SHARE PURCHASE AGREEMENT
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This Share Purchase Agreement ("Agreement") is made as of November 24,
2004, ("Effective Date") between PETROSEARCH CORPORATION, a Texas corporation,
(the "Company"), PETROSEARCH ENERGY CORPORATION, a Nevada corporation
("Petrosearch-Nevada") and XXXX I MANAGEMENT, LTD., a Texas limited partnership,
or its assigns ("Purchaser").
A. Company is in the business of acquiring, developing and operating
oil and gas properties in several states, including, Texas, Oklahoma, North
Dakota, Montana and Mississippi. Company has obtained commitments from industry
joint venturers to develop several drilling prospects, thereby requiring an
accelerated leasing program in the target areas. Additional acquisition and
exploration opportunities have contemporaneously been presented by third parties
to Company which Company desires to pursue in addition to the near term drilling
projects.
B. Company has obtained shareholder approval for a 6.5 to 1 reverse
split of Company's Common Stock and further intends, subject to shareholder
approval, to redomicile in Nevada by merging the Company into its wholly owned
subsidiary, Petrosearch-Nevada (the "Merger Transaction").
C. Company has elected to meet certain of its working capital needs
post-merger by the placement of Petrosearch-Nevada Common Stock, par value
$.001, with one or more willing, sophisticated investors and Purchaser desires
to acquire a specified number of shares of Petrosearch-Nevada Common Stock under
the terms and conditions set forth herein.
TERMS OF AGREEMENT:
NOW, THEREFORE, FOR VALUE RECEIVED, the sufficiency of which is
acknowledged by the parties, the parties hereto agree as follows:
ARTICLE I
NUMBER AND PURCHASE PRICE FOR SHARES/OPTION FOR ADDITIONAL SHARES/ADJUSTMENT OF
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PRICE FOR MORE FAVORABLE PLACEMENT
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1.1 NUMBER OFSHARES TO BE PURCHASED/PURCHASE PRICE. Subject to all of
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the terms and conditions of this Agreement, the Company and Petrosearch-Nevada
agree to issue and sell subsequent to the Merger Transaction to the Purchaser
(sometimes referred to herein as a "Holder") and Purchaser agrees to purchase,
512,821 Petrosearch-Nevada shares of Common Stock, par value $.001 (the "Initial
Investment Shares"), at a cash price of $1.95 per share, or a total purchase
price of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00) [the "Initial Investment
Purchase Funds"]. This sale, if consummated, shall be made by the Company
directly to Purchaser without the assistance of placement agents or a
broker-dealer.
1.2 OPTION TO ACQUIRE ADDITIONALSHARES. Conditioned upon consummation
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of the purchase by Purchaser of the Initial Investment Shares, and subject to
all of the terms and conditions of this Agreement, Company and
Petrosearch-Nevada agree within ninety (90) days after the Effective Date to
issue and sell to the Purchaser 333,361 shares of Petrosearch-Nevada Common
Stock, par value $.001 (the "Secondary Transaction Shares" and, together with
the Initial Investment Shares, the "Shares"), at Purchaser's sole option, at a
cash price of $3.00 per share, or a total purchase price of ONE MILLION AND
NO/100 DOLLARS ($1,000,000.00) [ the "Secondary Transaction Purchase Funds"].
1.3 ADJUSTMENT UPON MORE FAVORABLE PLACEMENT. If at any time during
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the period from the execution of this Agreement until thirty (30) days after the
release to Petrosearch-Nevada from escrow (described herein below) of the
Initial Investment Purchase Funds, Company or Petrosearch-Nevada shall sell to
any third party other than members of Company's management, Common Stock at less
than $0.30 per share on a pre-reverse split basis or $1.95 on a post-reverse
split basis, then the purchase price of the Initial Investment Shares shall be
automatically adjusted to the lower price made available to the third party and
such additional Petrosearch-Nevada Common Shares shall be issued to Purchaser
and delivered to Purchaser (or to Escrow Agent if the Initial Investment Shares
are still in escrow) as are necessary to make the purchase price per share paid
by Purchaser equal the more favorable price made available to the third party.
1.4 EFFECT OF REVERSE SPLIT UPON PURCHASE TERMS. The 6.5 for 1 reverse
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split of Company shares which has been approved by the Company's Board of
Directors and its shareholders described in Section 2.1 herein below shall not
affect the gross purchase price for the Initial Investment Shares and, if
applicable, the Secondary Transaction Shares, and each purchase price shall
remain as $1,000,000.00 for each such transaction.
ARTICLE II
ESCROW PENDING CERTAIN TRANSACTIONS/USE OF PROCEEDS
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2.1 ESCROW DEPOSITS. Upon execution of this Agreement, Purchaser shall
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deposit the Initial Investment Purchase Funds with the escrow agent (the "Escrow
Agent") named in the Escrow Agreement attached hereto as Exhibit "A". The
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Initial Investment Purchase Funds shall remain in escrow pending completion by
Company and Petrosearch-Nevada of the Merger Transaction and issuance of the
Initial Investment Shares to Purchaser all as documented to Escrow Agent by
delivery of (a) a certified copy of the Articles of Merger of Company filed with
the Texas Secretary of State, (b) a certified copy of the Articles of Merger of
Petrosearch-Nevada filed with the Nevada Secretary of State and (c) a
Petrosearch-Nevada Stock Certificate in Purchaser's name evidencing the Initial
Investment Shares and containing the usual and customary Rule 144 restrictive
legend (collectively, the "Escrow Release Conditions"). Should, for any reason,
Company fail to satisfy the Escrow Release Conditions by December 31, 2004,
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then, at Purchaser's option, Purchaser may terminate this Agreement and the
corresponding Escrow Agreement, whereupon the Initial Investment Purchase Funds
shall be returned by Escrow Agent to Purchaser without interest and without
deduction for escrow fees and expenses. In the event that the Escrow Release
Conditions and the other conditions contained in Article V are satisfied by
Company prior to December 31, 2004, then, the Initial Investment Purchase Funds
shall be released immediately from escrow to Company by Escrow Agent and
Purchaser shall execute with Company an instruction letter directing such
release to Company (such release date being sometimes referred to as the
"Closing Date"). In the event that Purchaser exercises its option to acquire
the Secondary Transaction Shares, Purchaser shall tender the Secondary
Transaction Purchase Funds to Company pursuant to Section 1.2 above and Company
shall cause the Secondary Transaction Shares to be delivered to Purchaser within
three (3) business days of funding ("Secondary Closing Date").
