EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of January 13,
2005, by and among Infinity, Inc., a Colorado corporation, with headquarters
located at 0000 Xxxx Xxxx Xxxxxx, Xxxxx X, Xxxxxxx, Xxxxxx 00000 (the
"COMPANY"), and the investors listed on the Schedule of Buyers attached hereto
(individually, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("REGULATION D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 ACT");
B. The Buyers, severally, and not jointly, initially wish to purchase from
the Company and the Company initially wishes to sell to the Buyers, upon the
terms and conditions stated in this Agreement (I) senior secured notes,
substantially in the form attached as Exhibit A, in an original aggregate
principal amount of $30,000,000 (such notes, together with any promissory notes
or other securities issued in exchange or substitution therefor or replacement
thereof, and as any of the same may be amended, restated or modified and in
effect from time to time, the "INITIAL NOTES"), and (II) warrants, substantially
in the form attached as Exhibit C, to acquire that number of shares of the
Company's common stock, par value $0.0001 per share (the "COMMON STOCK"), equal
to the quotient of (a) 28% of the original principal amount of the Initial Notes
purchased by the Buyers at the Initial Closing, divided by (b) the Warrant
Exercise Price (as defined in the Initial 115% Warrants (as defined below)) as
of the Initial Closing Date (the "INITIAL 115% WARRANTS"), and (III) warrants,
substantially in the form attached as Exhibit C, to acquire that number of
shares of Common Stock equal to the quotient of (x) 27% of the principal amount
of the Initial Notes purchased by the Buyers at the Initial Closing, divided by
(b) the Warrant Exercise Price (as defined in the Initial 140% Warrants (as
defined below)) as of the Initial Closing Date (the "INITIAL 140% WARRANTS"; the
Initial 115% Warrants and the Initial 140% Warrants, together with any warrants
or other securities issued in exchange or substitution therefor or replacement
thereof, and as any of the same may be amended, restated or modified and in
effect from time to time, being referred to as the "INITIAL WARRANTS"; the
shares of Common Stock issuable upon exercise of the Initial Warrants being
referred to as the "INITIAL WARRANT SHARES");
C. Subject to the terms and conditions set forth in this Agreement, during
the Additional Note Issuance Period (as defined in Section 1(b)), the Company
may have the option to sell, and if the Company exercises such option Buyers may
be obligated to buy (I) additional senior secured notes, each with a maturity
date that is 42 months after the date of issue thereof and otherwise
substantially in the form attached as Exhibit B, in an original aggregate
principal amount of up to $45,000,000 (such notes, together with any promissory
notes or other securities issued in exchange or substitution therefor or
replacement thereof, and as any of the same may be amended, restated, modified
or supplemented and in effect from time to time, "ADDITIONAL NOTES" and,
collectively with the Initial Notes, the "NOTES"), and (II) additional warrants
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acquire shares of Common Stock in accordance with, and in the number and form
set forth in, Section 1(b);
D. The Notes shall be convertible into shares of Common Stock (the shares
of Common Stock issuable upon conversion of the Notes being referred to herein
as the "CONVERSION SHARES") in accordance with the terms of the Notes;
E. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached as Exhibit D (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws;
F. Contemporaneously with the Initial Closing (as defined in Section
1(a)), the parties hereto and the Active Subsidiaries (as defined in Section
3(a)) will execute and deliver a Security Agreement, substantially in the form
attached as Exhibit E (the "SECURITY AGREEMENT"), pursuant to which the Company
and its Active Subsidiaries will agree to provide the Buyers with security
interests in all of the assets of the Company and its Subsidiaries;
G. Contemporaneously with the Initial Closing, the parties hereto and each
of the Subsidiaries will execute and deliver one or more Deposit Account Control
Agreements, substantially in the forms attached as Exhibit F (the "ACCOUNT
CONTROL AGREEMENTS"), pursuant to which the Company and each of the Active
Subsidiaries that maintain bank, brokerage or other similar accounts will agree
to enable the Buyers to perfect their security interest in all of the Company's
and such Subsidiary's right, title and interest in certain accounts and in all
collateral from time to time credited to such accounts;
H. Contemporaneously with the Initial Closing, the Active Subsidiaries
will execute and deliver a Guaranty, substantially in the form attached as
Exhibit G (the "GUARANTY"), pursuant to which the Active Subsidiaries will agree
to guaranty certain obligations of the Company; and
I. Contemporaneously with the Initial Closing, the parties hereto will
execute and deliver a Pledge Agreement, substantially in the form attached as
Exhibit H (the "PLEDGE AGREEMENT"), pursuant to which the Company will agree to
pledge all of the capital stock in the Active Subsidiaries to the Buyers as
collateral for the Notes; and
J. Contemporaneously with the Initial Closing, the Buyers and the Debtors
(as defined in the Security Agreement) will execute and deliver one or more
Mortgages, Deeds of Trust, Assignments of Production, Security Agreements,
Fixture Filings and Financing Statements, substantially in the form attached as
Exhibit I (the "MORTGAGES"), pursuant to which the Debtors will agree to grant
to the Buyers an interest in certain real and personal property, rights, titles,
interests and estates described therein.
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NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
a. Purchase of Initial Notes and Warrants. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6(a) and 7(a)
below, the Company shall issue and sell to each Buyer, and each Buyer severally
agrees to purchase from the Company, (I) Initial Notes in the principal amount
set forth opposite such Buyer's name on the Schedule of Buyers, along with (II)
the related Initial 115% Warrants with respect to the number of Initial Warrant
Shares equal to the quotient (rounded to the nearest whole number, with 0.5
rounded up) of (A) 28% of the original principal amount of the Initial Notes
purchased by such Buyer at the Initial Closing, divided by (B) the Warrant
Exercise Price (as defined in the Initial 115% Warrants) on the Initial Closing
Date (as defined in Section 1(c)), and (III) the related Initial 140% Warrants
with respect to the number of Initial Warrant Shares equal to the quotient
(rounded to the nearest whole number, with 0.5 rounded up) of (X) 27% of the
original principal amount of the Initial Notes purchased by such Buyer at the
Initial Closing, divided by (Y) the Warrant Exercise Price (as defined in the
Initial 140% Warrants) on the Initial Closing Date (the "INITIAL CLOSING"). The
purchase price (the "INITIAL PURCHASE PRICE") of the Initial Notes and the
related Initial Warrants at the Initial Closing shall be equal to $1.00 for each
$1.00 of principal amount of the Initial Notes purchased (representing an
aggregate Initial Purchase Price of $30,000,000 for the aggregate original
principal amount of $30,000,000 of Initial Notes and the related Initial
Warrants, to be purchased at the Initial Closing).
b. Purchase and Sale of Additional Notes and Warrants. Subject to
the satisfaction (or waiver) of the conditions set forth in Sections 1(d), 6(b)
and 7(b) below, during the period commencing on July 1, 2005 and ending on June
30, 2008 (the "ADDITIONAL NOTE ISSUANCE PERIOD"), the Company may elect to sell
Additional Notes and Additional Warrants (as defined in this Section 1(b)) to
the Buyers. At any time within the 10 consecutive Business Days (as defined in
this Section 1(b)) immediately following the Company's timely (without giving
effect to any extensions of time permitted by Rule 12b-25 under the 1934 Act (as
defined in the Notes)) filing of a quarterly report on Form 10-Q or annual
report on Form 10-K, as the case may be (a "PERIODIC REPORT"), during the
Additional Note Issuance Period, the Company may, in its sole discretion,
deliver (by facsimile) a written notice to each Buyer electing to sell
Additional Notes and Additional Warrants to the Buyers (an "ADDITIONAL SALE
ELECTION NOTICE"). The Additional Sale Election Notice shall set forth the
aggregate principal amount of Additional Notes to be sold to the Buyers (the
"ADDITIONAL NOTE ISSUANCE AMOUNT") on an Additional Closing Date (as defined in
Section 1(d)), which shall not be less than $3,000,000; provided, however, that
(A) the sum of the Additional Note Issuance Amount and the original aggregate
principal amount of all other Additional Notes issued and sold by the Company to
the Buyers during the 365-day period immediately preceding such Additional
Closing Date shall not exceed $15,000,000 in the aggregate, (B) the sum of the
Additional Note Issuance Amount and the aggregate principal amount of all other
Additional Notes issued and sold by the Company at any time pursuant to this
Agreement shall not exceed $45,000,000 in the aggregate, (C) the sum of the
Additional Note Issuance Amount and the aggregate principal amount and accrued
and unpaid interest of all other Notes outstanding as of each of the date of the
Additional Sale Election Notice and the Additional Closing Date shall not exceed
the Free Cash Flow Amount (as defined in the Notes), determined as of the end of
the quarterly or annual period covered by
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the most recently filed, or required to be filed, Periodic Report, and (D)
unless Shareholder Approval (as defined in Section 4(k)) has been obtained, the
Additional Note Issuance Amount shall not exceed an amount that would require,
pursuant to this Section 1(b), Buyers to buy Additional Warrants to acquire a
number of shares of Common Stock that, when multiplied by 1.2 and added to the
number of shares of Common Stock that have been issued upon exercise of any
Warrants (as defined in this Section 1(b)) or conversion of, or as interest on,
any Notes prior to the date of such Additional Sale Election Notice and added to
120% of the shares issuable as of the date of such Additional Sale Election
Notice upon exercise of all Warrants then outstanding, would exceed the Exchange
Cap (as defined in the Notes) (the limitations on the Additional Note Issuance
Amount set forth in the immediately preceding clauses (A), (B), (C) and (D)
being collectively referred to as the "ADDITIONAL NOTE ISSUANCE AMOUNT
LIMITATIONS"), and if the Additional Note Issuance Amount cannot be at least
$3,000,000 as a result of the Additional Note Issuance Amount Limitations, the
Company may not deliver an Additional Sale Election Notice and may not issue or
sell any Additional Notes on such Additional Closing Date. The Additional Sale
Election Notice shall also set forth (i) each Buyer's principal amount of
Additional Notes to be purchased (determined as provided in the next sentence),
and (ii) the Additional Closing Date for the purchase and sale of Additional
Notes and Additional Warrants pursuant to such Additional Sale Election Notice
(determined as provided in section 1(d) below). In the event that the Company
delivers an Additional Sale Election Notice in accordance with the foregoing,
subject to the conditions set forth in this Section 1(b) and Sections 1(d), 6(b)
and 7(b) below, the Company shall issue and sell to each Buyer, and each Buyer
severally agrees to buy from the Company, on the applicable Additional Closing
Date (an "ADDITIONAL CLOSING"), (I) Additional Notes in a principal amount equal
to the product of the Additional Note Issuance Amount, multiplied by such
Buyer's allocation percentage (as set forth opposite such Buyer's name in the
fourth column on the Schedule of Buyers (such Buyer's "ALLOCATION PERCENTAGE"),
and (II) warrants, substantially in the form attached as Exhibit C, to acquire
that number of shares of Common Stock equal to the quotient (rounded to the
nearest whole number, with 0.5 rounded up) of (a) 28% of the product of the
Additional Note Issuance Amount, multiplied by such Buyer's Allocation
Percentage, divided by (b) the Warrant Exercise Price (as defined in the
Additional 115% Warrants (as defined below)) as of the applicable Additional
Closing Date (the "ADDITIONAL 115% WARRANTS"), and (III) warrants, substantially
in the form attached as Exhibit C, to acquire that number of shares of Common
Stock equal to the quotient (rounded to the nearest whole number, with 0.5
rounded up) of (x) 27% of the product of the Additional Note Issuance Amount,
multiplied by such Buyer's Allocation Percentage, divided by (y) the Warrant
Exercise Price (as defined in the Additional 140% Warrants (as defined below))
as of the applicable Additional Closing Date (the "ADDITIONAL 140% WARRANTS";
the Additional 115% Warrants and the Additional 140% Warrants, together with any
warrants or other securities issued in exchange or substitution therefor or
replacement thereof, and as any of the same may be amended, restated, modified
or supplemented and in effect from time to time, the "ADDITIONAL WARRANTS" and,
collectively with the Initial Warrants, the "WARRANTS"; the shares of Common
Stock issuable upon exercise of the Additional Warrants being referred to as the
"ADDITIONAL WARRANT SHARES" and, collectively with the Initial Warrant Shares,
being referred to as the "WARRANT SHARES"). The purchase price (the "ADDITIONAL
PURCHASE PRICE" and, together with the Initial Purchase Price, each the
"PURCHASE PRICE") of the Additional Notes and the related Additional Warrants at
the applicable Additional Closing shall be equal to $1.00 for each $1.00 of
principal amount of the Additional Notes purchased. "BUSINESS DAY" means any day
other
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than Saturday, Sunday or other day on which commercial banks in the City of New
York are authorized or required by law to remain closed.
c. The Initial Closing Date. The date and time of the Initial
Closing (the "INITIAL CLOSING DATE") shall be 10:00 a.m., New York City time, on
the first Business Day following the date of this Agreement, subject to the
satisfaction (or waiver) of all of the conditions to the Initial Closing set
forth in Sections 6(a) and 7(a) (or such later or earlier date as is mutually
agreed to by the Company and the Buyers). The Initial Closing shall occur on the
Initial Closing Date at the offices of Xxxxxx Xxxxxx Xxxxx Xxxxxxxx, 000 Xxxx
Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000-0000 or at such other time,
date and place as the Company and the Buyers may collectively designate in
writing.
d. Additional Closing Dates. The date and time of any Additional
Closing (an "ADDITIONAL CLOSING DATE" and, together with the Initial Closing
Date, each a "CLOSING DATE") shall be 10:00 a.m., New York City time, on the
tenth (10th) Business Day following receipt by each Buyer of an Additional Sale
Election Notice, subject to the satisfaction (or waiver) of the conditions to
the Additional Closing set forth in Sections 1(b), 6(b) and 7(b) and the
conditions set forth in this Section 1(d) or the waiver thereof in writing by
such Buyer (or such later date as is mutually agreed to by the Company and the
Buyers). Notwithstanding the foregoing, the Company shall not be entitled to
deliver an Additional Sale Election Notice unless each of the following
conditions is satisfied (or waived in writing by the applicable Buyer) as of and
through the date on which the Company delivers to each Buyer the applicable
Additional Sale Election Notice (the "ADDITIONAL SALE ELECTION NOTICE DATE"),
and no Buyer shall be required to purchase the Additional Notes unless each of
the following conditions and the conditions set forth in Sections 1(b) and 7(b)
are satisfied (or waived in writing by the applicable Buyer) as of and through
the applicable Additional Closing Date (the "ADDITIONAL SALE ELECTION NOTICE
CONDITIONS"): (i) during the period beginning on the date of this Agreement and
ending on and including the applicable Additional Closing Date, there shall not
have occurred either (x) the public announcement of a pending, proposed or
intended Change of Control (as defined in the Notes) which has not been
abandoned or terminated and publicly announced as such or (y) a Triggering Event
or an Event of Default (each as defined in the Notes); (ii) during the sixty
(60) day period ending on and including such Additional Closing Date, there
shall not have occurred an event that with the passage of time or the giving of
notice would constitute a Triggering Event or an Event of Default; (iii) at all
times during the period beginning on the date of this Agreement and ending on
such Additional Closing Date, the Common Stock is listed on the Principal Market
(as defined in Section 3(s)) and the Common Stock shall not have been suspended
from trading nor shall delisting or suspension by the Principal Market have been
threatened either (A) in writing by such exchange or market or (B) by falling
below the minimum listing maintenance requirements of the Principal Market; (iv)
during the period beginning on the Initial Closing Date and ending on and
including such Additional Closing Date, the Company shall have delivered
Conversion Shares and Warrant Shares upon conversion or exercise, as the case
may be, of the Notes and the Warrants on a timely basis as set forth in Section
2(d)(ii) of the Notes or Section 2(a) of the Warrants; (v) as of the Additional
Sale Election Notice Date, Notes remain outstanding; (vi) there is not
outstanding any Indebtedness (as defined in the Notes) of the Company or any of
the Subsidiaries (as defined in Section 3(a)) that the Company or any Subsidiary
is prohibited from issuing, assuming or incurring under Section 4(n) or would be
prohibited from issuing, assuming or incurring under Section 4(n) if the
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Additional Notes proposed to be issued on the Additional Closing Date were
outstanding at the time of such issuance, assumption or incurrence; (vii) no
Permitted Subordinated Indebtedness (as defined in Section 4(n)) that is
outstanding on the applicable Additional Closing Date matures or otherwise
requires or permits redemption or repayment on or prior to the Maturity Date (as
defined in the Notes) of the Additional Notes proposed to be issued on the
applicable Additional Closing Date; (viii) no capital stock of the Company or
any Subsidiary is redeemable on or prior to the Maturity Date of the Additional
Notes proposed to be issued on the applicable Additional Closing Date; and (ix)
the Company shall have publicly disclosed (either on a Form 10-K, 10-Q or 8-K)
its After-tax PV10 (as defined in the Notes) as of a date during the last
forty-five (45) days of the fiscal quarter immediately preceding the Additional
Closing. Any Additional Closing shall occur on the applicable Additional Closing
Date at the offices of Xxxxxx Xxxxxx Xxxxx Xxxxxxxx, 000 Xxxx Xxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxx 00000-0000 or at such other time, date and place as the
Company and the Buyers may collectively designate in writing.
e. Form of Payment. On each of the Closing Dates, (i) each Buyer
shall pay the applicable Purchase Price to the Company for the Notes and the
Warrants to be issued and sold to such Buyer on such Closing Date, by wire
transfer of immediately available funds in accordance with the Company's written
wire instructions, less any amount withheld pursuant to Section 4(h), and (ii)
the Company shall deliver to each Buyer, Notes (in the principal amounts as such
Buyer shall request) (the "NOTE CERTIFICATES") representing such principal
amount of the Notes that such Buyer is purchasing hereunder at such Closing,
along with warrants representing the Warrants that such Buyer is purchasing
hereunder at such Closing, duly executed on behalf of the Company and registered
in the name of such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, as of the date of this Agreement, the
Initial Closing Date and each Additional Closing Date, with respect to only
itself, that:
a. Investment Purpose. Such Buyer (i) is acquiring the Notes and the
Warrants purchased by such Buyer hereunder, (ii) upon any conversion of the
Notes, will acquire the Conversion Shares then issuable, and (iii) upon any
exercise of the Warrants will acquire the Warrant Shares issuable upon such
exercise thereof (the Notes, the Conversion Shares, the Warrants and the Warrant
Shares being collectively referred to herein as the "SECURITIES") for its own
account and not with a view towards, or for resale in connection with, the
public sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act; provided, however, that by making the
representations herein, such Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of the United States federal and state
securities laws and that the Company is relying in part upon
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the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the Securities.
d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
that have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Sections 3 and 9(l) below. Such Buyer understands that its investment in the
Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that, except as
provided in the Registration Rights Agreement, (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) such
Buyer provides the Company with reasonable assurance that such Securities can be
sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933
Act, as amended (or a successor rule thereto) ("RULE 144"); (ii) any sale of the
Securities made in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 0000 Xxx) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register the Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder. Notwithstanding the foregoing, the
Securities may be pledged in connection with a bona fide margin account or other
loan or financing arrangement secured by the Securities.
g. Legends. Such Buyer understands that the certificates or other
instruments representing the Notes and the Warrants and, until such time as the
sale of the Conversion Shares and the Warrant Shares have been registered under
the 1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Conversion Shares and the Warrant Shares, except
as set forth below, shall bear a restrictive
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legend in substantially the following form (and a stop-transfer order may be
placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF
COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD
PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if (i) such Securities are registered for resale under the 1933 Act,
(ii) in connection with a sale transaction, such holder provides the Company
with an opinion of counsel, in a generally acceptable form, to the effect that a
public sale, assignment or transfer of the Securities may be made without
registration under the 1933 Act, (iii) such holder provides the Company with
reasonable assurances that the Securities can be sold pursuant to Rule 144(k),
or (iv) such holder provides the Company reasonable assurances that the
Securities have been or are being sold pursuant to Rule 144. Each Buyer
acknowledges, covenants and agrees to sell the Securities represented by a
certificate(s) from which the legend has been removed, only pursuant to (x) a
registration statement effective under the 1933 Act and in compliance with the
rules regarding the delivery of the prospectus included therein, (y) advice of
counsel that such sale is exempt from registration required by Section 5 of the
1933 Act, or (z) a transaction pursuant to Rule 144.
h. Authorization; Enforcement; Validity. Such Buyer is a validly
existing corporation, partnership, limited liability company or other entity and
has the requisite corporate, partnership, limited liability or other
organizational power and authority to purchase the Securities pursuant to this
Agreement. This Agreement and the Registration Rights Agreement have been duly
and validly authorized, executed and delivered on behalf of such Buyer and are
valid and binding agreements of such Buyer enforceable against such Buyer in
accordance with their respective terms. The Security Agreement, the Account
Control Agreements and each of the other agreements entered into and other
documents executed by such Buyer in connection with the transactions
contemplated hereby and thereby as of the Initial Closing or any Additional
Closing will have been duly and validly authorized, executed and delivered on
behalf of such Buyer as of the Initial Closing or such Additional Closing, as
applicable, and will be valid and binding agreements of such Buyer enforceable
against such Buyer in accordance with their respective terms.
