SHARE PURCHASE AGREEMENT
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This Share Purchase Agreement ("Agreement") is made as of January 24, 2005,
("Effective Date") between PETROSEARCH ENERGY CORPORATION, a Nevada corporation
(the "Company") and CBARNEY INVESTMENTS, LTD., a Texas limited partnership, or
its assigns ("Purchaser").
A. Company is in the business of acquiring, developing and operating
oil and gas properties in several states, including, Texas, Oklahoma, North
Dakota, Montana and Mississippi. Company has obtained commitments from industry
joint venturers to develop several drilling prospects, thereby requiring an
accelerated leasing program in the target areas. Additional acquisition and
exploration opportunities have contemporaneously been presented by third parties
to Company which Company desires to pursue in addition to the near term drilling
projects.
B. Company is the survivor of a December 30, 2004 merger between
Company and Petrosearch Corporation, a Texas corporation, the former parent of
Company, immediately following a 6.5 to 1 reverse split of Petrosearch
Corporation's Common Stock.
C. Company has elected to meet certain of its working capital needs
post-merger by the placement of Company Common Stock, par value $.001, with one
or more willing, sophisticated investors and Purchaser desires to acquire a
specified number of shares of Company Common Stock under the terms and
conditions set forth herein.
TERMS OF AGREEMENT:
NOW, THEREFORE, FOR VALUE RECEIVED, the sufficiency of which is
acknowledged by the parties, the parties hereto agree as follows:
ARTICLE I
NUMBER AND PURCHASE PRICE FOR SHARES/OPTION FOR ADDITIONAL SHARES/ADJUSTMENT OF
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PRICE FOR MORE FAVORABLE PLACEMENT
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1.1 NUMBER OF SHARES TO BE PURCHASED/PURCHASE PRICE. Subject to all of
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the terms and conditions of this Agreement, Company agrees to issue and sell to
Purchaser (sometimes referred to herein as a "Holder") and Purchaser agrees to
purchase, 100,000 shares of Company Common Stock, par value $.001 (the
"Investment Shares"), at a cash price of $1.95 per share, or a total purchase
price of ONE HUNDRED NINETY FIVE THOUSAND AND NO/100 DOLLARS ($195,000.00) [the
"Investment Purchase Funds"]. This sale, if consummated, shall be made by the
Company directly to Purchaser without the assistance of placement agents or a
broker-dealer.
1.2 ADJUSTMENT UPON MORE FAVORABLE PLACEMENT. If at any time during
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the period from the execution of this Agreement until thirty (30) days after the
release to Company from escrow (described herein below) of the Investment
Purchase Funds, Company shall sell to any third party other than members of
Company's management, Common Stock at less than $1.95 per share, then the
purchase price of the Investment Shares shall be automatically adjusted to the
lower price made available to the third party and such additional Common Shares
shall be issued to Purchaser and delivered to Purchaser (or to Escrow Agent if
the Investment Shares are still in escrow) as are necessary to make the purchase
price per share paid by Purchaser equal the more favorable price made available
to the third party.
ARTICLE II
ESCROW PENDING CERTAIN TRANSACTIONS/USE OF PROCEEDS
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2.1 ESCROW DEPOSIT. Upon execution of this Agreement, Purchaser shall
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deposit the Investment Purchase Funds with the escrow agent (the "Escrow Agent")
named in the Escrow Agreement attached hereto as Exhibit "A". The Investment
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Purchase Funds shall remain in escrow pending issuance of the Investment Shares
to Purchaser all as documented to Escrow Agent by delivery of a stock
certificate in Purchaser's name evidencing the Investment Shares and containing
the usual and customary Rule 144 restrictive legend. Should, for any reason,
Company fail to deliver the certificate within five (5) business days after
deposit of the Investment Purchase Funds with Escrow Agent, or in the event that
the additional conditions set forth in Article V (collectively, the "Escrow
Release Conditions") are not met by such time, then, at Purchaser's option,
Purchaser may terminate this Agreement and the corresponding Escrow Agreement,
whereupon the Investment Purchase Funds shall be returned by Escrow Agent to
Purchaser without interest and without deduction for escrow fees and expenses.
In the event that the Escrow Release Conditions are satisfied by Company by the
fifth business day after deposit of the Investment Purchase Funds with Escrow
Agent, then, the Investment Purchase Funds shall be released immediately from
escrow to Company by Escrow Agent and Purchaser shall execute with Company an
instruction letter directing such release to Company (such release date being
sometimes referred to as the "Closing Date").
2.2 USE OF PROCEEDS. The Investment Purchase Funds shall be applied to
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Company's general working capital needs without specific allocation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
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As an inducement to the Purchaser to enter into this Agreement, Company
represents, warrants and agrees that:
3.1 ORGANIZATION AND GOOD STANDING. The Company and each of its
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subsidiaries have been duly organized in accordance with the laws of their
respective jurisdictions of
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incorporation and exist in good standing under such laws with full power and
authority to conduct their businesses as described in the Disclosure Documents
(defined herein below), and are duly qualified and in good standing in each
other jurisdiction in which such qualification is required except where the
failure to so qualify, both individually and in the aggregate, does not have a
material adverse effect on the condition (financial or otherwise), business or
prospects of the Company or on its properties or assets. No actions or
proceedings to dissolve the Company are pending or, to the best knowledge of the
Company, threatened.
3.2 CORPORATE POWER AND AUTHORITY; DUE AUTHORIZATION. Company has full
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corporate power and authority to execute and deliver this Agreement and all
other documents required to be entered into by the Company pursuant hereto (this
Agreement and such other documents being hereinafter collectively referred to
as, the "Transaction Documents") and to consummate the transactions contemplated
by the Transaction Documents. This Agreement and the other Transaction Documents
have been duly authorized by all necessary corporate action of the Company and,
when executed and delivered, will be legal, valid and binding obligations of the
Company, enforceable in accordance with their respective terms except to the
extent that the enforceability hereof and thereof may be limited by bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights generally or
by general principles of equity.
3.3 NO VIOLATION. The execution, delivery and performance of this
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Agreement and the other Transaction Documents by the Company and the
consummation of the transactions herein and therein contemplated does not and
will not result in a breach or violation of any of the terms and provisions of
the articles or certificate of incorporation or by-laws of the Company as in
effect on the date hereof (the "Organizational Documents"), and does not and
will not constitute a material default under any indenture, mortgage, deed of
trust or other material agreement or instrument to which the Company is a party
or by which the Company is bound, and does not and will not violate or
contravene (i) any governmental statute, rule or regulation applicable to the
Company or (ii) any order, writ, judgment, injunction, decree, determination or
award which has been entered against the Company, the violation or contravention
of which would materially and adversely affect the condition (financial or
otherwise), business or prospects of the Company or on its properties or assets.
3.4 CAPITALIZATION. The Company has a duly authorized capitalization
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as set forth in Schedule 1 attached hereto. The outstanding shares of Common
Stock have been duly authorized and validly issued, fully paid and
nonassessable. None of the outstanding shares of Common Stock has been issued in
violation of the preemptive rights of any security holder of the Company. None
of the holders of the outstanding shares of Common Stock is subject to personal
liability solely by reason of being such a holder. Neither the holders of the
outstanding shares of Common Stock nor the holders of any other securities or
rights of the Company are entitled to pre-emptive or other rights or agreements
for the purchase or acquisition from the Company of any shares of the Common
Stock or to subscribe for the any of the Shares. The Company is not a party or
subject to any agreement or understanding, and, to the knowledge of the Company,
there is no agreement or understanding, between any persons and/or entities,
which affects or relates to the voting or giving of written consents with
respect to any security of the Company or by a director of the Company.
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3.5 AUTHORIZATION AND ISSUANCE OF SHARES. The Shares, when issued and
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paid for, will constitute duly authorized, legally and validly issued securities
of the Company, fully paid and non-assessable.
3.6 DISCLOSURE DOCUMENTS. The documents furnished by the Company to
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Purchaser in connection with this sale include audited financial statements
through December 31, 2003, unaudited compiled financial statements through June
30, 2004, the Company's fact summary sheet and business strategies and plan, a
private placement memorandum dated December 15, 2004, and supplement thereto, a
letter to Shareholders regarding the reverse split and redomicile transaction(s)
and prospect summaries and related materials regarding the various prospect
areas which the Company contemplates acquiring and developing in the near term,
and various economic models and projections (collectively, the "Disclosure
Documents"). When read as one document, the Disclosure Documents furnish all
information required to be furnished to accredited investors under Regulation D
("Regulation D") and Regulation S ("Regulation S") of the Securities and
Exchange Commission ("SEC") promulgated under the Securities Act of 1933, as
amended (the "1933 Act"). The Disclosure Documents and any amendments or
supplements thereto: (i) do and will, as the case may be, contain all material
statements and information which are required to be included in accordance with
Regulation D and Regulation S and the 1933 Act, and applicable state, provincial
and local laws, (ii) do and will in all material respects conform to the
requirements of Regulation D and Regulation S and the 1933 Act and applicable
state, provincial and local laws and (iii) do not and will not, as the case may
be, include any untrue statement of material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
3.7 REPRESENTATIONS AND WARRANTIES. No representation or warranty by
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the Company in this Agreement contains, or on the Closing Date will contain, any
untrue statement of material fact or omits or will omit to state any material
fact necessary, in light of the circumstances under which it is made, in order
to make the statements made herein not misleading. There is no fact known to
the Company that has or could have a material adverse effect on the Company,
which has not been set forth in this Agreement (including attached schedules) or
in the Disclosure Documents.
3.8 CONSENTS AND APPROVALS. No consent, approval, order, or
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authorization of, or declaration, filing, or registration with, any governmental
entity is required to be obtained or made by the Company or any of its
subsidiaries in connection with the execution, delivery, or performance by the
Company of this Agreement and the execution, delivery, and where applicable,
performance of the other Transaction Documents to which it is a party or the
consummation of the transactions contemplated hereby and thereby, other than (i)
compliance with any applicable requirements of the 1933 Act, (ii) compliance
with any applicable requirements of the Securities Exchange Act of 1934 (the
"1934 Act"), (iii) compliance with any applicable state securities laws; and
(iv) such consents, approvals, orders, or authorizations which, if not obtained,
and such declarations, filings, or registrations which, if not made, would not,
individually or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), business or prospects of the Company or on
its properties or assets. Except for such consents as are obtained before or
contemporaneously with consummation of the Closing, no consent or approval of
any other Person is required to be obtained or made by the Company or
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any of its subsidiaries in connection with the execution, delivery, or
performance by the Company of this Agreement and execution, delivery and, where
applicable, performance of the other Transaction Documents to which it is a
party or the consummation of the transactions contemplated hereby and thereby.
3.9 FINANCIAL CONDITION. The audited consolidated balance sheet of the
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Company and its subsidiaries as at December 31, 2003, and the related
consolidated statements of income, stockholders' equity and cash flow of the
Company and its subsidiaries for the fiscal year ended on said date, with the
opinion thereon of Xxx, Xxxxxxxx & Xxxxxxx, L.L.P. heretofore furnished to the
Purchaser, and the unaudited consolidated balance sheet of the Company and its
subsidiaries as at June 30, 2004, and the related consolidated statements of
income, stockholders' equity and cash flow of the Company and its subsidiaries
for the six-month period ending on such date heretofore furnished to the
Purchaser, are complete and correct and fairly present the consolidated
financial condition of the Company and its subsidiaries as at said dates and the
results of its operations for the fiscal year and the six-month period ending on
said dates, all in accordance with generally accepted accounting principles
("GAAP"), as applied on a consistent basis (subject, in the case of the interim
financial statements, to normal year-end adjustments). Other than the credit
facility with Fortuna Energy, L.P. described in Schedule 2 attached hereto,
neither the Company nor any of its subsidiaries has on the date hereof any debt,
trade payables, contingent liabilities, liabilities for taxes, unusual forward
or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
such financial statements or except to the extent that the existence of any of
the foregoing would not have a material adverse effect on the condition
(financial or otherwise), business or prospects of the Company or its properties
or assets. Since December 31, 2003, there has been no change or event having or
reasonably likely to have a material adverse effect on the condition (financial
or otherwise), business or prospects of the Company or its properties or assets,
except as disclosed to the Purchaser in writing. Since the date of such
financial statements, neither the business nor the properties of the Company's
subsidiaries, taken as a whole, have been materially and adversely affected as a
result of any fire, explosion, earthquake, flood, drought, windstorm, accident,
strike or other labor disturbance, embargo, requisition or taking of property or
cancellation of contracts, permits or concessions by any governmental entity,
riot, activities of armed forces or acts of God or of any public enemy.
3.10 NO GENERAL SOLICITATION OR INTEGRATED OFFERING. Neither the
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Company nor any distributor participating on the Company's behalf in the
transactions contemplated hereby (if any) nor any person acting for the Company,
or any such distributor, has conducted any "general solicitation" (as such term
is defined in Regulation D) with respect to any of the Shares being offered
hereby. Neither the Company nor any of its affiliates, nor any person acting on
its or their behalf, has directly or indirectly made any offers or sales of any
security or solicited any offers to buy any security under circumstances that
would require registration of the Shares being offered hereby under the 1933 Act
or cause this offering of Securities to be integrated with any prior offering of
securities of the Company for purposes of the 1933 Act, which result of such
integration would require registration under the 1933 Act, or would trigger any
applicable stockholder approval provisions.
3.11 SUBSIDIARIES. Each of the Company's subsidiaries is identified in
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Schedule 1
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attached hereto and is duly incorporated or organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization, as applicable, and has all requisite corporate or partnership
power and authority in all material respects to own, lease, and operate its
properties and to carry on its business as now being conducted. Each of its
subsidiaries is duly qualified to do business as a foreign corporation or
limited partnership, as applicable, and is in good standing in each jurisdiction
where such qualification is necessary, except where the failure to so qualify or
to be in good standing would not have a material adverse effect on the condition
(financial or otherwise), business or prospects of the Company or its properties
or assets. Other than the rights of certain subsidiary presidents to acquire ten
percent of their subsidiary after payout of that subsidiary's exploration
projects, there are outstanding (i) no securities of any of its subsidiaries
convertible into or exchangeable for shares of capital stock or other voting
securities of any subsidiary or of the Company and (ii) no options or other
rights to acquire from any of its subsidiaries and no obligation of any of its
subsidiaries to issue or sell, any shares of capital stock or other voting
securities of any of its subsidiaries or of the Company or any securities of any
subsidiary or of the Company convertible into or exchangeable for such capital
stock or voting securities.
3.12 TRANSACTIONS WITH AFFILIATES. Except as to drilling agreements
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with Maverick Drilling Co., Inc., a company controlled by the Xxx Xxxxxxx
family, none of the officers, directors or employees of the Company or any of
its subsidiaries is currently a party to any transaction with the Company or any
of its subsidiaries (other than for ordinary course services solely in their
capacity as officers, directors or employees), 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 such officer, director or employee or any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has an ownership interest of five percent or more or is an
officer, director, trustee or partner.
3.13 TITLES AND ASSETS.
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(a) Each of the Company and its subsidiaries has good and
defensible title to, or valid leasehold interests in, all of its material assets
and properties, except for such assets and properties as are no longer used or
useful in the conduct of its businesses or as have been disposed of in the
ordinary course of business and except for such imperfections of title,
easements, rights of way and similar liens or other matters and failures of
title as would not, individually or in the aggregate, have a material adverse
effect on the condition (financial or otherwise), business or prospects of the
Company or its properties or assets. All such assets and properties, other than
assets and properties in which the Company has leasehold interests, are free and
clear of all Liens, other than those liens in favor of Fortuna Energy, L.P.
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(b) All leases, licenses, permits, authorizations and agreements
necessary for the conduct of the business of the Company and its subsidiaries
are valid and subsisting, in full force and effect and there exists no default
or event or circumstance which with the giving of notice or the passage of time
or both would give rise to a default under any such leases, licenses, permits,
authorizations and agreements, which would have a material adverse effect on the
condition (financial or otherwise), business or prospects of the Company or its
properties or assets.
(c) The assets and properties currently owned, leased or licensed
by the Company and its subsidiaries, including, without limitation, all
easements, licenses, permits, authorizations and rights of way, include all
assets and properties necessary to permit the Company and its subsidiaries to
conduct their business in all material respects in the same manner as its
business has been conducted prior to the Closing Date.
(d) All of the assets and properties of the Company and its
subsidiaries that are reasonably necessary for the operation of their business
are in good working condition in all material respects and are maintained in
accordance with prudent business standards.
3.14 DEFAULTS. Neither the Company nor any of its subsidiaries is in
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default nor has any event or circumstance occurred which, but for the expiration
of any applicable grace period or the giving of notice, or both, would
constitute a default under any material agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound, except for defaults which in the aggregate would not
have a material adverse effect on the condition (financial or otherwise),
business or prospects of the Company or its properties or assets.
3.15 INSURANCE. All material policies of fire, liability, workmen's
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compensation and other forms of insurance owned or held by the Company and each
of its subsidiaries as of the date hereof are in full force and effect, all
premiums with respect thereto covering all periods up to and including the
Closing Date have been paid, and no notice of cancellation or termination has
been received with respect to any such policy. Such policies are sufficient for
compliance with all requirements of law and of all agreements to which the
Company or any of its subsidiaries is a party; are valid, outstanding and
enforceable policies; provide adequate insurance coverage in at least such
amounts and against at least such risks (but including in any event public
liability) as are usually insured against in the same general area by companies
engaged in the same or a similar business for the assets and operations of the
Company and each of its subsidiaries (taking into account the cost and
availability of such insurance); will remain in full force and effect through
the respective dates listed in such policies with the payment of additional
premiums; and will not in any way be affected by, or terminate or lapse by
reason of, the transactions contemplated by this Agreement.
3.16 LITIGATION. Except as disclosed in Schedule 3 hereto, there is no
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litigation, legal, administrative or arbitral proceeding, investigation or other
action of any nature pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its subsidiaries.
3.17 COMPLIANCE WITH THE LAW. Neither the Company nor any of its
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subsidiaries has
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violated any governmental requirement or failed to obtain any license, permit,
franchise or other governmental authorization necessary for the ownership of any
of its assets or properties or the conduct of its business, which violation or
failure would have (in the event such violation or failure were asserted by any
Person through appropriate action) a material adverse effect on the condition
(financial or otherwise), business or prospects of the Company or its properties
or assets. Except for such acts or failures to act as would not have a material
adverse effect on the condition (financial or otherwise), business or prospects
of the Company or its properties or assets, the assets and properties of the
Company have been maintained, operated and developed in a good and workmanlike
manner and in conformity with all applicable laws and all rules, regulations and
orders of all duly constituted authorities having jurisdiction and in conformity
with the provisions of agreements and other instruments comprising a part of the
assets and properties, including, without limitation, all leases, subleases or
other contracts comprising a part of the assets and properties.
