Exhibit 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of March
10, 2005, by and between DEEP WELL OIL & GAS, INC., a Nevada corporation (the
"Company"), and each of the entities whose names appear on the signature pages
hereof. Such entities are each referred to herein as an "Investor" and,
collectively, as the "Investors".
A. The Company wishes to sell to each Investor, and each Investor wishes
to purchase, on the terms and subject to the conditions set forth in this
Agreement, (A) shares (the "Shares") of the Company's common stock, $.001 par
value per share (the "Common Stock"), and (B) a Warrant in the form attached
hereto as Exhibit A (each, a "Warrant" and, collectively with the other warrants
issued hereunder, the "Warrants"). The shares of Common Stock into which the
Warrants are exercisable are referred to herein as the "Warrant Shares"; the
Shares, the Warrants and the Warrant Shares are collectively referred to herein
as the "Securities".
B. Each Warrant will entitle an Investor to purchase a number of Warrant
Shares equal to such investor's Pro Rata Share (as defined below) times 750,000,
will have an exercise price equal to $0.50 per Warrant Share (subject to
adjustment as provided therein), and will expire on the fifth (5th) anniversary
of the Closing Date.
C. The Company has agreed to effect the registration of the Shares and the
Warrant Shares for resale by the holders thereof under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Rights
Agreement in the form attached hereto as Exhibit B (the "Registration Rights
Agreement").
D. The sale of the Shares and the Warrants by the Company to the Investors
will be effected in reliance upon the exemption from securities registration
afforded by the provisions of Regulation D ("Regulation D"), as promulgated by
the Commission (as defined below) under the Securities Act.
In consideration of the mutual promises made herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and each Investor hereby agree as follows:
1. PURCHASE AND SALE OF SHARES AND WARRANTS.
1.1 Closing. Upon the terms and subject to the satisfaction or waiver of
the conditions set forth herein, the Company agrees to sell and each Investor
agrees to purchase (i) Shares in the amount set forth below such Investor's name
on the signature pages hereof and (ii) a Warrant. The date on which the closing
of such purchase and sale occurs (the "Closing") is hereinafter referred to as
the "Closing Date". The Closing will be deemed to occur at the offices of Xxxxx
& Stachenfeld, LLP, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, when (A)
this Agreement and the other Transaction Documents (as defined below) have been
executed and delivered by the Company and each Investor, (B) each of the
conditions to the Closing described in Section 5 hereof has been satisfied or
waived as specified therein and (C) full payment of each Investor's Purchase
Price (as defined below) has been made by such Investor to the Company by wire
transfer of immediately available funds. On or before the third (3rd) Business
Day following the Closing Date, the Company shall deliver to each Investor duly
executed certificates representing the Shares and Warrant purchased by such
Investor at the Closing (the "Share Delivery Date"). Each Investor will be
deemed for all purposes on and after the Closing Date, assuming the payment by
such Investor of such Investor's Purchase Price, to be the record holder of such
Investor's Shares and Warrants regardless of the date on which the certificates
therefor are delivered to such Investor. In the event that the Company fails to
deliver to an Investor certificates for the Shares and Warrant purchased by such
Investor, the Company shall make a cash payment to such Investor, on the first
day on which such failure occurs and on the last day of each thirty (30) day
period or part thereof in which such failure exists, equal to two percent (2%)
of the aggregate Purchase Price paid by such Investor for such Investor's Shares
and Warrant. Any such payment shall be in addition to any other remedies
available to each Investor at law or in equity, whether pursuant to the terms
hereof, the Securities Purchase Agreement or otherwise.
1.2 Certain Definitions. When used herein, the following terms shall have
the respective meanings indicated:
"Affiliate" means, as to any Person (the "subject Person"), any
other Person (a) that directly or indirectly through one or more intermediaries
controls or is controlled by, or is under direct or indirect common control
with, the subject Person, (b) that directly or indirectly beneficially owns or
holds ten percent (10%) or more of any class of voting equity of the subject
Person, or (c) ten percent (10%) or more of the voting equity of which is
directly or indirectly beneficially owned or held by the subject Person. For the
purposes of this definition, "control" when used with respect to any Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, through
representation on such Person's board of directors or other management committee
or group, by contract or otherwise.
"Board of Directors" means the Company's board of directors.
t 12 "Business Day" means any day other than a Saturday, a Sunday or a day
on which the New York Stock Exchange is closed or on which banks in the City of
New York are required or authorized by law to be closed.
"Closing" and "Closing Date" have the respective meanings set forth
in Section 1.1 hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" has the meaning specified in the preamble to this
Agreement.
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"Debt" means, as to any Person at any time: (a) all indebtedness,
liabilities and obligations of such Person for borrowed money; (b) all
indebtedness, liabilities and obligations of such Person to pay the deferred
purchase price of Property or services (except trade accounts payable, accrued
compensation, accrued expenses, and unearned revenue and customer deposits of
such Person that, in any such case, arise in the ordinary course of business and
are not more than ninety (90) days past due); (c) all capital lease obligations
of such Person; (d) all indebtedness, liabilities and obligations of others
guaranteed by such Person; (e) all indebtedness, liabilities and obligations
secured by a Lien existing on Property owned by such Person, whether or not the
indebtedness, liabilities or obligations secured thereby have been assumed by
such Person or are non-recourse to such Person; (f) all reimbursement
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, bankers' acceptances, surety or other bonds and similar
instruments; and (g) all indebtedness, liabilities and obligations of such
Person to redeem or retire shares of capital stock of such Person.
"Disclosure Documents" means all SEC Documents filed with the
Commission at least five (5) Business Days prior to the Execution Date.
"Effective Date" has the meaning set forth in the Registration
Rights Agreement.
"Environmental Law" means any federal, state, provincial, local or
foreign law, statute, code or ordinance, principle of common law, rule or
regulation, as well as any Permit, order, decree, judgment or injunction issued,
promulgated, approved or entered thereunder, relating to pollution or the
protection, cleanup or restoration of the environment or natural resources, or
to the public health or safety, or otherwise governing the generation, use,
handling, collection, treatment, storage, transportation, recovery, recycling,
discharge or disposal of hazardous materials.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations and published interpretations thereunder.
"Execution Date" means the date of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
(or any successor act), and the rules and regulations thereunder (or respective
successors thereto).
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in (i) opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants, (ii) statements
of the Financial Accounting Standards Board and (iii) interpretations of the
Commission and the staff of the Commission. Accounting principles are applied on
a "consistent basis" when the accounting principles applied in a current period
are comparable in all material respects to those accounting principles applied
in a preceding period.
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"Governmental Authority" means any nation or government, any state,
provincial or political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including without limitation any stock exchange, securities
market or self-regulatory organization.
"Governmental Requirement" means any law, statute, code, ordinance,
order, rule, regulation, judgment, decree, injunction, franchise, license or
other directive or requirement of any federal, state, county, municipal, parish,
provincial or other Governmental Authority or any department, commission, board,
court, agency or any other instrumentality of any of them.
"Intellectual Property" means any U.S. or foreign patents, patent
rights, patent applications, trademarks, trade names, service marks, brand
names, logos and other trade designations (including unregistered names and
marks), trademark and service xxxx registrations and applications, copyrights
and copyright registrations and applications, inventions, invention disclosures,
protected formulae, formulations, processes, methods, trade secrets, computer
software, computer programs and source codes, manufacturing research and similar
technical information, engineering know-how, customer and supplier information,
assembly and test data drawings or royalty rights.
t 12 "Lien" means, with respect to any Property, any mortgage, pledge,
hypothecation, assignment, deposit arrangement, security interest, tax lien,
financing statement, pledge, charge, or other lien, charge, easement,
encumbrance, preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever on or with respect to such Property
(including, without limitation, any conditional sale or other title retention
agreement having substantially the same economic effect as any of the
foregoing).
"Market Price" means, as of a particular date, the average of the
daily VWAP on each of the five (5) consecutive Trading Days occurring
immediately prior to (but not including) such date.
"Material Adverse Effect" means an effect that is material and
adverse to (i) the consolidated business, properties, assets, operations,
results of operations, financial condition, credit worthiness or prospects of
the Company and the Company Subsidiaries taken as a whole, (ii) the ability of
the Company to perform its obligations under this Agreement or the other
Transaction Documents (as defined below) or (iii) the rights and benefits to
which an Investor is entitled under this Agreement and the other Transaction
Documents.
"Material Contracts" means, as to the Company, any agreement
required pursuant to Item 601 of Regulation S-B or Item 601 of Regulation S-K,
as applicable, promulgated under the Securities Act to be filed as an exhibit to
any report, schedule, registration statement or definitive proxy statement filed
or required to be filed by the Company with the Commission under the Exchange
Act or any rule or regulation promulgated thereunder, and any and all
amendments, modifications, supplements, renewals or restatements thereof.
"NASD" means the National Association of Securities Dealers, Inc.
