PURCHASE AGREEMENT
Exhibit
10.1
THIS
PURCHASE AGREEMENT (“Agreement”)
is
made as of this 30th day of March, 2006 (the “Signing
Date”)
by and
among THE EXPLORATION COMPANY OF DELAWARE, INC., a Delaware corporation (the
“Company”),
and
the several investors named on the signature pages hereto (individually an
“Investor”
and
collectively the “Investors”).
Recitals:
A. The
Company and each Investor are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the “1933
Act”),
and
Rule 506 of Regulation D (“Regulation
D”)
as
promulgated by the United States Securities and Exchange Commission under the
1933 Act.
B. Each
Investor, severally and not jointly, wishes to purchase, and the Company wishes
to sell, upon the terms and conditions stated in this Agreement (the
“Private
Placement”),
that
aggregate number of shares of the Common Stock, par value $0.01 per share,
of
the Company (the “Common
Shares”),
equal
to the quotient obtained by dividing (1) such Investor’s Subscription Amount by
(2) $10.50 (which aggregate amount for all Investors together shall be
collectively referred to herein as the “Shares”).
C. The
Company has engaged X.X. Xxxxxxx & Sons, Inc. and Xxxxxx Xxxxxxx Corp. as
its placement agents (the “Placement
Agents”)
for
the Private Placement on a “best efforts” basis; and
D. Contemporaneously
with the purchase and sale of the Shares, the parties hereto will enter into
a
Registration Rights Agreement, in the form attached hereto as Exhibit
A
(the
“Registration
Rights Agreement”),
pursuant to which, among other things, the Company will agree to provide certain
registration rights under the 1933 Act and applicable state securities
laws.
NOW,
THEREFORE,
in
consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the
parties hereto agree as follows:
1.
Definitions.
In
addition to those terms defined above and elsewhere in this Agreement, for
the
purposes of this Agreement, the following terms shall have the meanings set
forth in this Section
1:
“Affiliate”
means,
with respect to any Person, any other Person which directly or indirectly
Controls, is Controlled by, or is under common Control with, such
Person.
“Business
Day”
means
a
day, other than a Saturday or Sunday, on which banks in New York City are open
for the general transaction of business.
“Common
Shares”
has
the
meaning set forth in the Recitals, and also includes any securities into which
the Common Shares may be reclassified.
“Company’s
Knowledge”
means
the actual knowledge of the officers of the Company, after reasonable due
inquiry and investigation.
“Confidential
Information”
means
trade secrets, confidential information and know-how (including but not limited
to ideas, formulae, compositions, processes, procedures and techniques, research
and development information, computer software (including, but not limited
to,
data, data bases and documentation), performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information).
“Control”
means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
“Intellectual
Property”
means
all of the following: (i) patents and patent applications, patent disclosures
and inventions (whether or not patentable and whether or not reduced to
practice); (ii) trademarks, service marks, trade dress, trade names, corporate
names, logos, slogans and Internet domain names, together with all goodwill
associated with each of the foregoing; (iii) copyrights; (iv) registrations,
applications and renewals for any of the foregoing; and (v) Confidential
Information.
“Material
Adverse Effect”
means
a
material adverse effect on (i) the assets, liabilities, results of operations,
condition (financial or otherwise), or business of the Company and its
Subsidiaries on a consolidated basis; or (ii) the ability of the Company to
issue and sell the securities contemplated hereby and to perform its obligations
under the Transaction Documents.
“Material
Contract”
means
any contract of the Company or any Subsidiary that was actually filed, or
required to be filed, as an exhibit to the SEC Filings pursuant to Item
601(b)(4) or Item 601(b)(10) of Regulation S-K.
“Net
Escrow Amount”
means
the Escrow Amount (as defined in Section
3.1)
less
the Cash Placement Agents Fee (as defined in Section
5.21)
and the
Placement Agents’ Counsel Fees (as defined in Section
10.5).
“Person”
means
an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole
proprietorship, unincorporated organization, governmental authority or any
other
form of entity not specifically listed herein.
“Placement
Agent Agreements”
means
(i)
that certain Letter Agreement, dated as of March 2, 2006, by and between
the Company and X.X. Xxxxxxx & Sons, Inc.; and (ii) that certain Letter
Agreement, dated as of February 24, 2006, by and between the Company and
Xxxxxx Xxxxxxx Corp.
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“Requisite
Holders”
means,
with respect to any consent, vote or other action, (i) prior to the Closing
Date
(as defined in Section
4),
the
Investors who have subscribed to purchase a majority of the Shares; and (ii)
following the Closing Date, the Investors holding a majority of the Shares.
“SEC
Filings”
has
the
meaning set forth in Section
5.7.
“Securities”
means
the Shares.
“Shares”
means
the Common Shares being purchased by the Investors hereunder.
“Subscription
Amount”
means
with respect to each Investor, the Subscription Amount indicated on such
Investor’s signature page to this Agreement.
“Subsidiary” of
any
Person means another Person, an amount of the voting securities of which, other
voting ownership or voting partnership interests of which is sufficient to
elect
at least a majority of its Board of Directors or other governing body (or,
if
there are no such voting interests, 50% or more of the equity interests of
which), is owned directly or indirectly by such first Person.
“Transaction
Documents”
means
this Agreement and the Registration Rights Agreement, together with any
instrument, certificate or document executed in connection
herewith.
“1933
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“1934
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
2.
Purchase
and Sale of the Shares.
Subject
to the terms and conditions of this Agreement, on the Closing Date, each of
the
Investors shall severally, and not jointly, purchase, and the Company shall
sell
and issue to the Investors, the Shares in the respective amounts set forth
on
the signature pages hereto in exchange for the cash consideration set forth
on
the signature pages hereto which shall be equal to the product of the number
of
shares purchased by an Investor and the per share purchase price.
3. Escrow
of Purchase Price.
3.1. Simultaneously
with the execution and delivery of a counterpart to this Agreement by an
Investor, such Investor shall (i) promptly cause a wire transfer of immediately
available funds (U.S. dollars) in an amount representing such Investor’s
“Aggregate
Purchase Price”,
as set
forth on such Investor’s signature page hereto, to be paid to the non-interest
bearing escrow account of The Bank of New York (“Escrow
Agent”),
set
forth on Schedule
I
affixed
hereto (the aggregate amounts being held in escrow are referred to herein as
the
“Escrow
Amount”);
and
(ii) deliver to the Placement Agents and the Company a duly executed counterpart
to the Registration Rights Agreement. The Escrow Agent shall hold the Escrow
Amount in escrow until (i) the Escrow Agent receives written instructions from
the Company and the Placement Agents authorizing the release of the Escrow
Amount in accordance with Section
4;
or (ii)
the Escrow Agent receives written instructions from the Company and/or the
Requisite Holders (or a specific terminating Investor pursuant to Section
7.3(a)(iv))
that
the Agreement has been terminated in accordance with Section
7.3
in which
case the Escrow Agent shall return to each Investor (or, in the case of a
termination of this Agreement by an Investor solely with respect to itself
pursuant to Section
7.3(a)(iv),
such
terminating Investor), the portion of the Escrow Amount each such Investor
delivered to the Escrow Agent. The Company and each Investor hereby authorizes
the Escrow Agent to release from the Escrow Amount, at the Closing (as defined
in Section
4),
without further action or deed (other than receipt of the written instructions
from the Company and the Placement Agents authorizing the release of the Escrow
Amount), the (i) Cash Placement Agents Fee (as defined in Section
5.21)
to the
Placement Agents; (ii) Placement Agents’ Counsel Fees (as defined in
Section
10.5)
to
Placement Agents’ Counsel; and (iii) the Net Escrow Amount to the Company.
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3.2. The
Company and the Investors acknowledge and agree for the benefit of the Escrow
Agent (which shall be deemed to be a third party beneficiary of this
Section
3)
as
follows:
(a) The
Escrow Agent (i) is not responsible for the performance by the Company or the
Investors of this Agreement or any of the Transaction Documents or for
determining or compelling compliance therewith; (ii) is only responsible for
(A)
holding the Escrow Amount in escrow pending receipt of written instructions
from
the Placement Agents and the Company directing the release of the Escrow Amount
in accordance with Section
3.1
and (B)
disbursing the Escrow Amount in accordance with the written instructions from
the Company and/or the Requisite Holders in accordance with Section
3.1,
each of
the responsibilities of the Escrow Agent herein is ministerial in nature, and
no
implied duties or obligations of any kind shall be read into this Agreement
against or on the part of the Escrow Agent (collectively, the “Escrow
Agent Duties”);
(iii)
shall not be obligated to take any legal or other action hereunder which might
in its judgment involve or cause it to incur any expense or liability unless
it
shall have been furnished with indemnification acceptable to it, in its sole
discretion; (iv) may rely on and shall be protected in acting or refraining
from
acting upon any written notice, instruction (including, without limitation,
wire
transfer instructions, whether incorporated herein or provided in a separate
written instruction), instrument, statement, certificate, request or other
document furnished to it hereunder and believed by it to be genuine and to
have
been signed or presented by the proper Person, and shall have no responsibility
for making inquiry as to, or for determining, the genuineness, accuracy or
validity thereof, or of the authority of the Person signing or presenting the
same; (v) may consult counsel satisfactory to it, and the written opinion or
advice of such counsel in any instance shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or advice of such
counsel; and (vi) shall be authorized to distribute, at the Closing, to
Placement Agents’ Counsel the Placement Agents’ Counsel Fees. Documents and
written materials referred to in this Section
3.2(a)
include,
without limitation, e-mail and other electronic transmissions capable of being
printed, whether or not they are in fact printed; and any such e-mail or other
electronic transmission may be deemed and treated by the Escrow Agent as having
been signed or presented by a Person if it bears, as sender, the Person’s e-mail
address.
