FINAL, DATED APRIL 11, 2005
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[FORM OF]
SUBSCRIPTION AND REGISTRATION RIGHTS AGREEMENT
PETROSEARCH ENERGY CORPORATION
PRIVATE OFFERING
OF UP TO 19,230,769 SHARES OF
COMMON STOCK
This Subscription and Registration Rights Agreement (this "Agreement"),
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made as of the date set forth below by and between Petrosearch Energy
Corporation, a Nevada corporation (the "Company"), and the undersigned (the
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"Subscriber"), is intended to set forth certain representations, covenants and
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agreements between the Company and the Subscriber, with respect to the offering
(the "Offering") for sale by the Company of shares (the "Shares") of the
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Company's common stock, par value $0.001 per share (the "Common Stock"), as
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described in the Company's Confidential Private Offering Memorandum dated April
11, 2005 (the "Memorandum"), a copy of which has been delivered to the
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Subscriber. The Shares are being offered by the Company through Sterne, Agee &
Xxxxx, Inc., as the Company's exclusive placement agent (the "Placement Agent").
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1. Subscription. Subject to the terms and conditions hereof, the
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Subscriber hereby irrevocably subscribes for and agrees to purchase from the
Company the number of Shares set forth under the Subscriber's name on the
signature page hereto, at a purchase price of $1.30 per Share (the "Offering
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Price"), and the Company hereby agrees to sell such Shares to the Subscriber at
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the Offering Price, subject to the Company's right to sell to the Subscriber
such lesser number of Shares as the Company may, in its sole discretion, deem
necessary or desirable.
2. Delivery of Subscription Amount; Acceptance of Subscription;
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Delivery of Shares. The Subscriber understands, acknowledges and agrees that
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this subscription is made subject to the following terms and conditions:
(a) Contemporaneously with the completion, execution and delivery of
this Agreement, the Subscriber shall complete, execute and deliver the
Certificate of Accredited Investor Status attached as EXHIBIT B hereto and
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incorporated herein by this reference, and shall submit to the Company payment
in the form of a wire of immediately available United States funds in the amount
equal to the Offering Price multiplied by the number of Shares for which the
Subscriber has subscribed (the "Subscription Amount") in accordance with the
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Subscription Instructions set forth on EXHIBIT A attached hereto and
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incorporated herein by this reference;
(b) The Company is offering for sale up to 19,230,769 Shares, for an
aggregate amount of up to $25,000,000;
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FINAL, DATED APRIL 11, 2005
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(c) The minimum Subscription Amount is $100,000 (76,923 Shares),
provided, however, that the Company reserves the right to accept subscriptions
for less than the minimum Subscription Amount;
(d) Pending the Company's acceptance of the Subscriber's subscription,
in whole or in part, the proceeds representing the Subscription Amount shall be
held in a non-interest-bearing account with Sterling Bank in Houston, Texas (the
"Offering Account"), until a closing occurs with respect to the Shares purchased
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with such proceeds. The Placement Agent and the Company may conduct one or more
closing with respect to the Company's sale of Shares in the Offering (each, a
"Closing"). Closings will occur at such intervals as requested in writing by the
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Company to the Placement Agent. The Placement Agent and the Company shall
exercise joint control over the Offering Account. The Company must obtain
authority from the Placement Agent prior to withdrawing any proceeds from the
Offering Account, which authority shall not be unreasonably withheld;
(e) The Subscriber understands and acknowledges that (i) the Company
has the unconditional right, exercisable in its sole and absolute discretion, to
accept or reject the Subscriber's subscription for Shares, in whole or in part,
(ii) subscriptions need not be accepted by the Company in the order received by
the Company, (iii) all subscriptions are subject to prior sale, withdrawal,
modification or cancellation of the Offering by the Company, (iv) no
subscription shall be valid unless and until accepted by the Company, (v) the
Subscriber's subscription for Shares shall be deemed to be accepted by the
Company only when this Agreement is signed by an authorized executive officer of
the Company, on behalf of the Company, and (vi) notwithstanding anything in this
Agreement to the contrary, the Company shall have no obligation to issue Shares
to any person to whom the issuance of Shares would constitute a violation of the
Securities Act of 1933, as amended (the "Securities Act"), or any state
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securities laws;
(f) The proceeds representing the Subscription Amount (or, in the case
of rejection of a portion of the Subscriber's subscription, the part of the
proceeds relating to such rejected portion) will be returned promptly to the
Subscriber, without interest, if the Subscriber's subscription is rejected in
whole or in part or if the Offering is withdrawn or canceled;
(g) The Subscriber's subscription is irrevocable; accordingly, the
Subscriber does not have the right to cancel the Subscriber's subscription or
withdraw the proceeds representing the Subscription Amount from the Offering
Account at any time during the Offering;
(h) The Offering will continue until the first to occur of (i) the sale
of all of the Shares, (ii) the date on which the Company, in its sole
discretion, terminates the Offering, or (iii) 5:00 p.m., Central Standard Time,
on April 29, 2005; provided, that the Company may extend the Offering for up to
sixty (60) days without notice to the subscribers;
(i) The Offering is being conducted on a "best efforts" basis, and the
Company is not required to accept any minimum amount of subscriptions before
conducting a Closing;
(j) Certificates representing the Shares purchased in a Closing will be
issued in the name of each purchaser therein as soon as reasonable possible
following each such Closing; and
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(k) In consideration of the Placement Agent's services rendered to the
Company as its exclusive placement agent in connection with the Offering, the
Company will pay the Placement Agent a fee equal to six percent (6.0%) of the
gross proceeds received from time to time by the Company in connection with the
sale of Shares in the Offering, and will reimburse the Placement Agent for its
out-of-pocket expenses incurred from time to time in connection therewith.