3.18 ENVIRONMENTAL MATTERS. Except to the extent that the inaccuracy
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of any of the following, individually or in the aggregate, would not have a
material adverse effect on the condition (financial or otherwise), business or
prospects of the Company or its properties or assets:
(a) No property owned, leased or operated by the Company or any of its
subsidiaries, and no operations conducted thereon violate any order or
requirement of any court or Governmental Entity or any Environmental Laws;
(b) Without limitation of clause (a) above, no property owned, leased
or operated by the Company or any of its subsidiaries, nor the operations
currently conducted thereon or, to the best knowledge of the Company, by any
prior owner or operator of such property or operation, are in violation of or
subject to any existing, pending or threatened action, suit, investigation,
inquiry or proceeding by or before any court or Governmental Entity or subject
to any remedial obligations under Environmental Laws;
(c) All notices, permits, licenses or similar authorizations, if any,
required to be obtained or filed by the Company or any of its subsidiaries in
connection with the operation or use of any and all property of the Company and
each of its subsidiaries, including without limitation present, or to the best
of Company's knowledge, past treatment, storage, disposal or release of a
hazardous substance or solid waste into the environment, have been duly obtained
or filed, and the Company and each of its subsidiaries are in compliance with
the terms and conditions of all such notices, permits, licenses and similar
authorizations;
(d) All hazardous substances, solid waste, and oil and gas exploration
and production wastes, if any, generated at any and all properties, owned,
leased or operated by the Company or any of its subsidiaries have in the past,
during the tenure of ownership of the Company and its subsidiaries and, to the
best of the Company's knowledge, prior thereto, been transported, treated and
disposed of in accordance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment, and, to the best knowledge of the Company, all such transport
carriers and treatment and disposal facilities have been and are operating in
compliance with Environmental Laws and so as not to
8
pose an imminent and substantial endangerment to public health or welfare or the
environment, and are not the subject of any existing, pending or threatened
action, investigation or inquiry by any Governmental Entity in connection with
any Environmental Laws;
(e) The Company has taken all steps reasonably necessary to determine
and has determined that no hazardous substances, solid waste, or oil and gas
exploration and production wastes, have been disposed of or otherwise released,
and there has been no threatened release of any hazardous substances, on or to
any properties, owned, leased or operated by the Company or any of its
subsidiaries, except in compliance with Environmental Laws and so as not to pose
an imminent and substantial endangerment to public health or welfare or the
environment; and
(f) Neither the Company nor any of its subsidiaries has any known
contingent liability in connection with any release or threatened release of any
oil, hazardous substance or solid waste into the environment.
3.19 TAXES. The Company has filed (taking into account any extensions)
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all United States Federal income tax returns and all other tax returns which are
required to be filed by it on or before the Closing and has paid all taxes due
pursuant to such returns or pursuant to any assessment received by the Company,
except for any taxes which are being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained. The
charges, accruals and reserves on the books of the Company in respect of taxes
and other governmental charges are adequate. No tax lien has been filed and, to
the knowledge of the Company, no claim is being asserted with respect to any
such tax, fee or other charge, except for any taxes, fees or other charges which
are being contested in good faith and by proper proceedings and against which
adequate reserves are being maintained.
3.20 BROKERAGE FEES. The Company has not retained any financial
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advisor, broker, agent, or finder or paid or agreed to pay any financial
advisor, broker, agent, or finder on account of the sale by the Company and the
purchase by the Purchaser of the Shares.
3.21 SEC REQUIREMENTS. Neither the Company nor any of its subsidiaries
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has received notice from the Securities and Exchange Commission or any state
securities agency that the Company or any subsidiary is not in compliance with
applicable Securities and Exchange Commission or state securities rules and
regulations or is under investigation regarding the potential violation of any
such rule or regulation.
3.22 MATERIAL AGREEMENTS. Set forth on Schedule 4 hereto is a complete
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and correct list of all material agreements of the Company and its subsidiaries
that would be required to be listed in an Annual Report on Form 10-K as material
contracts pursuant to Item 601 of Regulation S-K.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
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The Purchaser hereby represents, warrants and agrees that:
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4.1 AUTHORITY. The Purchaser has full corporate or partnership power
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and authority to execute and deliver this Agreement and, when executed and
delivered, will constitute the legal, valid and binding obligation of Purchaser,
enforceable in accordance with its terms. If the Purchaser is a corporation or a
trust, the officer or trustee executing this Agreement represents and warrants
that he/she is authorized to so sign; that the corporation or trust is
authorized by its charter and by-laws or the trust agreement, as the case may
be, to make this investment.
4.2 SUITABILITY OF PURCHASER. The Purchaser is able to (i) bear the
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economic risk of its investment in the Company, (ii) hold the Shares for an
indefinite period of time, and (iii) afford a complete loss of its investment.
4.3 INVESTMENT EXPERIENCE. The Purchaser, together with its purchaser
----------------------
representative (who is unaffiliated with and who is not compensated by the
Company, or any affiliate or selling agent of the Company, directly or
indirectly), if any, have the requisite knowledge and experience in financial
and business matters, including investments of this type, to be capable of
evaluating the merits and risks of an investment in the Shares and of making an
informed investment decision with respect thereto.
4.4 RECEIPT OF INFORMATION; RELIANCE UPON DISCLOSURE.
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(a) DOCUMENTS. The Purchaser has reviewed, read carefully, considered
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and fully understood the Disclosure Documents and the Purchaser has received
from the Company all of the information concerning the Company that it considers
to be material in making its investment decision, which information has been
requested by the Purchaser if not already furnished by the Company. The
Purchaser (and/or its representative, if any) have had full access to the books
and records of the Company and to its officers, directors and accountants for
the purpose of obtaining and verifying such information and the Purchaser has
had an opportunity to ask questions and receive answers from the officers of the
Company regarding the terms and conditions of this transaction and the Company's
business and financial condition.
(b) The Purchaser confirms that he has had adequate opportunity to
obtain such independent legal and tax advice and financial planning services as
he has deemed appropriate prior to making a decision to purchase the Shares.
(c) Except as expressly set forth herein, no representations or
warranties, oral or otherwise, have been made to the Purchaser, including
without limitation, any representations concerning the future prospects of the
Company, by the Company or any agent, employee or affiliate of the Company, or
any other person whether or not associated with this transaction, and in
entering into this transaction the Purchaser is not relying upon any
information, other than that contained in the Disclosure Documents, and the
results of its own independent investigation. The Purchaser has obtained
sufficient information to evaluate the merits and risks of its investment and to
make an informed investment decision.
4.5 RESTRICTED SECURITIES. The Purchaser understands and acknowledges
----------------------
that the Shares it is purchasing hereunder are "restricted securities" under
federal and state securities laws
10
insofar as they have not been registered under the 1933 Act or the securities
laws of any other jurisdiction, that they may not be resold or transferred
without compliance with the registration or qualification provisions of the 1933
Act or applicable federal and state securities laws or the laws of any other
jurisdiction or an opinion of counsel that an exemption from such registration
and qualification requirements is available. The Purchaser is familiar with SEC
Regulation D, Regulation S and Rule 144 promulgated under the 1933 Act, as
presently in effect, and the resale limitations imposed thereby and by the 1933
Act.
4.6 LIMITATIONS ON DISPOSITION. Without in any way limiting the
----------------------------
representations set forth above, the Purchaser further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a registration statement under the 1933 Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
(b)(i) The Purchaser shall have notified Company of the proposed
disposition and shall have furnished Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (ii) upon the request of
the Company, the Purchaser shall have furnished Company with an opinion of
counsel, reasonably satisfactory to Company, that such disposition will not
require registration of such securities under the 1933 Act and applicable state
securities laws.
The Purchaser understands that Company will issue stop transfer
instructions to its transfer agent with respect to the Shares and intends to
place a restrictive legend on every certificate as provided in Section 8.4
hereof.
4.7 ILLIQUID INVESTMENTS. The Purchaser's overall commitment to
---------------------
investments that are not readily marketable is not disproportionate to its net
worth and its investment in the Shares will not cause such overall commitment to
become excessive. The Purchaser has adequate means of providing for its current
needs and personal contingencies.
4.8 COMPANY RELIANCE ON QUESTIONNAIRE AND REPRESENTATIONS AND
---------------------------------------------------------------
WARRANTIES. The Purchaser understands, acknowledges and agrees that the Company
-
is relying on the accuracy of the responses by Purchaser contained in the
Confidential Purchaser Questionnaire heretofore delivered by you to the Company
(as well as Purchaser representations and warranties contained in this
Agreement), which responses, representations and warranties you warrant to be
true, complete and correct.
4.9 ACCREDITED INVESTOR STATUS. The Purchaser is an "accredited
----------------------------
investor" as such term is defined in SEC Rule 501(a) of Regulation D promulgated
under the 0000 Xxx.
4.10 PURCHASE FOR OWN ACCOUNT. The Purchaser is acquiring the Shares
--------------------------
for its own account, for investment purposes and not for resale or with a view
to any distribution, or in connection with any distribution thereof.
11
ARTICLE V
CONDITIONS TO PURCHASER'S OBLIGATIONS
-------------------------------------
Purchaser's obligations to purchase the Investment Shares under this
Agreement are subject to the fulfillment of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
------------------------------
of the Company contained in Article III hereof shall be true as of the Closing
Date.
5.2 COMPANY'S PERFORMANCE. The Company shall have performed and
----------------------
complied with all agreements, obligations and conditions contained in this
Agreement, which performance or compliance is required on or before the Closing
Date.
5.3 TRANSACTION DOCUMENTS. Each of the Transaction Documents shall
----------------------
have been fully executed and delivered by the parties thereto, and shall be in
full force and effect.
5.4 ESCROW RELEASE CONDITIONS. Each of the Escrow Release Conditions
---------------------------
shall have been satisfied.
5.5 LEGAL PROCEEDINGS. No proceeding shall, on the Closing Date, be
------------------
pending or threatened seeking to restrain, prohibit or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.
5.6 CAPITALIZATION. The Company shall have issued and outstanding
--------------
20,500,000 shares of Common Stock.
5.7 OFFICERS' CERTIFICATE. The Company shall have delivered an
----------------------
Officers' Certificate to the Purchaser to the effect that all conditions
contained in this Article V have been complied with.
ARTICLE VI
CONDITIONS TO COMPANY'S OBLIGATIONS
-----------------------------------
The obligations of the Company to sell and issue the Investment Shares to
Purchaser are subject to the fulfillment on or before the Closing of each of the
following conditions by Purchaser:
6.1 REPRESENTATIONS AND WARRANTIES. The Purchaser's representations
--------------------------------
and warranties contained in Article IV shall be true on and as of the Closing
Date with the same effect as though made on and as of the date thereof.
6.2 PAYMENT. The Purchaser shall have delivered into escrow the full
-------
amount of the Investment Purchase Funds.
12
6.3 TRANSACTION DOCUMENTS. Each of the Transaction Documents shall
----------------------
have been fully executed and delivered by the parties thereto, and shall be in
full force and effect and Purchaser, if requested by Company, shall have
delivered to the Company an executed Confidential Purchaser Questionnaire.
ARTICLE VII
REGISTRATION RIGHTS
-------------------
The Company covenants and agrees as follows:
7.1 DEFINITIONS. For purposes of this Article 7:
-----------
(a) The term "Holder" means any person owning or having the right to
acquire Shares or Registrable Securities.
(b) The term "1934 Act" means the Securities Exchange Act of 1934,
as amended.
(c) The term "Public Corporation" means a corporation which has a
class of equity securities registered pursuant to Section 12 of the 1934 Act, or
which is required to file periodic reports pursuant to Section 15(d) of the 1934
Act.
(d) The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act, and such registration
statement or document becoming effective.
(e) The term "Registrable Securities" means (i) the Shares, (ii)
any shares of Common Stock issued by Company pursuant to Section 1.1 or 1.2
hereof, and (iii) any Common Stock issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the Shares and the shares referred to in clause (ii) above, but excluding in all
cases, however, any Registrable Securities sold by a person in a transaction in
which his rights under this Article VII are not assigned; provided, however,
-------- -------
that any such securities shall cease to be Registrable Securities when one or
more registration statements with respect to the sale of such securities shall
have become effective under the 1933 Act and all such securities shall have been
disposed of in accordance with the plan of distribution set forth therein.
(f) The number of shares of "Registrable Securities Then
Outstanding" shall be equal to the sum of the number of shares of Common Stock
outstanding which are Registrable Securities.
(g) The term "Registration Expenses" means all registration,
qualification, listing and filing fees, printing expenses, escrow fees and blue
sky fees, fees and disbursements of counsel for the Company and of the Company's
independent certified public accountants, in
13
each case incident to or required by the registration under this Agreement, and
any other fees and expenses of the registration under this Agreement which are
not Selling Expenses.
(h) The term "Selling Expenses" means all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and all fees and disbursements of counsel for any
Holder.
(i) All other capitalized terms used in this Section that are not
defined herein shall have the meaning otherwise given in this Agreement.
7.2 REGISTRATION OBLIGATION. The Company agrees to cause a
-------------------------
registration statement on Form X-0, XX-0 or SB-2 to be filed with the Securities
Exchange Commission as to the Registrable Securities to be registered under the
1933 Act not later than one hundred twenty (120) days after the Closing Date and
use its reasonable best efforts to have such registration statement declared
effective within one hundred eighty (180) days of the Closing Date.
7.3 PIGGYBACK REGISTRATION RIGHTS.
-------------------------------
(a) If, at any time or from time to time, the Company shall
determine to register any of its Common Stock, either for its own account or the
account of a security holder or holders, other than pursuant to a Registration
Statement on Form S-4 or Form S-8, the Company will (x) promptly give each
Holder written notice thereof, and (y) include in such registration (and any
related qualification under blue sky or other state securities laws), and in any
underwriting involved therein, all of the Registrable Securities specified in a
written request or requests made by any Holder within thirty (30) days after
receipt of such written notice from the Company.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as part of the written notice given pursuant to Section
7.3(a). In such event, the right of any Holder to registration pursuant to this
Section 7.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of Registrable Securities owned by the Holder in
the underwriting to the extent provided under this Section 7.3. All Holders
proposing to distribute their Registrable Securities through such underwriting
shall (together with the Company and any other holders of securities of the
Company distributing their securities through such underwriting) enter into an
underwriting agreement with the managing or lead managing underwriter selected
by the Company in the form customarily used by such underwriter with such
changes thereto as the parties thereto shall agree. Notwithstanding any other
provision of this Section 7.3, if the managing or lead managing underwriter
determines that market factors require that the number of Registrable Securities
and other securities requested to be included in the registration be limited,
the managing or lead managing underwriter may reduce the number of Registrable
Securities and securities of any other holder of securities to be included in
the registration. If the registration includes an underwritten primary
registration on behalf of the Company, the reduction shall be taken (i) first
from and to the extent of the securities requested to be included in such
registration by the Holders and the holders of any other securities pro rata
--- ----
according to the number of securities requested by the Holders and such holders
to be included in
14
the registration, and (ii) thereafter from the securities to be registered on
behalf of the Company. If the registration consists only of any underwritten
secondary registration on behalf of holders of securities of the Company, the
reduction shall be taken (i) first from and to the extent of the securities
requested to be included in the registration by the Holders and any other
holders of securities included in the registration other than pursuant to demand
registration rights pro rata according to the number of securities requested by
--- ----
the Holders and such holders to be included in the registration and (ii)
thereafter from securities, if any, to be registered on behalf of holders of
securities included in the registration pursuant to demand registration rights.
The Company shall advise all Holders and other holders participating in such
underwriting as to any such limitation and the number of shares that may be
included in the registration and underwriting. If any Holder disapproves of the
terms of any such underwriting, such Holder may elect to withdraw therefrom by
written notice to the Company and the managing or lead underwriter. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
(c) The Company may withdraw a registration for which registration
rights have been exercised pursuant to this Section 7.3 at any time prior to the
time it becomes effective.
7.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
--------------------------
connection with a registration pursuant to this Article 7 shall be borne by the
Company. All Selling Expenses relating to the Registrable Securities registered
on behalf of the Holders shall be borne by the Holders of such Registrable
Securities pro rata based upon the total number of Registrable Securities
--- ----
included in the registration or, if such Selling Expenses are specifically
allocable to Registrable Securities held by specific Holders, by such Holders to
the extent related to the sale of such Registrable Securities.
7.5 REGISTRATION PROCEDURES.
------------------------
(a) In connection with the registration of Registrable Securities
required pursuant to this Article 7, the Company shall as expeditiously as is
reasonable:
(i) prepare and file with the SEC on any appropriate form a
registration statement with respect to such Registrable Securities and use its
reasonable reasonable best efforts to cause such registration statement to
become and remain effective for the period described in paragraph (ii) below;
(ii) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the 1933
Act with respect to the disposition of all Registrable Securities and other
securities covered by such registration statement the earliest of (w) when the
Shares have been sold pursuant to Rule 144 promulgated under the 1933 Act (or
any successor provision) ("Rule 144") or such registration statement, (x) when
the Shares have been otherwise transferred and a new certificate for the Shares
not bearing a legend restricting further transfer shall have been delivered by
the Company, (y) when all of the Holder's and its Affiliates'
15
remaining Shares can be sold in a single transaction in compliance with Rule
144, or (z) when the Shares have ceased to be outstanding;
(iii) furnish to each seller of such Registrable Securities
such number of conformed copies of such registration statement and of each such
amendment and supplement thereto (at least one of which shall include all
exhibits), such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the 1933 Act, such documents incorporated by
reference in such registration statement or prospectus, and such other
documents, as such seller may reasonably request in order to facilitate the sale
or disposition of such Registrable Securities;
(iv) use its reasonable best efforts to register or qualify
all Registrable Securities and other securities covered by such registration
statement under such other securities or "blue sky" laws of such jurisdictions
as each seller shall reasonably request, and do any and all other acts and
things as may be reasonably necessary to consummate the disposition in such
jurisdictions of the Registrable Securities covered by such registration
statement, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, or to subject itself to taxation in respect of
doing business in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;
(v) immediately notify each seller of Registrable Securities,
at any time when a prospectus relating thereto is required to be delivered under
the Act, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing or if it is necessary, in the opinion
of counsel to the Company, to amend or supplement such prospectus to comply with
law, and at the request of any such seller prepare and furnish to any such
seller a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing and shall otherwise comply in all
material respects with law and so that such prospectus, as amended or
supplemented, will comply with law;
(vi) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, beginning with the first
month of the first fiscal quarter after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the 1933 Act;
(vii) use its reasonable best efforts to list such securities
on each securities exchange or over-the-counter market on which shares of Common
Stock are then
16
listed, if such securities are not already so listed and if such listing is then
permitted under the rules of such exchange and, if shares of Common Stock are
not then listed on a securities exchange or over- the-counter market, to use its
reasonable best efforts to cause such securities to be listed on such securities
exchange or over-the-counter market as such seller shall reasonably request;
(viii) use its reasonable best efforts to provide a transfer
agent and registrar for such Registrable Securities not later than the effective
date of such registration statement; and
(b) The Holder or Holders of Registrable Securities included
in any registration shall furnish to the Company such information regarding such
Holder or Holders, the Registrable Securities held by them and the distribution
proposed by such Holder or Holders as the Company may from time to time
reasonably request and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
(c) In the case of an underwritten public offering, the Holder or
Holders of Registrable Securities included in any registration shall, upon
request by the Company and the managing or lead managing underwriter, execute
and deliver custodian agreements and powers of attorney in form and substance
reasonably satisfactory to the Company and such Holder or Holders and as shall
be reasonably necessary to consummate the offering.