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(b) The
Escrow Agent shall not be liable to anyone for any action taken or omitted
to be
taken by it hereunder in connection with its Escrow Agent Duties, except in
the
case of the Escrow Agent’s gross negligence, willful misconduct or bad faith (as
finally determined by a court of competent jurisdiction) in breach of the Escrow
Agent Duties. IN NO EVENT SHALL THE ESCROW AGENT BE LIABLE FOR INDIRECT,
PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGE OR LOSS (INCLUDING BUT NOT LIMITED
TO
LOST PROFITS) WHATSOEVER, EVEN IF THE ESCROW AGENT HAS BEEN INFORMED OF THE
LIKELIHOOD OF SUCH LOSS OR DAMAGE AND REGARDLESS OF THE FORM OF ACTION.
(c) The
Company and the Investors hereby indemnify and hold harmless the Escrow Agent
from and against, any and all loss, liability, cost, damage and expense,
including, without limitation, reasonable counsel fees and expenses, which
the
Escrow Agent may suffer or incur by reason of any action, claim or proceeding
brought against the Escrow Agent arising out of or relating to the performance
of the Escrow Agent Duties, unless such action, claim or proceeding is the
result of the gross negligence, willful misconduct or bad faith (as finally
determined by a court of competent jurisdiction) of the Escrow Agent.
(d) Each
of
the Investors acknowledges receipt and review of that Escrow Agreement with
the
Escrow Agent and attached as Exhibit C hereto (the “Escrow
Agreement”).
The
Investors hereby agree that, upon execution of this Agreement, each shall be
deemed a “Depositor” under the terms of the Escrow Agreement and to have
consented to and affirmed the terms and conditions of the Escrow Agreement
as if
and having the same legal consequence as he, she or it were a signatory thereof.
Each of the Company and the Investors has consulted with its own counsel
specifically about this Section
3
to the
extent they deemed necessary, and has entered into this Agreement after being
satisfied with such advice.
4. Closing.
Upon
confirmation that the conditions to Closing specified herein have been satisfied
or duly waived by the Requisite Holders or the Company, as applicable, (i)
the
Company shall deliver to the Escrow Agent, in trust, certificates, registered
in
such name or names as the Investors may designate, representing the Shares,
with
instructions that such Shares are to be held for release to the Investors only
upon payment in full of the Aggregate Purchase Price to the Escrow Agent by
all
the Investors and (ii) following receipt of such certificates, the Company
and
the Placement Agents shall jointly instruct the Escrow Agent to release (A)
the
Net Escrow Amount to the Company (the date of receipt of the Net Escrow Amount
by the Company is hereinafter referred to as the “Closing
Date”),
(B)
the Cash Placement Agents Fee to the Placement Agents and (C) the Placement
Agents’ Counsel Fees to Placement Agents’ Counsel. On the Closing Date, the
certificates representing the Shares shall be released to the Investors (the
“Closing”).
The
purchase and sale of the Shares in the Closing shall take place at the offices
of Xxxxxxx Xxxxx LLP, the Placement Agents’ Counsel, 0000 Xxxx Xxxxxx, Xxxxx
0000, Xxxxxx, Xxxxx 00000, or at such other location and on such other date
as
the Company and the Requisite Holders shall mutually agree.
5. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Investors and the Placement Agents
that, except as set forth in the schedules delivered herewith (collectively,
the
“Disclosure
Schedules”):
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5.1. Organization,
Good Standing and Qualification.
The
Company and each of its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, as applicable, with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. The Company and each Subsidiary is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property makes such
qualification necessary, unless the failure to so qualify would have a Material
Adverse Effect.
5.2. Authorization.
The
Company has full power and authority and has taken all requisite action on
the
part of the Company, its officers, directors and shareholders necessary for
(i)
the authorization, execution and delivery of the Transaction Documents; (ii)
authorization of the performance of all obligations of the Company hereunder
or
thereunder; and (iii) the authorization, issuance (or reservation for issuance)
and delivery of the Securities. The Transaction Documents constitute the legal,
valid and binding obligations of the Company, enforceable against the Company
in
accordance with their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights
generally.
5.3. Capitalization.
(a)
Schedule
5.3
sets
forth (i) the authorized capital shares of the Company on the date hereof,
(ii)
the number of capital shares issued and outstanding as of Xxxxx 00, 0000, (xxx)
the number of capital shares issuable pursuant to the Company’s share plans as
of December 31, 2005, and (iv) the number of capital shares issuable and
reserved for issuance pursuant to securities exercisable for, or convertible
into or exchangeable for any capital shares of the Company as of March 30,
2006.
All of the issued and outstanding Company capital shares have been duly
authorized and validly issued and are fully paid, nonassessable and free of
pre-emptive rights and, to the Company’s Knowledge, were issued in full
compliance with applicable law and any rights of third parties. No Person is
entitled to pre-emptive or similar statutory or contractual rights with respect
to any securities of the Company. Except as described on Schedule
5.3,
there
are no outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company is or may
be
obligated to issue any equity securities of any kind and, except as contemplated
by this Agreement, the Company is not currently in negotiations for the issuance
of any equity securities of any kind. Except as described on Schedule
5.3,
there
are no voting agreements, buy-sell agreements, option or right of first purchase
agreements or other agreements of any kind among the Company and any of the
security holders of the Company relating to the securities of the Company.
Except as described on Schedule
5.3,
the
Company has not granted any Person the right to require the Company to register
any securities of the Company under the 1933 Act, whether on a demand basis
or
in connection with the registration of securities of the Company for its own
account or for the account of any other Person, except as contemplated by the
Registration Rights Agreement. The
Company has not issued any capital shares since March 30, 2006.
(b)
Except
as
described on Schedule
5.3,
the
issuance and sale of the Securities hereunder will not obligate the Company
to
issue Common Shares or other securities to any other Person (other than the
Investors) and will not result in the adjustment of the exercise, conversion,
exchange or reset price of any outstanding security.
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(c)
Except
as
set forth on Schedule
5.3,
the
Company does not have outstanding shareholder purchase rights or any similar
arrangement in effect giving any Person the right to purchase any equity
interest in the Company upon the occurrence of certain events or
otherwise.
5.4. Subsidiaries.
Schedule
5.4
sets
forth the direct and indirect Subsidiaries of the Company. The Company owns,
directly or indirectly, all of the capital stock of each Subsidiary free and
clear of any and all liens, encumbrances and restrictions, and all the issued
and outstanding shares of capital stock of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar rights.
Neither the Company nor any Subsidiary is party to any material joint venture,
nor has any ownership interest in any other entity that is material to the
Company and not disclosed in the SEC Filings.
5.5. Valid
Issuance.
The
Shares have been duly and validly authorized and, when issued and paid for
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable, and shall be free and clear of all liens, encumbrances and
restrictions, except for restrictions on transfer set forth in the Transaction
Documents or imposed by applicable securities laws.
5.6. Consents.
The
execution, delivery and performance by the Company of the Transaction Documents
and the offer, issuance and sale of the Securities require no consent of, action
by or in respect of, or filing with, any Person, governmental body, agency,
or
official other than those filings and consents set forth on Schedule
5.6,
consents or filings that have already been obtained, the filings with the SEC
of
one or more registration statements in accordance with the Registration Rights
Agreement, filings required by Section
10.7
hereof,
and filings that have been made pursuant to applicable state securities laws
and
post-sale filings pursuant to applicable state and federal securities laws
which
the Company undertakes to file within the applicable time periods. The
issuance and sale of the Securities and the other transactions contemplated
by
the Transaction Documents do not contravene any laws of the State of Delaware
or
the federal laws applicable therein, the Certificate of Incorporation, or the
terms of any agreement to which the Company or any Subsidiary is
party.
5.7. Delivery
of SEC Filings; Business.
All
reports and other documents filed or furnished by the Company pursuant to the
1934 Act through the SEC’s Electronic Data Gathering, Analysis and Retrieval
(“XXXXX
Filings”)
system
and prior to the date hereof (collectively, the “SEC
Filings”)
are
publicly available for viewing by Investors. The SEC Filings are the only
filings required of the Company pursuant to the 1934 Act for such period.
5.8. Use
of
Proceeds.
The
proceeds of the sale of the Shares hereunder shall be used by the Company for
general corporate and working capital purposes.
5.9. No
Material Adverse Change.
Except
as identified and described in the SEC Filings or as described on Schedule
5.9,
since
December 31, 2005, there has not been:
7
(a) any
change in the consolidated assets, liabilities, financial condition or operating
results of the Company and its Subsidiaries from that reflected in the financial
statements included in the SEC Filings, except for changes in the ordinary
course of business that would not have a Material Adverse Effect, individually
or in the aggregate;
(b) any
declaration or payment of any dividend, or any authorization or payment of
any
distribution, on any of the capital shares of the Company, or any redemption
or
repurchase of any securities of the Company or any Subsidiary;
(c) any
material damage, destruction or loss, whether or not covered by insurance to
any
assets or properties of the Company or any Subsidiary;
(d) any
waiver, not in the ordinary course of business, by the Company of a material
right or of a material debt owed to it;
(e) any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company or any Subsidiary, except in the ordinary course
of
business and which would not have a Material Adverse Effect;
(f) any
change or amendment to the Certificate of Incorporation or Bylaws of the Company
or any of its Subsidiaries, or change to any Material Contract by which the
Company or any Subsidiary is bound or to which any of their respective assets
or
properties is subject;
(g) any
material labor difficulties or labor union organizing activities with respect
to
employees of the Company or any Subsidiary;
(h) any
material transaction entered into by the Company or any Subsidiary other than
in
the ordinary course of business (other than as contemplated by the Transaction
Documents);
(i) the
loss
of the services of any key employee, or material change in the composition
or
duties of the senior management of the Company or any Subsidiary;
(j) the
loss
or threatened loss of any customer which had or would have a Material Adverse
Effect; or
(k) any
other
event or condition of any character (i) that reasonably should be disclosed
to the Investors pursuant to Regulation D and as part of the Private
Placement or (ii) that had or would have a Material Adverse Effect;
provided however, any decline in the market price of the Company’s Common Shares
as a result of the transactions contemplated by the Transaction Documents,
the
public announcement thereof, or change in the general economic or industry
conditions shall not be deemed to be such a Material Adverse
Effect.