2.2 USE OF PROCEEDS. The Initial Investment Purchase Funds and the
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Secondary Transaction Purchase Funds (if Purchaser's option to purchase the
Secondary Transaction Shares) shall be applied to Company's general working
capital needs without specific allocation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
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As an inducement to the Purchaser to enter into this Agreement, each of the
Company and Petrosearch-Nevada represents, warrants and agrees that:
3.1 ORGANIZATION AND GOOD STANDING. The Company and each of its
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subsidiaries have been duly organized in accordance with the laws of their
respective jurisdictions of incorporation and exist in good standing under such
laws with full power and authority to conduct their businesses as described in
the Disclosure Documents (defined herein below), and are duly qualified and in
good standing in each other jurisdiction in which such qualification is required
except where the failure to so qualify, both individually and in the aggregate,
does not have a material adverse effect on the condition (financial or
otherwise), business or prospects of the Company or on its properties or assets.
No actions or proceedings to dissolve the Company (other than the contemplated
Merger Transaction) or Petrosearch Nevada are pending or, to the best knowledge
of the Company, threatened.
3.2 CORPORATE POWER AND AUTHORITY; DUE AUTHORIZATION. Each of the
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Company and Petrosearch-Nevada has full corporate power and authority to execute
and deliver this Agreement and all other documents required to be entered into
by the Company or Petrosearch-Nevada pursuant hereto (this Agreement and such
other documents being hereinafter collectively referred to as, the "Transaction
Documents") and to consummate the transactions contemplated by the Transaction
Documents. This Agreement and the other Transaction Documents have been duly
authorized by all necessary corporate action of the Company and
Petrosearch-Nevada and, when executed and delivered, will be legal, valid and
binding obligations of the Company and Petrosearch-Nevada, enforceable in
accordance with their respective terms except to the extent that the
enforceability hereof and thereof may be limited by bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally or by general
principles of equity.
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3.3 NO VIOLATION. The execution, delivery and performance of this
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Agreement and the other Transaction Documents by the Company and
Petrosearch-Nevada and the consummation of the transactions herein and therein
contemplated does not and will not result in a breach or violation of any of the
terms and provisions of the articles or certificate of incorporation or by-laws
of the Company or Petrosearch-Nevada as in effect on the date hereof (the
"Organizational Documents"), and does not and will not constitute a material
default under any indenture, mortgage, deed of trust or other material agreement
or instrument to which the Company or Petrosearch-Nevada is a party or by which
the Company or Petrosearch-Nevada is bound, and does not and will not violate or
contravene (i) any governmental statute, rule or regulation applicable to the
Company or Petrosearch-Nevada or (ii) any order, writ, judgment, injunction,
decree, determination or award which has been entered against the Company or
Petrosearch-Nevada, the violation or contravention of which would materially and
adversely affect the condition (financial or otherwise), business or prospects
of the Company or Petrosearch-Nevada or on its properties or assets.
3.4 CAPITALIZATION. The Company has (and Petrosearch-Nevada will have
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upon the Merger and stock issuance) a duly authorized capitalization as set
forth in Schedule 1 attached hereto. The outstanding shares of Common Stock
have been (and upon the Merger and stock issuance will be) duly authorized and
validly issued, fully paid and nonassessable. None of the outstanding shares of
Common Stock has been issued (or upon the Merger and stock issuance will be) in
violation of the preemptive rights of any security holder of the Company. None
of the holders of the outstanding shares of Common Stock is subject to personal
liability solely by reason of being such a holder. Neither the holders of the
outstanding shares of Common Stock nor the holders of any other securities or
rights of the Company are (or upon the Merger and stock issuance will be)
entitled to pre-emptive or other rights or agreements for the purchase or
acquisition from the Company of any shares of the Common Stock or to subscribe
for the any of the Shares. Neither the Company nor Petrosearch-Nevada is a
party or subject to any agreement or understanding, and, to the knowledge of the
Company and Petrosearch-Nevada, there is no agreement or understanding, between
any persons and/or entities, which affects or relates to the voting or giving of
written consents with respect to any security of the Company and
Petrosearch-Nevada or by a director of the Company and Petrosearch-Nevada.
3.5 AUTHORIZATION AND ISSUANCE OF SHARES. The Shares, when issued and
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paid for, will constitute duly authorized, legally and validly issued securities
of Petrosearch Nevada, fully paid and non-assessable.
3.6 DISCLOSURE DOCUMENTS. The documents furnished by the Company to
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Purchaser in connection with this sale include audited financial statements
through December 31, 2003, unaudited compiled financial statements through June
30, 2004, the Company's fact summary sheet and business strategies and plan, a
letter to Shareholders regarding the proposed reverse split and redomicile
transaction(s) and prospect summaries and related materials regarding the
various prospect areas which the Company contemplates acquiring and developing
in the near term, and various economic models and projections (collectively,
the "Disclosure Documents"). When read as one document, the Disclosure
Documents furnish all information required to be furnished to accredited
investors under Regulation D ("Regulation D") and Regulation S
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("Regulation S") of the Securities and Exchange Commission ("SEC") promulgated
under the Securities Act of 1933, as amended (the "1933 Act"). The Disclosure
Documents and any amendments or supplements thereto: (i) do and will, as the
case may be, contain all material statements and information which are required
to be included in accordance with Regulation D and Regulation S and the 1933
Act, and applicable state, provincial and local laws, (ii) do and will in all
material respects conform to the requirements of Regulation D and Regulation S
and the 1933 Act and applicable state, provincial and local laws and (iii) do
not and will not, as the case may be, include any untrue statement of material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
3.7 REPRESENTATIONS AND WARRANTIES. No representation or warranty by
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the Company or Petrosearch-Nevada in this Agreement contains, or on the Closing
Date will contain, any untrue statement of material fact or omits or will omit
to state any material fact necessary, in light of the circumstances under which
it is made, in order to make the statements made herein not misleading. There
is no fact known to the Company or Petrosearch-Nevada that has or could have a
material adverse effect on the Company or Petrosearch-Nevada, which has not been
set forth in this Agreement (including attached schedules) or in the Disclosure
Documents.
3.8 CONSENTS AND APPROVALS. No consent, approval, order, or
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authorization of, or declaration, filing, or registration with, any governmental
entity is required to be obtained or made by the Company or any of its
subsidiaries in connection with the execution, delivery, or performance by the
Company of this Agreement and the execution, delivery, and where applicable,
performance of the other Transaction Documents to which it is a party or the
consummation of the transactions contemplated hereby and thereby, other than (i)
compliance with any applicable requirements of the 1933 Act, (ii) compliance
with any applicable requirements of the 1934 Act, (iii) compliance with any
applicable state securities laws; and (iv) such consents, approvals, orders, or
authorizations which, if not obtained, and such declarations, filings, or
registrations which, if not made, would not, individually or in the aggregate,
have a material adverse effect on the condition (financial or otherwise),
business or prospects of the Company or on its properties or assets. Except for
such consents as are obtained before or contemporaneously with consummation of
the Closing, no consent or approval of any other Person is required to be
obtained or made by the Company or any of its subsidiaries in connection with
the execution, delivery, or performance by the Company and Petrosearch-Nevada of
this Agreement and execution, delivery and, where applicable, performance of the
other Transaction Documents to which it is a party or the consummation of the
transactions contemplated hereby and thereby.