3. Registration Rights.
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(a) The Subscriber acknowledges that it is acquiring the Shares for its
own account and for the purpose of investment and not with a view to any
distribution or resale thereof within the meaning of the Securities Act. The
Subscriber further agrees that it will not sell, assign or transfer the Shares
at any time in violation of the Securities Act and acknowledges that, in taking
unregistered securities, it must continue to bear the economic risk of its
investment for an indefinite period of time because of the fact that the Shares
have not been registered under the Securities Act, and further realizes that the
Shares cannot be sold unless subsequently registered under the Securities Act or
an exemption from such registration is available. The Subscriber also
acknowledges that appropriate legends reflecting the status of the Shares under
the Securities Act may be placed on the face of the certificates for such Shares
at the time of their transfer and delivery to the holder thereof.
(b) The Shares may not be transferred except in a transaction that is
in compliance with the Securities Act. Except as provided hereafter with respect
to registration of the Shares, it shall be a condition to any such transfer that
the Company shall be furnished with an opinion of counsel to the holder of such
Shares, reasonably satisfactory to the Company, to the effect that the proposed
transfer would be in compliance with the Securities Act.
(c) Within 45 days following the earlier to occur of (i) a Closing with
respect to the sale of all of the Shares in the Offering or (ii) the termination
of the Offering following a Closing with respect to the sale of less than all of
the Shares, as reflected in a written notice given by the Company to the
Placement Agent, the Company shall prepare and file with the Securities and
Exchange Commission (the "SEC") a registration statement on Form SB-1, Form SB-2
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or Form S-1, whichever is applicable (the "Registration Statement"), and such
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other documents as may be necessary in the opinion of counsel for the Company,
and use its best efforts to have the Registration Statement declared effective
by the SEC as soon as reasonably practicable after such filing (including,
without limitation, using its best efforts to respond to any of the SEC staff's
comments within 15 days following the Company's receipt thereof) in order to
comply with the provisions of the Securities Act, so as to permit the registered
resale of the Shares for a period of two (2) years following the last sale of
Shares in the Offering by each and every holder of Shares, except for those
holders who designate on the signature page hereto that they do not wish to have
their Shares included in the Registration Statement. The Subscriber acknowledges
that certain shares of Common Stock sold in past private placements, as well as
the shares of Common Stock issuable upon exercise of the Company's outstanding
warrants, will be included in the Registration Statement. The Shares that are
registered for resale under the Registration Statement are referred to herein as
the "Offering Shares," and the subscribers who are eligible to sell their
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Offering Shares under the Registration Statement, together with their respective
affiliates, are hereafter referred to as "Offering Holders." The Company will
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include in the Registration Statement (i) the information required under the
Securities Act to be so included
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FINAL, DATED APRIL 11, 2005
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concerning the Offering Holders, as provided by the Offering Holders on the
signature pages to this Agreement and the other Subscription and Registration
Rights Agreements entered into in connection with the Offering, including any
changes in such information that may be provided by the Offering Holders in
writing to the Company from time to time, and (ii) a section entitled "Plan of
Distribution," substantially in the form of EXHIBIT C attached hereto and
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incorporated herein by this reference, that describes the various procedures
that may be used by the Offering Holders in the sale of their Offering Shares.
(d) In the event that the Company does not file the Registration
Statement to register the Offering Shares with the SEC within the time period
specified in Section 3(c) above, the Company will be required to pay a penalty
to each Offering Holder equal to one percent (1%) of such Offering Holder's
purchase price ($1.30 per Share) for the Offering Shares, and an additional one
percent (1%) for each additional 45-day period during which the Registration
Statement is not filed.
(e) Notwithstanding the foregoing provisions of this Section 3, the
Company may voluntarily suspend the effectiveness of the Registration Statement
for a limited time, which in no event shall be longer than 60 days in any
three-month period and no longer than 120 days in any twelve-month period, if
the Company has been advised in writing by counsel or underwriters to the
Company that the offering of any Offering Shares pursuant to the Registration
Statement would materially adversely affect, or would be improper in view of (or
improper without disclosure in a prospectus), a proposed financing,
reorganization, recapitalization, merger, consolidation, or similar transaction
involving the Company. The Company shall notify all Offering Holders to such
effect, and, upon receipt of such notice, each such Offering Holder shall
immediately discontinue any sales of Offering Shares pursuant to the
Registration Statement until such Offering Holder has received copies of a
supplemented or amended prospectus or until such Offering Holder is advised in
writing by the Company that the then current prospectus may be used and has
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in such prospectus.