5.10. SEC
Filings.
At the
time of filing thereof, the SEC Filings complied in all material respects with
the requirements of the 1934 Act and did not contain any untrue statement of
a
material fact or omit to state any material fact necessary in order to make
the
statements made therein, in the light of the circumstances under which they
were
made, not misleading, except to the extent that information contained in any
such document has been revised or superseded by a later filed SEC Filing. The
Company is not (with or without the lapse of time or the giving of notice,
or
both) in breach or default of any Material Contract and, to the Company’s
Knowledge, no other party to any Material Contract is (with or without the
lapse
of time or the giving of notice, or both) in breach or default of any Material
Contract. The Company has not received any notice of the intention of any party
to terminate any Material Contract.
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5.11. No
Conflict, Breach, Violation or Default.
The
execution, delivery and performance of the Transaction Documents by the Company
and the issuance and sale of the Securities will not conflict with or result
in
a breach or violation of any of the terms and provisions of, or constitute
a
default under (i) the Company’s Certificate of Incorporation, Bylaws or other
charter documents, each as in effect on the date hereof, or any Subsidiary's
certificate or articles of incorporation, bylaws or other organizational or
charter documents, each as in effect on the date hereof; or (ii)(a) any statute,
rule, regulation or order of any governmental agency or body or any court,
domestic or foreign, having jurisdiction over the Company, any Subsidiary or
any
of their respective assets or properties, or (b) except as set forth on
Schedule
5.11,
any
Material Contract to which the Company or any Subsidiary is a party or by which
the Company or any Subsidiary is bound or to which any of their respective
assets or properties are subject.
5.12. Tax
Matters.
The
Company and each of its Subsidiaries has timely prepared and filed all tax
returns required to have been filed by the Company and each of its Subsidiaries
with all appropriate governmental agencies and timely paid all taxes shown
thereon or otherwise owed by them, except to the extent such taxes are being
disputed in good faith or to the extent any such non-payment would not have
a
Material Adverse Effect. The charges, accruals and reserves on the books of
the
Company in respect of taxes for all fiscal periods are adequate in all material
respects, and there are no material unpaid assessments against the Company
nor,
to the Company’s Knowledge, any basis for the assessment of any additional
taxes, penalties or interest for any fiscal period or audits by any foreign,
federal, state or local taxing authority except for any assessment that is
not
material to the Company. All taxes and other assessments and levies that the
Company is required to withhold or to collect for payment have been duly
withheld and collected and paid to the proper governmental entity or third
party
when due, except to the extent such taxes are being disputed in good faith
or to
the extent any such non-payment would not have a Material Adverse Effect. There
are no tax liens or claims pending or, to the Company’s Knowledge, threatened
against the Company, any of its Subsidiaries or any of its assets or property.
Except as described on Schedule
5.12,
there
are no outstanding tax sharing agreements or other such arrangements between
the
Company or any Subsidiary and any other entity and neither the Company nor
any
Subsidiary is presently undergoing any audit by a taxing authority, or has
waived or extended any statute of limitations at the request of any taxing
authority.
5.13. Title
to Properties.
(a) Except
as
disclosed in the SEC Filings, each of the Company and its Subsidiaries has
good
title to all real properties and all other properties and assets owned by it,
in
each case free from liens, encumbrances and defects, except as would not
individually or in the aggregate have a Material Adverse Effect; and except
as
disclosed in the SEC Filings, the Company and each Subsidiary holds any leased
real or personal property under valid and enforceable leases with no exceptions
that would materially interfere with the use made or currently planned to be
made thereof by them, except as would not individually or in the aggregate
have
a Material Adverse Effect.
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(b) All
interests in natural resource properties of the Company and its Subsidiaries
are
in all material respects: (i) owned or held by the Company or a Subsidiary
as
owner thereof with good title; (ii) in good standing; (iii) valid and
enforceable; and (iv) free and clear of any liens, charges or encumbrances,
and
no royalty is payable in respect of any of them except as disclosed in the
SEC
Filings, except as would not individually or in the aggregate have a Material
Adverse Effect; no other material property rights are necessary for the conduct
of the Company’s and each Subsidiary’s business, and there are no material
restrictions on the ability of the Company or any Subsidiary to use, transfer
or
otherwise exploit any such property rights except as disclosed in the SEC
Filings, and, to the Company’s Knowledge, there is no claim or basis for a claim
that may adversely affect such rights in any material respects except as
disclosed in the SEC Filings.
5.14. Certificates,
Authorities and Permits.
The
Company and its Subsidiaries possess adequate certificates, authorities or
permits issued by appropriate governmental agencies or bodies necessary to
conduct the business now operated by it, and neither the Company nor any of
its
Subsidiaries has received any notice of proceedings relating to the revocation
or modification of any such certificate, authority or permit that, if determined
adversely to the Company or any Subsidiary, would have a Material Adverse
Effect, individually or in the aggregate.
5.15. No
Labor Disputes.
No
material labor dispute with the employees of the Company exists or, to the
Company’s Knowledge, is likely.
5.16. Intellectual
Property.
(a) All
Intellectual Property of the Company is currently in compliance with all legal
requirements (including timely filings, proofs and payments of fees) and is
valid and enforceable, except to the extent that any non-compliance would not
individually or in the aggregate have a Material Adverse Effect. No Intellectual
Property of the Company that is necessary for the conduct of Company’s business
as currently conducted or as currently proposed to be conducted has been or
is
now involved in any cancellation, dispute or litigation, and, to the Company’s
Knowledge, no such action is threatened. No patent of the Company has been
or is
now involved in any interference, reissue, re-examination or opposition
proceeding.
(b) All
of
the licenses and sublicenses and consent, royalty or other agreements concerning
Intellectual Property that are necessary for the conduct of the Company’s
business as currently conducted or as currently proposed to be conducted to
which the Company is a party or by which any of its assets are bound (other
than
generally commercially available, non-custom, off-the-shelf software
application programs having a retail acquisition price of less than $10,000
per
license) (collectively, “License
Agreements”)
are
valid and binding obligations of the Company that are parties thereto and,
to
the Company’s Knowledge, of the other parties thereto, enforceable in accordance
with their terms, except to the extent that enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or
other similar laws affecting the enforcement of creditors’ rights generally,
and, to the Company’s Knowledge, there exists no event or condition that would
result in a material violation or breach of or constitute (with or without
due
notice or lapse of time or both) a default by the Company under any such License
Agreement.
10
(c) The
Company owns or has the valid right to use all of the Intellectual Property
that
is necessary for the conduct of the Company’s business as currently conducted or
as currently proposed to be conducted, free and clear of all liens,
encumbrances, adverse claims or obligations to license all such owned
Intellectual Property and Confidential Information, other than licenses entered
into in the ordinary course of the Company’s business, except that any such
invalidity or liens, encumbrances, or obligations would not have a Material
Adverse Effect. The Company has a valid and enforceable right to use all third
party Intellectual Property and Confidential Information used or held for use
in
the business of the Company as currently conducted or as currently proposed
to
be conducted, except where such invalidity or unenforceable right shall not
have
a Material Adverse Effect.
(d) To
the
Company’s Knowledge, the conduct of the Company’s business as currently
conducted and as currently proposed to be conducted does not and will not
infringe any Intellectual Property rights of any third party or any
confidentiality obligation owed to a third party. To the Company’s Knowledge,
the Intellectual Property and Confidential Information of the Company that
are
necessary for the conduct of Company’s business as currently conducted or as
currently proposed to be conducted are not being infringed by any third party.
There is no litigation or order pending or outstanding or, to the Company’s
Knowledge, threatened or imminent, that seeks to limit or challenge or that
concerns the ownership, use, validity or enforceability of any Intellectual
Property or Confidential Information of the Company and the Company’s use of any
Intellectual Property or Confidential Information owned by a third party, and,
to the Company’s Knowledge, there is no valid basis for the same.
(d)
The
consummation of the transactions contemplated hereby will not result in the
alteration, loss, impairment of or restriction on the Company’s ownership or
right to use any of the Intellectual Property or Confidential Information that
is necessary for the conduct of the Company’s business as currently conducted or
as currently proposed to be conducted, except as would not have a Material
Adverse Effect.
5.17. Environmental
Matters.
(a) The
Company and each of its Subsidiaries has been and is in material compliance
with
all applicable federal, state, municipal and local laws, statutes, ordinances,
bylaws and regulations and orders, directives and decisions rendered by any
ministry, department or administrative or regulatory agency, domestic or
foreign, (“Environmental
Laws”)
relating to the protection of the environment, occupational health and safety
or
the processing, use, treatment, storage, disposal, discharge, transport or
handling of any pollutants, contaminants, chemicals or industrial, toxic or
hazardous wastes or substance except where such non-compliance would not have
a
Material Adverse Effect on the Company on a consolidated basis.