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"Pension Plan" means an employee benefit plan (as defined in ERISA)
maintained by the Company for employees of the Company or any of its Affiliates.
"Permitted Liens" means the following:
(a) encumbrances consisting of easements, rights-of-way, zoning
restrictions or other restrictions on the use of Real Property or imperfections
to title that do not (individually or in the aggregate) materially impair the
ability of the Company or any of the Company Subsidiaries to use such Property
in its businesses, and none of which is violated in any material respect by
existing or proposed structures or land use;
(b) Liens for taxes, assessments or other governmental charges
(including without limitation in connection with workers' compensation and
unemployment insurance) that are not delinquent or which are being contested in
good faith by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the Property subject to such Liens, and for
which adequate reserves (as determined in accordance with GAAP) have been
established; and
(c) Liens of mechanics, materialmen, warehousemen, carriers,
landlords or other similar statutory Liens securing obligations that are not yet
due and are incurred in the ordinary course of business or which are being
contested in good faith by appropriate proceedings, which proceedings have the
effect of preventing the forfeiture or sale of the Property subject to such
Liens, for which adequate reserves (as determined in accordance with GAAP) have
been established.
"Person" means any individual, corporation, trust, association,
company, partnership, joint venture, limited liability company, joint stock
company, Governmental Authority or other entity.
"Principal Market" means the principal exchange, market or quotation
system on which the Common Stock is listed, traded or quoted.
"Property" means property and/or assets of all kinds, whether real,
personal or mixed, tangible or intangible (including, without limitation, all
rights relating thereto).
"Pro Rata Share" means, with respect to an Investor, the ratio
determined by dividing (i) the number of Shares purchased hereunder by such
Investor by (ii) the aggregate number of Shares purchased hereunder by all of
the Investors.
"Property Material Adverse Effect" means any material adverse effect
on or with respect to any of the geographical areas described under the heading
"major properties" (or otherwise described) in Item 2 (or a comparable section)
of the Company's annual report on Form 10-KSB most recently filed by the Company
prior to the date this representation is made, or any such geographical area
that will be required to be described in the next annual report on Form 10-KSB
or Form 10-K to be filed by the Company after the Execution Date.
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"Purchase Price" means, with respect to an Investor, the number of
Shares purchased by such Investor at the Closing times forty cents ($0.40).
"Real Property" has the meaning specified in Section 3.22 hereof.
"Registrable Securities" has the meaning set forth in the
Registration Rights Agreement.
"Rule 144" means Rule 144 under the Securities Act or any successor
provision.
"SEC Documents" means all reports, schedules, registration
statements and definitive proxy statements that the Company was required to file
with the Commission on or after December 31, 2003.
"Securities" has the meaning specified in the preamble to this
Agreement.
"Subsequent Placement" means the issuance, sale, exchange, or
reservation for issuance of (i) any shares of Common Stock, (ii) any other
equity security of the Company, including without limitation shares of preferred
stock, (iii) any other security of the Company which by its terms is convertible
into or exchangeable or exercisable for any equity security of the Company, or
(iv) any option, warrant or other right to subscribe for, purchase, sell or
otherwise acquire or transfer an economic or ownership interest in any such
security described in the foregoing clauses (i) through (iii).
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which at least a majority of the outstanding shares of stock or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors (or Persons performing similar
functions) of such corporation or entity (regardless of whether or not at the
time, in the case of a corporation, stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more of its Subsidiaries or by such Person and one or more
of its Subsidiaries.
"Trading Day" means any day on which the Common Stock is purchased
and sold on the Principal Market.
"Transaction Documents" means, collectively, this Agreement, the
Registration Rights Agreement, and delivered by or on behalf of the Company or
any of its officers at the Closing.
"VWAP" on a Trading Day means the volume weighted average price of
the Common Stock for such Trading Day on the Principal Market as reported by
Bloomberg Financial Markets or, if Bloomberg Financial Markets is not then
reporting such prices, by a comparable reporting service of national reputation
selected by the Investors and reasonably satisfactory to the Company. If the
VWAP cannot be calculated for the Common Stock on such Trading Day on any of the
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foregoing bases, then the Company shall submit such calculation to an
independent investment banking firm of national reputation reasonably acceptable
to each Investor, and shall cause such investment banking firm to perform such
determination and notify the Company and each Investor of the results of
determination no later than two (2) Business Days from the time such calculation
was submitted to it by the Company. All such determinations shall be
appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period.
1.3 Other Definitional Provisions. All definitions contained in this
Agreement are equally applicable to the singular and plural forms of the terms
defined. The words "hereof", "herein" and "hereunder" and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR.
Each Investor (with respect to itself only) hereby represents and warrants
to the Company and agrees with the Company that, as of the Execution Date:
2.1 Authorization; Enforceability. Such Investor is duly and validly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization as set forth below such
Investor's name on the signature page hereof with the requisite corporate power
and authority to purchase the Shares and Warrant to be purchased by it hereunder
and to execute and deliver this Agreement and the other Transaction Documents to
which it is a party. This Agreement constitutes, and upon execution and delivery
thereof, each other Transaction Document to which such Investor is a party will
constitute, such Investor's valid and legally binding obligation, enforceable in
accordance with its terms, subject to (i) applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other similar laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) general principles of equity.
2.2 Accredited Investor. Such Investor (i) is an "accredited investor" as
that term is defined in Rule 501 of Regulation D, (ii) was not formed or
organized for the specific purpose of making an investment in the Company, and
(iii) is acquiring the Securities solely for its own account and not with a
present view to the public resale or distribution of all or any part thereof,
except pursuant to sales that are registered under, or exempt from the
registration requirements of, the Securities Act and/or sales registered under
the Securities Act; provided, however, that in making such representation, such
Investor does not agree to hold the Securities for any minimum or specific term
and reserves the right to sell, transfer or otherwise dispose of the Securities
at any time in accordance with the provisions of this Agreement and with Federal
and state securities laws applicable to such sale, transfer or disposition. Such
Investor can bear the economic risk of a total loss of its investment in the
Securities and has such knowledge and experience in business and financial
matters so as to enable it to understand the risks of and form an investment
decision with respect to its investment in the Securities.
2.3 Information. The Company has, prior to the Execution Date, provided
such Investor with information regarding the business, operations and financial
condition of the Company and has, prior to the Execution Date, granted to such
Investor the opportunity to ask questions of and receive answers from
representatives of the Company, its officers, directors, employees and agents
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concerning the Company in order for such Investor to make an informed decision
with respect to its investment in the Shares and Warrants. Neither such
information nor any other investigation conducted by such Investor or any of its
representatives shall modify, amend or otherwise affect such Investor's right to
rely on the Company's representations and warranties contained in this
Agreement.
2.4 Limitations on Disposition. Such Investor acknowledges that, except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the Securities Act and may not be transferred or
resold without registration under the Securities Act or unless pursuant to an
exemption therefrom.
2.5 Legend. Such Investor understands that the certificates representing
the Securities may bear at issuance a restrictive legend in substantially the
following form:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or
the securities laws of any state, and may not be offered or sold unless a
registration statement under the Securities Act and applicable state
securities laws shall have become effective with regard thereto, or an
exemption from registration under the Securities Act and applicable state
securities laws is available in connection with such offer or sale."
Notwithstanding the foregoing, it is agreed that, as long as (A) the
resale or transfer (including without limitation a pledge) of any of the
Securities is registered pursuant to an effective registration statement, (B)
such Securities have been sold pursuant to Rule 144, subject to receipt by the
Company of customary documentation reasonably acceptable to the Company in
connection therewith, or (C) such Securities are eligible for resale under Rule
144(k) or any successor provision, such Securities shall be issued without any
legend or other restrictive language and, with respect to Securities upon which
such legend is stamped, the Company shall issue new certificates without such
legend to the holder upon request.
2.6 Reliance on Exemptions. Such Investor understands that the Securities
are being offered and sold to it in reliance upon specific exemptions from the
registration requirements of U.S. federal and state securities laws and that the
Company is relying upon the truth and accuracy of the representations and
warranties of such Investor set forth in this Section 2 in order to determine
the availability of such exemptions and the eligibility of such Investor to
acquire the Securities. Such Investor acknowledges that it did not purchase the
Securities based upon any advertisement in any publication of general
circulation.
2.7 Non-Affiliate Status; Common Stock Ownership. Such Investor is not an
Affiliate of the Company or of any other Investor and is not acting in
association or concert with any other Person in regard to its purchase of the
Securities or otherwise in respect of the Company. Such Investor's investment in
the Securities is not for the purpose of acquiring, directly or indirectly,
control of, and it has no intent to acquire or exercise control of, the Company
or to influence the decisions or policies of the Board of Directors.
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2.8 Fees. Such Investor is not obligated to pay any compensation or other
fee, cost or related expenditure to any underwriter, broker, agent or other
representative in connection with the transactions contemplated hereby.