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i. Residency. Such Buyer is a resident of that jurisdiction
specified below its address on the Schedule of Buyers.
j. No Other Agreements. As of the Initial Closing Date, such Buyer
has not, directly or indirectly, made any agreements with the Company relating
to the terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents (as defined in
Section 3(b)).
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants, as of the date of this
Agreement, the Initial Closing Date and each Additional Closing Date, to each of
the Buyers, that:
a. Organization and Qualification. Set forth in Schedule 3(a) is a
true and correct list of the entities in which the Company, directly or
indirectly, owns capital stock or holds an equity or similar interest. Each of
the Company and its Active Subsidiaries is a corporation, limited liability
company, partnership or other entity and is duly organized and validly existing
in good standing under the laws of the jurisdiction in which it is incorporated
and has the requisite corporate, partnership, limited liability company or other
organizational power and authority to own its properties and to carry on its
business as now being conducted. Each of the Company and its Active Subsidiaries
is duly qualified to do business and is in good standing in every jurisdiction
in which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be
so qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse
effect on the business, properties, assets, operations, results of operations,
financial condition, credit worthiness or prospects of the Company and its
Active Subsidiaries taken as a whole, or on the transactions contemplated hereby
or on the agreements and instruments to be entered into in connection herewith,
or on the authority or ability of the Company or any Active Subsidiary to
perform its obligations under the Transaction Documents. Except as set forth in
Schedule 3(a), the Company holds all right, title and interest in and to 100% of
the capital stock, equity or similar interests of each of its Subsidiaries, in
each case, free and clear of any Liens (as defined below), including any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of free and clear ownership by a current holder, and no such
Subsidiary owns capital stock or holds an equity or similar interest in any
other Person. "LIEN" means, with respect to any asset, any mortgage, lien,
pledge, hypothecation, charge, security interest, encumbrance or adverse claim
of any kind and any restrictive covenant, condition, restriction or exception of
any kind that has the practical effect of creating a mortgage, lien, pledge,
hypothecation, charge, security interest, encumbrance or adverse claim of any
kind (including any of the foregoing created by, arising under or evidenced by
any conditional sale or other title retention agreement, the interest of a
lessor with respect to a Capital Lease Obligation (as defined in the Notes), or
any financing lease having substantially the same economic effect as any of the
foregoing). "SUBSIDIARY" means any entity in which the Company, directly or
indirectly, owns capital stock or holds an equity or similar interest at the
time of this Agreement or at any time hereafter. "ACTIVE SUBSIDIARY" means any
Subsidiary other than an Inactive Subsidiary. "INACTIVE SUBSIDIARY" means any
Subsidiary that does not have, and has not within the past 12 months prior to
the date this representation is made had, any business or other activities or
operations, employees, assets,
9
Indebtedness or other liabilities (subordinated, contingent or otherwise) or
obligations (contractual or otherwise), provided that immediately upon any
Inactive Subsidiary's becoming an Active Subsidiary (whether by engaging in any
business or other activities or operations, coming into possession of any
assets, incurring any Indebtedness or other liabilities or obligations, or
otherwise), such Subsidiary shall for all purposes of this Agreement and the
other Transaction Documents be treated as if it had just been formed as an
Active Subsidiary. Each of the Company's Inactive Subsidiaries is designated as
such on Schedule 3(a).
b. Authorization; Enforcement; Validity. Each of the Company and the
applicable Subsidiaries has the requisite corporate power and authority to enter
into and perform its obligations under each of this Agreement, the Registration
Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in
Section 5), the Notes, the Warrants, the Security Agreement, the Account Control
Agreements, the Guaranty, the Mortgages, the Pledge Agreement and each of the
other agreements to which it is a party or by which it is bound and which is
entered into by the parties hereto in connection with the transactions
contemplated hereby and thereby (collectively, the "TRANSACTION DOCUMENTS"), and
to issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of the Transaction Documents by the Company and, to the
extent applicable, its Subsidiaries and the consummation by the Company and its
Subsidiaries of the transactions contemplated hereby and thereby, including the
issuance of up to $45,000,000 in principal amount of the Notes and the related
Warrants and the reservation for issuance and the issuance of the Conversion
Shares and Warrant Shares issuable upon conversion or exercise thereof, have
been duly authorized by the Company's Board of Directors and no further consent
or authorization is required by the Company, its Board of Directors or its
shareholders, except as contemplated by Section 4(k) and except for
authorization by the Company's Board of Directors for the issuance of in excess
of $45,000,000 in principal amount of the Notes and the related Warrants
contemplated by this Agreement. This Agreement and the other Transaction
Documents dated of even date herewith have been duly executed and delivered by
the Company and, to the extent applicable, its Subsidiaries and constitute the
valid and binding obligations of each of the Company and its Active Subsidiaries
that is a party thereto, enforceable against such parties in accordance with
their terms. As of each of the Closings, the Transaction Documents dated after
the date of this Agreement and on or prior to the date of such Closing shall
have been duly executed and delivered by such parties and shall constitute the
valid and binding obligations of each of the Company and its Subsidiaries that
is a party thereto, enforceable against such parties in accordance with their
terms.
c. Capitalization. As of the date of this Agreement, the authorized
capital stock of the Company consists of (i) 300,000,000 shares of Common Stock,
of which as of the date of this Agreement 10,663,097 shares are issued and
outstanding, 1,361,131 shares are reserved for issuance pursuant to the
Company's stock option, restricted stock and stock purchase plans and 4,115,344
shares are issuable and reserved for issuance pursuant to securities (other than
the Notes and the Warrants) exercisable or exchangeable for, or convertible
into, shares of Common Stock and (ii) 5,000,000 shares of preferred stock, no
par value, of which as of the date of this Agreement, none is issued or
outstanding. All of such outstanding or issuable shares have been, or upon
issuance will be, validly issued and are, or upon issuance will be, fully paid
and nonassessable. Except as disclosed in Schedule 3(c), (A) no shares of the
capital stock of the Company or any of its Subsidiaries are subject to
preemptive rights or any other similar
10
rights or any Liens suffered or permitted by the Company or any of its
Subsidiaries; (B) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exercisable for, any shares of capital
stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exercisable for, any shares of capital
stock of the Company or any of its Subsidiaries; (C) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act (except the
Registration Rights Agreement); (D) there are no outstanding securities or
instruments of the Company or any of its Subsidiaries that contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (E) there are no securities or instruments containing
anti-dilution or similar provisions that will or may be triggered by the
issuance of the Securities; and (F) the Company does not have any stock
appreciation rights or "phantom stock" plans or agreements or any similar plan
or agreement. The Company has furnished to each Buyer true and correct copies of
the Company's Articles of Incorporation, as amended and as in effect on the date
this representation is made (the "ARTICLES OF INCORPORATION"), and the Company's
Bylaws, as amended and as in effect on the date this representation is made (the
"BYLAWS"), and the terms of all securities convertible into, or exercisable or
exchangeable for, Common Stock, and the material rights of the holders thereof
in respect thereto.
d. Issuance of Securities. The Notes are duly authorized and, upon
issuance in accordance with the terms hereof, shall be (i) free from all taxes
and Liens with respect to the issuance thereof and (ii) entitled to the rights
set forth in the Notes. At least 2,000,000 shares of Common Stock (subject to
adjustment pursuant to the Company's covenant set forth in Section 4(f) below)
have been duly authorized and reserved for issuance upon exercise of the Initial
Warrants and in connection with any Additional Closing, the Company will have
reserved at least 110% of the number of Warrant Shares issuable upon exercise of
any Additional Warrants then issued. Upon conversion or exercise in accordance
with the Notes or the Warrants, as the case may be, the Conversion Shares and
the Warrant Shares will be validly issued, fully paid and nonassessable and free
from all taxes and Liens with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Stock. Assuming the
accuracy of the representations and warranties of the Buyers set forth in
Section 2(a), 2(b), 2(d), 2(i) and 2(j), the issuance by the Company of the
Securities is exempt from registration under the 1933 Act and applicable state
securities laws.
e. No Conflicts. The execution and delivery of the Transaction
Documents by the Company and, if applicable, its Subsidiaries, the performance
by such parties of their obligations thereunder and the consummation by such
parties of the transactions contemplated thereby (including the reservation for
issuance and issuance of the Conversion Shares and the Warrant Shares) will not
(i) result in a violation of the Articles of Incorporation or the Bylaws or the
organizational documents of any Subsidiary; (ii) conflict with, or constitute a
breach or default (or an event which, with the giving of notice or lapse of time
or both, constitutes or
11
would constitute a breach or default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or other remedy with
respect to, any agreement, indenture or instrument to which the Company or any
of its Subsidiaries is a party; (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the Principal Market (as
defined in Section 3(s)) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected. Neither the Company nor any of its Active Subsidiaries is in
violation of any term of its articles of incorporation (or other organizational
charter) or is in material violation of any term of its bylaws (or partnership
or operating agreement), as applicable. Neither the Company nor any of its
Subsidiaries is in violation of any term of or in default under (or with the
giving of notice or lapse of time or both would be in violation of or default
under) any contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or its Subsidiaries, except where such violation or default could not
reasonably be expected to have a Material Adverse Effect or to result in the
acceleration of any Indebtedness or other obligation. The business of the
Company and its Active Subsidiaries is not being conducted, and shall not be
conducted, in violation of any law, ordinance or regulation of any governmental
entity except as could not reasonably be expected to have a Material Adverse
Effect. Except for the filing of a proxy statement with the SEC as would be
required if the Company seeks shareholder approval pursuant to the rules of the
NASDAQ National Market for the issuance of an aggregate number of Warrant Shares
and Conversion Shares greater than 19.99% of the number of shares of Common
Stock outstanding immediately prior to the Initial Closing Date, the filings and
listings contemplated by the Registration Rights Agreement or described in
Section 4(b) and Section 4(g), and the filing of instruments to perfect security
interests, none of the Company and its Subsidiaries is required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and registrations that
the Company or any of its Subsidiaries is required to obtain as described in the
preceding sentence have been obtained or effected on or prior to the date of
this Agreement. To the Knowledge (as defined below) of the Company, there are no
facts or circumstances that might give rise to any of the foregoing. The Company
and its Active Subsidiaries are in material compliance with applicable provision
of the Xxxxxxxx-Xxxxx Act of 2002, as amended, and the rules and regulations
thereunder (collectively, "XXXXXXXX-XXXXX"). The "KNOWLEDGE" of the Company
means, unless otherwise specified, the actual knowledge of any "officer" (as
such term is defined in Rule 16a-1 under the 0000 Xxx) of the Company or of the
principal financial officer of any Active Subsidiary.
f. SEC Documents; Financial Statements. Since December 31, 2002, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the 1934 Act (all of the foregoing filed prior to the date this
representation is made (including all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference
therein) being hereinafter referred to as the "SEC DOCUMENTS"). A complete and
accurate list of the SEC Documents is set forth on Schedule 3(f). The Company
has made available to the Buyers or their respective representatives true and
complete copies of the SEC Documents. Each
12
of the SEC Documents was filed with the SEC within the time frames prescribed by
the SEC for the filing of such SEC Documents (including any extensions of such
time frames permitted by Rule 12b-25 under the 0000 Xxx) such that each filing
was timely filed (or deemed timely filed pursuant to Rule 12b-25 under the 0000
Xxx) with the SEC. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents.
None of the SEC Documents, at the time they were filed with the SEC, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the consolidated financial statements
of the Company and its Subsidiaries included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company and its Subsidiaries as of the dates thereof and the
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments). None
of the Company and its Subsidiaries, or any of their respective officers,
directors or Affiliates (as defined in Section 4(j)) or, to the Company's
Knowledge, any shareholder of the Company has made any other filing with the
SEC, issued any press release or made any other public statement or
communication on behalf of the Company or any of its Subsidiaries or otherwise
relating to the Company or any of its subsidiaries that contains any untrue
statement of a material fact or omits any statement of material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they are or were made, not misleading or has provided any other
information to the Buyers, including information referred to in Section 2(d),
that, considered in the aggregate, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are or
were made, not misleading. None of the Company, its Subsidiaries and their
respective officers, directors, employees or agents has provided the Buyers with
any material, nonpublic information. The Company is not required to file and
will not be required to file any agreement, note, lease, mortgage, deed or other
instrument entered into prior to the date this representation is made and in
effect on the date this representation is made and to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary is bound that
has not been previously filed as an exhibit (including by way of incorporation
by reference) to its reports filed or made with the SEC under the 1934 Act. The
accounting firm that has expressed its opinion with respect to the consolidated
financial statements included in the Company's most recently filed annual report
on Form 10-K (the "AUDIT OPINION") is independent of the Company pursuant to the
standards set forth in Rule 2-01 of Regulation S-X promulgated by the SEC, and
such firm was otherwise qualified to render the Audit Opinion under applicable
law and the rules and regulations of the SEC. There is no transaction,
arrangement or other relationship between the Company and an unconsolidated or
other off-balance-sheet entity that is required to be disclosed by the Company
in its reports pursuant to the 1934 Act that has not been so disclosed in the
SEC Documents.
13
g. Absence of Certain Changes. Except as disclosed in any SEC
Documents which were filed with the SEC at least five (5) days prior to the date
of this Agreement, since December 31, 2003, there has been no Material Adverse
Effect. Neither the Company nor any of its Active Subsidiaries has taken any
steps, and neither the Company nor any of its Active Subsidiaries currently
expects to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company have any Knowledge or reason to believe that the creditors of
the Company or any of its Active Subsidiaries intend to initiate involuntary
bankruptcy proceedings or any Knowledge of any fact that would reasonably lead a
creditor to do so. Neither the Company nor any of its Active Subsidiaries is as
of the date this representation is made, nor after giving effect to the
transactions contemplated hereby, will be Insolvent (as defined below). For
purposes of this Section 3(g), "INSOLVENT" means (i) the present fair saleable
value of the Company's assets is less than the amount required to pay the
Company's total indebtedness, contingent or otherwise, (ii) the Company is
unable to pay its debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured, (iii) the Company
intends to incur, prior to the second anniversary of the date this
representation is made, or believes that it will incur, prior to the second
anniversary of the date this representation is made, debts that would be beyond
its ability to pay as such debts mature or (iv) the Company has unreasonably
small capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted. Except as disclosed
in Schedule 3(g), since December 31, 2003, the Company has not declared or paid
any dividends or sold any assets outside of the ordinary course of business,
individually or in the aggregate, in excess of $100,000. Except as disclosed in
Schedule 3(g), since December 31, 2003, the Company has not had any capital
expenditures outside the ordinary course of its business or individually in
excess of $1,000,000.
h. Absence of Litigation. Except as set forth on Schedule 3(h) (i)
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the Knowledge of the Company, threatened against or affecting the
Company, the Common Stock or any of the Company's Subsidiaries or any of the
Company's or its Subsidiaries' officers or directors in their capacities as
such, other than any proceeding, inquiry or investigation arising in the
ordinary course related to permits, approvals or licenses related to the
Company's oil and gas exploration and production operations, (ii) during the
past three (3) years there has been no material action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the Knowledge of the
Company, threatened against or affecting the Company, the Common Stock or any of
the Subsidiaries or any of the Company's or its Subsidiaries' officers or
directors in their capacities as such, other than any proceeding, inquiry or
investigation arising in the ordinary course related to permits, approvals or
licenses related to the Company's oil and gas exploration and production
operations and (iii) to the Knowledge of the Company, none of the directors or
officers of the Company has been involved in securities-related litigation
during the past five years. None of the matters described in Schedule 3(h),
regardless of their outcome, could reasonably be expected to have a Material
Adverse Effect.
i. Acknowledgment Regarding Buyer's Purchase of Notes and Warrants.
The Company acknowledges and agrees that each of the Buyers is acting solely in
the capacity of an arm's length purchaser with respect to the Company in
connection with the Transaction
14
Documents and the transactions contemplated hereby and thereby. The Company
further acknowledges that each Buyer is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby, and
any advice given by any of the Buyers or any of their respective representatives
or agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to such Buyer's purchase of
the Securities. The Company further represents to each Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
j. No Undisclosed Events, Liabilities, Developments or
Circumstances. Except as set forth on Schedule 3(j), and except for the issuance
of the Notes and Warrants contemplated by this Agreement, no material event,
liability, development or circumstance has occurred or exists with respect to
the Company or its Subsidiaries or their respective business, properties, credit
worthiness, prospects, operations or financial condition, that would be required
to be disclosed by the Company under applicable securities laws at the time this
representation is made that has not been publicly disclosed at least five (5)
days prior to the date that this representation is made.
k. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged or will
engage in any form of general solicitation or general advertising (within the
meaning of Regulation D under the 0000 Xxx) in connection with the offer or sale
of the Securities.
l. No Integrated Offering. 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 any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable shareholder approval provisions of the Principal Market or any
other authority, nor will the Company or any of its Subsidiaries take any action
or steps that would require registration of the issuance of any of the
Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings for purposes of the 1933 Act or any applicable
shareholder provision of the Principal Market or any other authority.
m. Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Notes and the
Warrant Shares issuable upon exercise of the Warrants will increase in certain
circumstances. The Company further acknowledges that any obligation to issue
Conversion Shares upon conversion of the Notes in accordance with this Agreement
and the Notes and its obligation to issue the Warrant Shares upon exercise of
the Warrants in accordance with this Agreement and the Warrants is, in each
case, absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other shareholders of the
Company.
n. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any labor union dispute nor, to the Knowledge of the
Company is any such dispute threatened. None of the Company's or its
Subsidiaries' employees is a member of a union that
15
relates to such employee's relationship with the Company and neither the Company
nor any of its Subsidiaries is a party to a collective bargaining agreement.
Except as set forth in Schedule 3(n), no executive officer (as defined in Rule
501(f) of the 0000 Xxx) has notified the Company that such executive officer
intends to leave the Company or otherwise terminate such officer's employment
with the Company. No executive officer, to the Knowledge of the Company, is, or
is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability with respect to
any of the foregoing matters. The Company and its Subsidiaries are in compliance
with all federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance would not result,
either individually or in the aggregate, in a Material Adverse Effect.
o. Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights necessary
to conduct their respective businesses as now conducted. None of the Company's
and its Subsidiaries' trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and other
intellectual property rights have expired or terminated, or are expected to
expire or terminate within two years from the date this representation is made.
The Company has no Knowledge of any infringement by the Company or any of its
Subsidiaries of trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, trade secrets or other intellectual property rights of others, or of
any development of similar or identical trade secrets or technical information
by others. There is no claim, action or proceeding being made or brought
against, or to the Company's Knowledge, being threatened against, the Company or
any of its Subsidiaries regarding its trademarks, trade names, service marks,
service xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses or trade secrets, or infringement of other intellectual
property rights. The Company does not have any Knowledge of any facts or
circumstances that could reasonably be expected to give rise to any of the
foregoing. The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties.
p. Environmental Laws. Except as set forth in Schedule 3(p), and
except as could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect, the Company and its Subsidiaries (I) are in
compliance with any and all Environmental Laws (as defined below), (II) have
received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses as
presently conducted and (III) are in compliance with all terms and conditions of
any such permit, license or approval. The term "ENVIRONMENTAL LAWS" means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata), including laws relating to
emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, or
16
toxic or hazardous substances or wastes into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of hazardous materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
q. Title. Except as set forth in Schedule 3(bb), neither the Company
nor any of its Subsidiaries has any interest in real property or any oil, gas or
other mineral drilling, exploration or development rights. The Company and its
Subsidiaries have good and valid title to all personal property owned by them
that is material to the business of the Company and its Subsidiaries, in each
case free and clear of all Liens except such as are described in Schedule 3(q).
The Company and its Subsidiaries have good, marketable and indefeasible title in
fee simple to all real property owned (rather than leased) by them (the "OWNED
REAL PROPERTY") as set forth on Schedule 3(q), in each case free and clear of
all Liens, other than Permitted Liens, except such as are described in Schedule
3(q).
r. Insurance. The Company and each of its Active Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its Active
Subsidiaries are engaged. Neither the Company nor any such Active Subsidiary has
been refused any insurance coverage sought or applied for, and neither the
Company nor any such Active Subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a Material Adverse
Effect.
s. Regulatory Permits. Except as set forth on Schedule 3(s) or as
could not, individually or in the aggregate, reasonably be expected to have any
of (i) a Material Adverse Effect, (ii) a Services Business Material Adverse
Effect, (iii) a Property Material Adverse Effect, or (iv) a material adverse
effect on the production, extraction, transportation or sale of oil, gas,
minerals or other Hydrocarbons (as defined in the Mortgages) from any portion of
the Real Property (as defined in Section 3(bb)) that is producing oil, gas,
minerals and/or other Hydrocarbons at the time this representation is made, the
Company and its Active Subsidiaries possess all certificates, authorizations,
approvals, licenses and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct their respective businesses
as conducted at the time this representation is made ("PERMITS"), and neither
the Company nor any such Active Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such Permit.