(f) If any event occurs that would cause the Registration Statement to
contain a material misstatement or omission or not to be effective and usable
during the period that such Registration Statement is required to be effective
and usable, the Company shall promptly notify the Offering Holders of such event
and, if requested, the Offering Holders shall immediately cease making offers of
Offering Shares and return all prospectuses to the Company. The Company shall
promptly file an amendment to the Registration Statement to correct such
misstatement or omission and use its reasonable best efforts to cause such
amendment to be declared effective as soon as practicable thereafter. The
Company shall promptly provide the Offering Holders with revised prospectuses
and, following receipt of the revised prospectuses, the Offering Holders shall
be free to resume making offers of the Offering Shares.
(g) Notwithstanding any provision contained herein to the contrary, the
Company's obligation to include, or continue to include, Offering Shares in the
Registration Statement pursuant to this Section 3 shall terminate to the extent
such Offering Shares are eligible for resale under Rule 144(k) promulgated under
the Securities Act.
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(h) If and whenever the Company is required by the provisions of this
Agreement to use its best efforts to effect the registration of the Offering
Shares under the Securities Act for the account of an Offering Holder, the
Company will, as promptly as possible:
(i) prepare and file with the SEC such amendments and supplements
to the Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective
and to comply with the requirements of the Securities Act and the rules and
regulations promulgated by the SEC thereunder relating to the sale or other
disposition of the securities covered by such Registration Statement; and
(ii) furnish to each Offering Holder such numbers of copies of a
prospectus, including a preliminary prospectus, complying with the
requirements of the Securities Act, and such other documents as such
Offering Holder may reasonably request in order to facilitate the public
sale or other disposition of the Offering Shares owned by such Offering
Holder, but such Offering Holder shall not be entitled to use any selling
materials other than a prospectus and such other materials as may be
approved by the Company, which approval will not be unreasonably withheld.
(i) Except as provided below in this Section 3, the expenses incurred
by the Company in connection with action taken by the Company to comply with
this Section 3, including, without limitation, all registration and filing fees,
printing and delivery expenses, accounting fees, fees and disbursements of
counsel to the Company, consultant and expert fees, premiums for liability
insurance, if the Company chooses to obtain such insurance, obtained in
connection with the Registration Statement filed to effect such compliance and
all expenses, including counsel fees, of complying with any state securities
laws, shall be paid by the Company. All fees and disbursements of any counsel,
experts, or consultants employed by any Offering Holder shall be borne by such
Offering Holder. The Company shall not be obligated in any way in connection
with any registration pursuant to this Section 3 for any selling commissions or
discounts payable by any Offering Holder to any underwriter or broker of
securities to be sold by such Offering Holder. The Subscriber agrees that any
such selling commissions or discounts shall be borne by such Offering Holder.
(j) In the event of any registration of Shares pursuant to this Section
3, the Company will indemnify and hold harmless each Offering Holder, its
officers, directors, attorneys, partners, agents, employees and consultants and
each underwriter of such securities, and any person who controls such Offering
Holder or underwriter within the meaning of Section 15 of the Securities Act
(collectively, the "Indemnified Parties"), against all claims, actions, losses,
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damages, liabilities and expenses, joint or several, to which any of such
Indemnified Parties may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise out of or
are based upon any actual or alleged untrue statement of any material fact
contained in the Registration Statement under which such securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the actual or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and will reimburse each of such Indemnified Parties for any legal
and any other expenses
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FINAL, DATED APRIL 11, 2005
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reasonably incurred by such Indemnified Party in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage, liability or action arises directly out of or is
based primarily upon an untrue statement or omission of a material fact made in
said Registration Statement, said preliminary prospectus or said prospectus, or
said amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Offering Holder or such underwriter
specifically for use in the preparation thereof; and provided further, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability or action arises directly out of or is based
primarily upon an untrue statement or omission of a material fact made in any
preliminary prospectus or final prospectus if (i) such Offering Holder failed to
send or deliver the copy of the final prospectus or prospectus supplement which
such Offering Holder shall have been previously provided by the Company, with or
prior to the delivery of written confirmation of the sale of the Offering
Shares, and (ii) the final prospectus or prospectus supplement would have
corrected such untrue statement or omission.
(k) At any time when a prospectus relating to the Offering is required
to be delivered under the Securities Act, the Company will notify the Offering
Holder of the happening of any event, upon the notification or awareness of such
event by an executive officer of the Company, as a result of which the
prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing.
(l) In the event of any registration of Shares under the Securities Act
pursuant to this Section 3, the Subscriber agrees to indemnify and hold harmless
the Company, its officers, directors, attorneys, partners, agents, employees and
consultants and any person who controls the Company within the meaning of
Section 15 of the Securities Act (collectively, the "Indemnified Persons"),
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against any losses, claims, damages, liabilities, or actions, joint or several,
to which any of such Indemnified Persons may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages, liabilities, or
actions arise out of or are based upon any actual or alleged untrue statement of
any material fact contained in the Registration Statement under which such
Shares were registered under the Securities Act, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereto, or
arise out of or are based upon the actual or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent and only to the extent that
any such loss, claim, damage, liability, or action arises out of or is based
upon an untrue statement or omission of a material fact made in said
Registration Statement, said preliminary prospectus or said prospectus or said
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by the Subscriber or any affiliate (as
defined in the Securities Act) of the Subscriber specifically for use in the
preparation thereof.
