SECURITIES PURCHASE AGREEMENT
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LAURUS MASTER FUND, LTD.
AND
XXXXXXX PETROSEARCH, INC.
DATED: NOVEMBER 1, 2006
TABLE OF CONTENTS
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PAGE
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1. Agreement to Sell and Purchase . . . . . . . . . . . . . . . . . 1
2. Fees and Warrant . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Closing, Delivery and Payment. . . . . . . . . . . . . . . . . . 2
3.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Delivery. . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. Representations and Warranties of Xxxxxxx. . . . . . . . . . . . 2
4.1 Organization, Good Standing and Qualification . . . . . . . 2
4.2 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 3
4.3 Capitalization; Voting Rights . . . . . . . . . . . . . . . 3
4.4 Authorization; Binding Obligations. . . . . . . . . . . . . 4
4.5 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 4
4.6 Agreements; Action. . . . . . . . . . . . . . . . . . . . . 4
4.7 Obligations to Related Parties. . . . . . . . . . . . . . . 5
4.8 Changes . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.9 Title to Properties and Assets; Liens, Etc. . . . . . . . . 6
4.10 Intellectual Property . . . . . . . . . . . . . . . . . . . 7
4.11 Compliance with Other Instruments . . . . . . . . . . . . . 7
4.12 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 7
4.13 Tax Returns and Payments. . . . . . . . . . . . . . . . . . 8
4.14 Employees . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.15 Voting Rights . . . . . . . . . . . . . . . . . . . . . . . 8
4.16 Compliance with Laws; Permits . . . . . . . . . . . . . . . 9
4.17 Environmental and Safety Laws . . . . . . . . . . . . . . . 9
4.18 Valid Offering. . . . . . . . . . . . . . . . . . . . . . . 9
4.19 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . 9
4.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.21 Dilution. . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.22 Patriot Act.. . . . . . . . . . . . . . . . . . . . . . . . 10
4.23 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Representations and Warranties of the Purchaser. . . . . . . . . 10
5.1 No Shorting . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Requisite Power and Authority . . . . . . . . . . . . . . . 11
5.3 Investment Representations and Covenants. . . . . . . . . . 11
5.4 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6. Covenants of Xxxxxxx . . . . . . . . . . . . . . . . . . . . . . 13
6.1 Reporting Requirements. . . . . . . . . . . . . . . . . . . 13
6.2 Use of Funds. . . . . . . . . . . . . . . . . . . . . . . . 14
PAGE
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6.3 Access to Facilities. . . . . . . . . . . . . . . . . . . . 14
6.4 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.6 Intellectual Property . . . . . . . . . . . . . . . . . . . 16
6.7 Properties. . . . . . . . . . . . . . . . . . . . . . . . . 16
6.8 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 16
6.9 Required Approvals. . . . . . . . . . . . . . . . . . . . . 16
6.10 Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.11 Margin Stock. . . . . . . . . . . . . . . . . . . . . . . . 17
6.12 Financing Right of First Refusal. . . . . . . . . . . . . . 17
6.13 Authorization and Reservation of Shares . . . . . . . . . . 18
6.14 Summaries; Reports. . . . . . . . . . . . . . . . . . . . . 18
6.15 Registration Rights . . . . . . . . . . . . . . . . . . . . 18
7. Covenants of the Purchaser . . . . . . . . . . . . . . . . . . . 19
7.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 19
7.2 Limitation on Acquisition of Common Stock of Xxxxxxx. . . . 19
8. Covenants of Xxxxxxx and the Purchaser Regarding Indemnification 19
8.1 Xxxxxxx Indemnification . . . . . . . . . . . . . . . . . . 19
8.2 Purchaser's Indemnification.. . . . . . . . . . . . . . . . 20
9. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.1 Governing Law, Jurisdiction and Waiver of Jury Trial. . . . 20
9.2 Severability. . . . . . . . . . . . . . . . . . . . . . . . 21
9.3 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.4 Successors. . . . . . . . . . . . . . . . . . . . . . . . . 21
9.5 Entire Agreement; Maximum Interest. . . . . . . . . . . . . 22
9.6 Amendment and Waiver. . . . . . . . . . . . . . . . . . . . 22
9.7 Delays or Omissions . . . . . . . . . . . . . . . . . . . . 22
9.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.9 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . 23
9.10 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . 24
9.11 Facsimile Signatures; Counterparts. . . . . . . . . . . . . 24
9.12 Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . 24
9.13 Construction. . . . . . . . . . . . . . . . . . . . . . . . 24
LIST OF EXHIBITS
Form of Term Note . . . . . . Exhibit A
Form of Warrant . . . . . . . Exhibit B
Form Form of Opinion. . . . . Exhibit C
Form of Escrow Agreement. . . Exhibit D
LIST OF SCHEDULES
Schedule 4.3 Capitalization
Schedule 4.5 Liabilities
Schedule 4.6 Agreements
Schedule 4.7 Obligations to Related Parties Schedule 4.8(b) Resignations
Schedule 4.9 Title to Properties and Assets, Liens, Etc.
Schedule 4.11 Compliance with Other Instruments
Schedule 4.12 Litigation
Schedule 4.13 Tax Returns and Payments
Schedule 4.14 Employees
Schedule 4.15 Voting Rights
Schedule 4.17 Environmental
Schedule 6.9 Required Approvals
Schedule 9.12 Brokers
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of November 1, 2006, by and between XXXXXXX PETROSEARCH, INC., a Texas
corporation ("Xxxxxxx") and LAURUS MASTER FUND, LTD., a Cayman Islands company
(the "Purchaser").
RECITALS
WHEREAS, Xxxxxxx has authorized the sale to the Purchaser of a Secured Term
Note in the aggregate principal amount of Eight Million Three Hundred Thousand
Dollars ($8,300,000) in the form of Exhibit A hereto (as amended, modified
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and/or supplemented from time to time, the "Note");
WHEREAS, Xxxxxxx wishes to issue to the Purchaser a warrant in the form of
Exhibit B hereto (as amended, modified and/or supplemented from time to time,
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the "Warrant") to purchase up to 4,500 shares of Xxxxxxx'x common stock, $0.001
par value per share (the "Xxxxxxx Common Stock");
WHEREAS, the Purchaser desires to purchase the Note and the Warrant on the
terms and conditions set forth herein; and
WHEREAS, Xxxxxxx desires to issue and sell the Note and to issue and sell
the Warrant to the Purchaser on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Sell and Purchase. Pursuant to the terms and conditions
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set forth in this Agreement, on the Closing Date (as defined in Section 3),
Xxxxxxx shall sell to the Purchaser, and the Purchaser shall purchase from
Xxxxxxx, the Note. The sale of the Note on the Closing Date shall be known as
the "Offering." The Note will mature on the Maturity Date (as defined in the
Note). Collectively, the Note, the Warrant, and the Xxxxxxx Common Stock
issuable upon exercise of the Warrant are referred to as the "Securities."
2. Fees and Warrant. On the Closing Date:
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(a) Xxxxxxx will issue and deliver to the Purchaser the Warrant to
purchase up to 4,500 shares of Xxxxxxx Common Stock (subject to
adjustment as set forth therein) in connection with the Offering, pursuant
to Section 1 hereof. All the representations, covenants, warranties,
undertakings, and indemnification, and other rights made or granted to or
for the benefit of the Purchaser by Xxxxxxx are hereby also made and
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granted for the benefit of the holder of the Warrant and shares of
Xxxxxxx Common Stock issuable upon exercise of the Warrant (the "Warrant
Shares").
(b) Subject to the terms of Section 2(c) below, Xxxxxxx shall pay
to Laurus Capital Management, LLC, the manager of the Purchaser, a
closing payment of $290,500.00. The foregoing fee is referred to herein as
the "Closing Payment."
(c) Xxxxxxx shall reimburse the Purchaser for its reasonable
expenses (including legal fees and expenses) incurred in connection
with the preparation and negotiation of this Agreement and the Related
Agreements (as hereinafter defined), and expenses incurred in connection
with the Purchaser's due diligence review of Xxxxxxx and all related
matters. Amounts required to be paid under this Section 2(c) will be paid
on the Closing Date.
(d) The Closing Payment and the expenses referred to in the
preceding Section 2(e) (net of deposits previously paid by Xxxxxxx)
shall be paid at closing out of funds held pursuant to the Escrow Agreement
(as defined below) and a disbursement letter (the "Disbursement Letter").