Without limiting the foregoing, except as set forth on Schedule 3(s), the
Company and its Active Subsidiaries possess all Permits necessary to produce,
extract, transport and sell the oil, gas and other minerals in that portion of
Real Property that is producing oil, gas, minerals and/or other Hydrocarbons at
the time this representation is made. Except as set forth in Schedule 3(s) or as
could not reasonably be expected to have a Material Adverse Effect or a Property
Material Adverse Effect, the Company and its Active Subsidiaries have no reason
to believe that they will not be able to obtain necessary Permits as and when
necessary to enable the Company to produce, extract, transport and sell the oil,
gas, minerals and other Hydrocarbons in the Real Property. The Company is not in
violation of any of the rules, regulations or requirements of The NASDAQ
National Market (the "PRINCIPAL MARKET";
17
provided however, that, if after the date of this Agreement the Common Stock is
listed on the New York Stock Exchange or both the NASDAQ National Market or the
New York Stock Exchange, the "PRINCIPAL MARKET" shall mean the New York Stock
Exchange or both the NASDAQ National Market and the New York Stock Exchange, as
applicable) and has no knowledge of any facts or circumstances which would
reasonably lead to delisting or suspension of the Common Stock by the Principal
Market in the foreseeable future. Since December 31, 2002, (i) the Company's
Common Stock has been listed on the Principal Market, (ii) trading in the Common
Stock has not been suspended by the SEC or the Principal Market and (iii) the
Company has received no communication, written or oral, from the SEC or the
Principal Market regarding the suspension or delisting of the Common Stock from
the Principal Market. As used in this Agreement, "SERVICES BUSINESS MATERIAL
ADVERSE EFFECT" means any material adverse effect on the business, properties,
assets, operations, results of operations, financial condition, credit
worthiness or prospects of the Services Business, and "PROPERTY MATERIAL ADVERSE
EFFECT" means any material adverse effect on the business, properties, assets,
operations, results of operations, financial condition, credit worthiness or
prospects of the Company and its Active Subsidiaries, taken as a whole, with
respect to any of the geographical areas described under the heading "major
properties"(or otherwise described) in Item 2 (or a comparable section) of the
Company's annual report on Form 10-K most recently filed by the Company prior to
the date this representation is made, or any such geographical area that will be
required to be described in the next annual report on Form 10-K to be filed by
the Company after the date this representation is made.
t. Internal Accounting Controls; Disclosure Controls and Procedures.
The Company and each of its Active Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset and liability accountability, (iii)
access to assets or incurrence of liability is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets and liabilities is compared with the existing assets
and liabilities at reasonable intervals and appropriate action is taken with
respect to any differences. The Company maintains disclosure controls and
procedures required by Rule 13a-15 or Rule 15d-15 under the 1934 Act; such
controls and procedures are effective to ensure that the information required to
be disclosed by the Company in the reports that it files with or submits to the
SEC is recorded, processed, summarized and reported accurately within the time
periods specified in the SEC's rules and forms.
u. Tax Status. The Company and each of its Active Subsidiaries (i)
has made or filed all foreign, federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject (unless and only to the extent that the Company and each of its Active
Subsidiaries has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes), (ii) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and for which the Company has made appropriate
reserves on its books, and (iii) has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations (referred to in clause
(i) above) apply. There are
18
no unpaid taxes in any material amount claimed in writing to be due by the
taxing authority of any jurisdiction, and to the Company's Knowledge, there is
no basis for any such claim.
v. Transactions With Affiliates. Except as set forth in Schedule
3(v) or for transactions in which the sole obligation of the Company or any of
its Subsidiaries is the payment of cash in a maximum amount of $5,000
individually (for any single transaction) and $15,000 in the aggregate in any
calendar year, no Related Party (as defined in Section 4(j)) of the Company or
any of its Subsidiaries, nor any of their respective affiliates, is presently,
or has been within the past two years, a party to any transaction, contract,
agreement, instrument, commitment, understanding or other arrangement or
relationship with the Company or any of its Subsidiaries (other than for
services as an employee, officer and/or director), whether for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments or consideration to or from any such Related
Party. Except as set forth in Schedule 3(v), no Related Party of the Company or
any of its Subsidiaries, or any of their respective affiliates, has any direct
or indirect ownership interest in any Person (other than ownership of less than
2% of the outstanding common stock of a publicly traded corporation) in which
the Company or any of its Subsidiaries has any direct or indirect ownership
interest or with which the Company or any of its Subsidiaries competes or has a
business relationship.
w. Application of Takeover Protections. The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under the Articles of Incorporation or the laws
of Colorado that is or could become applicable to the Buyers as a result of the
transactions contemplated by this Agreement, including the Company's issuance of
the Securities and the Buyers' ownership of the Securities.
x. Rights Agreement. The Company has not adopted a shareholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
y. Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor to the Company's Knowledge, any director, officer, agent,
employee or other person acting on behalf of the Company or any of its Active
Subsidiaries has, in the course of its actions for, or on behalf of, the
Company, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made
any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
z. No Other Agreements. As of the Initial Closing Date, the Company
has not, directly or indirectly, made any agreements with any Buyers relating to
the terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents.
19
aa. Outstanding Indebtedness; Liens. Payments of principal and other
payments due under the Notes will, upon issuance in connection with the
Closings, rank senior to all other Indebtedness (as defined in the Notes) of the
Company or any of its Subsidiaries (other than, at the Initial Closing, with
respect to the repayment of the Indebtedness required to be repaid by Section
4(u), and provided, however, that such payments will be no less than pari passu
with Indebtedness permitted under clauses (a)(IV), (a)(V), (a)(VI) (a)(VII),
(a)(VIII) and (A)(IX) of Section 4(n)) and, by virtue of their secured position,
to all trade account payables of the Company or any of its Subsidiaries. Except
as set forth on Schedule 3(aa), (I) neither the Company nor any of its
Subsidiaries has any outstanding Indebtedness or trade account payables, (II)
there are no Liens on any of the assets of the Company and its Subsidiaries, and
(III) there are no financing statements securing obligations of any amounts
filed against the Company or any of its Subsidiaries or any of their respective
assets.
bb. Real Property. Schedule 3(bb) (subject to the exclusions set
forth therein) contains a complete and correct list of all the real property;
facilities; and oil, gas and other mineral drilling, exploration and development
rights, concessions, working interests and participation interests (including
all Hydrocarbon Property (as defined in the Mortgages)) that (i) are leased or
otherwise owned or possessed by the Company or any of its Subsidiaries, (ii) in
connection with which the Company or any of its Subsidiaries has entered into an
option agreement, participation agreement or acquisition and drilling agreement
or (iii) the Company or any of its Subsidiaries has agreed (or has an option) to
lease or otherwise acquire or may be obligated to lease or otherwise acquire in
connection with the conduct of its business (collectively, the "REAL PROPERTY").
Schedule 3(bb) also contains a complete and correct list of all leases and other
agreements with respect to which the Company or any of its Subsidiaries is a
party or otherwise bound or affected with respect to the Real Property, except
easements, rights of way, access agreements, surface damage agreements, surface
use agreements or similar agreements that pertain to Real Property that is
contained wholly within the boundaries of any owned or leased Real Property
otherwise described on Schedule 3(bb) (the "REAL PROPERTY LEASES"). The lists of
Real Property and Real Property Leases included in Schedule 3(bb) do not contain
any material non-public information. Except as set forth in Schedule 3(bb), the
Company is the legal and equitable owner of a leasehold interest in all of the
Real Property that is producing oil, gas, minerals and/or other Hydrocarbons at
the time this representation is made ("PRODUCING PROPERTY"), and possesses good,
marketable and defensible title thereto, free and clear of all Liens (other than
Permitted Liens) and other matters affecting title to such leasehold that could
impair the ability of the Company and its Subsidiaries to realize the benefits
of the rights provided to any of them under the Real Property Leases. Except
with respect to the Owned Real Property, the Company is the legal and equitable
owner of a leasehold interest in all of the Real Property that is not Producing
Property and, except as could not reasonably be expected, individually or in the
aggregate, to have any of a Material Adverse Effect, a Property Material Adverse
Effect or a Services Business Material Adverse Effect, possesses good,
marketable and defensible title thereto, free and clear of all Liens (other than
Permitted Liens) and other matters affecting title to such leasehold that could
impair the ability of the Company and its Subsidiaries to realize the benefits
of the rights provided to any of them under the Real Property Leases. All of the
Real Property Leases with respect to Producing Property are valid and in full
force and effect and are enforceable against all parties thereto, (ii) neither
the Company nor any of its Subsidiaries nor, to the Company's Knowledge, any
other party thereto is in default in any material respect under any of such Real
Property Leases and (iii) no event has
20
occurred which with the giving of notice or the passage of time or both could
constitute a default under, or otherwise give any party the right to terminate,
any of such Real Property Leases, or could adversely affect the Company's or any
of its Subsidiaries' interest in and title to the Real Property subject to any
of such Real Property Leases. Except as could not reasonably be expected,
individually or in the aggregate, to have any of a Material Adverse Effect, a
Property Material Adverse Effect or a Services Business Material Adverse Effect,
(i) all of the Real Property Leases with respect to all of the Real Property
that is not Producing Property are valid and in full force and effect and are
enforceable against all parties thereto, (ii) neither the Company nor any of its
Subsidiaries nor, to the Company's Knowledge, any other party thereto is in
default under any of such Real Property Leases and (iii) no event has occurred
which with the giving of notice or the passage of time or both could constitute
a default by the Company or its Subsidiaries under, or otherwise give any party
the right to terminate, any of such Real Property Leases, or could adversely
affect the Company's or any of its Subsidiaries' interest in and title to the
Real Property subject to any of such Real Property Leases. No Real Property
Lease is subject to termination, modification or acceleration as a result of the
transactions contemplated hereby. Except as set forth in Schedule 3(bb), all of
the Real Property Leases will remain in full force and effect upon, and permit,
the consummation of the transactions contemplated hereby (including the granting
of leasehold mortgages). Except as could not reasonably be expected,
individually or in the aggregate, to have either a Material Adverse Effect or a
Property Material Adverse Effect, the Real Property are permitted for their
present uses under applicable zoning laws, are permitted conforming structures
and comply with all applicable building codes, ordinances and other similar
legal requirements. Except as set forth on Schedule 3(bb), there are no pending
or, to the Knowledge of the Company, threatened condemnation, eminent domain or
similar proceedings, or litigation or other proceedings affecting the Real
Property, or any portion or portions thereof. Except as set forth on Schedule
3(bb), to the Knowledge of the Company, there are no pending or threatened
requests, applications or proceedings to alter or restrict any zoning or other
use restrictions applicable to the Real Property that would interfere with the
conduct of the Company's or any of its Subsidiaries' business as conducted at
the time this representation is made. Except as set forth on Schedule 3(bb),
there are no restrictions applicable to the Real Property that would interfere
with the Company's or any of its Subsidiary's making an assignment or granting
of a leasehold or other mortgage to the Buyers as contemplated by the Security
Documents (as defined in the Notes), including any requirement under any Real
Property Leases requiring the consent of, or notice to, any lessor of any such
Real Property. None of the Real Property of the Company and its Subsidiaries
located in the State of Kansas is currently producing any Hydrocarbons, and none
of such Real Property has any material value as of the date hereof.
cc. Joint Value Enhancement Agreement. The Joint Value Enhancement
Agreement, dated December 3, 2003, among Infinity Oil & Gas of Wyoming, Inc.
("IOGW"), Schlumberger Technology Corporation and Red Oak Capital Management LP
(the "JVEA") has been terminated and will be of no further force or effect as of
and after February 6, 2005; provided, however, that (i) the obligation to make
Deferred Payments (as such term is defined in the JVEA) under Article 5 of the
JVEA in respect of each Bundle (as such term is defined in the JVEA) shall
continue for the full period provided by Article 5.2 of the JVEA for that
Bundle, and (ii) the confidentiality provisions of Article 10 of the JVEA shall
continue for a period of eighteen (18) months following the termination of the
JVEA.
21
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
b. Form D and Blue Sky. The Company agrees to timely file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before each of the Closing Dates, take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to
qualify the Securities for, sale to the Buyers at each of the Closings pursuant
to this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the Buyers on or prior to each of the Closing Dates. The Company shall make all
filings and reports relating to the offer and sale of the Securities required
under applicable securities or "Blue Sky" laws of the states of the United
States following each of the Closing Dates.
c. Reporting Status. Until the latest of (i) the date that is one
year after the date as of which the Investors (as that term is defined in the
Registration Rights Agreement) may sell all of the Conversion Shares and the
Warrant Shares without restriction pursuant to Rule 144(k) promulgated under the
1933 Act (or successor thereto), (ii) the date on which no Notes or Warrants
remain outstanding, and (iii) the date that is the last day of the Additional
Note Issuance Period (the "REPORTING PERIOD"), the Company shall timely file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the sale
of the Notes and Warrants first (i) to pay expenses and commissions related to
the sale of the Notes and Warrants, (ii) to repay all outstanding borrowings
(including principal thereof and accrued but unpaid interest and fees thereon)
of Consolidated Oil Well Services, Inc. (a Subsidiary of the Company)
("CONSOLIDATED"), under Consolidated's term loan and lines of credit
(collectively, the "LASALLE FACILITY") with LaSalle Bank, N.A. ("LASALLE"), such
repayment to be made as of the Initial Closing, (iii) to repay all outstanding
borrowings (including principal thereof and accrued but unpaid interest and fees
thereon) of Infinity Oil & Gas of Wyoming, Inc. (a Subsidiary of the Company)
("INFINITY-WYOMING"), under Infinity-Wyoming's credit facility (the "U.S. BANK
FACILITY") with U.S. Bank National Association ("U.S. Bank"), such repayment to
be made as of the Initial Closing, and (iv) to pay the redemption price of any
of the Company's 8% Subordinated Convertible Notes due 2006 (the "8% NOTES")
redeemed by the Company as required by Section 4(q), in each case as more
specifically described and in the amounts indicated in Schedule 4(d). Except as
provided in Section 4(r) and 4(u), the Company will use the remainder of such
proceeds to fund its oil and gas exploration and development operating
activities (and not for the redemption or repayment of any Indebtedness).
e. Financial Information. The Company agrees to send the following
to each Investor (as that term is defined in the Registration Rights Agreement)
during the Reporting Period: (i) within one (1) day after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports
on Form 10-Q, any Current Reports on Form 8-K and any
22
registration statements (other than on Form S-8) or amendments filed pursuant to
the 1933 Act, unless the foregoing are filed with the SEC through XXXXX and are
immediately available to the public through XXXXX; (ii) on the same day as the
release thereof, facsimile copies of all press releases issued by the Company or
any of its Subsidiaries, except to the extent such release is available through
Bloomberg Financial Markets (or any successor thereto) contemporaneously with
such issuance; and (iii) copies of any notices and other information made
available or given to the shareholders of the Company generally,
contemporaneously with the making available or giving thereof to the
shareholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 100% of the aggregate number of shares of Common Stock
issuable upon exercise of all outstanding Warrants.
g. Listing. The Company shall promptly secure the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents. The Company shall
maintain the Common Stock's listing on the NASDAQ National Market or the New
York Stock Exchange. Neither the Company nor any of its Subsidiaries shall take
any action which would be reasonably expected to result in the delisting or
suspension of the Common Stock on the Principal Market. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 4(g).
h. Expenses. Subject to Section 9(k) below, at each Closing, the
Company shall pay each of the Buyers a non-accountable reimbursement amount
equal to such Buyer's Reimbursement Allocation Percentage, as set forth opposite
such Buyer's name on the Schedule of Buyers (which for all Buyers shall total
1.5%), multiplied by the original principal amount of Notes purchased by all the
Buyers at such Closing to cover due diligence, negotiating and preparing the
Transaction Documents and consummating the transactions contemplated thereby
(less at the Initial Closing, in the case of HFTP Investment L.L.C., a Buyer
("HFTP"), the $25,000 previously paid to HFTP as a reimbursement). The amount
payable to each Buyer pursuant to the preceding sentence at each Closing shall
be withheld as an off-set by such Buyer from its Purchase Price to be paid by it
at such Closing.
i. Disclosure of Transactions and Other Material Information.
Contemporaneous with or prior to the earlier of (i) the Company's first public
announcement of the transactions contemplated hereby and (ii) 8:00 a.m. (New
York City time) on the second (2nd) Business Day following the Initial Closing
Date, the Company shall file a Form 8-K with the SEC describing the terms of the
transactions contemplated by the Transaction Documents and including as exhibits
to such Form 8-K this Agreement (including the schedules hereto, other than the
lists of Real Property and Real Property Leases included in Schedule 3(bb)), the
Form of Initial Note, the Form of Additional Note, the Registration Rights
Agreement, the Form of Warrant, the Form of Security Agreement, the Form of
Guaranty and the Form of Mortgage, in the form required by the 1934 Act (the
"ANNOUNCING FORM 8-K"). Unless required by law or a
23
rule of the Principal Market, the Company shall not make any public announcement
regarding the transactions contemplated hereby prior to the Initial Closing. No
later than 8:00 a.m. (New York City time) on the first (1st) Business Day
following each Additional Sale Election Notice Date and each Additional Closing
Date, the Company shall file a Form 8-K with the SEC describing the terms of the
transactions proposed or consummated in connection with such Additional Sale
Election Notice Date or Additional Closing Date. From and after the filing of
the Announcing Form 8-K with the SEC, no Buyer shall be in possession of any
material nonpublic information received from the Company, any of its
Subsidiaries or any of their respective officers, directors, employees or
agents. The Company shall not, and shall cause each of its Subsidiaries and its
and each of their respective officers, directors, employees and agents not to,
provide any Buyer with any material nonpublic information regarding the Company
or any of its Subsidiaries from and after the filing of the Announcing Form 8-K
with the SEC without the express prior written consent of such Buyer. In the
event of a breach of the foregoing covenant by the Company, any of its
Subsidiaries, or any of its or their respective officers, directors, employees
and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Buyer shall have the right to make a public disclosure
twenty-four (24) hours after notifying the Company in writing of its intention
to do so, in the form of a press release, public advertisement or otherwise, of
such material nonpublic information without the prior approval by the Company,
its Subsidiaries, or any of its or their respective officers, directors,
employees or agents. No Buyer shall have any liability to the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees,
shareholders or agents for any such disclosure. Subject to the foregoing,
neither the Company nor any Buyer shall issue any press releases or any other
public statements with respect to the transactions contemplated hereby or
disclosing the name of any Buyer; provided, however, that the Company shall be
entitled, without the prior approval of any Buyer, to make any press release or
other public disclosure with respect to such transactions (i) in substantial
conformity with the Announcing Form 8-K and contemporaneously therewith and (ii)
as is required by applicable law and regulations (provided that each Buyer shall
be consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
j. Transactions With Affiliates. From the date of this Agreement
until the first date following the Initial Closing Date on which no Notes or
Warrants are outstanding, the Company shall not, and shall cause each of its
Subsidiaries not to, enter into, amend, modify or supplement any transaction,
contract, agreement, instrument, commitment, understanding or other arrangement
with any of its or any Subsidiary's officers, directors, persons who were
officers or directors at any time during the previous two years, shareholders
(other than any holder of less than 5% of the outstanding Common Stock), or
affiliates of the Company or any of its Subsidiaries, or with any individual
related by blood, marriage or adoption to any such individual or with any entity
in which any such entity or individual owns a beneficial interest (each a
"RELATED PARTY"), except for (a) customary employment arrangements and benefit
programs on reasonable terms, or (b) any transaction, contract, agreement,
instrument, commitment, understanding or other arrangement on an arms-length
basis that is on terms no less favorable than terms that would have been
obtainable from a person other than such Related Party and that is approved by a
majority of the disinterested directors of the Company. For purposes hereof, any
director who is also an officer of the Company or any Subsidiary shall not be a
disinterested director with respect to any such transaction, contract,
agreement, instrument,
24
commitment, understanding or other arrangement. "AFFILIATE" for purposes hereof
means, with respect to any person or entity, another person or entity that,
directly or indirectly, (i) has a 5% equity interest in that person or entity,
(ii) has a common ownership with that person or entity, (iii) controls that
person or entity, (iv) is controlled by that person or entity or (v) shares
common control with that person or entity. "CONTROL" or "CONTROLS" for purposes
hereof means that a person or entity has the power, direct or indirect, to
conduct or govern the policies of another person or entity.