(m) Any party entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such
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FINAL, DATED APRIL 11, 2005
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indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (which consent may not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(n) With a view to making available to the Offering Holders the
benefits of Rule 144 promulgated under the Securities Act, the Company agrees
that it will use its best efforts to maintain registration of its Common Stock
under Section 12 or 15 of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act"), following the effectiveness of the Registration Statement
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and to file with the SEC in a timely manner all reports and other documents
required to be filed by an issuer of securities registered under the Exchange
Act so as to maintain the availability of Rule 144. Upon the request of any
record owner, the Company will deliver to such owner a written statement as to
whether it has complied with the reporting requirements of Rule 144.
4. Representations, Warranties and Covenants of the Subscriber. The
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Subscriber hereby represents and warrants to, and covenants with, each of the
Company and the Placement Agent as follows:
(a) The Subscriber is acquiring the Shares for its own account, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities
Act, and applicable state securities laws. The Subscriber understands that (A)
the Shares (1) have not been registered under the Securities Act or any state
securities laws, (2) will be issued in reliance upon an exemption from the
registration and prospectus delivery requirements of the Securities Act pursuant
to Section 4(2) and/or Regulation D thereof, and (3) will be issued in reliance
upon exemptions from the registration and prospectus delivery requirements of
state securities laws which relate to private offerings, and (B) the Subscriber
must therefore bear the economic risk of such investment indefinitely unless a
subsequent disposition thereof is registered under the Securities Act and
applicable state securities laws or is exempt therefrom. The Subscriber further
understands that such exemptions depend upon, among other things, the bona fide
nature of the investment intent of the Subscriber expressed herein. Pursuant to
the foregoing, the Subscriber acknowledges that the certificates representing
the Shares acquired by the Subscriber shall bear a restrictive legend
substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO RESTRICTIONS ON TRANSFER UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF UNLESS (I) REGISTERED UNDER THE
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APPLICABLE SECURITIES LAWS OR (II) AN OPINION OF COUNSEL,
WHICH OPINION AND COUNSEL ARE BOTH REASONABLY SATISFACTORY
TO THE COMPANY, HAS BEEN DELIVERED TO THE COMPANY AND SUCH
OPINION STATES THAT THE SHARES MAY BE TRANSFERRED WITHOUT
SUCH REGISTRATION."
(b) The Subscriber has knowledge, skill and experience in financial,
business and investment matters relating to an investment of this type and is
capable of evaluating the merits and risks of such investment and protecting the
Subscriber's interest in connection with the acquisition of the Shares. The
Subscriber understands that the acquisition of the Shares is a speculative
investment and involves substantial risks and that the Subscriber could lose the
Subscriber's entire investment in the Shares. Further, the Subscriber has
carefully read and considered the matters set forth under the section entitled
"Risk Factors" in each of the Company's Preliminary Confidential Private
Offering Memorandum, dated March 29, 2005 (the "Preliminary Memorandum"), and
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the Memorandum, and has taken full cognizance of and understands all of the
risks related to the purchase of the Shares. To the extent deemed necessary by
the Subscriber, the Subscriber has retained, at its own expense, and relied
upon, appropriate professional advice regarding the investment, tax and legal
merits and consequences of purchasing and owning the Shares. The Subscriber has
the ability to bear the economic risks of the Subscriber's investment in the
Company, including a complete loss of the investment, and the Subscriber has no
need for liquidity in such investment.
(c) The Subscriber has been furnished by the Company all information
(or provided access to all information) regarding the business and financial
condition of the Company, its expected plans for future business activities, the
attributes of the Shares and the merits and risks of an investment in the Shares
which the Subscriber has requested or otherwise believes that the Subscriber
needs to evaluate the investment in the Company.
(d) The Subscriber is in receipt of and has carefully read and
understands the following items:
- The Preliminary Memorandum; and
- The Memorandum.
(e) In making the Subscriber's investment decision, the Subscriber is
relying solely on investigations made by the Subscriber and the Subscriber's
representative(s), if any. The offer to sell the Shares was communicated to the
Subscriber in such a manner that the Subscriber was able to ask questions of and
receive answers from the management of the Company concerning the terms and
conditions of the proposed transaction. At no time was the Subscriber presented
with or solicited by or through any advertisement, article, leaflet, public
promotional meeting, notice or other communication published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or meeting or any other form of general or public advertising or
solicitation.
(f) The Subscriber acknowledges that the Subscriber has been advised
that:
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FINAL, DATED APRIL 11, 2005
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(i) The Shares have not been approved or disapproved by the SEC or
any state securities commission nor has the SEC or any state securities
commission passed upon the accuracy or adequacy of any representations by
the Company. Any representation to the contrary is a criminal offense.
(ii) In making an investment decision, the Subscriber must rely on
its own examination of the Company and the terms of the Offering, including
the merits and risks involved. The Shares have not been recommended by any
federal or state securities commission or other regulatory authority.
Furthermore, the foregoing authorities have not confirmed the accuracy or
determined the adequacy of any representation by the Company. Any
representation to the contrary is a criminal offense.
(iii) The Shares will be "restricted securities" within the
meaning of Rule 144 under the Securities Act, are subject to restrictions
on transferability and resale and may not be transferred or resold except
as permitted under the Securities Act and applicable state securities laws,
pursuant to registration or exemption therefrom. The Subscriber is aware
that the Subscriber may be required to bear the financial risks of this
investment for an indefinite period of time.