3. Closing, Delivery and Payment.
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3.1 Closing. Subject to the terms and conditions herein, the
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closing of the transactions contemplated hereby (the "Closing") shall take place
on the date hereof, at such time or place as Xxxxxxx and the Purchaser may
mutually agree (such date is hereinafter referred to as the "Closing Date").
3.2 Delivery. Pursuant to the Escrow Agreement, at the Closing on
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the Closing Date, Xxxxxxx will deliver to the Purchaser, among other things, the
Note and the Warrant, and the Purchaser will deliver to Xxxxxxx, among other
things, the amounts set forth in the Disbursement Letter by certified funds or
wire transfer. Xxxxxxx hereby acknowledges and agrees that Purchaser's
obligation to purchase the Note from Xxxxxxx on the Closing Date shall be
contingent upon the satisfaction (or waiver by the Purchaser in its sole
discretion) of the items and matters set forth in the closing checklist provided
by the Purchaser to Xxxxxxx on or prior to the Closing Date and those items and
matters set forth in the conditions of funding letter dated as of the date
hereof between Petrosearch Energy Corp., a Nevada corporation "Petrosearch",
Xxxxxxx and the Purchaser.
4. Representations and Warranties of Xxxxxxx. Xxxxxxx hereby represents
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and warrants to the Purchaser as follows:
4.1 Organization, Good Standing and Qualification. Xxxxxxx is a
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corporation duly organized, validly existing and in good standing under the
Applicable Laws of its jurisdiction of organization. For purposes of this
Agreement, "Applicable Laws" means all present laws, statutes, regulations,
treaties, judgments and decrees in relation to an entity, and all requirements,
requests, official directives, consents, approvals, authorizations, guidelines,
rules, orders and policies of any governmental or regulatory authority
applicable to the entity in a jurisdiction in which (i) it is incorporated, (ii)
its assets are located, (iii) it conducts business, and/or (iv) its stock is
traded, if applicable. Xxxxxxx has the corporate power and authority to
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own and operate its properties and assets and, insofar as it is or shall be a
party thereto, to (1) execute and deliver (i) this Agreement, (ii) the Note and
the Warrant to be issued in connection with this Agreement, (iii) the Master
Security Agreement dated as of the date hereof among Xxxxxxx and the Purchaser
(as amended, modified and/or supplemented from time to time, the "Master
Security Agreement"), (iv) the Deed of Trust, Mortgage, Assignment, Security
Agreement, Fixture Filing, and Financing Statement dated as of the date hereof
made by Xxxxxxx in favor of the Purchaser (as amended, modified and/or
supplemented from time to time, the "Deed of Trust"), (v) the Stock Pledge
Agreement dated as of the date hereof between Petrosearch and the Purchaser (as
amended, modified and/or supplemented from time to time, the "Petrosearch Stock
Pledge Agreement"), (vi) the Funds Escrow Agreement dated as of the date hereof
among Xxxxxxx, the Purchaser and the escrow agent referred to therein,
substantially in the form of Exhibit D hereto (as amended, modified and/or
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supplemented from time to time, the "Escrow Agreement"), (vii) the Collateral
Assignment dated as of the date hereof between Petrosearch and the Purchaser,
and (viii) all other documents, instruments and agreements entered into in
connection with the transactions contemplated hereby and thereby (the preceding
clauses (ii) through (viii), collectively, the "Related Agreements"); (2) issue
and sell the Note; (3) issue and sell the Warrant and the Warrant Shares; and
(4) carry out the provisions of this Agreement and the Related Agreements and to
carry on its business as presently conducted. Xxxxxxx is duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
all jurisdictions in which the nature or location of its activities and of its
properties (both owned and leased) makes such qualification necessary, except
for those jurisdictions in which failure to do so has not, or could not
reasonably be expected to have a Material Adverse Effect. As used in this
Agreement and the Related Agreements, the term "Material Adverse Effect" shall
mean a change, occurrence or development that has had or could reasonably be
expected to have, either individually or in the aggregate, a material adverse
effect on the business, assets, liabilities, condition (financial or otherwise),
properties, operations or prospects of Xxxxxxx, taken individually and as a
whole (a "Material Adverse Effect").
4.2 Subsidiaries. Xxxxxxx does not have any subsidiaries. For the
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purpose of this Agreement, a "Subsidiary" of any person or entity means (i) a
corporation or other entity whose shares of stock or other ownership interests
having ordinary voting power (other than stock or other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the directors of such corporation, or other persons or entities
performing similar functions for such person or entity, are owned, directly or
indirectly, by such person or entity or (ii) a corporation or other entity in
which such person or entity owns, directly or indirectly, more than 50% of the
equity interests at such time.
4.3 Capitalization; Voting Rights.
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(a) With respect to Xxxxxxx, the authorized capital stock as of
the Closing Date consists of 1,000,000 shares, of which 1,000,000 are
shares of Xxxxxxx Common Stock, par value $.001 per share, and 5,500 shares
of which are issued and outstanding.
(b) Except as disclosed on Schedule 4.3, other than the shares
which may be granted pursuant to this Agreement and the Related
Agreements, as of the Closing Date there will be no (A) securities of
Xxxxxxx convertible into, or exchangeable or
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exercisable for, shares of capital stock or other voting securities of
Xxxxxxx; or (B) outstanding options, warrants, rights (including conversion
or preemptive rights and rights of first refusal), commitments, proxy or
stockholder agreements, arrangements or agreements to which Xxxxxxx is a
party or by which it is bound, in any case relating to the issued or
unissued capital stock of Xxxxxxx or obligating Xxxxxxx to issue, deliver,
sell, purchase, redeem, repurchase or acquire, or cause to be issued,
delivered, sold, purchased, redeemed, repurchased or acquired, shares of
capital stock or other voting securities of Xxxxxxx, or obligating Xxxxxxx
to grant, extend or enter into any such option, warrant, call, right,
commitment, arrangement or agreement. Except as disclosed on Schedule 4.3,
neither the offer, issuance or sale of the Note or the Warrant, or the
issuance of any of the Warrant Shares, nor the consummation of any
transaction contemplated hereby will result in a change in the price or
number of any securities of Xxxxxxx outstanding, under anti-dilution or
other similar provisions contained in or affecting any such securities.
(c) All issued and outstanding shares of Xxxxxxx'x Common Stock:
(i) have been duly authorized and validly issued and are fully paid
and nonassessable; and (ii) were issued in compliance with all applicable
state and federal laws concerning the issuance of securities.
(d) The rights, preferences, privileges and restrictions of the
shares of the Xxxxxxx'x common stock are as stated in Xxxxxxx'x
Certificate or Articles of Incorporation (Xxxxxxx'x "Charter"). The Warrant
Shares have been duly and validly reserved for issuance. When issued in
compliance with the provisions of this Agreement and Xxxxxxx'x Charter, the
Warrant Shares will be validly issued, fully paid and nonassessable, and
will be free of any liens or encumbrances.
4.4 Authorization; Binding Obligations. All corporate action on
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the part of Xxxxxxx (including its respective officers and directors) necessary
for the authorization of this Agreement and the Related Agreements, the
performance of all obligations of Xxxxxxx hereunder and under the other Related
Agreements at the Closing and, the authorization, sale, issuance and delivery of
the Note and the Warrant has been taken or will be taken prior to the Closing.
This Agreement and the Related Agreements, when executed and delivered, will be
valid and binding obligations of Xxxxxxx, enforceable against Xxxxxxx in
accordance with their terms.
The sale of the Note is not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with. The
issuance of the Warrant and the subsequent exercise of the Warrant for Warrant
Shares are not and will not be subject to any preemptive rights or rights of
first refusal that have not been properly waived or complied with.
4.5 Liabilities. Except as set forth in Schedule 4.5, Xxxxxxx does
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not have any liabilities.
4.6 Agreements; Action. Except as set forth on Schedule 4.6:
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(a) there are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees
to which Xxxxxxx is a party or by which it is bound which may involve: (i)
obligations (contingent or otherwise) of, or payments to, Xxxxxxx; or (ii)
the transfer or license of any patent, copyright, trade secret or other
proprietary right to or from Xxxxxxx (other than licenses arising from the
purchase of "off the shelf" or other standard products); or (iii)
provisions restricting the development, manufacture or distribution of
Xxxxxxx'x products or services; or (iv) indemnification by Xxxxxxx with
respect to infringements of proprietary rights; and
(b) since its formation (the "Formation Date"), Xxxxxxx has not:
(i) declared or paid any dividends, or authorized or made any
distribution upon or with respect to any class or series of its capital
stock; (ii) incurred any indebtedness for money borrowed or any other
liabilities; (iii) made any loans or advances to any person or entity; or
(iv) sold, exchanged or otherwise disposed of any of its assets or rights.