3.9 FINANCIAL CONDITION. The audited consolidated balance sheet of the
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Company and its subsidiaries as at December 31, 2003, and the related
consolidated statements of income, stockholders' equity and cash flow of the
Company and its subsidiaries for the fiscal year ended on said date, with the
opinion thereon of Xxx, Xxxxxxxx & Xxxxxxx, L.L.P. heretofore furnished to the
Purchaser, and the unaudited consolidated balance sheet of the Company and its
subsidiaries as at June 30, 2004, and the related consolidated statements of
income, stockholders' equity and cash flow of the Company and its subsidiaries
for the six-month period ending on such date heretofore furnished to the
Purchaser, are complete and correct and fairly present the consolidated
financial condition of the Company and its subsidiaries as at said dates and the
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results of its operations for the fiscal year and the nine-month period ending
on said dates, all in accordance with generally accepted accounting principles
("GAAP"), as applied on a consistent basis (subject, in the case of the interim
financial statements, to normal year-end adjustments). Other than the credit
facility with Fortuna Energy, L.P. described in Schedule 2 attached hereto,
neither the Company nor any of its subsidiaries has on the date hereof any debt,
trade payables, contingent liabilities, liabilities for taxes, unusual forward
or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
such financial statements or except to the extent that the existence of any of
the foregoing would not have a material adverse effect on the condition
(financial or otherwise), business or prospects of the Company or its properties
or assets. Since December 31, 2003, there has been no change or event having or
reasonably likely to have a material adverse effect on the condition (financial
or otherwise), business or prospects of the Company or its properties or assets,
except as disclosed to the Purchaser in writing. Since the date of such
financial statements, neither the business nor the properties of the Company's
subsidiaries, taken as a whole, have been materially and adversely affected as a
result of any fire, explosion, earthquake, flood, drought, windstorm, accident,
strike or other labor disturbance, embargo, requisition or taking of property or
cancellation of contracts, permits or concessions by any governmental entity,
riot, activities of armed forces or acts of God or of any public enemy.
3.10 NO GENERAL SOLICITATION OR INTEGRATED OFFERING. Neither the
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Company nor any distributor participating on the Company's behalf in the
transactions contemplated hereby (if any) nor any person acting for the Company,
or any such distributor, has conducted any "general solicitation" (as such term
is defined in Regulation D) with respect to any of the Shares being offered
hereby. Neither the Company nor any of its affiliates, nor any person acting on
its or their behalf, has directly or indirectly made any offers or sales of any
security or solicited any offers to buy any security under circumstances that
would require registration of the Shares being offered hereby under the 1933 Act
or cause this offering of Securities to be integrated with any prior offering of
securities of the Company for purposes of the 1933 Act, which result of such
integration would require registration under the 1933 Act, or would trigger any
applicable stockholder approval provisions.
3.11 SUBSIDIARIES. Each of the Company's subsidiaries is identified in
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Schedule 1 attached hereto and is duly incorporated or organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, as applicable, and has all requisite corporate or
partnership power and authority in all material respects to own, lease, and
operate its properties and to carry on its business as now being conducted.
Each of its subsidiaries is duly qualified to do business as a foreign
corporation or limited partnership, as applicable, and is in good standing in
each jurisdiction where such qualification is necessary, except where the
failure to so qualify or to be in good standing would not have a material
adverse effect on the condition (financial or otherwise), business or prospects
of the Company or its properties or assets. Other than the rights of certain
subsidiary presidents to acquire ten percent of their subsidiary after payout of
that subsidiary's exploration projects, there are outstanding (i) no securities
of any of its subsidiaries convertible into or exchangeable for shares of
capital stock or other voting securities of any subsidiary or of the Company and
(ii) no options or other rights to acquire from any of its subsidiaries and no
obligation of any of its subsidiaries to issue or sell, any shares of capital
stock or other voting securities of any of its subsidiaries or of the Company or
any securities of any
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subsidiary or of the Company convertible into or exchangeable for such capital
stock or voting securities.
3.12 TRANSACTIONS WITH AFFILIATES. Except as to drilling agreements
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with Maverick Drilling Co., Inc., a company controlled by the Xxx Xxxxxxx
family, none of the officers, directors or employees of the Company or any of
its subsidiaries is currently a party to any transaction with the Company or any
of its subsidiaries (other than for ordinary course services solely in their
capacity as officers, directors or employees), including any contract, agreement
or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has an ownership interest of five percent or more or is an
officer, director, trustee or partner.
3.13 TITLES AND ASSETS.
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(a) Each of the Company and its subsidiaries has good and
defensible title to, or valid leasehold interests in, all of its material assets
and properties, except for such assets and properties as are no longer used or
useful in the conduct of its businesses or as have been disposed of in the
ordinary course of business and except for such imperfections of title,
easements, rights of way and similar liens or other matters and failures of
title as would not, individually or in the aggregate, have a material adverse
effect on the condition (financial or otherwise), business or prospects of the
Company or its properties or assets. All such assets and properties, other than
assets and properties in which the Company has leasehold interests, are free and
clear of all Liens, other than those liens in favor of Fortuna Energy, L.P.
(b) All leases, licenses, permits, authorizations and agreements
necessary for the conduct of the business of the Company and its subsidiaries
are valid and subsisting, in full force and effect and there exists no default
or event or circumstance which with the giving of notice or the passage of time
or both would give rise to a default under any such leases, licenses, permits,
authorizations and agreements, which would have a material adverse effect on the
condition (financial or otherwise), business or prospects of the Company or its
properties or assets.
(c) The assets and properties currently owned, leased or licensed
by the Company and its subsidiaries, including, without limitation, all
easements, licenses, permits, authorizations and rights of way, include all
assets and properties necessary to permit the Company and its subsidiaries to
conduct their business in all material respects in the same manner as its
business has been conducted prior to the Closing Date.
(d) All of the assets and properties of the Company and its
subsidiaries that are reasonably necessary for the operation of their business
are in good working condition in all material respects and are maintained in
accordance with prudent business standards.
3.14 DEFAULTS. Neither the Company nor any of its subsidiaries is in
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default nor has any event or circumstance occurred which, but for the expiration
of any applicable grace period or the giving of notice, or both, would
constitute a default under any material agreement or
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instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound, except for defaults which
in the aggregate would not have a material adverse effect on the condition
(financial or otherwise), business or prospects of the Company or its properties
or assets.
3.15 INSURANCE. All material policies of fire, liability, workmen's
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compensation and other forms of insurance owned or held by the Company and each
of its subsidiaries as of the date hereof are in full force and effect, all
premiums with respect thereto covering all periods up to and including the
Closing Date have been paid, and no notice of cancellation or termination has
been received with respect to any such policy. Such policies are sufficient for
compliance with all requirements of law and of all agreements to which the
Company or any of its subsidiaries is a party; are valid, outstanding and
enforceable policies; provide adequate insurance coverage in at least such
amounts and against at least such risks (but including in any event public
liability) as are usually insured against in the same general area by companies
engaged in the same or a similar business for the assets and operations of the
Company and each of its subsidiaries (taking into account the cost and
availability of such insurance); will remain in full force and effect through
the respective dates listed in such policies with the payment of additional
premiums; and will not in any way be affected by, or terminate or lapse by
reason of, the transactions contemplated by this Agreement.
