible Installment Date; and (E) the “Final
Company Alternative Conversion Date” shall be the final Trading Day of the month
containing the applicable Convertible Installment Date. For purposes of this
Section 6.1(a) and notwithstanding anything to the contrary contained in Section
7(a), (V) a Convertible Installment Redemption shall constitute a Company
Alternative Redemption; (W) a Convertible Installment Notice containing a
Convertible Installment Redemption Amount shall constitute a Company Alternative
Redemption Notice; (X) the Company Alternative Redemption Date with respect to a
Convertible Installment Redemption shall be the applicable Convertible Installment
Date; (Y) the Pro Rata Redemption Amount with respect to a Convertible Installment
Redemption shall be the Convertible Installment Redemption Amount; and (Z) the
Conditions to Company Alternative Redemption set forth in Section 7(c) shall be
deemed to have been satisfied.
(b) Cash Installment. With respect to each Cash Installment Date (as
defined in Section 6.1(c)), the Company shall be deemed to have given a Company
Alternative Redemption Notice with respect to the Cash Redemption Amount (and, for
purposes of Section 7(a), shall be entitled to give such Company Alternative
Redemption Notice) and shall redeem the Cash Installment Amount (as defined in
Section 6.1(c)) in accordance with this Section 6.1 and Section 7 and the
corresponding provisions of the Other Notes held by the Holder (a “Cash Installment
Redemption”). Each holder shall elect the one or more Series of Notes held by such
holder to which such Cash Installment Redemption shall apply. That portion of the
Principal of this Note and the Other Notes held by the Holder constituting the Cash
Installment Amount shall be redeemed in accordance with the provisions of this
Section 6.1 and Section 7 and the corresponding provisions of the Other Notes held
by the Holder at the applicable Company Alternative Redemption Rate. For purposes
of this Section 6.1(b) and notwithstanding anything to the contrary contained in
Section 7(a), (i) a Cash Installment Redemption shall constitute a Company
Alternative Redemption; (ii) the Company Alternative Redemption Date with respect to
a Cash Installment Redemption shall be the applicable Cash Installment Date; (iii)
the Pro Rata Redemption Amount with respect to a Cash Installment Redemption shall
be the Cash Installment Redemption Amount; and (iv) the Conditions to Company
Alternative Redemption set forth in Section 7(c) shall be deemed to have been
satisfied.
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(c) Definitions.
(i) For purposes of this Section 6.1, “Cash Installment Amount” means the
portion of the Principal of this Note and the Other Notes held by the Holder equal
to the lesser of (A) the product of $9,000,000, multiplied by the Holder’s
Allocation Percentage, together with the Interest Amount with respect thereto, and
(B) the aggregate outstanding Principal of all of the Notes held by the Holder,
together with the Interest Amount with respect thereto.
(ii) For purposes of this Section 6.1, “Cash Installment Date” means each of
January 15, 2007, April 15, 2007 and July 15, 2007, or if any such date is not a
Business Day, the first Business Day thereafter.
(iii) For purposes of this Section 6.1, “Convertible Installment Amount” means
a portion of the Principal of this Note and the Other Notes held by the Holder equal
to the lesser of (A) the product of $2,000,000, multiplied by the Holder’s
Allocation Percentage, together with the Interest Amount with respect thereto, and
(B) the aggregate outstanding Principal of all of the Notes held by the Holder,
together with the Interest Amount with respect thereto.
(iv) For purposes of this Section 6.1, “Convertible Installment Date” means the
first Business Day of each calendar month, beginning on and including October 1,
2006 through and including June 1, 2007.”
b. Each of the Buyers, severally and not jointly, hereby agrees with the Company that Section
8(b) of all of the Notes be amended by adding the phrase “, a Convertible Installment Conversion
Amount” in the third sentence of such Section immediately following the phrase “Mandatory
Compliance Amount”.
c. Each of the Buyers, severally and not jointly, hereby agrees with the Company that Section
8(b) of all of the Notes be amended by adding the phrase “, a Convertible Installment Conversion”
in the fourth sentence of such Section immediately following the phrase “Interest Conversion”.
d. Each of the Buyers, severally and not jointly, hereby agrees with the Company that Section
8(d) of all of the Notes be amended by adding the phrase “, a Convertible Installment Conversion
Amount” in the final sentence of such Section immediately following the phrase “Mandatory
Compliance Amount”.