11
(b) The
Company and each of its Subsidiaries has obtained all material licenses,
permits, approvals, consents, certificates, registrations and other
authorizations under Environmental Laws (the “Environmental
Permits”)
necessary for the operation of its projects as currently operated and each
Environmental Permit is valid, subsisting and in good standing and the holders
of the Environmental Permits are not in default or breach thereof and no
proceeding is pending or threatened to revoke or limit any Environmental Permit,
except in each case where the result would not have a Material Adverse Effect
on
the Company and its Subsidiaries, on a consolidated basis.
(c) (i)
neither the Company (including, if applicable, any predecessor companies
thereof) nor any of its Subsidiaries has been prosecuted for an offence alleging
material non-compliance with any Environmental Laws and (ii) there are no orders
or directions relating to environmental matters requiring any material work,
repairs, construction or capital expenditures to be made with respect to any
of
the assets of the Company or its Subsidiaries, nor to the Company’s Knowledge
has the Company or any of its Subsidiaries received notice of any of the same
and which orders, directions or notices remain outstanding as
unresolved.
5.18. Litigation.
Except
as disclosed in the SEC Filings, there are no pending investigations, actions,
suits or proceedings against or affecting the Company, any Subsidiary or any
of
their respective properties before or by any court or governmental or regulatory
agency, authority or body; and except as disclosed in the SEC Filings, to the
Company’s Knowledge, no such legal, governmental or regulatory investigations,
actions, suits or proceedings are threatened or contemplated that if adversely
determined would have a Material Adverse Effect.
5.19. Financial
Statements.
The
financial statements included in each SEC Filing fairly present the financial
position of the Company and its Subsidiaries as of the dates shown and its
results of operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with United States generally
accepted accounting principles applied on a consistent basis; provided,
however,
that
the unaudited financial statements are subject to normal year end and quarter
end audit adjustments (which are not expected to be material either individually
or in the aggregate), and do not contain all footnotes required under generally
accepted accounting principles. Except as set forth in the financial statements
of the Company and its Subsidiaries included in the SEC Filings, neither the
Company nor any Subsidiary has incurred any liabilities, contingent or
otherwise, except those which, individually or in the aggregate, would not
have
a Material Adverse Effect.
5.20. Insurance
Coverage.
The
Company and each of its Subsidiaries maintains in full force and effect
insurance coverage by insurers of recognized financial responsibility against
losses and risks and in such amounts as are prudent and customary in its
business; and the Company reasonably believes such insurance coverage is
adequate.
5.21. Brokers
and Finders.
Except
for the cash commission to be paid (the “Cash
Placement Agents Fee”)
to the
Placement Agents pursuant to the terms of the Placement Agent Agreements, no
Person will have, as a result of the transactions contemplated by this
Agreement, any valid right, interest or claim against or upon the Company or
any
Investor for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on behalf of the
Company.
12
5.22. No
Directed Selling Efforts or General Solicitation.
Neither
the Company nor, to the Company’s Knowledge, any Person acting on its behalf,
has conducted any “general solicitation” or “general advertising” (as those
terms are used in Regulation D) in connection with the offer or sale of any
of
the Shares.
5.23. No
Integrated Offering.
Neither
the Company nor any of its Affiliates, nor, to the Company’s Knowledge, any
Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any Company security or solicited any offers to buy any
security, under circumstances that would adversely affect reliance by the
Company on Section 4(2) of the 1933 Act for the exemption from the registration
requirements imposed under Section 5 of the 1933 Act for the transactions
contemplated hereby or that would require such registration the 1933
Act.
5.24. Private
Placement.
Subject
to the accuracy of the representations and warranties of the Investors contained
in Section
6
hereof,
the offer, sale and issuance of the Securities to the Investors as contemplated
hereby is exempt from the registration requirements of the 0000 Xxx. The Company
has not provided to the Investors any information that is, or reasonably could
be deemed, material, non-public information, other than information regarding
the existence of the Private Placement itself.
5.25. Foreign
Corrupt Practices Act.
Neither
the Company nor, to the Company’s Knowledge, any of its current or former
shareholders, directors, officers, employees, agents or other Persons acting
on
behalf of the Company has on behalf of the Company or in connection with its
business,
taken
any action, directly or indirectly, that would result in a violation by such
persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules
and regulations thereunder (“FCPA”),
including, without limitation, making use of the mails or any means or
instrumentality of interstate commerce corruptly in furtherance of an offer,
payment, promise to pay or authorization of the payment of any money, or other
property, gift, promise to give, or authorization of the giving of anything
of
value to any “foreign official” (as such term is defined in the FCPA) or any
foreign political party or official thereof or any candidate for foreign
political office, in contravention of the FCPA and the Company has conducted
its
businesses in compliance with the FCPA and have instituted and maintain policies
and procedures designed to ensure, and which are reasonably expected to continue
to ensure, continued compliance therewith.
5.26. Transactions
with Affiliates.
Except
as disclosed in SEC Filings made on or prior to the date hereof, none of the
officers or directors of the Company and, to the Company’s Knowledge, none of
the employees of the Company is presently a party to any transaction with the
Company or to a presently contemplated transaction (other than for services
as
employees, officers and directors) that would be required to be disclosed
pursuant to Item 404 of Regulation S-K promulgated under the 0000
Xxx.
5.27. Internal
Controls.
The
Company is in material compliance with the provisions of the Xxxxxxxx-Xxxxx
Act
of 2002 currently applicable to the Company. The Company maintains 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 accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared
with
the existing assets at reasonable intervals and appropriate action is taken
with
respect to any differences. The Company has established disclosure controls
and
procedures (as defined in 1934 Act Rules 13a-15 and 15d-15) for the Company
and
has designed such disclosure controls and procedures with the intent of ensuring
that material information relating to the Company is made known to the
certifying officers by others within those entities, particularly with respect
to the period covered by the Company’s most recently filed period report under
the 1934 Act. Under the supervision and with the participation of the Company's
management, the Company evaluated the effectiveness of the Company's disclosure
controls and procedures as of the end of the most recent periodic reporting
period under the 1934 Act (such date, the “Evaluation
Date”).
The
Company presented in its most recently filed periodic report under the 1934
Act
the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date and such conclusions are accurate in all material respects.
Since the Evaluation Date, there have been no significant changes in the
Company's internal controls (as such term is defined in Item 308(c) of
Regulation S-K) or, to the Company's Knowledge, in other factors that could
significantly affect the Company's internal controls. The Company maintains
a
standard system of accounting established and administered in accordance with
generally accepted accounting principles and the applicable requirements of
the
1934 Act.
13
5.28. Listing.
The
Common Shares are listed and posted for trading on The NASDAQ Capital Market
(the “Exchange”)
and
the Company has not received any notification (written or oral) from the
Exchange to the effect that the Company is not in compliance with the listing
or
maintenance requirements of such Exchange. The Company will use its commercially
reasonable efforts to seek and obtain the acceptance for the purchase, sale
and
listing of the Securities contemplated by the Transaction Documents from the
Exchange.
6. Representations
and Warranties of the Investors.
Each of
the Investors hereby severally, and not jointly, represents and warrants to
the
Company and the Placement Agents that:
6.1. Organization;
Authorization.
For
each Investor that is an entity, such Investor is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or organizational power and authority
to enter into and to consummate the transactions contemplated in the Transaction
Documents and to otherwise carry out its obligations thereunder. The execution,
delivery and performance by the Investor of the transactions contemplated by
the
Transaction Documents to which such Investor is a party have been duly
authorized and will each constitute the valid and legally binding obligation
of
the Investor, enforceable against the Investor in accordance with their
respective terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors’ rights generally.
6.2. Purchase
Entirely for Own Account.
The
Securities to be purchased by the Investor hereunder will be acquired by the
Investor as principal for the Investor’s own account, not as nominee or agent,
and not with a view to the resale or distribution of any part thereof in
violation of the 1933 Act, and the Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same in violation
of the 1933 Act. The Investor is not a registered broker dealer or an entity
engaged in the business of being a broker dealer.
14
6.3. Investment
Experience.
The
Investor acknowledges that it can bear the economic risk and complete loss
of
its investment in the Securities and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment contemplated hereby. The Investor is experienced in
making private investments in public equities, similar to the purchase of the
Securities hereunder.
6.4. Disclosure
of Information.
The
Investor has no knowledge of any “material fact” or “material change” in the
affairs of the Company that has not been generally disclosed to the public,
other than this particular transaction; the Investor’s decision to tender this
offer and purchase the Shares has not been made as a result of any verbal or
written representation as to factual or other matters made by or on behalf
of
the Company, or any other Person and is based entirely upon currently available
public information concerning the Company. The Investor has had an opportunity
to receive all additional information related to the Company requested by it
and
to ask questions of and receive answers from the Company regarding the Company
and its business, to the extent such information is not material nonpublic
information, and the terms and conditions of the offering of the Shares. The
Investor acknowledges its satisfactory review of the SEC Filings. The Investor
acknowledges that it has been afforded the opportunity to obtain such additional
information, other than material nonpublic information, that the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment.
6.5. Restricted
Securities.
The
Investor understands that the Securities are characterized as “restricted
securities” under the U.S. federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and
that under such laws and applicable regulations such Securities may not be
resold unless the Securities are registered pursuant to the 1933 Act, or an
exemption from registration is available therefrom. In connection with any
transfer of the Securities other than pursuant to an effective registration
statement, except as provided for in Section
8.7,
the
Company may require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under
the
1933 Act.
6.6. Legends.
(a) It
is
understood that certificates evidencing the Securities shall bear the following
legend:
“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD UNLESS (I) SUCH SECURITIES HAVE
BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED,
OR
(II) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT
SUCH
TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT
OF
1933, AS AMENDED, OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.”
15
(b) If
required by the authorities of any state in connection with the issuance or
sale
of the Securities, the legend required by such state authority.
6.7. Accredited
Investor.