3.16 LITIGATION. Except as disclosed in Schedule 3 hereto, there is no
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litigation, legal, administrative or arbitral proceeding, investigation or other
action of any nature pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its subsidiaries.
3.17 COMPLIANCE WITH THE LAW. Neither the Company nor any of its
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subsidiaries has violated any governmental requirement or failed to obtain any
license, permit, franchise or other governmental authorization necessary for the
ownership of any of its assets or properties or the conduct of its business,
which violation or failure would have (in the event such violation or failure
were asserted by any Person through appropriate action) a material adverse
effect on the condition (financial or otherwise), business or prospects of the
Company or its properties or assets. Except for such acts or failures to act as
would not have a material adverse effect on the condition (financial or
otherwise), business or prospects of the Company or its properties or assets,
the assets and properties of the Company have been maintained, operated and
developed in a good and workmanlike manner and in conformity with all applicable
laws and all rules, regulations and orders of all duly constituted authorities
having jurisdiction and in conformity with the provisions of agreements and
other instruments comprising a part of the assets and properties, including,
without limitation, all leases, subleases or other contracts comprising a part
of the assets and properties.
3.18 ENVIRONMENTAL MATTERS. Except to the extent that the inaccuracy
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of any of the following, individually or in the aggregate, would not have a
material adverse effect on the condition (financial or otherwise), business or
prospects of the Company or its properties or assets:
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(a) No property owned, leased or operated by the Company or any of
its subsidiaries, and no operations conducted thereon violate any order or
requirement of any court or Governmental Entity or any Environmental Laws;
(b) Without limitation of clause (a) above, no property owned,
leased or operated by the Company or any of its subsidiaries, nor the operations
currently conducted thereon or, to the best knowledge of the Company, by any
prior owner or operator of such property or operation, are in violation of or
subject to any existing, pending or threatened action, suit, investigation,
inquiry or proceeding by or before any court or Governmental Entity or subject
to any remedial obligations under Environmental Laws;
(c) All notices, permits, licenses or similar authorizations, if
any, required to be obtained or filed by the Company or any of its subsidiaries
in connection with the operation or use of any and all property of the Company
and each of its subsidiaries, including without limitation present, or to the
best of Company's knowledge, past treatment, storage, disposal or release of a
hazardous substance or solid waste into the environment, have been duly obtained
or filed, and the Company and each of its subsidiaries are in compliance with
the terms and conditions of all such notices, permits, licenses and similar
authorizations;
(d) All hazardous substances, solid waste, and oil and gas
exploration and production wastes, if any, generated at any and all properties,
owned, leased or operated by the Company or any of its subsidiaries have in the
past, during the tenure of ownership of the Company and its subsidiaries and, to
the best of the Company's knowledge, prior thereto, been transported, treated
and disposed of in accordance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment, and, to the best knowledge of the Company, all such transport
carriers and treatment and disposal facilities have been and are operating in
compliance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment, and are
not the subject of any existing, pending or threatened action, investigation or
inquiry by any Governmental Entity in connection with any Environmental Laws;
(e) The Company has taken all steps reasonably necessary to
determine and has determined that no hazardous substances, solid waste, or oil
and gas exploration and production wastes, have been disposed of or otherwise
released, and there has been no threatened release of any hazardous substances,
on or to any properties, owned, leased or operated by the Company or any of its
subsidiaries, except in compliance with Environmental Laws and so as not to pose
an imminent and substantial endangerment to public health or welfare or the
environment; and
(f) Neither the Company nor any of its subsidiaries has any known
contingent liability in connection with any release or threatened release of any
oil, hazardous substance or solid waste into the environment.
3.19 TAXES. Each of the Company and Petrosearch-Nevada has filed
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(taking into account any extensions) all United States Federal income tax
returns and all other tax returns which are required to be filed by it on or
before the Closing and has paid all taxes due pursuant to such returns or
pursuant to any assessment received by the Company or Petrosearch-Nevada,
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except for any taxes which are being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained. The
charges, accruals and reserves on the books of the Company in respect of taxes
and other governmental charges are adequate. No tax lien has been filed and, to
the knowledge of the Company, no claim is being asserted with respect to any
such tax, fee or other charge, except for any taxes, fees or other charges which
are being contested in good faith and by proper proceedings and against which
adequate reserves are being maintained.
3.20 BROKERAGE FEES. Neither the Company nor Petrosearch-Nevada has
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retained any financial advisor, broker, agent, or finder or paid or agreed to
pay any financial advisor, broker, agent, or finder on account of the sale by
the Company and Petrosearch-Nevada and the purchase by the Purchaser of the
Shares.
3.21 SEC REQUIREMENTS. Neither the Company nor any of its subsidiaries
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has received notice from the Securities and Exchange Commission or any state
securities agency that the Company or any subsidiary is not in compliance with
applicable Securities and Exchange Commission or state securities rules and
regulations or is under investigation regarding the potential violation of any
such rule or regulation.
3.22 MATERIAL AGREEMENTS. Set forth on Schedule 4 hereto is a complete
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and correct list of all material agreements of the Company and its subsidiaries
that would be required to be listed in an Annual Report on Form 10-K as material
contracts pursuant to Item 601 of Regulation S-K.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
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The Purchaser hereby represents, warrants and agrees that:
4.1 AUTHORITY. The Purchaser has full partnership power and authority
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to execute and deliver this Agreement and, when executed and delivered, will
constitute the legal, valid and binding obligation of Purchaser, enforceable in
accordance with its terms. If the Purchaser is a corporation or a trust, the
officer or trustee executing this Agreement represents and warrants that he/she
is authorized to so sign; that the corporation or trust is authorized by its
charter and by-laws or the trust agreement, as the case may be, to make this
investment.
4.2 SUITABILITY OF PURCHASER. The Purchaser is able to (i) bear the
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economic risk of its investment in the Company, (ii) hold the Shares for an
indefinite period of time, and (iii) afford a complete loss of its investment.
4.3 INVESTMENT EXPERIENCE. The Purchaser, together with its purchaser
----------------------
representative (who is unaffiliated with and who is not compensated by the
Company, or any affiliate or selling agent of the Company, directly or
indirectly), if any, have the requisite knowledge and experience in financial
and business matters, including investments of this type,
10
to be capable of evaluating the merits and risks of an investment in the Shares
and of making an informed investment decision with respect thereto.
