EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of April
2, 2004 by and among Cadence Resources Corporation, a Utah corporation (the
"COMPANY"), and each purchaser identified on the signature pages hereto (each, a
"PURCHASER" and collectively, the "PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended, the
Company desires to issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, desires to purchase from the Company, certain
securities of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each of the
Purchasers agree as follows:
ARTICLE I DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:
"AFFILIATE" means any Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 144.
"ANNUAL REPORT" means the Company's Annual Report (Form 10-KSB) for the
fiscal year ended September 30, 2003.
"BUSINESS DAY" means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.
"CLOSING" means the closing of the purchase and sale of the Senior Secured
Notes and Warrants pursuant to Section 2.1.
"CLOSING DATE" means the date of the Closing.
"COLLATERAL AGENT" has the meaning ascribed to such term in the Security
Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par value $0.01 per
share.
"COMMON STOCK EQUIVALENTS" means, collectively, Options and Convertible
Securities. "COMPANY COUNSEL" means Jenkens & Gilchrist Parker Chapin LLP.
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"CONVERTIBLE SECURITIES" means any stock or securities (other than
Options) convertible into or exercisable or exchangeable for Common Stock.
"EFFECTIVE DATE" means the date that the Registration Statement is first
declared effective by the Commission.
"ELIGIBLE MARKET" means any of The New York Stock Exchange, Inc., the
American Stock Exchange, the Nasdaq National Market, The Nasdaq SmallCap Market
or the OTC Bulletin Board.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FILING DATE" means June 1, 2004.
"HYDROCARBONS" means oil, gas, coal seam gas, casinghead gas, condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons, all products refined,
separated, settled and dehydrated therefrom and all products refined therefrom,
including, without limitation, kerosene, liquefied petroleum gas, refined
lubricating oils, diesel fuel, drip gasoline, natural gasoline, helium, sulfur
and all other gaseous or liquid minerals.
"HYDROCARBON INTERESTS" means all rights, titles, interests and estates
now owned or hereafter acquired by the Company in and to Hydrocarbon leases,
Hydrocarbon or mineral fee or lease interests, farm-ins, overriding royalty and
royalty interests, net profit interests, oil payments, production payment
interests and similar mineral interests, including any reserved or residual
interest of whatever nature.
"LEAD PURCHASER" means Smithfield Fiduciary LLC.
"LIEN" means any lien, charge, claim, tax, security interest, encumbrance,
right of first refusal or other restriction.
"LOSSES" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including, without limitation, costs of
preparation and reasonable attorneys' fees.
"OIL AND GAS PROPERTIES" means Hydrocarbon Interests; the personal
property and/or real property now or hereafter pooled or unitized with
Hydrocarbon Interests; all presently existing or future unitization, pooling
agreements and declarations of pooled units and the units created thereby
(including without limitation all units created under orders, regulations and
rules of any governmental authority having jurisdiction) which may affect all or
any portion of the Hydrocarbon Interests; all Hydrocarbons in and under and
which may be produced, saved, processed or attributable to the Hydrocarbon
Interests, the lands covered thereby and all Hydrocarbons in pipelines,
gathering lines, tanks and processing plants and all rents, issues, profits,
proceeds, products, revenues and other incomes from or attributable to the
Hydrocarbon Interests; all tenements, hereditaments, appurtenances and personal
property and/or real property in any way appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests, and all rights, titles, interests and
estates described or referred to above, including any and all real property, now
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owned or hereafter acquired, used or held for use in connection with the
operating, working or development of any of such Hydrocarbon Interests or
personal property and/or real property and including any and all pipelines,
gathering lines, compression facilities, tanks and processing plants, all oil
wells, gas wells, water wells, injection wells, platforms, spars or other
offshore facilities, casings, rods, tubing, pumping units and engines, Christmas
trees, derricks, separators, gun barrels, flow lines, gas systems (for
gathering, treating and compression), and water systems (for treating, disposal
and injection); surface leases, rights-of-way, easements and servitude together
with all additions, substitutions, replacements, accessions and attachments to
any and all of the foregoing.
"OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERMITTED LIENS" means (i) royalties, overriding royalties, reversionary
interests, production payments and similar burdens which have been taken into
account in the ownership interests of the Company in and to the Oil and Gas
Properties as set forth in the Annual Report or the Reserve Report, as the case
may be; (ii) sales contracts or other arrangements for the sale of production of
Hydrocarbons which would not (when considered cumulatively with the matters
discussed in clause (i) above) deprive the Company of any material right in
respect of the Oil and Gas Properties (except for rights customarily granted
with respect to such contracts and arrangements); (iii) statutory Liens for
taxes or other assessments that are not yet delinquent (or that, if delinquent,
are being contested in good faith by appropriate proceedings, levy and execution
thereon having been stayed and continue to be stayed and for which the Company
has set aside on its books adequate reserves); (iv) easements, rights of way,
servitudes, permits, surface leases and other rights in respect to surface
operations, pipelines, grazing, logging, canals, ditches, reservoirs or the
like, conditions, covenants and other restrictions, and easements of streets,
alleys, highways, pipelines, telephone lines, power lines, railways and other
easements and rights of way on, over or in respect of the Oil and Gas Properties
and that do not individually or in the aggregate, have a material adverse effect
on the Oil and Gas Properties; (v) rights reserved to or vested in any
municipality, governmental, statutory or other public authority to control or
regulate the Oil and Gas Properties in any manner, and all applicable laws,
rules and orders from any governmental authority; (vi) Liens in favor of
operators and non-operators under joint operating agreements to secure amounts
owing, which amounts are not yet due or are being contested in good faith by
appropriate proceedings, if adequate reserves shall have been made therefor;
(vii) such imperfections of title which do not in the aggregate materially
detract from the value of the Oil and Gas Properties, or the use thereof, in the
business of the Company; and (vii) Liens incurred pursuant to the Transaction
Documents.