4.7 Obligations to Related Parties. Except as set forth on
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Schedule 4.7,
(a) there are no obligations of Xxxxxxx to officers, directors,
stockholders or employees of Xxxxxxx other than (i) for payment of
salary for services rendered; and (ii) reimbursement for reasonable
expenses incurred on behalf of Xxxxxxx; and
(b) none of the officers, directors or, key employees or
stockholders of Xxxxxxx or any members of their immediate families,
are indebted to Xxxxxxx, individually or in the aggregate, or have any
direct or indirect ownership interest in any firm or corporation with which
Xxxxxxx is affiliated or with which Xxxxxxx has a business relationship, or
any firm or corporation which competes with Xxxxxxx, other than passive
investments in publicly traded companies (representing less than one
percent (1%) of such company) which may compete with Xxxxxxx. Except as
described above, no officer, director or stockholder of Xxxxxxx, or any
member of their immediate families, is, directly or indirectly, interested
in any material contract with Xxxxxxx and no agreements, understandings or
proposed transactions are contemplated between Xxxxxxx and any such person.
Except as set forth on Schedule 4.7, Xxxxxxx is not a guarantor or
indemnitor of any indebtedness of any other person or entity.
4.8 Changes. Since the Formation Date, except as disclosed in any
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Schedule to this Agreement or to any of the Related Agreements, there has not
been:
(a) any change in the business, assets, liabilities, condition
(financial or otherwise), properties, operations or prospects of
Xxxxxxx;
(b) except as set forth on Schedule 4.8(b) hereto, any resignation
or termination of any officer, key employee or group of employees of
Xxxxxxx;
(c) any change in the contingent obligations of Xxxxxxx by way of
guaranty, endorsement, indemnity, warranty or otherwise;
(d) any damage, destruction or loss, whether or not covered by
insurance, to any of Xxxxxxx'x properties or assets;
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(e) any waiver by Xxxxxxx of a right or of a debt owed to it;
(f) any direct or indirect loans made by Xxxxxxx to any
stockholder, employee, officer or director of Xxxxxxx;
(g) any change in any compensation arrangement or agreement with
any employee, officer, director or stockholder of Xxxxxxx;
(h) any declaration or payment of any dividend or other
distribution of the assets of Xxxxxxx;
(i) any labor organization activity related to Xxxxxxx;
(j) any debt, obligation or liability incurred, assumed or
guaranteed by Xxxxxxx;
(k) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets owned by Xxxxxxx;
(l) any change in any agreement to which Xxxxxxx is a party or by
which either Xxxxxxx is bound;
(m) any other event or condition of any character that, either
individually or in the aggregate, has had, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect; or
(n) any arrangement or commitment by Xxxxxxx to do any of the acts
described in subsection (a) through (m) above.
4.9 Title to Properties and Assets; Liens, Etc. Except as set
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forth on Schedule 4.9:
(a) Xxxxxxx has good and indefeasible title to all of its
properties and assets, including but not limited to its oil and gas
leasehold interests, free and clear of all liens, encumbrances, or adverse
claims other than Permitted Encumbrances (as defined in the Deed of Trust)
and of all impediments to the use of such properties and assets in
Xxxxxxx'x business;
(b) the leases, contracts, servitudes and other agreements forming
a part of Xxxxxxx'x oil and gas properties are in full force and
effect. All rents, royalties and other payments due and payable under such
leases, contracts, servitudes and other agreements, or otherwise attendant
to the ownership or operation of Xxxxxxx'x oil and gas properties, have
been properly and timely paid. Xxxxxxx is not in default with respect to
its obligations (and Xxxxxxx is not aware of any default by any third party
with respect to such third party's obligations) under any such leases,
contracts, servitudes and other agreements, or otherwise attendant to the
ownership or operation of any part of Xxxxxxx'x oil and gas properties; and
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(c) all facilities, machinery, equipment, fixtures, vehicles and
other properties owned, leased or used by Xxxxxxx are in good
operating condition and repair and are reasonably fit and usable for the
purposes for which they are being used.
4.10 Intellectual Property.
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(a) Xxxxxxx owns or possesses sufficient legal rights to all
patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information and other proprietary rights and processes
necessary for its business as now conducted and as presently proposed to be
conducted (the "Intellectual Property"), without any known infringement of
the rights of others. There are no outstanding options, licenses or
agreements of any kind relating to the foregoing proprietary rights, nor is
Xxxxxxx bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and other proprietary
rights and processes of any other person or entity other than such licenses
or agreements arising from the purchase of "off the shelf" or standard
products.
(b) Xxxxxxx has not received any communications alleging that
Xxxxxxx has violated any of the patents, trademarks, service marks,
trade names, copyrights or trade secrets or other proprietary rights of any
other person or entity, nor is Xxxxxxx aware of any basis therefor.
(c) Xxxxxxx does not believe it is or will be necessary to utilize
any inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by Xxxxxxx, except for inventions,
trade secrets or proprietary information that have been rightfully assigned
to Xxxxxxx.
4.11 Compliance with Other Instruments. Except as set forth on
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Schedule 4.11, Xxxxxxx is not in violation or default of (i) any term of its
Charter or Bylaws, or (ii) any provision of any indebtedness, mortgage,
indenture, contract, agreement or instrument to which it is party or by which it
is bound or of any judgment, decree, order or writ, which violation or default.
The execution, delivery and performance of and compliance with this Agreement
and the Related Agreements to which it is a party, and the issuance and sale of
the Note by Xxxxxxx and the other Securities by Xxxxxxx pursuant hereto and
thereto, will not, with or without the passage of time or giving of notice,
result in any such violation, or be in conflict with or constitute a default
under any such term or provision, or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of
Xxxxxxx or the suspension, revocation, impairment, forfeiture or nonrenewal of
any permit, license, authorization or approval applicable to Xxxxxxx, its
business or operations or any of its assets or properties.
4.12 Litigation. Except as set forth on Schedule 4.12 hereto,
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there is no action, suit, proceeding or investigation pending or currently
threatened against Xxxxxxx that prevents Xxxxxxx from entering into this
Agreement or the other Related Agreements, or from consummating the transactions
contemplated hereby or thereby, or any change in the current equity ownership of
Xxxxxxx, nor is Xxxxxxx aware that there is any basis to assert any of the
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foregoing. Xxxxxxx is not a party to or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by
Xxxxxxx currently pending or which Xxxxxxx intends to initiate.
4.13 Tax Returns and Payments. Xxxxxxx has timely filed all tax
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returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and all other
taxes due and payable by Xxxxxxx on or before the Closing, have been paid or
will be paid prior to the time they become delinquent. Except as set forth on
Schedule 4.13, Xxxxxxx has not been advised:
(a) that any of its returns, federal, state or other, have been or
are being audited as of the date hereof; or
(b) of any adjustment, deficiency, assessment or court decision in
respect of its federal, state or other taxes.
No liability for any tax to be imposed upon Xxxxxxx'x properties or assets as of
the date of this Agreement exists that is not adequately provided for.
4.14 Employees. Except as set forth on Schedule 4.14, Xxxxxxx does
---------
not have any collective bargaining agreements with any of its employees. There
is no labor union organizing activity pending or threatened with respect to
Xxxxxxx. Except as disclosed on Schedule 4.14, Xxxxxxx is not a party to, or
bound by, any currently effective employment contract, deferred compensation
arrangement, bonus plan, incentive plan, profit sharing plan, retirement
agreement or other employee compensation plan or agreement. No employee of
Xxxxxxx, nor any consultant with whom Xxxxxxx has contracted, is in violation of
any term of any employment contract, proprietary information agreement or any
other agreement relating to the right of any such individual to be employed by,
or to contract with, Xxxxxxx because of the nature of the business to be
conducted by Xxxxxxx; and the continued employment by Xxxxxxx of its present
employees, and the performance of Xxxxxxx'x contracts with its independent
contractors, will not result in any such violation. Xxxxxxx is not aware that
any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency that would
interfere with their duties to Xxxxxxx. Xxxxxxx has not received any notice
alleging that any such violation has occurred. Except for employees who have a
current effective employment agreement with Xxxxxxx, no employee of Xxxxxxx has
been granted the right to continued employment by Xxxxxxx or to any material
compensation following termination of employment with Xxxxxxx. Except as set
forth on Schedule 4.14, Xxxxxxx is not aware that any officer, key employee or
group of employees intends to terminate his, her or their employment with
Xxxxxxx, nor does Xxxxxxx have a present intention to terminate the employment
of any officer, key employee or group of employees.