e. Each of the Buyers, severally and not jointly, hereby agrees with the Company that Section
8(e) of all of the Notes be amended by adding the phrase “, a Convertible Installment Conversion
Amount” in the final sentence of such Section immediately following the phrase “Mandatory
Compliance Amount”.
f. Each of the Buyers, severally and not jointly, hereby agrees with the Company that the
definition of Triggering Event set forth in Section 3(b)(viii) of each of the Notes be amended by
adding the following at the end of such Section:
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“or Section 6.1 hereof, or the Company breaches or otherwise fails to comply with
any representation, warranty, covenant or other term or condition of that certain
Amendment and Waiver, dated as of August 9, 2006, by and among the Company, the
Buyers and the Company’s Subsidiaries.”
g. The Notes, except as amended pursuant to this Section 2, shall remain unmodified, unamended
and in full force and effect. In the event of any conflict between the terms and provisions of the
Notes and the terms and provisions of this Section 2, the terms and provisions of this Section 2
shall prevail.
3. Amendment to the Warrants.
a. Each of the Buyers, severally and not jointly, hereby agrees with the Company that the
definition of Warrant Exercise Price set forth in Section 1(b)(xv) of each of the Warrants be
amended to read in its entirety as follows:
“Warrant Exercise Price” shall be equal to, with respect to any Warrant Share $5.00,
subject to adjustment and hereinafter provided.”
b. Each of the Buyers, severally and not jointly, hereby agrees with the Company that the
amendment of the definition of Warrant Exercise Price as provided in Section 3(a) (the “Warrant
Amendment”) shall be deemed for purposes of the second sentence of Section 8(a) of each of the
Warrants to be an adjustment to the Warrant Exercise Price of the Warrants pursuant to the first
sentence of Section 8(a) thereof (i.e., as having resulted from an issuance or sale of shares of
Common Stock for a consideration per share less than the Applicable Price in effect immediately
prior to such issuance or sale), and that upon such deemed adjustment to the Warrant Exercise
Price, the number of Warrant Shares (as defined in such Warrant) acquirable upon exercise of such
Warrant shall be amended and adjusted in accordance with the provisions of the second sentence of
Section 8(a) of such Warrant (i.e., the number of shares of Common Stock acquirable upon exercise
of such Warrant shall be increased to the number of shares determined by multiplying the Warrant
Exercise Price of such Warrant in effect immediately prior to the Warrant Amendment by the number
of shares of Common Stock acquirable upon exercise of such Warrant immediately prior to the Warrant
Amendment and dividing the product thereof by $5.00).
c. The Warrants, except as amended pursuant to this Section 3, shall remain unmodified,
unamended and in full force and effect. In the event of any conflict between the terms and
provisions of the Warrants and the terms and provisions of this Section 3, the terms and provisions
of this Section 3 shall prevail.
4. Limited Waivers.
a. Subject to Section 4(c), each of the Buyers, severally and not jointly, hereby waives (i)
the occurrence of a Triggering Event under Section 3(b)(vii) and (viii) of each of the Notes and an
Event of Default under Section 11(a)(iii) and (viii) of each of the Notes, the breach of Section 12
of each of the Notes and the breach of Section 4(n) of the Securities Purchase Agreement resulting
solely from the Accounts Payable Default, and (ii) the Accounts Payable Default’s constituting a
failure to satisfy any Condition to Company Alternative
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Conversion with respect to the August 2006 Company Conversion pursuant to this Amendment or
any Convertible Installment Conversion pursuant to this Amendment and Section 6.1 of each of the
Notes, as amended by this Amendment; provided that such waivers are subject to, and conditioned
upon, (A) the aggregate outstanding amount of the O & G Accounts Payable not exceeding $12,500,000
on the date of this Amendment and not having exceeded $13,500,000 at any time prior to the date of
this Amendment, (B) the aggregate amount of the Accounts Payable unpaid in excess of 90 days beyond
invoice due date not exceeding $1,500,000 on the date of this Amendment and not having exceeded
$1,500,000 at any time prior to the date of this Amendment, and (C) none of the Accounts Payable
being unpaid in excess of 127 days beyond invoice due date on the date of this Amendment or having
been unpaid in excess of 162 days beyond invoice due date at any time prior to the date of this
Amendment; and provided, further, that the waivers contained in this Section 4(a) shall be null and
void and of no force or effect, and there shall be an immediate breach of the Securities Purchase
Agreement and each of the Notes and a Triggering Event under each of the Notes, in the event that
(V) the aggregate amount of the O & G Accounts Payable exceeds $12,500,000 at any time following
the date of this Amendment, or (W) the aggregate amount of the O & G Accounts Payable exceeds
$5,000,000 as of January 1, 2007 or at any time thereafter, (X) the aggregate amount of the
Accounts Payable unpaid in excess of 90 days beyond invoice due date exceeds $2,500,000 at any time
following the date of this Amendment through (and including) September 15, 2006 or exceeds
$1,500,000 at any time after September 15, 2006; (Y) any Accounts Payable are unpaid in excess of
150 days beyond invoice due date at any time following the date of this Amendment or (Z) any
Accounts Payable are unpaid in excess of 90 days beyond invoice due date on December 31, 2006 or at
any time thereafter.