7.6 INDEMNIFICATION.
---------------
(a) The Company will indemnify each Holder with respect to which
registration has been effected pursuant to this Agreement, each of its officers
and directors, if any, and each underwriter, if any, and each person who
controls the Holder or any such underwriter within the meaning of Section 15 of
the 1933 Act, against any and all losses, claims, damages, liabilities or
expenses (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement or prospectus, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances in which they were made, not
misleading, or any violation by the Company of the 1933 Act or any rule or
regulation promulgated under the 1933 Act applicable to the Company in
connection with any such registration, and the Company will reimburse each such
Holder, each such underwriter and each person who controls any such underwriter,
for any legal and other expenses reasonably incurred, as such expenses are
incurred, in connection with investigating, preparing or defending any such
claims, loss, damage, liability or action; provided, however, that the Company
-------- -------
will not be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission or alleged untrue statement or omission, made in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder or underwriter and stated to be specifically for
use therein.
17
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration is being
effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each Person who controls the Company or such underwriter within the
meaning of Section 15 of the 1933 Act and each other such Holder against any and
all losses, claims, damages, liabilities and expenses (or actions in respect
thereof), arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement or
prospectus, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statement therein,
in the light of the circumstances under which they were made, not misleading,
and will reimburse the Company, such Holders, underwriters or control persons
for any legal or any other expenses reasonably incurred, as such expenses are
incurred, in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement or prospectus in reliance upon
and in conformity with written information furnished to the Company by such
Holder. Notwithstanding the foregoing, the liability of each Holder under this
Section 7.6 shall be limited to an amount equal to the aggregate proceeds
received by such Holder from the sale of Registrable Securities hereunder,
unless such liability arises out of or is based on willful conduct by such
Holder.
(c) Each party entitled to indemnification under this Section 7.6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claims or any
litigation resulting therefrom; provided, however, that counsel for the
-------- -------
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (which approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such Indemnified Party's expense; provided, however, that the failure
-------- -------
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. Notwithstanding the foregoing, the Indemnifying Party shall
not be entitled to assume the defense for matters as to which there is, in the
opinion of counsel to the Indemnifying Party, a conflict of interest or separate
and different defenses. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and the litigation resulting therefrom.
7.7 CONTRIBUTION.
------------
(a) If the indemnification provided for in Section 7.6 hereof
is unavailable to the Indemnified Parties in respect of any losses, claims,
damages, liabilities or
18
expenses (or actions in respect thereof) referred to therein, then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and the Indemnified Party on the other in
connection with the statement or omission which resulted in such losses, claims,
damages, liabilities or expenses (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue statement (or alleged
untrue statement), of a material fact or the omission (or alleged omission) to
state a material fact relates to information supplied by the Indemnifying Party
or the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and each Holder agree that it would not be just and equitable if
contribution pursuant to this Section 7.7 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to above. The amount paid or payable by an
Indemnified Party as a result of the losses, claims, damages, liabilities or
expenses (or actions in respect thereof) referred to above in this Section shall
be deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim.
(b) Notwithstanding anything to the contrary contained
herein, the obligation of each Holder to contribute pursuant to this Section 7.7
is several and not joint and no selling Holder shall be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities of such selling Holder were offered to the public exceeds
the amount of any damages which such selling Holder has otherwise been required
to pay by reason of such untrue statement (or alleged untrue statement) or
omission (or alleged omission).
(c) No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
7.8. EXCHANGE ACT REGISTRATION. The Company covenants and agrees
---------------------------
that until such time as there shall be no Registrable Securities outstanding:
(a) it will, if required by law, maintain an effective
registration statement (containing such information and documents as the SEC
shall specify) with respect to the Common Stock under Section 12(g) of the 1934
Act and will file in a timely manner such information, documents and reports as
the SEC may require or prescribe for companies whose stock has been registered
pursuant to said Section 12(g);
(b) it will, if a registration statement with respect to the
Common Stock under Section 12(b) or Section 12(g) of the 1934 Act is effective,
make whatever filings with the SEC or otherwise make generally available to the
public such financial and other information as may be necessary in order to
enable the Holders to sell shares of Common Stock
19
pursuant to the provisions of Rule 144 or any successor rule or regulation
thereto or any statute hereafter adopted to replace or to establish the
exemption that is now covered by Rule 144;
(c) it will, if no longer required to file reports pursuant
to Section 12 (g) of the 1934 Act, upon the request of any Holder, make publicly
available the information specified in subparagraph (c) (2) of Rule 144, and
will take such further action as any Holder may reasonably request, all to the
extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the 1933 Act within the limitation of the
exemptions provided by Rule 144 or any similar rule or regulation hereafter
adopted by the SEC; and
(d) upon the request of any Holder, it will deliver to such
Holder a written statement as to whether it has complied with the requirements
of this Section 7.8.
The Company represents and warrants that such registration statement or any
information, documents or report filed with the SEC in connection therewith or
any information so made public shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements contained therein not misleading. The
Company agrees to indemnify and hold harmless (or to the extent the same is not
enforceable, make contribution to the Holders, their partners, advisory
committee members, officers, directors and employees acting for any Holder in
connection with any offering or sale by such Holder of Registrable Securities or
any person, firm or corporation controlling (within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act) such Holder from and
against any and all losses, claims, damages, liabilities or expenses (or actions
in respect thereof) arising out of or resulting from any breach of the foregoing
representation or warranty, all on terms and conditions comparable to those set
forth in Section 7.6; provided, however, that the Company shall be given written
-------- -------
notice and an opportunity to assume on terms and conditions comparable to those
set forth in Section 7.6 the defense thereof.
7.9 DELAY OF REGISTRATION. No holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Article VII.
7.10 AMENDMENTS AND WAIVERS. Any term or provision of the registration
----------------------
rights stated in this Agreement may be amended and the observance of any term of
such rights may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company and the holders of at least sixty-seven percent (67%) of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance
with this section shall be binding upon each holder of the Shares and any
Registrable Securities then outstanding, each future holder of Shares and such
Registrable Securities, and the Company.
ARTICLE VIII
MISCELLANEOUS AND FURTHER PROVISIONS
------------------------------------
The Purchaser agrees that:
20
8.1 NO TRANSFER OF SHARES UNTIL REGISTERED. Purchaser will not
-------------------------------------------
transfer or assign the Investment Shares except as provided in Section 4.6.
8.2 SUCCESSORS AND ASSIGNS. This Agreement and this Agreement shall be
----------------------
binding upon the parties and their respective successors and assigns.
8.3 INDEMNIFICATION REGARDING QUESTIONNAIRE. Purchaser shall
-----------------------------------------
indemnify, hold harmless and defend the Company and its affiliates and agents
with respect to any and all loss, damage, expense, claim, action or liability
any of them may incur as a result of the breach or untruth of any
representations or warranties made by the Purchaser in the Confidential
Purchaser Questionnaire completed by the Purchaser, and the Purchaser agrees
that in the event of any breach or untruth of any representations or warranties
made by the Purchaser herein or in the Confidential Purchaser Questionnaire, the
Company may, at its option, forthwith rescind the sale of the Shares to the
Purchaser, if the failure to rescind due to the breach or untruth by Purchaser
would cause the Company to be in violation of the registration requirements of
the 1933 Act or applicable state securities laws.
8.4 LEGEND. A legend in substantially the following form will be
------
placed on all documents or certificates evidencing the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE
ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933
ACT.
8.5 SURVIVAL OF WARRANTIES. The warranties, representations and
------------------------
covenants of the parties contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing.
8.6 ENTIRE AGREEMENT. This Agreement, together with the other
-----------------
Transaction Documents, constitutes the entire agreement among the parties, and
no party shall be liable or bound to any other party in any manner by any
warranties, representations, guarantees or covenants except as specifically set
forth in this Agreement. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective successors and 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 assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.
8.7 GOVERNING LAW. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of Texas (except where Nevada law
pertains to the corporate matters of Company) without regard to conflicts of
law.
21
8.8 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.9 NOTICES. All notices, requests, demands and other communications
-------
under this Agreement shall be in writing and shall be deemed to have been duly
given (i) on the date of service if served personally on the party to whom
notice is to be given, (ii) on the date of delivery if sent by prepaid overnight
courier services, (iii) on the fifth day after the date of mailing if mailed to
the party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and (iv) upon the receipt of a confirmation of
transmission if sent by facsimile transmission at the following addresses. Any
party may change its address for purposes of this section by giving the other
party written notice of the new address in the manner set forth above.
To Purchaser: CBarney Invesments, Ltd.
000 Xxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx Xxxxxx
FAX: (000) 000-0000
With a copy to: Gardere Xxxxx Xxxxxx, L.L.P.
0000 Xxxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxxxx
FAX: (000) 000-0000
To Company: Petrosearch Energy Corporation
0000 Xxxxxxx Xxxxx, Xxxxx 000X
Xxxxxxx, Xxxxx 00000
Attention: President
FAX: (000) 000-0000
8.10 SEVERABILITY. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provisions were so excluded and shall be enforceable in accordance with its
terms.
8.11 AMENDMENT AND/OR MODIFICATION. Neither this Agreement, nor any
-------------------------------
term or provision hereof, may be changed, waived, discharged, amended, modified
or terminated orally, or in any manner other than by an instrument in writing
signed by each of the parties hereto.
8.12 HEADINGS. The various headings of this Agreement are inserted for
--------
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
SIGNATURES APPEAR ON THE FOLLOWING PAGES
22
EXECUTED as of the Effective Date above.
PETROSEARCH ENERGY CORPORATION, A
NEVADA CORPORATION
By: /s/
-----------------------------------
Name:_________________________________
Title:________________________________
CBARNEY INVESTMENTS, LTD., A
TEXAS LIMITED PARTNERSHIP
By: /s/
-----------------------------------
Name:_________________________________
Title:________________________________
LIST OF ATTACHMENTS:
----------------------
Exhibit A - Escrow Agreement
Schedule 1 - Capitalization of Company
Schedule 2 - Fortuna Energy, L.P. Credit Facility
Schedule 3 - Pending Litigation
Schedule 4 - Material Contracts per Section 3.22
23
EXHIBIT "A"
-----------
THE UNDERSIGNED, XXXX XXXXXXXXXXXX, OF XXXXXXX XXXXX XXXXXX LLP WHO HAS
SERVED AS COUNSEL TO PURCHASER UNDER THIS AGREEMENT, AGREES TO ACT AS ESCROW
AGENT FOR THE PARTIES AS CONTEMPLATED IN SECTION 2.1 OF THIS AGREEMENT AND IN
SUCH CAPACITY TO EFFECT THE DELIVERY OF THE INVESTMENT PURCHASE FUNDS TO THE
COMPANY UPON DELIVERY TO ESCROW AGENT BY THE COMPANY OF THE INVESTMENT SHARES
AND THE OFFICERS' CERTIFICATE DESCRIBED IN SECTION 5.7 OF THE AGREEMENT.
/s/
-----------------------------------
XXXX XXXXXXXXXXXX
24
SHARE PURCHASE AGREEMENT
------------------------
This Share Purchase Agreement ("Agreement") is made as of January 24, 2005,
("Effective Date") between PETROSEARCH ENERGY CORPORATION, a Nevada corporation
(the "Company") and CBARNEY INVESTMENTS, LTD., a Texas limited partnership, or
its assigns ("Purchaser").
A. Company is in the business of acquiring, developing and operating
oil and gas properties in several states, including, Texas, Oklahoma, North
Dakota, Montana and Mississippi. Company has obtained commitments from industry
joint venturers to develop several drilling prospects, thereby requiring an
accelerated leasing program in the target areas. Additional acquisition and
exploration opportunities have contemporaneously been presented by third parties
to Company which Company desires to pursue in addition to the near term drilling
projects.
B. Company is the survivor of a December 30, 2004 merger between
Company and Petrosearch Corporation, a Texas corporation, the former parent of
Company, immediately following a 6.5 to 1 reverse split of Petrosearch
Corporation's Common Stock.
C. Company has elected to meet certain of its working capital needs
post-merger by the placement of Company Common Stock, par value $.001, with one
or more willing, sophisticated investors and Purchaser desires to acquire a
specified number of shares of Company Common Stock under the terms and
conditions set forth herein.
TERMS OF AGREEMENT:
NOW, THEREFORE, FOR VALUE RECEIVED, the sufficiency of which is
acknowledged by the parties, the parties hereto agree as follows:
ARTICLE I
NUMBER AND PURCHASE PRICE FOR SHARES/OPTION FOR ADDITIONAL SHARES/ADJUSTMENT OF
-------------------------------------------------------------------------------
PRICE FOR MORE FAVORABLE PLACEMENT
----------------------------------
1.1 NUMBER OFSHARES TO BE PURCHASED/PURCHASE PRICE. Subject to all of
-----------------------------------------------
the terms and conditions of this Agreement, Company agrees to issue and sell to
Purchaser (sometimes referred to herein as a "Holder") and Purchaser agrees to
purchase, 205,129 shares of Company Common Stock, par value $.001 (the
"Investment Shares"), at a cash price of $1.95 per share, or a total purchase
price of FOUR HUNDRED THOUSAND AND NO/100 DOLLARS ($400,000.00) [the "Investment
Purchase Funds"]. This sale, if consummated, shall be made by the Company
directly to Purchaser without the assistance of placement agents or a
broker-dealer.
1.2 ADJUSTMENT UPON MORE FAVORABLE PLACEMENT. If at any time during
-------------------------------------------
the period from the execution of this Agreement until thirty (30) days after the
release to Company from escrow (described herein below) of the Investment
Purchase Funds, Company shall sell to any third party other than members of
Company's management, Common Stock at less than $1.95 per share, then the
purchase price of the Investment Shares shall be automatically adjusted to the
lower price made available to the third party and such additional Common Shares
shall be issued to Purchaser and delivered to Purchaser (or to Escrow Agent if
the Investment Shares are still in escrow) as are necessary to make the purchase
price per share paid by Purchaser equal the more favorable price made available
to the third party.
ARTICLE II
ESCROW PENDING CERTAIN TRANSACTIONS/USE OF PROCEEDS
---------------------------------------------------
2.1 ESCROW DEPOSIT. Upon execution of this Agreement, Purchaser shall
---------------
deposit the Investment Purchase Funds with the escrow agent (the "Escrow Agent")
named in the Escrow Agreement attached hereto as Exhibit "A". The Investment
------------
Purchase Funds shall remain in escrow pending issuance of the Investment Shares
to Purchaser all as documented to Escrow Agent by delivery of a stock
certificate in Purchaser's name evidencing the Investment Shares and containing
the usual and customary Rule 144 restrictive legend. Should, for any reason,
Company fail to deliver the certificate within five (5) business days after
deposit of the Investment Purchase Funds with Escrow Agent, or in the event that
the additional conditions set forth in Article V (collectively, the "Escrow
Release Conditions") are not met by such time, then, at Purchaser's option,
Purchaser may terminate this Agreement and the corresponding Escrow Agreement,
whereupon the Investment Purchase Funds shall be returned by Escrow Agent to
Purchaser without interest and without deduction for escrow fees and expenses.
In the event that the Escrow Release Conditions are satisfied by Company by the
fifth business day after deposit of the Investment Purchase Funds with Escrow
Agent, then, the Investment Purchase Funds shall be released immediately from
escrow to Company by Escrow Agent and Purchaser shall execute with Company an
instruction letter directing such release to Company (such release date being
sometimes referred to as the "Closing Date").
2.2 USE OF PROCEEDS. The Investment Purchase Funds shall be applied to
---------------
Company's general working capital needs without specific allocation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
-----------------------------------------
As an inducement to the Purchaser to enter into this Agreement, Company
represents, warrants and agrees that:
3.1 ORGANIZATION AND GOOD STANDING. The Company and each of its
---------------------------------
subsidiaries have been duly organized in accordance with the laws of their
respective jurisdictions of
2
incorporation and exist in good standing under such laws with full power and
authority to conduct their businesses as described in the Disclosure Documents
(defined herein below), and are duly qualified and in good standing in each
other jurisdiction in which such qualification is required except where the
failure to so qualify, both individually and in the aggregate, does not have a
material adverse effect on the condition (financial or otherwise), business or
prospects of the Company or on its properties or assets. No actions or
proceedings to dissolve the Company are pending or, to the best knowledge of the
Company, threatened.
3.2 CORPORATE POWER AND AUTHORITY; DUE AUTHORIZATION. Company has full
------------------------------------------------
corporate power and authority to execute and deliver this Agreement and all
other documents required to be entered into by the Company pursuant hereto (this
Agreement and such other documents being hereinafter collectively referred to
as, the "Transaction Documents") and to consummate the transactions contemplated
by the Transaction Documents. This Agreement and the other Transaction
Documents have been duly authorized by all necessary corporate action of the
Company and, when executed and delivered, will be legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms except to the extent that the enforceability hereof and thereof may be
limited by bankruptcy, insolvency, moratorium or similar laws affecting
creditors' rights generally or by general principles of equity.
