FINANCING AGREEMENT
THIS AGREEMENT dated for reference January 12, 2001, is among Wet Coast
Management Corp., a British Columbia company ("Wet Coast"), of 0000 Xxxxxxxx
Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0, and fax (000) 000-0000;
and San Xxxxxxx Resources Inc., a Nevada company ("San Xxxxxxx"), of 1305 - 0000
Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0, and fax (604)
000-0000. WHEREAS Wet Coast has agreed to finance San Xxxxxxx for the
development of its business, FOR VALUABLE CONSIDERATION, the receipt and
sufficiency of which are acknowledged, and the following mutual promises, the
parties agree that:
INTERPRETATION
1. The definitions in the recitals are part of this agreement.
2. In this agreement:
a. "Closing" means 5:00 pm Vancouver time on February 12, 2001.
b. "Consulting Agreement" means the consulting agreement attached
as exhibit A.
c. "Financing" means $7.2 million to be raised through the
assistance of Wet Coast by the issuance of new shares of the
common stock of San Xxxxxxx at $3.00 per share under available
registration exemptions.
d. "Merger Agreement" means the merger agreement among San
Xxxxxxx, Pannonian Energy Inc. and a wholly owned subsidiary
of San Xxxxxxx attached as exhibit B.
e. "Riverbend Project" means the project of the same name
consisting of leased acreage in the Uintah Basin area of Utah
and owned by Pannonian Energy, Inc., including but not limited
to that acreage described in the acquisition agreement dated
December 18, 2001 between Pannonian Energy Inc. and Xxxxxxxx
Petroleum Company.
f. "Term" means the twelve months following the Closing.
g. "$" means United States dollars unless otherwise indicated.
THE TRANSACTION
The Financing
3. Wet Coast will arrange the Financing by delivering to San Xxxxxxx
subscriptions for the appropriate number of shares of San Joaquin's
common stock from non-US or accredited US investors together with the
cash proceeds in good same-day funds as set out in Table 1.
Table 1
Financing Schedule
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Subscription
Date amount
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On closing $1,200,000
1 May 2001 1,500,000
1 August 2001 4,500,000
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$7,200,000
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4. San Xxxxxxx, as soon as practical after it receives the subscriptions
and cash proceeds, will issue to the subscribers through its transfer
agent the number of shares of its common stock as set out in Table 2
under available registration exemptions as provided by the United
States securities law. Wet Coast will provide all information to San
Xxxxxxx, including tax identification number, if applicable, ownership
registration, and address information to enable the issuance of these
shares.
Table 2
Subscription Shares
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Subscription Number of shares @
amount $3 per share
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$1,200,000 400,000
1,500,000 500,000
4,500,000 1,500,000
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$7,500,000 2,400,000
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Additional Financing
5. Wet Coast will introduce San Xxxxxxx to institutional investors,
investment bankers, lending institutions and high net worth individual
investors and will assist in negotiating the terms of debt, equity or
other additional financing required by San Xxxxxxx.
6. San Xxxxxxx will give Wet Coast the right of first refusal during the
Term to find any additional financing needed by San Xxxxxxx by giving
Wet Coast a written notice of the terms and conditions of its
requirements and its proposed use of proceeds at least two months
before it requires the financing. Wet Coast must notify San Xxxxxxx in
writing within one month of its receipt of San Joaquin's notice whether
it intends to exercise its right to arrange the financing. This right
of first refusal ends if Wet Coast refuses to arrange a specific
financing.
7. San Xxxxxxx will pay Wet Coast a finder's fee equal to 2% of the gross
proceeds of any additional financing found by Wet Coast and will
reimburse Wet Coast for its expenses incurred in finding the additional
financing. In this regard, Wet Coast represents that it has a legal
status under United States securities laws that will enable it to be
paid this finder's fee.