k. Shareholder Approval. In the event that the Company solicits
approval by the Company's shareholders of the Company's issuance of all of the
Conversion Shares and Warrant Shares, as set forth in this Agreement, the Notes
and the Warrants, in accordance with the rules and regulations of the Principal
Market (such approval being referred to herein as "SHAREHOLDER APPROVAL"), each
Buyer and a counsel of its choice shall be entitled to review, prior to filing
with the SEC, the proxy statement to be provided by the Company to its
shareholders in connection with soliciting Shareholder Approval, which proxy
statement shall not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
l. Corporate Existence; Real Property Leases. From the date of this
Agreement until the first date following the Initial Closing Date on which no
Notes or Warrants are outstanding, the Company shall maintain its corporate
existence and shall not sell all or substantially all of the assets of the
Company's assets (including, for the avoidance of any doubt, all or
substantially all of the assets of the Subsidiaries in the aggregate), except in
the event of a merger or consolidation or sale or transfer of all or
substantially all of the Company's assets (including, for the avoidance of any
doubt, all or substantially all of the assets of the Subsidiaries in the
aggregate), where the surviving or successor entity in such transaction (i)
assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose common stock is quoted on or listed for trading on the NASDAQ
National Market or the New York Stock Exchange. From the date of this Agreement
until the end of the Additional Note Issuance Period and for so long as any
Notes or Warrants are outstanding, the Company shall, and shall cause each of
its Subsidiaries to, refrain from violating, breaching or defaulting under in
any respect, or taking or failing to take any action that (with or without
notice or lapse of time or both) would constitute a violation or breach of, or
default under, any term or provision of any Real Property Lease to which the
Company or any of its Subsidiaries is a party, except to the extent such
violation, breach or default, action or in-action could not reasonably be
expected, either individually or in the aggregate, to have a Material Adverse
Effect.
m. Pledge of Securities. The Company acknowledges and agrees that
the Securities may be pledged by an Investor (as defined in the Registration
Rights Agreement) in connection with a bona fide margin agreement or other loan
secured by the Securities. The pledge of Securities shall not be deemed to be a
transfer, sale or assignment of the Securities hereunder, and no Investor
effecting any such pledge of Securities shall be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document, including Section 2(f) of
this Agreement; provided that an Investor and its pledgee shall be required to
comply with the provisions of
25
Section 2(f) in order to effect a sale, transfer or assignment of Securities to
such pledgee. The Company hereby agrees to execute and deliver such
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an Investor.
n. Priority of Notes. From the date of this Agreement until the
first date following the Initial Closing Date on which no Notes are outstanding,
the Company shall not, and shall not permit any of its Subsidiaries to, (a)
issue, assume or incur any Indebtedness (as defined in the Notes), except for
(I) Indebtedness under the Notes, (II) Indebtedness (A) the holders of which
agree in writing to be subordinate to the Notes on terms and conditions
acceptable to the Buyers, including with regard to interest payments and
repayment of principal, (B) which does not mature or otherwise require or permit
redemption or repayment prior to or on the Maturity Date of any Notes then
outstanding, and (C) which is not secured by any of the assets of the Company or
any of its Subsidiaries ("PERMITTED SUBORDINATED INDEBTEDNESS"), (III)
Indebtedness solely between the Company and/or one of its domestic Active
Subsidiaries on the one hand, and the Company and/or one of its domestic Active
Subsidiaries on the other, provided that in each case a majority of the equity
of any such domestic Active Subsidiary is directly or indirectly owned by the
Company, such domestic Active Subsidiary is controlled by the Company and such
domestic Active Subsidiary is a party to the Guaranty Agreement and the Security
Agreement, (IV) surety bonds, bids, performance bonds, and similar obligations
(exclusive of obligations for the payment of borrowed money) obtained by the
Company and its Subsidiaries in the ordinary course of business for the purpose
of satisfying federal, state and/or local legal requirements for owning and
operating their oil and gas properties or for operating the Services Business
(as defined in Section 4(s)), (V) Capital Lease Obligations incurred in
connection with acquiring equipment for the Company's oil and gas exploration
and production business in amounts not exceeding individually, the fair market
value of the equipment subject to such Capital Lease Obligations and in an
aggregate outstanding amount not exceeding 7.5% of After-tax PV10 (as defined in
the Notes) at any one time, (VI) reimbursement obligations in respect of letters
of credit issued by one or more financial institutions for the account of the
Company or any of its Active Subsidiaries in connection with the Company's
establishment and maintenance of a Hedged (as defined in Section 4(t)) position
with respect to, at any time, a maximum of 2/3 of the Company's estimate of its
oil and gas production for the succeeding 12 calendar months on a rolling
12-calendar month basis, (VII) reimbursement obligations in respect of letters
of credit issued for the account of the Company or any of its Active
Subsidiaries for the purpose of securing performance obligations of the Company
or its Active Subsidiaries incurred in the ordinary course of business (and not
issued in connection with the Company's establishment and maintenance of a
Hedged position) so long as the aggregate face amount of all such letters of
credit does not exceed $1,000,000 at any one time, (VIII) Indebtedness under
that certain unsecured promissory note, dated January 27, 2003, in the name of
Dobber Aviation, L.L.C., in a principal amount not exceeding $2,500,000 (less
any payments of principal thereon or other reductions to principal made from
time to time with respect thereto), and (IX) that certain unsecured obligation
of the Company to Premium Assignment Corporation existing as of the date of this
Agreement in an amount not to exceed $159,623.86 (less any payments of such
obligation or other reductions to such obligation made from time to time with
respect thereto); (b) issue, incur, assure or extend the term of any
Indebtedness in a principal amount in excess of $2,000,000 where the proceeds of
such Indebtedness are to be used to develop, or in connection with the
development, of assets located outside the United States in
26
which the holders of the Notes do not have a valid perfected, first priority
security interest; (c) issue any capital stock of the Company or any Subsidiary
redeemable prior to or on the Maturity Date of any Notes then outstanding; (d)
directly or indirectly, create, assume or suffer to exist any Lien, other than a
Permitted Lien, on any asset now owned or hereafter acquired by the Company or
any of its Subsidiaries or (e) except as required or expressly permitted by
Section 4(d), 4(q), 4(r) or 4(u), redeem, or otherwise repay in cash any
principal of any Indebtedness (other than Indebtedness under the Notes and
Indebtedness permitted by clauses (a)(III), (a)(IV), (a)(V), (a)(VI), (a)(VII),
(a)(VIII) and (a)(IX) of this Section 4(n)). The provisions of this Section 4(n)
are in furtherance of Section 12 of the Notes, and in no way limit the other
restrictions on or obligations of the Company pursuant to Section 12 of the
Notes or otherwise.
o. Restriction on Loans; Investments; Subsidiary Equity. From the
date of this Agreement until the first date following the Initial Closing Date
on which no Notes are outstanding, the Company shall not, and shall not permit
any of its Subsidiaries to, (i) except for Permitted Investments (as defined
herein) in which the holders of the Notes have a valid, perfected first priority
security interest, make any loans to, or investments in, any other person or
entity, including through lending money, deferring the purchase price of
property or services (other than trade accounts receivable on terms of ninety
(90) days or less), purchasing any note, bond (excluding surety and similar
bonds obtained by the Company and its Subsidiaries in the ordinary course of
their business to the extent permitted by clause (a)(IV) of Section 4(n)),
debenture or similar instrument, entering into any letter of credit (except as
permitted by clause (a)(VI) or (a)(VII) of Section 4(n)), guaranteeing (or
taking any action that has the effect of guaranteeing) any obligations of any
other person or entity, or acquiring any equity securities of, or other
ownership interest in, or making any capital contribution to any other entity
(provided, however that the Company and its domestic Active Subsidiaries may
make loans to each other to the extent the incurrence of the Indebtedness
represented by such loans would not be prohibited by Section 4(n)), (ii) invest
in, participate in, lease, purchase, obtain or otherwise acquire any real
property, facilities, or oil, gas or other mineral drilling, exploration or
development rights, concessions, working interests or participation interests
(collectively, "INTERESTS") in which the Buyers are not provided with a valid,
perfected first priority security interest in such Interests on or prior to the
date that is the earliest of (I) the tenth Business Day of the subsequent
calendar quarter, (II) ten (10) Business Days after the date on which the
aggregate acquisition price of such investments, participations, leases,
purchases or acquisitions exceeds $1,000,000 during a calendar quarter and (III)
concurrently with any investment, participation, lease, purchase or acquisition
that has an acquisition price that individually exceeds $1,000,000, or (iii)
issue, transfer or pledge any capital stock or equity interest in any Subsidiary
to any Person other than the Company. "PERMITTED INVESTMENTS" means any
investment in (A) direct obligations of the United States, or obligations
guaranteed by the United States, in each case which mature and become payable
within 90 days of the investment by the Company or any Subsidiary, (B)
commercial paper rated at least A-1 by Standard & Poor's Ratings Service and P-1
by Xxxxx'x Investors Services, Inc., (C) time deposits with, including
certificates of deposit issued by, any office located in the United States of
any bank or trust company which is organized under the laws of the United States
or any State thereof and has capital, surplus and undivided profits aggregating
at least $500,000,000 and which issues (or the parent of which issues)
certificates of deposit or commercial paper with a rating described in clause
(B) above, in each case which mature and become payable within 90 days of the
investment by the Company or any Subsidiary, (D) repurchase agreements with
respect to securities described in clause (A) above entered into
27
with an office of a bank or trust company meeting the criteria specified in
clause (C) above, provided in each case that such investment matures and becomes
payable within 90 days of the investment by the Company or any Subsidiary, or
(E) any money market or mutual fund which invests only in the foregoing types of
investments and the liquidity of which is satisfactory to the Secured Party (as
defined in the Security Agreement).
p. Restriction on Purchases or Payments. From the date of this
Agreement until the first date following the Initial Closing Date on which no
Notes are outstanding, the Company shall not, and shall not permit any of its
Subsidiaries to, (i) declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for any capital stock; provided however, that any
Subsidiary may declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any of its capital stock that is held solely by the Company or by a domestic
Active Subsidiary, provided that a majority of the equity of such domestic
Active Subsidiary is directly or indirectly owned by the Company, such domestic
Active Subsidiary is controlled by the Company and such domestic Active
Subsidiary is a party to the Guaranty Agreement and the Security Agreement, or
(ii) purchase, redeem or otherwise acquire, directly or indirectly, any shares
of the Company's capital stock or the capital stock of any of its Subsidiaries,
except repurchases of unvested shares at cost in connection with the termination
of the employment relationship with any employee pursuant to stock option or
purchase agreements in effect on the date of this Agreement and set forth on
Schedule 3(c).
q. Redemption of 8% Subordinated Convertible Notes. As soon as
possible after the Initial Closing, and in any event within five (5) Business
Days thereafter, the Company shall mail or cause to be mailed a notice of
redemption of the 8% Notes in accordance with Section 3.02 of the Indenture for
the 8% Notes, dated as of December 21, 2001, between the Company and Wilmington
Trust Company, as trustee (the "8% INDENTURE"), to effect an optional redemption
of the 8% Notes pursuant to Section 3.05 of the 8% Indenture (such notice of
redemption to be mailed to the holders of the 8% Notes at least 30 days but not
more than 60 days before the redemption date), and shall redeem the 8% Notes in
accordance with Article III of the Indenture, subject to the right of the
holders of the 8% Notes to convert the 8% Notes into shares of Common Stock
pursuant to Article 8 of the 8% Indenture.
r. Redemption of 7% Subordinated Convertible Notes. In the event
that, the Weighted Average Price (as defined in the Notes) of the Common Stock
exceeds $11.50 (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions after the date of this Agreement) on
any five (5) Trading Days (as defined in the Notes) during any period of 10
consecutive Trading Days while any of the Notes are outstanding, the Company
shall, as soon as possible after such fifth (5th) Trading Day and in any event
within five (5) Business Days thereafter, mail or cause to be mailed a notice of
redemption of the Company's 7% Subordinated Convertible Notes due 2007 (the "7%
NOTES") in accordance with Section 3.02 of the Indenture for the 7% Notes, dated
as of April 22, 2002, between the Company and Wilmington Trust Company, as
trustee (the "7% INDENTURE"), to effect an optional redemption of the 7% Notes
pursuant to Section 3.05 of the 7% Indenture (such notice of redemption to be
mailed to the holders of the 7% Notes at least 30 days but not more than 60 days
before the
28
redemption date), and shall redeem the 7% Notes in accordance with Article III
of the 7% Indenture, subject to the right of the holders of the 7% Notes to
convert the 7% Notes into shares of Common Stock pursuant to Article 8 of the 7%
Indenture. Except as provided in the immediately preceding sentence, from the
date of this Agreement until the earlier of the first date following the Initial
Closing Date on which no Notes are outstanding and April 15, 2007, the Company
shall not redeem, or otherwise repay in cash the principal of, the 7% Notes;
provided, however, that the Company may redeem, or otherwise repay in cash the
principal of, the 7% Notes using proceeds solely from the Company's issuance or
incurrence of Permitted Subordinated Indebtedness and the Company may redeem, or
otherwise prepay the principal of, the 7% Notes using nonredeemable capital
stock of the Company.
s. Sale of Oil and Gas Well Services Operations. In the event that,
while any of the Notes are outstanding, the Company sells all or any portion of
its oil and gas well services operations (as described in the Company's annual
report on Form 10-K for the year ended December 31, 2003) (the "SERVICES
BUSINESS"), through the sale of any assets of such Services Business (other than
assets sold in the ordinary course of business in one or more good faith,
arms-length transactions to Persons that are not Related Parties where (I) the
aggregate value of all assets sold in such transactions is less than $300,000 in
any 365-day period and the holders of the Notes receive a valid, perfected first
priority security interest in the proceeds of such sales, or (II) the proceeds
of such sales are used solely for capital expenditures on assets for the
Services Business and the holders of the Notes receive a valid, perfected first
priority security interest in such assets), sale of any stock of Consolidated or
any other transaction, the Company shall promptly use any proceeds received from
such sale(s) by the Company or any of its Subsidiaries to redeem Principal (as
defined in the Notes) of the outstanding Notes, in accordance with the terms of
the Notes. In such case, the Company shall first redeem Principal of outstanding
Notes of the Series (as defined in the Notes) then having the latest Fixed
Maturity Date (as defined in the Notes) and then each Series having the next
latest Fixed Maturity Date, until all of such proceeds have been used.
t. Hedging Requirement. As of each date (a "DETERMINATION DATE")
that is the end of a quarterly or annual period covered by a quarterly report on
Form 10-Q or annual report on Form 10-K (as the case may be) filed, or required
to be filed, by the Company with the SEC from the date of this Agreement until
the first date following the Initial Closing Date on which no Notes are
outstanding, at least 20% of the Company's estimate of its oil and gas
production for the 12-month period commencing immediately after such
Determination Date shall be protected from price fluctuations using derivatives,
fixed price agreements and/or volumetric production payments ("HEDGED"). Within
one (1) Business Day after the filing of the quarterly report on Form 10-Q or
annual report on Form 10-K covering the quarterly or annual period ended on such
Determination Date, the Company shall deliver to each Buyer a certificate as to
the Company's compliance with the foregoing, which certificate shall not contain
any material nonpublic information. The Company's obligation to hedge against
price fluctuations as set forth in this Section 3(t), the amount and nature of
such Hedged position and a statement as to the Company's compliance with this
requirement shall be disclosed in the quarterly report on Form 10-Q or annual
report on Form 10-K ended on such Determination Date, as filed with the SEC.
29
u. Repayment of Certain Indebtedness. As soon as practicable after
the Initial Closing and in any event within thirty (30) Business Days
thereafter, the Company shall (i) repay all of the borrowings with respect to
the properties and vehicles listed on Schedule 4(u), in each case in the amounts
set forth thereon, and (ii) provide the Buyers valid perfected, first priority
security interests in such properties and vehicles (except, with respect to
vehicles, to the extent not required pursuant to the terms of the Security
Agreement) and all Owned Real Property not otherwise described on Schedule 4(u).
v. Prohibition Against Variable Priced Securities. From the date of
this Agreement until the first date following the Initial Closing Date on which
no Notes or Warrants are outstanding, the Company shall not in any manner issue
or sell any Options (as defined below) or Convertible Securities (as defined
below) that are convertible into or exchangeable or exercisable for shares of
Common Stock at a price that varies or may vary with the market price of the
Common Stock, including by way of one or more resets to a fixed price or
increases in the number of shares of Common Stock issued or issuable, or at a
price that upon the passage of time or the occurrence of certain events
automatically is reduced or is adjusted or at the option of any Person may be
reduced or adjusted, whether or not based on a formulation of the then current
market price of the Common Stock, provided however, that the Company may
temporarily adjust the conversion price of the 7% Notes that are outstanding on
the date of this Agreement, to a lower fixed conversion price for a period of
not more than (30) thirty days in any 365-day period. For purposes of this
Agreement, "CONVERTIBLE SECURITIES" means any stock or securities (other than
Options) directly or indirectly convertible into or exchangeable or exercisable
for shares of Common Stock and "OPTIONS" means any rights, warrants or options
to subscribe for or purchase shares of Common Stock or Convertible Securities.
w. Security Covenants. With respect to any Production Proceeds (as
defined in the Mortgages) received by Company or any of its Subsidiaries which
constitute (i) payment of oil or gas proceeds received on account of, or for the
benefit of, any third-party owner of oil or gas interests or (ii) taxes,
charges, costs and expenses that are required to be paid on account of such
Production Proceeds on account of, or for the benefit of, any third-party owner
of oil or gas interests (the items in clauses (i) and (ii), the "THIRD-PARTY
PRODUCTION PROCEEDS"), the Company shall, and shall cause its Subsidiaries to,
segregate that portion of Production Proceeds received on any day constituting
Third-Party Production Proceeds into a segregated Deposit Account (as defined in
the Security Agreement) covered by an Account Control Agreement (as defined in
the Security Agreement) which only has Third-Party Production Proceeds on
deposit therein at any time. Company shall, and shall cause its Subsidiaries to,
deposit all Production Proceeds not constituting Third-Party Production Proceeds
into a Deposit Account of the Company or one of its Subsidiaries which does not
contain Third-Party Production Proceeds or any other Production Proceeds that
are subject to an ownership interest or other claim by any third-party. The
Company shall provide written notice to the holders of the Notes as to which
Deposit Account is segregated for Third-Party Production Proceeds, and shall not
change the Deposit Account segregated for Third-Party Production Proceeds
without prior written consent of the holders of the Notes. Notwithstanding
anything else to the contrary contained in this Agreement or any Transaction
Document, Company shall, and shall cause its Active Subsidiaries to, enter into
Mortgages covering all Real Property located in the State of Kansas within
thirty (30) days of the Initial Closing and, in connection therewith, shall
simultaneously deliver to the Buyers an opinion from Kansas counsel acceptable
to the Buyers with respect to (i) the creation
30
and perfection of the security interests purported to be created by such
Mortgages, (ii) the compliance of such Mortgages with applicable laws, (iii)
taxes, fees or other charges required under applicable laws in connection with
the filing of such Mortgages, and (iv) such other opinions with respect to the
Mortgages as reasonably requested by the Buyers, in each case in form and
substance substantially similar to the opinions received by the Buyers in
connection with the Mortgages filed in connection with the Initial Closing. The
Company shall, and shall cause its Subsidiaries to, engage in the businesses
conducted by such Persons as of the date hereof (and businesses related or
complimentary thereto) and preserve, renew and keep in full force and effect
their respective material rights, privileges and franchises necessary or
desirable in the normal conduct of their business, including receiving,
collecting and enforcing their rights to receive payment of Production Proceeds,
enforcing liens and security interests in respect thereof and protecting their
interests in and to all Production Proceeds. Immediately upon creation of any
Active Subsidiary or any Inactive Subsidiary's becoming an Active Subsidiary,
the Company shall immediately pledge or cause to be pledged to the Buyers the
stock of such new Active Subsidiary in accordance with the terms of the Pledge
Agreement, and cause such Active Subsidiary to enter into the Guaranty and the
Security Agreement and such other Security Documents as necessary to grant to
the Buyers a security interest in, and lien on, substantially all of the assets
of such new Active Subsidiary, and comply with the terms thereof.
x. North Sand Wash Leases. Notwithstanding anything to the contrary
contained in the Mortgages, IOGW shall be permitted to sell, free and clear of
any Liens in favor of the Buyers, all of its interests in and to the Real
Property Leases with respect to the Real Property located in the North Sand Wash
area that are subject to the letter of intent between IOGW and Contex Energy
Corporation dated December 14, 2004 (as previously disclosed to the Buyers), and
set forth on Exhibit A thereto, if, and only if, all of the following conditions
are satisfied: (i) such sale is consummated and IOGW receives the sale proceeds
thereof within four (4) months of the Initial Closing Date, (ii) no Event of
Default or Triggering Event, and no occurrence that, with the giving of notice
or passage of time would constitute an Event of Default or Triggering Event, has
occurred and is continuing at the time of such sale, (iii) such sale is to a
third party not affiliated with Company or any of its Subsidiaries, (iv) such
Real Property Leases do not cover an area of over 20,000 acres in the aggregate,
and (v) such Real Property Leases are sold for no less than $10.00 per net
mineral acre.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent in the form attached hereto as Exhibit J (the "IRREVOCABLE TRANSFER AGENT
INSTRUCTIONS"), and any subsequent transfer agent, to issue certificates or
credit shares to the applicable balance accounts at DTC, registered in the name
of each Buyer or its respective nominee(s), for the Conversion Shares and the
Warrant Shares in such amounts as specified from time to time by each Buyer to
the Company upon conversion of the Notes or exercise of the Warrants. Prior to
registration of the Conversion Shares and the Warrant Shares under the 1933 Act,
all such certificates shall bear the restrictive legend specified in Section
2(g). The Company warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 5 and stop transfer
instructions to give effect to Section 2(f) (in the case of the Conversion
Shares and the Warrant Shares, prior to registration of the Conversion Shares
and the Warrant Shares under the 0000 Xxx) will be given by the Company to its
transfer agent and that the Securities shall otherwise be
31
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. If a Buyer
provides the Company with an opinion of counsel, in a generally acceptable form,
to the effect that a public sale, assignment or transfer of the Securities may
be made without registration under the 1933 Act or the Buyer provides the
Company with reasonable assurances that the Securities can be sold pursuant to
Rule 144 without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold, the Company shall permit the
transfer and, in the case of the Conversion Shares and the Warrant Shares,
promptly instruct its transfer agent to issue one or more certificates or credit
shares to the applicable balance accounts at DTC in such name and in such
denominations as specified by such Buyer and without any restrictive legend. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
a. Initial Closing Date. The obligation of the Company to issue and
sell the Initial Notes and the Initial Warrants to each Buyer at the Initial
Closing is subject to the satisfaction, at or before the Initial Closing Date,
of each of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.