4.4 RECEIPT OF INFORMATION; RELIANCE UPON DISCLOSURE.
-----------------------------------------------------
(a) DOCUMENTS. The Purchaser has reviewed, read carefully, considered
---------
and fully understood the Disclosure Documents and the Purchaser has received
from the Company all of the information concerning the Company that it considers
to be material in making its investment decision, which information has been
requested by the Purchaser if not already furnished by the Company. The
Purchaser (and/or its representative, if any) have had full access to the books
and records of the Company and to its officers, directors and accountants for
the purpose of obtaining and verifying such information and the Purchaser has
had an opportunity to ask questions and receive answers from the officers of the
Company regarding the terms and conditions of this transaction and the Company's
business and financial condition.
(b) The Purchaser confirms that he has had adequate opportunity to
obtain such independent legal and tax advice and financial planning services as
he has deemed appropriate prior to making a decision to purchase the Shares.
(c) Except as expressly set forth herein, no representations or
warranties, oral or otherwise, have been made to the Purchaser, including
without limitation, any representations concerning the future prospects of the
Company, by the Company or any agent, employee or affiliate of the Company, or
any other person whether or not associated with this transaction, and in
entering into this transaction the Purchaser is not relying upon any
information, other than that contained in the Disclosure Documents, and the
results of its own independent investigation. The Purchaser has obtained
sufficient information to evaluate the merits and risks of its investment and to
make an informed investment decision.
4.5 RESTRICTED SECURITIES. The Purchaser understands and acknowledges
----------------------
that the Shares it is purchasing hereunder are "restricted securities" under
federal and state securities laws insofar as they have not been registered under
the 1933 Act or the securities laws of any other jurisdiction, that they may not
be resold or transferred without compliance with the registration or
qualification provisions of the 1933 Act or applicable federal and state
securities laws or the laws of any other jurisdiction or an opinion of counsel
that an exemption from such registration and qualification requirements is
available. The Purchaser is familiar with SEC Regulation D, Regulation S and
Rule 144 promulgated under the 1933 Act, as presently in effect, and the resale
limitations imposed thereby and by the 1933 Act.
4.6 LIMITATIONS ON DISPOSITION. Without in any way limiting the
----------------------------
representations set forth above, the Purchaser further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a registration statement under the 1933 Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
11
(b)(i) The Purchaser shall have notified the Petrosearch-Nevada of the
proposed disposition and shall have furnished Petrosearch-Nevada with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii)
upon the request of the Petrosearch-Nevada, the Purchaser shall have furnished
Petrosearch-Nevada with an opinion of counsel, reasonably satisfactory to
Petrosearch-Nevada, that such disposition will not require registration of such
securities under the 1933 Act and applicable state securities laws.
The Purchaser understands that Petrosearch-Nevada will issue stop transfer
instructions to its transfer agent with respect to the Shares and intends to
place a restrictive legend on every certificate as provided in Section 8.4
hereof.
4.7 ILLIQUID INVESTMENTS. The Purchaser's overall commitment to
---------------------
investments that are not readily marketable is not disproportionate to its net
worth and its investment in the Shares will not cause such overall commitment to
become excessive. The Purchaser has adequate means of providing for its current
needs and personal contingencies.
4.8 COMPANY RELIANCE ON QUESTIONNAIRE AND REPRESENTATIONS AND
---------------------------------------------------------------
WARRANTIES. The Purchaser understands, acknowledges and agrees that the Company
----------
is relying on the accuracy of the responses by Purchaser contained in the
Confidential Purchaser Questionnaire heretofore delivered by you to the Company
(as well as Purchaser representations and warranties contained in this
Agreement), which responses, representations and warranties you warrant to be
true, complete and correct.
4.9 ACCREDITED INVESTOR STATUS. The Purchaser is an "accredited
----------------------------
investor" as such term is defined in SEC Rule 501(a) of Regulation D promulgated
under the 0000 Xxx.
4.10 PURCHASE FOR OWN ACCOUNT. The Purchaser is acquiring the Shares
--------------------------
for its own account, for investment purposes and not for resale or with a view
to any distribution, or in connection with any distribution thereof.
ARTICLE V
CONDITIONS TO PURCHASER'S OBLIGATIONS
-------------------------------------
Purchaser's obligations to purchase the Initial Investment Shares under
this Agreement are subject to the fulfillment of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
------------------------------
of the Company and Petrosearch-Nevada contained in Article III hereof shall be
true as of the Closing Date.
5.2 COMPANY'S PERFORMANCE. The Company and Petrosearch-Nevada shall
----------------------
have performed and complied with all agreements, obligations and conditions
contained in this Agreement, which performance or compliance is required on or
before the Closing Date.
12
5.3 TRANSACTION DOCUMENTS. Each of the Transaction Documents shall
----------------------
have been fully executed and delivered by the parties thereto, and shall be in
full force and effect.
5.4 ESCROW RELEASE CONDITIONS. Each of the Escrow Release Conditions
---------------------------
shall have been satisfied.
5.5 LEGAL PROCEEDINGS. No proceeding shall, on the Closing Date, be
------------------
pending or threatened seeking to restrain, prohibit or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.
5.6 OFFICERS' CERTIFICATE. The Company and Petrosearch-Nevada shall
----------------------
have delivered an Officers' Certificate to the Purchase to the effect that all
conditions contained in this Article V have been complied with.
The purchase by the Purchaser of the Secondary Transaction Shares under
this Agreement is subject to the fulfillment of the following conditions:
5.7 REPRESENTATIONS AND WARRANTIES. The representations and warranties
------------------------------
of the Company and Petrosearch-Nevada contained in Article III hereof shall be
true as of the Secondary Closing Date.
5.8 PERFORMANCE. The Company and Petrosearch-Nevada shall have
-----------
performed and complied with all agreements, obligations and conditions contained
in this Agreement, which performance or compliance is required on or before the
Secondary Closing Date.
5.9 LEGAL PROCEEDINGS. No proceeding shall, on the Secondary Closing
-----------------
Date, be pending or threatened seeking to restrain, prohibit or obtain damages
or other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby.
5.10 OFFICERS' CERTIFICATE. Each of the Company and Petrosearch-Nevada
---------------------
shall have delivered an Officers' Certificate to the Purchase to the effect that
all conditions contained in Sections 5.7, 5.8 and 5.9 have been complied with as
of the Secondary Closing Date.
ARTICLE VI
CONDITIONS TO COMPANY'S OBLIGATIONS
-----------------------------------
The obligations of the Company and Petrosearch-Nevada to sell and issue the
Initial Investment Shares to Purchaser are subject to the fulfillment on or
before the Closing of each of the following conditions by Purchaser:
6.1 REPRESENTATIONS AND WARRANTIES. The Purchaser's representations
--------------------------------
and warranties contained in Article IV shall be true on and as of the Closing
Date with the same effect as though made on and as of the date thereof.
13
6.2 PAYMENT. The Purchaser shall have delivered into escrow the full
-------
amount of the Initial Investment Purchase Funds.
6.3 TRANSACTION DOCUMENTS. Each of the Transaction Documents shall
----------------------
have been fully executed and delivered by the parties thereto, and shall be in
full force and effect and Purchaser, if requested by Company, shall have
delivered to the Company an executed Confidential Purchaser Questionnaire.