3.3 NO VIOLATION. The execution, delivery and performance of this
-------------
Agreement and the other Transaction Documents by the Company and the
consummation of the transactions herein and therein contemplated does not and
will not result in a breach or violation of any of the terms and provisions of
the articles or certificate of incorporation or by-laws of the Company as in
effect on the date hereof (the "Organizational Documents"), and does not and
will not constitute a material default under any indenture, mortgage, deed of
trust or other material agreement or instrument to which the Company is a party
or by which the Company is bound, and does not and will not violate or
contravene (i) any governmental statute, rule or regulation applicable to the
Company or (ii) any order, writ, judgment, injunction, decree, determination or
award which has been entered against the Company, the violation or contravention
of which would materially and adversely affect the condition (financial or
otherwise), business or prospects of the Company or on its properties or assets.
3.4 CAPITALIZATION. The Company has a duly authorized capitalization
--------------
as set forth in Schedule 1 attached hereto. The outstanding shares of Common
Stock have been duly authorized and validly issued, fully paid and
nonassessable. None of the outstanding shares of Common Stock has been issued in
violation of the preemptive rights of any security holder of the Company. None
of the holders of the outstanding shares of Common Stock is subject to personal
liability solely by reason of being such a holder. Neither the holders of the
outstanding shares of Common Stock nor the holders of any other securities or
rights of the Company are entitled to pre-emptive or other rights or agreements
for the purchase or acquisition from the Company of any shares of the Common
Stock or to subscribe for the any of the Shares. The Company is not a party or
subject to any agreement or understanding, and, to the knowledge of the Company,
there is no agreement or understanding, between any persons and/or entities,
which affects or relates to the voting or giving of written consents with
respect to any security of the Company or by a director of the Company.
3
3.5 AUTHORIZATION AND ISSUANCE OF SHARES. The Shares, when issued and
-------------------------------------
paid for, will constitute duly authorized, legally and validly issued securities
of the Company, fully paid and non-assessable.
3.6 DISCLOSURE DOCUMENTS. The documents furnished by the Company to
---------------------
Purchaser in connection with this sale include audited financial statements
through December 31, 2003, unaudited compiled financial statements through June
30, 2004, the Company's fact summary sheet and business strategies and plan, a
private placement memorandum dated December 15, 2004, and supplement thereto, a
letter to Shareholders regarding the reverse split and redomicile transaction(s)
and prospect summaries and related materials regarding the various prospect
areas which the Company contemplates acquiring and developing in the near term,
and various economic models and projections (collectively, the "Disclosure
Documents"). When read as one document, the Disclosure Documents furnish all
information required to be furnished to accredited investors under Regulation D
("Regulation D") and Regulation S ("Regulation S") of the Securities and
Exchange Commission ("SEC") promulgated under the Securities Act of 1933, as
amended (the "1933 Act"). The Disclosure Documents and any amendments or
supplements thereto: (i) do and will, as the case may be, contain all material
statements and information which are required to be included in accordance with
Regulation D and Regulation S and the 1933 Act, and applicable state, provincial
and local laws, (ii) do and will in all material respects conform to the
requirements of Regulation D and Regulation S and the 1933 Act and applicable
state, provincial and local laws and (iii) do not and will not, as the case may
be, include any untrue statement of material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
3.7 REPRESENTATIONS AND WARRANTIES. No representation or warranty by
--------------------------------
the Company in this Agreement contains, or on the Closing Date will contain, any
untrue statement of material fact or omits or will omit to state any material
fact necessary, in light of the circumstances under which it is made, in order
to make the statements made herein not misleading. There is no fact known to
the Company that has or could have a material adverse effect on the Company,
which has not been set forth in this Agreement (including attached schedules) or
in the Disclosure Documents.
3.8 CONSENTS AND APPROVALS. No consent, approval, order, or
------------------------
authorization of, or declaration, filing, or registration with, any governmental
entity is required to be obtained or made by the Company or any of its
subsidiaries in connection with the execution, delivery, or performance by the
Company of this Agreement and the execution, delivery, and where applicable,
performance of the other Transaction Documents to which it is a party or the
consummation of the transactions contemplated hereby and thereby, other than (i)
compliance with any applicable requirements of the 1933 Act, (ii) compliance
with any applicable requirements of the Securities Exchange Act of 1934 (the
"1934 Act"), (iii) compliance with any applicable state securities laws; and
(iv) such consents, approvals, orders, or authorizations which, if not obtained,
and such declarations, filings, or registrations which, if not made, would not,
individually or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), business or prospects of the Company or on
its properties or assets. Except for such consents as are obtained before or
contemporaneously with consummation of the Closing, no consent or approval of
any other Person is required to be obtained or made by the Company or
4
any of its subsidiaries in connection with the execution, delivery, or
performance by the Company of this Agreement and execution, delivery and, where
applicable, performance of the other Transaction Documents to which it is a
party or the consummation of the transactions contemplated hereby and thereby.
3.9 FINANCIAL CONDITION. The audited consolidated balance sheet of the
-------------------
Company and its subsidiaries as at December 31, 2003, and the related
consolidated statements of income, stockholders' equity and cash flow of the
Company and its subsidiaries for the fiscal year ended on said date, with the
opinion thereon of Xxx, Xxxxxxxx & Xxxxxxx, L.L.P. heretofore furnished to the
Purchaser, and the unaudited consolidated balance sheet of the Company and its
subsidiaries as at June 30, 2004, and the related consolidated statements of
income, stockholders' equity and cash flow of the Company and its subsidiaries
for the six-month period ending on such date heretofore furnished to the
Purchaser, are complete and correct and fairly present the consolidated
financial condition of the Company and its subsidiaries as at said dates and the
results of its operations for the fiscal year and the six-month period ending on
said dates, all in accordance with generally accepted accounting principles
("GAAP"), as applied on a consistent basis (subject, in the case of the interim
financial statements, to normal year-end adjustments). Other than the credit
facility with Fortuna Energy, L.P. described in Schedule 2 attached hereto,
neither the Company nor any of its subsidiaries has on the date hereof any debt,
trade payables, contingent liabilities, liabilities for taxes, unusual forward
or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
such financial statements or except to the extent that the existence of any of
the foregoing would not have a material adverse effect on the condition
(financial or otherwise), business or prospects of the Company or its properties
or assets. Since December 31, 2003, there has been no change or event having or
reasonably likely to have a material adverse effect on the condition (financial
or otherwise), business or prospects of the Company or its properties or assets,
except as disclosed to the Purchaser in writing. Since the date of such
financial statements, neither the business nor the properties of the Company's
subsidiaries, taken as a whole, have been materially and adversely affected as a
result of any fire, explosion, earthquake, flood, drought, windstorm, accident,
strike or other labor disturbance, embargo, requisition or taking of property or
cancellation of contracts, permits or concessions by any governmental entity,
riot, activities of armed forces or acts of God or of any public enemy.
3.10 NO GENERAL SOLICITATION OR INTEGRATED OFFERING. Neither the
----------------------------------------------
Company nor any distributor participating on the Company's behalf in the
transactions contemplated hereby (if any) nor any person acting for the Company,
or any such distributor, has conducted any "general solicitation" (as such term
is defined in Regulation D) with respect to any of the Shares being offered
hereby. Neither the Company nor any of its affiliates, nor any person acting on
its or their behalf, has directly or indirectly made any offers or sales of any
security or solicited any offers to buy any security under circumstances that
would require registration of the Shares being offered hereby under the 1933 Act
or cause this offering of Securities to be integrated with any prior offering of
securities of the Company for purposes of the 1933 Act, which result of such
integration would require registration under the 1933 Act, or would trigger any
applicable stockholder approval provisions.
3.11 SUBSIDIARIES. Each of the Company's subsidiaries is identified in
------------
Schedule 1
5
attached hereto and is duly incorporated or organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization, as applicable, and has all requisite corporate or partnership
power and authority in all material respects to own, lease, and operate its
properties and to carry on its business as now being conducted. Each of its
subsidiaries is duly qualified to do business as a foreign corporation or
limited partnership, as applicable, and is in good standing in each jurisdiction
where such qualification is necessary, except where the failure to so qualify or
to be in good standing would not have a material adverse effect on the condition
(financial or otherwise), business or prospects of the Company or its properties
or assets. Other than the rights of certain subsidiary presidents to acquire ten
percent of their subsidiary after payout of that subsidiary's exploration
projects, there are outstanding (i) no securities of any of its subsidiaries
convertible into or exchangeable for shares of capital stock or other voting
securities of any subsidiary or of the Company and (ii) no options or other
rights to acquire from any of its subsidiaries and no obligation of any of its
subsidiaries to issue or sell, any shares of capital stock or other voting
securities of any of its subsidiaries or of the Company or any securities of any
subsidiary or of the Company convertible into or exchangeable for such capital
stock or voting securities.
3.12 TRANSACTIONS WITH AFFILIATES. Except as to drilling agreements
------------------------------
with Maverick Drilling Co., Inc., a company controlled by the Xxx Xxxxxxx
family, none of the officers, directors or employees of the Company or any of
its subsidiaries is currently a party to any transaction with the Company or any
of its subsidiaries (other than for ordinary course services solely in their
capacity as officers, directors or employees), 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 such officer, director or employee or any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has an ownership interest of five percent or more or is an
officer, director, trustee or partner.
3.13 TITLES AND ASSETS.
-------------------
(a) Each of the Company and its subsidiaries has good and
defensible title to, or valid leasehold interests in, all of its material assets
and properties, except for such assets and properties as are no longer used or
useful in the conduct of its businesses or as have been disposed of in the
ordinary course of business and except for such imperfections of title,
easements, rights of way and similar liens or other matters and failures of
title as would not, individually or in the aggregate, have a material adverse
effect on the condition (financial or otherwise), business or prospects of the
Company or its properties or assets. All such assets and properties, other than
assets and properties in which the Company has leasehold interests, are free and
clear of all Liens, other than those liens in favor of Fortuna Energy, L.P.
6
(b) All leases, licenses, permits, authorizations and agreements
necessary for the conduct of the business of the Company and its subsidiaries
are valid and subsisting, in full force and effect and there exists no default
or event or circumstance which with the giving of notice or the passage of time
or both would give rise to a default under any such leases, licenses, permits,
authorizations and agreements, which would have a material adverse effect on the
condition (financial or otherwise), business or prospects of the Company or its
properties or assets.
(c) The assets and properties currently owned, leased or licensed
by the Company and its subsidiaries, including, without limitation, all
easements, licenses, permits, authorizations and rights of way, include all
assets and properties necessary to permit the Company and its subsidiaries to
conduct their business in all material respects in the same manner as its
business has been conducted prior to the Closing Date.
(d) All of the assets and properties of the Company and its
subsidiaries that are reasonably necessary for the operation of their business
are in good working condition in all material respects and are maintained in
accordance with prudent business standards.
3.14 DEFAULTS. Neither the Company nor any of its subsidiaries is in
--------
default nor has any event or circumstance occurred which, but for the expiration
of any applicable grace period or the giving of notice, or both, would
constitute a default under any material agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound, except for defaults which in the aggregate would not
have a material adverse effect on the condition (financial or otherwise),
business or prospects of the Company or its properties or assets.
3.15 INSURANCE. All material policies of fire, liability, workmen's
---------
compensation and other forms of insurance owned or held by the Company and each
of its subsidiaries as of the date hereof are in full force and effect, all
premiums with respect thereto covering all periods up to and including the
Closing Date have been paid, and no notice of cancellation or termination has
been received with respect to any such policy. Such policies are sufficient for
compliance with all requirements of law and of all agreements to which the
Company or any of its subsidiaries is a party; are valid, outstanding and
enforceable policies; provide adequate insurance coverage in at least such
amounts and against at least such risks (but including in any event public
liability) as are usually insured against in the same general area by companies
engaged in the same or a similar business for the assets and operations of the
Company and each of its subsidiaries (taking into account the cost and
availability of such insurance); will remain in full force and effect through
the respective dates listed in such policies with the payment of additional
premiums; and will not in any way be affected by, or terminate or lapse by
reason of, the transactions contemplated by this Agreement.
3.16 LITIGATION. Except as disclosed in Schedule 3 hereto, there is no
----------
litigation, legal, administrative or arbitral proceeding, investigation or other
action of any nature pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its subsidiaries.
3.17 COMPLIANCE WITH THE LAW. Neither the Company nor any of its
--------------------------
subsidiaries has
7
violated any governmental requirement or failed to obtain any license, permit,
franchise or other governmental authorization necessary for the ownership of any
of its assets or properties or the conduct of its business, which violation or
failure would have (in the event such violation or failure were asserted by any
Person through appropriate action) a material adverse effect on the condition
(financial or otherwise), business or prospects of the Company or its properties
or assets. Except for such acts or failures to act as would not have a material
adverse effect on the condition (financial or otherwise), business or prospects
of the Company or its properties or assets, the assets and properties of the
Company have been maintained, operated and developed in a good and workmanlike
manner and in conformity with all applicable laws and all rules, regulations and
orders of all duly constituted authorities having jurisdiction and in conformity
with the provisions of agreements and other instruments comprising a part of the
assets and properties, including, without limitation, all leases, subleases or
other contracts comprising a part of the assets and properties.
3.18 ENVIRONMENTAL MATTERS. Except to the extent that the inaccuracy
----------------------
of any of the following, individually or in the aggregate, would not have a
material adverse effect on the condition (financial or otherwise), business or
prospects of the Company or its properties or assets:
(a) No property owned, leased or operated by the Company or any of
its subsidiaries, and no operations conducted thereon violate any order or
requirement of any court or Governmental Entity or any Environmental Laws;
(b) Without limitation of clause (a) above, no property owned,
leased or operated by the Company or any of its subsidiaries, nor the operations
currently conducted thereon or, to the best knowledge of the Company, by any
prior owner or operator of such property or operation, are in violation of or
subject to any existing, pending or threatened action, suit, investigation,
inquiry or proceeding by or before any court or Governmental Entity or subject
to any remedial obligations under Environmental Laws;
(c) All notices, permits, licenses or similar authorizations, if
any, required to be obtained or filed by the Company or any of its subsidiaries
in connection with the operation or use of any and all property of the Company
and each of its subsidiaries, including without limitation present, or to the
best of Company's knowledge, past treatment, storage, disposal or release of a
hazardous substance or solid waste into the environment, have been duly obtained
or filed, and the Company and each of its subsidiaries are in compliance with
the terms and conditions of all such notices, permits, licenses and similar
authorizations;
(d) All hazardous substances, solid waste, and oil and gas
exploration and production wastes, if any, generated at any and all properties,
owned, leased or operated by the Company or any of its subsidiaries have in the
past, during the tenure of ownership of the Company and its subsidiaries and, to
the best of the Company's knowledge, prior thereto, been transported, treated
and disposed of in accordance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment, and, to the best knowledge of the Company, all such transport
carriers and treatment and disposal facilities have been and are operating in
compliance with Environmental Laws and so as not to
8
pose an imminent and substantial endangerment to public health or welfare or the
environment, and are not the subject of any existing, pending or threatened
action, investigation or inquiry by any Governmental Entity in connection with
any Environmental Laws;
(e) The Company has taken all steps reasonably necessary to
determine and has determined that no hazardous substances, solid waste, or oil
and gas exploration and production wastes, have been disposed of or otherwise
released, and there has been no threatened release of any hazardous substances,
on or to any properties, owned, leased or operated by the Company or any of its
subsidiaries, except in compliance with Environmental Laws and so as not to pose
an imminent and substantial endangerment to public health or welfare or the
environment; and
(f) Neither the Company nor any of its subsidiaries has any known
contingent liability in connection with any release or threatened release of any
oil, hazardous substance or solid waste into the environment.
3.19 TAXES. The Company has filed (taking into account any extensions)
-----
all United States Federal income tax returns and all other tax returns which are
required to be filed by it on or before the Closing and has paid all taxes due
pursuant to such returns or pursuant to any assessment received by the Company,
except for any taxes which are being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained. The
charges, accruals and reserves on the books of the Company in respect of taxes
and other governmental charges are adequate. No tax lien has been filed and, to
the knowledge of the Company, no claim is being asserted with respect to any
such tax, fee or other charge, except for any taxes, fees or other charges which
are being contested in good faith and by proper proceedings and against which
adequate reserves are being maintained.
3.20 BROKERAGE FEES. The Company has not retained any financial
---------------
advisor, broker, agent, or finder or paid or agreed to pay any financial
advisor, broker, agent, or finder on account of the sale by the Company and the
purchase by the Purchaser of the Shares.
3.21 SEC REQUIREMENTS. Neither the Company nor any of its
----------------
subsidiaries has received notice from the Securities and Exchange Commission or
any state securities agency that the Company or any subsidiary is not in
compliance with applicable Securities and Exchange Commission or state
securities rules and regulations or is under investigation regarding the
potential violation of any such rule or regulation.
3.22 MATERIAL AGREEMENTS. Set forth on Schedule 4 hereto is a
-------------------
complete and correct list of all material agreements of the Company and its
subsidiaries that would be required to be listed in an Annual Report on Form
10-K as material contracts pursuant to Item 601 of Regulation S-K.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
The Purchaser hereby represents, warrants and agrees that:
9
4.1 AUTHORITY. The Purchaser has full corporate or partnership power
---------
and authority to execute and deliver this Agreement and, when executed and
delivered, will constitute the legal, valid and binding obligation of Purchaser,
enforceable in accordance with its terms. If the Purchaser is a corporation or a
trust, the officer or trustee executing this Agreement represents and warrants
that he/she is authorized to so sign; that the corporation or trust is
authorized by its charter and by-laws or the trust agreement, as the case may
be, to make this investment.
4.2 SUITABILITY OF PURCHASER. The Purchaser is able to (i) bear the
--------------------------
economic risk of its investment in the Company, (ii) hold the Shares for an
indefinite period of time, and (iii) afford a complete loss of its investment.
4.3 INVESTMENT EXPERIENCE. The Purchaser, together with its purchaser
----------------------
representative (who is unaffiliated with and who is not compensated by the
Company, or any affiliate or selling agent of the Company, directly or
indirectly), if any, have the requisite knowledge and experience in financial
and business matters, including investments of this type, to be capable of
evaluating the merits and risks of an investment in the Shares and of making an
informed investment decision with respect thereto.
4.4 RECEIPT OF INFORMATION; RELIANCE UPON DISCLOSURE.
-----------------------------------------------------
(a) DOCUMENTS. The Purchaser has reviewed, read carefully, considered
---------
and fully understood the Disclosure Documents and the Purchaser has received
from the Company all of the information concerning the Company that it considers
to be material in making its investment decision, which information has been
requested by the Purchaser if not already furnished by the Company. The
Purchaser (and/or its representative, if any) have had full access to the books
and records of the Company and to its officers, directors and accountants for
the purpose of obtaining and verifying such information and the Purchaser has
had an opportunity to ask questions and receive answers from the officers of the
Company regarding the terms and conditions of this transaction and the Company's
business and financial condition.