(ii) Such Buyer shall have delivered to the Company the
Purchase Price (less the amount withheld pursuant to Section 4(h)) for the
Initial Notes and the Initial Warrants being purchased by such Buyer at the
Initial Closing by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company.
(iii) The representations and warranties of such Buyer shall
be true and correct as of the date when made and as of the Initial Closing Date
as though made at that time (except for representations and warranties that
speak as of a specific date, which shall be true and correct as of such date),
and such Buyer shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by such Buyer at or prior to the Initial Closing
Date.
b. Additional Closing Date. The obligation of the Company to issue
and sell the Additional Notes and Additional Warrants to each Buyer at any
Additional Closing is subject to the satisfaction, at or before the applicable
Additional Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived
32
by the Company at any time in its sole discretion by providing each Buyer with
prior written notice thereof:
(i) Such Buyer shall have delivered to the Company the
Purchase Price (less the amount withheld pursuant to Section 4(h)) for the
Additional Notes and Additional Warrants being purchased by such Buyer at such
Additional Closing by wire transfer of immediately available funds pursuant to
the wire instructions provided by the Company.
(ii) The representations and warranties of such Buyer shall be
true and correct as of the date when made and as of such Additional Closing Date
as though made at that time (except for representations and warranties that
speak as of a specific date, which shall be true and correct as of such date),
and such Buyer shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by such Buyer at or prior to such Additional Closing
Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
a. Initial Closing Date. The obligation of each Buyer hereunder to
purchase the Initial Notes and the Initial Warrants from the Company at the
Initial Closing is subject to the satisfaction, at or before the Initial Closing
Date, of each of the following conditions, provided that these conditions are
for each Buyer's sole benefit and may be waived only by such Buyer at any time
in its sole discretion by providing the Company with prior written notice
thereof:
(i) Each of the Company and its Subsidiaries shall have
executed each of the Transaction Documents to which it is a party (other than
any Additional Notes and Additional Warrants) and delivered the same to such
Buyer.
(ii) The representations and warranties of the Company shall
be true and correct as of the date when made and as of the Initial Closing Date
as though made at that time (except for representations and warranties that
speak as of a specific date, which shall be true and correct as of such date)
and the Company shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Initial Closing
Date. Such Buyer shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the Initial Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
such Buyer, including an update as of a date as close to the Initial Closing
Date as practicable of the representations contained in Sections 3(c) and 3(bb)
above.
(iii) Such Buyer shall have received (A) the opinion of Xxxxx
Xxxxxx & Xxxxxx, LLP, dated as of the Initial Closing Date, which opinion will
address, among other things, laws of the State of Colorado applicable to the
transactions contemplated hereby, in form, scope and substance reasonably
satisfactory to such Buyer and in substantially the form of Exhibit K attached
hereto, and (B) the opinions of Xxxxx Xxxxxx & Xxxxxx, LLP, Xxxxx & Bolt, LLC,
and Xxxx, Xxxxx and Xxxxxx, each dated as of the Initial Closing Date, which
opinions will collectively address, among other things, certain laws of the
States of Wyoming, Kansas and Texas applicable to the security interests
provided pursuant to the Security Agreement, in form,
33
scope and substance reasonably satisfactory to such Buyer and in substantially
the form of Exhibit L attached hereto.
(iv) The Company shall have executed and delivered to such
Buyer the Note Certificates and the Initial Warrants (in such denominations as
such Buyer shall request) for the Initial Notes and the Initial Warrants being
purchased by such Buyer at the Initial Closing.
(v) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b) above and in a form reasonably
acceptable to such Buyer (the "RESOLUTIONS").
(vi) As of the Initial Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of the Initial Notes and the exercise of the Initial
Warrants, at least 5,000,000 shares of Common Stock (such number to be adjusted
for any stock splits, stock dividends, stock combinations or other similar
transactions involving the Common Stock that are effective at any time after the
date of this Agreement).
(vii) The Irrevocable Transfer Agent Instructions shall have
been delivered to and acknowledged in writing by the Company's transfer agent,
and the Company shall have delivered a copy thereof to such Buyer.
(viii) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company and
each Subsidiary in such entity's state or other jurisdiction of incorporation or
organization issued by the Secretary of State (or other applicable authority) of
such state or jurisdiction of incorporation or organization as of a date within
ten (10) days of the Initial Closing Date.
(ix) The Company shall have delivered to such Buyer a
secretary's certificate, dated as of the Initial Closing Date, certifying as to
(A) the Resolutions, (B) the Articles of Incorporation, certified as of a date
within ten (10) days of the Initial Closing Date, by the Secretary of State of
the State of Colorado, and (C) the Bylaws, each as in effect at the Initial
Closing.
(x) The Company shall have made all filings under all
applicable federal and state securities laws necessary to consummate the
issuance of the Securities pursuant to this Agreement in compliance with such
laws.
(xi) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five (5) days of the Initial Closing Date.
(xii) The Company and its Subsidiaries shall have delivered to
such Buyer evidence, satisfactory to such Buyer, of the repayment of all
borrowings (including all principal thereof and interest and fees thereon) under
the LaSalle Facility and the U.S. Bank Facility, and undertakings and
authorizations in a form acceptable to such Buyer concerning all UCC-3
termination statements and other notices, certificates, instruments, documents
and other
34
papers, filings and actions necessary or desirable to terminate and release all
security interests of LaSalle and U.S. Bank in the Collateral.
(xiii) The Company and its Subsidiaries shall have delivered
and pledged to such Buyer any and all Instruments, Negotiable Documents, Chattel
Paper (each of the foregoing terms, as defined in the Security Agreement) and
certificated securities (accompanied by stock powers executed in blank), duly
endorsed and/or accompanied by such instruments of assignment and transfer
executed by the Company and its Subsidiaries, in such form and substance as such
Buyer may request.
(xiv) The Company and its Subsidiaries shall have given,
executed, delivered, filed and/or recorded any financing statements, notices,
instruments, documents, agreements and other papers that may be necessary or
desirable (in the reasonable judgment of such Buyer) to create, preserve,
perfect or validate the security interest granted to such Buyer pursuant to the
Security Agreement and to enable such Buyer to exercise and enforce its rights
with respect to such security interest.
(xv) The Company shall not have made any public announcement
regarding the transactions contemplated by the Agreement prior to the Initial
Closing.
(xvi) The Company and its Subsidiaries shall have delivered to
such Buyer such other documents relating to the transactions contemplated by
this Agreement as such Buyer or its counsel may reasonably request.
b. Additional Closing Date. The obligation of each Buyer hereunder
to purchase Additional Notes and Additional Warrants from the Company at any
Additional Closing is subject to the satisfaction, at or before the Additional
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived only by such
Buyer at any time in its sole discretion by providing the Company with prior
written notice thereof:
(i) The Initial Closing shall have occurred.
(ii) The Company shall have complied with the requirements of
Section 1(b) (including the Additional Note Issuance Amount Limitations) and all
of the Additional Sale Notice Election Conditions set forth in Section 1(d)
shall have been satisfied as of such Additional Closing Date.
(iii) The representations and warranties of the Company
(including any exceptions thereto contained in the schedules hereto) shall be
true and correct as of the date when made and as of such Additional Closing Date
as though made at that time (except for representations and warranties that
speak as of a specific date, which shall be true and correct as of such date),
provided that such representations shall be true and correct as of such
Additional Closing Date giving effect to the updates required by the last
sentence of this paragraph (iii) so long as there is nothing disclosed in any
such updates that could, individually or in the aggregate, have a Material
Adverse Effect as determined by such Buyer, in good faith, in its sole
discretion, and the Company shall have performed, satisfied and complied with
the covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied
35
with by the Company at or prior to such Additional Closing Date. Such Buyer
shall have received a certificate, executed by the Chief Executive Officer of
the Company, dated as of such Additional Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by such Buyer,
including an update as of such Additional Closing Date of the representations
and related schedule contained in Section 3(c) above and an update of Schedules
3(a), 3(f), 3(g), 3(h), 3(n), 3(q), 3(s), 3(v), 3(aa) and 3(bb) hereto.
(iv) Such Buyer shall have received (A) the opinion of Xxxxx
Xxxxxx & Xxxxxx, LLP (or such other law firm as is reasonably acceptable to the
Buyers being obligated to purchase at least two-thirds (2/3) of the aggregate
principal amount of the Additional Notes on such Additional Closing Date), dated
as of such Additional Closing Date, which opinion will address, among other
things, laws of the State of Colorado applicable to the transactions
contemplated hereby, in form, scope and substance reasonably satisfactory to
such Buyer and in substantially the form of Exhibit K attached hereto and (B)
the opinions of Xxxxx Xxxxxx & Xxxxxx, LLP, Xxxxx & Bolt, LLC, and Xxxx, Xxxxx
and Xxxxxx (or such other law firms as are reasonably acceptable to the Buyers
being obligated to purchase at least two-thirds (2/3) of the aggregate principal
amount of the Additional Notes on such Additional Closing Date), each dated as
of such Additional Closing Date, which opinions will collectively address, among
other things, certain laws of the States of Kansas, Wyoming and Texas (and any
other states in which the Company has properties or assets as of such Additional
Closing Date) applicable to the security interests provided pursuant to the
Security Agreement, in form, scope and substance reasonably satisfactory to such
Buyer and in substantially the form of Exhibit L attached hereto.
(v) The Company shall have executed and delivered to such
Buyer the Note Certificates and the Additional Warrants (in such denominations
as such Buyer shall request) for the Additional Notes and Additional Warrants
being purchased by such Buyer at such Additional Closing.
(vi) The Board of Directors of the Company shall have adopted,
and not rescinded or otherwise amended or modified resolutions consistent with
Section 3(b) above and in a form reasonably acceptable to such Buyer with
respect to the issuance at such Additional Closing Date of the Additional Notes
and Additional Warrants being purchased by the Buyers at such Additional Closing
Date.
(vii) As of such Additional Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the exercise of the Warrants, at least the number of shares
of Common Stock equal to 100% of the sum of (A) the aggregate number of shares
issuable as of such Additional Closing Date upon exercise of all Warrants
outstanding immediately prior thereto, and (B) the aggregate number of shares
that may be acquired as of such Additional Closing Date upon exercise of all
Additional Warrants issued and sold to all of the Buyers thereat.
(viii) The Irrevocable Transfer Agent Instructions shall
remain in effect as of such Additional Closing Date and the Company shall have
caused the Transfer Agent to deliver a letter to the Buyers to that effect.
36
(ix) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company and
each Subsidiary in such entity's state or other jurisdiction of incorporation or
organization issued by the Secretary of State (or other applicable authority) of
such state of incorporation or organization as of a date within ten (10) days of
such Additional Closing Date.
(x) The Company shall have delivered to such Buyer a
secretary's certificate, dated as of such Additional Closing Date, certifying as
to (A) the Resolutions, (B) the Articles of Incorporation, certified as of a
date within ten (10) days of such Additional Closing Date, by the Secretary of
State of the State of Colorado and (C) the Bylaws, each as in effect at such
Additional Closing.
(xi) The Company shall have made all filings under all
applicable federal and state securities laws necessary to consummate the
issuance of the Securities pursuant to this Agreement in compliance with such
laws.
(xii) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five (5) days of such Additional Closing
Date.
(xiii) The Company and its Subsidiaries shall have delivered
to such Buyer such other documents relating to the transactions contemplated by
this Agreement as such Buyer or its counsel may reasonably request.
8. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities and all of their shareholders,
partners, officers, directors, employees and direct or indirect investors and
any of the foregoing persons' agents or other representatives (including those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "INDEMNITEES") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitees is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"INDEMNIFIED LIABILITIES"), incurred by any Indemnitees as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (c) any cause of action, suit or claim brought
or made against such Indemnitees and arising out of or resulting from the
execution, delivery, performance or enforcement of the Transaction Documents in
accordance with the terms thereof or any other certificate, instrument or
document contemplated hereby or thereby in accordance with the terms thereof
(other than a cause of action, suit or claim brought or made against an
Indemnitee by such Indemnitee's owners, investors or affiliates), (d) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or (e) the
status of such
37
Buyer or holder of the Securities as an investor in the Company. To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities that is permissible under
applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 8 shall
be the same as those set forth in Sections 6(a) and (d) of the Registration
Rights Agreement, including those procedures with respect to the settlement of
claims and the Company's rights to assume the defense of claims.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. The Parties acknowledge that
each of the Buyers has executed each of the Transaction Documents to be executed
by it in the State of New York and will have made the payment of the Purchase
Price from its bank account located in the State of New York. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to each other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity
38
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between each Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the Buyers that purchased at least two-thirds (2/3) of the aggregate
principal amount of the Initial Notes on the Initial Closing Date, or if prior
to the Initial Closing, by the Buyers listed on the Schedule of Buyers as being
obligated to purchase at least two-thirds (2/3) of the aggregate principal
amount of the Initial Notes. Any such amendment shall bind all holders of the
Notes and the Warrants. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the Notes or Warrants then
outstanding. No consideration shall be offered or paid to any person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration also is offered to all of the parties to
the Transaction Documents or holders of Notes, as the case may be.
f. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
Infinity, Inc.
0000 Xxxx Xxxx Xxxxxx, Xxxxx X
Xxxxxxx, Xxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Chief Executive Officer
and
Infinity, Inc.
000 00xx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Senior Vice President
39
With a copy to:
Xxxxx Xxxxxx & Xxxxxx, LLP
0000 Xxxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxxx Xxxxxxxx, Esq.
If to the Transfer Agent:
Computershare Investor Services
000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx, 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxx Xxxxxx
If to a Buyer, to it at the address and facsimile number set forth on the
Schedule of Buyers, with copies to such Buyer's representatives as set forth on
the Schedule of Buyers, or, in the case of a Buyer or any other party named
above, at such other address and/or facsimile number and/or to the attention of
such other person as the recipient party has specified by written notice given
to each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by a nationally recognized overnight delivery service shall be
rebuttable evidence of personal service, receipt by facsimile or deposit with a
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the holders of at least two-thirds (2/3) of the aggregate principal
of the Notes then outstanding, including by merger or consolidation, except
pursuant to a Change of Control (as defined in Section 4(b) of the Notes) with
respect to which the Company is in compliance with Section 4(l) of this
Agreement, Section 4 of the Notes and Section 9 of the Warrants. A Buyer may
assign some or all of its rights hereunder without the consent of the Company;
provided, however, that any such assignment shall not release such Buyer from
its obligations hereunder unless such obligations are assumed by such assignee
and the Company has consented to such assignment and assumption, which consent
shall not be unreasonably withheld. Notwithstanding anything to the contrary
contained in the Transaction Documents, the Buyers shall be entitled to pledge
the Securities in connection with a bona fide margin account or other loan or
financing arrangement secured by the Securities.
40
h. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and, to the extent provided in Section 8 hereof, each Indemnitee, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.
i. Survival. Unless this Agreement is terminated under Section
9(k)(i), the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8,
shall survive the Closings. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
k. Termination.
(i) In the event that the Initial Closing shall not have
occurred with respect to a Buyer on or before the third (3rd) Business Day
following the date of this Agreement due to the Company's or such Buyer's
failure to satisfy the conditions set forth in Sections 6(a) and 7(a) above (and
the nonbreaching party's failure to waive such unsatisfied condition(s)), the
nonbreaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without
liability of any party to any other party; provided, however, that if this
Agreement is terminated pursuant to this Section 9(k)(i), the Company shall be
obligated to pay each of the Buyers (so long as such Buyer is not a breaching
party) its expense and commitment allowance as set forth in Section 4(h) as if
such Buyer had purchased the principal amount of Notes set forth opposite its
name on the Schedule of Buyers.
(ii) In the event that an Additional Closing shall not have
occurred with respect to a Buyer on or before the eighth (8th) Business Day
following an Additional Sale Election Notice Date due to the Company's or such
Buyer's failure to satisfy the conditions set forth in Sections 6(b) and 7(b)
above (and the nonbreaching party's failure to waive such unsatisfied
condition(s)), the nonbreaching party shall have the option to terminate the
obligations with respect to such Additional Closing at the close of business on
such date without liability of any party to any other party with respect thereto
(and without affecting any other rights or obligations under this Agreement);
provided, however, that if a party's obligations with respect to such Additional
Closing are terminated pursuant to this Section 9(k)(ii), the Company shall be
obligated to reimburse the nonbreaching Buyers and their affiliates for their
expenses (including attorneys' fees and expenses) associated with such
Additional Closing.
l. Placement Agent. The Company acknowledges that it has engaged
X.X. Xxxxxx & Company as placement agent in connection with the sale of the
Notes and the related Warrants, which placement agent may have formally or
informally engaged other agents on its behalf. The Company shall be responsible
for the payment of any placement agent's fees or
41
broker's commissions relating to or arising out of the transactions contemplated
hereby. The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including attorneys' fees and out-of-pocket
expenses) arising in connection with any such claim.
m. No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
n. Remedies. Each Buyer and each holder of the Securities shall have
all rights and remedies set forth in the Transaction Documents and all rights
and remedies that such holders have been granted at any time under any other
agreement or contract and all of the rights that such holders have under any
law. Any person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security or proving actual damages), to recover damages by reason of any breach
of any provision of this Agreement and to exercise all other rights granted by
law.
o. Payment Set Aside. To the extent that the Company makes a payment
or payments to the Buyers hereunder or pursuant to the Registration Rights
Agreement, the Notes or Warrants or the Buyers enforce or exercise their rights
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
by a trustee, receiver or any other person under any law (including any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
p. Independent Nature of Buyers. The obligations of each Buyer
hereunder are several and not joint with the obligations of any other Buyer, and
no Buyer shall be responsible in any way for the performance of the obligations
of any other Buyer hereunder. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder. The decision of
each Buyer to purchase the Securities pursuant to this Agreement has been made
by such Buyer independently of any other Buyer and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or any of its Subsidiaries
which may have been made or given by any other Buyer or by any agent or employee
of any other Buyer, and no Buyer or any of its agents or employees shall have
any liability to any other Buyer (or any other person or entity) relating to or
arising from any such information, materials, statements or opinions. Nothing
contained herein, and no action taken by any Buyer pursuant hereto or thereto,
shall be deemed to constitute the Buyers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Buyers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated hereby. Each Buyer shall be
entitled to independently protect and enforce its rights, including the rights
arising out of this Agreement the Notes or the Warrants, and it shall not be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.
42
q. Interpretative Matters. Unless the context otherwise requires,
(a) all references to Sections, Schedules or Exhibits are to Sections, Schedules
or Exhibits contained in or attached to this Agreement, (b) each accounting term
not otherwise defined in this Agreement has the meaning assigned to it in
accordance with GAAP, (c) words in the singular or plural include the singular
and plural and pronouns stated in either the masculine, the feminine or neuter
gender shall include the masculine, feminine and neuter and (d) the use of the
word "including" in this Agreement shall be by way of example rather than
limitation.