Each
Investor (a) at the time it was offered the Shares was, and at the date hereof
is, an “accredited investor” as defined in Rule 501(a) of Regulation D, as
amended, under the 1933 Act and (b) has completed and delivered with this
Agreement an Accredited Investor Certificate attached as Schedule
II,
the
representations and warranties contained in such certificate being incorporated
and forming part of this Agreement.
6.8. No
General Solicitation.
In
connection with the Private Placement, the Investor did not learn of the
investment in the Securities or make their decision to purchase the Securities
as a result of any “general advertising” or “general solicitation” as those
terms are contemplated in Regulation D, as amended, under the 1933
Act.
6.9. Brokers
and Finders.
No
Person will have, as a result of the transactions contemplated by this
Agreement, any valid right, interest or claim against or upon the Company,
or
any Investor for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on behalf of the
Investor.
6.10. Prohibited
Transactions.
Since
the time the Investor learned of the Private Placement, neither the Investor
nor
any Affiliate of such Investor that (i) has or had knowledge of the transactions
contemplated hereby, (ii) has or shares discretion relating to such Investor’s
investments or trading or information concerning such Investor’s investments,
including in respect of the Securities, or (iii) is subject to such Investor’s
review or input concerning such Affiliate’s investments or trading
(collectively, “Trading
Affiliates”)
has,
directly or indirectly, effected or agreed to effect any transactions in the
securities of the Company, including any short sale, whether or not against
the
box, established any “put equivalent position” (as defined in Rule 16a-1(h)
under the 0000 Xxx) with respect to the Common Shares, granted any other right
(including, without limitation, any put or call option) with respect to the
Common Shares or with respect to any security that includes, relates to or
derived any significant part of its value from the Common Shares (each, a
“Prohibited
Transaction”).
Such
Investor shall
not, and shall cause its Trading Affiliates not to, engage, directly or
indirectly, in a Prohibited Transaction
during
the period from the date hereof until such time as (i) the transactions
contemplated by this Agreement are first publicly announced or (ii) this
Agreement is terminated pursuant to Section
7.3
hereof.
16
6.11 Limited
Ownership.
The
purchase by such Investor of the Shares issuable to it at the Closing will
not
result in such Investor (individually or together with other Persons with whom
such Investor has identified, or will have identified, itself as part of a
“group” in a public filing made with the SEC involving the Company’s securities)
acquiring, or obtaining the right to acquire, in excess of 4.999% of the
outstanding Common Shares or the voting power of the Company on a post
transaction basis that assumes that such Closing shall have occurred or
otherwise becoming a “control person” of the Company as such term is defined
under applicable securities laws. Such Investor does not presently intend to,
alone or together with others, make a public filing with the SEC to disclose
that it has (or that it together with such other Persons have) acquired, or
obtained the right to acquire, as a result of such Closing (when added to any
other securities of the Company that it or they then own or have the right
to
acquire), in excess of 14.999% of the outstanding Common Shares or the voting
power of the Company on a post transaction basis that assumes that the Closing
at issue shall have occurred.
6.12 Independent
Investment Decision.
Such
Investor has independently evaluated the merits of its decision to purchase
the
Shares pursuant to the Transaction Documents, and such Investor confirms that
it
has not relied on the advice of any other Investor’s business and/or legal
counsel in making such decision. Such Investor has not relied on the business
or
legal advice of the Placement Agents or any of their agents, counsel or
Affiliates in making its investment decision hereunder. Further, each Investor
acknowledges that the Placement Agents have not functioned as financial
advisors, agents or fiduciaries of the Company or the Investors and that the
Placement Agents may be engaged in a broad range of transactions that involve
interests that differ from those of the Company and the Investors, and that
the
Placement Agents have no obligation to disclose any of such interests by virtue
of any advisory, agency or fiduciary relationship.
6.13 Use
of
Personal Information.
The
Investor hereby acknowledges and consents to: (a) the disclosure by the Investor
and the Company of Personal Information concerning the Investor to a securities
commission or other regulatory authority (a “Securities
Commission”),
or to
the Exchange and its affiliates, authorized agents, subsidiaries and divisions,
including the Exchange; and (b) the collection, use and disclosure of Personal
Information by the Exchange for the following purposes (or as otherwise
identified by the Exchange, from time to time): (i) to conduct background
checks; (ii) to verify the Personal Information that has been provided about
the
Investor; (iii) to consider the suitability of the Investor as a holder of
securities of the Company; (iv) to consider the eligibility of the Company
to
continue to list on the Exchange; (v) to provide disclosure to market
participants as the security holdings of the Company’s shareholders, and their
involvement with any other reporting issuers, issuers subject to a cease trade
order or bankruptcy, and information respecting penalties, sanctions or personal
bankruptcies, and possible conflicts of interest with the Company; (vi) to
detect and prevent fraud; (vii) to conduct enforcement proceedings; and (viii)
to perform other investigations as required by and to ensure compliance with
all
applicable rules, policies, rulings and regulations of the Exchange, securities
legislation and other legal and regulatory requirements governing the conduct
and protection of the public markets in the United States.
17
6.14 Present
Ownership of Securities.
The
Investor has fully and accurately disclosed to the Company its present ownership
of securities of the Company by completing the disclosure statement attached
as
Schedule
III
to this
Agreement, and acknowledges that the Company will rely on the information
entered on Schedule
III
in
completing its filings with the Exchange and filing the registration statement
contemplated by the Registration Rights Agreement.
7. Conditions
to Closing.
7.1. Conditions
to the Investors’ Obligations.
The
obligation of each Investor to purchase the Securities at the Closing is subject
to the fulfillment to the Requisite Holders’ reasonable satisfaction, on or
prior to the Closing Date, of the following conditions, any of which may be
waived in writing by the Requisite Holders:
(a) The
representations and warranties made by the Company in Section
5
hereof
qualified as to materiality shall be true and correct at all times prior to
and
on the Closing Date, except to the extent any such representation or warranty
expressly speaks as of an earlier date, in which case such representation or
warranty shall be true and correct as of such earlier date, and, the
representations and warranties made by the Company in Section
5
hereof
not qualified as to materiality shall be true and correct in all material
respects at all times prior to and on the Closing Date, except to the extent
any
such representation or warranty expressly speaks as of an earlier date, in
which
case such representation or warranty shall be true and correct in all material
respects as of such earlier date. The Company shall have performed in all
material respects all obligations and conditions herein required to be performed
or observed by it on or prior to the Closing Date (including the delivery of
the
certificates representing the Shares in accordance with Section
4
hereof).
(b) The
Company shall have executed and delivered the Registration Rights Agreement
to
the Placement Agents.
(c) No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order
of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, or
self-regulatory organization enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction
Documents.
(d) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Chief Executive Officer or its Chief Financial Officer, dated as of the
Closing Date, certifying to the fulfillment of the conditions specified in
subsections (a), (b), (c) and (h) of this Section
7.1.
(e) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Secretary, dated as of the Closing Date, certifying the resolutions adopted
by the Board of Directors of the Company approving the transactions contemplated
by this Agreement and the other Transaction Documents and the issuance of the
Securities, certifying the current versions of the Certificate of Incorporation
and Bylaws of the Company and certifying as to the signatures and authority
of
persons signing the Transaction Documents and related documents on behalf of
the
Company.
18
(f) The
Company shall have delivered a Certificate of the Secretary of State of the
State of Delaware, dated a recent date, to the effect that the Company is in
good standing.
(g) The
Investors shall have received a legal opinion of Jenkens &
Xxxxxxxxx,
P.C., the
Company's counsel, dated as of the Closing Date, in the form set forth in
Exhibit B hereto, executed by such counsel and addressed to the Investors and
the Placement Agent.
(h) No
stop
order or suspension of trading shall have been imposed by any Person with
respect to public trading in the Common Shares.
7.2. Conditions
to Obligations of the Company.
The
Company's obligation to sell and issue the Securities at the Closing is subject
to the fulfillment to the reasonable satisfaction of the Company on or prior
to
the Closing Date of the following conditions, any of which may be waived by
the
Company:
(a) The
representations and warranties made by the Investors in Section
6
hereof
shall be true and correct in all material respects when made, and shall be
true
and correct in all material respects on the Closing Date with the same force
and
effect as if they had been made on and as of said date. The Investors shall
have
performed in all material respects all obligations and conditions herein
required to be performed or observed by them on or prior to the Closing
Date.
(b) The
Investors shall have executed and delivered the Registration Rights Agreement
to
the Placement Agents and the Company at or prior to Closing; provided,
that,
this
condition shall be satisfied with respect to each Investor who has executed
and
delivered the Registration Rights Agreement.
(c) Each
of
the Investors shall have delivered to the Escrow Agent prior to Closing its
portion of the Aggregate Purchase Price set forth on the respective signature
pages hereto.
(d) No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order
of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, or
self-regulatory organization enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction
Documents.
(e) The
Company shall have received from each of the Investors duly and accurately
completed disclosures as required under this Agreement in the form specified
in
Schedule
III
to this
Agreement.
(f) The
Company shall have received from each of the Investors a duly and accurately
completed Accredited Investor Certificate in form specified in Schedule
II.
19
7.3. Termination
of Obligations to Effect Closing; Effects.
(a) The
obligations of the Company, on the one hand, and the Investors, on the other
hand, to effect the Closing shall terminate as follows:
(i) Upon
the
mutual written consent of the Company and the Requisite Holders;
(ii) By
the
Company if any of the conditions set forth in Section
7.2
shall
have become incapable of fulfillment, and shall not have been waived by the
Company;
(iii) By
the
Requisite Holders if any of the conditions set forth in Section
7.1
shall
have become incapable of fulfillment, and shall not have been waived by the
Requisite Holders; or
(iv) By
either
the Company or any Investor (with respect to itself only) if the Closing has
not
occurred on or prior to May 1, 2006;
provided,
however, that, except in the case of clause (i) above, the party seeking to
terminate its obligation to effect the Closing shall not then be in breach
of
any of its representations, warranties, covenants or agreements contained in
this Agreement or the other Transaction Documents if such breach has resulted
in
the circumstances giving rise to such party’s seeking to terminate its
obligation to effect the Closing.