CONDITIONS PRECEDENT
8. The following conditions must be satisfied before any of the Financing
is advanced as set out in Table 1:
a. The representations and warranties of San Xxxxxxx in this
agreement must be true and correct in all material respects.
b. The Merger Agreement must be executed and delivered by all
necessary parties.
c. San Xxxxxxx must have signed the Consulting Agreement and must
not be in default of any terms or conditions under the
Consulting Agreement.
POSITIVE COVENANTS
San Xxxxxxx
9. San Xxxxxxx will immediately begin preparing the pro forma financial
statements as of December 31, 2000 giving effect to the merger
contemplated under the Merger Agreement.
10. If it has not already done so, San Xxxxxxx will take the steps that are
necessary to
a. have its shares approved for quotation on a quotation medium
or listed for trading on a stock exchange, and
b. be listed in the Standard & Poor's Corporation Records with
super accelerated coverage.
11. Wet Coast or an affiliate of Wet Coast will assist San Xxxxxxx with the
endeavors described in paragraph 10 and make available to San Xxxxxxx
the experience and contacts of Wet Coast to enable San Xxxxxxx to
complete these tasks. In this regard, San Xxxxxxx authorizes Wet Coast
or an affiliate to act as agent for San Xxxxxxx in completing these
endeavors. San Xxxxxxx will bear all of the costs incurred by Wet Coast
acting as agent under this paragraph.
12. During the Term, San Xxxxxxx, its subsidiaries, and its successors by
merger or other corporate reorganization, will
a. maintain their corporate existence,
b. carry on their business in a proper and businesslike manner in
accordance with good business practices, prudently manage
their cash resources, and keep proper books of account in
accordance with generally accepted accounting principles,
c. at the end of each month, deliver to Wet Coast a written
report describing any exploration results or material
modifications on the Riverbend Project, provided that Wet
Coast is not entitled to nonpublic material information about
the operations at the Riverbend Project, and San Xxxxxxx may
delay reporting to Wet Coast if necessary to allow for initial
press release or SEC filing preparation.,
d. by the twentieth day of each month, deliver to Wet Coast their
unaudited consolidated financial statements for the preceding
month consisting of a balance sheet, statement of operations,
statement of changes in shareholders' equity, statement of
cash flow, and notes to the financial statements, all prepared
in accordance with accounting principals generally accepted
for public companies engaged in the natural gas business in
the United States,
e. deliver to Wet Coast any other information that Wet Coast
reasonably requests,
f. use, calculated pro rata against the total Financing,
i. a minimum of $5 million of the Financing only to pay
any costs incurred in the development and exploration
of the Riverbend Project, or to acquire more land to
be included in the Riverbend Project, and
ii. the remainder of the Financing for other corporate
purposes approved by San Joaquin's board of directors
in consultation with Wet Coast, it being understood
that substantially all of the Financing is intended
by both parties to advance the market value and
success of San Xxxxxxx, and
g. file with the Securities & Exchange Commission any document
that is necessary to maintain its status as a reporting issuer
under United States securities laws.
13. San Xxxxxxx will file the disclosure documents with the Securities &
Exchange Commission that are necessary to register certain shares as
set out in Table 3 but will not permit any other restricted stock to be
registered during the Term without the written consent of Wet Coast.
Table 3
Registration Filings
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Shares to be registered When registration documents to
be filed
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The restricted shares of San As soon as possible after the
Xxxxxxx that are outstanding Closing, recognizing that the
on the Closing (approximately Pannonian acquisition is a
5 million shares) material and significant
transaction for San Xxxxxxx,
and the Securities & Exchange
Commission may require a delay
in the effectiveness of any
such registration statement
pending the completion of the
merger and the filing of pro
forma financial information on
Form 8-K.
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The shares that are issued in As soon as possible after the
accordance with the schedule shares are issued, recognizing
set out in Table 2 (no more the same caveat set forth
than 2.4 million shares) above.