"PERSON" means any individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or any court or other federal, state, local or other governmental authority or
other entity of any kind.
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"POST-EFFECTIVE AMENDMENT" means a post-effective amendment to the
Registration Statement.
"POST-EFFECTIVE AMENDMENT FILING DEADLINE" means the tenth Trading Day
after the Registration Statement ceases to be effective pursuant to applicable
securities laws due to the passage of time or the occurrence of an event
requiring the Company to file a Post-Effective Amendment; provided, however,
that such number of Trading Days does not include any days that the
Post-Effective Amendment cannot be filed because one or more Purchasers has not
provided the Company with information required to be contained in the
Post-Effective Amendment, but only to the extent one or more Purchasers fails to
deliver such information within five (5) Trading Days after the date that the
Company reasonably requests, in writing, the Purchasers to provide such
information.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" means any Common Stock issued or issuable
pursuant to the Transaction Documents, together with any securities issued or
issuable upon any stock split, dividend or other distribution, recapitalization
or similar event with respect to the foregoing.
"REGISTRATION STATEMENT" means each registration statement required to be
filed under Article VI, including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
"REQUIRED EFFECTIVENESS DATE" means September 1, 2004, provided, however,
that such date shall be extended by such number of days as the Company is unable
to file the Registration Statement or an amendment thereto because one or more
Purchasers has not provided the Company with information required to be included
in the Registration Statement or an amendment thereto, but only to the extent
one or more Purchasers fails to deliver such information within five (5) Trading
Days after the date that the Company reasonably requests, in writing, that the
Purchasers to provide such information.
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"RESERVE REPORT" means that certain Reserve Report from Ralph E. Davis
Associations, Inc., dated January 9, 2004 relating to certain of the Oil and Gas
Properties located in the State of Texas as more fully described therein.
"RULE 144," "RULE 415," and "RULE 424" means Rule 144, Rule 415 and Rule
424, respectively, promulgated by the Commission pursuant to the Securities Act,
as such Rules may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.
"SECURITIES" means, collectively, the Senior Secured Notes, the Warrants
and the Warrant Shares.
"SECURITY AGREEMENT" means the security agreement attached hereto as
Exhibit C.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR SECURED NOTES" means the senior secured notes of the Company in
the form attached hereto as Exhibit A (together with any senior secured notes
issued in replacement thereof in accordance with the terms thereof).
"SUBSIDIARY" means any Person in which the Company, directly or
indirectly, owns capital stock or holds an equity or similar interest.
"TRADING DAY" means (a) any day on which the Common Stock is listed or
quoted and traded on its primary Trading Market, (b) if the Common Stock is not
then listed or quoted and traded on any Eligible Market, then a day on which
trading occurs on The Nasdaq SmallCap Market (or any successor thereto), or (c)
if trading does not occur on The Nasdaq SmallCap Market (or any successor
thereto), any Business Day.
"TRADING MARKET" means the OTC Bulletin Board or any other Eligible Market
on which the Common Stock is then listed or quoted.
"TRANSACTION DOCUMENTS" means this Agreement, the Senior Secured Notes,
the Warrants, the Security Agreement, the Transfer Agent Instructions and any
other documents or agreements executed in connection with the transactions
contemplated hereunder.
"TRANSFER AGENT" means OTC Stock Transfer Company of Salt Lake City, Utah,
or any other transfer agent selected by the Company
"TRANSFER AGENT INSTRUCTIONS" means the Irrevocable Transfer Agent
Instructions, in the form of Exhibit D, executed by the Company and delivered to
and acknowledged in writing by the Transfer Agent.
"WARRANTS" means the warrants, in substantially the form attached hereto
as Exhibit B.
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"WARRANT SHARES" means the shares of Common Stock issued and issuable upon
exercise of the Warrants.
ARTICLE II PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
that aggregate principal amount of Senior Secured Notes as indicated below such
Purchaser's name on the signature page of this Agreement along with the Warrants
to acquire 6,375 Warrant Shares for each $50,000 principal amount of Senior
Secured Notes purchased. The Closing shall take place at the offices of Schulte
Roth & Zabel LLP immediately following the execution hereof, or at such other
location or time as the parties may agree.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be
delivered to each Purchaser the following:
(i) each of the Transaction Documents to which the Company is
a party duly executed by the Company;
(ii) a Senior Secured Note in such principal amount as such
Purchaser is purchasing hereunder and the related Warrants (in such amounts as
such Purchaser shall request) being purchased by such Purchaser at the Closing
pursuant to this Agreement.
(iii) a legal opinion of Company Counsel, in the form of
Exhibit E, executed by such counsel and delivered to the Purchasers; and
(iv) duly executed Transfer Agent Instructions acknowledged by
the Transfer Agent.