* * * * * *
43
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
INFINITY, INC. HFTP INVESTMENT L.L.C.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By: /s/ Xxxxx X. Xxxxx
--------------------------------
Name: Xxxxx X. Xxxxx
Title: Senior Vice President
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Partner and Authorized
Signatory
AG DOMESTIC CONVERTIBLES, L.P
By: Xxxxxx, Xxxxxx & Co., L.P.
Managing Member of the General
Partner
By: /s/ Xxxxxx X. Xxxxxxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxxxxxx
Title: Authorized Person
AG OFFSHORE CONVERTIBLES, LTD.
By: Xxxxxx, Xxxxxx & Co., L.P. Director
By: /s/ Xxxxxx X. Xxxxxxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxxxxxx
Title: Authorized Person
44
SCHEDULE OF BUYERS
REIMBURSEMENT INVESTOR'S LEGAL
BUYER ADDRESS PRINCIPAL AMOUNT OF ALLOCATION ALLOCATION REPRESENTATIVE'S
BUYER'S NAME AND FACSIMILE NUMBER INITIAL NOTES PERCENTAGE PERCENTAGE ADDRESS AND FACSIMILE NUMBER
--------------- ---------------------------- -------------------- ---------- ------------- --------------------------------
HFTP Investment c/o Promethean Asset Management $15,000,000 50% 1.17% Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
L.L.C. L.L.C. 000 X. Xxxxxx Xxxxxx Xxxxxxx,
000 Xxxxxxxxx Xxxxxx Xxxxxxxx 00000-0000
22nd Floor Attention: Xxxx X. Xxxx, Esq.
Xxx Xxxx, Xxx Xxxx 00000 Telephone: (000) 000-0000
Attention: Xxxxxx X. Facsimile: (000) 000-0000
Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Residence: Delaware
AG Domestic c/o Xxxxxx, Xxxxxx & Co. $ 5,000,000 16.67% 0.11% Xxxx, Weiss, Rifkind, Xxxxxxx
Convertibles, 000 Xxxx Xxxxxx & Xxxxxxxx LLP 0000 Xxxxxx xx
X.X Xxx Xxxx, Xxx Xxxx 00000 the Americas
Attention: Xxxx X. Xxxx Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000 Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000 Telephone: (000) 000-0000
Residence: Delaware Facsimile: (000) 000-0000
AG Offshore c/o Xxxxxx, Xxxxxx & Co. $10,000,000 33.33% 0.22% Xxxx, Weiss, Rifkind,
Convertibles, 000 Xxxx Xxxxxx Xxxxxxx & Xxxxxxxx LLP 1285
Ltd. Xxx Xxxx, Xxx Xxxx 00000 Avenue of the Americas New York,
Attention: Xxxx X. Xxxx Xxx Xxxx 00000-0000
Telephone: (000) 000-0000 Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000 Telephone: (000) 000-0000
Residence: British Virgin Facsimile: (000) 000-0000
Islands
SCHEDULES
Schedule 3(a) Subsidiaries
Schedule 3(c) Capitalization
Schedule 3(f) SEC Documents
Schedule 3(g) Absence of Certain Changes
Schedule 3(h) Litigation
Schedule 3(j) Undisclosed Liabilities
Schedule 3(n) Employee Relations
Schedule 3(p) Environmental Laws
Schedule 3(q) Title
Schedule 3(s) Regulatory Permits
Schedule 3(v) Transactions with Affiliates
Schedule 3(aa) Outstanding Indebtedness; Liens
Schedule 3(bb) Real Property, Leases
Schedule 4(d) Use of Proceeds
Schedule 4(u) Repayment of Certain Indebtedness
EXHIBITS
Exhibit A Form of Initial Note
Exhibit B Form of Additional Note
Exhibit C Form of Warrant
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Security Agreement
Exhibit F Forms of Account Control Agreement
Exhibit G Form of Guaranty
Exhibit H Form of Pledge Agreement
Exhibit I Form of Mortgage
Exhibit J Form of Irrevocable Transfer Agent Instructions
Exhibit K Form of Company Counsel Opinion
Exhibit L Form of Company Regulatory Counsel Opinion
SCHEDULES
Dated as of January 13, 2005
These Schedules are the Schedules referred to in the Securities Purchase
Agreement, dated as of January 13, 2005 by and among Infinity, Inc., a Colorado
corporation (the "COMPANY"), and HFTP Investment L.L.C., a Delaware limited
liability company; AG Domestic Convertibles, L.P., a Delaware limited
partnership; and AG Offshore Convertibles, Ltd., a British Virgin Islands
corporation (the "PURCHASE AGREEMENT").
INTRODUCTION
Capitalized terms and others used in these Schedules and not otherwise defined
herein are used as defined in the Purchase Agreement.
These Schedules are qualified in their entirety by reference to specific
provisions of the Purchase Agreement and are not intended to constitute, and
shall not be construed as constituting, any representation or warranty of the
Company except as and to the extent expressly provided in the Purchase
Agreement.
SCHEDULE 3(a)
ORGANIZATION, QUALIFICATIONS
NAME OF WHOLLY-OWNED SUBSIDIARY STATE OF ORGANIZATION
Infinity Oil and Gas of Texas, Inc. Delaware
Infinity Oil & Gas of Wyoming, Inc. Wyoming
Consolidated Oil Well Services, Inc. Kansas
CIS-Oklahoma, Inc. Kansas
Infinity Oil & Gas of Kansas, Inc. Kansas
Consolidated Pipeline, Inc. Texas--Inactive
CIS Oil and Gas, Inc. Kansas--Inactive
L.D.C. Food Systems, Inc. New Jersey--Inactive
Infinity Operating Company Colorado--Inactive
Infinity Nicaragua Ltd. Bahamas - Inactive
Infinity Nicaragua Offshore Ltd Bahamas--Inactive
Rio Grande Resources, SA* Nicaragua--Inactive
* Infinity Nicaragua Ltd. and Infinity Nicaragua Offshore Ltd. together own a
98.2% interest in Rio Grande Resources, SA. Pursuant to Nicaraguan law,
Nicaraguan companies must have a minimum of three shareholders and there are
three shareholders of Rio Grande.
2
SCHEDULE 3(c)
CAPITALIZATION
(A) None.
(B)
(i) As of the date of this Agreement there are 1,165,250 options
outstanding that were issued pursuant to Infinity's employee option
plans.
(ii) 7% Subordinated Convertible Notes due 2007
8% Subordinated Convertible Notes due 2006
(iii) Other Outstanding Stock Options and Warrants
EXPIRATION
LAST NAME FIRST NAME OPTIONS WARRANTS PRICE DATE
--------------------------------------------------------------------------------------------------------------
ADS Consulting 5,000 8.7500 11/25/2007
ADS Consulting 10,000 8.7500 6/27/2008
Xxxxxxxx Xxxxxx M. 50,000 8.7500 1/23/2008
Xxxxxxxx Xxxxxx M. 34,000 8.7500 4/15/2008
X. X. Xxxxxxxxx Towbin 0 220,000 5.9900 6/13/2006
X. X. Xxxxxxxxx Towbin 0 200,000 9.0550 4/15/2007
X. X. Xxxxxxxxx Towbin 52,500 8.7500 4/18/2008
XxXxxx Xxxxxxx 8,000 8.7500 4/18/2008
XxXxxx Xxxx 8,000 8.7500 4/18/2008
Xxxxx Xxxx 15,000 8.7500 11/22/2007
Drawbridge Special Ops Fund 138,873 7.8800 7/2/2008
Xxxxxxxx Xxxxxx & Agatha 4,000 8.7500 4/18/2008
Xxxxxxx Xxxxx 40,000 3.2190 7/13/2005
Xxxxx Xxxx 8,000 8.7500 4/18/2008
Goettlieb Xxxxxxx 8,000 8.7500 4/18/2008
Xxxxxxxxx Xxxx H. 8,000 8.7500 4/18/2008
Highbridge/Xxxxx Special Ops. 138,873 7.8800 7/2/2008
Xxxxxxxxxxx Xxxxx D. 11,250 7.3400 3/7/2007
Xxxxxxxxxxx Xxxxx D. 50,000 8.7500 1/23/2008
Xxxxxxxxxxx Xxxxx D. 17,000 8.7500 4/15/2008
Xxxxxxxxxxx Xxxxx D. 20,000 8.7500 12/6/2009
Xxxxx Xxxxxxx 16,250 7.3400 3/7/2007
Xxxxx Xxxxxxx 30,000 8.7500 1/23/2008
Xxxxxxxxx Xxxxxxx C. 8,000 8.7500 4/18/2008
Xxxxxxxxx Xxxxxxx C., CEUT Xxxxxxxxx
Investments 32,000 8.7500 4/18/2008
Xxxxx Associates 62,500 7.3400 3/7/2007
Xxxxx Associates 150,000 8.7500 11/22/2007
Xxxxx Associates 75,000 8.7500 5/26/2008
Xxxxx Associates 50,000 8.7500 6/18/2008
Xxxxx Associates 107,500 8.7500 6/27/2008
3
EXPIRATION
LAST NAME FIRST NAME OPTIONS WARRANTS PRICE DATE
---------------------------------------------------------------------------------------------------------------
PBA Associates 25,000 8.7500 6/18/2008
Xxxxx Xxxxxxx 10,000 8.7500 11/22/2007
Xxxxxx Xxxxx 11,250 7.3400 3/7/2007
Xxxxxx Xxxxx 12,500 8.7500 11/22/2007
Xxxxxxx Xxxxx Xxxxxxx TTEE FBO SAS
Trust 16,000 8.7500 4/18/2008
Xxxx Xxxxxx & Xxxx Xxxx Family
Foundation 16,000 8.7500 4/18/2008
Xxxx Xxxxxx, Siam Partners II 16,000 8.7500 4/18/2008
Xxxx Xxxxxx, Tahoe Partnership 16,000 8.7500 4/18/2008
Xxxxxxxxxxx Xxx 5,000 8.7500 11/22/2007
Xxxxxxxxxxx Xxxxxx 40,000 7.3400 3/7/2007
Xxxxxxxxxxx Xxxxxx 100,000 8.7500 11/22/2007
Xxxxxxxxxxx Xxxxxx 75,000 8.7500 5/26/2008
Xxxxxxxxxxx Xxxxxx 50,000 8.7500 6/18/2008
Xxxxxxxxxxx Xxxxxx 107,500 8.7500 6/27/2008
Xxxxxxxxxxx Xxxxxx 11,250 7.3400 3/7/2007
Xxxxxxxxxxx Xxxxxx 12,500 8.7500 11/22/2007
Xxxxxxxxxxx Xxxxx 5,000 8.7500 11/22/2007
Xxxxxxxxxxx Xxxx 5,000 8.7500 11/22/2007
U. S. Capital Growth Fund LLC 14,150 7.3400 3/7/2007
U. S. Capital Growth Fund LLC 20,000 8.7500 1/23/2008
Xxxxxxxxx Xxxxxx I. 12,000 8.7500 4/18/2008
TOTAL 1,460,150 697,746
(C) Outstanding Registration Rights.
The following is a list of all parties to registration rights agreements or
arrangements pursuant to which the Company is obligated to register the sale of
securities and the holdings (subject to such registration rights agreements or
arrangements). Amounts shown are based on information provided by each investor
and are accurate as of the date of the applicable registration statement or
registration statement supplements.
The "Common Stock" column below includes the following securities: (i) common
stock held by the investor, (ii) common stock issuable upon conversion of the 8%
notes, (iii) common stock issuable upon conversion of the 7% notes, (iv) common
stock issuable upon exercise of warrants held by the investor, and (v) common
stock issuable upon exercise of options.
4
*No registration statement filed.
TYPE OF SECURITY
-------------------------------------------------------
Common 8% Notes 7% Notes
NAME OF INVESTOR Stock ($ amount) ($ amount) Warrants
--------------------------------------------------------- ------- ---------- ---------- --------
A. Xxxxxx Xxxxxx TTEE FBO Xxxx Xxxx Trust 5,200 50,000
A. Xxxxxx Xxxxxx TTEE FBO: Xxxxx Xxxxxx Trust 5,200 50,000
Aberdeen Strategic Capital L.P 36,608 352,000
Xxxx Xxxxxx TTEE AF Services Money Purchase Plan 3,120 30,000
Xxxx Xxxxxx 2,600 25,000
ADS Consulting, LLC 15,000
Xxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxxxxx M.D. JTWROS 4,000
Xxxx X. Xxxxxxx Revocable Trust, Xxxx X. Xxxxxxx, Xxxxxxx 8,177 70,530
Xxxxxxx &William Xxxxxxx TTEES
Xxxxxx Xxxx ACF Xxxxx Xxxxxxxx Xxxx 4,644 25,000 17,632
Xxxxxx Xxxx ACF Xxxxxxx Xxxx 14,866 25,000 105,795
Xxxxxx Xxxxxxx and Xxxxx Xxxxx 8,177 70,530
Xxxxxx X. Xxxxx & Xxxxx Xxxxxxx TTEES FBO: Xxxxxx Xxxxxx 1,040 10,000
Xxxxx Trust
Xxxxxx X. Xxxxx & Xxxxx Xxxxxxx TTEES FBO: Xxxxxx 6,689 25,000 35,265
Xxxxxxxxx Xxxxxxx Trust
Xxxxxx X. Xxxxx & Xxxxx Xxxxxxx TTEES FBO: Xxxxxx Xxxxxx 1,560 15,000
Xxxxx Trust
Xxxxxx X. Xxxxx & Xxxxx Xxxxxxx TTEES FBO: Xxxxxxx Xxxx 2,600 25,000
Xxxxx Trust
Xxxxxx X. Xxxxx & Xxxxx Xxxxxxx TTEES FBO: Xxxxxxxx X. 6,689 25,000 35,265
Satloff Trust
Xxx Xxxxxxxxxxx 5,000
Xxxxxxx Xxxxxx & Xxxxx Xxxxxx 2,600 25,000
Xxxxx Xxxxx and Xxxxxxx Xxxxx 8,177 70,530
Xxxxxxx X. Xxxxxxxx 1991 Revocable Intervivos Sep. 5,000
Property Trust
Xxxxxxx Xxxx 4,089 35,265
Xxxxxxx Xxxxxx 4,089 35,265
Bella & Xxxxxx Xxxxxxxxx Foundation #2 13,377 50,000 70,530
Blossom Berlin 2,600 25,000
Xxxxx Xxxx XxxXxxxxxxx Trust 8,177 70,530
Xxxxx Xxxxxx 21,555 50,000 141,060
Xxxxxx Xxxxx 4,089 35,265
X.X. Xxxxxxxxx, Towbin 119,389 250,000 352,650 310,000
X.X. Xxxxxxxxx, Towbin Capital Partners I, LP 52,000 500,000
Capital Ventures International 100,000
Catalyst International Ltd. 11,565 31,000 72,940
Catalyst Partners L.P. 24,378 74,000 143,881
Xxxxxxx Xxxx Xxxxxxxx & Xxxx Xxxxxx-Xxxxxxxx 5,200 50,000
Xxxxxxx XxXxxx 8,000
Xxxxxxx Xxxxxx &Co. Inc. CDN FBO: Xxxx X. Xxxxxxxxxx Xx.