b. Subject to Section 4(c), each of the Buyers, severally and not jointly, hereby waives (i)
the occurrence of a Triggering Event (if any) under Section 3(b)(vii) of each of the Notes and an
Event of Default (if any) under Section 11(a)(viii) of each of the Notes, and the breach of
Sections 2(f) and 4.5(a) of the Security Agreement, resulting solely from the Company’s
establishment of a Deposit Account (as defined in the Security Agreement) at Cornerstone Bank
(“Cornerstone”) that is not subject to an Account Control Agreement (the “Cornerstone Deposit
Account”), and deposit of $852,000 in Company funds therein, solely for purposes of securing
reimbursement obligations under a letter of credit issued by Cornerstone Bank (such establishment
and deposit for such purposes being collectively referred to as the “Cornerstone Collateral
Deposit”), and (ii) the Cornerstone Collateral Deposit’s constituting a failure to satisfy any
Condition to Company Alternative Conversion with respect to the August 2006 Company Conversation
pursuant to this Amendment or any Convertible Installment Conversion pursuant to this Amendment and
Section 6.1 of each of the Notes; provided that the waivers contained in this Section 4(b) shall be
null and void and of no force and effect, and there shall be an immediate breach of the Security
Agreement, in the event that (i) the aggregate funds in the Cornerstone Deposit Account at any time
exceed $852,000 or (ii) the Cornerstone Collateral Deposit would constitute a breach of Section 12
of any of the Notes.
c. The limited waivers set forth in Sections 4(a) and 4(b) are conditioned upon, and subject
to, the Company’s performance of its commitments and obligations under this Amendment, the breach
or non-performance of which shall render such waivers null and void and of no force and effect,
each Buyer being entitled thereafter to exercise all remedies at law or in equity under the
Transaction Documents as if Sections 4(a) and 4(b) had not been part of this
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Amendment, as executed. The limited waivers set forth in Sections 4(a) and 4(b) are not, and
shall not be deemed to be, a waiver under any other circumstance or a waiver of any other
condition, requirement, provision or breach of any of the Transaction Documents or any other
agreement or instrument.
5. Additional Note Issuance Prohibition. The Company hereby agrees with each of the
Buyers, severally and not jointly, that as of and after the date of this Amendment, the Company
shall not have the right to sell any Additional Notes or Additional Warrants to the Buyers pursuant
to Section 1(b) of the Securities Purchase Agreement, and any Additional Sale Election Notice
delivered pursuant thereto as of and after the date of this Amendment shall be null and void and of
no force or effect.
6. Company Alternative Conversion Limitation. The Company hereby agrees with each of
the Buyers, severally and not jointly, that as of and after the date of this Amendment, (a) the
Company shall not have the right to effect any Company Alternative Conversion pursuant to Section 8
of the Notes other than pursuant to the August 2006 Company Conversion in accordance with this
Amendment or a Convertible Installment Conversion (as defined in Section 6.1 of the Notes, as
amended by this Amendment) in accordance with this Amendment and Section 6.1 of the Notes, as
amended by this Amendment, and (b) any Company Alternative Conversion Notice delivered pursuant to
any of the Notes (other than a Company Alternative Conversion Notice with respect to the August
2006 Company Conversion deemed delivered pursuant to Section 1(b) of this Amendment or a Company
Alternative Conversion Notice deemed delivered pursuant to Section 6.1 of any of the Notes, as
amended by this Amendment) as of and after the date of this Amendment shall be null and void and of
no force or effect.