(b) Nothing
in this Section
7.3
shall be
deemed to release any party from any liability for any breach by such party
of
the terms and provisions of this Agreement or the other Transaction Documents
or
to impair the right of any party to compel specific performance by any other
party of its obligations under this Agreement or the other Transaction
Documents.
8. Covenants
and Agreements of the Company.
8.1. Reports.
The
Company covenants and agrees that neither it nor any other Person acting on
its
behalf will provide any Investor or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Investor shall have executed a written agreement regarding
the confidentiality and non-use of such information. The Company is presently
a
reporting issuer under the 1934 Act and will use its reasonable efforts to
remain a reporting issuer under the 1934 Act. The Company understands and
confirms that each Investor shall be relying on the foregoing representations
in
effecting transactions in securities of the Company.
8.2. No
Conflicting Agreements.
The
Company will not take any action, enter into any agreement or make any
commitment that would conflict or interfere in any material respect with the
Company’s obligations to the Investors under the Transaction
Documents.
8.3. Insurance.
The
Company shall not materially reduce the insurance coverages described in
Section
5.20.
20
8.4. Compliance
with Laws.
The
Company will comply in all material respects with all applicable laws, rules,
regulations, orders and decrees of all governmental authorities.
8.5. Termination
of Certain Covenants.
The
provisions of Section
8.1
through
8.4
shall
terminate and be of no further force and effect upon the date on which the
Company’s obligations under the Registration Rights Agreement to register and
maintain the effectiveness of any registration covering the Registrable
Securities (as such term is defined in the Registration Rights Agreement) shall
terminate.
8.6. Listing
of Shares and Related Matters.
Promptly following the date hereof, the Company shall take all necessary action
to cause the Shares to be approved for inclusion in the Exchange. Further,
if
the Company applies to have its Common Shares or other securities traded on
any
other principal stock exchange or market, it shall include in such application
the Shares and will take such other action as is necessary to cause such Common
Shares to be so listed. The Company will use commercially reasonable efforts
to
continue the listing and trading of its Common Shares on the Exchange and,
in
accordance, therewith, will use commercially reasonable efforts to comply in
all
respects with the Company’s reporting, filing and other obligations applicable
to issuers whose securities are listed on such Exchange.
8.7. Removal
of Legends.
Upon
the earlier of (i) registration for resale pursuant to the Registration Rights
Agreement and receipt by the Company of the Investor’s written confirmation that
the Securities will not be disposed of except in compliance with the prospectus
delivery requirements of the 1933 Act or (ii) delivery to the Company of a
representation letter in customary form that Rule 144(k) has become available,
the Company shall, upon an Investor’s written request, promptly cause
certificates evidencing the Investor’s Securities to be replaced with
certificates which do not bear such restrictive legends. When the Company is
required to cause unlegended certificates to replace previously issued legended
certificates, if unlegended certificates are not delivered to an Investor within
three (3) Business Days of submission by that Investor of legended
certificate(s) to the Company’s transfer agent together with a representation
letter in customary form, the Company shall be liable to the Investor for
liquidated damages in an amount equal to 1.0% of the Aggregate Purchase Price
of
the Securities evidenced by such certificate(s) for each thirty (30) day period
(or portion thereof) beyond such three (3) Business Day that the unlegended
certificates have not been so delivered, which such amount shall be payable
in
cash, monthly on the last day of each month; provided, however, that the Company
shall not be liable to the Investor for any such liquidated damages totaling
in
the aggregate more than 10% of the Aggregate Purchase Price.
9. Survival
and Indemnification.
9.1. Survival.
All
representations and warranties contained in this Agreement shall survive the
Closing Date for a period of twelve (12) months. All covenants and agreements
contained in this Agreement, including the provisions contained in Section
8
hereof,
shall survive in accordance therewith.
9.2. Indemnification.
The
Company agrees to indemnify and hold harmless, each Investor and their
respective Affiliates and the directors, officers, employees and agents of
each
of them and their respective Affiliates, from and against any and all losses,
claims, damages, liabilities and expenses (including without limitation
reasonable attorney fees and disbursements and other expenses incurred in
connection with investigating, preparing or defending any action, claim or
proceeding, pending or threatened and the costs of enforcement hereof)
(collectively, “Losses”)
to
which such Person may become subject as a result of any breach of
representation, warranty, covenant or agreement made by, or to be performed
on
the part of, the Company under the Transaction Documents, and will reimburse
any
such Person for all such amounts as they are incurred by such
Person.
21
9.3. Conduct
of Indemnification Proceedings.
Promptly
after receipt by any Person (the “Indemnified
Person”)
of
notice of any demand, claim or circumstances which would or might give rise
to a
claim or the commencement of any action, proceeding or investigation in respect
of which indemnity may be sought pursuant to Section
9.2,
such
Indemnified Person shall promptly notify the Company in writing and the Company
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Person, and shall assume the payment of all
fees and expenses; provided,
however, that
the
failure of any Indemnified Person so to notify the Company shall not relieve
the
Company of its obligations hereunder except to the extent that the Company
is
actually and materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense
of
such Indemnified Person unless: (i) the Company and the Indemnified Person
shall
have mutually agreed to the retention of such counsel; or (ii) in the reasonable
judgment of counsel to such Indemnified Person representation of both parties
by
the same counsel would be inappropriate due to actual or potential differing
interests between them. The Company shall not be liable for any settlement
of
any proceeding effected without its written consent, which consent shall not
be
unreasonably withheld, delayed or conditioned, but if there be a final judgment
for the plaintiff, the Company shall indemnify and hold harmless such
Indemnified Person from and against any Losses by reason of such judgment.
Without the prior written consent of the Indemnified Person, the Company shall
not effect any settlement of any pending or threatened proceeding in respect
of
which any Indemnified Person is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Party, unless such settlement
includes an unconditional release of such Indemnified Person from all liability
arising out of such proceeding.
10. Miscellaneous.
10.1. Successors
and Assigns.
This
Agreement may not be assigned by a party hereto without the prior written
consent of the Company or the Investors, as applicable; provided,
however,
that an
Investor may assign its rights and delegate its duties hereunder in whole or
in
part to an Affiliate or to a third party, that is an “accredited investor” as
defined in Rule 501(a) of Regulation D, as amended under the 1933 Act, and
that
shall agree in writing to be bound by the terms and conditions of this
Agreement, including the completion by such assignee of Schedules II and III
to
this Agreement. The provisions of this Agreement shall inure to the benefit
of
and be binding upon the respective permitted successors and assigns of the
parties. Except for the Placement Agents, the Escrow Agent and the Indemnified
Persons, which are express intended third party beneficiaries of this Agreement,
and except for provisions of this Agreement expressly to the contrary, nothing
in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement.
22
10.2. Counterparts;
Faxes.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. This Agreement may also be executed via facsimile, which shall
be
deemed an original.
10.3. Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
10.4. Notices.
Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given as hereinafter
described on the earlier of (i) if given by personal delivery, then such notice
shall be deemed given upon such delivery; (ii) if given by facsimile or
electronic mail, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal; (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient, or (B) three days after such notice is deposited in first class
mail,
postage prepaid; (iv) if given by an internationally recognized overnight air
courier, then such notice shall be deemed given one day after delivery to such
carrier; and (v) upon actual receipt by the party to whom the notice is required
to be given. All notices shall be addressed to the party to be notified at
the
address as follows, or at such other address as such party may designate by
ten
days’ advance written notice to the other party:
If
to the
Company:
The
Exploration Company of Delaware, Inc.
000
Xxxxx
Xxxx 0000, Xxxx
Xxxxx
000
Xxx
Xxxxxxx, Xxxxx 00000
Attn:
M.
Xxxxx Xxxxxxx
Fax:
(000) 000-0000
With
a
copy to:
Jenkens
& Xxxxxxxxx, P.C.
000
Xxxxxxxx Xxxxxx
Xxxxx
0000
Xxxxxx,
Xxxxx 00000
Attn:
X.
Xxxxxxx Xxxx
Fax:
(000) 000-0000
If
to any
of the Investors:
to
the
addresses set forth on the signature pages hereto.
23
With
a
copy to:
X.X.
Xxxxxxx & Sons, Inc.
0
Xxxxx
Xxxxxxxxx
Xx.
Xxxxx, XX 00000
Attn:
Xxxxxx X. Xxxxxx
Fax:
(000) 000-0000
and
to:
Xxxxxx
Xxxxxxx Corp.
0
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
General Counsel
Fax:
(000) 000-0000
and
to:
Xxxxxxx
Xxxxx LLP
0000
Xxxx
Xxxxxx, Xxxxx 0000
Xxxxxx,
Xxxxx 00000
Attn:
Xxxxx Xxxxxxxx
Fax:
(000) 000-0000
10.5. Expenses.
The
Company shall pay the reasonable fees and expenses of the Placement Agents
in
connection with the Private Placement (the “Placement
Agents’ Fees”),
which
Placement Agents’ Fees shall include, without limitation, the legal fees and
expenses and all other expenses of the Placement Agents, but in no event in
an
amount to exceed $50,000. The Placement Agents’ Fees shall be paid to Placement
Agents at the Closing by release to Placement Agents of the portion of the
Escrow Amount equal to the Placement Agents’ Fees. Except as set forth above,
the Company and the Investors shall each bear their own expenses in connection
with the negotiation, preparation, execution and delivery of this Agreement.