(b) At the Closing, each Purchaser shall deliver or cause to be
delivered to the Company (i) each Transaction Document to which such Purchaser
is a party duly executed by such Purchaser and (ii) the purchase price indicated
below such Purchaser's name on the signature page of this Agreement, in United
States dollars and in immediately available funds, by wire transfer to an
account designated in writing by the Company for such purpose.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchasers as follows:
(a) Subsidiaries. The Company has no direct or indirect Subsidiaries
other than those listed in Schedule 3.1(a). Except as disclosed in Schedule
3.1(a), the Company owns, directly or indirectly, all of the capital stock or
comparable equity interests of each Subsidiary free and clear of any Lien, and
all the issued and outstanding shares of capital stock or comparable equity
interests of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights.
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(b) Organization and Qualification. Except as disclosed in Schedule
3.1(b) each of the Company and the Subsidiaries is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. To the
knowledge of the Company, each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation or
other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not,
individually or in the aggregate, (i) adversely affect the legality, validity or
enforceability of any Transaction Document, (ii) have or result in a material
adverse effect on the results of operations, assets, prospects, business or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole, or (iii) impair the Company's ability to materially perform on a timely
basis its obligations under any of the Transaction Documents (any of (i), (ii)
or (iii), a "MATERIAL ADVERSE EFFECT").
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including the granting of a
security interest in the Collateral (as defined in the Security Agreement)) have
been duly authorized by all necessary action on the part of the Company and no
further consent or action is required by the Company, its Board of Directors or
its stockholders. Each of the Transaction Documents has been (or upon delivery
will be) duly executed by the Company and is, or when delivered in accordance
with the terms hereof, will constitute, the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) conflict
with or violate any provision of the Company's or any Subsidiary's certificate
or articles of incorporation, bylaws or other organizational or charter
documents, (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing a Company or Subsidiary debt or otherwise) or
other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, except to the extent that such conflict, default or termination right
could not reasonably be expected to have a Material Adverse Effect, or (iii), to
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the knowledge of the Company, result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations and the rules and
regulations of any self-regulatory organization to which the Company or its
securities are subject), or by which any property or asset of the Company or a
Subsidiary is bound or affected.
(e) Issuance of the Securities. The Senior Secured Notes and the
Warrants are duly authorized and, when issued and paid for in accordance with
the Transaction Documents, shall be free and clear from all Liens with respect
to the issue thereof and shall not be subject to preemptive rights or similar
rights of stockholders. As of the Closing Date, a number of shares of Common
Stock shall have been duly authorized and reserved for issuance which equals
125% of the number of shares of Common Stock issuable upon exercise of the
Warrants to be issued at such Closing. Upon exercise or issuance in accordance
the Warrants, the Warrant Shares shall be validly issued, fully paid and
nonassessable and free from all Liens with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Common Stock.
Assuming the accuracy of each of the representations and warranties of the
Purchasers contained in Section 3.2, the issuance by the Company of the
Securities is exempt from registration under the Securities Act.
(f) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock, options and other securities of the
Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is set forth in
Schedule 3.1(f). All outstanding shares of capital stock are duly authorized,
validly issued, fully paid and nonassessable and have been issued in compliance
with all applicable securities laws, except where the failure to be so
authorized, issued or in compliance could not reasonably be expected to result
in a Material Adverse Effect (as defined below). Except as disclosed in Schedule
3.1(f), there are no outstanding options, warrants, script rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exercisable or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. Except as set forth in Schedule 3.1(f), there are no anti-dilution
or price adjustment provisions contained in any security issued by the Company
(or in any agreement providing rights to security holders) and the issue and
sale of the Securities will not obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under such securities. To the knowledge of
the Company, except as specifically disclosed in Schedule 3.1(f), no Person or
group of related Persons beneficially owns (as determined pursuant to Rule 13d-3
under the Exchange Act), or has the right to acquire, by agreement with or by
obligation binding upon the Company, beneficial ownership of in excess of 5% of
the outstanding Common Stock, ignoring for such purposes any limitation on the
number of shares of Common Stock that may be owned at any single time.
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(g) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively referred
to herein as the "SEC REPORTS" and, together with this Agreement and the
Schedules to this Agreement, the "DISCLOSURE MATERIALS") on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. The Company has delivered
to the Purchasers true, correct and complete copies of all SEC Reports filed
within the ten (10) days preceding the date hereof. As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved ("GAAP"), except as may be otherwise specified
in such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments. All material
agreements to which the Company or any Subsidiary is a party or to which the
property or assets of the Company or any Subsidiary are subject are included as
part of or specifically identified in the SEC Reports.
(h) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports, (i) there has been no event, occurrence or development that,
individually or in the aggregate, has had or that could result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company's financial statements pursuant to
GAAP or required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting or the identity of its
auditors, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock, and (v) the
Company has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock option plans or as set
forth in Schedule 3.1(h). No event, liability, development or circumstance has
occurred or exists, or is contemplated to occur with respect to the Company or
its Subsidiaries or their respective business, properties, prospects, operations
or financial condition, that would be required to be disclosed by the Company
under applicable securities laws on a registration statement on Form S-1 filed
with the SEC relating to an issuance and sale by the Company of its Common Stock
and which has not been publicly announced.
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(i) Absence of Litigation. Except as set forth in Schedule 3.1(i),
there is no action, suit, claim, proceeding, inquiry or investigation before or
by any court, public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries that could, individually or in
the aggregate, have a Material Adverse Effect. Schedule 3.1(i) contains a
complete list and summary description of any pending or, to the knowledge of the
Company, threatened proceeding against or affecting the Company or any of its
Subsidiaries that could individually or in the aggregate, have a Material
Adverse Effect.