7. Covenants.
a. Prior to 9:00 a.m., New York time, on August 10, 2006, but in no event no later than the
earlier of (i) the filing by the Company of its Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006 (the “Form 10-Q”) or (ii) the issuance by the Company of a press release disclosing
the Company’s operating results with respect to the quarter ended June 30, 2006, the Company shall
file a Form 8-K or the Form 10-Q (the “Amendment SEC Filing”) with the Securities and Exchange
Commission (the “SEC”) describing the terms of this Amendment, any information reasonably requested
to be disclosed therein by any Buyer and any material non-public information previously provided by
the Company, any of its Subsidiaries or any of their respective officers, directors, employees or
agents to any of the Buyers and not subsequently disclosed on a Form 8-K or other
publicly-available filing with the SEC prior to the filing of the Amendment SEC Filing, and
including as an exhibit to such Amendment SEC Filing this Amendment, all in the form required by
the 1934 Act. The Company shall provide each Buyer with a reasonably opportunity to review and
comment upon such disclosure prior to the filing of the Amendment SEC Filing with the SEC. The
Company hereby represents and warrants to each of the Buyers that, from and after the filing of the
Amendment SEC Filing with the SEC, no Buyer shall be in possession of any material nonpublic
information received from the Company, any of its Subsidiaries or any of their respective officers,
directors, employees or agents.
10
b. Within two (2) Business Days following the execution of this Amendment by the Company and
the Buyers, the Company shall promptly reimburse each Buyer for all of the out-of-pocket fees,
costs and expenses (including, but not limited to, attorneys’ fees, costs and expenses) incurred by
such Buyer in connection with the negotiation and documentation of this Amendment. Following the
date hereof, the Company shall promptly reimburse each Buyer for all of the out-of-pocket fees,
costs and expenses (including, without limitation, attorneys’ fees, costs and expenses) incurred by
such Buyer in connection with any amendment, modification or waiver of any of the Transaction
Documents and/or the enforcement of such Buyer’s rights and remedies under any of the Transaction
Documents.
8. Representations and Warranties of the Company. The Company represents and warrants
to each of the Buyers that:
a. Authorization; Enforcement; Validity. Each of the Company and its Subsidiaries has the
requisite corporate power and authority to enter into and perform its obligations under this
Amendment, the Notes, as amended hereby, and the Warrants, as amended hereby. The execution and
delivery of this Amendment by each of the Company and its Subsidiaries and the consummation of the
transactions contemplated hereby (including the issuance of the Conversion Shares upon conversion
of the Notes (as amended hereby) and the issuance of Warrant Shares upon the issuance of the
Warrants (as amended hereby)) have been duly authorized by the respective boards of directors of
the Company and its Subsidiaries, and no further consent or authorization is required of any of the
Company, its Subsidiaries or their respective Boards of Directors or shareholders (under applicable
law, the rules and regulations of the Principal Market or otherwise). This Amendment has been duly
executed and delivered by each of the Company and its Subsidiaries, and each of this Amendment, the
Notes (as amended hereby) and the Warrants (as amended hereby) constitutes a valid and binding
obligation of each of the Company and its Subsidiaries, enforceable against each of the Company and
its Subsidiaries in accordance with its terms.
b. Issuance of Securities. Upon issuance in accordance with the Notes (as amended hereby) and
the Warrants (as amended hereby), the Conversion Shares and the Warrant Shares will be validly
issued, fully paid and nonassessable and free from all taxes and Liens with respect to the issue
thereof, with the holders being entitled to all rights accorded to a holder of the Common Stock.
c. No Conflicts. The execution and delivery of this Amendment by each of the Company and its
Subsidiaries, the performance by each of the Company and its Subsidiaries of its obligations
hereunder and the consummation by each of the Company and its Subsidiaries of the transactions
contemplated hereby and by the Notes (as amended hereby) and the Warrants (as amended hereby) will
not (i) result in a violation of the Articles of Incorporation or the Bylaws or the organizational
documents of any Subsidiary; (ii) conflict with, or constitute a breach or default (or an event
which, with the giving of notice or lapse of time or both, constitutes or would constitute a breach
or default) under, or give to others any right of termination, amendment, acceleration or
cancellation of, or other remedy with respect to, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party; or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the Principal Market)
11
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. None of the Company nor any of its
Subsidiaries is required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency, the Principal Market or any other regulatory
or self-regulatory authority in order for it to execute, deliver or perform any of its obligations
under or contemplated by this Amendment in accordance with the terms hereof, or under the Notes (as
amended hereby) or the Warrants (as mended hereby), including, the issuance of the Conversion
Shares and the Warrant Shares in accordance with the terms of the Notes (as amended hereby) and the
Warrants (as amended hereby).
d. No Default. Other than the Accounts Payable Default, there exists no Triggering Event,
Event of Default or breach or failure to comply by the Company or any of its Subsidiaries with any
representation, warranty, covenant or other term or condition of any of the Transaction Documents,
or an event which, with the giving of notice or lapse of time or both and without being cured,
constitutes or would constitute such a Triggering Event, Event of Default or breach or failure.