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The shares that are issued At San Joaquin's discretion
under the Merger Agreement to but not before registration
the shareholders of Pannonian statements to register the
Energy Inc. who paid $1.80 per shares described above are
share for 800,000 Pannonian filed.
shares (approximately 1.4
million San Xxxxxxx shares)
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NEGATIVE COVENANTS
14. Until the earlier of the end of the Term, and the day on which San
Xxxxxxx completes another financing, if it completes one during the
Term,, San Xxxxxxx will not, without the written consent of Wet Coast,
a. issue or authorize the issuance of any of its shares or other
securities except those authorized by this agreement,
b. authorize any changes to its charter documents unless the
changes are required to implement this agreement,
c. cause any of its assets to be encumbered, sold or transferred,
x. xxxxx stock options to its directors, officers and employees
that may be exercised during the Term, or
e. file a registration statement in respect of any shares except
those described in Table 3.
REPRESENTATIONS AND WARRANTIES
Wet Coast
15. Wet Coast represents and warrants that it has the experience and
expertise required to negotiate and finalize the Financing and to
perform the Consulting Agreement and all of its undertakings as
described in this Agreement and in the Consulting Agreement..
San Xxxxxxx
16. San Xxxxxxx represents and warrants that:
a. San Xxxxxxx is a company formed and in good standing under the
laws of Nevada.
b. San Xxxxxxx has the legal capacity and authority to make and
perform this agreement.
c. San Xxxxxxx will have a minimum of $300,000 in cash at
Closing.
d. No person has made a claim against San Xxxxxxx before any
court or regulatory authority, no claims are pending or
threatened, and San Xxxxxxx is not aware of any ground for any
claim that might succeed.
e. This Agreement has been reviewed and approved by the board of
directors of San Xxxxxxx.
OTHER PROVISIONS
17. San Xxxxxxx will pay all reasonable legal and other costs in connection
with the making and performing of this agreement, whether incurred by
Wet Coast or Pannonian or San
Xxxxxxx, out of the proceeds of the Financing, provided, however, that
Wet Coast's costs in this regard may not exceed $30,000 without the
advance and express written approval of San Xxxxxxx.
18. This is the entire agreement among the parties and replaces any earlier
understandings and agreements regarding financing, whether written or
oral.
19. Time is of the essence of this agreement.
20. This agreement is governed by the laws of British Columbia and must be
litigated in the courts of British Columbia.
21. Any notice that must be given or delivered under this agreement must be
in writing and delivered by hand to the address or transmitted by fax
to the fax number given for the party on page 1 and is deemed to have
been received when it is delivered by hand or transmitted by fax unless
the delivery or transmission is made after 4:00 p.m. or on a
non-business day where it is received, in which case it is deemed to
have been delivered or transmitted on the next business day. Any
payments of money must be delivered by hand or wired as instructed in
writing by the receiving party. Any delivery other than a written
notice or money must be made by hand at the receiving party's address.
Any notice sent to San Xxxxxxx must also be sent by fax to Xxxxxx
Xxxxxx for Pannonian Energy, Inc., fax (000-000-0000.
22. San Xxxxxxx may not assign this agreement or any part of it to another
party.
23. Any amendment of this agreement must be in writing and signed by the
parties.
24. This agreement enures to the benefit of and binds the parties and their
respective successors, heirs and permitted assignees.
25. No failure or delay of Wet Coast in exercising any right under this
agreement operates as a waiver of the right. Wet Coast's rights under
this agreement are cumulative and do not preclude Wet Coast from
relying on or enforcing any legal or equitable right or remedy.
26. If any provision of this agreement is, illegal or unenforceable under
any law, the remaining provisions remain legal and enforceable.
This agreement may be signed in counterparts and delivered to the parties by
fax, and the counterparts together are deemed to be one original document.
THE PARTIES' signatures below are evidence of their agreement.
Wet Coast Management Corp. San Xxxxxxx Resources Inc.
_____________________________ _______________________________
Authorized signatory Authorized signatory
Financing Agreement 7/7
This agreement has been reviewed and
approved by Pannonian Energy, Inc.
____________________________________
Authorized signatory