(j) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
to the knowledge of the Company, is or has been in violation of any statute,
rule or regulation of any governmental authority, including without limitation
all foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not, individually or
in the aggregate, have or result in a Material Adverse Effect.
(k) Title to Assets. The Company and the Subsidiaries have good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries. To the knowledge of the
Company, any real property and facilities held under lease by the Company and
the Subsidiaries are held by them under valid, subsisting and enforceable leases
of which the Company and the Subsidiaries are in compliance.
(l) Certain Fees. Except as set forth on Schedule 3.1(l), no
brokerage or finder's fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Company has not taken any action that would
cause any Purchaser to be liable for any such fees or commissions.
(m) Private Placement. Neither the Company nor any Person acting on
the Company's behalf has sold or offered to sell or solicited any offer to buy
the Securities by means of any form of general solicitation or advertising. To
the knowledge of the Company, neither the Company nor any of its Affiliates nor
any Person acting on the Company's behalf has, directly or indirectly, at any
time within the past six months, made any offer or sale of any security or
solicitation of any offer to buy any security under circumstances that would (i)
eliminate the availability of the exemption from registration under Regulation D
under the Securities Act in connection with the offer and sale of the Securities
as contemplated hereby or (ii) cause the offering of the Securities pursuant to
the Transaction Documents to be integrated with prior offerings by the Company
for purposes of any applicable law, regulation or stockholder approval
provisions, including, without limitation, under the rules and regulations of
any Trading Market. The Company is not, and is not an Affiliate of, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended. The Company is not a United States real property holding corporation
within the meaning of the Foreign Investment in Real Property Tax Act of 1980.
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(n) Form SB-2 Eligibility. The Company is eligible to register its
Common Stock for resale by the Purchasers using Form SB-2 promulgated under the
Securities Act.
(o) Listing and Maintenance Requirements. The Company is in
compliance with the listing or maintenance requirements of its Trading Market
and will take all steps necessary to have its shares of Common Stock continue to
be traded and listed on its Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
(p) Registration Rights. Except as described in Schedule 3.1(p), the
Company has not granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have not
been satisfied.
(q) Application of Takeover Protections. There is no control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
charter documents or the laws of its state of incorporation that is or could
become applicable to any of the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of the
Company's issuance of the Securities and the Purchasers' ownership of the
Securities. The foregoing notwithstanding, the Company has authorized in its
articles of incorporation blank check preferred stock.
(r) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their agents
or counsel with any information that constitutes or might constitute material,
nonpublic information. The Company understands and confirms that each of the
Purchasers will rely on the foregoing representations in effecting transactions
in securities of the Company. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of the
Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or information
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, prospects, operations or financial conditions, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed. The Company acknowledges and agrees that no Purchaser makes or has
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2.
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(s) Acknowledgment Regarding Purchasers' Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is acting solely in
the capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company or any
other Purchaser (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by any Purchaser or
any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental to such
Purchaser's purchase of the Securities. The Company further represents to each
Purchaser that the Company's decision to enter into this Agreement has been
based solely on the independent evaluation of the transactions contemplated
hereby by the Company and its representatives.
(t) Patents and Trademarks. The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could have a Material Adverse Effect (collectively, the "INTELLECTUAL
PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights.
(u) Regulatory Permits. To the knowledge of the Company, the Company
and the Subsidiaries possess all certificates, authorizations and permits issued
by the appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in the SEC
Reports, except where the failure to possess such permits could not,
individually or in the aggregate, have or result in a Material Adverse Effect
("MATERIAL PERMITS"), and neither the Company nor any Subsidiary has received
any notice of proceedings relating to the revocation or modification of any
Material Permit.
(v) Transactions With Affiliates and Employees. Except as set forth
below or in SEC Reports filed at least ten days prior to the date hereof, none
of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), 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 officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
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(w) Indebtedness. Except as disclosed in Schedule 3.1(w), neither
the Company nor any of its Subsidiaries has any outstanding Indebtedness (as
defined below). Schedule 3.1(w) provides a detailed description of the material
terms of any such outstanding Indebtedness. Except as disclosed in Schedule
3.1(w), no Indebtedness of the Company is senior to or ranks pari passu with the
Senior Secured Notes in right of payment, whether with respect of payment of
redemptions, interest, damages or upon liquidation or dissolution or otherwise.
For purposes of this Agreement: (i) "INDEBTEDNESS" of any Person means, without
duplication (A) all indebtedness for borrowed money, (B) all obligations issued,
undertaken or assumed as the deferred purchase price of property or services
(other than trade payables entered into in the ordinary course of business), (C)
all reimbursement or payment obligations with respect to letters of credit,
surety bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses, (E) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in accordance with GAAP, is classified as a capital lease,
(G) all indebtedness referred to in clauses (A) through (F) above secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through (G) above; and (ii)"CONTINGENT OBLIGATION" means, as to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability
will be protected (in whole or in part) against loss with respect thereto.
(x) Solvency. Based on the financial condition of the Company as of
the Closing Date, and including the proceeds received from the offering of not
more than $6,000,000 aggregate principal amount of Senior Secured Notes to the
Purchasers listed in Schedule 3.1(w) or their Affiliates (the "OFFERING"): (i)
the Company's fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they mature; (ii) the
Company's assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
13
(y) Internal Accounting Controls. To the knowledge of the Company.
the Company and the Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(z) Sarbanes-Oxley Act. The Company is in compliance with any and
all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective
as of the date hereof, and any and all applicable rules and regulations
promulgated by the SEC thereunder that are effective as of the date hereof,
except where such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect.