(g) The Subscriber acknowledges and is aware that there has never been
any representation, guarantee or warranty made by the Company or any officer,
director, employee or agent or representative of the Company, expressly or by
implication, as to (i) the approximate or exact length of time that the
Subscriber will be required to remain an owner of the Shares; (ii) the
percentage of profit and/or amount of or type of consideration, profit or loss
to be realized, if any, as a result of this investment; or (iii) that the
limited past performance (if any) or experience on the part of the Company, or
any future expectations regarding the Company's business or operations, will in
any way indicate the predictable results of the ownership of Shares or of the
overall financial performance of the Company.
(h) The Subscriber agrees to furnish the Company such other information
as the Company may reasonably request in order to verify the accuracy of the
information contained herein and agrees to notify the Company immediately of any
material change in the information provided herein that occurs prior to the
Company's acceptance of this Agreement.
(i) The Subscriber further represents and warrants that the Subscriber
is an "accredited investor" within the meaning of Rule 501 of Regulation D under
the Securities Act, and the Subscriber has executed the Certificate of
Accredited Investor Status, attached hereto as EXHIBIT B and incorporated herein
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by this reference.
(j) If the Subscriber is a natural person, the Subscriber has reached
the age of majority in the state in which the Subscriber resides, has adequate
means of providing for the Subscriber's current financial needs and
contingencies, is able to bear the substantial economic risks of an investment
in the Shares for an indefinite period of time, has no need for liquidity in
such investment and, at the present time, could afford a complete loss of such
investment.
(k) If this Agreement is executed and delivered on behalf of a
partnership, corporation, trust, estate or other entity (an "Entity"): (i) such
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Entity has the full legal right and
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FINAL, DATED APRIL 11, 2005
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power and all authority and approval required (a) to execute and deliver, or
authorize execution and delivery of, this Agreement and all other instruments
executed and delivered by or on behalf of such Entity in connection with the
purchase of the Shares, (b) to delegate authority pursuant to power of attorney
and (c) to purchase and hold such Shares, (ii) the signature of the party
signing on behalf of such Entity is binding upon such Entity; and (iii) such
Entity has not been formed for the specific purpose of acquiring such Shares,
unless each beneficial owner of such Entity is qualified as an accredited
investor within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act and has submitted information substantiating such individual
qualification.
(l) If the Subscriber is not a United States person, the Subscriber
hereby represents that it has satisfied itself as to the full observance of the
laws of its jurisdiction in connection with any invitation to subscribe for the
Shares or any use of this Agreement, including, without limitation, (i) the
legal requirements within its jurisdiction for the purchase of the Shares, (ii)
any foreign exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained, and (iv) the income
tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale or transfer of the Shares. The Subscriber represents
and warrants that the Subscriber's subscription and payment for, and the
Subscriber's continued beneficial ownership of, the Shares will not violate any
applicable securities or other laws of the Subscriber's jurisdiction.
(m) If the Subscriber is a retirement plan or is investing on behalf of
a retirement plan, the Subscriber acknowledges that investment in the Common
Stock poses additional risks, including, without limitation, the inability to
use losses generated by an investment in the Common Stock to offset taxable
income.
(n) The Subscriber represents and warrants that it is not a
broker-dealer or an affiliate of a broker-dealer, except as follows:
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.
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If the Subscriber is a broker-dealer, the Subscriber acknowledges that the
Subscriber will be deemed to be an underwriter with respect to the resale of its
Shares. If the Subscriber is an affiliate of a broker-dealer, the Subscriber
acknowledges that the Subscriber will be deemed to be an underwriter with
respect to the resale of its Shares to the extent that such Shares are sold
through its affiliated broker-dealer. To the extent that the Subscriber is
affiliated in any manner with a broker-dealer, the Subscriber further represents
and warrants that it is purchasing the Shares in the ordinary course of its
business and that as of the date hereof it has no agreements or understandings,
directly or indirectly, with any person to distribute the Shares.
The foregoing representations and warranties and undertakings are made by
the Subscriber with the intent that they be relied upon by the Company and the
Placement Agent in determining the Subscriber's suitability as an investor, and
the Subscriber hereby agrees that such representations and warranties shall
survive the Subscriber's purchase of the Shares.
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FINAL, DATED APRIL 11, 2005
---------------------------
5. Representations and Warranties of the Company. The Company hereby
-----------------------------------------------
represents and warrants to the Subscriber as follows:
(a) The Company is duly incorporated, validly existing and in good
standing under the laws of the State of Nevada, and is duly qualified to do
business as a foreign corporation in all jurisdictions in which the failure to
be so qualified would materially and adversely affect the business or financial
condition, properties or operations of the Company.
(b) The Company has duly authorized the issuance and sale of the Shares
in accordance with the terms of this Agreement (as described herein) by all
requisite corporate action, including the authorization of the Company's Board
of Directors of the issuance and sale of the Shares in accordance herewith, and
the execution, delivery and performance of any other agreements and instruments
executed in connection herewith. This Agreement constitutes a valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained
herein may be limited by applicable federal or state securities laws.