9. Representation and Warranties of the Buyers. Each of the Buyers represents and
warrants to the Company that (a) such Buyer is a validly existing corporation, partnership, limited
liability company or other entity and has the requisite corporate, partnership, limited liability
or other organizational power and authority to enter into and perform its obligations under this
Amendment, and (b) this Amendment has been duly and validly authorized, executed and delivered on
behalf of such Buyer and is a valid and binding agreement of such Buyer enforceable against such
Buyer in accordance with its terms.
10. Avoidance of Doubt. The parties hereto hereby agree, for the avoidance of doubt,
that the terms “Notes” and “Warrants” as used in the Transaction Documents shall mean the Notes and
the Warrants as amended by this Amendment, and each of the parties hereto agrees not to take any
contrary positions.
11. Independent Nature of the Buyers. The obligations of each of the Buyers hereunder
are several and not joint with the obligations of the other, and none of the Buyers shall be
responsible in any way for the performance of the obligations of any of the other Buyers hereunder
or under any of the Transaction Documents. Each of the Buyers shall be responsible only for its
own agreements and covenants hereunder and under the Transaction Documents. The decision of each
of the Buyers to enter into this Amendment has been made by such party independently of any of the
other Buyers and independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or any of its Subsidiaries which may have been
made or given by any of the other Buyers or by any agent or employee of any of the other Buyers,
and none of the Buyers nor any of their respective agents or employees shall have any liability to
any of the other Buyers (or any other person or entity) relating to or arising from any such
information, materials, statements or opinions. Nothing contained herein or in any of the
Transaction Documents, and no action taken by any of the Buyers pursuant hereto or thereto, shall
be deemed to constitute any of the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that any of the Buyers are in any way acting in
concert or as a group with respect to such
12
obligations or the transactions contemplated hereby or thereby. Each of the Buyers shall be
entitled to independently protect and enforce its rights, including the rights arising out of this
Amendment, the Notes, the Warrants and the other Transaction Documents, and it shall not be
necessary for any of the other Buyers to be joined as an additional party in any proceeding for
such purpose.
12. Successors and Assigns. This Amendment shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and permitted assigns. The
successors and assigns of such entities shall include their respective receivers, trustees or
debtors-in-possession.
13. Further Assurances. The Company hereby agrees from time to time, as and when
requested by any Buyer, to execute and deliver or cause to be executed and delivered, all such
documents, instruments and agreements, including financing statements, secretary’s certificates,
stock powers and irrevocable transfer agent instructions, and to take or cause to be taken such
further or other action, as such Buyer may reasonably deem necessary or desirable in order to carry
out the intent and purposes of this Amendment and the Transaction Documents.
14. Rules of Construction. All words in the singular or plural include the singular
and plural and pronouns stated in either the masculine, the feminine or neuter gender shall include
the masculine, feminine and neuter, and the use of the word “including” in this Amendment shall be
by way of example rather than limitation.
15. Governing Law; Jurisdiction; July Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Amendment shall be governed by the
internal laws of the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding
is improper. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof to such party
at the address for such notices to it under this Amendment and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL
FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AMENDMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
13
16. Severability. Wherever possible, each provision of this Amendment shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Amendment shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Amendment.
17. Merger. This Amendment and the Transaction Documents, as amended hereby,
represent the final agreement of each of the parties hereto with respect to the matters contained
herein and may not be contradicted by evidence of prior or contemporaneous agreements, or prior or
subsequent oral agreements, among any of the parties hereto.