4.15 Voting Rights. Except as set forth on Schedule 4.15, no
--------------
stockholder of Xxxxxxx has entered into any agreement with respect to the voting
of equity securities of Xxxxxxx.
8
4.16 Compliance with Laws; Permits. Xxxxxxx is not in violation of
-----------------------------
any provision of the Sarbanes Oxley Act of 2002 or any applicable statute, rule,
regulation, order or restriction of any domestic or foreign government or any
Applicable Law in respect of the conduct of its business or the ownership of its
properties which has had, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. No governmental
orders, permissions, consents, approvals or authorizations are required to be
obtained and no registrations or declarations are required to be filed in
connection with the execution and delivery of this Agreement or any other
Related Agreement and the issuance of any of the Securities, except such as have
been duly and validly obtained or filed, or with respect to any filings that
must be made after the Closing, as will be filed in a timely manner. Xxxxxxx, or
to the extent applicable, the operators of the Xxxxxxx assets, has all material
franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it.
4.17 Environmental and Safety Laws. Xxxxxxx is not in violation of
-----------------------------
any applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.
4.18 Valid Offering. Assuming the accuracy of the representations
--------------
and warranties of the Purchaser contained in this Agreement, the offer, sale and
issuance of the Securities will be exempt from the prospectus and registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws.
4.19 Full Disclosure. Xxxxxxx has provided the Purchaser with all
---------------
information requested by the Purchaser in connection with its decision to
purchase the Note and the Warrant, including all information Xxxxxxx believes is
reasonably necessary to make such investment decision. Neither this Agreement,
the Related Agreements, the exhibits and schedules hereto and thereto nor any
other document delivered by Xxxxxxx to Purchaser or its attorneys or agents in
connection herewith or therewith or with the transactions contemplated hereby or
thereby, contain any untrue statement of a material fact nor omit to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances in which they are made, not misleading.
Any financial projections and other estimates provided to the Purchaser by
Xxxxxxx were based on Xxxxxxx'x experience in the industry and on assumptions of
fact and opinion as to future events which Xxxxxxx, at the date of the issuance
of such projections or estimates, believed to be reasonable.
4.20 Insurance. Intentionally omitted.
---------
4.21 Dilution. Xxxxxxx specifically acknowledges that its
--------
obligation to issue the shares of Xxxxxxx Common Stock upon exercise of the
Warrant is binding upon Xxxxxxx and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of Xxxxxxx.
9
4.22 Patriot Act. Xxxxxxx certifies that it has not been
------------
designated, nor is or shall be owned or controlled, by a "suspected terrorist"
as defined in Executive Order 13224. Xxxxxxx hereby acknowledges that the
Purchaser seeks to comply with all applicable laws concerning money laundering
and related activities. In furtherance of those efforts, Xxxxxxx hereby
represents, warrants and covenants that: (i) none of the cash or property that
Xxxxxxx will pay or will contribute to the Purchaser has been or shall be
derived from, or related to, any activity that is deemed criminal under United
States law; and (ii) no contribution or payment by Xxxxxxx to the Purchaser, to
the extent that they are within Xxxxxxx'x control shall cause the Purchaser to
be in violation of the United States Bank Secrecy Act, the United States
International Money Laundering Control Act of 1986 or the United States
International Money Laundering Abatement and Anti-Terrorist Financing Act of
2001. Xxxxxxx shall promptly notify the Purchaser if any of these
representations, warranties or covenants ceases to be true and accurate
regarding Xxxxxxx. Xxxxxxx shall provide the Purchaser all additional
information regarding Xxxxxxx that the Purchaser deems necessary or convenient
to ensure compliance with all applicable laws concerning money laundering and
similar activities. Xxxxxxx understands and agrees that if at any time it is
discovered that any of the foregoing representations, warranties or covenants
are incorrect, or if otherwise required by Applicable Law or regulation related
to money laundering or similar activities, the Purchaser may undertake
appropriate actions to ensure compliance with Applicable Law or regulation,
including but not limited to segregation and/or redemption of the Purchaser's
investment in Xxxxxxx. Xxxxxxx further understands that the Purchaser may
release confidential information about Xxxxxxx and, if applicable, any
underlying beneficial owners, to proper authorities if the Purchaser, in its
sole discretion, determines that it is in the best interests of the Purchaser in
light of any Applicable Law including the relevant rules and regulations under
the laws set forth in subsection (ii) above.
4.23 ERISA. Based upon the Employee Retirement Income Security Act
-----
of 1974 ("ERISA"), and the regulations and published interpretations thereunder:
-----
(i) Xxxxxxx has not engaged in any Prohibited Transactions (as defined in
Section 406 of ERISA and Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code")); (ii) Xxxxxxx has met all applicable minimum funding
----
requirements under Section 302 of ERISA in respect of its plans; (iii) Xxxxxxx
does not have any knowledge of any event or occurrence which would cause the
Pension Benefit Guaranty Corporation to institute proceedings under Title IV of
ERISA to terminate any employee benefit plan(s); (iv) Xxxxxxx does not have any
fiduciary responsibility for investments with respect to any plan existing for
the benefit of persons other than Xxxxxxx'x or such Subsidiary's employees; and
(v) Xxxxxxx has not withdrawn, completely or partially, from any multi-employer
pension plan so as to incur liability under the Multiemployer Pension Plan
Amendments Act of 1980.
5. Representations and Warranties of the Purchaser. The Purchaser
---------------------------------------------------
hereby represents and warrants to Xxxxxxx as follows (such representations and
warranties do not lessen or obviate the representations and warranties of
Xxxxxxx set forth in this Agreement):
5.1 No Shorting. Neither the Purchaser nor any of its affiliates
-----------
or investment partners has caused, nor will cause, any person or entity to
directly engage in "short sales" of Xxxxxxx'x or Petrosearch's common stock as
long as the Note is outstanding.
10
5.2 Requisite Power and Authority. The Purchaser has all necessary
------------------------------
power and authority under all applicable provisions of law to execute and
deliver this Agreement and the Related Agreements and to carry out their
provisions. All corporate action on the Purchaser's part required for the lawful
execution and delivery of this Agreement and the Related Agreements have been or
will be effectively taken prior to the Closing. Upon their execution and
delivery, this Agreement and the Related Agreements will be valid and binding
obligations of the Purchaser, enforceable in accordance with their terms,
except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; and
(b) as limited by general principles of equity that restrict the
availability of equitable and legal remedies.
5.3 Investment Representations and Covenants.
-------------------------------------------
(a) The Purchaser is resident in the jurisdiction of the Cayman
Islands.
(b) The Purchaser is acquiring the Securities for investment only
and not with a view to resale or distribution in violation of any
securities laws.
(c) The Purchaser is not a party to, and is not acting in concert
with a person who is party to: (A) an agreement to transfer the
Purchaser's legal or beneficial interest in the Securities; or (B) an
agreement to grant a participating interest in the Securities.
(d) As the Securities purchased hereunder are subject to resale
restrictions under the Securities Act, the Purchaser shall comply with
all securities laws concerning any resale of the Securities purchased
hereunder and shall consult with his, her or its own legal advisors with
respect to such compliance; the Purchaser acknowledges that the Securities
may only be resold pursuant to Regulation S under the Securities Act,
pursuant to registration under the Securities Act, or pursuant to another
available exemption from registration; and that Xxxxxxx is obligated by
this Agreement to refuse to register any transfers not made in accordance
with the foregoing.
(e) If required by applicable securities laws, the Purchaser will
execute, deliver, file and otherwise assist Xxxxxxx in filing such
reports, undertakings and other documents with respect to the issuance of
the Securities as may be required.
(f) The Purchaser is purchasing the Securities as principal for
its own account and not as a nominee or agent.
(g) The Purchaser is an accredited investor within the meaning of
Regulation D under the Securities Act.