(c) The Preliminary Memorandum, as of its date, did 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
the light of the circumstances under which they were made, not misleading.
(d) The Memorandum, as of its date and as of the date of this
Agreement, does 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 the light of the circumstances under which they
were made, not misleading.
The representations and warranties of the Company contained herein and in
any other writing delivered in connection with the transactions contemplated
hereby shall be true and correct in all respects on and as of the date of the
Closing of any sale of Shares to the Subscriber if made on and as of such date
and shall survive the execution and delivery of this Agreement and the purchase
of Shares.
6. Understandings and Acknowledgements. The Subscriber understands,
-------------------------------------
acknowledges and agrees with the Company as follows:
(a) Neither the execution of this Agreement nor the solicitation of the
investment contemplated hereby shall create any obligation of the Company to
accept any subscription or complete the Offering.
(b) Except as required by law, the Subscriber is not entitled to
cancel, terminate or revoke this Agreement or any agreements of the Subscriber
hereunder and that this Agreement and such other agreements shall survive the
death or disability of the Subscriber and shall be
11
FINAL, DATED APRIL 11, 2005
---------------------------
binding upon and inure to the benefit of the parties and their heirs, executors,
administrators, successors, legal representatives and permitted assigns. If the
Subscriber is more than one person, the obligations of the Subscriber hereunder
shall be joint and several and the agreements, representations, warranties and
acknowledgments herein contained shall be deemed to be made by and be binding
upon each such person and his/her heirs, executors, administrators, successors,
legal representatives and permitted assigns.
(c) No federal or state agency has made any finding or determination as
to the accuracy or adequacy of the Preliminary Memorandum or the Memorandum or
as to the suitability of the Offering for investment nor any recommendation or
endorsement of the Shares.
(d) The Offering is intended to be exempt from registration under the
Securities Act by virtue of Section 4(2) of the Securities Act and the
provisions of Regulation D thereunder, which is in part dependent upon the
truth, completeness and accuracy of the statements made by the Subscriber
herein.
(e) There can be no assurance that the Subscriber will be able to sell
or dispose of the Shares. It is understood that in order not to jeopardize the
Offering's exempt status under Section 4(2) of the Securities Act and Regulation
D, any transferee will, at a minimum, be required to fulfill the investor
suitability requirements thereunder.
(f) The Subscriber acknowledges that the information contained in each
of the Preliminary Memorandum and the Memorandum is confidential and non-public
and agrees that all such information shall be kept in confidence by the
Subscriber and neither used for the Subscriber's personal benefit (other than in
connection with this subscription) nor disclosed to any third party for any
reason; provided, however, that this confidentiality obligation shall not apply
to any such information that (i) is part of the public knowledge or literature,
(ii) becomes part of the public knowledge or literature (except as a result of a
breach of this provision) or (iii) is received from third parties (except third
parties who disclose such information in violation of any confidentiality
agreements or obligations, including, without limitation, any subscription
agreement entered into with the Company). In addition, the Subscriber may
disclose any information as may be required by law or applicable legal process;
provided, however, to the extent permitted by law or applicable legal process,
the Subscriber shall provide the Company at least five business days prior
written notice before making any such disclosure.
(g) The representations and warranties of the Subscriber contained
herein and in any other writing delivered in connection with the transactions
contemplated hereby shall be true and correct in all respects on and as of the
date of the Closing of any sale of Shares to the Subscriber if made on and as of
such date and shall survive the execution and delivery of this Agreement and the
purchase of Shares.
7. Survival; Indemnification. All representations, warranties and
--------------------------
covenants contained in this Agreement and the indemnification obligations
contained in this Section 7 shall survive (i) the acceptance of this Agreement
by the Company, (ii) changes in the transactions, documents and instruments
described herein which are not material or which are to the benefit of the
Subscriber, and (iii) the death or disability of the Subscriber. The Subscriber
understands the meaning and legal consequences of the representations,
warranties and covenants contained in
12
FINAL, DATED APRIL 11, 2005
---------------------------
this Agreement and that the Company and the Placement Agent have relied upon
such representations, warranties and covenants in determining the Subscriber's
qualification and suitability to purchase the Shares. The Subscriber hereby
agrees to indemnify, defend and hold harmless the Company, the Placement Agent
and their respective officers, directors, employees, agents and controlling
persons, from and against any and all losses, claims, damages, liabilities,
expenses (including attorneys' fees and disburse-ments), judgments or amounts
paid in settlement of actions arising out of or resulting from the untruth of
any representation of the Subscriber herein or the breach of any warranty or
covenant herein by the Subscriber. Notwithstanding the foregoing, however, no
representation, warranty, covenant or acknowledgment made herein by the
Subscriber shall in any manner be deemed to constitute a waiver of any rights
granted to it under the Securities Act or state securities laws.
8. Notices. All notices and other communications provided for herein
-------
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid, or sent by reputable overnight courier, charges prepaid:
(a) if to the Company, to the following address:
Petrosearch Energy Corporation
0000 Xxxxxxx Xxxxx, Xxxxx 000X
Xxxxxxx, Xxxxx 00000
Attn: President
Telephone: (000) 000-0000
(b) if to the Subscriber, to the address set forth on the signature
page hereto;
or at such other address as any party shall have specified by notice in writing
to the other.