(b) The Purchaser confirms that he has had adequate opportunity to
obtain such independent legal and tax advice and financial planning services as
he has deemed appropriate prior to making a decision to purchase the Shares.
(c) Except as expressly set forth herein, no representations or
warranties, oral or otherwise, have been made to the Purchaser, including
without limitation, any representations concerning the future prospects of the
Company, by the Company or any agent, employee or affiliate of the Company, or
any other person whether or not associated with this transaction, and in
entering into this transaction the Purchaser is not relying upon any
information, other than that contained in the Disclosure Documents, and the
results of its own independent investigation. The Purchaser has obtained
sufficient information to evaluate the merits and risks of its investment and to
make an informed investment decision.
4.5 RESTRICTED SECURITIES. The Purchaser understands and acknowledges
----------------------
that the Shares it is purchasing hereunder are "restricted securities" under
federal and state securities laws
10
insofar as they have not been registered under the 1933 Act or the securities
laws of any other jurisdiction, that they may not be resold or transferred
without compliance with the registration or qualification provisions of the 1933
Act or applicable federal and state securities laws or the laws of any other
jurisdiction or an opinion of counsel that an exemption from such registration
and qualification requirements is available. The Purchaser is familiar with SEC
Regulation D, Regulation S and Rule 144 promulgated under the 1933 Act, as
presently in effect, and the resale limitations imposed thereby and by the 1933
Act.
4.6 LIMITATIONS ON DISPOSITION. Without in any way limiting the
----------------------------
representations set forth above, the Purchaser further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a registration statement under the 1933 Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
(b)(i) The Purchaser shall have notified Company of the proposed
disposition and shall have furnished Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (ii) upon the request of
the Company, the Purchaser shall have furnished Company with an opinion of
counsel, reasonably satisfactory to Company, that such disposition will not
require registration of such securities under the 1933 Act and applicable state
securities laws.
The Purchaser understands that Company will issue stop transfer
instructions to its transfer agent with respect to the Shares and intends to
place a restrictive legend on every certificate as provided in Section 8.4
hereof.
4.7 ILLIQUID INVESTMENTS. The Purchaser's overall commitment to
---------------------
investments that are not readily marketable is not disproportionate to its net
worth and its investment in the Shares will not cause such overall commitment to
become excessive. The Purchaser has adequate means of providing for its current
needs and personal contingencies.
4.8 COMPANY RELIANCE ON QUESTIONNAIRE AND REPRESENTATIONS AND
---------------------------------------------------------------
WARRANTIES. The Purchaser understands, acknowledges and agrees that the Company
----------
is relying on the accuracy of the responses by Purchaser contained in the
Confidential Purchaser Questionnaire heretofore delivered by you to the Company
(as well as Purchaser representations and warranties contained in this
Agreement), which responses, representations and warranties you warrant to be
true, complete and correct.
4.9 ACCREDITED INVESTOR STATUS. The Purchaser is an "accredited
----------------------------
investor" as such term is defined in SEC Rule 501(a) of Regulation D promulgated
under the 0000 Xxx.
4.10 PURCHASE FOR OWN ACCOUNT. The Purchaser is acquiring the Shares
--------------------------
for its own account, for investment purposes and not for resale or with a view
to any distribution, or in connection with any distribution thereof.
11
ARTICLE V
CONDITIONS TO PURCHASER'S OBLIGATIONS
-------------------------------------
Purchaser's obligations to purchase the Investment Shares under this
Agreement are subject to the fulfillment of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
------------------------------
of the Company contained in Article III hereof shall be true as of the Closing
Date.
5.2 COMPANY'S PERFORMANCE. The Company shall have performed and
----------------------
complied with all agreements, obligations and conditions contained in this
Agreement, which performance or compliance is required on or before the Closing
Date.
5.3 TRANSACTION DOCUMENTS. Each of the Transaction Documents shall
----------------------
have been fully executed and delivered by the parties thereto, and shall be in
full force and effect.
5.4 ESCROW RELEASE CONDITIONS. Each of the Escrow Release Conditions
---------------------------
shall have been satisfied.
5.5 LEGAL PROCEEDINGS. No proceeding shall, on the Closing Date, be
------------------
pending or threatened seeking to restrain, prohibit or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.
5.6 OFFICERS' CERTIFICATE. The Company shall have delivered an
----------------------
Officers' Certificate to the Purchaser to the effect that all conditions
contained in this Article V have been complied with.
ARTICLE VI
CONDITIONS TO COMPANY'S OBLIGATIONS
-----------------------------------
The obligations of the Company to sell and issue the Investment Shares to
Purchaser are subject to the fulfillment on or before the Closing of each of the
following conditions by Purchaser:
6.1 REPRESENTATIONS AND WARRANTIES. The Purchaser's representations
--------------------------------
and warranties contained in Article IV shall be true on and as of the Closing
Date with the same effect as though made on and as of the date thereof.
6.2 PAYMENT. The Purchaser shall have delivered into escrow the full
-------
amount of the Investment Purchase Funds.
6.3 TRANSACTION DOCUMENTS. Each of the Transaction Documents shall
----------------------
have been fully executed and delivered by the parties thereto, and shall be in
full force and effect and
12
Purchaser, if requested by Company, shall have delivered to the Company an
executed Confidential Purchaser Questionnaire.
ARTICLE VII
REGISTRATION RIGHTS
-------------------
The Company covenants and agrees as follows:
7.1 DEFINITIONS. For purposes of this Article 7:
-----------
(a) The term "Holder" means any person owning or having the right
to acquire Shares or Registrable Securities.
(b) The term "1934 Act" means the Securities Exchange Act of 1934,
as amended.
(c) The term "Public Corporation" means a corporation which has a
class of equity securities registered pursuant to Section 12 of the 1934 Act, or
which is required to file periodic reports pursuant to Section 15(d) of the 1934
Act.
(d) The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act, and such registration
statement or document becoming effective.
(e) The term "Registrable Securities" means (i) the Shares, (ii)
any shares of Common Stock issued by Company pursuant to Section 1.1 or 1.2
hereof, and (iii) any Common Stock issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the Shares and the shares referred to in clause (ii) above, but excluding in all
cases, however, any Registrable Securities sold by a person in a transaction in
which his rights under this Article VII are not assigned; provided, however,
-------- -------
that any such securities shall cease to be Registrable Securities when one or
more registration statements with respect to the sale of such securities shall
have become effective under the 1933 Act and all such securities shall have been
disposed of in accordance with the plan of distribution set forth therein.
(f) The number of shares of "Registrable Securities Then
Outstanding" shall be equal to the sum of the number of shares of Common Stock
outstanding which are Registrable Securities.
(g) The term "Registration Expenses" means all registration,
qualification, listing and filing fees, printing expenses, escrow fees and blue
sky fees, fees and disbursements of counsel for the Company and of the Company's
independent certified public accountants, in each case incident to or required
by the registration under this Agreement, and any other fees and expenses of the
registration under this Agreement which are not Selling Expenses.
13
(h) The term "Selling Expenses" means all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and all fees and disbursements of counsel for any
Holder.
(i) All other capitalized terms used in this Section that are not
defined herein shall have the meaning otherwise given in this Agreement.
7.2 REGISTRATION OBLIGATION. The Company agrees to cause a
-------------------------
registration statement on Form X-0, XX-0 or SB-2 to be filed with the Securities
Exchange Commission as to the Registrable Securities to be registered under the
1933 Act not later than one hundred twenty (120) days after the Closing Date and
use its reasonable best efforts to have such registration statement declared
effective within one hundred eighty (180) days of the Closing Date.
7.3 PIGGYBACK REGISTRATION RIGHTS.
-------------------------------
(a) If, at any time or from time to time, the Company shall
determine to register any of its Common Stock, either for its own account or the
account of a security holder or holders, other than pursuant to a Registration
Statement on Form S-4 or Form S-8, the Company will (x) promptly give each
Holder written notice thereof, and (y) include in such registration (and any
related qualification under blue sky or other state securities laws), and in any
underwriting involved therein, all of the Registrable Securities specified in a
written request or requests made by any Holder within thirty (30) days after
receipt of such written notice from the Company.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as part of the written notice given pursuant to Section
7.3(a). In such event, the right of any Holder to registration pursuant to this
Section 7.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of Registrable Securities owned by the Holder in
the underwriting to the extent provided under this Section 7.3. All Holders
proposing to distribute their Registrable Securities through such underwriting
shall (together with the Company and any other holders of securities of the
Company distributing their securities through such underwriting) enter into an
underwriting agreement with the managing or lead managing underwriter selected
by the Company in the form customarily used by such underwriter with such
changes thereto as the parties thereto shall agree. Notwithstanding any other
provision of this Section 7.3, if the managing or lead managing underwriter
determines that market factors require that the number of Registrable Securities
and other securities requested to be included in the registration be limited,
the managing or lead managing underwriter may reduce the number of Registrable
Securities and securities of any other holder of securities to be included in
the registration. If the registration includes an underwritten primary
registration on behalf of the Company, the reduction shall be taken (i) first
from and to the extent of the securities requested to be included in such
registration by the Holders and the holders of any other securities pro rata
--- ----
according to the number of securities requested by the Holders and such holders
to be included in the registration, and (ii) thereafter from the securities to
be registered on behalf of the Company. If the registration consists only of
any underwritten secondary registration on behalf of holders of securities of
the Company, the reduction shall be taken (i) first from and to the extent of
the
14
securities requested to be included in the registration by the Holders and any
other holders of securities included in the registration other than pursuant to
demand registration rights pro rata according to the number of securities
--- ----
requested by the Holders and such holders to be included in the registration and
(ii) thereafter from securities, if any, to be registered on behalf of holders
of securities included in the registration pursuant to demand registration
rights. The Company shall advise all Holders and other holders participating in
such underwriting as to any such limitation and the number of shares that may be
included in the registration and underwriting. If any Holder disapproves of the
terms of any such underwriting, such Holder may elect to withdraw therefrom by
written notice to the Company and the managing or lead underwriter. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
(c) The Company may withdraw a registration for which registration
rights have been exercised pursuant to this Section 7.3 at any time prior to the
time it becomes effective.
7.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
--------------------------
connection with a registration pursuant to this Article 7 shall be borne by the
Company. All Selling Expenses relating to the Registrable Securities registered
on behalf of the Holders shall be borne by the Holders of such Registrable
Securities pro rata based upon the total number of Registrable Securities
--- ----
included in the registration or, if such Selling Expenses are specifically
allocable to Registrable Securities held by specific Holders, by such Holders to
the extent related to the sale of such Registrable Securities.
7.5 REGISTRATION PROCEDURES.
------------------------
(a) In connection with the registration of Registrable Securities
required pursuant to this Article 7, the Company shall as expeditiously as is
reasonable:
(i) prepare and file with the SEC on any appropriate form a
registration statement with respect to such Registrable Securities and use its
reasonable reasonable best efforts to cause such registration statement to
become and remain effective for the period described in paragraph (ii) below;
(ii) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the 1933
Act with respect to the disposition of all Registrable Securities and other
securities covered by such registration statement the earliest of (w) when the
Shares have been sold pursuant to Rule 144 promulgated under the 1933 Act (or
any successor provision) ("Rule 144") or such registration statement, (x) when
the Shares have been otherwise transferred and a new certificate for the Shares
not bearing a legend restricting further transfer shall have been delivered by
the Company, (y) when all of the Holder's and its Affiliates' remaining Shares
can be sold in a single transaction in compliance with Rule 144, or (z) when the
Shares have ceased to be outstanding;
15
(iii) furnish to each seller of such Registrable Securities
such number of conformed copies of such registration statement and of each such
amendment and supplement thereto (at least one of which shall include all
exhibits), such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the 1933 Act, such documents incorporated by
reference in such registration statement or prospectus, and such other
documents, as such seller may reasonably request in order to facilitate the sale
or disposition of such Registrable Securities;
(iv) use its reasonable best efforts to register or qualify
all Registrable Securities and other securities covered by such registration
statement under such other securities or "blue sky" laws of such jurisdictions
as each seller shall reasonably request, and do any and all other acts and
things as may be reasonably necessary to consummate the disposition in such
jurisdictions of the Registrable Securities covered by such registration
statement, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, or to subject itself to taxation in respect of
doing business in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;
(v) immediately notify each seller of Registrable Securities,
at any time when a prospectus relating thereto is required to be delivered under
the Act, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing or if it is necessary, in the opinion
of counsel to the Company, to amend or supplement such prospectus to comply with
law, and at the request of any such seller prepare and furnish to any such
seller a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing and shall otherwise comply in all
material respects with law and so that such prospectus, as amended or
supplemented, will comply with law;
(vi) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, beginning with the first
month of the first fiscal quarter after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the 1933 Act;
(vii) use its reasonable best efforts to list such securities
on each securities exchange or over-the-counter market on which shares of Common
Stock are then listed, if such securities are not already so listed and if such
listing is then permitted under the rules of such exchange and, if shares of
Common Stock are not then listed on a securities exchange or over- the-counter
market, to use its reasonable best efforts to cause such securities to
16
be listed on such securities exchange or over-the-counter market as such seller
shall reasonably request;
(viii) use its reasonable best efforts to provide a transfer
agent and registrar for such Registrable Securities not later than the effective
date of such registration statement; and
(b) The Holder or Holders of Registrable Securities included in
any registration shall furnish to the Company such information regarding such
Holder or Holders, the Registrable Securities held by them and the distribution
proposed by such Holder or Holders as the Company may from time to time
reasonably request and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
(c) In the case of an underwritten public offering, the Holder or
Holders of Registrable Securities included in any registration shall, upon
request by the Company and the managing or lead managing underwriter, execute
and deliver custodian agreements and powers of attorney in form and substance
reasonably satisfactory to the Company and such Holder or Holders and as shall
be reasonably necessary to consummate the offering.
7.6 INDEMNIFICATION.
---------------
(a) The Company will indemnify each Holder with respect to which
registration has been effected pursuant to this Agreement, each of its officers
and directors, if any, and each underwriter, if any, and each person who
controls the Holder or any such underwriter within the meaning of Section 15 of
the 1933 Act, against any and all losses, claims, damages, liabilities or
expenses (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement or prospectus, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances in which they were made, not
misleading, or any violation by the Company of the 1933 Act or any rule or
regulation promulgated under the 1933 Act applicable to the Company in
connection with any such registration, and the Company will reimburse each such
Holder, each such underwriter and each person who controls any such underwriter,
for any legal and other expenses reasonably incurred, as such expenses are
incurred, in connection with investigating, preparing or defending any such
claims, loss, damage, liability or action; provided, however, that the Company
-------- -------
will not be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission or alleged untrue statement or omission, made in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder or underwriter and stated to be specifically for
use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration is being
effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered
17
by such a registration statement, each Person who controls the Company or such
underwriter within the meaning of Section 15 of the 1933 Act and each other such
Holder against any and all losses, claims, damages, liabilities and expenses (or
actions in respect thereof), arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement or prospectus, or any omission (or alleged omission) to state therein
a material fact required to be stated therein or necessary to make the statement
therein, in the light of the circumstances under which they were made, not
misleading, and will reimburse the Company, such Holders, underwriters or
control persons for any legal or any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement or
prospectus in reliance upon and in conformity with written information furnished
to the Company by such Holder. Notwithstanding the foregoing, the liability of
each Holder under this Section 7.6 shall be limited to an amount equal to the
aggregate proceeds received by such Holder from the sale of Registrable
Securities hereunder, unless such liability arises out of or is based on willful
conduct by such Holder.
(c) Each party entitled to indemnification under this Section 7.6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claims or any
litigation resulting therefrom; provided, however, that counsel for the
-------- -------
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (which approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such Indemnified Party's expense; provided, however, that the failure
-------- -------
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. Notwithstanding the foregoing, the Indemnifying Party shall
not be entitled to assume the defense for matters as to which there is, in the
opinion of counsel to the Indemnifying Party, a conflict of interest or separate
and different defenses. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and the litigation resulting therefrom.
7.7 CONTRIBUTION.
------------
(a) If the indemnification provided for in Section 7.6 hereof
is unavailable to the Indemnified Parties in respect of any losses, claims,
damages, liabilities or expenses (or actions in respect thereof) referred to
therein, then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses (or
18
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and the Indemnified
Party on the other in connection with the statement or omission which resulted
in such losses, claims, damages, liabilities or expenses (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue statement (or alleged untrue statement), of a material fact or the
omission (or alleged omission) to state a material fact relates to information
supplied by the Indemnifying Party or the Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and each Holder agree that it
would not be just and equitable if contribution pursuant to this Section 7.7
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above.
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages, liabilities or expenses (or actions in respect thereof)
referred to above in this Section shall be deemed to include any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim.
(b) Notwithstanding anything to the contrary contained
herein, the obligation of each Holder to contribute pursuant to this Section 7.7
is several and not joint and no selling Holder shall be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities of such selling Holder were offered to the public exceeds
the amount of any damages which such selling Holder has otherwise been required
to pay by reason of such untrue statement (or alleged untrue statement) or
omission (or alleged omission).
(c) No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
7.8. EXCHANGE ACT REGISTRATION. The Company covenants and agrees
---------------------------
that until such time as there shall be no Registrable Securities outstanding:
(a) it will, if required by law, maintain an effective
registration statement (containing such information and documents as the SEC
shall specify) with respect to the Common Stock under Section 12(g) of the 1934
Act and will file in a timely manner such information, documents and reports as
the SEC may require or prescribe for companies whose stock has been registered
pursuant to said Section 12(g);
(b) it will, if a registration statement with respect to the
Common Stock under Section 12(b) or Section 12(g) of the 1934 Act is effective,
make whatever filings with the SEC or otherwise make generally available to the
public such financial and other information as may be necessary in order to
enable the Holders to sell shares of Common Stock pursuant to the provisions of
Rule 144 or any successor rule or regulation thereto or any statute hereafter
adopted to replace or to establish the exemption that is now covered by Rule
144;
19
(c) it will, if no longer required to file reports pursuant
to Section 12 (g) of the 1934 Act, upon the request of any Holder, make publicly
available the information specified in subparagraph (c) (2) of Rule 144, and
will take such further action as any Holder may reasonably request, all to the
extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the 1933 Act within the limitation of the
exemptions provided by Rule 144 or any similar rule or regulation hereafter
adopted by the SEC; and
(d) upon the request of any Holder, it will deliver to such
Holder a written statement as to whether it has complied with the requirements
of this Section 7.8.