In
the event that legal proceedings are commenced by any party to this Agreement
against another party to this Agreement in connection with this Agreement or
the
other Transaction Documents, the party or parties which do not prevail in such
proceedings shall severally, but not jointly, pay their pro rata share of the
reasonable attorneys’ fees and other reasonable out-of-pocket costs and expenses
incurred by the prevailing party in such proceedings.
10.6. Amendments
and Waivers.
No term
of this Agreement may be amended and the observance of any term of this
Agreement shall not be waived (either generally or in a particular instance
and
either retroactively or prospectively), without the prior written consent of
the
Company and the Requisite Holders; provided,
however,
that
any provision hereof which impairs the rights or increases the obligations
of a
specific Investor disproportionately to other Investors shall not be amended
or
waived without the prior written consent of the Company and that particular
Investor; provided,
further,
that
any provision affecting the rights or obligations of the Escrow Agent shall
not
be waived or amended without the prior written consent of the Escrow
Agent.
Any
amendment or waiver effected in accordance with this Section
10.6
shall be
binding upon each holder of any Securities purchased under this Agreement at
the
time outstanding, each future holder of all such Securities, and the
Company.
24
10.7. Publicity.
Except
as
set forth below, no public release or announcement concerning the transactions
contemplated hereby shall be issued by the Company or the Investors without
the
prior consent of the Placement Agents (which consent shall not be unreasonably
withheld), except as such release or announcement may be required by law or
the
applicable rules or regulations of any securities exchange or securities market,
in which case the Company or the Investors, as the case may be, shall allow
the
Placement Agents to the extent reasonably practicable in the circumstances,
reasonable time to comment on such release or announcement in advance of such
issuance. By 8:30 a.m. (New York City time) on the trading day immediately
following the Signing Date, the Company shall issue a press release disclosing
the execution of this Agreement. No later than the fourth Business Day following
the Signing Date, the Company will file a Form 8-K, as applicable, attaching
the
press release described in the foregoing sentence as well as copies of the
Transaction Documents. By 8:30 a.m. (New York City time) on the trading day
immediately following the Closing Date, the Company shall issue a press release
disclosing the consummation of the transactions contemplated by this Agreement.
No later than the fourth Business Day following the Closing Date, the Company
will file a Form 8-K, as applicable, attaching the press release described
in
the foregoing sentence. In addition, the Company will make such other filings
and notices in the manner and time required by the SEC. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Investor,
or
include the name of any Investor in any filing with the SEC (other than the
Registration Statement and any exhibits to filings made in respect of this
transaction in accordance with periodic filing requirements under the 0000
Xxx)
without the prior written consent of such Investor, except to the extent such
disclosure is required by law or trading market regulations, in which case
the
Company shall provide the Investors with prior notice of such disclosure except
to the extent such prior notice is provided in this Agreement.
10.8. Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be interpreted as if it were written so as to be
enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law
which
renders any provision hereof prohibited or unenforceable in any
respect.
10.9. Entire
Agreement.
This
Agreement, including the Schedules, Exhibits and the Disclosure Schedules,
and
the other Transaction Documents, constitute the entire agreement among the
Company and the Investors with respect to the Private Placement and the subject
matter hereof and thereof and supersede all prior agreements and understandings,
both oral and written, between the Company and the Investors with respect to
the
Private Placement and the subject matter hereof and thereof; provided however,
the obligations of an Investor under any nondisclosure agreement (whether
written or oral) or confidentiality letter entered into by such Investor in
connection with the offering of the Securities shall continue to apply in
accordance with the terms thereof.
25
10.10. Further
Assurances.
The
parties shall execute and deliver all such further instruments and documents
and
take all such other actions as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained.
10.11. Governing
Law; Consent to Jurisdiction.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York located in New York County
and the United States District Court for the Southern District of New York
for
the purpose of any suit, action, proceeding or judgment relating to or arising
out of this Agreement and the transactions contemplated hereby. Service of
process in connection with any such suit, action or proceeding may be served
on
each party hereto anywhere in the world by the same methods as are specified
for
the giving of notices under this Agreement. Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. Each party hereto
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in such courts and irrevocably waives any claim that
any
such suit, action or proceeding brought in any such court has been brought
in an
inconvenient forum.
10.12.
Independent
Nature of Investor's Obligations and Rights.
The
obligations of each Investor under any Transaction Document are several and
not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. Nothing contained herein or in any
other Transaction Document and no action taken by any Investor pursuant hereto
or thereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents and the Company acknowledges that the Investors are not
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. Each Investor confirms
that it has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each
Investor shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or
out
of any other Transaction Documents, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such
purpose.
26
IN
WITNESS WHEREOF, the undersigned has executed this Purchase Agreement or caused
its duly authorized officers to execute this Purchase Agreement as of the date
first above written.
|
THE
EXPLORATION COMPANY OF DELAWARE,
INC.
By:
/s/
Xxxxx X.
Xxxxxx
Name:
Xxxxx
X. Xxxxxx
Title:
President
|
IN
WITNESS WHEREOF, the undersigned has executed this Purchase Agreement or caused
its duly authorized officers to execute this Purchase Agreement as of the date
first above written.
|
Date:
____________________
|
|
|
IF
AN INDIVIDUAL:
|
IF
A CORPORATION, PARTNERSHIP,
|
|
TRUST,
ESTATE OR OTHER ENTITY:
|
|
|
____________________________
|
|
|
(Signature)
|
____________________________
|
|
Print
name of entity
|
|
|
____________________________
|
|
|
(Printed
Name)
|
By:__________________________
|
|
Name:________________________
|
|
|
Title:_________________________
|
|
|
Address
for Notices:
____________________________
____________________________
____________________________
|
Address
for Notices:
____________________________
____________________________
____________________________
|
|
Address
for Delivery of Common Shares:
____________________________
____________________________
____________________________
|
Address
for Delivery of Common Shares:
____________________________
____________________________
____________________________
|
|
Taxpayer
Identification Number:
____________________________
|
Taxpayer
Identification Number:
____________________________
|
Aggregate
dollar amount of Common Shares committed
to
be purchased pursuant to the terms of the Agreement: $________________________
Number
of Common Shares committed to be
purchased
pursuant to the terms of the
Agreement:_______________________________
Note:
Each investor completed a copy of this signature page. A listing of investors
will be provided to the SEC upon request.
EXHIBIT
A
[FORM
OF
REGISTRATION RIGHTS AGREEMENT]
See
Exhibit 10.2
EXHIBIT
B
OPINION
OF COMPANY COUNSEL
1. The
Company is a corporation duly incorporated and validly existing under, and
by
virtue of, the laws of the State of Delaware and is in good standing under
such
laws. The Company has requisite corporate power to own and operate its
properties and assets, and to carry on its business as presently conducted.
2. The
Company has all requisite legal and corporate power to execute and deliver
the
Agreement and the Transaction Documents, to sell and issue the Common Stock
under the Agreement and to carry out and perform its obligations under the
terms
of the Agreement and the Transaction Documents.
3. The
shares of Common Stock have been duly authorized and when issued, delivered
and
paid for in accordance with the terms of the Agreement, will be validly issued,
fully paid and nonassessable.
4. All
corporate action on the part of the Company necessary for the authorization,
execution and delivery of the Agreement and the Transaction Documents by the
Company, the authorization, sale, issuance and delivery of the Common Stock
and
the performance by the Company of its obligations under the Agreement and the
Transaction Documents has been taken. The Agreement and the Transaction
Documents have been duly and validly executed and delivered by the Company
and
constitute valid and binding obligations of the Company, enforceable against
the
Company in accordance with their respective terms.
5. The
execution and delivery by the Company of the Agreement and the Transaction
Documents, the performance by the Company of its obligations under the Agreement
and the Transaction Documents, and the issuance of the Common Stock do not
violate any provision of the Certificate of Incorporation or Bylaws, or any
provision of the Delaware General Corporations Law, any applicable federal
or
Delaware state law, or rule or regulation known to us to be customarily
applicable to transactions of this nature. The execution and delivery by the
Company of the Agreement and the Transaction Documents, the performance by
the
Company of its obligations under the Agreement and the Transaction Documents,
and the issuance of the Common Stock do not violate, or constitute a default
under, any contract or agreement filed as an exhibit (or required to be filed
as
an exhibit) to the Company’s Form 10-K for the fiscal year ended December 31,
2005 with the Securities and Exchange Commission pursuant to Item 601(b)(10)
of
Regulation S-K to which the Company or any Subsidiary is a party or by which
the
Company or any Subsidiary is bound.
6. No
consent, approval or authorization of or designation, declaration or filing
with
any governmental authority on the part of the Company is required in connection
with the valid execution
and delivery of the Agreement or the Transaction Documents, the offer, sale
or
issuance of the Common Stock or the consummation by the Company of any other
transaction contemplated by the Agreement or the Transaction Documents, except
the filing of a Form D pursuant to Regulation D under the Securities
Act of 1933, as amended.
B-1
7. Subject
to the accuracy of the Investors’ representations in Section 6 of the Agreement,
the offer, sale and issuance of the Common Stock in conformity with the terms
of
the Agreement constitute transactions exempt from the registration requirements
of Section 5 of the Securities Act of 1933, as amended.
8. Except
as
identified in the Agreement, to our knowledge, there are no actions, suits,
proceedings or investigations pending against the Company or its properties
before any court or governmental agency nor, to our knowledge, has the Company
received any written threat thereof.