2.9 No Conflicts. The execution and performance of this Agreement and the
other Transaction Documents to which it is a party do not conflict in any
material respect with any agreement to which such Investor is a party or is
bound thereby, any court order or judgment applicable to such Investor, or the
constituent documents of such Investor.
2.10 No Governmental Review. Such Investor understands that no U.S.
federal or state agency or any other Governmental Authority has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon the accuracy of any information provided to such Investor or made any
finding or determination as to the merits of the offering of the Securities.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents
and warrants to each Investor and agrees with each Investor that, as of the
Execution Date:
3.1 Organization, Good Standing and Qualification. Each of the Company and
each of its Subsidiaries (collectively, the "Company Subsidiaries") is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite power
and authority to carry on its business as now conducted. Each of the Company and
the Company Subsidiaries is duly qualified to transact business and is in good
standing in each jurisdiction in which it conducts business except where the
failure so to qualify has not had or would not reasonably be expected to have a
Material Adverse Effect.
3.2 Authorization; Consents. The Company has the requisite corporate power
and authority to enter into and perform its obligations under the Transaction
Documents, to issue and sell the Shares and the Warrants to the Investors in
accordance with the terms hereof and thereof, and to issue the Warrant Shares
upon exercise of the Warrants. All corporate action on the part of the Company
by its officers, directors and shareholders necessary for the authorization,
execution and delivery of, and the performance by the Company of its obligations
under, the Transaction Documents has been taken, and no further consent or
authorization of the Company, its Board of Directors, shareholders, any
Governmental Authority or organization (other than such approval as may be
required under the Securities Act and applicable state securities laws in
respect of the Registration Rights Agreement), or any other person or entity is
required (pursuant to any rule of the NASD or otherwise). The Board of Directors
has determined that the issuance and sale of the Securities, and the
consummation of the transactions contemplated hereby and by the other
Transaction Documents (including without limitation the issuance of Warrant
Shares in accordance with the terms of the Warrants), are in the best interests
of the Company.
3.3 Enforcement. This Agreement has been and, at or prior to the Closing,
each other Transaction Document to be delivered at the Closing will be, duly
executed and delivered by the Company. This Agreement constitutes and, upon the
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execution and delivery thereof by the Company, each other Transaction Document
will constitute the valid and legally binding obligation of the Company,
enforceable against it in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or other
similar laws of general application relating to or affecting the enforcement of
creditors' rights generally and (ii) general principles of equity.
3.4 Disclosure Documents; Agreements; Financial Statements; Other
Information. The Company is subject to the reporting requirements of the
Exchange Act and. except as described on Schedule 3.4, has filed with the
Commission all SEC Documents. Except as described on Schedule 3.4, the Company
is not aware of any event occurring or expected to occur on or prior to the
Closing Date (other than the transactions effected hereby) that would require
the filing of, or with respect to which the Company intends to file, a Form 8-K
after the Closing. Except as described on Schedule 3.4, each SEC Document, as of
the date of the filing thereof with the Commission (or if amended or superseded
by a filing prior to the Execution Date, then on the date of such amending or
superseding filing), complied in all material respects with the requirements of
the Securities Act or Exchange Act, as applicable, and the rules and regulations
promulgated thereunder and, as of the date of such filing (or if amended or
superseded by a filing prior to the Execution Date, then on the date of such
filing), such SEC Document (including all exhibits and schedules thereto and
documents incorporated by reference therein) did not contain an untrue statement
of material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. All documents required to be filed as
exhibits to the SEC Documents have been filed as required. Except as set forth
in the Disclosure Documents, the Company has no liabilities, contingent or
otherwise, other than liabilities incurred in the ordinary course of business
which, under GAAP, are not required to be reflected in the financial statements
included in the Disclosure Documents and which, individually or in the
aggregate, are not material to the consolidated business or financial condition
of the Company and its Subsidiaries taken as a whole. As of their respective
dates, the financial statements of the Company included in the SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto. Such financial statements have been prepared in accordance with
GAAP consistently applied at the times and 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
adjustments). The Company will prepare the financial statements to be included
in any reports, schedules, registration statements and definitive proxy
statements that the Company is required to file or files with the Commission
after the date hereof in accordance with GAAP (except in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements).
3.5 Capitalization; Debt Schedule. The capitalization of the Company,
including its authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans and agreements, the number of shares issuable
and reserved for issuance pursuant to securities (other than the Warrants)
exercisable for, or convertible into or exchangeable for any shares of Common
Stock and the number of shares initially to be reserved for issuance upon
exercise of the Warrants, is set forth on Schedule 3.5 hereto. All outstanding
shares of capital stock of the Company have been, or upon issuance will be,
validly issued, fully paid and non-assessable. Except as disclosed on Schedule
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3.5 hereto, the Company or a Company Subsidiary owns all of the capital stock of
each Company Subsidiary, which capital stock is validly issued, fully paid and
non-assessable, and no shares of the capital stock of the Company or any of its
Subsidiaries are subject to preemptive rights or any other similar rights of the
shareholders of the Company or any such Subsidiary or any Liens created by or
through the Company or any such Subsidiary. Except as disclosed on Schedule 3.5
or as contemplated herein, there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exercisable or
exchangeable for, any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its Subsidiaries (whether pursuant to anti-dilution, "reset" or other
similar provisions). Schedule 3.5 identifies all Debt of the Company and its
Subsidiaries currently outstanding in excess of $100,000 as of the date hereof.
3.6 Due Authorization; Valid Issuance. The Shares are duly authorized and
reserved for issuance and, when issued in accordance with the terms of this
Agreement, will be duly and validly issued, fully paid and nonassessable, free
and clear of any Liens imposed by or through the Company. The Warrants are duly
authorized and, when issued, sold and delivered in accordance with the terms
hereof, will be duly and validly issued, fully paid and nonassessable, free and
clear of any Liens imposed by or through the Company. The Warrant Shares
issuable under the Warrants are duly authorized and reserved for issuance and,
when issued in accordance with the terms of the Warrants, will be duly and
validly issued, fully paid and nonassessable, free and clear of any Liens
imposed by or through the Company. Assuming the accuracy of each Investor's
representations contained herein, the issuance and sale of the Shares and
Warrants under this Agreement will be effected in compliance with all applicable
Federal and state securities laws.
3.7 No Conflict. Neither the Company nor any of the Company Subsidiaries
is in violation of any provisions of its charter, Bylaws or any other governing
document. Except as set forth on Schedule 3.7, neither the Company nor any of
the Company Subsidiaries is in violation of or in default (and no event has
occurred which, with notice or lapse of time or both, would constitute a
default) under any provision of any instrument or contract to which it is a
party or by which it or any of its Property is bound, or in violation of any
provision of any Governmental Requirement applicable to the Company or any
Company Subsidiary, except for any violation or default that has not had or
would not reasonably be expected to have a Material Adverse Effect. Except as
set forth on Schedule 3.7, the (i) execution, delivery and performance of this
Agreement and the other Transaction Documents and (ii) consummation of the
transactions contemplated hereby and thereby (including without limitation, the
issuance of the Shares and the Warrants and the reservation for issuance and
issuance of the Warrant Shares) will not result in any violation of any
provisions of the Company's or any Company Subsidiary's charter, Bylaws or any
other governing document or in a default under any provision of any instrument
or contract to which it is a party or by which it or any of its Property is
bound, or in violation of any provision of any Governmental Requirement
applicable to the Company or any Company Subsidiary or be in conflict with or
constitute, with or without the passage of time and giving of notice, either a
default under any such provision, instrument or contract or an event which
results in the creation of any Lien upon any assets of the Company or of any of
the Company Subsidiaries or the triggering of any preemptive or anti-dilution
rights (including without limitation pursuant to any "reset" or similar
provisions) or rights of first refusal or first offer, or any other rights that
would allow or permit the holders of the Company's securities to purchase shares
of Common Stock or other securities of the Company (whether pursuant to a
shareholder rights plan provision or otherwise), on the part of holders of the
Company's securities.
11
3.8 Financial Condition; Taxes; Litigation.
3.8.1 Except as set forth on Schedule 3.8.1 hereto, the financial
condition of the Company and each Company Subsidiary is, in all material
respects, as described in the Disclosure Documents, except for changes in the
ordinary course of business and normal year-end adjustments that are not, in the
aggregate, materially adverse to the consolidated business or financial
condition of the Company and its Subsidiaries taken as a whole. Except as set
forth on Schedule 3.8.1 hereto, there has been no (i) material adverse change to
the business, operations, properties, financial condition, prospects or results
of operations of the Company and its Subsidiaries taken as a whole since the
date of the Company's most recent audited financial statements contained in the
Disclosure Documents or (ii) change by the Company in its accounting principles,
policies and methods except as required by changes in GAAP.