(h) The Purchaser understands that the Securities are being
offered and sold pursuant to an exemption from registration contained
in the Securities Act based in part upon the Purchaser's representations
contained in this Agreement, including, without
11
limitation, that the Purchaser is an "accredited investor" within the
meaning of Regulation D under the Securities Act.
(i) The Purchaser confirms that it has received or has had full
access to all the information it considers necessary or appropriate to
make an informed investment decision with respect to the Note and the
Warrant to be purchased by it under this Agreement and the Warrant Shares
acquired by it upon the exercise of the Warrant. The Purchaser further
confirms that it has had an opportunity to ask questions and receive
answers from Xxxxxxx regarding Xxxxxxx'x business, management and financial
affairs and the terms and conditions of the Offering, the Note, the Warrant
and the Securities and to obtain additional information (to the extent
Xxxxxxx possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify any information furnished to the
Purchaser or to which the Purchaser had access.
(j) The Purchaser understands that the Securities have not been
and will not be registered under the Securities Act or any applicable
state securities laws and that the sale contemplated hereby is being made
in reliance on an exemption from registration therefrom.
(k) The Purchaser acknowledges that the Purchaser has not
purchased the Securities as a result of any general solicitation or
general advertising (as those terms are used in Regulation D), including
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar media, or broadcast over radio, television
or other forms of telecommunication, including electronic display (such as
the Internet), or any seminar or meeting whose attendees have been invited
by general solicitation or general advertising.
(l) The Purchaser has substantial experience in evaluating and
investing in private placement transactions of securities in companies
similar to Xxxxxxx so that it is capable of evaluating the merits and risks
of its investment in Xxxxxxx and has the capacity to protect its own
interests. The Purchaser must bear the economic risk of this investment
until the Securities are sold.
(m) By reason of its, or of its management's business and
financial experience, the Purchaser has the capacity to evaluate the
merits and risks of its investment in the Note, the Warrant and the
Securities and to protect its own interests in connection with the
transactions contemplated in this Agreement and the Related Agreements.
(n) The Purchaser has not entered into any agreement which would
entitle any person to a claim against Xxxxxxx for a brokerage
commission, finder's fee or any like payment in respect of the issuance of
the Securities.
(o) The Purchaser is not a "U.S. person" as that term is defined
in Rule 902 of Regulation S under the Securities Act, nor is the
Purchaser acquiring the Securities for the account or benefit of any U.S.
person, and at the time of the purchase of the Securities, the Purchaser is
outside of the United States.
12
5.4 Legends.
-------
(a) Each Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT OR THE UNDERLYING
SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO XXXXXXX PETROSEARCH, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(b) The Warrant Shares, if not issued by the Deposit Withdrawal
Agent Commission system, shall bear a legend which shall be in
substantially the following form until such shares are covered by an
effective registration statement filed with the Securities and Exchange
Commission:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THESE
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE STATE
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
XXXXXXX PETROSEARCH, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
6. Covenants of Xxxxxxx. Xxxxxxx covenants and agrees with the
----------------------
Purchaser as follows:
6.1 Reporting Requirements. Xxxxxxx will deliver, or cause to be
-----------------------
delivered, to the Purchaser each of the following, which shall be in form and
detail acceptable to the Purchaser:
(a) As soon as available, and in any event within ninety (90) days
after the end of each fiscal year of Xxxxxxx, Xxxxxxx'x audited
financial statements with a report of independent certified public
accountants of recognized standing selected by Xxxxxxx and acceptable to
the Purchaser (the "Accountants"), which annual financial statements shall
be without qualification and shall include Xxxxxxx'x balance sheet as at
the end of such fiscal year and the related statements of Xxxxxxx'x income,
retained earnings and
13
cash flows for the fiscal year then ended, all in reasonable detail
and prepared in accordance with GAAP, together with (i) if and when
available, copies of any management letters prepared by the Accountants;
and (ii) a certificate of Xxxxxxx'x President, Chief Executive Officer or
Chief Financial Officer stating that such financial statements have been
prepared in accordance with GAAP and whether or not such officer has
knowledge of the occurrence of any Event of Default (as defined in the
Note) and, if so, stating in reasonable detail the facts with respect
thereto;
(b) As soon as available and in any event within sixty (60) days
after the end of each fiscal quarter of Xxxxxxx, an unaudited/internal
balance sheet and statements of income, retained earnings and cash flows of
Xxxxxxx as at the end of and for such quarter and for the year to date
period then ended, in reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the previous year, all
prepared in accordance with GAAP, but without footnotes and subject to
year-end adjustments and accompanied by a certificate of Xxxxxxx'x
President, Chief Executive Officer or Chief Financial Officer, stating (i)
that such financial statements have been prepared in accordance with GAAP,
subject to year-end audit adjustments, and (ii) whether or not such officer
has knowledge of the occurrence of any Event of Default (as defined in the
Note) not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto;
(c) As soon as available and in any event within thirty (30) days
after the end of each calendar month, an unaudited/internal balance
sheet and statements of income, retained earnings and cash flows of Xxxxxxx
as at the end of and for such month and for the year to date period then
ended, in reasonable detail and stating in comparative form the figures for
the corresponding date and periods in the previous year, all prepared in
accordance with GAAP, but without footnotes and subject to year-end
adjustments and accompanied by a certificate of Xxxxxxx'x President, Chief
Executive Officer or Chief Financial Officer, stating (i) that such
financial statements have been prepared in accordance with GAAP, subject to
year-end audit adjustments, and (ii) whether or not such officer has
knowledge of the occurrence of any Event of Default (as defined in the
Note) not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto; and
(d) Xxxxxxx shall deliver such other information as the Purchaser
shall reasonably request.
6.2 Use of Funds. Xxxxxxx shall use the proceeds of the sale of
------------
the Note and the Warrant solely for the following: (a) to pay the items set
forth on schedule 6.2 hereof, and (b) to fund transaction costs and working
capital, plus such other amounts as may be payable by Xxxxxxx to the Purchaser
under the terms of the Proposal Letter provided by the Purchaser to Petrosearch
in connection with the transactions contemplated hereby.
6.3 Access to Facilities. Xxxxxxx will permit any representatives
---------------------
designated by the Purchaser (or any successor of the Purchaser), at Xxxxxxx'x
expense and upon reasonable notice and during normal business hours (provided
that no such prior notice shall be required to be given in the event the
Purchaser believes such access is necessary to preserve or protect the
14
Collateral (as defined in the Master Security Agreement) or following the
occurrence and during the continuance of an Event of Default (as defined in the
Note)), to:
(a) visit and inspect any of Xxxxxxx'x properties;
(b) examine Xxxxxxx'x corporate and financial records and make
copies thereof or extracts therefrom; and
(c) discuss the affairs, finances and accounts of Xxxxxxx with the
directors, officers and independent accountants of Xxxxxxx.
6.4 Taxes. Xxxxxxx will promptly pay and discharge, or cause to be
-----
paid and discharged, when due and payable, all taxes, assessments and
governmental charges or levies imposed upon its income, profits, property or
business; provided, however, that any such tax, assessment, charge or levy need
not be paid currently if (i) the validity thereof shall currently and diligently
be contested in good faith by appropriate proceedings, (ii) such tax,
assessment, charge or levy shall have no effect on the lien priority of the
Purchaser in any property of Xxxxxxx and (iii) if Xxxxxxx shall have set aside
on its books adequate reserves with respect thereto in accordance with GAAP; and
provided, further, that Xxxxxxx will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefor.