(aa) Oil and Gas Title. Subject to Permitted Liens, the Company has
good and defensible title to all Oil and Gas Properties, including without
limitation the Oil and Gas Properties referred to in the Annual Report and the
Reserve Report, free and clear of Liens.
(bb) Present Value. The present discounted value of the Company's
interests in the Oil and Gas Properties located in the State of Texas is as set
forth in the Reserve Report.
(cc) Reserve Report. The quantum and nature of the interest of the
Company in and to the Oil and Gas Properties is as set forth in the Annual
Report or the Reserve Report, as the case may be, to the extent set forth
therein, and there are no "back-in" or "reversionary" interests held by third
parties which could materially reduce the interest of the Company in such Oil
and Gas Properties except as expressly set forth in the Annual Report or the
Reserve Report, as the case may be. The ownership of the Oil and Gas Properties
by the Company shall not in any material respect obligate the Company to bear
the costs and expenses relating to the maintenance, development or operations of
each such Oil and Gas Property in an amount in excess of the working interest of
the Company in each Oil and Gas Property as set forth in the Annual Report or
the Reserve Report, as the case may be (unless there is a corresponding increase
in the net revenue interest of the Company in such Oil and Gas Property).
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, as to itself only and for no other Purchaser, represents and warrants to
the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership or
other applicable power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The purchase by such Purchaser of
the Securities hereunder has been duly authorized by all necessary action on the
part of such Purchaser. This Agreement and the Security Agreement has been duly
executed and delivered by such Purchaser and constitutes the valid and binding
obligation of such Purchaser, enforceable against it in accordance with its
terms.
14
(b) Investment Intent. Such Purchaser is (i) acquiring the Senior
Secured Notes and Warrants and (ii) upon exercise of the Warrants will acquire
the Warrant Shares issuable upon exercise of the Warrants, in the ordinary
course of business for its own account and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the Securities Act; provided,
however, that by making the representations herein, such Purchaser does not
agree to hold any of the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in accordance with
or pursuant to a registration statement or an exemption under the Securities
Act. Such Purchaser does not have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities it was, and at the date hereof it is, an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(d) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
(e) Access to Information. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or canacquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser's right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Company's representations and
warranties contained in the Transaction Documents.
15
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of pursuant to an effective
registration statement under the Securities Act or pursuant to an available
exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities laws. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or to the Company or pursuant to Rule 144(k), except as otherwise set
forth herein, the Company may require the transferor to provide to the Company
an opinion of counsel selected by the transferor, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the books of the Company and with its Transfer Agent, without any
such legal opinion, any transfer of Securities by a Purchaser to an Affiliate of
such Purchaser, provided that the transferee certifies to the Company that it is
an "accredited investor" as defined in Rule 501(a) under the Securities Act.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 4.1(b), of a legend substantially in the following form on any
certificate evidencing Securities:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.
Certificates evidencing Securities shall not be required to contain such legend
or any other legend (i) while a Registration Statement covering the resale of
such Securities is effective under the Securities Act; provided, that the
Company's counsel shall have delivered a legal opinion relating to the removal
of legends upon a sale or transfer of such Securities, or (ii) following any
sale of such Securities pursuant to Rule 144, or (iii) if such Securities are
eligible for sale under Rule 144(k), or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission). The
Company shall cause its counsel to issue the legal opinion included in the
Transfer Agent Instructions to the Transfer Agent on the Effective Date and to
deliver any required legal opinions with respect to the removal of legends upon
the sale or transfer of Securities. Following the Effective Date or at such
earlier time as a legend is no longer required for certain Securities, the
Company will no later than five Trading Days following the delivery by a
Purchaser to the Company of a legended certificate representing such Securities,
use its reasonable best efforts to deliver or cause to be delivered to such
Purchaser a certificate representing such Securities that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in this Section. For so long as any
Purchaser owns Securities, the Company will not effect or publicly announce its
intention to effect any exchange, recapitalization or other transaction that
effectively requires or rewards physical delivery of certificates evidencing the
Common Stock.
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(c) The Company acknowledges and agrees that a Purchaser may from
time to time pledge or grant a security interest in some or all of the
Securities in connection with a bona fide margin agreement or other loan or
financing arrangement secured by the Securities and, if required under the terms
of such agreement, loan or arrangement, such Purchaser may transfer pledged or
secured Securities to the pledgees or secured parties. Such a pledge or transfer
would not be subject to approval of the Company and no legal opinion of the
pledgee, secured party or pledgor shall be required in connection therewith.
Further, no notice shall be required of a pledge. At the appropriate Purchaser's
expense, the Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Securities may reasonably request in connection with
a pledge or transfer of the Securities, including the preparation and filing of
any required prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of selling stockholders thereunder.
4.2 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to use its best efforts to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act. Upon the request of any Purchaser, the Company shall deliver
to such Purchaser a written certification of a duly authorized officer as to
whether it has complied with the preceding sentence. As long as any Purchaser
owns any Securities, if the Company is not required to file reports pursuant to
such laws, it will prepare and furnish to the Purchasers and make publicly
available in accordance with paragraph (c) of Rule 144 such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any Purchaser or
subsequent holder of Securities may reasonably request to satisfy the provisions
of Rule 144 applicable to the issuer of securities relating to transactions for
the sale of securities pursuant to Rule 144, but only to the extent that the
Company, or counsel of the Company agree, that the Purchaser or subsequent
holder is able to avail themselves of the exemption created by Rule 144.