3.8.2 Except as set forth on Schedule 3.8.2 hereto, the Company and
each of the Company Subsidiaries has prepared in good faith and duly and timely
filed all tax returns required to be filed by it and such returns are complete
and accurate in all material respects and the Company and each of the Company
Subsidiaries has paid all taxes required to have been paid by it, except for
taxes which it reasonably disputes in good faith or the failure of which to pay
has not had or would not reasonably be expected to have a Material Adverse
Effect. Except as set forth on Schedule 3.8.2 hereto, neither the Company nor
any Company Subsidiary has any liability with respect to taxes that accrued on
or before the date of the most recent balance sheet of the Company included in
the Disclosure Documents in excess of the amounts accrued with respect thereto
that are reflected on such balance sheet.
3.8.3 Except as set forth on Schedule 3.8.3 hereto, neither the
Company nor any of its Subsidiaries is the subject of any pending or, to the
Company's knowledge, threatened inquiry, investigation or administrative or
legal proceeding by the Internal Revenue Service, the taxing authorities of any
state or local jurisdiction, the Commission, the NASD, any state securities
commission or other Governmental Authority.
3.8.4 Except as set forth on Schedule 3.8.4 hereto, there is no
material claim, litigation or administrative proceeding pending, or, to the
Company's knowledge, threatened or contemplated, against the Company or any of
the Company Subsidiaries, or against any officer, director or employee of the
Company or any such Subsidiary in connection with such person's employment
therewith. Neither the Company nor any of the Company Subsidiaries is a party to
or subject to the provisions of, any order, writ, injunction, judgment or decree
of any court or Government Authority which has had or would reasonably be
expected to have a Material Adverse Effect.
12
3.9 Form SB-2. The Company is eligible to register all Conversion Shares
and Warrant Shares issuable hereunder and under the Warrants for resale in a
secondary offering by each Investor on a registration statement on Form SB-2
under the Securities Act. To the Company's knowledge, and except as otherwise
set forth on Schedule 3.9, there exist no facts or circumstances (including
without limitation any required approvals or waivers of any circumstances that
may delay or prevent the obtaining of accountant's consents) that could
reasonably be expected to prohibit or delay the preparation, filing or
effectiveness of such registration statement.
3.10 Acknowledgement of Dilution. The Company acknowledges that the
issuance of Warrant Shares upon exercise of the Warrants may result in dilution
of the outstanding shares of Common Stock, which dilution may be substantial
under certain market conditions. The Company further acknowledges that its
obligation to issue Warrant Shares upon exercise of the Warrants in accordance
with the terms of the Warrants is unconditional (other than with respect to the
conditions set forth in the Warrants) regardless of the effect of any such
dilution.
3.11 Intellectual Property. Except as set forth in Schedule 3.11:
(a) The Company and the Company Subsidiaries own, free and clear of
claims or rights or any other Person, with full right to use, sell, license,
sublicense, dispose of, and bring actions for infringement of, or, to the
knowledge of the Company, has acquired licenses or other rights to use, all
Intellectual Property necessary for the conduct of its business as presently
conducted (other than with respect to software which is generally commercially
available and not used or incorporated into the Company's products and open
source software which may be subject to one or more "general public" licenses).
All works that are used or incorporated into the Company's or the Company
Subsidiaries' services, products or services or products actively under
development and which is proprietary to the Company or such Subsidiary was
developed by or for the Company or the Company Subsidiaries by the current or
former employees, consultants or independent contractors of the Company or the
Company Subsidiaries or purchased or licensed by the Company or one or more of
the Company Subsidiaries.
(b) The business of the Company and the Company Subsidiaries as
presently conducted and the production, marketing, licensing, use and servicing
of any products or services of the Company and the Company Subsidiaries do not,
to the knowledge of the Company, infringe or conflict with any patent,
trademark, copyright, or trade secret rights of any third parties or any other
Intellectual Property of any third parties in any material respect. Neither the
Company nor any of the Company Subsidiaries has received written notice from any
third party asserting that any Intellectual Property owned or licensed by the
Company or the Company Subsidiaries, or which the Company or any of the Company
Subsidiaries otherwise has the right to use, is invalid or unenforceable by the
Company or such Subsidiary and, to the Company's knowledge, there is no valid
basis for any such claim (whether or not pending or threatened).
(c) No claim is pending or, to the Company's knowledge, threatened
against the Company or any of the Company Subsidiaries nor has the Company or
any of the Company Subsidiaries received any written notice or other written
claim from any Person asserting that any of the Company's or the Company
Subsidiaries' present or contemplated activities infringe or may infringe in any
material respect any Intellectual Property of such Person, and the Company is
not aware of any infringement by any other Person of any material rights of the
Company or any of the Company Subsidiaries under any Intellectual Property
Rights.
13
(d) All licenses or other agreements under which the Company or any
of the Company Subsidiaries is granted Intellectual Property (excluding licenses
to use software utilized in the Company's or such Subsidiary's internal
operations and which is generally commercially available) are in full force and
effect and, to the Company's knowledge, there is no material default by any
party thereto. The Company has no reason to believe that the licensors under
such licenses and other agreements do not have and did not have all requisite
power and authority to grant the rights to the Intellectual Property purported
to be granted thereby.
(e) All licenses or other agreements under which the Company or any
of the Company Subsidiaries has granted rights to Intellectual Property to
others (including all end-user agreements) since January 1, 2004, are in full
force and effect, there has been no material default by the Company or any of
the Company Subsidiaries thereunder and, to the Company's knowledge, there is no
material default of any provision thereof relating to Intellectual Property by
any other party thereto.
(f) The Company and the Company Subsidiaries have taken all steps
required in accordance with commercially reasonable business practice to
establish and preserve their ownership in their owned Intellectual Property and
to keep confidential all material technical information developed by or
belonging to the Company or the Company Subsidiaries which has not been patented
or copyrighted. To the Company's knowledge, neither the Company nor any of the
Company Subsidiaries is making any unlawful use of any Intellectual Property of
any other Person, including, without limitation, any former employer of any past
or present employees of the Company or any of the Company Subsidiaries. To the
Company's knowledge, neither the Company, any of the Company Subsidiaries nor
any of their respective employees has any agreements or arrangements with former
employers of such employees relating to any Intellectual Property of such
employers, which materially interfere or conflict with the performance of such
employee's duties for the Company or the Company Subsidiaries or result in any
former employers of such employees having any rights in, or claims on, the
Company's or any of the Company Subsidiaries' Intellectual Property. Each
current employee of the Company and of each of the Company Subsidiaries has
executed agreements regarding confidentiality, proprietary information and
assignment of inventions and copyrights to the Company or the Company
Subsidiaries, each independent contractor or consultant of the Company and of
each of the Company Subsidiaries has executed agreements regarding
confidentiality and proprietary information, and neither the Company nor any of
the Company Subsidiaries has received written notice that any employee,
consultant or independent contractor is in violation of any agreement or in
breach of any agreement or arrangement with former or present employers relating
to proprietary information or assignment of inventions. Without limiting the
foregoing: (i) the Company and each of the Company Subsidiaries has taken
reasonable security measures to guard against unauthorized disclosure or use of
any of its Intellectual Property that is confidential or proprietary; and (ii)
the Company has no reason to believe that any Person (including, without
limitation, any former employee or consultant of the Company or of any of the
Company Subsidiaries) has unauthorized possession of any of its Intellectual
Property, or any part thereof, or that any Person has obtained unauthorized
access to any of its Intellectual Property. The Company and each of the Company
Subsidiaries has complied in all material respects with its respective
obligations pursuant to all agreements relating to Intellectual Property rights
that are the subject of licenses granted by third parties, except for any
non-compliance that has not had or would not reasonably be expected to have a
Material Adverse Effect.
14
3.12 Registration Rights; Rights of Participation. Except as described on
Schedule 3.12 hereto, (A) the Company has not granted or agreed to grant to any
person or entity any rights (including "piggy-back" registration rights) to have
any securities of the Company registered with the Commission or any other
governmental authority which has not been satisfied in full prior or waived to
the date hereof and (B) no person or entity, including, but not limited to,
current or former shareholders of the Company, underwriters, brokers, agents or
other third parties, has any right of first refusal, preemptive right, right of
participation, anti-dilutive right or any similar right to participate in, or to
receive securities or other assets of the Company solely as a result of the
transactions contemplated by this Agreement or the other Transaction Documents.
3.13 Solicitation; Other Issuances of Securities. Neither the Company nor
any of its Subsidiaries or Affiliates, nor any person acting on its or their
behalf, (i) has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Securities, or (ii) has, directly or indirectly, made any offers or
sales of any security or the right to purchase any security, or solicited any
offers to buy any security or any such right, under circumstances that would
require registration of the Securities under the Securities Act.
3.14 Fees. Except as described on Schedule 3.14 hereto, the Company is not
obligated to pay any brokers, finders or financial advisory fees or commissions
to any underwriter, broker, agent or other representative in connection with the
transactions contemplated hereby. The Company will indemnify and hold harmless
such Investor from and against any claim by any person or entity alleging that
such Investor is obligated to pay any such compensation, fee, cost or related
expenditure in connection with the transactions contemplated hereby.