The Company represents and warrants that such registration statement or any
information, documents or report filed with the SEC in connection therewith or
any information so made public shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements contained therein not misleading. The
Company agrees to indemnify and hold harmless (or to the extent the same is not
enforceable, make contribution to the Holders, their partners, advisory
committee members, officers, directors and employees acting for any Holder in
connection with any offering or sale by such Holder of Registrable Securities or
any person, firm or corporation controlling (within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act) such Holder from and
against any and all losses, claims, damages, liabilities or expenses (or actions
in respect thereof) arising out of or resulting from any breach of the foregoing
representation or warranty, all on terms and conditions comparable to those set
forth in Section 7.6; provided, however, that the Company shall be given written
-------- -------
notice and an opportunity to assume on terms and conditions comparable to those
set forth in Section 7.6 the defense thereof.
7.9 DELAY OF REGISTRATION. No holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Article VII.
7.10 AMENDMENTS AND WAIVERS. Any term or provision of the registration
----------------------
rights stated in this Agreement may be amended and the observance of any term of
such rights may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company and the holders of at least sixty-seven percent (67%) of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance
with this section shall be binding upon each holder of the Shares and any
Registrable Securities then outstanding, each future holder of Shares and such
Registrable Securities, and the Company.
ARTICLE VIII
MISCELLANEOUS AND FURTHER PROVISIONS
------------------------------------
The Purchaser agrees that:
8.1 NO TRANSFER OF SHARES UNTIL REGISTERED. Purchaser will not
-------------------------------------------
transfer or assign the Investment Shares except as provided in Section 4.6.
20
8.2 SUCCESSORS AND ASSIGNS. This Agreement and this Agreement shall be
----------------------
binding upon the parties and their respective successors and assigns.
8.3 INDEMNIFICATION REGARDING QUESTIONNAIRE. Purchaser shall
-----------------------------------------
indemnify, hold harmless and defend the Company and its affiliates and agents
with respect to any and all loss, damage, expense, claim, action or liability
any of them may incur as a result of the breach or untruth of any
representations or warranties made by the Purchaser in the Confidential
Purchaser Questionnaire completed by the Purchaser, and the Purchaser agrees
that in the event of any breach or untruth of any representations or warranties
made by the Purchaser herein or in the Confidential Purchaser Questionnaire, the
Company may, at its option, forthwith rescind the sale of the Shares to the
Purchaser, if the failure to rescind due to the breach or untruth by Purchaser
would cause the Company to be in violation of the registration requirements of
the 1933 Act or applicable state securities laws.
8.4 LEGEND. A legend in substantially the following form will be
------
placed on all documents or certificates evidencing the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE
ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933
ACT.
8.5 SURVIVAL OF WARRANTIES. The warranties, representations and
------------------------
covenants of the parties contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing.
8.6 ENTIRE AGREEMENT. This Agreement, together with the other
-----------------
Transaction Documents, constitutes the entire agreement among the parties, and
no party shall be liable or bound to any other party in any manner by any
warranties, representations, guarantees or covenants except as specifically set
forth in this Agreement. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective successors and 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 assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.
8.7 GOVERNING LAW. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of Texas (except where Nevada law
pertains to the corporate matters of Company) without regard to conflicts of
law.
21
8.8 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.9 NOTICES. All notices, requests, demands and other communications
-------
under this Agreement shall be in writing and shall be deemed to have been duly
given (i) on the date of service if served personally on the party to whom
notice is to be given, (ii) on the date of delivery if sent by prepaid overnight
courier services, (iii) on the fifth day after the date of mailing if mailed to
the party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and (iv) upon the receipt of a confirmation of
transmission if sent by facsimile transmission at the following addresses. Any
party may change its address for purposes of this section by giving the other
party written notice of the new address in the manner set forth above.
To Purchaser: CBarney Invesments, Ltd.
000 Xxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx Xxxxxx
FAX: (000) 000-0000
With a copy to: Gardere Xxxxx Xxxxxx, L.L.P.
0000 Xxxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxxxx
FAX: (000) 000-0000
To Company: Petrosearch Energy Corporation
0000 Xxxxxxx Xxxxx, Xxxxx 000X
Xxxxxxx, Xxxxx 00000
Attention: President
FAX: (000) 000-0000
8.10 SEVERABILITY. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provisions were so excluded and shall be enforceable in accordance with its
terms.
8.11 AMENDMENT AND/OR MODIFICATION. Neither this Agreement, nor any
-------------------------------
term or provision hereof, may be changed, waived, discharged, amended, modified
or terminated orally, or in any manner other than by an instrument in writing
signed by each of the parties hereto.
8.12 HEADINGS. The various headings of this Agreement are inserted for
--------
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
SIGNATURES APPEAR ON THE FOLLOWING PAGES
22
EXECUTED as of the Effective Date above.
PETROSEARCH ENERGY CORPORATION, A
NEVADA CORPORATION
By: /s/
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
CBARNEY INVESTMENTS, LTD., A
TEXAS LIMITED PARTNERSHIP
By: /s/
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
LIST OF ATTACHMENTS:
----------------------
Exhibit A - Escrow Agreement
Schedule 1 - Capitalization of Company
Schedule 2 - Fortuna Energy, L.P. Credit Facility
Schedule 3 - Pending Litigation
Schedule 4 - Material Contracts per Section 3.22
23
EXHIBIT "A"
-----------
THE UNDERSIGNED, XXXX XXXXXXXXXXXX, OF XXXXXXX XXXXX XXXXXX LLP WHO HAS
SERVED AS COUNSEL TO PURCHASER UNDER THIS AGREEMENT, AGREES TO ACT AS ESCROW
AGENT FOR THE PARTIES AS CONTEMPLATED IN SECTION 2.1 OF THIS AGREEMENT AND IN
SUCH CAPACITY TO EFFECT THE DELIVERY OF THE INVESTMENT PURCHASE FUNDS TO THE
COMPANY UPON DELIVERY TO ESCROW AGENT BY THE COMPANY OF THE INVESTMENT SHARES
AND THE OFFICERS' CERTIFICATE DESCRIBED IN SECTION 5.6 OF THE AGREEMENT.
/s/
---------------------------------
XXXX XXXXXXXXXXXX
24
SHARE PURCHASE AGREEMENT
------------------------
This Share Purchase Agreement ("Agreement") is made as of January 24, 2005,
("Effective Date") between PETROSEARCH ENERGY CORPORATION, a Nevada corporation
(the "Company") and CBARNEY INVESTMENTS, LTD., a Texas limited partnership, or
its assigns ("Purchaser").
A. Company is in the business of acquiring, developing and operating
oil and gas properties in several states, including, Texas, Oklahoma, North
Dakota, Montana and Mississippi. Company has obtained commitments from industry
joint venturers to develop several drilling prospects, thereby requiring an
accelerated leasing program in the target areas. Additional acquisition and
exploration opportunities have contemporaneously been presented by third parties
to Company which Company desires to pursue in addition to the near term drilling
projects.
B. Company is the survivor of a December 30, 2004 merger between
Company and Petrosearch Corporation, a Texas corporation, the former parent of
Company, immediately following a 6.5 to 1 reverse split of Petrosearch
Corporation's Common Stock.
C. Company has elected to meet certain of its working capital needs
post-merger by the placement of Company Common Stock, par value $.001, with one
or more willing, sophisticated investors and Purchaser desires to acquire a
specified number of shares of Company Common Stock under the terms and
conditions set forth herein.
TERMS OF AGREEMENT:
NOW, THEREFORE, FOR VALUE RECEIVED, the sufficiency of which is
acknowledged by the parties, the parties hereto agree as follows:
ARTICLE I
NUMBER AND PURCHASE PRICE FOR SHARES/OPTION FOR ADDITIONAL SHARES/ADJUSTMENT OF
-------------------------------------------------------------------------------
PRICE FOR MORE FAVORABLE PLACEMENT
----------------------------------
1.1 NUMBER OFSHARES TO BE PURCHASED/PURCHASE PRICE. Subject to all of
-----------------------------------------------
the terms and conditions of this Agreement, Company agrees to issue and sell to
Purchaser (sometimes referred to herein as a "Holder") and Purchaser agrees to
purchase, 105,129 shares of Company Common Stock, par value $.001 (the
"Investment Shares"), at a cash price of $1.95 per share, or a total purchase
price of TWO HUNDRED FIVE THOUSAND AND NO/100 DOLLARS ($205,000.00) [the
"Investment Purchase Funds"]. This sale, if consummated, shall be made by the
Company directly to Purchaser without the assistance of placement agents or a
broker-dealer.
1.2 ADJUSTMENT UPON MORE FAVORABLE PLACEMENT. If at any time during
--------------------------------------------
the period from the execution of this Agreement until thirty (30) days after the
release to Company from escrow (described herein below) of the Investment
Purchase Funds, Company shall sell to any third party other than members of
Company's management, Common Stock at less than $1.95 per share, then the
purchase price of the Investment Shares shall be automatically adjusted to the
lower price made available to the third party and such additional Common Shares
shall be issued to Purchaser and delivered to Purchaser (or to Escrow Agent if
the Investment Shares are still in escrow) as are necessary to make the purchase
price per share paid by Purchaser equal the more favorable price made available
to the third party.
ARTICLE II
ESCROW PENDING CERTAIN TRANSACTIONS/USE OF PROCEEDS
---------------------------------------------------
2.1 ESCROW DEPOSIT. Upon execution of this Agreement, Purchaser shall
---------------
deposit the Investment Purchase Funds with the escrow agent (the "Escrow Agent")
named in the Escrow Agreement attached hereto as Exhibit "A". The Investment
------------
Purchase Funds shall remain in escrow pending issuance of the Investment Shares
to Purchaser all as documented to Escrow Agent by delivery of a stock
certificate in Purchaser's name evidencing the Investment Shares and containing
the usual and customary Rule 144 restrictive legend. Should, for any reason,
Company fail to deliver the certificate within five (5) business days after
deposit of the Investment Purchase Funds with Escrow Agent, or in the event that
the additional conditions set forth in Article V (collectively, the "Escrow
Release Conditions") are not met by such time, then, at Purchaser's option,
Purchaser may terminate this Agreement and the corresponding Escrow Agreement,
whereupon the Investment Purchase Funds shall be returned by Escrow Agent to
Purchaser without interest and without deduction for escrow fees and expenses.
In the event that the Escrow Release Conditions are satisfied by Company by the
fifth business day after deposit of the Investment Purchase Funds with Escrow
Agent, then, the Investment Purchase Funds shall be released immediately from
escrow to Company by Escrow Agent and Purchaser shall execute with Company an
instruction letter directing such release to Company (such release date being
sometimes referred to as the "Closing Date").
2.2 USE OF PROCEEDS. The Investment Purchase Funds shall be applied to
---------------
Company's general working capital needs without specific allocation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
-----------------------------------------
As an inducement to the Purchaser to enter into this Agreement, Company
represents, warrants and agrees that:
3.1 ORGANIZATION AND GOOD STANDING. The Company and each of its
---------------------------------
subsidiaries have been duly organized in accordance with the laws of their
respective jurisdictions of
2
incorporation and exist in good standing under such laws with full power and
authority to conduct their businesses as described in the Disclosure Documents
(defined herein below), and are duly qualified and in good standing in each
other jurisdiction in which such qualification is required except where the
failure to so qualify, both individually and in the aggregate, does not have a
material adverse effect on the condition (financial or otherwise), business or
prospects of the Company or on its properties or assets. No actions or
proceedings to dissolve the Company are pending or, to the best knowledge of the
Company, threatened.
3.2 CORPORATE POWER AND AUTHORITY; DUE AUTHORIZATION. Company has full
------------------------------------------------
corporate power and authority to execute and deliver this Agreement and all
other documents required to be entered into by the Company pursuant hereto (this
Agreement and such other documents being hereinafter collectively referred to
as, the "Transaction Documents") and to consummate the transactions contemplated
by the Transaction Documents. This Agreement and the other Transaction Documents
have been duly authorized by all necessary corporate action of the Company and,
when executed and delivered, will be legal, valid and binding obligations of the
Company, enforceable in accordance with their respective terms except to the
extent that the enforceability hereof and thereof may be limited by bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights generally or
by general principles of equity.
3.3 NO VIOLATION. The execution, delivery and performance of this
-------------
Agreement and the other Transaction Documents by the Company and the
consummation of the transactions herein and therein contemplated does not and
will not result in a breach or violation of any of the terms and provisions of
the articles or certificate of incorporation or by-laws of the Company as in
effect on the date hereof (the "Organizational Documents"), and does not and
will not constitute a material default under any indenture, mortgage, deed of
trust or other material agreement or instrument to which the Company is a party
or by which the Company is bound, and does not and will not violate or
contravene (i) any governmental statute, rule or regulation applicable to the
Company or (ii) any order, writ, judgment, injunction, decree, determination or
award which has been entered against the Company, the violation or contravention
of which would materially and adversely affect the condition (financial or
otherwise), business or prospects of the Company or on its properties or assets.
3.4 CAPITALIZATION. The Company has a duly authorized capitalization
--------------
as set forth in Schedule 1 attached hereto. The outstanding shares of Common
Stock have been duly authorized and validly issued, fully paid and
nonassessable. None of the outstanding shares of Common Stock has been issued in
violation of the preemptive rights of any security holder of the Company. None
of the holders of the outstanding shares of Common Stock is subject to personal
liability solely by reason of being such a holder. Neither the holders of the
outstanding shares of Common Stock nor the holders of any other securities or
rights of the Company are entitled to pre-emptive or other rights or agreements
for the purchase or acquisition from the Company of any shares of the Common
Stock or to subscribe for the any of the Shares. The Company is not a party or
subject to any agreement or understanding, and, to the knowledge of the Company,
there is no agreement or understanding, between any persons and/or entities,
which affects or relates to the voting or giving of written consents with
respect to any security of the Company or by a director of the Company.
3
3.5 AUTHORIZATION AND ISSUANCE OF SHARES. The Shares, when issued and
-------------------------------------
paid for, will constitute duly authorized, legally and validly issued securities
of the Company, fully paid and non-assessable.
3.6 DISCLOSURE DOCUMENTS. The documents furnished by the Company to
---------------------
Purchaser in connection with this sale include audited financial statements
through December 31, 2003, unaudited compiled financial statements through June
30, 2004, the Company's fact summary sheet and business strategies and plan, a
private placement memorandum dated December 15, 2004, and supplement thereto, a
letter to Shareholders regarding the reverse split and redomicile transaction(s)
and prospect summaries and related materials regarding the various prospect
areas which the Company contemplates acquiring and developing in the near term,
and various economic models and projections (collectively, the "Disclosure
Documents"). When read as one document, the Disclosure Documents furnish all
information required to be furnished to accredited investors under Regulation D
("Regulation D") and Regulation S ("Regulation S") of the Securities and
Exchange Commission ("SEC") promulgated under the Securities Act of 1933, as
amended (the "1933 Act"). The Disclosure Documents and any amendments or
supplements thereto: (i) do and will, as the case may be, contain all material
statements and information which are required to be included in accordance with
Regulation D and Regulation S and the 1933 Act, and applicable state, provincial
and local laws, (ii) do and will in all material respects conform to the
requirements of Regulation D and Regulation S and the 1933 Act and applicable
state, provincial and local laws and (iii) do not and will not, as the case may
be, include any untrue statement of material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
3.7 REPRESENTATIONS AND WARRANTIES. No representation or warranty by
--------------------------------
the Company in this Agreement contains, or on the Closing Date will contain, any
untrue statement of material fact or omits or will omit to state any material
fact necessary, in light of the circumstances under which it is made, in order
to make the statements made herein not misleading. There is no fact known to
the Company that has or could have a material adverse effect on the Company,
which has not been set forth in this Agreement (including attached schedules) or
in the Disclosure Documents.
3.8 CONSENTS AND APPROVALS. No consent, approval, order, or
------------------------
authorization of, or declaration, filing, or registration with, any governmental
entity is required to be obtained or made by the Company or any of its
subsidiaries in connection with the execution, delivery, or performance by the
Company of this Agreement and the execution, delivery, and where applicable,
performance of the other Transaction Documents to which it is a party or the
consummation of the transactions contemplated hereby and thereby, other than (i)
compliance with any applicable requirements of the 1933 Act, (ii) compliance
with any applicable requirements of the Securities Exchange Act of 1934 (the
"1934 Act"), (iii) compliance with any applicable state securities laws; and
(iv) such consents, approvals, orders, or authorizations which, if not obtained,
and such declarations, filings, or registrations which, if not made, would not,
individually or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), business or prospects of the Company or on
its properties or assets. Except for such consents as are obtained before or
contemporaneously with consummation of the Closing, no consent or approval of
any other Person is required to be obtained or made by the Company or
4
any of its subsidiaries in connection with the execution, delivery, or
performance by the Company of this Agreement and execution, delivery and, where
applicable, performance of the other Transaction Documents to which it is a
party or the consummation of the transactions contemplated hereby and thereby.
3.9 FINANCIAL CONDITION. The audited consolidated balance sheet of the
-------------------
Company and its subsidiaries as at December 31, 2003, and the related
consolidated statements of income, stockholders' equity and cash flow of the
Company and its subsidiaries for the fiscal year ended on said date, with the
opinion thereon of Xxx, Xxxxxxxx & Xxxxxxx, L.L.P. heretofore furnished to the
Purchaser, and the unaudited consolidated balance sheet of the Company and its
subsidiaries as at June 30, 2004, and the related consolidated statements of
income, stockholders' equity and cash flow of the Company and its subsidiaries
for the six-month period ending on such date heretofore furnished to the
Purchaser, are complete and correct and fairly present the consolidated
financial condition of the Company and its subsidiaries as at said dates and the
results of its operations for the fiscal year and the six-month period ending on
said dates, all in accordance with generally accepted accounting principles
("GAAP"), as applied on a consistent basis (subject, in the case of the interim
financial statements, to normal year-end adjustments). Other than the credit
facility with Fortuna Energy, L.P. described in Schedule 2 attached hereto,
neither the Company nor any of its subsidiaries has on the date hereof any debt,
trade payables, contingent liabilities, liabilities for taxes, unusual forward
or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
such financial statements or except to the extent that the existence of any of
the foregoing would not have a material adverse effect on the condition
(financial or otherwise), business or prospects of the Company or its properties
or assets. Since December 31, 2003, there has been no change or event having or
reasonably likely to have a material adverse effect on the condition (financial
or otherwise), business or prospects of the Company or its properties or assets,
except as disclosed to the Purchaser in writing. Since the date of such
financial statements, neither the business nor the properties of the Company's
subsidiaries, taken as a whole, have been materially and adversely affected as a
result of any fire, explosion, earthquake, flood, drought, windstorm, accident,
strike or other labor disturbance, embargo, requisition or taking of property or
cancellation of contracts, permits or concessions by any governmental entity,
riot, activities of armed forces or acts of God or of any public enemy.