6.5 Insurance. Xxxxxxx will keep its assets which are of an
---------
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured against by
companies in similar business similarly situated as Xxxxxxx; and Xxxxxxx will
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons and property to the extent and in the
manner which is customary for companies in similar business similarly situated
as Xxxxxxx and to the extent available on commercially reasonable terms. Xxxxxxx
will bear the full risk of loss from any loss of any nature whatsoever with
respect to the assets pledged to the Purchaser as security for their respective
obligations hereunder and under the Related Agreements. At Xxxxxxx'x cost and
expense, and in amounts and with carriers reasonably acceptable to the
Purchaser, Xxxxxxx shall (i) keep all its insurable properties and properties in
which it has an interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies engaged
in businesses similar to Xxxxxxx'x including business interruption insurance;
(ii) maintain a bond in such amounts as is customary in the case of companies
engaged in businesses similar to Xxxxxxx'x insuring against larceny,
embezzlement or other criminal misappropriation of insured's officers and
employees who may either singly or jointly with others at any time have access
to the assets or funds of Xxxxxxx either directly or through governmental
authority to draw upon such funds or to direct generally the disposition of such
assets; (iii) maintain Well Control and Extra Expense Insurance; (iv) maintain
Pollution and Clean Up Liability Insurance; (v) maintain Comprehensive General
Liability Insurance; (vi) maintain all such worker's compensation or similar
insurance as may be required under the laws of any state or jurisdiction in
which Xxxxxxx is engaged in business; and (vii) furnish the Purchaser with (x)
copies of all policies and evidence of the maintenance of such policies at least
thirty (30) days before any expiration date, (y) excepting Xxxxxxx'x workers'
compensation
15
policy, endorsements to such policies naming the Purchaser as "co-insured" or
"additional insured" and appropriate loss payable endorsements in form and
substance satisfactory to the Purchaser, naming the Purchaser as loss payee, and
(z) evidence that as to the Purchaser the insurance coverage shall not be
impaired or invalidated by any act or neglect of Xxxxxxx and the insurer will
provide the Purchaser with at least thirty (30) days notice prior to
cancellation. Xxxxxxx shall instruct the insurance carriers that in the event of
any loss thereunder, the carriers shall make payment for such loss to Xxxxxxx
and the Purchaser jointly. In the event that as of the date of receipt of each
loss recovery upon any such insurance, the Purchaser has not declared an event
of default with respect to this Agreement or any of the Related Agreements, then
Xxxxxxx shall be permitted to direct the application of such loss recovery
proceeds toward investment in property, plant and equipment that would comprise
"Collateral" secured by the Purchaser's security interest pursuant to the Master
Security Agreement or such other security agreement as shall be required by the
Purchaser, with any surplus funds to be applied toward payment of the
obligations of Xxxxxxx to the Purchaser. In the event that the Purchaser has
properly declared an event of default with respect to this Agreement or any of
the Related Agreements, then all loss recoveries received by the Purchaser upon
any such insurance thereafter may be applied to the obligations of Xxxxxxx
hereunder and under the Related Agreements, in such order as the Purchaser may
determine. Any surplus (following satisfaction of Xxxxxxx'x obligations to the
Purchaser) shall be paid by the Purchaser to Xxxxxxx or applied as may be
otherwise required by law. Any deficiency thereon shall be paid by Xxxxxxx to
the Purchaser, on demand.
6.6 Intellectual Property. Xxxxxxx shall maintain in full force
---------------------
and effect its existence, rights and franchises and all licenses and other
rights to use Intellectual Property owned or possessed by it and reasonably
deemed to be necessary to the conduct of its business.
6.7 Properties. Xxxxxxx will keep its properties in good repair,
----------
working order and condition, reasonable wear and tear excepted, and from time to
time make all needful and proper repairs, renewals, replacements, additions and
improvements thereto. Xxxxxxx will maintain in full force and effect all oil,
gas or mineral leases, contracts, servitudes and other agreements to which it is
a party, and Xxxxxxx will timely perform all of its obligations thereunder.
Xxxxxxx will properly and timely pay all rents, royalties and other payments due
and payable under any such leases, contracts, servitudes and other agreements,
or otherwise attendant to its ownership or operation of any of its properties.
6.8 Confidentiality. Xxxxxxx will not disclose, and will not
---------------
include in any public announcement, the name of the Purchaser, unless expressly
agreed to by the Purchaser or unless and until such disclosure is required by
law or applicable regulation, and then only to the extent of such requirement.
6.9 Required Approvals. Except as set forth on Schedule 6.9,
------------------- ------------
Xxxxxxx shall not, without the prior written consent of the Purchaser,:
(a) directly or indirectly declare or pay any dividends;
(b) liquidate, dissolve or effect a reorganization (it being
understood that in no event shall Xxxxxxx dissolve, liquidate or merge
with any other person or entity);
16
(c) become subject to (including, without limitation, by way of
amendment to or modification of) any agreement or instrument which by
its terms would (under any circumstances) restrict Xxxxxxx'x right to
perform the provisions of this Agreement, any Related Agreement or any of
the agreements contemplated hereby or thereby;
(d) alter or change the scope of its business;
(e) (i) create, incur, assume or suffer to exist any indebtedness
(exclusive of trade debt and debt incurred to finance the purchase of
equipment (not in excess of five percent (5%) of the fair market value of
Xxxxxxx'x assets)) whether secured or unsecured other than (x) Xxxxxxx'x
obligations owed to the Purchaser, (y) indebtedness set forth on Schedule
6.9 attached hereto and made a part hereof and any refinancings or
replacements thereof on terms no less favorable to the Purchaser than the
indebtedness being refinanced or replaced, and (z) any indebtedness
incurred in connection with the purchase of assets (other than equipment)
in the ordinary course of business, or any refinancings or replacements
thereof on terms no less favorable to the Purchaser than the indebtedness
being refinanced or replaced, so long as any lien relating thereto shall
only encumber the fixed assets so purchased and no other assets of Xxxxxxx;
(ii) cancel any indebtedness owing to it in excess of $10,000 in the
aggregate during any 12 month period; (iii) assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any
obligations of any other person or entity, except the endorsement of
negotiable instruments by Xxxxxxx for deposit or collection or similar
transactions in the ordinary course of business or guarantees of
indebtedness otherwise permitted to be outstanding pursuant to this clause
(e); and/or
(f) create or acquire any Subsidiary after the date hereof unless
(i) such Subsidiary is a wholly-owned Subsidiary of Xxxxxxx and (ii)
such Subsidiary becomes a party to the Master Security Agreement, a Stock
Pledge Agreement and the Subsidiary Guaranty (either by executing a
counterpart thereof or an assumption or joinder agreement in respect
thereof) and, to the extent required by the Purchaser, satisfies each
condition of this Agreement and the Related Agreements as if such
Subsidiary were a Subsidiary on the Closing Date.
6.10 Opinion. On the Closing Date, Xxxxxxx will deliver to the
-------
Purchaser an opinion acceptable to the Purchaser from Xxxxxxx'x external legal
counsel in the form of Exhibit C hereto. Xxxxxxx will provide, at Xxxxxxx'x
---------
expense, such other legal opinions in the future as are deemed reasonably
necessary by the Purchaser (and acceptable to the Purchaser) in connection with
the exercise of any Warrant.
6.11 Margin Stock. Xxxxxxx will not permit any of the proceeds of
-------------
the Note or any Warrant to be used directly or indirectly to "purchase" or
"carry" "margin stock" or to repay indebtedness incurred to "purchase" or
"carry" "margin stock" within the respective meanings of each of the quoted
terms under Regulation U of the Board of Governors of the Federal Reserve System
as now and from time to time hereafter in effect.
17
6.12 Financing Right of First Refusal.
------------------------------------
(a) Until such time as all indebtedness and/or monetary
obligations owing to the Purchaser in connection with the transactions
contemplated by this Agreement or any Related Agreement have been
indefeasibly paid in full, Xxxxxxx hereby grants to the Purchaser a right
of first refusal to provide any Additional Financing (as defined below) to
be issued by Xxxxxxx, subject to the following terms and conditions. From
and after the date hereof, prior to the incurrence of any additional
indebtedness and/or the sale or issuance of any equity interests of Xxxxxxx
(an "Additional Financing"), Xxxxxxx shall notify the Purchaser of its
intention to enter into such Additional Financing. In connection therewith,
Xxxxxxx shall submit a fully executed term sheet (a "Proposed Term Sheet")
to the Purchaser setting forth the terms, conditions and pricing of any
such Additional Financing (such financing to be negotiated on "arm's
length" terms and the terms thereof to be negotiated in good faith)
proposed to be entered into by Xxxxxxx. The Purchaser shall have the right,
but not the obligation, to deliver its own proposed term sheet (the
"Purchaser Term Sheet") setting forth the terms and conditions upon which
the Purchaser would be willing to provide such Additional Financing to
Xxxxxxx. The Purchaser Term Sheet shall contain terms no less favorable to
Xxxxxxx than those outlined in Proposed Term Sheet. The Purchaser shall
deliver such Purchaser Term Sheet within ten calendar days of receipt of
each such Proposed Term Sheet. If the provisions of the Purchaser Term
Sheet are at least as favorable to the Xxxxxxx as the provisions of the
Proposed Term Sheet, Xxxxxxx shall enter into and consummate the Additional
Financing transaction outlined in the Purchaser Term Sheet.