XXX 11,448 98,742
5
TYPE OF SECURITY
-------------------------------------------------------
Common 8% Notes 7% Notes
NAME OF INVESTOR Stock ($ amount) ($ amount) Warrants
---------------------------------------------------------- ------- ---------- ---------- --------
Xxxxxxx X. Xxxxxxx TTEE of the Xxxxxxx X. Xxxxxxx Trust 10,777 25,000 70,530
Cheyenne Holdings Limited Partnership 81,774 705,300
Xxxxxx Xxxxx 2,600 25,000
Cranshire Capital, LP 100,000
Xxx &Ellen Weiner TTEES The Xxxxxx Family Trust FBO Benno, 24,532 211,590
Xxxxxx &Carl Xxxxxx
Xxxxx Xxxxx 40,887 352,650
Xxxx X. Xxxxxxxx 16,355 141,060
Xxxxxx X. Day TTEE Xxxxxx X. Day Rev Trust 12,266 105,795
Xxxxx X. Xxxxxxx 81,774 705,300
Xxxxxxx Xxxxx 4,089 36,265
Drawbridge Special Opportunities Fund, LP 133,750
Duck Partners, LP 24,532 211,590
Xxxx Xxxxx 16,355 141,060
Xxxxxx and Xxxx Xxxx Family Foundation 16,000
Xxxxx X. Xxxxx 26,755 100,000 142,060
Xxxxx X. Xxxxx &Emily X. Xxxxxxx TTEES, T.I. Unterberg 4,089 35,265
Grandchildren's Trust
Xxxxx Xxxxxx Xxxxxx &John Xxxxxx Xxxxxx M.D. 4,089 35,265
Xxxxx X. Xxxxxxx 18,577 100,000 70,530
Xxxx Xxxxxxx 8,177 70,530
Xxxx Xxxxx 4,089 35,265
Xxxxxx X. Xxxxxx 4,089 35,265
Xxxxxx Capital 163,548 1,410,600
Great Plains Trust Company 26,000 250,000
Xxxxxxxx Multi-Strategy Master Fund L.P. 163,548 1,410,600
Xxxxxx Xxxxxxxx, Xxxxx Xxxxxxxxxx &Ellen Colton TTEES 4,089 35,265
Xxxxxxx Xxxxxxxx Testamentary Trust
Xxxxxx X. Xxxxxxxx 84,000
Xxxxxxx X. Xxxxxxx, XXX 3,640 35,000
Highbridge/Xxxxx Special Opportunities Fund, LP 133,750
Xxxxxx Xxxxx 4,089 35,265
6
TYPE OF SECURITY
-------------------------------------------------------
Common 8% Notes 7% Notes
NAME OF INVESTOR Stock ($ amount) ($ amount) Warrants
-------------------------------------------------- ------- ---------- ---------- --------
Hull Associates LP 40,887 352,650
Hurricane International 16,355 141,060
Xxxxxx Xxxxxxxxxxx 457,500
J. Xxxxx Xxxxxxxxx 12,266 105,795
J. Xxxxxx Xxxxxxxxx & X. Xxxxxxxxx TTEES X. Xxxxxx 2,600 25,000
Xxxxxxxxx Revocable Trust FBO: X.X. Xxxxxxxxx
Xxxxx Xxxxxxx 2,080 20,000
Xxxxx X. Xxxxxxxxxxx 67,000
Xxxxx X. Xxxxxx & Xxx X. Xxxxxx 32,710 282,120
Xxxxx X. Xxxxx 7,506 25,000 42,318
Xxxxx X. Xxxxxxx 5,200 50,000
Xxxxx X. Xxxxx 4,089 35,265
Xxxxxxx X. Xxxxxxxxx 18,400 100,000
Xxxxxxx X. Xxxxxxxxx* 8,000
Jemp, Inc 2,600 25,000
Xxxx Xxxxxxxxx 16,355 141,060
Xxxx Xxxxxxxxx* 8,000
Xxxx X.X. Xxxxxxxx 57,242 493,710
Xxxx Xxxxx 8,177 70,530
Xxxx X. Xxxxxx 5,200 50,000
Xxxxxxx X. Xxxxxxxx 13,000
Xxxxxxx Xxxxxxxxx 10,400 100,000
Xxxxxxxx Xxxxxxxx Xxxxxxxxxx 1,000
Xxxxxxx Xxxxx Xxxxx & Xxxxx Xxxx Xxxxx 5,200 50,000
Xxxxxx Xxxxxxxx Family Trust 2,000
Xxxx Xxxxxxx 4,089 35,265
Xxxxxxxx & Xxxxxxxx X. Xxxxxxxxx Foundation, Inc. 85,953 325,000 458,445
Xxxx Xxxxx 15,000
Xxxxxxx Xxxxx 10,000
Xxxxxx Entertainment Group Ltd. 5,200 50,000
Xxxx XxXxxx 8,000
Xxxxxxx X. Wall Trust 15,600 150,000
Xxxxxxx Xxxxxxxx 10,400 100,000
Xxxxxxx X. Xxxxxx 32,600 25,000
Xxxxxxx Xxxxx and Xxxx X. Xxxxx 5,724 49,371
Xxxxxxx X. Xxxxxxxx 8,000
Xxxxxxx X. Xxxxxxx 8,177 70,530
Xxxxxx Xxxxxxxxx & J. Xxxxx Xxxxxxxxx, TTEES Xxxxx 4,089 35,265
Xxxxxxxxx Rev Trust
Xxxx Xxxxx 8,000
Xxxx Xxxxxxx 8,177 70,530
Xxxxx Associates 382,500
Xxxxxx Xxxxx 8,177 70,530
Xxxxx Xxxxxx as XXX CDN FBO: Xxxxxx Xxxxxx, XXX Rollover 5,200 50,000
Xxxxx Xxxxxx as XXX Custodian FBO: Xxxxxx X. Xxxxxxxxx, 2,600 25,000
XXX Rollover
Xxxxx Xxxxxx as XXX Custodian FBO: Xxxxxx Xxxxx, XXX 2,600 25,000
Xxxxx Xxxxxx as XXX Custodian FBO: J. Xxxxx Xxxxxxxxx, XXX 17,800 75,000
Xxxxx Xxxxxx as XXX Custodian FBO: Xxxxx Xxxxxx XXX 4,680 45,000
Rollover
Xxxxx Xxxxxx as XXX Custodian FBO: Xxxxxx Xxxxxxx, XXX 10,400 100,000
Rollover
Xxxx X. Xxxxxxx &Sheri X. Xxxxxxx TTEES of The Xxxx X. 8,177 70,530
Xxxxxxx and Xxxxx Xxxxxxx Trust
Xxxx X.X. Xxxxx 2,600 25,000
Xxxx X.X. Xxxxx 4,089 35,265
7
TYPE OF SECURITY
---------------------------------------------------------
8% Notes 7% Notes
NAME OF INVESTOR Common Stock ($ amount) ($ amount) Warrants
---------------- ------------ ---------- ---------- --------
PBA Enterprises, LLC 25,000
Xxxxx X. Xxxxxxxx 20,800 200,000
Plampton Ltd. 10,400 100,000
Platinum Partners Value Arbitrage Fund, LP 100,000
X. Xxxxxxx & X. Xxxxxxxxx TTEES X.X. Xxxxxxxxx, Towbin 5,200 50,000
401(k) Profit Sharing Plan FBO: Xxxxxx Xxxx
Xxx Xxxxxx 16,355 141,600
Xxxxxxx X. XxXxx 21,000
Ridgecrest Partners L.P. 2,430 10,000 11,990
Ridgecrest Partners Ltd. 23,951 110,000 107,910
Ridgecrest Partners QP, L.P. 59,183 275,000 263,782
Xxxx X. Xxxxxx, XXX 1,000
Xxxxxx & Xxxxxx Xxxxxxxx 4,089 35,265
Xxxxxx Xxxxxxx 6,689 25,000 35,265
Xxxxxx X. Xxxx 31,200 300,000
Xxxxxx X. Xxxxxx XXX Rollover 2,000
Xxxxxx Xxxxxxxxxxx 12,500
Xxxxxx Xxxxxxx 8,177 70,530
Xxxxxx Xxxxxxx 24,155 75,000 141,060
Scone Foundation 8,177 70,530
Scone Investments, L.P. 18,284 50,000 56,424
Xxxxx X. Fine 4,089 35,265
Xxxxx Xxxxxxx TTEE FBO SAS Trust I IS U/A/D 07/30/93 48,710 282,120
Xxxxx Xxxxxxxxxxx 5,000
Seneca Capital LP 327,096 2,821,200
Sensus LLC 10,400 100,000
Senvest Master Fund 40,887 352,650
Siam Partners II 16,000
Smithfield Fiduciary LLC 100,000
Solar Group S.A. 26,000 250,000
Spindrift Investors (Bermuda) L.P. 660,000
Spindrift Partners L.P. 540,000
SRG Capital LLC 100,000
Xxxxxxx Xxxxx 9,813 84,636
Xxxxxxx Xxxxx Irrevocable Trust 1994 Trust FBO: Issue 4,160 40,000
Xxxxxxx X. Xxxxx &Jonathan X. Xxxxx CO-TTEES for The Xxxxx 8,177 70,000
Xxxxx Revocable Trust
Xxxxxxx Xxxxxx 18,435 20,000 142,060
Xxxxxxx Xxxxx 8,177 70,530
Xxxxxxx Xxxxx 1997 Trust Xxxx Xxxxx Trustee FBO: Xxxx 4,907 42,318
Xxxxx and Xxxxxxx Xxxxx
Xxxxxx - GEPT Partners, LP 90,121 246,855
Xxxxxx Partners LP 147,777 726,459
Xxxxxx-Xxxxxxx L.P. 9,813 84,636
8
TYPE OF SECURITY
---------------------------------------------------------
8% Notes 7% Notes
NAME OF INVESTOR Common Stock ($ amount) ($ amount) Warrants
---------------- ------------ ---------- ---------- --------
Xxxxxx X. Xxxxxx 2,600 25,000
Xxxxxx Xxxxxxxx Xxxxx, Bear Xxxxxxx Secs Corp. Custodian 12,266 105,795
Summit Industrial 16,535 141,060
Xxxxx Xxxxxx 12,500
Tahoe Partnership I 16,000
Xxxx Xxxxxxxxxxx 5,000
The Xxxxxx Xxxxxxx Xxxxxx, XX Trust 4,000
The Xxxxxxx Family Revocable Trust 5,000
The Xxxxxx Family Trust 30,000
The Xxxxxx X. and Xxxxx X. Xxxx Trust 6,000
The Xxxxxx X. Xxxxxxx Marital QTIP Trust 2,000
The Scone Foundation, Inc. 6,240 60,000
The Xxxxxxx X. Bullenworth Revocable Trust 10,000
The Timken Living Trust 26,000 250,000
Xxxxxx X. Xxxxxxxxx 43,100 100,000 282,120
Xxxxxx X. Xxxxxxxxx Trust, A. Xxxxxx Xxxxxx TTEE 68,732 425,000 211,590
Xxxxxx X. Xxxxxxxxx TTEE FBO: Xxxxx Xxxxx Family Trust 5,200 50,000
Xxxxxx X. Xxxxxxxxx TTEE FBO: Xxxxx Xxxxxxx Family Trust 13,377 50,000 70,530
Xxxxxx X. Xxxxxxxxx* 12,000
Truk International Fund, LP 7,000
Truk Opportunity Fund, LLC 93,000
U.S. Capital Fund, L.L.C. 20,000
Xxxxxxx Xxx 32,710 282,120
Wardenclyffe Micro-cap Fund L.P. 4,992 48,000
Wayen Investments 5,870 25,000 282,120
Xxxxxxx X. Xxxxx 5,200 50,000
Xxxxxxx X. Xxxxxx & Xxx Xxxxxxxxxxx Xxxxxx 4,089 35,265
Xxxxxxx X. Xxxxxxxx 5,200 50,000
Xxxxxxx Xxxxx Xxxxxx &Loretta Xxxxxx 40,887 352,650
Yaudoon Xxxxx Xxxxxx 5,200 50,000
--------- ---------- -------
TOTAL 6,475,000 17,688,924 310,000
========= ========== =======
9
(D)
(i) 7% Subordinated Convertible Notes due 2007
(ii) 8% Subordinated Convertible Notes due 2006
(E)
Each of the indentures governing the 7% Subordinated Convertible Notes due
2007 and 8% Subordinated Convertible Notes due 2006 provide similar
anti-dilution protection for the holders of those notes. The issuance of the
Initial Notes and the Initial Warrants will not trigger these anti-dilution
provisions because the conversion price of the Initial Notes (based on the price
of the Company's common stock on January 12, 2005) and the exercise price of the
Initial Warrants are both higher than the prevailing conversion prices for the
7% and 8% notes. In the future, if the Initial Notes are converted into common
stock at a conversion price below the conversion price then in effect for the 7%
or 8% notes, the conversion price of the 7% and 8% notes will be adjusted on a
weighted-average basis as provided in the applicable indenture.
(F) None.
10
SCHEDULE 3(f)
SEC DOCUMENTS
10K Filing Results APPENDIX A
COMPANY NAME FORM TYPE DATE
SYMBOL (FILER NAME) (ITEMS) (PERIOD ENDING) SIZE PAGE
IFNY INFINITY INC 8-K 12/29/2004 3.0 KB 3
(5.02) (12/29/2004)
IFNY INFINITY INC 8-K (1.01, 2.02, 2.04, 3.02, 9.01) 11/16/2004 128.1 KB 45
(11/12/2004)
IFNY INFINITY INC NT 10-Q 11/16/2004 5.3 KB 3
(09/30/2004)
IFNY INFINITY INC 10-Q 11/16/2004 765.8 KB 36
(09/30/2004)
IFNY INFINITY INC 8-K (1.01, 2.02, 2.04, 3.02, 9.01) 11/16/2004 128.1 KB 45
(11/12/2004)
IFNY INFINITY INC NT 10-Q 08/17/2004 5.2 KB 3
(06/30/2004)
IFNY INFINITY INC 10-Q 08/17/2004 162.8 KB 52
(06/30/2004)
IFNY INFINITY INC 8-K 08/16/2004 56.3 KB 20
(12) (08/16/2004)
IFNY INFINITY INC DEF 14A 05/20/2004 119.6 KB 37
(06/17/2004)
IFNY INFINITY INC 8-K 05/17/2004 35.2 KB 15
(7, 12) (05/17/2004)
IFNY INFINITY INC 10-Q 05/17/2004 127.5 KB 48
(03/31/2004)
IFNY INFINITY INC 10-K/A 04/29/2004 67.9 KB 20
(12/31/2003)
IFNY INFINITY INC 10-K 04/14/2004 490.5 KB 139
(12/31/2003)
IFNY INFINITY INC 8-K 03/30/2004 57.8 KB 20
(7, 12) (03/29/2004)
IFNY INFINITY INC NT 10-K 03/30/2004 24.4 KB 1
(12/31/2003)
IFNY INFINITY INC 8-K 01/21/2004 70.8 KB 24
(5,7) (01/16/2004)
IFNY INFINITY INC 8-K 12/12/2003 6.0 KB 4
(5) (12/10/2003)
IFNY INFINITY INC 10-Q 11/19/2003 326.6 KB 8
(09/30/2003)
IFNY INFINITY INC NT 10-Q 11/17/2003 5.8 KB 1
(09/30/2003)
IFNY INFINITY INC 8-K 11/14/2003 36.2 KB 13
(7, 12) (11/14/2003)
1FNY INFINITY INC 10-Q 08/19/2003 106.7 KB 10
(06/30/2003)
IFNY INFINITY INC 8-K 08/15/2003 39.4 KB 14
(7, 12) (08/13/2003)
IFNY INFINITY INC NT 10-Q 08/15/2003 5.7 KB 1
(06/30/2003)
IFNY INFINITY INC 8-K 05/21/2003 21.4 KB 8
(7,9) (05/15/2003)
IFNY INFINITY INC 10-Q 05/15/2003 63.0 KB 7
(03/31/2003)
IFNY INFINITY INC DEF 14A 04/29/2003 51.7 KB 1
(06/05/2003)
IFNY INFINITY INC 10KSB 04/14/2003 274.6 KB 6
(12/31/2002)
IFNY INFINITY INC NT 10-K 03/31/2003 6.0 KB 1
(12/31/2002)
11
SCHEDULE 3(g)
ABSENCE OF CERTAIN CHANGES
(i) By Agreement dated April 16, 2004, Consolidated acquired substantially all
of the assets and liabilities of Blue Star Acid Services, Inc., and
Wyoming Oil & Minerals Inc., providers of acid and cementing services in
eastern and central Kansas and north-central Oklahoma, for $1.2 million in
cash and the assumption of $0.2 million in liabilities.
(ii) On July 16, 2004, Infinity-Texas acquired approximately 28,400 (21,800
net) acres of leasehold in the Xxxxxxx Shale area of the Fort Worth Basin
of north central Texas for approximately $1.6 million.
(iii) On September 15, 2004, Consolidated closed the sale of selected assets to
an exploration and production company and Consolidated customer, for $4.1
million in cash. The assets sold consisted of 37 oilfield service trucks,
13 trailers, real estate and other support equipment, vehicles and
inventory relating to a portion of Consolidated's Chanute, Kansas
operations.
12
SCHEDULE 3(h)
LITIGATION
3(H)
(a) Xxxx Xxxx, the surface owner adjacent to Infinity's Xxxxxxx Springs
four-well coalbed methane pilot project, has made a number of
challenges to the validity of the permit issued by Routt County,
Colorado for the pilot project. Most recently, by Order dated
November 15, 0000, xxx Xxxxxxxx Xxxxx xx Xxxxx Xxxxxx dismissed the
complaint filed by Xxxx Xxxx, challenging the issuance of the
Xxxxxxx Springs Permit. Xxxx Xxxx x. Xxxxx County Regional Planning
Department, Board of County Commissioners of Routt County, 04CV75
(2004). The Xxxxxxx Springs pilot project is currently shut-in for
the winter. Infinity Oil & Gas of Wyoming, Inc. may seek to renew or
obtain a new permit to operate this pilot in the spring of 2005, and
Infinity anticipates that Xx. Xxxx will continue to object to the
issuance of this permit.
(b) In a letter dated July 28, 2004, the Bureau of Land Management
("BLM") made inquiry of Infinity Oil & Gas of Wyoming, Inc. to
verify volumes of oil and gas production from the Riley Ridge Unit
in Sublette County, Wyoming. Infinity Oil & Gas of Wyoming, Inc. has
responded to the inquiry but has received no further communication
from the BLM.
13
SCHEDULE 3(j)
UNDISCLOSED LIABILITIES
None.
14
SCHEDULE 3(n)
EMPLOYEE RELATIONS
None.
15
SCHEDULE 3(p)
ENVIRONMENTAL LAWS
1. Xxxx Xxxx, the surface owner adjacent to Infinity's Xxxxxxx Springs
four-well coalbed methane pilot project, has made a number of challenges
to the validity of the permit issued by Routt County, Colorado for the
pilot project. Most recently, by Order dated November 15, 0000, xxx
Xxxxxxxx Xxxxx xx Xxxxx Xxxxxx dismissed the complaint filed by Xxxx Xxxx,
challenging the issuance of the Woodly Springs Permit. Xxxx Xxxx x. Xxxxx
County Regional Planning Department, Board of County Commissioners of
Routt County, 04CV75 (2004). The Xxxxxxx Springs pilot project is
currently shut-in for the winter. Infinity Oil & Gas of Wyoming, Inc. may
seek to renew or obtain a new permit to operate this pilot in the spring
of 2005, and Infinity anticipates that Xx. Xxxx will continue to object to
the issuance of this permit.
2. The South Piney Environmental Impact Statement for Riley Ridge Natural Gas
Development Project Area in Sublette County, Wyoming is currently pending
(Xxxxxxx).
3. The Bitter Creek Shallow Gas Exploration and Development Environmental
Assessment for the Pipeline Project Area in Sweetwater County, Wyoming is
currently pending.
16
SCHEDULE 3(q)
TITLE
LIENS
1. Loan and Security Agreement, as amended on September 15, 2004 and UCC-1
Financing Statement, filed in Kansas on December 3, 2001 by LaSalle Bank,
N.A., covering all (current and after-acquired) assets of Consolidated Oil
Well Services, Inc. All indebtedness in the amount of $3,855,830.77 and
liens described herein are to be paid in full and released in connection
with the Initial Closing.
2. Mortgage, Deed of Trust, Security Agreement, Assignment of Production and
Financing Statement, dated May 1, 2004, recorded June 7, 2004, in book
2004L and page 2734 of the records of Moffat County, Colorado, in favor of
Xxxxxx Xxxxxxxxxxx and Xxxxx Associates, covering real and personal
property including without limitation the leases and lands described
therein. All indebtedness secured by the liens described herein has been
paid in full and the liens described herein have been released pursuant to
mortgage releases to be filed promptly after the Initial Closing.
3. Mortgage, Deed of Trust, Security Agreement, Assignment of Production and
Financing Statement, dated July 2, 2003, recorded July 25, 2003, at
Reception No. 587049, and Amendment to Mortgage dated September 4, 2003,
recorded September 18, 2003, at Reception No. 590551 of the records of
Routt County, Colorado, in favor of Xxxxxx Xxxxxxxxxxx and Xxxxx
Associates, covering real and personal property including without
limitation the leases and lands described therein. All indebtedness
secured by the liens described herein has been paid in full and the liens
described herein have been released pursuant to mortgage releases to be
filed promptly after the Initial Closing.
4. Mortgage, Deed of Trust, Security Agreement, Assignment of Production and
Financing Statement, dated July 2, 2003, recorded August 6, 2003, in Book
125 at Page 338, and Amendment to Mortgage dated September 4, 2003,
recorded September 18, 2003, in Book 105 at Page 331 of the records of
Sublette County, Wyoming, in favor of Xxxxxx Xxxxxxxxxxx and Xxxxx
Associates, covering real and personal property including without
limitation the leases and lands described therein. All indebtedness
secured by the liens described herein has been paid in full and the liens
described herein have been released pursuant to mortgage releases to be
filed promptly after the Initial Closing.
5. Mortgage, Security Agreement, Assignment, Financing Statement and Fixture
Filing, dated September 4, 2003, recorded September 16, 2003, in book 984
and page 1380 of the records of Sweetwater County, Wyoming, in favor of
U.S. Bank National Association, covering real and personal property
including without limitation the leases and lands described therein. All
indebtedness in the amount of $5,037,285.67 and liens described herein are
to be paid in full and released in connection with the Initial Closing.
6. Mortgage, Security Agreement, Assignment, Financing Statement and Fixture
Filing, dated September 4, 2003, recorded September 7, 2003, in book 105
and page 242 of the records of Sublette County, Wyoming, in favor of U.S.
Bank National Association, covering real and personal property including
without limitation the leases and lands
17
described therein. All indebtedness in the amount of $5,037,285.67 and
liens described herein are to be paid in full and released in connection
with the Initial Closing.
7. UCC-1 Financing Statement 2003-20100518 filed with the Wyoming Secretary
of State on October 24, 2003 by U.S. Bank National Association. All
indebtedness in the amount of $5,037,285.67 and liens described herein are
to be paid in full and released in connection with the Initial Closing.
8. Mortgage dated May 15, 2001, from Consolidated Industrial Services Inc.
and CIS-Oklahoma, Inc. to NBC Bank, an Oklahoma banking corporation,
granting a lien upon three metes and bounds tracts located at Xxxxx
Xxxxxxx 000, Xxxx 0000, Xxxxxxxxxxxx, Oklahoma 74005, in the NE/4 of
Section 16, Township 26 North, Range 12 East in Osage County, Oklahoma.
All indebtedness secured by the liens described herein are to be paid in
full and such liens released pursuant to Section 4(u) of the Purchase
Agreement (See Schedule 4(u)(1)).
9. Mortgage dated January 29, 2003, granting Home Bank & Trust Company a lien
upon property located at 0000 Xxxx Xxxx, Xxxxxx, Xxxxxx. All indebtedness
secured by the liens described herein are to be paid in full and such
liens released pursuant to Section 4(u) of the Purchase Agreement (See
Schedule 4(u)(2)).
10. Mortgage dated May 12, 2000, recorded in Book 1602 at page 445, of the
records of Xxxxxxxx County, Wyoming, covering real estate located at 000
Xxxxxxxxxx Xxxxxx, Xxxxxxxx, Wyoming. All indebtedness secured by the
liens described herein are to be paid in full and such liens released
pursuant to Section 4(u) of the Purchase Agreement (See Schedule 4(u)(7)).
11. Ford Motor Credit lien against 2004 Ford F-250 VIN 0XXXX00X00XX00000. All
indebtedness secured by the liens described herein are to be paid in full
and such liens released pursuant to Section 4(u) of the Purchase Agreement
(See Schedule 4(u)(3)).
12. Ford Motor Credit lien against 2002 Ford F250 VIN- 0XXXX00X00XX00000. All
indebtedness secured by the liens described herein are to be paid in full
and such liens released pursuant to Section 4(u) of the Purchase Agreement
(See Schedule 4(u)(4)).
13. Daimler Chrysler Credit Corp. lien against 2004 Dodge 2500 VIN-
0X0XX00X00X000000. All indebtedness secured by the liens described herein
are to be paid in full and such liens released pursuant to Section 4(u) of
the Purchase Agreement (See Schedule 4(u)(6)).
14. Ford Motor Credit lien against 2004 Ford F150 CC VIN- 0XXXX00000XX00000.
All indebtedness secured by the liens described herein are to be paid in
full and such liens released pursuant to Section 4(u) of the Purchase
Agreement (See Schedule 4(u)(5)).