4.3 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers, or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.
4.4 Reservation and Listing of Common Stock.
17
(a) The Company shall maintain a reserve from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction Documents in
such amount as may be required to fulfill its obligations in full under the
Transaction Documents. In the event that at any time the then authorized shares
of Common Stock are insufficient for the Company to satisfy its obligations in
full under the Transaction Documents, the Company shall promptly take such
actions as may be required to increase the number of authorized shares.
(b) The Company shall take all steps necessary to cause its Common
Stock to be approved for listing on its Trading Market and maintain the listing
of such Common Stock on such Trading Market or another Eligible Market. The
Company covenants to promptly file any listing application required by its
Trading Market with respect to the Warrant Shares.
4.5 [Intentionally Deleted.]
4.6 Additional Notes; Variable Securities; Additional Registration
Statement. For so long as any Purchaser beneficially owns any Securities, the
Company will not issue any Senior Secured Notes other than to the Purchasers as
contemplated hereby and the Company shall not issue any other securities that
would cause a breach or default under the Senior Secured Notes. For long as any
Warrants remain outstanding, the Company shall not, in any manner, issue or sell
any rights, warrants or options to subscribe for or purchase Common Stock or
directly or indirectly convertible into or exchangeable or exercisable for
Common Stock at a price which varies or may vary with the market price of the
Common Stock, including by way of one or more reset(s) to any fixed price unless
the conversion, exchange or exercise price of any such security cannot be less
than the then applicable Exercise Price (as defined in the Warrants) with
respect to the Common Stock under any into which any Warrant is exerciseable.
Until the Effective Time, the Company will not file a registration statement
under the Securities Act relating to securities that are not the Securities,
other than a registration statement on Form S-8, in order to register increases
in the shares underlying equity incentive plans in existence as of the date of
this Agreement.
4.7 Securities Laws Disclosure; Publicity. The Company shall, on or before
8:30 a.m., New York City Time, on the day following execution of this Agreement,
issue a press release, not in violation of any applicable securities laws,
acceptable to the Purchasers disclosing all material terms of the transactions
contemplated hereby. On the Closing Date, the Company shall file a Current
Report on Form 8-K with the Commission (the "8-K FILING") describing the terms
of the transactions contemplated by the Transaction Documents and including as
exhibits to such Current Report on Form 8-K this Agreement, the form of Senior
Secured Note, the form of Warrant and the Security Agreement in the form
required by the Exchange Act. Thereafter, the Company shall timely file any
filings and notices required by the Commission or applicable law with respect to
the transactions contemplated hereby and provide copies thereof to the
Purchasers promptly after filing. Except with respect to the 8-K Filing and the
press release referenced above (a copy of which will be provided to the
Purchasers for their review as early as practicable prior to its filing), the
18
Company shall, at least two Trading Days prior to the filing or dissemination of
any disclosure required by this paragraph, provide a copy thereof to the
Purchasers for their review. The Company and the Purchasers shall consult with
each other in issuing any press releases or otherwise making public statements
or filings and other communications with the Commission or any regulatory agency
or Trading Market with respect to the transactions contemplated hereby, and
neither party shall issue any such press release or otherwise make any such
public statement, filing or other communication without the prior consent of the
other, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement, filing or other communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except to the extent such disclosure (but not any disclosure as to
the controlling Persons thereof) is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure. The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees
and agents not to, provide any Purchaser with any material nonpublic information
regarding the Company or any of its Subsidiaries from and after the filing of
the 8-K Filing without the express written consent of such Purchaser. In the
event of a breach of the foregoing covenant by the Company, any of its
Subsidiaries, or any of its or their respective officers, directors, employees
and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Purchaser shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material nonpublic information without the prior approval by the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Purchaser shall have any liability to the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, stockholders or agents for any such disclosure. Each
Purchaser hereby agrees not to knowingly request any information from the
Company, its directors, officers, employees or agents which such purchaser
should reasonably know is material non-public information. Subject to the
foregoing, neither the Company nor any Purchaser shall issue any press releases
or any other public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without the prior
approval of any Purchaser, to make any press release or other public disclosure
with respect to such transactions (i) in substantial conformity with the 8-K
Filing and contemporaneously therewith and (ii) as is required by applicable law
and regulations (provided that in the case of clause (i) the Lead Purchaser
shall be consulted by the Company in connection with any such press release or
other public disclosure prior to its release). Each press release disseminated
during the 12 months preceding the date of this Agreement did not at the time of
release 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 therein, in the light of the circumstances under which they are made,
not misleading
4.8 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Senior Secured Notes and Warrants hereunder in the following order: (i)
first, pay any and all expenses incurred in connection with the sale of the
Securities hereunder and the filing and maintaining of any registration
statement required by this Agreement, (ii) second, up to $1,479,000 of net
proceeds to repay existing loans made by a party related to officers or
directors of the Company, and (iii) third, any remaining proceeds to be used for
general working capital requirements of the Company.