3.15 Foreign Corrupt Practices. Neither the Company, any of the Company
Subsidiaries nor, to the knowledge of the Company, any director, officer, agent,
employee or other person acting on behalf of the Company or any of the Company
Subsidiaries, has (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity,
(ii) made any direct or indirect unlawful payment to any foreign or domestic
government official or employee, or (iii) violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
3.16 Key Employees. Each of the Company's executive officers (as defined
in Rule 501(f) of the Securities Act) (each, a "Key Employee") is currently
serving in the capacity described in the Disclosure Documents. The Company has
no knowledge of any fact or circumstance (including without limitation (i) the
terms of any agreement to which such person is a party or any litigation in
which such person is or may become involved and (ii) any illness or medical
condition that could reasonably be expected to result in the disability or
incapacity of such person) that would limit or prevent any such person from
serving in such capacity on a full-time basis in the foreseeable future, or of
any intention on the part of any such person to limit or terminate his or her
employment with the Company. To the knowledge of the Company, no Key Employee
has borrowed money pursuant to a currently outstanding loan that is secured by
Common Stock or any right or option to receive Common Stock.
15
3.17 Employee Matters. There is no strike, labor dispute or union
organization activities pending or, to the knowledge of the Company, threatened
between it and its employees. No employees of the Company belong to any union or
collective bargaining unit. The Company has complied in all material respects
with all applicable federal and state equal opportunity and other laws related
to employment.
3.18 Environment. Except as disclosed in the Disclosure Documents, the
Company and the Company Subsidiaries have no liabilities under any Environmental
Law, nor, to the Company's knowledge, do any factors exist that are reasonably
likely to give rise to any such liability, affecting any of the properties owned
or leased by the Company or any of the Company Subsidiaries that, individually
or in the aggregate, has had or would reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any of the Company Subsidiaries has
violated any Environmental Law applicable to it now or previously in effect,
other than such violations or infringements that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect.
3.19 ERISA. Except as described on Schedule 3.19, the Company does not
maintain or contribute to, or have any obligation under, any Pension Plan. The
Company is in compliance in all material respects with the presently applicable
provisions of ERISA and the United States Internal Revenue Code of 1986, as
amended, with respect to each Pension Plan except in any such case for any such
matters that, individually or in the aggregate, have not had, and would not
reasonably be expected to have, a Material Adverse Effect.
3.20 Disclosure. The representations, warranties and written statements
contained in this Agreement and the other Transaction Documents and in the
certificates, exhibits and schedules delivered to such Investor by the Company
pursuant to this Agreement and the other Transaction Documents and in connection
with such Investor's due diligence investigation of the Company, do not contain
any untrue statement of a material fact, and do not omit to state a material
fact required to be stated therein or necessary in order to make such
representations, warranties or statements not misleading in light of the
circumstances under which they were made. Neither the Company nor any Person
acting on its behalf or at its direction has provided such Investor with
material non-public information other than the terms of the transactions
contemplated hereby. Following the issuance of a press release in accordance
with Section 4.1(c) hereof, to the Company's knowledge, such Investor will not
possess any material non-public information concerning the Company that was
provided to such Investor by the Company or its agents or representatives. The
Company acknowledges that such Investor is relying on the representations,
acknowledgments and agreements made by the Company in this Section 3.20 and
elsewhere in this Agreement in making trading and other decisions concerning the
Company's securities.
3.21 Insurance. The Company maintains insurance for itself and the Company
Subsidiaries in such amounts and covering such losses and risks as is reasonably
sufficient and customary in the businesses in which the Company and the Company
Subsidiaries are engaged. As of the date hereof and as of the Closing Date, no
16
notice of cancellation has been received for any of such policies and the
Company is in compliance in all material respects with all of the terms and
conditions thereof. The Company has no reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue to conduct its business as currently conducted without a significant
increase in cost. Without limiting the generality of the foregoing, the Company
maintains Director's and Officer's insurance in an amount not less than $10
million for each covered occurrence.
3.22 Personal Property. The Company and the Company Subsidiaries have good
and marketable title to all personal Property owned by them, in each case free
and clear of all Liens, except for Permitted Liens or as described on Schedule
3.22 hereto. Any personal Property held under lease by the Company and the
Company Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made or proposed to be made of such Property by the Company and the Company
Subsidiaries.
3.22A Real Property. Schedule 3.22A contains a complete and correct list
of all the real property, facilities and oil, gas and other mineral drilling,
exploration and development rights, concessions, working interests and
participation interests that (i) are leased or otherwise owned or possessed by
the Company or any of the Company Subsidiaries, (ii) in connection with which
the Company or any of the Company Subsidiaries has entered into an option
agreement, participation agreement or acquisition and drilling agreement or
(iii) the Company or any of the Company Subsidiaries has agreed (or has an
option) to lease or otherwise acquire or may be obligated to lease or otherwise
acquire in connection with the conduct of its business (collectively, the "Real
Property"). The Company and the Company Subsidiaries have good and marketable
title in fee simple to all Real Property owned by them. Schedule 3.22A also
contains a complete and correct list of all leases and other agreements with
respect to which the Company or any of the Company Subsidiaries is a party or
otherwise bound or affected with respect to the Real Property, except easements,
rights of way, access agreements, surface damage agreements, surface use
agreements or similar agreements that pertain to Real Property that is contained
wholly within the boundaries of any owned or leased Real Property otherwise
described on Schedule 3.22A (the "Real Property Leases"). The lists of Real
Property and Real Property Leases included in Schedule 3.22A do not contain any
material non-public information. Except as set forth in Schedule 3.22A, the
Company is the legal and equitable owner of a leasehold interest in all of the
Real Property that is producing oil, gas, minerals and/or other hydrocarbons at
the time this representation is made ("Producing Property"), and possesses good,
marketable and defensible title thereto, free and clear of all Liens (other than
Permitted Liens) and other matters affecting title to such leasehold that could
impair the ability of the Company and the Company Subsidiaries to realize the
17
benefits of the rights provided to any of them under the Real Property Leases.
Except with respect to the Owned Real Property, the Company is the legal and
equitable owner of a leasehold interest in all of the Real Property that is not
Producing Property and, except as could not reasonably be expected, individually
or in the aggregate, to have any of a Material Adverse Effect or a Property
Material Adverse Effect, possesses good, marketable and defensible title
thereto, free and clear of all Liens (other than Permitted Liens) and other
matters affecting title to such leasehold that could impair the ability of the
Company and the Company Subsidiaries to realize the benefits of the rights
provided to any of them under the Real Property Leases. All of the Real Property
Leases with respect to Producing Property are valid and in full force and effect
and are enforceable against all parties thereto, (ii) neither the Company nor
any of the Company Subsidiaries nor, to the Company's knowledge, any other party
thereto is in default in any material respect under any of such Real Property
Leases and (iii) no event has occurred which with the giving of notice or the
passage of time or both could constitute a default under, or otherwise give any
party the right to terminate, any of such Real Property Leases, or could
adversely affect the Company's or any of the Company Subsidiaries' interest in
and title to the Real Property subject to any of such Real Property Leases.
Except as could not reasonably be expected, individually or in the aggregate, to
have any of a Material Adverse Effect or a Property Material Adverse Effect, (i)
all of the Real Property Leases with respect to all of the Real Property that is
not Producing Property are valid and in full force and effect and are
enforceable against all parties thereto, (ii) neither the Company nor any of the
Company Subsidiaries nor, to the Company's knowledge, any other party thereto is
in default under any of such Real Property Leases and (iii) no event has
occurred which with the giving of notice or the passage of time or both could
constitute a default by the Company or the Company Subsidiaries under, or
otherwise give any party the right to terminate, any of such Real Property
Leases, or could adversely affect the Company's or any of the Company
Subsidiaries' interest in and title to the Real Property subject to any of such
Real Property Leases. No Real Property Lease is subject to termination,
modification or acceleration as a result of the transactions contemplated
hereby. Except as set forth in Schedule 3.22A, all of the Real Property Leases
will remain in full force and effect upon, and permit, the consummation of the
transactions contemplated hereby. Except as could not reasonably be expected,
individually or in the aggregate, to have either a Material Adverse Effect or a
Property Material Adverse Effect, the Real Property are permitted for their
present uses under applicable zoning laws, are permitted conforming structures
and comply with all applicable building codes, ordinances and other similar
legal requirements. Except as set forth on Schedule 3.22A, there are no pending
or, to the knowledge of the Company, threatened condemnation, eminent domain or
similar proceedings, or litigation or other proceedings affecting the Real
Property, or any portion or portions thereof. Except as set forth on Schedule
3.22A, to the knowledge of the Company, there are no pending or threatened
requests, applications or proceedings to alter or restrict any zoning or other
use restrictions applicable to the Real Property that would interfere with the
conduct of the Company's or any of the Company Subsidiaries' business as
conducted at the time this representation is made.