9. Notification of Changes. The Subscriber agrees and covenants to
-------------------------
notify the Company immediately upon the occurrence of any event prior to the
consummation of the Offering that would cause any representation, warranty,
covenant or other statement contained in this Agreement to be false or incorrect
or of any change in any statement made herein occurring prior to the
consummation of the Offering.
10. Assignability; Modification. This Agreement is not assignable by
----------------------------
the Subscriber, and may not be modified, waived or terminated except by an
instrument in writing signed by the party against whom enforcement of such
modification, waiver or termination is sought.
11. Binding Effect. Except as otherwise provided herein, this
---------------
Agreement shall be binding upon and inure to the benefit of the parties and
their respective heirs, executors, administrators, successors, legal
representatives and permitted assigns, and the agreements, representations,
warranties and acknowledgments contained herein shall be deemed to be made by
and be binding upon such heirs, executors, administrators, successors, legal
representatives and permitted assigns.
13
FINAL, DATED APRIL 11, 2005
---------------------------
12. Obligations Irrevocable. The obligations of the Subscriber
------------------------
hereunder shall be irrevocable, except with the written consent of the Company,
until the consummation or termination of the Offering.
13. Entire Agreement. This Agreement constitutes the entire agreement
-----------------
of the Subscriber and the Company relating to the matters contained herein,
superseding all prior contracts or agreements, whether oral or written.
14. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
--------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF THAT WOULD REQUIRE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN TEXAS. ANY ACTION OR PROCEEDING SEEKING TO
ENFORCE ANY PROVISION OF, OR BASED ON ANY RIGHT ARISING OUT OF, THIS AGREEMENT
MAY BE BROUGHT AGAINST EITHER OF THE PARTIES HERETO IN THE COURTS IN THE STATE
OF TEXAS, COUNTY OF XXXXXX, OR, IF IT HAS OR CAN ACQUIRE JURISDICTION, IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS, AND EACH OF THE
PARTIES HERETO CONSENTS TO THE JURISDICTION OF SUCH COURTS (AND THE APPROPRIATE
APPELLATE COURTS) IN ANY SUCH ACTION OR PROCEEDING AND WAIVES ANY OBJECTION TO
VENUE MADE THERIN. PROCESS IN ANY ACTION OR PROCEEDING REFERRED TO IN THE
PRECEDING SENTENCE MAY BE SERVED ON EITHER OF THE PARTIES HERETO ANYWHERE IN THE
WORLD.
15. Severability. If any provision of this Agreement or the
------------
application thereof to the Subscriber or any circumstance shall be held invalid
or unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other subscriptions or circumstances shall not
be affected thereby and shall be enforced to the greatest extent permitted by
law.
16. Headings. The headings in this Agreement are inserted for
--------
convenience and identification only and are not intended to describe, interpret,
define, or limit the scope, extent or intent of this Agreement or any provision
hereof.
17. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
[SIGNATURES TO FOLLOW]
14
FINAL, DATED APRIL 11, 2005
---------------------------
IN WITNESS WHEREOF, the Subscriber has executed this Subscription and
Registration Rights Agreement as of , 2005.
------------ ---
SUBSCRIBER
----------------------------------------
Number of Shares:
-----------------------
Offering Price per Share: $1.30
Subscription Amount: $
----------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Address:
--------------------------------
----------------------------------------
----------------------------------------
Please designate name in which
stock certificate(s) representing Shares
purchased are to be registered.
----------------------------------------
Please designate address for
delivery of stock certificate(s)
representing Shares purchased (if
different from above).
----------------------------------------
----------------------------------------
----------------------------------------
15
FINAL, DATED APRIL 11, 2005
---------------------------
Please designate the individual to
whom all correspondence concerning the
Subscriber's subscription for Shares
should be sent, along with such
individual's requested contact
information.
Name:
-----------------------------------
Address:
--------------------------------
----------------------------------------
Telephone: ( )
---- ---------------------
E-mail:
---------------------------------
The name(s) of the natural person(s) who will have voting and investment power
over the Shares purchased are as follows:
---------------------------------
Please indicate the number of shares of the Company's Common Stock currently
owned by the Subscriber in addition to those being subscribed for in this
Agreement.
----------------------
The Company hereby accepts the foregoing subscription subject to the terms
and conditions hereof as of , 2005.
------------ ---
Petrosearch Energy Corporation,
a Nevada corporation
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
16
FINAL, DATED APRIL 11, 2005
---------------------------
EXHIBIT A
---------
SUBSCRIPTION INSTRUCTIONS
(1) If you are subscribing for the purchase of Shares, please complete,
date and sign the signature page to this Subscription and Registration Rights
Agreement in the applicable spaces. Please signify the amount of Shares for
which you are subscribing by inserting such amount in the space provided for on
the signature page to the Agreement.
(2) Complete, date and sign the accompanying Certificate of Accredited
Investor Status (Exhibit B).
(3) Send all completed documents to:
Petrosearch Energy Corporation
0000 Xxxxxxx Xxxxx, Xxxxx 000X
Xxxxxxx, Xxxxx 00000
Attn: President
Telephone: (000) 000-0000
(4) Fax all completed documents to:
Sterne, Agee & Xxxxx, Inc.