18. Execution in Counterparts. This Amendment may be executed in two or more
identical counterparts, all of which shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered to each other
party. In the event that any signature to this Amendment or any amendment hereto is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall
create a valid and binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or “.pdf” signature page were an
original thereof. No party hereto shall raise the use of a facsimile machine or e-mail delivery of
a “.pdf” format data file to deliver a signature to this Amendment or any amendment hereto or the
fact that such signature was transmitted or communicated through the use of a facsimile machine or
e-mail delivery of a “.pdf” format data file as a defense to the formation or enforceability of a
contract, and each party hereto forever waives any such defense.
19. Section Headings. The section headings herein are for convenience of reference
only, and shall not affect in any way the interpretation of any of the provisions hereof.
20. No Strict Construction. The language used in this Amendment will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
21. Ratification by Guarantors. By execution hereof, each of the Subsidiaries hereby
acknowledges and agrees that it has reviewed this Amendment and hereby ratifies and confirms its
respective obligations under the Transaction Documents, in each case as amended hereby.
[Remainder of page intentionally left blank; Signature page follows]
14
IN WITNESS WHEREOF, this Amendment has been duly executed by each of the undersigned as of the
day and year first set forth above.
| INFINITY ENERGY RESOURCES, INC. | ||||
| By: | /s/ X.X. Xxxxx | |||
| Name: | X.X. Xxxxx | |||
| Title: | President and CEO | |||
| CONSOLIDATED OIL WELL SERVICES, INC. | ||||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxx | |||
| Title: | Vice President, CFO | |||
| CIS-OKLAHOMA, INC. | ||||
| By: | /s/ Xxxxxxx X. Xxxx | |||
| Name: | Xxxxxxx X. Xxxx | |||
| Title: | President | |||
| INFINITY OIL & GAS OF WYOMING, INC. | ||||
| By: | /s/ X.X. Xxxxx | |||
| Name: | X.X. Xxxxx | |||
| Title: | President | |||
| INFINITY OIL & GAS OF KANSAS, INC. | ||||
| By: | /s/ X.X. Xxxxx | |||
| Name: | X.X. Xxxxx | |||
| Title: | President | |||
| INFINITY OIL AND GAS OF TEXAS, INC. | ||||
| By: | /s/ X.X. Xxxxx | |||
| Name: | X.X. Xxxxx | |||
| Title: | President | |||
| HFTP INVESTMENT L.L.C. | ||||||
| By: Promethean Asset Management L.L.C. | ||||||
| Its: Investment Manager | ||||||
| By: | /s/ Xxxxxx X. Xxxxxxxx | |||||
| Name: | Xxxxxx X. Xxxxxxxx | |||||
| Title: | Partner and Authorized Signatory | |||||
| GAIA OFFSHORE MASTER FUND, LTD. | ||||||
| By: Promethean Asset Management L.L.C. | ||||||
| Its: Investment Manager | ||||||
| By: | /s/ Xxxxxx X. Xxxxxxxx | |||||
| Name: | Xxxxxx X. Xxxxxxxx | |||||
| Title: | Partner and Authorized Signatory | |||||
| AG OFFSHORE CONVERTIBLES, LTD. | ||||||||
| By: Xxxxxx, Xxxxxx & Co. L.P. | ||||||||
| Its: Director | ||||||||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||||||
| Name: | Xxxxxxx X. Xxxxxx | |||||||
| Title: | Chief Operating Officer | |||||||
| XXXXXXXX, L.P. | ||||||||
| By: Xxxxxxxx Capital Management, Inc. | ||||||||
| Its: General Partner | ||||||||
| By: Xxxxxx, Xxxxxx & Co., L.P. | ||||||||
| Its: Director | ||||||||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||||||
| Name: | Xxxxxxx X. Xxxxxx | |||||||
| Title: | Chief Operating Officer | |||||||
| PORTSIDE GROWTH & OPPORTUNITY FUND | ||||||
| By: | ||||||
| Its: | ||||||
| By: | /s/ Xxxxxxx X. Xxxxx | |||||
| Name: | Xxxxxxx X. Xxxxx | |||||
| Title: | Authorized Signatory | |||||
Exhibit A
August 2006 Company Conversion
| Buyer | Aggregate Pro Rata Conversion Amount | |||
HFTP Investment L.L.C. |
$ | 934,437.16 | ||
Gaia Offshore Master Fund, Ltd. |
$ | 315,562.84 | ||
AG Offshore Convertibles, Ltd. |
$ | 519,736.84 | ||
Xxxxxxxx, L.P. |
$ | 205,263.16 | ||
Portside Growth & Opportunity Fund |
$ | 525,000.00 | ||