4.9 Reimbursement. If any Purchaser or any of its Affiliates or any
officer, director, partner, controlling Person, employee or agent of a Purchaser
or any of its Affiliates (a "RELATED PERSON") becomes involved in any capacity
in any Proceeding brought by or against any Person in connection with or as a
result of the transactions contemplated by the Transaction Documents other than
one brought by the applicable Purchaser or a Related Person thereof, the Company
19
will indemnify and hold harmless such Purchaser or Related Person for its
reasonable legal and other expenses (including the costs of any investigation,
preparation and travel) and for any Losses incurred in connection therewith, as
such expenses or Losses are incurred, excluding only Losses that result directly
from such Purchaser's or Related Person's gross negligence or willful
misconduct. In addition, the Company shall indemnify and hold harmless each
Purchaser and Related Person from and against any and all Losses, as incurred,
arising out of or relating to any breach by the Company of any of the
representations, warranties or covenants made by the Company in this Agreement
or any other Transaction Document, or any allegation by a third party that, if
true, would constitute such a breach. The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed by Section
6.4(c) below. The indemnification obligations of the Company under this
paragraph shall be in addition to any liability that the Company may otherwise
have and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Purchasers and any such
Related Persons. The Company also agrees that neither the Purchasers nor any
Related Persons shall have any liability to the Company or any Person asserting
claims on behalf of or in right of the Company in connection with or as a result
of the transactions contemplated by the Transaction Documents, except to the
extent that any Losses incurred by the Company result from the gross negligence
or willful misconduct of the applicable Purchaser or Related Person in
connection with such transactions. If the Company breaches its obligations under
any Transaction Document, then, in addition to any other liabilities the Company
may have under any Transaction Document or applicable law, the Company shall pay
or reimburse the Purchasers on demand for all costs of collection and
enforcement (including reasonable attorneys fees and expenses). Subject to the
foregoing, the Company specifically agrees to reimburse the Purchasers on demand
for all costs of enforcing the indemnification obligations in this paragraph.
4.10 Incurrence of Liens. So long as any Senior Secured Notes are
outstanding, the Company shall not, directly or indirectly, allow or suffer to
exist any Lien, other than Liens pursuant to the Security Agreement, upon any
property or assets (including accounts and contract rights) owned by the
Company.
4.11 Corporate Existence. So long as any Purchaser beneficially owns any
Senior Secured Notes or Warrants, the Company shall maintain its corporate
existence and shall not sell all or substantially all of the Company's assets,
except in the event of a merger or consolidation or sale of all or substantially
all of the Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose common stock is quoted on or listed for
trading on an Eligible Market.
4.12 Covenants Regarding Oil and Gas Properties. The Company hereby
covenants as follows:
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(a) Within ten (10) Business Days following the date hereof, the
Company shall cause to be filed of record, in the applicable real property
records of each jurisdiction in . which the Oil and Gas Properties are located,
a fee or leasehold mortgage, deed of trust or deed to secure debt, in form and
substance satisfactory to the Purchasers, in favor of the Collateral Agent for
the benefit of Purchasers, securing the Senior Secured Notes and covering all of
the Oil and Gas Properties (each, a "MORTGAGE") and the Company represents that
each such Mortgage shall be valid and enforceable first priority mortgage Liens
on such Oil and Gas Properties free and clear of all Liens, defects and
encumbrances, other than Permitted Liens.
(b) Within sixty (60) calendar days following the date hereof, the
Company shall furnish, at the Company's expense, title opinions or reports,
dated as of a date no earlier than the date of filing of each Mortgage, based on
updated land records and/or title searches and abstracts and otherwise in form
and substance and issued by counsel reasonably satisfactory to Collateral Agent,
confirming to Collateral Agent's reasonable satisfaction that . (i) the Company
has good and defensible title to the quantity of interest represented herein
inand to all of the Oil and Gas Properties, and (ii) all of such Company's
interest in all of the Oil and Gas Properties is subject to a valid, perfected
and enforceable first-priority Mortgage Lien in favor of Collateral Agent,
subject only to Permitted Liens.
(c) Upon request of any Purchaser, the Company shall provide to
Collateral Agent copies from its files of all contracts and documents affecting
the Oil and Gas Properties, and at Collateral Agent's request, the Company shall
make its files and personnel available in the Company's offices and otherwise
fully cooperate with Collateral Agent in the title verification and due
diligence program to be conducted by Collateral Agent, which shall be at the
Company's expense, to confirm the ownership and value of the Oil and Gas
Properties.
ARTICLE V
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to acquire the Senior Secured Notes and Warrants at
the Closing is subject to the satisfaction or waiver by such Purchaser, at or
before the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
on and as of such date.
(b) Performance. The Company and each other Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by it at or prior to the Closing.
(c) Good Standing. The Company shall have delivered to such
Purchaser a certificate evidencing the formation and good standing of the
Company and each of its Subsidiaries in such entity's jurisdiction of formation
issued by the Secretary of State (or comparable office) of such jurisdiction, as
of a date within 10 days of the Closing Date.
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(d) Qualification. The Company shall have delivered to such
Purchaser a certificate evidencing the Company's qualification as a foreign
corporation and good standing issued by the Secretary of State (or comparable
office) of each jurisdiction in which the Company is so qualified, as of a date
within 10 days of the Closing Date.
(e) Listing. The Common Stock (I) shall be designated for quotation
or listed on the Trading Market and (II) shall not have been suspended, as of
the Closing Date, by the SEC or the Trading Market from trading on the Trading
Market nor shall suspension by the SEC or the Trading Market have been
threatened, as of the Closing Date, either (A) in writing by the SEC or the
Trading Market or (B) by falling below the minimum listing maintenance
requirements of the Trading Market.