3.10 NO GENERAL SOLICITATION OR INTEGRATED OFFERING. Neither the
----------------------------------------------
Company nor any distributor participating on the Company's behalf in the
transactions contemplated hereby (if any) nor any person acting for the Company,
or any such distributor, has conducted any "general solicitation" (as such term
is defined in Regulation D) with respect to any of the Shares being offered
hereby. Neither the Company nor any of its affiliates, nor any person acting on
its or their behalf, has directly or indirectly made any offers or sales of any
security or solicited any offers to buy any security under circumstances that
would require registration of the Shares being offered hereby under the 1933 Act
or cause this offering of Securities to be integrated with any prior offering of
securities of the Company for purposes of the 1933 Act, which result of such
integration would require registration under the 1933 Act, or would trigger any
applicable stockholder approval provisions.
3.11 SUBSIDIARIES. Each of the Company's subsidiaries is identified in
Schedule 1
5
attached hereto and is duly incorporated or organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization, as applicable, and has all requisite corporate or partnership
power and authority in all material respects to own, lease, and operate its
properties and to carry on its business as now being conducted. Each of its
subsidiaries is duly qualified to do business as a foreign corporation or
limited partnership, as applicable, and is in good standing in each jurisdiction
where such qualification is necessary, except where the failure to so qualify or
to be in good standing would not have a material adverse effect on the condition
(financial or otherwise), business or prospects of the Company or its properties
or assets. Other than the rights of certain subsidiary presidents to acquire ten
percent of their subsidiary after payout of that subsidiary's exploration
projects, there are outstanding (i) no securities of any of its subsidiaries
convertible into or exchangeable for shares of capital stock or other voting
securities of any subsidiary or of the Company and (ii) no options or other
rights to acquire from any of its subsidiaries and no obligation of any of its
subsidiaries to issue or sell, any shares of capital stock or other voting
securities of any of its subsidiaries or of the Company or any securities of any
subsidiary or of the Company convertible into or exchangeable for such capital
stock or voting securities.
3.12 TRANSACTIONS WITH AFFILIATES. Except as to drilling agreements
------------------------------
with Maverick Drilling Co., Inc., a company controlled by the Xxx Xxxxxxx
family, none of the officers, directors or employees of the Company or any of
its subsidiaries is currently a party to any transaction with the Company or any
of its subsidiaries (other than for ordinary course services solely in their
capacity as officers, directors or employees), 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 such officer, director or employee or any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has an ownership interest of five percent or more or is an
officer, director, trustee or partner.
3.13 TITLES AND ASSETS.
-------------------
(a) Each of the Company and its subsidiaries has good and defensible
title to, or valid leasehold interests in, all of its material assets and
properties, except for such assets and properties as are no longer used or
useful in the conduct of its businesses or as have been disposed of in the
ordinary course of business and except for such imperfections of title,
easements, rights of way and similar liens or other matters and failures of
title as would not, individually or in the aggregate, have a material adverse
effect on the condition (financial or otherwise), business or prospects of the
Company or its properties or assets. All such assets and properties, other than
assets and properties in which the Company has leasehold interests, are free and
clear of all Liens, other than those liens in favor of Fortuna Energy, L.P.
6
(b) All leases, licenses, permits, authorizations and agreements
necessary for the conduct of the business of the Company and its subsidiaries
are valid and subsisting, in full force and effect and there exists no default
or event or circumstance which with the giving of notice or the passage of time
or both would give rise to a default under any such leases, licenses, permits,
authorizations and agreements, which would have a material adverse effect on the
condition (financial or otherwise), business or prospects of the Company or its
properties or assets.
(c) The assets and properties currently owned, leased or licensed by
the Company and its subsidiaries, including, without limitation, all easements,
licenses, permits, authorizations and rights of way, include all assets and
properties necessary to permit the Company and its subsidiaries to conduct their
business in all material respects in the same manner as its business has been
conducted prior to the Closing Date.
(d) All of the assets and properties of the Company and its
subsidiaries that are reasonably necessary for the operation of their business
are in good working condition in all material respects and are maintained in
accordance with prudent business standards.
3.14 DEFAULTS. Neither the Company nor any of its subsidiaries is in
--------
default nor has any event or circumstance occurred which, but for the expiration
of any applicable grace period or the giving of notice, or both, would
constitute a default under any material agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound, except for defaults which in the aggregate would not
have a material adverse effect on the condition (financial or otherwise),
business or prospects of the Company or its properties or assets.
3.15 INSURANCE. All material policies of fire, liability, workmen's
---------
compensation and other forms of insurance owned or held by the Company and each
of its subsidiaries as of the date hereof are in full force and effect, all
premiums with respect thereto covering all periods up to and including the
Closing Date have been paid, and no notice of cancellation or termination has
been received with respect to any such policy. Such policies are sufficient for
compliance with all requirements of law and of all agreements to which the
Company or any of its subsidiaries is a party; are valid, outstanding and
enforceable policies; provide adequate insurance coverage in at least such
amounts and against at least such risks (but including in any event public
liability) as are usually insured against in the same general area by companies
engaged in the same or a similar business for the assets and operations of the
Company and each of its subsidiaries (taking into account the cost and
availability of such insurance); will remain in full force and effect through
the respective dates listed in such policies with the payment of additional
premiums; and will not in any way be affected by, or terminate or lapse by
reason of, the transactions contemplated by this Agreement.
3.16 LITIGATION. Except as disclosed in Schedule 3 hereto, there is no
----------
litigation, legal, administrative or arbitral proceeding, investigation or other
action of any nature pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its subsidiaries.
3.17 COMPLIANCE WITH THE LAW. Neither the Company nor any of its
--------------------------
subsidiaries has
7
violated any governmental requirement or failed to obtain any license, permit,
franchise or other governmental authorization necessary for the ownership of any
of its assets or properties or the conduct of its business, which violation or
failure would have (in the event such violation or failure were asserted by any
Person through appropriate action) a material adverse effect on the condition
(financial or otherwise), business or prospects of the Company or its properties
or assets. Except for such acts or failures to act as would not have a material
adverse effect on the condition (financial or otherwise), business or prospects
of the Company or its properties or assets, the assets and properties of the
Company have been maintained, operated and developed in a good and workmanlike
manner and in conformity with all applicable laws and all rules, regulations and
orders of all duly constituted authorities having jurisdiction and in conformity
with the provisions of agreements and other instruments comprising a part of the
assets and properties, including, without limitation, all leases, subleases or
other contracts comprising a part of the assets and properties.
3.18 ENVIRONMENTAL MATTERS. Except to the extent that the inaccuracy
----------------------
of any of the following, individually or in the aggregate, would not have a
material adverse effect on the condition (financial or otherwise), business or
prospects of the Company or its properties or assets:
(a) No property owned, leased or operated by the Company or any of
its subsidiaries, and no operations conducted thereon violate any order or
requirement of any court or Governmental Entity or any Environmental Laws;
(b) Without limitation of clause (a) above, no property owned, leased
or operated by the Company or any of its subsidiaries, nor the operations
currently conducted thereon or, to the best knowledge of the Company, by any
prior owner or operator of such property or operation, are in violation of or
subject to any existing, pending or threatened action, suit, investigation,
inquiry or proceeding by or before any court or Governmental Entity or subject
to any remedial obligations under Environmental Laws;
(c) All notices, permits, licenses or similar authorizations, if any,
required to be obtained or filed by the Company or any of its subsidiaries in
connection with the operation or use of any and all property of the Company and
each of its subsidiaries, including without limitation present, or to the best
of Company's knowledge, past treatment, storage, disposal or release of a
hazardous substance or solid waste into the environment, have been duly obtained
or filed, and the Company and each of its subsidiaries are in compliance with
the terms and conditions of all such notices, permits, licenses and similar
authorizations;
(d) All hazardous substances, solid waste, and oil and gas
exploration and production wastes, if any, generated at any and all properties,
owned, leased or operated by the Company or any of its subsidiaries have in the
past, during the tenure of ownership of the Company and its subsidiaries and, to
the best of the Company's knowledge, prior thereto, been transported, treated
and disposed of in accordance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment, and, to the best knowledge of the Company, all such transport
carriers and treatment and disposal facilities have been and are operating in
compliance with Environmental Laws and so as not to
8
pose an imminent and substantial endangerment to public health or welfare or the
environment, and are not the subject of any existing, pending or threatened
action, investigation or inquiry by any Governmental Entity in connection with
any Environmental Laws;
(e) The Company has taken all steps reasonably necessary to determine
and has determined that no hazardous substances, solid waste, or oil and gas
exploration and production wastes, have been disposed of or otherwise released,
and there has been no threatened release of any hazardous substances, on or to
any properties, owned, leased or operated by the Company or any of its
subsidiaries, except in compliance with Environmental Laws and so as not to pose
an imminent and substantial endangerment to public health or welfare or the
environment; and
(f) Neither the Company nor any of its subsidiaries has any known
contingent liability in connection with any release or threatened release of any
oil, hazardous substance or solid waste into the environment.
3.19 TAXES. The Company has filed (taking into account any extensions)
-----
all United States Federal income tax returns and all other tax returns which are
required to be filed by it on or before the Closing and has paid all taxes due
pursuant to such returns or pursuant to any assessment received by the Company,
except for any taxes which are being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained. The
charges, accruals and reserves on the books of the Company in respect of taxes
and other governmental charges are adequate. No tax lien has been filed and, to
the knowledge of the Company, no claim is being asserted with respect to any
such tax, fee or other charge, except for any taxes, fees or other charges which
are being contested in good faith and by proper proceedings and against which
adequate reserves are being maintained.
3.20 BROKERAGE FEES. The Company has not retained any financial
---------------
advisor, broker, agent, or finder or paid or agreed to pay any financial
advisor, broker, agent, or finder on account of the sale by the Company and the
purchase by the Purchaser of the Shares.
3.21 SEC REQUIREMENTS. Neither the Company nor any of its subsidiaries
----------------
has received notice from the Securities and Exchange Commission or any state
securities agency that the Company or any subsidiary is not in compliance with
applicable Securities and Exchange Commission or state securities rules and
regulations or is under investigation regarding the potential violation of any
such rule or regulation.
3.22 MATERIAL AGREEMENTS. Set forth on Schedule 4 hereto is a complete
-------------------
and correct list of all material agreements of the Company and its subsidiaries
that would be required to be listed in an Annual Report on Form 10-K as material
contracts pursuant to Item 601 of Regulation S-K.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
The Purchaser hereby represents, warrants and agrees that:
9
4.1 AUTHORITY. The Purchaser has full corporate or partnership power
---------
and authority to execute and deliver this Agreement and, when executed and
delivered, will constitute the legal, valid and binding obligation of Purchaser,
enforceable in accordance with its terms. If the Purchaser is a corporation or a
trust, the officer or trustee executing this Agreement represents and warrants
that he/she is authorized to so sign; that the corporation or trust is
authorized by its charter and by-laws or the trust agreement, as the case may
be, to make this investment.
4.2 SUITABILITY OF PURCHASER. The Purchaser is able to (i) bear the
--------------------------
economic risk of its investment in the Company, (ii) hold the Shares for an
indefinite period of time, and (iii) afford a complete loss of its investment.
4.3 INVESTMENT EXPERIENCE. The Purchaser, together with its purchaser
----------------------
representative (who is unaffiliated with and who is not compensated by the
Company, or any affiliate or selling agent of the Company, directly or
indirectly), if any, have the requisite knowledge and experience in financial
and business matters, including investments of this type, to be capable of
evaluating the merits and risks of an investment in the Shares and of making an
informed investment decision with respect thereto.
4.4 RECEIPT OF INFORMATION; RELIANCE UPON DISCLOSURE.
-----------------------------------------------------
(a) DOCUMENTS. The Purchaser has reviewed, read carefully, considered
---------
and fully understood the Disclosure Documents and the Purchaser has received
from the Company all of the information concerning the Company that it considers
to be material in making its investment decision, which information has been
requested by the Purchaser if not already furnished by the Company. The
Purchaser (and/or its representative, if any) have had full access to the books
and records of the Company and to its officers, directors and accountants for
the purpose of obtaining and verifying such information and the Purchaser has
had an opportunity to ask questions and receive answers from the officers of the
Company regarding the terms and conditions of this transaction and the Company's
business and financial condition.
(b) The Purchaser confirms that he has had adequate opportunity to
obtain such independent legal and tax advice and financial planning services as
he has deemed appropriate prior to making a decision to purchase the Shares.
(c) Except as expressly set forth herein, no representations or
warranties, oral or otherwise, have been made to the Purchaser, including
without limitation, any representations concerning the future prospects of the
Company, by the Company or any agent, employee or affiliate of the Company, or
any other person whether or not associated with this transaction, and in
entering into this transaction the Purchaser is not relying upon any
information, other than that contained in the Disclosure Documents, and the
results of its own independent investigation. The Purchaser has obtained
sufficient information to evaluate the merits and risks of its investment and to
make an informed investment decision.
4.5 RESTRICTED SECURITIES. The Purchaser understands and acknowledges
----------------------
that the Shares it is purchasing hereunder are "restricted securities" under
federal and state securities laws
10
insofar as they have not been registered under the 1933 Act or the securities
laws of any other jurisdiction, that they may not be resold or transferred
without compliance with the registration or qualification provisions of the 1933
Act or applicable federal and state securities laws or the laws of any other
jurisdiction or an opinion of counsel that an exemption from such registration
and qualification requirements is available. The Purchaser is familiar with SEC
Regulation D, Regulation S and Rule 144 promulgated under the 1933 Act, as
presently in effect, and the resale limitations imposed thereby and by the 1933
Act.
4.6 LIMITATIONS ON DISPOSITION. Without in any way limiting the
----------------------------
representations set forth above, the Purchaser further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a registration statement under the 1933 Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
(b)(i) The Purchaser shall have notified Company of the proposed
disposition and shall have furnished Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (ii) upon the request of
the Company, the Purchaser shall have furnished Company with an opinion of
counsel, reasonably satisfactory to Company, that such disposition will not
require registration of such securities under the 1933 Act and applicable state
securities laws.
The Purchaser understands that Company will issue stop transfer
instructions to its transfer agent with respect to the Shares and intends to
place a restrictive legend on every certificate as provided in Section 8.4
hereof.
4.7 ILLIQUID INVESTMENTS. The Purchaser's overall commitment to
---------------------
investments that are not readily marketable is not disproportionate to its net
worth and its investment in the Shares will not cause such overall commitment to
become excessive. The Purchaser has adequate means of providing for its current
needs and personal contingencies.
4.8 COMPANY RELIANCE ON QUESTIONNAIRE AND REPRESENTATIONS AND
---------------------------------------------------------------
WARRANTIES. The Purchaser understands, acknowledges and agrees that the Company
----------
is relying on the accuracy of the responses by Purchaser contained in the
Confidential Purchaser Questionnaire heretofore delivered by you to the Company
(as well as Purchaser representations and warranties contained in this
Agreement), which responses, representations and warranties you warrant to be
true, complete and correct.
4.9 ACCREDITED INVESTOR STATUS. The Purchaser is an "accredited
----------------------------
investor" as such term is defined in SEC Rule 501(a) of Regulation D promulgated
under the 0000 Xxx.
4.10 PURCHASE FOR OWN ACCOUNT. The Purchaser is acquiring the Shares
--------------------------
for its own account, for investment purposes and not for resale or with a view
to any distribution, or in connection with any distribution thereof.
11
ARTICLE V
CONDITIONS TO PURCHASER'S OBLIGATIONS
-------------------------------------
Purchaser's obligations to purchase the Investment Shares under this
Agreement are subject to the fulfillment of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
------------------------------
of the Company contained in Article III hereof shall be true as of the Closing
Date.
5.2 COMPANY'S PERFORMANCE. The Company shall have performed and
----------------------
complied with all agreements, obligations and conditions contained in this
Agreement, which performance or compliance is required on or before the Closing
Date.
5.3 TRANSACTION DOCUMENTS. Each of the Transaction Documents shall
----------------------
have been fully executed and delivered by the parties thereto, and shall be in
full force and effect.
5.4 ESCROW RELEASE CONDITIONS. Each of the Escrow Release Conditions
---------------------------
shall have been satisfied.
5.5 LEGAL PROCEEDINGS. No proceeding shall, on the Closing Date, be
------------------
pending or threatened seeking to restrain, prohibit or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.
5.6 OFFICERS' CERTIFICATE. The Company shall have delivered an
----------------------
Officers' Certificate to the Purchaser to the effect that all conditions
contained in this Article V have been complied with.
ARTICLE VI
CONDITIONS TO COMPANY'S OBLIGATIONS
-----------------------------------
The obligations of the Company to sell and issue the Investment Shares to
Purchaser are subject to the fulfillment on or before the Closing of each of the
following conditions by Purchaser:
6.1 REPRESENTATIONS AND WARRANTIES. The Purchaser's representations
--------------------------------
and warranties contained in Article IV shall be true on and as of the Closing
Date with the same effect as though made on and as of the date thereof.
6.2 PAYMENT. The Purchaser shall have delivered into escrow the full
-------
amount of the Investment Purchase Funds.
6.3 TRANSACTION DOCUMENTS. Each of the Transaction Documents shall
----------------------
have been fully executed and delivered by the parties thereto, and shall be in
full force and effect and
12
Purchaser, if requested by Company, shall have delivered to the Company an
executed Confidential Purchaser Questionnaire.
ARTICLE VII
REGISTRATION RIGHTS
-------------------
The Company covenants and agrees as follows:
7.1 DEFINITIONS. For purposes of this Article 7:
-----------
(a) The term "Holder" means any person owning or having the right to
acquire Shares or Registrable Securities.
(b) The term "1934 Act" means the Securities Exchange Act of 1934,
as amended.
(c) The term "Public Corporation" means a corporation which has a
class of equity securities registered pursuant to Section 12 of the 1934 Act, or
which is required to file periodic reports pursuant to Section 15(d) of the 1934
Act.
(d) The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act, and such registration
statement or document becoming effective.
(e) The term "Registrable Securities" means (i) the Shares, (ii)
any shares of Common Stock issued by Company pursuant to Section 1.1 or 1.2
hereof, and (iii) any Common Stock issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the Shares and the shares referred to in clause (ii) above, but excluding in all
cases, however, any Registrable Securities sold by a person in a transaction in
which his rights under this Article VII are not assigned; provided, however,
-------- -------
that any such securities shall cease to be Registrable Securities when one or
more registration statements with respect to the sale of such securities shall
have become effective under the 1933 Act and all such securities shall have been
disposed of in accordance with the plan of distribution set forth therein.