Attn: W. Xxxxx XxXxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
(5) Transmit funds (in an amount equal to the number of Shares for
which you are subscribing multiplied by the Offering Price) via wire transfer to
the Offering Account as follows:
Legal Name: Petrosearch Energy Corporation
Bank Name: Sterling Bank, Houston, Texas
Contact: Xxxxxx Xxxxx
Phone Number: (000) 000-0000
ABA / Routing Number: 000000000
Account Number: 0311006711
Tax ID Number: 00-0000000
ATTENTION SUBSCRIBERS: NO SUBSCRIPTION WILL BE ACCEPTED UNLESS ALL DOCUMENTATION
---------------------
PRESCRIBED HEREIN IS FULLY COMPLETED AND EXECUTED. ANY MATERIALS RECEIVED THAT
ARE INCOMPLETE IN ANY RESPECT WILL BE RETURNED BY THE COMPANY.
FINAL, DATED APRIL 11, 2005
---------------------------
EXHIBIT B
---------
CERTIFICATE OF ACCREDITED INVESTOR STATUS
The undersigned is an "accredited investor," as that term is defined in
Regulation D under the Securities Act of 1933, as amended (the "Securities
----------
Act"). The undersigned has checked the box below indicating the basis on which
---
the undersigned is representing the undersigned's status as an "accredited
investor":
- a bank as defined in Section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or
fiduciary capacity; a broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934, as amended; an insurance company as
defined in Section 2(13) of the Securities Act; an investment company
registered under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of that Act; a small
business investment company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment
Act of 1958; a plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, and such plan has total
assets in excess of $5,000,000; an employee benefit plan within the meaning
of the Employee Retirement Income Security Act of 1974, if the investment
decision is made by a plan fiduciary, as defined in Section 3(21) of such
Act, which is either a bank, savings and loan association, insurance
company, or registered investment adviser, or if the employee benefit plan
has total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are "accredited
investors";
- a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
- an organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership,
not formed for the specific purpose of acquiring the securities offered,
with total assets in excess of $5,000,000;
- a natural person whose individual net worth, or joint net worth with
the undersigned's spouse, at the time of this purchase exceeds $1,000,000;
- a natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with the undersigned's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year;
- a trust with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is
directed by a person who has such
FINAL, DATED APRIL 11, 2005
---------------------------
knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the prospective investment;
- an entity in which all of the equity holders are "accredited
investors" by virtue of their meeting one or more of the above standards;
or
- an individual who is a director or executive officer of Petrosearch
Energy Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Accredited Investor Status effective as of the day of , 2005.
--- ------------
------------------------------
Name of Subscriber
By:
---------------------------
Name:
-------------------------
Title:
------------------------
2
FINAL, DATED APRIL 11, 2005
---------------------------
EXHIBIT C
---------
PLAN OF DISTRIBUTION
As of the date of this prospectus, we have not been advised by the selling
stockholders as to any plan of distribution. Shares owned by the selling
stockholders, or by their partners, pledgees, donees (including charitable
organizations), transferees or other successors in interest, may from time to
time be offered for sale either directly by such individual, or through
underwriters, dealers or agents or on any exchange on which the shares may from
time to time be traded, in the over-the-counter market, or in independently
negotiated transactions or otherwise. The methods by which the shares may be
sold include:
- a block trade (which may involve crosses) in which the broker or
dealer so engaged will attempt to sell the securities as agent but may
position and resell a portion of the block as principal to facilitate
the transaction;
- purchases by a broker or dealer as principal and resale by such
broker or dealer for its own account pursuant to this prospectus;
- exchange distributions and/or secondary distributions;
- sales in the over-the-counter market;
- underwritten transactions;
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers; and
- privately negotiated transactions.
Such transactions may be effected by the selling stockholders at market
prices prevailing at the time of sale or at negotiated prices. The selling
stockholders may effect such transactions by selling the common stock to
underwriters or to or through broker-dealers, and such underwriters or
broker-dealers may receive compensations in the form of discounts or commissions
from the selling stockholders and may receive commissions from the purchasers of
the common stock for whom they may act as agent. The selling stockholders may
agree to indemnify any underwriter, broker-dealer or agent that participates in
transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act. We have agreed to
register the shares for sale under the Securities Act and to indemnify the
selling stockholders, certain representatives of the selling stockholders and
each person who participates as an underwriter in the offering of the shares
against certain civil liabilities, including certain liabilities under the
Securities Act.
In connection with sales of the common stock under this prospectus, the
selling stockholders may enter into hedging transactions with broker-dealers,
who may in turn engage in short sales of the common stock in the course of
hedging the positions they assume. The selling
1
FINAL, DATED APRIL 11, 2005
---------------------------
stockholders also may sell shares of common stock short and deliver them to
close out the short positions, or loan or pledge the shares of common stock to
broker-dealers that in turn may sell them.
The selling stockholders and any underwriters, dealers or agents that
participate in distribution of the shares may be deemed to be underwriters, and
any profit on sale of the shares by them and any discounts, commissions or
concessions received by any underwriter, dealer or agent may be deemed to be
underwriting discounts and commissions under the Securities Act.
There can be no assurances that the selling stockholders will sell any or
all of the shares offered under this prospectus.
2