15. As to Personal Property, the Company is subject the following Permitted
Liens:
(a) Liens created by the Security Documents;
(b) Liens for taxes or other governmental charges not at the time
due and payable so long as the Company and its Subsidiaries maintain
adequate reserves in
18
accordance with United States generally accepted accounting
principles ("GAAP") in respect of such taxes and charges which
include county ad valorem taxes, state severance or similar gross
product taxes, and oil and gas conservation commission taxes;
(c) Liens arising in the ordinary course of business in favor of
carriers, warehousemen, mechanics and materialmen, or other similar
Liens imposed by law, which remain payable without penalty and in
each case for which adequate reserves in accordance with GAAP are
being maintained including oil and gas liens under applicable state
statutes which relate back to the date upon which work was first
performed;
(d) Liens arising in the ordinary course of business in connection
with worker's compensation, unemployment compensation and other
types of social security (excluding Liens arising under ERISA) or
Liens consisting of cash collateral securing the Company's or any of
its Active Subsidiaries' performance of surety bonds, bids,
performance bonds and similar obligations (exclusive of obligations
for the payment of borrowed money) permitted pursuant to clause
(a)(IV) of Section 12 of the Note and, in each case, for which the
Company maintains adequate reserves including bonds obtained for
federal, state and local authorities to secure plugging and
reclamation activities;
(e) Liens in favor of U.S. Bank and LaSalle in respect of the Xxxx
XX Account and the Returned Items Account (each as defined in the
Security Agreement) to the extent such accounts are maintained and
permitted to exist in accordance with the terms of the Security
Agreement;
(f) Liens consisting of cash collateral securing the Company's and
its Active Subsidiaries' reimbursement obligations under letters of
credit permitted by clauses (a)(VI) and (a)(VII) of Section 12,
provided that the aggregate amount of cash collateral securing such
Indebtedness does not exceed the undrawn face amount of all such
letters of credit outstanding at any one time;
(g) Liens securing Indebtedness listed on Schedule 4(u) of the
Securities Purchase Agreement for up to thirty (30) days following
the Initial Closing Date;
(h) Liens on equipment subject to Capital Lease Obligations
permitted to be incurred pursuant to clause (a)(V) of Section 12, to
the extent such Liens secure such Capital Lease Obligations
including lease agreements between Infinity Oil and Gas of Texas
Inc. and Hanover Compression for a compressor, separator and dehy.
OWNED REAL PROPERTY
1. 4.4-acre tract owned by CIS-Oklahoma, Inc. described in Corporation
Warranty Deed dated November 15, 1999, and located at 0000 X. Xxxxxxxxxx
Xxxxxx, Xxxxxx, Kansas (Franklin County).
19
2. Real property acquired from Blue Star Acid Services, Inc. located at 0000
Xxxx Xxxx, Xxxxxx, Xxxxxx covering a 3.9-acre tract in the NW/4 of Section
30, Township 29 South, Range 18 East, Neosho County, Kansas.
3. Real property located at 000 Xxxxxxxxxx Xx., Xxxxxxxx, Xxxxxxx 00000, in
Xxxxxxxx County, Wyoming, as more particularly described in the Real
Estate Mortgage dated May 12, 2000, recorded in Book 1602 at page 445 of
the records of Xxxxxxxx County, Wyoming.
4. Real property owned by CIS-Oklahoma, Inc. located at Xxxxx Xxxxxxx 000,
Xxxx 0000, Xxxxxxxxxxxx, Xxxxxxxx 00000, located in the NE/4 of Section
16, Township 26 North, Range 12 East of the Indian Meridian, Osage County,
Oklahoma.
20
SCHEDULE 3(s)
REGULATORY PERMITS
1. Xxxx Xxxx, the surface owner adjacent to Infinity's Xxxxxxx Springs
four-well coalbed methane pilot project, has made a number of challenges
to the validity of the permit issued by Routt County, Colorado for the
pilot project. Most recently, by Order dated November 15, 0000, xxx
Xxxxxxxx Xxxxx xx Xxxxx Xxxxxx dismissed the complaint filed by Xxxx Xxxx,
challenging the issuance of the Xxxxxxx Springs Permit. Xxxx Xxxx x. Xxxxx
County Regional Planning Department, Board of County Commissioners of
Routt County, 04CV75 (2004). The Xxxxxxx Springs pilot project is
currently shut-in for the winter. Infinity Oil & Gas of Wyoming, Inc. may
seek to renew or obtain a new permit to operate this pilot in the spring
of 2005, and Infinity anticipates that Xx. Xxxx will continue to object to
the issuance of this permit.
2. The South Piney Environmental Impact Statement for Riley Ridge Natural Gas
Development Project Area in Sublette County, Wyoming is currently
pending.(Xxxxxxx).
3. The Bitter Creek Shallow Gas Exploration and Development Environmental
Assessment for the Pipeline Project Area in Sweetwater County, Wyoming is
currently pending.
21
SCHEDULE 3(v)
TRANSACTIONS WITH AFFILIATES
(i) In July 2003, Infinity entered into an eighteen-month financial consulting
agreement with Xxxxxx Xxxxxxxxxxx, an Infinity shareholder, in
consideration for which Xx. Xxxxxxxxxxx was issued 125,000 options to
purchase Infinity's Common Stock.
(ii) The LaSalle Facility was secured in part by a personal guarantee by
Xxxxxxx X. Xxxx, President and Chief Executive Officer of Infinity, in the
amount of $1 million.
(iii) Infinity, Inc. and its subsidiaries paid $16,720 to Xxxxx X. Xxxxx for
services rendered during the period beginning September 2003 and through
January 2005 as an independent contractor.
(iv) In June 2004, Infinity executed a promissory note payable to Xxxxxxx Xxxx
for $20,000. The note has been repaid in full.
(v) Infinity engaged Northeast Securities, Inc. as a placement agent in
connection with its November 2004 private placement for a fee of
$52,377.00 O. Xxx Xxxxx, a director of Infinity, is a principal of
Northeast Securities, Inc.
22
SCHEDULE 3(aa)
OUTSTANDING INDEBTEDNESS, LIENS
I. Outstanding Indebtedness; Trade Accounts Payable
1. Amounts owing on accounts payable are estimated to range from
$5,250,000 to $5,850,0000 as of December 31, 2004. Under the terms
of the Note and Securities Purchase Agreement, the Company has
agreed to certain restrictions on the type and amount of accounts
payable which may be outstanding.
2. Aircraft Usage Agreement executed January 27, 2003, between Dobber
Aviation, L.L.C. and Infinity, Inc. covering a Cessna Citation
aircraft, Model Xx. 000X, Xxxxxx Xx. 000X-0000, Federal Aviation
Administration Registration No. N140DA with respect to payment of
$2,617,975.
3. Promissory Note dated May 15, 2001, from Consolidated Oil Well
Services Inc. to NBC Bank in the principal amount of $380,000. This
Note is guaranteed by Infinity Inc. under a Guaranty Agreement dated
May 15, 2001. All indebtedness hereunder will be paid in full as
required under Section 4(u) of the Purchase Agreement (See Schedule
4(u)(1)).
4. By Assignment and Assumption Agreement dated April 2004, Blue Star
Acid Services, Inc. assigned to Consolidated Oil Well Services, Inc.
all interest in and Consolidated agreed to pay the Note dated
January 29, 2003, from Blue Star Acid Services, Inc. to Home Bank &
Trust Company in the principal amount of $32,000. All indebtedness
hereunder will be paid in full as required under Section 4(u) of the
Purchase Agreement (See Schedule 4(u)(2)).
5. Note dated November 11, 2000, from CIS-Oklahoma Inc. to Bank of
Commerce in the principal amount of $348,000. All indebtedness
hereunder will be paid in full as required under Section 4(u) of the
Purchase Agreement (See Schedule 4(u)(7)).
6. 7% Subordinated Convertible Notes due 2007
7. 8% Subordinated Convertible Notes due 2006
8. Ford Motor Credit: 2004 Ford F-250 VIN 0XXXX00X00XX00000. All
indebtedness secured by the liens described herein are to be paid in
full and such liens released pursuant to Section 4(u) of the
Purchase Agreement. See Schedule 4(u)(3).
9. Ford Motor Credit: 2002 Ford F250 VIN- 0XXXX00X00XX00000. All
indebtedness secured by the liens described herein are to be paid in
full and such liens released pursuant to Section 4(u) of the
Purchase Agreement. See Schedule 4(u)(4).
10. Daimler Chrysler Credit Corp.: 2004 Dodge 2500 VIN-
0X0XX00X00X000000. All indebtedness secured by the liens described
herein are to be paid in full and
23
such liens released pursuant to Section 4(u) of the Purchase
Agreement. See Schedule 4(u)(6).
11. Ford Motor Credit: 2004 Ford F150 CC VIN- 0XXXX00000XX00000. All
indebtedness secured by the liens described herein are to be paid in
full and such liens released pursuant to Section 4(u) of the
Purchase Agreement. See Schedule 4(u)(5).
II. Liens
1. Mortgage dated May 15, 2001, from Consolidated Industrial Services
Inc. and CIS-Oklahoma, Inc. to NBC Bank, an Oklahoma banking
corporation, granting a lien upon three metes and bounds tracts
located in the NE/4 of Section 16, Township 26 North, Range 12 East
in Osage County, Oklahoma. All indebtedness hereunder will be paid
in full as required under Section 4(u) of the Purchase Agreement
(See Schedule 4(u)(1)).
2. Mortgage dated May 12, 2000, recorded in Book 1602 at page 445, of
the records of Xxxxxxxx County, Wyoming, covering real estate
located at 000 Xxxxxxxxxx Xxxxxx, Xxxxxxxx, Wyoming. All
indebtedness hereunder will be paid in full as required under
Section 4(u) of the Purchase Agreement (See Schedule 4(u)(7)).
3. Mortgage dated January 29, 2003, granting Home Bank & Trust Company
a lien upon property located at 0000 Xxxx Xxxx, Xxxxxx, Xxxxxx. All
indebtedness secured by the liens described herein are to be paid in
full and such liens released pursuant to Section 4(u) of the
Purchase Agreement (See Schedule 4(u)(2)).
4. Loan and Security Agreement, as amended on September 15, 2004 and
UCC-1 Financing Statement, filed in Kansas on December 3, 2001 by
LaSalle Bank, N.A., covering all (current and after-acquired) assets
of Consolidated Oil Well Services, Inc. All indebtedness in the
amount of $3,855,830.77 and liens described herein are to be paid in
full and released in connection with the Initial Closing.
5. Mortgage, Deed of Trust, Security Agreement, Assignment of
Production and Financing Statement, dated May 1, 2004, recorded June
7, 2004, in book 2004L and page 2734 of the records of Moffat
County, Colorado, in favor of Xxxxxx Xxxxxxxxxxx and Xxxxx
Associates, covering real and personal property including without
limitation the leases and lands described therein. All indebtedness
secured by the liens described herein has been paid in full and the
liens described herein have been released pursuant to mortgage
releases to be filed on or before the Initial Closing.
6. Mortgage, Deed of Trust, Security Agreement, Assignment of
Production and Financing Statement, dated July 2, 2003, recorded
July 25, 2003, at Reception No. 587049, and Amendment to Mortgage
dated September 4, 2003, recorded September 18, 2003, at Reception
No. 590551 of the records of Routt County, Colorado, in favor of
Xxxxxx Xxxxxxxxxxx and Xxxxx Associates, covering real and personal
property including without limitation the leases and lands described
24
therein. All indebtedness secured by the liens described herein has
been paid in full and the liens described herein have been released
pursuant to mortgage releases to be filed on or before the Initial
Closing.
7. Mortgage, Deed of Trust, Security Agreement, Assignment of
Production and Financing Statement, dated July 2, 2003, recorded
August 6, 2003, in Book 125 at Page 338, and Amendment to Mortgage
dated September 4, 2003, recorded September 18, 2003, in Book 105 at
Page 331 of the records of Sublette County, Wyoming, in favor of
Xxxxxx Xxxxxxxxxxx and Xxxxx Associates, covering real and personal
property including without limitation the leases and lands described
therein. All indebtedness secured by the liens described herein has
been paid in full and the liens described herein have been released
pursuant to mortgage releases to be filed on or before the Initial
Closing.
8. Mortgage, Deed of Trust, Security Agreement, Assignment of
Production and Financing Statement, dated July 2, 2003, recorded
July 25, 2003, in Book 980 at Page 338, and Amendment to Mortgage
dated September 4, 2003, recorded September 18, 2003, in Book 984 at
Page 1759 of the records of Sweetwater County, Wyoming, in favor of
Xxxxxx Xxxxxxxxxxx and Xxxxx Associates, covering real and personal
property including without limitation the leases and lands described
therein. All indebtedness secured by the liens described herein has
been paid in full and the liens described herein have been released
pursuant to mortgage releases to be filed on or before the Initial
Closing.
9. Mortgage, Security Agreement, Assignment, Financing Statement and
Fixture Filing, dated September 4, 2003, recorded September 16,
2003, in book 984 and page 1380 of the records of Sweetwater County,
Wyoming, in favor of U.S. Bank National Association, covering real
and personal property including without limitation the leases and
lands described therein. All indebtedness in the amount of
$5,037,285.67 and liens described herein are to be paid in full and
released in connection with the Initial Closing.
10. Mortgage, Security Agreement, Assignment, Financing Statement and
Fixture Filing, dated September 4, 2003, recorded September 7, 2003,
in book 105 and page 242 of the records of Sublette County, Wyoming,
in favor of U.S. Bank National Association, covering real and
personal property including without limitation the leases and lands
described therein. All indebtedness in the amount of $5,037,285.67
and liens described herein are to be paid in full and released in
connection with the Initial Closing.
11. UCC-1 Financing Statement 2003-20100518 filed with the Wyoming
Secretary of State on October 24, 2003 by U.S. Bank National
Association. All indebtedness in the amount of $5,037,285.67 and
liens described herein are to be paid in full and released in
connection with the Initial Closing.
12. Financing Statement filed on January 21, 2002 in favor of ABB
Structural Finance American covering a copier lease.
25
13. The Company's assets are subject to the following Permitted Liens:
(a) Liens created by the Security Documents;
(b) Liens for taxes or other governmental charges not at the time
due and payable so long as the Company and its Subsidiaries maintain
adequate reserves in accordance with United States generally
accepted accounting principles ("GAAP") in respect of such taxes and
charges which include county ad valorem taxes, state severance or
similar gross product taxes, oil and gas conservation taxes,
commission;
(c) Liens arising in the ordinary course of business in favor of
carriers, warehousemen, mechanics and materialmen, or other similar
Liens imposed by law, which remain payable without penalty and in
each case for which adequate reserves in accordance with GAAP are
being maintained including oil and gas liens under applicable state
statutes which relate back to the date upon which work was first
performed;
(d) Liens arising in the ordinary course of business in connection
with worker's compensation, unemployment compensation and other
types of social security (excluding Liens arising under ERISA) or
Liens consisting of cash collateral securing the Company's or any of
its Active Subsidiaries' performance of surety bonds, bids,
performance bonds and similar obligations (exclusive of obligations
for the payment of borrowed money) permitted pursuant to clause
(a)(IV) of Section 12 of the Note and, in each case, for which the
Company maintains adequate reserves including bonds obtained for
federal, state or local authorities to secure plugging and
reclamation activities;
(e) easements, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens arising in the
ordinary course of business and not materially detracting from the
value of the property subject thereto and not interfering in any
material respect with the ordinary conduct of the business of the
Company or any Subsidiary;
(f) Liens in favor of U.S. Bank and LaSalle in respect of the Xxxx
XX Account and the Returned Items Account (each as defined in the
Security Agreement) to the extent such accounts are maintained and
permitted to exist in accordance with the terms of the Security
Agreement;
(g) Liens consisting of cash collateral securing the Company's and
its Active Subsidiaries' reimbursement obligations under letters of
credit permitted by clauses (a)(VI) and (a)(VII) of Section 12,
provided that the aggregate amount of cash collateral securing such
Indebtedness does not exceed the undrawn face amount of all such
letters of credit outstanding at any one time;
(h) Liens securing Indebtedness listed on Schedule 4(u) of the
Securities Purchase Agreement for up to thirty (30) days following
the Initial Closing Date;
26
(i) Liens on equipment subject to Capital Lease Obligations
permitted to be incurred pursuant to clause (a)(V) of Section 12, to
the extent such Liens secure such Capital Lease Obligations
including lease agreements between Infinity Oil and Gas of Texas
Inc. and Hanover Compression for a compressor, separator and dehy.
(j) Liens in favor of Schlumberger Technology Corporation and Red
Oak Capital Management LP (collectively, the "Service Parties"),
granted pursuant to the Joint Value Enhancement Agreement, dated
December 3, 2003, among Infinity Oil & Gas of Wyoming, Inc. ("IOGW")
and the Service Parties (as in effect on the date of the Purchase
Agreement, the "JVEA"), on the three (3) Project Xxxxx (as such term
is defined in the JVEA) described on Exhibit C to Schedule VIII of
the Security Agreement, to the extent such Liens secure the
obligations of IOGW to the Service Parties under the JVEA.
III. Financing Statements Filed Against the Company
See part II above.
27
SCHEDULE 3(bb)
REAL PROPERTY, LEASES
1. All real property interests of Company are listed in Exhibits A and B of
this Schedule 3(bb).
Exhibit A Oil and Gas Leases and Oil and Gas Xxxxx
Exhibit B Office Leases, Camp Leases and real property
2. Infinity Oil & Gas of Kansas Inc. owns a partial working interest in
non-producing leases in southwest Kansas for which it does not have a
complete legal description. In addition, Infinity Oil and Gas of Texas,
Inc. and Infinity Oil & Gas of Wyoming, Inc. are currently obtaining oil
and gas leases on a daily basis and, therefore, oil and gas leases taken
or acquired within ten Business Days of Closing may not appear on this
Schedule.
3. The description xxxxx in Exhibit A is the Companies' list of "facilities"
for purposes of describing the facilities owned by Company and its
subsidiaries for drilling, production and marketing of oil and gas.
4. Xxxx Xxxx, the surface owner adjacent to Infinity's Xxxxxxx Springs
four-well coalbed methane pilot project, has made a number of challenges
to the validity of the permit issued by Routt County, Colorado for the
pilot project. Most recently, by Order dated November 15, 0000, xxx
Xxxxxxxx Xxxxx xx Xxxxx Xxxxxx dismissed the complaint filed by Xxxx Xxxx,
challenging the issuance of the Xxxxxxx Springs Permit. Xxxx Xxxx x. Xxxxx
County Regional Planning Department, Board of County Commissioners of
Routt County, 04CV75 (2004). The Xxxxxxx Springs pilot project is
currently shut-in for the winter. Infinity Oil & Gas of Wyoming, Inc. may
seek to renew or obtain a new permit to operate this pilot in the spring
of 2005, and Infinity anticipates that Xx. Xxxx will continue to object to
the issuance of this permit.
5. The South Piney Environmental Impact Statement for Riley Ridge Natural Gas
Development Project Area in Sublette County, Wyoming is currently pending.
6. The Bitter Creek Shallow Gas Exploration and Development Environmental
Assessment for the Pipeline Project Area in Sweetwater County, Wyoming is
currently pending (Xxxxxxx).
7. The leases in the North Sand Wash Area are subject to a Letter of Intent
dated December 14, 2004, whereby Cedar Ridge LLC offers to purchase from
Infinity Oil & Gas of Wyoming, Inc. all of its leasehold interest in a
portion of the North Sand Wash Area.
8. As to the representation that "there are no pending or, to the Knowledge
of the Company, threatened . . . litigation or other proceedings affecting
the Real Property . . ." there is a letter dated July 28, 2004, from the
Bureau of Land Management making inquiry of Infinity Oil & Gas of Wyoming,
Inc. to verify volumes of oil and gas production from the Riley Ridge Unit
in Sublette County, Wyoming. Infinity Oil & Gas of Wyoming, Inc. has
responded to the inquiry but has received no further word.
28
SCHEDULE 4(d)
USE OF PROCEEDS
(i) Payment of expenses and commissions, totaling approximately $2,500,000.
(ii) Repayment of the LaSalle facility, in the amount of $3,853,502.38, plus
the per diem amount set forth in the payoff letter delivered in connection
therewith, if applicable.
(iii) Repayment of the US Bank Facility, in the amount of $5,037,285.67, plus
the per diem amount set forth in the payoff letter delivered in connection
therewith, if applicable.
(iv) Redemption of the 8% Subordinated Convertible Notes due 2006, in the
principal amount of up to $2,493,000, exclusive of interest and premiums.
29
SCHEDULE 4(u)
REPAYMENT OF CERTAIN INDEBTEDNESS
DESCRIPTION CURRENT BALANCE
-------------------------------------------------------------------------------- ---------------
1. HOME NATIONAL BANK - BARTLESVILLE FACILITY $ 298,927.14
2. HOME BANK AND TRUST - XXXXXX FACILITY $ 21,227.75
3. FORD MOTOR CREDIT 2004 Ford F-250 VIN 0XXXX00X00XX00000 $ 29,116.58
4. FORD MOTOR CREDIT 2002 Ford F250 VIN- 0XXXX00X00XX00000 $ 22,865.19
5. FORD MOTOR CREDIT 2004 Ford F150 CC VIN- 0XXXX00000XX00000 $ 17,259.26
6. DAIMLER CHRYSLER CREDIT CORP 2004 Dodge 2500 VIN- 0X0XX00X00X000000 $ 31,263.41
7. BANK OF COMMERCE - GILLETTE FACILITY $ 124,743.44
Descriptions of each item on this schedule are incorporated by reference from
Schedule 3(aa).
30