3.23 Regulatory Permits. The Company and the Company Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, including without limitation, to produce, extract, transport and
sell the oil, gas and other minerals in that portion of Real Property that is
producing oil, gas, minerals and/or other hydrocarbons at the time this
representation is made except where the failure to have any such authorization
or permit would have a Material Adverse Effect or Property Material Adverse
Effect, and neither the Company nor any such Subsidiary has received any notice
of proceedings relating to the revocation or modification of any such
certificate, authorization or permit. Except as set forth in Schedule 3.23 or as
could not reasonably be expected to have a Material Adverse Effect or a Property
Material Adverse Effect, the Company has no reason to believe that it and the
Company Subsidiaries will not be able to obtain necessary Permits as and when
necessary to enable the Company to produce, extract, transport and sell the oil,
gas, minerals and other hydrocarbons in the Real Property.
18
3.24 Exchange Act Registration. The Company's Common Stock is registered
pursuant to Section 12(g) of the Exchange Act. The Company has taken no action
designed to, or which, to the knowledge of the Company, would reasonably be
expected to have the effect of, terminating the registration of the Common Stock
under the Exchange Act.
3.25 Investment Company Status. The Company is not, and immediately after
receipt of payment for the Shares and the Warrants issued under this Agreement
will not be, an "investment company" or an entity "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended
(the "Investment Company Act"), and shall conduct its business in a manner so
that it will not become subject to the Investment Company Act.
3.26 Transfer Taxes. No stock transfer or other taxes (other than income
taxes) are required to be paid in connection with the issuance and sale of any
of the Securities, other than such taxes for which the Company has established
appropriate reserves and intends to pay in full on or before the Closing.
3.27 Xxxxxxxx-Xxxxx Act; Internal Controls and Procedures. The Company is
in material compliance with any and all applicable requirements of the
Xxxxxxxx-Xxxxx Act of 2002 and any and all applicable rules and regulations
promulgated by the SEC thereunder that are effective as of the date hereof. The
Company maintains internal accounting controls, policies and procedures, and
such books and records as are reasonably designed to provide reasonable
assurance that (i) all transactions to which the Company or any Subsidiary is a
party or by which its properties are bound are effected by a duly authorized
employee or agent of the Company, supervised by and acting within the scope of
the authority granted by the Company's senior management; (ii) the recorded
accounting of the Company's consolidated assets is compared with existing assets
at regular intervals; and (iii) all transactions to which the Company or any
Company Subsidiary is a party, or by which its properties are bound, are
recorded (and such records maintained) in accordance with all Government
Requirements and as may be necessary or appropriate to ensure that the financial
statements of the Company are prepared in accordance with GAAP.
3.28 Embargoed Person. None of the funds or other assets of the Company or
the Company Subsidiaries shall constitute property of, or shall be beneficially
owned, directly or indirectly, by any person subject to trade restrictions under
United States law, including, but not limited to, the International Emergency
Economic Powers Act, 50 U.S.C. ss. 1701 et seq., the Trading with the Enemy Act,
50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated
under any such United States laws (each, an "Embargoed Person"), with the result
that the investments evidenced by the Securities are or would be in violation of
law. No Embargoed Person shall have any interest of any nature whatsoever in the
Company or any Subsidiary with the result that the investments evidenced by the
Securities are or would be in violation of law. None of the funds or other
assets of the Company or the Company Subsidiaries shall be derived from any
unlawful activity with the result that the investments evidenced by the
Securities are or would be in violation of law.
19
3.29 Transactions with Interested Persons. Except as set forth in Schedule
3.29, or as described in the Disclosure Documents, no officer, director or
employee of the Company or any of the Company Subsidiaries is or has made any
arrangements with the Company or any of the Company Subsidiaries to become a
party to any transaction with the Company or any Company Subsidiary (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
3.30 Customers and Suppliers. The relationships of the Company and the
Company Subsidiaries with their respective customers and suppliers are
maintained on commercially reasonable terms. Except as set forth on Schedule
3.30 hereto, to the Company's knowledge, no customer or supplier of the Company
or any of the Company Subsidiaries has any plan or intention to terminate its
agreement with the Company or such Subsidiary, which termination would
reasonably be expected to have a Material Adverse Effect.
3.31 Accountants. The Company's accountants, who the Company expects will
render their opinion with respect to the financial statements to be included in
the Company's Annual Report on Form 10-KSB for the year ended September 30,
2004, are, to the Company's knowledge, independent accountants as required by
the Securities Act.
3.32 No Other Agreements. The Company has not, directly or indirectly,
entered into any agreement with or granted any right to any Investor relating to
the terms or conditions of the transactions contemplated by the Transaction
Documents, except as expressly set forth in the Transaction Documents.
4. COVENANTS OF THE COMPANY AND EACH INVESTOR.
4.1 The Company agrees with each Investor that the Company will:
(a) file a Form D with respect to the Securities issued at the
Closing as and when required under Regulation D and provide a copy thereof to
such Investor promptly after such filing;
(b) take such action as the Company reasonably determines upon the
advice of counsel is necessary to qualify the Securities for sale under
applicable state or "blue-sky" laws or obtain an exemption therefrom, and shall
promptly provide evidence of any such action to such Investor at such Investor's
request; and
(c) (i) on or prior to 8:30 a.m. (eastern time) on the Business Day
immediately following the Execution Date, issue a press release disclosing the
material terms of this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby, and (ii) on or prior to 5:00 p.m.
(eastern time) on such Business Day, file with the Commission a Current Report
on Form 8-K disclosing the material terms of and including as exhibits this
Agreement and the other Transaction Documents and the transactions contemplated
hereby and thereby; provided, however, that each Investor shall have a
20
reasonable opportunity to review and comment on any such press release or Form
8-K prior to the issuance or filing thereof; and provided, further, that if the
Company fails to issue a press release disclosing the material terms of this
Agreement and the other Transaction Documents within the time frames described
herein, any Investor may issue a press release disclosing such information
without any notice to or consent by the Company. Thereafter, the Company shall
timely file any filings and notices required by the Commission or applicable law
with respect to the transactions contemplated hereby.
4.2 Existence and Compliance. The Company agrees that it will, while any
Investor holds any Shares or Warrants:
(a) maintain its corporate existence in good standing;
(b) comply with all Governmental Requirements applicable to the
operation of its business, except for instances of noncompliance that would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;
(c) comply with all agreements, documents and instruments binding on
it or affecting its Properties or business, including, without limitation, all
Material Contracts, except for instances of noncompliance that would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;
(d) provide each Investor with copies of all materials sent to its
shareholders at the same time as such materials are delivered to such
shareholders;
(e) timely file with the Commission all reports required to be filed
pursuant to the Exchange Act and refrain from terminating its status as an
issuer required by the Exchange Act to file reports thereunder even if the
Exchange Act or the rules or regulations thereunder would permit such
termination;
(f) take commercially reasonable steps to restrict each of the
Company's Key Employees from selling shares of Common Stock until the Effective
Date,, other than in connection with any 10b-5(1) trading plans in effect as of
the Execution Date and disclosed to each Investor in writing prior to such date;
and
(g) use commercially reasonable efforts to maintain adequate
insurance coverage (including D&O insurance) for the Company and each Company
Subsidiary.
4.3 Reservation of Common Stock. The Company shall, on the Closing Date,
have authorized and reserved for issuance to the Investors upon exercise of the
Warrants, free from any preemptive rights, and shall keep available at all times
during which any Warrants are outstanding, a number of shares of Common Stock
(the "Reserved Amount") that, on the Closing Date, is not less than the number
of Warrant Shares issuable upon exercise of all of the Warrants issued at the
Closing, in each case without regard to any limitation or restriction on such
exercise that may be set forth in the Warrants. The Reserved Amount shall be
allocated among the Investors in accordance with each Investor's Pro Rata Share.
In the event that an Investor shall sell or otherwise transfer any of such
Investor's Warrants, each transferee shall be allocated a pro rata portion of
such transferor's Reserved Amount. Any portion of the Reserved Amount allocated
21
to any Investor or other Person which no longer holds any Warrants shall be
reallocated to the remaining Investors pro rata based on the number of
Registrable Securities held by such Investors at such time. In the event that
the Reserved Amount is insufficient at any time to cover all of the Registrable
Securities issuable upon the exercise of the Warrants (without regard to any
restriction on such exercise), the Company shall take such action (including
without limitation holding a meeting of its shareholders) to increase the
Reserved Amount to cover all of the Registrable Securities issuable upon such
exercise, such increase to be effective not later than the thirtieth (30th) day
(or sixtieth (60th) day, in the event shareholder approval is required for such
increase) following the Company's receipt of written notice of such deficiency.
While any Warrants are outstanding, the Company shall not reduce the Reserved
Amount without obtaining the prior written consent of each Investor then holding
Warrants.