B-2
EXHIBIT
C
[ESCROW
AGREEMENT]
SCHEDULE
I
THE
ESCROW AGENT WIRE INSTRUCTIONS
FOR
ESCROW AMOUNT
The
Bank
of New York
ABA#
000000000
GLA
111-565
TAS
184152
Attn:
Xxxx X. Xxxxxxxxx-TXCO/XX Xxxxxxx Escrow
Please
include both the GLA & TAS numbers with the wire transfer. If there is only
one block for an account number, the two numbers can be on the same line but
should be separated by a slash, dash, or space. The wire may also be formatted
where the GLA is the account number and the TAS is a further
credit.
I-1
SCHEDULE
II
U.S.
ACCREDITED INVESTOR CERTIFICATE
As
required by state and federal securities laws, the following information must
be
obtained regarding the Investor’s accredited investor status:
If
the Investor is an individual, please answer the following
items:
|
¨
True
|
¨
False
|
(1)
|
The
Investor is a natural person whose net worth,1
either individually or jointly with such Investor’s spouse, exceeds
$1,000,000.
|
|
|
¨
True
|
¨
False
|
(2)
|
The
Investor is a natural person who had individual income in excess
of
$200,000, or joint income with such Investor’s spouse in excess of
$300,000, in each of 2004 and 2005 and reasonably expects to reach
the
same income level in 2006.2
|
|
|
¨
True
|
¨
False
|
(3)
|
The
Investor is a director or executive officer of the
Company.
|
If
the Investor is an entity (not an individual), please check each applicable
statement:
|
¨
|
(4)
|
The
Investor is a bank as defined in Section 3(a)(2) of the Securities
Act of
1933 (the “Securities Act”), or a 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;
|
||
|
¨
|
(5)
|
The
Investor is a broker or dealer registered pursuant to Section 15
of the
Securities Exchange Act of 1934;
|
||
|
¨
|
(6)
|
The
Investor is an insurance company as defined in Section 2(13) of the
Securities Act;
|
||
|
¨
|
(7)
|
The
Investor is 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;
|
||
|
¨
|
(8)
|
The
Investor is 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;
|
1 The
term
“net
worth”
means
the excess of total assets over total liabilities. In calculating “net
worth,”
the
Investor may include the estimated fair market value of the Investor’s principal
residence as an asset.
2 In
determining “income,”
the
Investor should (i) add to adjusted gross income any amounts attributable
to tax
exempt income received, losses claimed as a limited partner in any limited
partnership, deductions claimed for depletion, contributions to an XXX
or Xxxxx
retirement plan to the extent vested and any amount by which income from
long-term capital gains has been reduced in arriving at adjusted gross
income
and (ii) subtract from adjusted gross income any unrealized capital
gain.
II-1
|
¨
|
(9)
|
The
Investor is 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;
|
||
|
¨
|
(10)
|
The
Investor is an employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974 and (i) 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 (ii) the employee benefit plan
has total
assets in excess of $5,000,000, or (iii) if a self-directed plan,
the
investment decisions are made solely by persons that are accredited
investors;
|
||
|
¨
|
(11)
|
The
Investor is a private business development company as defined in
Section
202(a)(22) of the Investment Advisers Act of 1940;
|
||
|
¨
|
(12)
|
The
Investor is an organization described in Section 501(c)(3) of the
Internal
Revenue Code, a corporation, a Massachusetts or similar business
trust, a
partnership, or a limited liability company, not formed for the specific
purpose of acquiring Shares in the Company, with total assets in
excess of
$5,000,000;
|
||
|
¨
|
(13)
|
The
Investor is a trust, with total assets in excess of $5,000,000, not
formed
for the specific purpose of acquiring Shares in the Company, whose
purchase is directed by a person who has such knowledge and experience
in
financial and business matters that such person is capable of evaluating
the merits and risks of investing in the Shares of the
Company;
|
||
|
¨
|
(14)
|
The
Investor is an entity in which all of the equity owners qualify as
an
“accredited investor” under any of items (1) through (13) above. If the
Investor qualifies under this “accredited investor” category only, list
the equity owners of the Investor, their respective percentage interests
in the Investor and the item number above under which each such equity
owner qualifies as an “accredited investor” (including categories for
individuals listed above) and include a completed copy of this Certificate
for each such equity owner:
|
||
|
(Continue
on a separate piece of paper, if
necessary.)
|
II-2
THE
UNDERSIGNED ACKNOWLEDGES AND UNDERSTANDS THAT THE COMPANY IS RELYING ON HIS,
HER
OR ITS REPRESENTATIONS AND WARRANTIES SET FORTH ABOVE IN DETERMINING WHETHER
INVESTOR WILL BE PERMITTED TO INVEST IN THE COMPANY PURSUANT TO THE
AGREEMENT.
IN
WITNESS WHEREOF,
the
undersigned has/have executed and made effective this Accredited Investor
Certificate on this ________ day of _________, 2006.
|
ACCREDITED
INVESTOR:
|
|
|
If
an entity:
By:
________________________________
Name:
______________________________
Title:
_______________________________
|
|
| If an individual or individuals: | |
|
(Signature)
|
|
|
(Print
Name)
|
|
|
(Signature)
|
|
|
(Print
Name)
|
|
Note:
Each investor completed a copy of this schedule. A listing of investors will
be
provided to the SEC upon request.
II-3
SCHEDULE
III
INVESTOR’S
CERTIFICATE REGARDING PRESENT OWNERSHIP OF SECURITIES
(to
be completed by each Investor)
To: [The
Exploration Company of Delaware, Inc.]
The
Investor certifies that the information set out in this Certificate below
accurately describes the Investor’s present ownership of securities of [The
Exploration Company of Delaware, Inc.]
The
Investor either [check
appropriate box]:
| o |
owns
directly or indirectly, or exercises control or direction over, no
common
shares in the capital stock of the Company or securities convertible
into
common shares in the capital stock of the Company; or
|
|
| o |
owns
directly or indirectly, or exercises control or direction over, ________
common shares in the capital stock of the Company and convertible
securities entitling the Investor to acquire an additional ________
common shares in the capital stock of the
Company.
|
|
Affiliate
Status
The
Investor either [check
appropriate box]:
| o |
is
an “Affiliate” of the Company as defined in the Securities Exchange Act of
1934.
|
|
| o |
is
not an “Affiliate” of the Company.
|
EXECUTED
by the Investor at ________________________________ this
___
day
of
___________,
2006.
| If a corporation, partnership or other entity: | If an individual: |
|
Print Name of Investor |
|
|
|
|
|
|
Signature |
|
Print
name of entity
|
|
|
|
Jurisdiction of Residence |
|
|
|
|
|
|
|
Jurisdiction of Residence |
Note:
Each investor completed a copy of this schedule. A listing of investors will
be
provided to the SEC upon request.
III-1
SCHEDULES
TO PURCHASE AGREEMENT
BY
AND AMONG
THE
EXPLORATION COMPANY OF DELAWARE, INC. AND THE INVESTORS
Schedule
5.3
Capitalization,
etc.
Schedule
5.3(a):
| 1. |
Authorized
capital shares as of March 30,
2006:
|
Preferred
Stock, par value $0.01 per share: 10,000,000 authorized
Common
Stock, par value $0.01 per share: 50,000,000 authorized
| 2. |
Capital
shares issued and outstanding as of March 30,
2006:
|
29,862,230
shares of Common Stock
| 3. |
Number
of shares issuable and reserved for issuance pursuant to the Company’s
share plans as of December 31,
2005:
|
The
Company granted options to its officers, directors, and key employees under
its
1995 Flexible Incentive Plan (the “1995 Plan”), as amended, in prior years. The
1995 Plan was replaced during 2005 with the 2005 Stock Incentive Plan (the
“2005
Plan”). The 2005 Plan allows for the future award of a maximum number of shares
limited to 10% of the total number of then issued and outstanding shares of
common stock for issuance, reduced by shares issued under, and outstanding
grants issued under the 1995 Plan. These shares may be issued as the result
of
exercise of options granted or as restricted stock to management, directors,
and
key employees. At December 31, 2005, 2,937,990 shares were authorized for grant
and 981,990 shares remained available for grant. All currently outstanding
options have 10-year terms that vest and become fully exercisable based on
the
specific terms imposed as of the date of grant.
| 4. |
Options,
Warrants and Restricted Stock outstanding as of March 30,
2006:
|
Restricted
stock: 349,000 (this amount included in Item 2, above)
Options:
1,253,750
Warrants:
966,500
| 5. |
Voting
agreements, buy-sell agreements, etc.:
None
|
| 6. |
Registration
Rights:
|
| a. |
Registration
Rights Agreement relative to the Company’s May 2004 PIPES
transaction.
|
| b. |
Registration
Rights granted to Xxxx X. Xxxxx relative to his exercise in January,
2006
of warrants for the purchase of 133,333 shares of Common
Stock.
|
Schedule
5.3(b):
None
Schedule
5.3(c):
None
Schedule
5.4
Subsidiaries
| Parent: The Exploration Company of Delaware, Inc. | |
| Subsidiaries (all wholly owned): | Eagle Pass Well Service, Inc.
PPL
Operating, Inc.
Maverick
Gas Marketing, L.P.
Maverick
Dimmit Pipeline, L.P.
Paloma
Pipeline, L.P.
TXCO
Drilling Corp.
|
Schedule
5.6
Consents
and Filings
None
other than the filing of a Form D with the Securities and Exchange Commission
under the Securities Act of 1933 and with
certain states in which the filing of a Form D is necessary to perfect an
applicable exemption.
Schedule
5.9
No
Material Adverse Effect
On
March
20, 2006, the Company purchased a drilling rig at a cost of $4.3
million.
Schedule
5.11
Material
Contracts
None.
Schedule
5.12
Tax
Matters
None
other than an on-going franchise tax audit conducted by the Texas Comptroller
of
Public Accounts for 2002, 2003 and 2004.