(b) Xxxxxxx will not agree, directly or indirectly, to any
restriction with any person or entity which limits the ability of the
Purchaser to consummate an Additional Financing with Xxxxxxx.
6.13 Authorization and Reservation of Shares. Xxxxxxx shall at
----------------------------------------
all times have authorized and reserved a sufficient number of shares of Xxxxxxx
Common Stock to provide for the exercise of the Warrant.
6.14 Summaries; Reports. Xxxxxxx shall deliver to the Purchaser,
------------------
as soon as available and in any event by the 15th day of each month, summaries
of its lease operating expenses and production relating to its oil and gas
properties as and for the immediately preceding month. Xxxxxxx shall deliver to
the Purchaser, as soon as available and in any event within thirty (30) days
after the end of each fiscal quarter of Xxxxxxx, or at such other time as the
Purchaser shall request, an economic reserve report concerning Xxxxxxx'x oil and
gas properties prepared by a registered professional engineer chosen by Xxxxxxx
and reasonably acceptable to the Purchaser.
6.15 Registration Rights. Not later than ten (10) business days
--------------------
prior to Xxxxxxx'x, completion, if ever, of an initial public offering of its
securities or the public trading of Xxxxxxx'x securities (i.e. through a reverse
merger or otherwise), Xxxxxxx shall execute in favor of Purchaser a Registration
Rights Agreement containing, without limitation, piggyback registration rights
provisions reasonably satisfactory to Purchaser, in form and substance
reasonably satisfactory to Purchaser, with respect to the shares underlying the
Warrant, as applicable, the provisions of which shall be deemed incorporated
herein by reference to the extent necessary to effectuate the purpose and intent
of this provision. The provisions of this
18
Section 6.15 shall not be subject to any cure or grace period as may be
applicable thereto under any Related Agreement.
7. Covenants of the Purchaser. The Purchaser covenants and agrees with
---------------------------
Xxxxxxx as follows:
7.1 Confidentiality. The Purchaser will not disclose, and will not
---------------
include in any public announcement, the name of Xxxxxxx, unless expressly agreed
to by Xxxxxxx or unless and until such disclosure is required by Applicable Law
or applicable regulation, and then only to the extent of such requirement.
7.2 Limitation on Acquisition of Common Stock of Xxxxxxx.
----------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, any
Related Agreement or any document, instrument or agreement entered into in
connection with any other transactions between the Purchaser and Xxxxxxx, the
Purchaser may not acquire stock in Xxxxxxx (including, without limitation,
pursuant to a contract to purchase, by exercising an option or warrant, by
converting any other security or instrument, by acquiring or exercising any
other right to acquire, shares of stock or other security convertible into
shares of stock in Xxxxxxx, or otherwise, and such contracts, options, warrants,
conversion or other rights shall not be enforceable or exercisable) to the
extent such stock acquisition would cause any interest (including any original
issue discount) payable by Xxxxxxx to the Purchaser not to qualify as "portfolio
interest" within the meaning of Section 881(c)(2) of the Code, by reason of
Section 881(c)(3) of the Code, taking into account the constructive ownership
rules under Section 871(h)(3)(C) of the Code (the "Stock Acquisition
Limitation"). The Stock Acquisition Limitation shall automatically become null
and void without any notice to Xxxxxxx upon the existence of an Event of Default
(as defined in the Note).
8. Covenants of Xxxxxxx and the Purchaser Regarding Indemnification.
-------------------------------------------------------------------
8.1 Xxxxxxx Indemnification. Xxxxxxx agrees to indemnify, hold
------------------------
harmless, reimburse and defend the Purchaser, each of the Purchaser's officers,
directors, agents, affiliates, control persons, and principal shareholders,
against all claims, costs, expenses, liabilities, obligations, losses or damages
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Purchaser which result, arise out of or are based upon: (i) any
misrepresentation by Xxxxxxx or breach of any warranty by Xxxxxxx in this
Agreement, any other Related Agreement or in any exhibits or schedules attached
hereto or thereto; or (ii) any breach or default in performance by Xxxxxxx of
any covenant or undertaking to be performed by Xxxxxxx hereunder, under any
other Related Agreement or any other agreement entered into by Xxxxxxx and the
Purchaser relating hereto or thereto; or (iii) (a) the violation of any local,
state or federal law, rule or regulation pertaining to environmental regulation,
contamination or cleanup (collectively, "Environmental Laws"), including without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. 9601 et seq. and 40 CFR 302.1 et seq.), the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. 6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. 1251 et seq., and 40 CFR 116.1 et
seq.), the Hazardous Materials Transportation Act (49 U.S.C. 1801 et seq.) and
the regulations promulgated pursuant to said laws, all as amended and relating
to or affecting Xxxxxxx or Xxxxxxx'x properties, whether or not caused by or
within the control of the Purchaser and/or (b)
19
the presence, release or threat of release of any hazardous materials
(including, without limitation, asbestos, polychlorinated biphenyls, petroleum
products, flammable explosives, radioactive materials, infectious substances or
raw materials which include hazardous constituents) on, in, under or affecting
all or any portion of any property of Xxxxxxx or any surrounding areas,
regardless of whether or not caused by or within the control of the Purchaser.
8.2 Purchaser's Indemnification. The Purchaser agrees to
----------------------------
indemnify, hold harmless, reimburse and defend Xxxxxxx and each of Xxxxxxx'x
officers, directors, agents, affiliates, control persons and principal
shareholders, at all times against any claims, costs, expenses, liabilities,
obligations, losses or damages (including reasonable legal fees) of any nature,
incurred by or imposed upon Xxxxxxx which result, arise out of or are based
upon: (i) any misrepresentation by the Purchaser or breach of any warranty by
the Purchaser in this Agreement or in any exhibits or schedules attached hereto
or any Related Agreement; or (ii) any material breach or default in performance
by the Purchaser of any covenant or undertaking to be performed by the Purchaser
hereunder, or any other agreement entered into by Xxxxxxx and the Purchaser
relating hereto.
9. Miscellaneous.
-------------
9.1 Governing Law, Jurisdiction and Waiver of Jury Trial.
-----------------------------------------------------------
(a) THIS AGREEMENT AND THE OTHER RELATED AGREEMENTS SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
(b) XXXXXXX HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
XXXXXXX, ON THE ONE HAND, AND THE PURCHASER, ON THE OTHER HAND, PERTAINING
TO THIS AGREEMENT OR ANY OF THE RELATED AGREEMENTS OR TO ANY MATTER ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER RELATED AGREEMENTS;
PROVIDED, THAT THE PURCHASER AND XXXXXXX ACKNOWLEDGE THAT ANY APPEALS FROM
THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY
OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT, NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE PURCHASER FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO
COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL (AS DEFINED IN THE
MASTER SECURITY AGREEMENT) OR ANY OTHER SECURITY FOR THE OBLIGATIONS (AS
DEFINED IN THE MASTER SECURITY AGREEMENT), OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF THE PURCHASER. XXXXXXX EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED
20
IN ANY SUCH COURT, AND HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS. XXXXXXX HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES
THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO XXXXXXX AT THE ADDRESS SET FORTH
IN SECTION 9.8 AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF XXXXXXX'X ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT
IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
(c) THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT,
TORT, OR OTHERWISE BETWEEN THE PURCHASER AND XXXXXXX ARISING OUT OF,
CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, ANY OTHER RELATED AGREEMENT
OR THE TRANSACTIONS RELATED HERETO OR THERETO.
9.2 Severability. Wherever possible each provision of this
------------
Agreement and the Related Agreements shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this
Agreement or any Related Agreement shall be prohibited by or invalid or illegal
under applicable law such provision shall be ineffective to the extent of such
prohibition or invalidity or illegality, without invalidating the remainder of
such provision or the remaining provisions thereof which shall not in any way be
affected or impaired thereby.
9.3 Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by the Purchaser or
Xxxxxxx and the closing of the transactions contemplated hereby to the extent
provided therein. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of Xxxxxxx pursuant
hereto in connection with the transactions contemplated hereby shall be deemed
to be representations and warranties by Xxxxxxx hereunder solely as of the date
of such certificate or instrument. All indemnities set forth herein shall
survive the execution, delivery and termination of this Agreement and the Note
and the making and repayment of the obligations arising hereunder, under the
Note and under the other Related Agreements.