4.4 Use of Proceeds. The Company shall use the proceeds from the sale of
the Shares and Warrants as specified on Schedule 4.4 hereof; provided, that the
Company shall not use any of such proceeds (i) to pay any dividend or make any
distribution on any of its securities, or (ii) to repay any loan made to or
incurred by any Key Employee or any other officer or director or Affiliate of
the Company.
4.5 Transactions with Affiliates. The Company agrees that any transaction
or arrangement between it or any Company Subsidiary and any Affiliate or
employee of the Company shall be effected on an arms' length basis and shall be
approved by the Company's independent directors.
4.6 Use of Investor Name. Except as may be required by applicable law
and/or this Agreement, the Company shall not use, directly or indirectly, any
Investor's name or the name of any of its Affiliates in any advertisement,
announcement, press release or other similar communication unless it has
received the prior written consent of such Investor for the specific use
contemplated or as otherwise required by applicable law or regulation.
4.7 Company's Instructions to Transfer Agent. On or prior to the Closing
Date, the Company shall execute and deliver irrevocable written instructions to
the transfer agent for its Common Stock (the "Transfer Agent"), and provide each
Investor with a copy thereof, directing the Transfer Agent (i) to issue
certificates representing Warrant Shares upon exercise of the Warrants and (ii)
to deliver such certificates to such Investor no later than the close of
business on the third (3rd) business day following the related Exercise Date (as
defined in the Warrants), as the case may be. Such certificates may bear legends
pursuant to applicable provisions of this Agreement or applicable law. The
Company shall instruct the transfer agent that, in lieu of delivering physical
certificates representing shares of Common Stock to an Investor upon exercise of
the Warrants, and as long as the Transfer Agent is a participant in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and
such Investor has not informed the Company that it wishes to receive physical
certificates therefor, and no legend is required to appear on any physical
certificate if issued, the transfer agent shall effect delivery of Warrant
Shares by crediting the account of such Investor or its nominee at DTC for the
number of shares for which delivery is required hereunder within the time frame
specified above for delivery of certificates. The Company represents to and
agrees with each Investor that it will not give any instruction to the Transfer
Agent that will conflict with the foregoing instruction or otherwise restrict
such Investor's right to exercise such Investor's Warrant or to receive Warrant
Shares upon exercise of such Investor's Warrant. In the event that the Company's
relationship with the Transfer Agent should be terminated for any reason, the
Company shall use its best efforts to cause the Transfer Agent to continue
acting as transfer agent pursuant to the terms hereof until such time that a
successor transfer agent is appointed by the Company and receives the
instructions described above.
22
4.8 Limitations on Disposition. No Investor shall sell, transfer, assign
or dispose of any Securities, unless:
(a) there is then in effect an effective registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(b) such Investor has notified the Company in writing of any such
disposition, and furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
of such Securities under the Securities Act; provided, however, that no such
opinion of counsel will be required (A) if the sale, transfer or assignment is
made to an Affiliate of such Investor, (B) if the sale, transfer or assignment
is made pursuant to Rule 144 and such Investor provides the Company with
evidence reasonably satisfactory to the Company that the proposed transaction
satisfies the requirements of Rule 144 or (C) in connection with a bona fide
pledge or hypothecation of any Securities under a margin arrangement with a
broker-dealer or other financial institution or the sale of any such Securities
by such broker-dealer or other financial institution following such Investor's
default under such margin arrangement.
4.9 Disclosure of Non-public Information. The Company agrees that it will
not at any time following the Execution Date disclose material non-public
information to any Investor without first obtaining such Investor's written
consent to such disclosure.
4.10 Indemnification of Investors. The Company will indemnify and hold
each Investor and its directors, managers, officers, shareholders, members,
partners, employees and agents (each, an "Investor Party") harmless from any and
all losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation that any such Investor
Party may suffer or incur as a result of or relating to (a) any breach of any of
the representations, warranties, covenants or agreements made by the Company in
this Agreement or in the other Transaction Documents or (b) any action
instituted against an Investor, or any of them or their respective Affiliates,
by any shareholder of the Company who is not an Affiliate of such Investor, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Investor's representation,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Investor may have with any such shareholder or any
violations by such Investor of state or federal securities laws or any conduct
by such Investor which constitutes fraud, gross negligence, willful misconduct
or malfeasance). If any action shall be brought against any Investor Party in
respect of which indemnity may be sought pursuant to this Agreement, such
Investor Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of its own
choosing. Any Investor Party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Investor Party except
to the extent that (i) the employment thereof has been specifically authorized
by the Company in writing, (ii) the Company has failed after a reasonable period
of time following such Investor Party's written request that it do so, to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such Investor
Party. The Company will not be liable to any Investor Party under this Agreement
(i) for any settlement by an Investor Party effected without the Company's prior
written consent, which shall not be unreasonably withheld or delayed; or (ii) to
the extent, but only to the extent that a loss, claim, damage or liability is
attributable to such Investor Party's wrongful actions or omissions, or gross
negligence or to such Investor Party's breach of any of the representations,
warranties, covenants or agreements made by such Investor in this Agreement or
in the other Transaction Documents.
23
4.11 Restriction on Issuances. During the period beginning on the
Execution Date and ending on the Effective Date, the Company will not, directly
or indirectly, effect a Subsequent Placement except as may be required by (i)
the terms of the acquisition of Northern Alberta Oil, LTD by the Company or (ii)
the Letter of Intent dated February 17, 2005 with Surge Global Energy, Inc.
5. CONDITIONS TO CLOSING.
5.1 Conditions to Investors' Obligations at the Closing. Each Investor's
obligations to effect the Closing, including without limitation its obligation
to purchase Shares and a Warrant at the Closing, are conditioned upon the
fulfillment (or waiver by such Investor in its sole and absolute discretion) of
each of the following events as of the Closing Date, and the Company shall use
commercially reasonable efforts to cause each of such conditions to be
satisfied:
5.1.1 the representations and warranties of the Company set forth in
this Agreement and in the other Transaction Documents shall be
true and correct in all material respects as of such date as
if made on such date (except that to the extent that any such
representation or warranty relates to a particular date, such
representation or warranty shall be true and correct in all
material respects as of that particular date);
5.1.2 the Company shall have complied with or performed in all
material respects all of the agreements, obligations and
conditions set forth in this Agreement and in the other
Transaction Documents that are required to be complied with or
performed by the Company on or before the Closing;
5.1.3 the Closing Date shall occur on a date that is not later than
March 2, 2005;
24
5.1.4 the Company shall have delivered to such Investor a
certificate, signed by the Chief Executive Officer and Chief
Financial Officer of the Company, certifying that the
conditions specified in this Section 5.1 have been fulfilled
as of the Closing, it being understood that such Investor may
rely on such certificate as though it were a representation
and warranty of the Company made herein;
5.1.5 the Company shall have delivered to such Investor an opinion
of counsel for the Company, dated as of the Closing Date, in
the form attached hereto as Exhibit F hereto;
5.1.6 the Company shall have delivered to such Investor a duly
executed certificate representing the Warrant being purchased
by such Investor;
5.1.7 the Company shall have executed and delivered to such Investor
the Registration Rights Agreement;
5.1.8 the Company shall have delivered to such Investor a
certificate, signed by the Secretary or an Assistant Secretary
of the Company, attaching (i) the charter and By-Laws of the
Company and (ii) resolutions passed by its Board of Directors
to authorize the transactions contemplated hereby and by the
other Transaction Documents, and certifying that such
documents are true and complete copies of the originals and
have not been amended or superseded, it being understood that
such Investor may rely on such certificate as a representation
and warranty of the Company made herein;
5.1.9 the Company shall have obtained the written agreement of each
Key Employee to refrain from selling shares of Common Stock
for the period specified in, and in accordance with, Section
4.2(f) hereof;
5.1.10 there shall have occurred no material adverse change in the
Company's consolidated business or financial condition since
the date of the Company's most recent financial statements
contained in the Disclosure Documents;
5.1.11 the Company shall have authorized and reserved for issuance
upon exercise of the Warrants the aggregate number of shares
of Common Stock issuable upon exercise of all of the Warrants
to be issued at the Closing (such number to be determined
without regard to any restriction on such exercise);
5.1.12 there shall be no injunction, restraining order or decree of
any nature of any court or Government Authority of competent
jurisdiction that is in effect that restrains or prohibits the
consummation of the transactions contemplated hereby and by
the other Transaction Documents; and
25
5.1.13 the Company shall have delivered a letter from Nearshore
Petroleum Corporation ("Nearshore"), addressed to the
Investors, under which Nearshore agrees, promptly following
the Closing, to reserve and grant to each Investor an option
to purchase, for a period of eighteen (18) months beginning on
the Closing Date, such Investor's Pro Rata Share of an
undivided one percent (1%) Over Riding Royalty Interest in the
Sawn Lake Oil Sands Project as described in the Royalty
Agreement between Mikwec Energy Canada Ltd. and Nearshore as
executed December 12, 2003 (the "Option to ----------
Purchase"), exercisable for the aggregate sum of US$1,000,000
payable to Nearshore, and to execute and deliver all such
instruments and documents, and take all such action as may be
necessary, or as any Investor may request, in order to grant,
reserve, perfect and protect the Option to Purchase.