ARTICLE VII
REGISTRATION RIGHTS
-------------------
The Company and Petrosearch-Nevada covenant and agree as follows:
7.1 DEFINITIONS. For purposes of this Article 7:
-----------
(a) The term "Holder" means any person owning or having the right
to acquire Shares or Registrable Securities.
(b) The term "1934 Act" means the Securities Exchange Act of 1934,
as amended.
(c) The term "Public Corporation" means a corporation which has a
class of equity securities registered pursuant to Section 12 of the 1934 Act, or
which is required to file periodic reports pursuant to Section 15(d) of the 1934
Act.
(d) The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act, and such registration
statement or document becoming effective.
(e) The term "Registrable Securities" means (i) the Shares, (ii)
any shares of Common Stock issued by Petrosearch-Nevada pursuant to Section 1.1
or 1.2 hereof, and (iii) any Common Stock issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of the Shares and the shares referred to in clause (ii) above, but
excluding in all cases, however, any Registrable Securities sold by a person in
a transaction in which his rights under this Article VII are not assigned;
provided, however, that any such securities shall cease to be Registrable
-------- -------
Securities when one or more registration statements with respect to the sale of
such securities shall have become effective under the 1933 Act and all such
securities shall have been disposed of in accordance with the plan of
distribution set forth therein.
(f) The number of shares of "Registrable Securities Then
Outstanding" shall be equal to the sum of the number of shares of Common Stock
outstanding which are Registrable Securities.
14
(g) The term "Registration Expenses" means all registration,
qualification, listing and filing fees, printing expenses, escrow fees and blue
sky fees, fees and disbursements of counsel for the Company or
Petrosearch-Nevada and of the Company's or Petrosearch-Nevada's independent
certified public accountants, in each case incident to or required by the
registration under this Agreement, and any other fees and expenses of the
registration under this Agreement which are not Selling Expenses.
(h) The term "Selling Expenses" means all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and all fees and disbursements of counsel for any
Holder.
(i) All other capitalized terms used in this Section that are not
defined herein shall have the meaning otherwise given in this Agreement.
7.2 REGISTRATION OBLIGATION. The Company and Petrosearch-Nevada agree
-------------------------
to cause a registration statement on Form X-0, XX-0 or SB-2 to be filed with the
Securities Exchange Commission as to the Registrable Securities to be registered
under the 1933 Act not later than one hundred twenty (120) days after the
Closing Date and use its reasonable best efforts to have such registration
statement declared effective within one hundred eighty (180) days of the Closing
Date.
7.3 PIGGYBACK REGISTRATION RIGHTS.
-------------------------------
(a) If, at any time or from time to time, the Company or
Petrosearch-Nevada shall determine to register any of its Common Stock, either
for its own account or the account of a security holder or holders, other than
pursuant to a Registration Statement on Form S-4 or Form S-8, the Company or
Petrosearch-Nevada will (x) promptly give each Holder written notice thereof,
and (y) include in such registration (and any related qualification under blue
sky or other state securities laws), and in any underwriting involved therein,
all of the Registrable Securities specified in a written request or requests
made by any Holder within thirty (30) days after receipt of such written notice
from the Company or Petrosearch-Nevada.
(b) If the registration of which the Company or Petrosearch-Nevada
gives notice is for a registered public offering involving an underwriting, the
Company or Petrosearch-Nevada shall so advise the Holders as part of the written
notice given pursuant to Section 7.3(a). In such event, the right of any Holder
to registration pursuant to this Section 7.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of Registrable
Securities owned by the Holder in the underwriting to the extent provided under
this Section 7.3. All Holders proposing to distribute their Registrable
Securities through such underwriting shall (together with the Company or
Petrosearch-Nevada and any other holders of securities of the Company or
Petrosearch-Nevada distributing their securities through such underwriting)
enter into an underwriting agreement with the managing or lead managing
underwriter selected by the Company or Petrosearch-Nevada in the form
customarily used by such underwriter with such changes thereto as the parties
thereto shall agree. Notwithstanding any other provision of this Section 7.3, if
the managing or lead managing underwriter determines that market factors require
that the number of Registrable Securities and other securities
15
requested to be included in the registration be limited, the managing or lead
managing underwriter may reduce the number of Registrable Securities and
securities of any other holder of securities to be included in the registration.
If the registration includes an underwritten primary registration on behalf of
the Company or Petrosearch-Nevada, the reduction shall be taken (i) first from
and to the extent of the securities requested to be included in such
registration by the Holders and the holders of any other securities pro rata
--- ----
according to the number of securities requested by the Holders and such holders
to be included in the registration, and (ii) thereafter from the securities to
be registered on behalf of the Company or Petrosearch-Nevada. If the
registration consists only of any underwritten secondary registration on behalf
of holders of securities of the Company or Petrosearch-Nevada, the reduction
shall be taken (i) first from and to the extent of the securities requested to
be included in the registration by the Holders and any other holders of
securities included in the registration other than pursuant to demand
registration rights pro rata according to the number of securities requested by
--- ----
the Holders and such holders to be included in the registration and (ii)
thereafter from securities, if any, to be registered on behalf of holders of
securities included in the registration pursuant to demand registration rights.
The Company or Petrosearch-Nevada shall advise all Holders and other holders
participating in such underwriting as to any such limitation and the number of
shares that may be included in the registration and underwriting. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company or Petrosearch-Nevada and
the managing or lead underwriter. Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
(c) The Company or Petrosearch-Nevada may withdraw a registration
for which registration rights have been exercised pursuant to this Section 7.3
at any time prior to the time it becomes effective.
7.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
--------------------------
connection with a registration pursuant to this Article 7 shall be borne by the
Company or Petrosearch-Nevada. All Selling Expenses relating to the Registrable
Securities registered on behalf of the Holders shall be borne by the Holders of
such Registrable Securities pro rata based upon the total number of Registrable
--- ----
Securities included in the registration or, if such Selling Expenses are
specifically allocable to Registrable Securities held by specific Holders, by
such Holders to the extent related to the sale of such Registrable Securities.