(f) The number of shares of "Registrable Securities Then
Outstanding" shall be equal to the sum of the number of shares of Common Stock
outstanding which are Registrable Securities.
(g) The term "Registration Expenses" means all registration,
qualification, listing and filing fees, printing expenses, escrow fees and blue
sky fees, fees and disbursements of counsel for the Company and of the Company's
independent certified public accountants, in each case incident to or required
by the registration under this Agreement, and any other fees and expenses of the
registration under this Agreement which are not Selling Expenses.
13
(h) The term "Selling Expenses" means all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and all fees and disbursements of counsel for any
Holder.
(i) All other capitalized terms used in this Section that are not
defined herein shall have the meaning otherwise given in this Agreement.
7.2 REGISTRATION OBLIGATION. The Company agrees to cause a
-------------------------
registration statement on Form X-0, XX-0 or SB-2 to be filed with the Securities
Exchange Commission as to the Registrable Securities to be registered under the
1933 Act not later than one hundred twenty (120) days after the Closing Date and
use its reasonable best efforts to have such registration statement declared
effective within one hundred eighty (180) days of the Closing Date.
7.3 PIGGYBACK REGISTRATION RIGHTS.
-------------------------------
(a) If, at any time or from time to time, the Company shall
determine to register any of its Common Stock, either for its own account or the
account of a security holder or holders, other than pursuant to a Registration
Statement on Form S-4 or Form S-8, the Company will (x) promptly give each
Holder written notice thereof, and (y) include in such registration (and any
related qualification under blue sky or other state securities laws), and in any
underwriting involved therein, all of the Registrable Securities specified in a
written request or requests made by any Holder within thirty (30) days after
receipt of such written notice from the Company.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as part of the written notice given pursuant to Section
7.3(a). In such event, the right of any Holder to registration pursuant to this
Section 7.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of Registrable Securities owned by the Holder in
the underwriting to the extent provided under this Section 7.3. All Holders
proposing to distribute their Registrable Securities through such underwriting
shall (together with the Company and any other holders of securities of the
Company distributing their securities through such underwriting) enter into an
underwriting agreement with the managing or lead managing underwriter selected
by the Company in the form customarily used by such underwriter with such
changes thereto as the parties thereto shall agree. Notwithstanding any other
provision of this Section 7.3, if the managing or lead managing underwriter
determines that market factors require that the number of Registrable Securities
and other securities requested to be included in the registration be limited,
the managing or lead managing underwriter may reduce the number of Registrable
Securities and securities of any other holder of securities to be included in
the registration. If the registration includes an underwritten primary
registration on behalf of the Company, the reduction shall be taken (i) first
from and to the extent of the securities requested to be included in such
registration by the Holders and the holders of any other securities pro rata
--- ----
according to the number of securities requested by the Holders and such holders
to be included in the registration, and (ii) thereafter from the securities to
be registered on behalf of the Company. If the registration consists only of
any underwritten secondary registration on behalf of holders of securities of
the Company, the reduction shall be taken (i) first from and to the extent of
the
14
securities requested to be included in the registration by the Holders and any
other holders of securities included in the registration other than pursuant to
demand registration rights pro rata according to the number of securities
--- ----
requested by the Holders and such holders to be included in the registration and
(ii) thereafter from securities, if any, to be registered on behalf of holders
of securities included in the registration pursuant to demand registration
rights. The Company shall advise all Holders and other holders participating in
such underwriting as to any such limitation and the number of shares that may be
included in the registration and underwriting. If any Holder disapproves of the
terms of any such underwriting, such Holder may elect to withdraw therefrom by
written notice to the Company and the managing or lead underwriter. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
(c) The Company may withdraw a registration for which registration
rights have been exercised pursuant to this Section 7.3 at any time prior to the
time it becomes effective.
7.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
--------------------------
connection with a registration pursuant to this Article 7 shall be borne by the
Company. All Selling Expenses relating to the Registrable Securities registered
on behalf of the Holders shall be borne by the Holders of such Registrable
Securities pro rata based upon the total number of Registrable Securities
--- ----
included in the registration or, if such Selling Expenses are specifically
allocable to Registrable Securities held by specific Holders, by such Holders to
the extent related to the sale of such Registrable Securities.
7.5 REGISTRATION PROCEDURES.
------------------------
(a) In connection with the registration of Registrable Securities
required pursuant to this Article 7, the Company shall as expeditiously as is
reasonable:
(i) prepare and file with the SEC on any appropriate form a
registration statement with respect to such Registrable Securities and use its
reasonable reasonable best efforts to cause such registration statement to
become and remain effective for the period described in paragraph (ii) below;
(ii) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the 1933
Act with respect to the disposition of all Registrable Securities and other
securities covered by such registration statement the earliest of (w) when the
Shares have been sold pursuant to Rule 144 promulgated under the 1933 Act (or
any successor provision) ("Rule 144") or such registration statement, (x) when
the Shares have been otherwise transferred and a new certificate for the Shares
not bearing a legend restricting further transfer shall have been delivered by
the Company, (y) when all of the Holder's and its Affiliates' remaining Shares
can be sold in a single transaction in compliance with Rule 144, or (z) when the
Shares have ceased to be outstanding;
15
(iii) furnish to each seller of such Registrable Securities
such number of conformed copies of such registration statement and of each such
amendment and supplement thereto (at least one of which shall include all
exhibits), such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the 1933 Act, such documents incorporated by
reference in such registration statement or prospectus, and such other
documents, as such seller may reasonably request in order to facilitate the sale
or disposition of such Registrable Securities;
(iv) use its reasonable best efforts to register or qualify
all Registrable Securities and other securities covered by such registration
statement under such other securities or "blue sky" laws of such jurisdictions
as each seller shall reasonably request, and do any and all other acts and
things as may be reasonably necessary to consummate the disposition in such
jurisdictions of the Registrable Securities covered by such registration
statement, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, or to subject itself to taxation in respect of
doing business in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;
(v) immediately notify each seller of Registrable Securities,
at any time when a prospectus relating thereto is required to be delivered under
the Act, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing or if it is necessary, in the opinion
of counsel to the Company, to amend or supplement such prospectus to comply with
law, and at the request of any such seller prepare and furnish to any such
seller a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing and shall otherwise comply in all
material respects with law and so that such prospectus, as amended or
supplemented, will comply with law;
(vi) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, beginning with the first
month of the first fiscal quarter after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the 1933 Act;
(vii) use its reasonable best efforts to list such securities
on each securities exchange or over-the-counter market on which shares of Common
Stock are then listed, if such securities are not already so listed and if such
listing is then permitted under the rules of such exchange and, if shares of
Common Stock are not then listed on a securities exchange or over- the-counter
market, to use its reasonable best efforts to cause such securities to
16
be listed on such securities exchange or over-the-counter market as such seller
shall reasonably request;
(viii) use its reasonable best efforts to provide a transfer
agent and registrar for such Registrable Securities not later than the effective
date of such registration statement; and
(b) The Holder or Holders of Registrable Securities included
in any registration shall furnish to the Company such information regarding such
Holder or Holders, the Registrable Securities held by them and the distribution
proposed by such Holder or Holders as the Company may from time to time
reasonably request and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
(c) In the case of an underwritten public offering, the Holder or
Holders of Registrable Securities included in any registration shall, upon
request by the Company and the managing or lead managing underwriter, execute
and deliver custodian agreements and powers of attorney in form and substance
reasonably satisfactory to the Company and such Holder or Holders and as shall
be reasonably necessary to consummate the offering.
7.6 INDEMNIFICATION.
---------------
(a) The Company will indemnify each Holder with respect to which
registration has been effected pursuant to this Agreement, each of its officers
and directors, if any, and each underwriter, if any, and each person who
controls the Holder or any such underwriter within the meaning of Section 15 of
the 1933 Act, against any and all losses, claims, damages, liabilities or
expenses (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement or prospectus, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances in which they were made, not
misleading, or any violation by the Company of the 1933 Act or any rule or
regulation promulgated under the 1933 Act applicable to the Company in
connection with any such registration, and the Company will reimburse each such
Holder, each such underwriter and each person who controls any such underwriter,
for any legal and other expenses reasonably incurred, as such expenses are
incurred, in connection with investigating, preparing or defending any such
claims, loss, damage, liability or action; provided, however, that the Company
-------- -------
will not be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission or alleged untrue statement or omission, made in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder or underwriter and stated to be specifically for
use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration is being
effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered
17
by such a registration statement, each Person who controls the Company or such
underwriter within the meaning of Section 15 of the 1933 Act and each other such
Holder against any and all losses, claims, damages, liabilities and expenses (or
actions in respect thereof), arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement or prospectus, or any omission (or alleged omission) to state therein
a material fact required to be stated therein or necessary to make the statement
therein, in the light of the circumstances under which they were made, not
misleading, and will reimburse the Company, such Holders, underwriters or
control persons for any legal or any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement or
prospectus in reliance upon and in conformity with written information furnished
to the Company by such Holder. Notwithstanding the foregoing, the liability of
each Holder under this Section 7.6 shall be limited to an amount equal to the
aggregate proceeds received by such Holder from the sale of Registrable
Securities hereunder, unless such liability arises out of or is based on willful
conduct by such Holder.
(c) Each party entitled to indemnification under this Section 7.6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claims or any
litigation resulting therefrom; provided, however, that counsel for the
-------- -------
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (which approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such Indemnified Party's expense; provided, however, that the failure
-------- -------
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. Notwithstanding the foregoing, the Indemnifying Party shall
not be entitled to assume the defense for matters as to which there is, in the
opinion of counsel to the Indemnifying Party, a conflict of interest or separate
and different defenses. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and the litigation resulting therefrom.
7.7 CONTRIBUTION.
------------
(a) If the indemnification provided for in Section 7.6 hereof
is unavailable to the Indemnified Parties in respect of any losses, claims,
damages, liabilities or expenses (or actions in respect thereof) referred to
therein, then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses (or
17
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and the Indemnified
Party on the other in connection with the statement or omission which resulted
in such losses, claims, damages, liabilities or expenses (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue statement (or alleged untrue statement), of a material fact or the
omission (or alleged omission) to state a material fact relates to information
supplied by the Indemnifying Party or the Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and each Holder agree that it
would not be just and equitable if contribution pursuant to this Section 7.7
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above.
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages, liabilities or expenses (or actions in respect thereof)
referred to above in this Section shall be deemed to include any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim.
(b) Notwithstanding anything to the contrary contained
herein, the obligation of each Holder to contribute pursuant to this Section 7.7
is several and not joint and no selling Holder shall be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities of such selling Holder were offered to the public exceeds
the amount of any damages which such selling Holder has otherwise been required
to pay by reason of such untrue statement (or alleged untrue statement) or
omission (or alleged omission).
(c) No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
7.8. EXCHANGE ACT REGISTRATION. The Company covenants and agrees
---------------------------
that until such time as there shall be no Registrable Securities outstanding:
(a) it will, if required by law, maintain an effective
registration statement (containing such information and documents as the SEC
shall specify) with respect to the Common Stock under Section 12(g) of the 1934
Act and will file in a timely manner such information, documents and reports as
the SEC may require or prescribe for companies whose stock has been registered
pursuant to said Section 12(g);
(b) it will, if a registration statement with respect to the
Common Stock under Section 12(b) or Section 12(g) of the 1934 Act is effective,
make whatever filings with the SEC or otherwise make generally available to the
public such financial and other information as may be necessary in order to
enable the Holders to sell shares of Common Stock pursuant to the provisions of
Rule 144 or any successor rule or regulation thereto or any statute hereafter
adopted to replace or to establish the exemption that is now covered by Rule
144;
19
(c) it will, if no longer required to file reports pursuant
to Section 12 (g) of the 1934 Act, upon the request of any Holder, make publicly
available the information specified in subparagraph (c) (2) of Rule 144, and
will take such further action as any Holder may reasonably request, all to the
extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the 1933 Act within the limitation of the
exemptions provided by Rule 144 or any similar rule or regulation hereafter
adopted by the SEC; and
(d) upon the request of any Holder, it will deliver to such
Holder a written statement as to whether it has complied with the requirements
of this Section 7.8.
The Company represents and warrants that such registration statement or any
information, documents or report filed with the SEC in connection therewith or
any information so made public shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements contained therein not misleading. The
Company agrees to indemnify and hold harmless (or to the extent the same is not
enforceable, make contribution to the Holders, their partners, advisory
committee members, officers, directors and employees acting for any Holder in
connection with any offering or sale by such Holder of Registrable Securities or
any person, firm or corporation controlling (within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act) such Holder from and
against any and all losses, claims, damages, liabilities or expenses (or actions
in respect thereof) arising out of or resulting from any breach of the foregoing
representation or warranty, all on terms and conditions comparable to those set
forth in Section 7.6; provided, however, that the Company shall be given written
-------- -------
notice and an opportunity to assume on terms and conditions comparable to those
set forth in Section 7.6 the defense thereof.
7.9 DELAY OF REGISTRATION. No holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Article VII.
7.10 AMENDMENTS AND WAIVERS. Any term or provision of the registration
----------------------
rights stated in this Agreement may be amended and the observance of any term of
such rights may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company and the holders of at least sixty-seven percent (67%) of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance
with this section shall be binding upon each holder of the Shares and any
Registrable Securities then outstanding, each future holder of Shares and such
Registrable Securities, and the Company.
ARTICLE VIII
MISCELLANEOUS AND FURTHER PROVISIONS
------------------------------------
The Purchaser agrees that:
8.1 NO TRANSFER OF SHARES UNTIL REGISTERED. Purchaser will not
-------------------------------------------
transfer or assign the Investment Shares except as provided in Section 4.6.
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8.2 SUCCESSORS AND ASSIGNS. This Agreement and this Agreement shall
------------------------
be binding upon the parties and their respective successors and assigns.
8.3 INDEMNIFICATION REGARDING QUESTIONNAIRE. Purchaser shall
-----------------------------------------
indemnify, hold harmless and defend the Company and its affiliates and agents
with respect to any and all loss, damage, expense, claim, action or liability
any of them may incur as a result of the breach or untruth of any
representations or warranties made by the Purchaser in the Confidential
Purchaser Questionnaire completed by the Purchaser, and the Purchaser agrees
that in the event of any breach or untruth of any representations or warranties
made by the Purchaser herein or in the Confidential Purchaser Questionnaire, the
Company may, at its option, forthwith rescind the sale of the Shares to the
Purchaser, if the failure to rescind due to the breach or untruth by Purchaser
would cause the Company to be in violation of the registration requirements of
the 1933 Act or applicable state securities laws.
8.4 LEGEND. A legend in substantially the following form will be
------
placed on all documents or certificates evidencing the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE
ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933
ACT.
8.5 SURVIVAL OF WARRANTIES. The warranties, representations and
------------------------
covenants of the parties contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing.
8.6 ENTIRE AGREEMENT. This Agreement, together with the other
-----------------
Transaction Documents, constitutes the entire agreement among the parties, and
no party shall be liable or bound to any other party in any manner by any
warranties, representations, guarantees or covenants except as specifically set
forth in this Agreement. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective successors and 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 assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.
8.7 GOVERNING LAW. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of Texas (except where Nevada law
pertains to the corporate matters of Company) without regard to conflicts of
law.
21
8.8 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.9 NOTICES. All notices, requests, demands and other communications
-------
under this Agreement shall be in writing and shall be deemed to have been duly
given (i) on the date of service if served personally on the party to whom
notice is to be given, (ii) on the date of delivery if sent by prepaid overnight
courier services, (iii) on the fifth day after the date of mailing if mailed to
the party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and (iv) upon the receipt of a confirmation of
transmission if sent by facsimile transmission at the following addresses. Any
party may change its address for purposes of this section by giving the other
party written notice of the new address in the manner set forth above.
To Purchaser: CBarney Invesments, Ltd.
000 Xxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx Xxxxxx
FAX: (000) 000-0000
With a copy to: Gardere Xxxxx Xxxxxx, L.L.P.
0000 Xxxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxxxx
FAX: (000) 000-0000
To Company: Petrosearch Energy Corporation
0000 Xxxxxxx Xxxxx, Xxxxx 000X
Xxxxxxx, Xxxxx 00000
Attention: President
FAX: (000) 000-0000
8.10 SEVERABILITY. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provisions were so excluded and shall be enforceable in accordance with its
terms.
8.11 AMENDMENT AND/OR MODIFICATION. Neither this Agreement, nor any
-------------------------------
term or provision hereof, may be changed, waived, discharged, amended, modified
or terminated orally, or in any manner other than by an instrument in writing
signed by each of the parties hereto.
8.12 HEADINGS. The various headings of this Agreement are inserted for
--------
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
SIGNATURES APPEAR ON THE FOLLOWING PAGES
22
EXECUTED as of the Effective Date above.
PETROSEARCH ENERGY CORPORATION, A
NEVADA CORPORATION
By: /s/
----------------------------------
Name:________________________________
Title:_______________________________
CBARNEY INVESTMENTS, LTD., A
TEXAS LIMITED PARTNERSHIP
By: /s/
-----------------------------------
Name:_________________________________
Title:________________________________
LIST OF ATTACHMENTS:
----------------------
Exhibit A - Escrow Agreement
Schedule 1 - Capitalization of Company
Schedule 2 - Fortuna Energy, L.P. Credit Facility
Schedule 3 - Pending Litigation
Schedule 4 - Material Contracts per Section 3.22
23
EXHIBIT "A"
-----------
THE UNDERSIGNED, XXXX XXXXXXXXXXXX, OF XXXXXXX XXXXX XXXXXX, LLP , WHO HAS
SERVED AS COUNSEL TO PURCHASER UNDER THIS AGREEMENT, AGREES TO ACT AS ESCROW
AGENT FOR THE PARTIES AS CONTEMPLATED IN SECTION 2.1 OF THIS AGREEMENT AND IN
SUCH CAPACITY TO EFFECT THE DELIVERY OF THE INVESTMENT PURCHASE FUNDS TO THE
COMPANY UPON DELIVERY TO ESCROW AGENT BY THE COMPANY OF THE INVESTMENT SHARES
AND THE OFFICER'S CERTIFICATE DESCRIBED IN SECTION 5.6 OF THE AGREEMENT.
/s/
-------------------------------
XXXX XXXXXXXXXXXX
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