5.2 Conditions to Company's Obligations at the Closing. The Company's
obligations to effect the Closing with each Investor are conditioned upon the
fulfillment (or waiver by the Company in its sole and absolute discretion) of
each of the following events as of the Closing Date:
5.2.1 the representations and warranties of such Investor set forth
in this Agreement and in the other Transaction Documents shall
be true and correct in all material respects as of such date
as if made on such date (except that to the extent that any
such representation or warranty relates to a particular date,
such representation or warranty shall be true and correct in
all material respects as of that date);
5.2.2 such Investor shall have complied with or performed all of the
agreements, obligations and conditions set forth in this
Agreement that are required to be complied with or performed
by such Investor on or before the Closing;
5.2.3 there shall be no injunction, restraining order or decree of
any nature of any court or Government Authority of competent
jurisdiction that is in effect that restrains or prohibits the
consummation of the transactions contemplated hereby and by
the other Transaction Documents;
5.2.4 such Investor shall have executed each Transaction Document to
which it is a party and shall have delivered the same to the
Company; and
26
5.2.5 such Investor shall have tendered to the Company the Purchase
Price for the Shares and the Warrant being purchased by it at
the Closing by wire transfer of immediately available funds.
6. MISCELLANEOUS.
6.1 Survival; Severability. The representations, warranties,
covenants and indemnities made by the parties herein and in the other
Transaction Documents shall survive the Closing notwithstanding any due
diligence investigation made by or on behalf of the party seeking to rely
thereon. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that in such case the parties shall negotiate in good faith
to replace such provision with a new provision which is not illegal,
unenforceable or void, as long as such new provision does not materially change
the economic benefits of this Agreement to the parties.
6.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement. The Investors may assign their
respective rights and obligations hereunder in connection with any private sale
or transfer of the Shares or Warrants in accordance with the terms hereof, as
long as, as a condition precedent to such transfer, the transferee executes an
acknowledgment agreeing to be bound by the applicable provisions of this
Agreement, in which case the term "Investor" shall be deemed to refer to such
transferee as though such transferee were an original signatory hereto. The
Company may not assign its rights or obligations under this Agreement.
6.3 No Reliance. Each party acknowledges that (i) it has such
knowledge in business and financial matters as to be fully capable of evaluating
this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby, (ii) it is not relying on any advice or
representation of any other party in connection with entering into this
Agreement, the other Transaction Documents or such transactions (other than the
representations made in this Agreement or the other Transaction Documents),
(iii) it has not received from any other party any assurance or guarantee as to
the merits (whether legal, regulatory, tax, financial or otherwise) of entering
into this Agreement or the other Transaction Documents or the performance of its
obligations hereunder and thereunder, and (iv) it has consulted with its own
legal, regulatory, tax, business, investment, financial and accounting advisors
to the extent that it has deemed necessary, and has entered into this Agreement
and the other Transaction Documents based on its own independent judgment and on
the advice of its advisors as it has deemed necessary, and not on any view
(whether written or oral) expressed by any other party.
6.4 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor hereunder are several and not joint with the
obligations of the other Investors hereunder, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor hereunder. The Company acknowledges and agrees that nothing contained
herein or in any other agreement or document delivered at the Closing, and no
27
action taken by any Investor pursuant hereto or thereto, shall be deemed to
constitute the Investors as a partnership, an association, a joint venture or
any other kind of entity, or a "group" as described in Section 13(d) of the
Exchange Act, or create a presumption that the Investors are in any way acting
in concert with respect to such obligations or the transactions contemplated by
this Agreement. Each Investor has been represented by its own separate counsel
in connection with the transactions contemplated hereby, shall be entitled to
protect and enforce its rights, including without limitation rights arising out
of this Agreement or the other Transaction Documents, individually, and shall
not be required to join any other Investor as an additional party in any
proceeding for such purpose.
6.5 Investors' Trading Activity. The Company acknowledges that,
following the Closing and the press release described in paragraph 4.1 above,
each Investor shall have the right to purchase or sell, long or short, Common
Stock and instruments or contracts whose value is derived from the market value
of the Common Stock, and that sales of or certain derivative transactions
relating to the Common Stock may have a negative impact on the market price of
the Common Stock.
6.6 Injunctive Relief. The Company acknowledges and agrees that a
breach by it of its obligations hereunder will cause irreparable harm to each
Investor and that the remedy or remedies at law for any such breach will be
inadequate and agrees, in the event of any such breach, in addition to all other
available remedies, such Investor shall be entitled to an injunction restraining
any breach and requiring immediate and specific performance of such obligations
without the necessity of showing economic loss or the posting of any bond.
6.7 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed under the laws of the State of New York applicable to contracts
made and to be performed entirely within the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City and County of New York for the adjudication
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby 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 in effect for
notices to it under this Agreement 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.
6.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. This Agreement may be
executed and delivered by facsimile transmission.
6.9 Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
28
6.10 Notices. Any notice, demand or request required or permitted to
be given by the Company or the Investor pursuant to the terms of this Agreement
shall be in writing and shall be deemed delivered (i) when delivered personally
or by verifiable facsimile transmission, unless such delivery is made on a day
that is not a Business Day, in which case such delivery will be deemed to be
made on the next succeeding Business Day, (ii) on the next Business Day after
timely delivery to an overnight courier and (iii) on the Business Day actually
received if deposited in the U.S. mail (certified or registered mail, return
receipt requested, postage prepaid), addressed as follows:
If to the Company:
Deep Well Oil & Gas, Inc.
Suite 2600 Sun Life Plaza
000 Xxxxxx Xxxxxx XX
Xxxxxxx, XX, X0X 0X0
Attn: Chief Financial Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy (which shall not constitute notice) to:
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
and if to any Investor, to such address for such Investor as shall appear on the
signature page hereof executed by such Investor, or as shall be designated by
such Investor in writing to the Company in accordance with this Section 6.10.
6.11 Expenses. The Company and each Investor shall pay all costs and
expenses that it incurs in connection with the negotiation, execution, delivery
and performance of this Agreement or the other Transaction Documents, provided,
however, that that the Company shall, at the Closing, and in addition to $10,000
paid by the Company prior to the Closing (which amount shall not be reimbursable
to the Company regardless of whether the Closing occurs) pay up to $15,000 in
immediately available funds for all reasonable, documented out-of-pocket
expenses (including without limitation legal fees and expenses) incurred or to
29
be incurred by Gemini Investment Strategies, LLC ("Gemini") in connection its
due diligence investigation of the Company and the negotiation, preparation,
execution, delivery and performance of this Agreement and the other Transaction
Documents. At the Closing, the amount due for such fees and expenses (which may
include fees and expenses estimated to be incurred for completion of the
transaction and post-closing matters) may be netted out of the Purchase Price
payable by Gemini. In the event the amount paid by the Company for such fees and
expenses is less than the amount of such reasonable, documented, fees and
expenses actually incurred by Gemini, the Company shall promptly pay such
deficiency (up to $15,000 in the aggregate, including any amounts paid at
Closing) within thirty (30) days following receipt of an invoice therefor.
6.12 Entire Agreement; Amendments. This Agreement and the other
Transaction Documents constitute the entire agreement between the parties with
regard to the subject matter hereof and thereof, superseding all prior
agreements or understandings, whether written or oral, between or among the
parties. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended except pursuant to a written instrument executed by
the Company and the holders of at least a majority of the Shares and Warrant
Shares into which all of the Warrants then outstanding are exercisable (without
regard to any limitation on such exercise), and no provision hereof may be
waived other than by a written instrument signed by the party against whom
enforcement of any such waiver is sought. Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
[Signature Pages to Follow]
30
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
DEEP WELL OIL & GAS, INC.
By: /s/ Xxxxxx Xxxxx
---------------------------------------------
Name: Xxxxxx Xxxxx
Title: President and Chief Executive Officer
PROVIDENT PREMIER MASTER FUND, LTD.
By: ____________________________, its Manager
By: __________________________
Name:
Title:
ADDRESS:
Tel:
Fax:
With a copy (which shall not constitute notice) to:
Xxxxx & Stachenfeld LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
Number of Shares to be Purchased: 1,250,000 shares
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
DEEP WELL OIL & GAS, INC.
By: /s/ Xxxxxx Xxxxx
---------------------------------------------
Name: Xxxxxx Xxxxx
Title: President and Chief Executive Officer
GREY K FUND LP
By: GREY K GP LLC, its General Partner
By: _________________________
Name:
Title:
ADDRESS:
c/o RNK Capital LLC
000 Xxxxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Number of Shares to be Purchased: 625,000