7.5 REGISTRATION PROCEDURES.
------------------------
(a) In connection with the registration of Registrable Securities
required pursuant to this Article 7, the Company or Petrosearch-Nevada shall as
expeditiously as is reasonable:
(i) prepare and file with the SEC on any appropriate form a
registration statement with respect to such Registrable Securities and use its
reasonable reasonable best efforts to cause such registration statement to
become and remain effective for the period described in paragraph (ii) below;
16
(ii) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the 1933
Act with respect to the disposition of all Registrable Securities and other
securities covered by such registration statement the earliest of (w) when the
Shares have been sold pursuant to Rule 144 promulgated under the 1933 Act (or
any successor provision) ("Rule 144") or such registration statement, (x) when
the Shares have been otherwise transferred and a new certificate for the Shares
not bearing a legend restricting further transfer shall have been delivered by
the Company or Petrosearch-Nevada, (y) when all of the Holder's and its
Affiliates' remaining Shares can be sold in a single transaction in compliance
with Rule 144, or (z) when the Shares have ceased to be outstanding;
(iii) furnish to each seller of such Registrable Securities
such number of conformed copies of such registration statement and of each such
amendment and supplement thereto (at least one of which shall include all
exhibits), such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the 1933 Act, such documents incorporated by
reference in such registration statement or prospectus, and such other
documents, as such seller may reasonably request in order to facilitate the sale
or disposition of such Registrable Securities;
(iv) use its reasonable best efforts to register or qualify
all Registrable Securities and other securities covered by such registration
statement under such other securities or "blue sky" laws of such jurisdictions
as each seller shall reasonably request, and do any and all other acts and
things as may be reasonably necessary to consummate the disposition in such
jurisdictions of the Registrable Securities covered by such registration
statement, except that the Company or Petrosearch-Nevada shall not for any such
purpose be required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it is not so qualified, or to subject itself to
taxation in respect of doing business in any such jurisdiction, or to consent to
general service of process in any such jurisdiction;
(v) immediately notify each seller of Registrable Securities,
at any time when a prospectus relating thereto is required to be delivered under
the Act, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing or if it is necessary, in the opinion
of counsel to the Company or Petrosearch-Nevada, to amend or supplement such
prospectus to comply with law, and at the request of any such seller prepare and
furnish to any such seller a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing and shall
otherwise comply in all material respects with law and so that such prospectus,
as amended or supplemented, will comply with law;
17
(vi) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, beginning with the first
month of the first fiscal quarter after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the 1933 Act;
(vii) use its reasonable best efforts to list such securities
on each securities exchange or over-the-counter market on which shares of Common
Stock are then listed, if such securities are not already so listed and if such
listing is then permitted under the rules of such exchange and, if shares of
Common Stock are not then listed on a securities exchange or over- the-counter
market, to use its reasonable best efforts to cause such securities to be listed
on such securities exchange or over-the-counter market as such seller shall
reasonably request;
(viii) use its reasonable best efforts to provide a transfer
agent and registrar for such Registrable Securities not later than the effective
date of such registration statement; and
(b) The Holder or Holders of Registrable Securities included in any
registration shall furnish to the Company such information regarding such Holder
or Holders, the Registrable Securities held by them and the distribution
proposed by such Holder or Holders as the Company or Petrosearch-Nevada may from
time to time reasonably request and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement.
(c) In the case of an underwritten public offering, the Holder or
Holders of Registrable Securities included in any registration shall, upon
request by the Company and the managing or lead managing underwriter, execute
and deliver custodian agreements and powers of attorney in form and substance
reasonably satisfactory to the Company or Petrosearch-Nevada and such Holder or
Holders and as shall be reasonably necessary to consummate the offering.
7.6 INDEMNIFICATION.
---------------
(a) The Company and Petrosearch-Nevada will indemnify each Holder
with respect to which registration has been effected pursuant to this Agreement,
each of its officers and directors, if any, and each underwriter, if any, and
each person who controls the Holder or any such underwriter within the meaning
of Section 15 of the 1933 Act, against any and all losses, claims, damages,
liabilities or expenses (or actions in respect thereof), including any of the
foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement or prospectus, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading, or any
18
violation by the Company or Petrosearch-Nevada of the 1933 Act or any rule or
regulation promulgated under the 1933 Act applicable to the Company or
Petrosearch-Nevada in connection with any such registration, and the Company or
Petrosearch-Nevada will reimburse each such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and other expenses
reasonably incurred, as such expenses are incurred, in connection with
investigating, preparing or defending any such claims, loss, damage, liability
or action; provided, however, that the Company or Petrosearch-Nevada will not be
-------- -------
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company or
Petrosearch-Nevada by an instrument duly executed by such Holder or underwriter
and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration is being
effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's or Petrosearch-Nevada securities covered
by such a registration statement, each Person who controls the Company or
Petrosearch-Nevada or such underwriter within the meaning of Section 15 of the
1933 Act and each other such Holder against any and all losses, claims, damages,
liabilities and expenses (or actions in respect thereof), arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement or prospectus, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statement therein, in the light of the circumstances
under which they were made, not misleading, and will reimburse the Company or
Petrosearch-Nevada, such Holders, underwriters or control persons for any legal
or any other expenses reasonably incurred, as such expenses are incurred, in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement or prospectus in reliance upon
and in conformity with written information furnished to the Company or
Petrosearch-Nevada by such Holder. Notwithstanding the foregoing, the liability
of each Holder under this Section 7.6 shall be limited to an amount equal to the
aggregate proceeds received by such Holder from the sale of Registrable
Securities hereunder, unless such liability arises out of or is based on willful
conduct by such Holder.
(c) Each party entitled to indemnification under this Section 7.6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claims or any
litigation resulting therefrom; provided, however, that counsel for the
-------- -------
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (which approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such Indemnified Party's expense; provided, however, that the failure
-------- -------
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. Notwithstanding the foregoing, the Indemnifying Party shall
not be entitled to assume the
19
defense for matters as to which there is, in the opinion of counsel to the
Indemnifying Party, a conflict of interest or separate and different defenses.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect of such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with the defense of such claim and
the litigation resulting therefrom.
7.7 CONTRIBUTION.
------------
(a) If the indemnification provided for in Section 7.6 hereof
is unavailable to the Indemnified Parties in respect of any losses, claims,
damages, liabilities or expenses (or actions in respect thereof) referred to
therein, then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party on the one hand and the
Indemnified Party on the other in connection with the statement or omission
which resulted in such losses, claims, damages, liabilities or expenses (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue statement (or alleged untrue statement), of a
material fact or the omission (or alleged omission) to state a material fact
relates to information supplied by the Indemnifying Party or the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
Petrosearch-Nevada and each Holder agree that it would not be just and equitable
if contribution pursuant to this Section 7.7 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above. The amount paid or payable by an
Indemnified Party as a result of the losses, claims, damages, liabilities or
expenses (or actions in respect thereof) referred to above in this Section shall
be deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim.
(b) Notwithstanding anything to the contrary contained
herein, the obligation of each Holder to contribute pursuant to this Section 7.7
is several and not joint and no selling Holder shall be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities of such selling Holder were offered to the public exceeds
the amount of any damages which such selling Holder has otherwise been required
to pay by reason of such untrue statement (or alleged untrue statement) or
omission (or alleged omission).