9.4 Successors. Except as otherwise expressly provided herein, the
----------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be enforceable by each person or entity which shall
be a holder of the Securities from time to time, other than the
21
holders of common stock which has been sold by the Purchaser pursuant to Rule
144 or Rule 904 under the Securities Act or other resale restriction provisions
of applicable securities laws.
9.5 Entire Agreement; Maximum Interest. This Agreement, the
-------------------------------------
Related Agreements, the exhibits and schedules hereto and thereto and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and no
party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein. Nothing contained in this Agreement, any Related
Agreement or in any document referred to herein or delivered in connection
herewith shall be deemed to establish or require the payment of a rate of
interest or other charges in excess of the maximum rate permitted by applicable
law. In the event that the rate of interest or dividends required to be paid or
other charges hereunder exceed the maximum rate permitted by such law, any
payments in excess of such maximum made by Xxxxxxx shall be credited against
amounts owed by Xxxxxxx to the Purchaser.
9.6 Amendment and Waiver.
----------------------
(a) This Agreement may be amended or modified only upon the
written consent of Xxxxxxx and the Purchaser.
(b) The obligations of Xxxxxxx and the rights of the Purchaser
under this Agreement may be waived only with the written consent of
the Purchaser.
(c) The obligations of the Purchaser and the rights of Xxxxxxx
under this Agreement may be waived only with the written consent of
Xxxxxxx.
9.7 Delays or Omissions. It is agreed that no delay or omission to
-------------------
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Related
Agreements, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. All remedies, either under this Agreement or the Related
Agreements, by law or otherwise afforded to any party, shall be cumulative and
not alternative.
9.8 Notices. All notices required or permitted hereunder shall be
-------
in writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business
day;
(c) three (3) business days after having been sent by registered
or certified mail, return receipt requested, postage prepaid; or
(d) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written
verification of receipt.
22
All communications shall be sent as follows:
c/x Xxxxxxx Petrosearch, Inc.
If to Xxxxxxx, to: 000 Xxxxxx Xxxxx, Xxxxx 000,
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Facsimilie: 000-000-0000
with a copy to:
Xxxxx X. Xxxxxx
0000 X.X. Xxxx 000, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimilie:
--------------
If to the Purchaser, Laurus Master Fund, Ltd.
to: c/o M&C Corporate Services Limited
X.X. Xxx 000 XX
Xxxxxx Xxxxx
Xxxxxx Xxxx
South Church Street
Grand Cayman, Cayman Islands
Facsimile: 000-000-0000
with a copy to:
Xxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxxxx 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
and to:
Xxxxx Xxxxx, Esq.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Facsimilie: 000-000-0000
or at such other address as Xxxxxxx or the Purchaser may designate by written
notice to the other parties hereto given in accordance herewith.
9.9 Attorneys' Fees. In the event that any suit or action is
----------------
instituted to enforce any provision in this Agreement or any Related Agreement,
the prevailing party in such dispute shall be entitled to recover from the
losing party all fees, costs and expenses of enforcing any right of such
prevailing party under or with respect to this Agreement and/or such Related
Agreement, including, without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
23
9.10 Titles and Subtitles. The titles of the sections and
----------------------
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
9.11 Facsimile Signatures; Counterparts. This Agreement may be
------------------------------------
executed by facsimile signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
agreement.
9.12 Broker's Fees. Except as set forth on Schedule 9.12 hereof,
--------------
each party hereto represents and warrants that no agent, broker, investment
banker, person or firm acting on behalf of or under the authority of such party
hereto is or will be entitled to any broker's or finder's fee or any other
commission directly or indirectly in connection with the transactions
contemplated herein. Each party hereto further agrees to indemnify each other
party for any claims, losses or expenses incurred by such other party as a
result of the representation in this Section 9.12 being untrue.
9.13 Construction. Each party acknowledges that its legal counsel
------------
participated in the preparation of this Agreement and the Related Agreements
and, therefore, stipulates that the rule of construction that ambiguities are to
be resolved against the drafting party shall not be applied in the
interpretation of this Agreement or any Related Agreement to favor any party
against the other.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
24
IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
XXXXXXX: PURCHASER:
XXXXXXX PETROSEARCH, INC. LAURUS MASTER FUND, LTD.
By: /s/ Xxxxxxx X. Xxxx By: /s/ illegible
--------------------------- ---------------------------
Name: Xxxxxxx X. Xxxx Name: illegible
--------------------------- ---------------------------
Title: Manager Title: illegible
--------------------------- ---------------------------
EXHIBIT A
FORM OF NOTE
EXHIBIT B
FORM OF WARRANT
EXHIBIT C
FORM OF OPINION
[A SEPARATE LEGAL OPINION WILL BE REQUIRED REGARDING THE DEEDS OF TRUST AND
PERFECTION IN OIL AND GAS PROPERTIES]
1. Xxxxxxx is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its formation and has all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business as it is now being conducted.
2. Xxxxxxx has the requisite corporate power and authority to execute,
deliver and perform its obligations under the Agreement and the Related
Agreements. All necessary corporate action on the part of Xxxxxxx and its
officers, directors and stockholders has been taken for: (i) the authorization
of the Agreement and the Related Agreements and the performance of all
obligations of Xxxxxxx thereunder; and (ii) the authorization, sale, issuance
and delivery of the Securities pursuant to the Agreement and the Related
Agreements. The Warrant Shares, when issued pursuant to and in accordance with
the terms of the Agreement and the Related Agreements and upon delivery, shall
be validly issued and outstanding, fully paid and non assessable.
3. The execution, delivery and performance by Xxxxxxx of the Agreement
and the Related Agreements (to which it is a party) and the consummation of the
transactions on its part contemplated by any thereof, will not, with or without
the giving of notice or the passage of time or both:
(a) Violate the provisions of its respective Charter or bylaws; or
(b) Violate any judgment, decree, order or award of any court
binding upon Xxxxxxx; or
(c) Except with respect to the Deed of Trust, as to which we
express no opinion, violate any Texas or federal law, rule or
regulation that a lawyer practicing in the State of Texas exercising
customary professional diligence would reasonably recognize to be
applicable to Xxxxxxx and to the transactions contemplated by the Agreement
and the Related Agreements.
4. The Agreement and the Related Agreements (other than the Deed of
Trust, as to which we express no opinion) will constitute, valid and legally
binding obligations of Xxxxxxx (to the extent such entity is a party thereto),
and are enforceable against Xxxxxxx party thereto in accordance with their
respective terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other laws of
general application affecting enforcement of creditors' rights; and
(b) general principles of equity that restrict the availability of
equitable or legal remedies.
5. The sale of the Note is not subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with. The
sale of the Warrant and the subsequent exercise of the Warrant for Warrant
Shares are not subject to any preemptive rights or rights of first refusal that
have not been properly waived or complied with.
6. The offer, sale and issuance of the Securities on the Closing Date
will be exempt from the registration requirements of the Securities Act.
7. There is no action, suit, proceeding or investigation pending or
currently threatened against Xxxxxxx that prevents the right of Xxxxxxx to enter
into this Agreement or any Related Agreement, or to consummate the transactions
contemplated thereby.
8. The terms and provisions of the Master Security Agreement and the
Stock Pledge Agreements create a valid security interest in favor of the
Purchaser, in the respective rights, title and interests of Xxxxxxx and
Petrosearch in and to the Collateral (as defined in each of the Master Security
Agreement and the Stock Pledge Agreements). Each UCC-1 Financing Statement
naming Xxxxxxx as debtor and the Purchaser as secured party is in proper form
for filing and assuming that such UCC-1 Financing Statements have been filed
with the Secretary of State of Texas, the security interest created under the
Master Security Agreement will constitute a perfected security interest under
the Uniform Commercial Code in favor of the Purchaser in respect of the
Collateral that can be perfected by filing a financing statement. After giving
effect to the delivery to the Purchaser of the stock certificates representing
the ownership interests of Petrosearch in Xxxxxxx (together with effective
endorsements), and assuming the continued possession by the Purchaser of such
stock certificates in the State of New York, the security interest created in
favor of the Purchaser under the Stock Pledge Agreements constitutes a valid and
enforceable perfected security interest in such ownership interests (and the
proceeds thereof) in favor of the Purchaser. No filings, registrations or
recordings are required in order to perfect (or maintain the perfection or
priority of) the security interest created under the Stock Pledge Agreements in
respect of such ownership interests.
EXHIBIT D
FORM OF ESCROW AGREEMENT