(c) No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
20
7.8. EXCHANGE ACT REGISTRATION. The Company and Petrosearch-Nevada
--------------------------
covenant and agree that until such time as there shall be no Registrable
Securities outstanding:
(a) it will, if required by law, maintain an effective
registration statement (containing such information and documents as the SEC
shall specify) with respect to the Common Stock under Section 12(g) of the 1934
Act and will file in a timely manner such information, documents and reports as
the SEC may require or prescribe for companies whose stock has been registered
pursuant to said Section 12(g);
(b) it will, if a registration statement with respect to the
Common Stock under Section 12(b) or Section 12(g) of the 1934 Act is effective,
make whatever filings with the SEC or otherwise make generally available to the
public such financial and other information as may be necessary in order to
enable the Holders to sell shares of Common Stock pursuant to the provisions of
Rule 144 or any successor rule or regulation thereto or any statute hereafter
adopted to replace or to establish the exemption that is now covered by Rule
144;
(c) it will, if no longer required to file reports pursuant
to Section 12 (g) of the 1934 Act, upon the request of any Holder, make publicly
available the information specified in subparagraph (c) (2) of Rule 144, and
will take such further action as any Holder may reasonably request, all to the
extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the 1933 Act within the limitation of the
exemptions provided by Rule 144 or any similar rule or regulation hereafter
adopted by the SEC; and
(d) upon the request of any Holder, it will deliver to such
Holder a written statement as to whether it has complied with the requirements
of this Section 7.8.
The Company and Petrosearch-Nevada represent and warrant that such
registration statement or any information, documents or report filed with the
SEC in connection therewith or any information so made public shall not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
contained therein not misleading. The Company and Petrosearch-Nevada agree to
indemnify and hold harmless (or to the extent the same is not enforceable, make
contribution to the Holders, their partners, advisory committee members,
officers, directors and employees acting for any Holder in connection with any
offering or sale by such Holder of Registrable Securities or any person, firm or
corporation controlling (within the meaning of either Section 15 of the 1933 Act
or Section 20 of the 1934 Act) such Holder from and against any and all losses,
claims, damages, liabilities or expenses (or actions in respect thereof) arising
out of or resulting from any breach of the foregoing representation or warranty,
all on terms and conditions comparable to those set forth in Section 7.6;
provided, however, that the Company and Petrosearch-Nevada shall be given
-------- -------
written notice and an opportunity to assume on terms and conditions comparable
to those set forth in Section 7.6 the defense thereof.
7.9 DELAY OF REGISTRATION. No holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Article VII.
21
7.10 AMENDMENTS AND WAIVERS. Any term or provision of the registration
----------------------
rights stated in this Agreement may be amended and the observance of any term of
such rights may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company and Petrosearch-Nevada and the holders of at least sixty-seven percent
(67%) of the Registrable Securities then outstanding. Any amendment or waiver
effected in accordance with this section shall be binding upon each holder of
the Shares and any Registrable Securities then outstanding, each future holder
of Shares and such Registrable Securities, and the Company and
Petrosearch-Nevada.
ARTICLE VIII
MISCELLANEOUS AND FURTHER PROVISIONS
------------------------------------
The Purchaser agrees that:
8.1 NO TRANSFER OF SHARES UNTIL REGISTERED. Purchaser will not
-------------------------------------------
transfer or assign the Initial Investment Shares or the Secondary Transaction
Shares except as provided in Section 4.6.
8.2 SUCCESSORS AND ASSIGNS. This Agreement and this Agreement shall be
----------------------
binding upon the parties and their respective successors and assigns.
8.3 INDEMNIFICATION REGARDING QUESTIONNAIRE. Purchaser shall
-----------------------------------------
indemnify, hold harmless and defend the Company and its affiliates and agents
with respect to any and all loss, damage, expense, claim, action or liability
any of them may incur as a result of the breach or untruth of any
representations or warranties made by the Purchaser in the Confidential
Purchaser Questionnaire completed by the Purchaser, and the Purchaser agrees
that in the event of any breach or untruth of any representations or warranties
made by the Purchaser herein or in the Confidential Purchaser Questionnaire, the
Company may, at its option, forthwith rescind the sale of the Shares to the
Purchaser, if the failure to rescind due to the breach or untruth by Purchaser
would cause the Company to be in violation of the registration requirements of
the 1933 Act or applicable state securities laws.
8.4 LEGEND. A legend in substantially the following form will be
------
placed on all documents or certificates evidencing the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE
ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933
ACT.
22
8.5 SURVIVAL OF WARRANTIES. The warranties, representations and
------------------------
covenants of the parties contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing.
8.6 ENTIRE AGREEMENT. This Agreement, together with the other
-----------------
Transaction Documents, constitutes the entire agreement among the parties, and
no party shall be liable or bound to any other party in any manner by any
warranties, representations, guarantees or covenants except as specifically set
forth in this Agreement. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective successors and assigns of
the parties. 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, except as expressly provided in this Agreement.
8.7 GOVERNING LAW. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of Texas (except where Nevada law
pertains to the corporate matters of Petrosearch-Nevada) without regard to
conflicts of law.
8.8 COUNTERPARTS. 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.
8.9 NOTICES. All notices, requests, demands and other communications
-------
under this Agreement shall be in writing and shall be deemed to have been duly
given (i) on the date of service if served personally on the party to whom
notice is to be given, (ii) on the date of delivery if sent by prepaid overnight
courier services, (iii) on the fifth day after the date of mailing if mailed to
the party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and (iv) upon the receipt of a confirmation of
transmission if sent by facsimile transmission at the following addresses. Any
party may change its address for purposes of this section by giving the other
party written notice of the new address in the manner set forth above.
To Purchaser: Xxxx I Management, Ltd.
000 Xxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx Xxxxxx
FAX: (000) 000-0000
With a copy to: Gardere Xxxxx Xxxxxx, L.L.P.
0000 Xxxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxxxx
FAX: (000) 000-0000
To Company and
to Petrosearch-Nevada: Petrosearch Corporation
0000 Xxxxxxx Xxxxx, Xxxxx 000X
00
Xxxxxxx, Xxxxx 00000
Attention: President
FAX: (000) 000-0000
8.10 SEVERABILITY. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provisions were so excluded and shall be enforceable in accordance with its
terms.
8.11 AMENDMENT AND/OR MODIFICATION. Neither this Agreement, nor any
-------------------------------
term or provision hereof, may be changed, waived, discharged, amended, modified
or terminated orally, or in any manner other than by an instrument in writing
signed by each of the parties hereto.
8.12 HEADINGS. The various headings of this Agreement are inserted for
--------
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
SIGNATURES APPEAR ON THE FOLLOWING PAGES
24
EXECUTED as of the Effective Date above.
PETROSEARCH CORPORATION, A TEXAS
CORPORATION
By: /s/
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PETROSEARCH ENERGY CORPORATION, A
NEVADA CORPORATION
By: /s/
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
XXXX I MANAGEMENT, LTD., A TEXAS LIMITED
PARTNERSHIP
By: /s/
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
LIST OF ATTACHMENTS:
----------------------
Schedule 1 - Capitalization of Company
Schedule 2 - Fortuna Energy, L.P. Credit Facility
Schedule 3 - Pending Litigation
Schedule 4 - Material Contracts per Section 3.22
25