(f) Liens. The Company shall have delivered or caused to be
delivered to each Purchaser (A) certified copies of UCC search results, listing
all effective financing statements which name as debtor the Company or any of
its Subsidiaries filed in the prior five years to perfect an interest in any
assets thereof, together with copies of such financing statements, none of
which, except as otherwise agreed in writing by the Purchasers, shall cover any
of the Collateral (as defined in the Security Agreement) and the results of
searches for any tax lien and judgment lien filed against such Person or its
property, which results, except as otherwise agreed to in writing by the
Purchasers, shall not show any such Liens; and . (B) a perfection certificate,
duly completed and executed by the Company and each of itsSubsidiaries, in form
and substance satisfactory to the Purchasers.
(g) Security Agreement. The Company shall have executed and
delivered the Security Agreement to the Lead Purchaser, as collateral agent for
the Purchasers and the Company shall have executed and delivered all security
documentation contained therein.
5.2 Conditions Precedent to the Obligations of the Company. The obligation
of the Company to sell the Senior Secured Notes and Warrants at the Closing is
subject to the satisfaction or waiver by the Company, at or before the Closing,
of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Purchasers contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made on and as of such date; and
(b) Performance. The Purchasers shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing.
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ARTICLE VI
REGISTRATION RIGHTS
6.1 Shelf Registration
(a) As promptly as possible, and in any event on or prior to the
Filing Date, the Company shall prepare and file with the Commission a "Shelf"
Registration Statement covering the resale of all Registrable Securities for an
offering to be made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form SB-2 (except if the Company is not then eligible to
register for resale the Registrable Securities on Form SB-2, in which case such
registration shall be on another appropriate form in accordance herewith as the
Purchasers may reasonably consent) and shall contain (except if otherwise
directed by the Purchasers) the "Plan of Distribution" attached hereto as
Exhibit G.
(b) The Company shall use its commercially reasonable efforts to
cause the Registration Statement to be declared effective by the Commission as
promptly as possible after the filing thereof, but in any event prior to the
Required Effectiveness Date, and shall use its best efforts to keep the
Registration Statement continuously effective under the Securities Act until the
third anniversary of the Effective Date or such earlier date when either (i) all
Registrable Securities of the Purchaser covered by such Registration Statement
have been sold (the "EFFECTIVENESS PERIOD") or (ii) all Registrable Securities
owned by the Purchaser may be sold pursuant to Rule 144(k).
(c) The Company shall notify each Purchaser in writing promptly (and
in any event within one Trading Day) after receiving notification from the
Commission that the Registration Statement has been declared effective.
(d) As promptly as possible, and in any event no later than the
Post-Effective Amendment Filing Deadline, the Company shall prepare and file
with the Commission a Post-Effective Amendment. The Company shall use its best
efforts to cause the Post-Effective Amendment to be declared effective by the
Commission as promptly as possible after the filing thereof, but in any event
prior to the fifteenth Trading Day after the Post-Effective Amendment Filing
Deadline. The Company shall notify each Purchaser in writing promptly (and in
any event within one business day) after receiving notification from the
Commission that the Post-Effective Amendment has been declared effective.
(e) Upon the occurrence of any Event (as defined below) prior to the
24month anniversary of the Closing, and on every monthly anniversary thereof
occurring no later than the 24-month anniversary of the Closing until the
applicable Event is cured, as partial relief for the damages suffered therefrom
by the Purchasers (which remedy shall not be exclusive of any other remedies
available under this Agreement, at law or in equity), the Company shall pay to
each Purchaser an amount in cash, as liquidated damages and not as a penalty,
equal to 1% of the aggregate purchase price paid by such Purchaser. The payments
to which a Purchaser shall be entitled pursuant to this Section 6.1(e) are
referred to herein as "EVENT PAYMENTS". Any Event Payments payable pursuant to
the terms hereof shall apply on a pro-rata basis for any portion of a month
prior to the cure of an Event. In the event the Company fails to make Event
Payments within 10 Business Days of any demand therefore, such Event Payments
shall bear interest at the rate of 1.5% per month (prorated for partial months)
until paid in full.
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For such purposes, each of the following shall constitute an "EVENT":
(i) the Registration Statement is not filed on or prior to the
Filing Date or is not declared effective on or prior to the Required
Effectiveness Date;
(ii) a Post-Effective Amendment is not filed on or prior to
the Post-Effective Amendment Filing Deadline or is not declared effective on or
prior to the twenty-first Trading Day after the Post-Effective Amendment Filing
Deadline;
(iii) after the Effective Date, a Purchaser is not permitted
to sell Registrable Securities under the Registration Statement (or a subsequent
Registration Statement filed in replacement thereof) for any reason (other than
the requirement of the Company to file a Post-Effective Amendment and for such
Post-Effective Amendment to be declared effective) for either (A) 10 or more
consecutive Trading Days or (B) 30 Trading Days, whether or not consecutive, in
any 365-day period); provided, however, that none of the foregoing shall
constitute an "Event" if the delay is caused by any act of war, terrorism,
natural disaster or power failure.
(f) The Company shall not, prior to the Effective Date of the
Registration Statement, prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities.
6.2 Registration Procedures. In connection with the Company's registration
obligations hereunder, the
Company shall:
(a) Not less than three Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish to each
Purchaser and any counsel designated by any Purchaser (each, a "PURCHASER
COUNSEL", and Smithfield Fiduciary LLC has initially designated Schulte Roth &
Zabel LLP) copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by reference) will
be subject to the review of such Purchasers and each Purchaser Counsel, and (ii)
cause its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of each Purchaser Counsel, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file a Registration Statement or any such Prospectus or any amendments or
supplements thereto to which Purchasers holding a majority of the Registrable
Securities shall reasonably object. However, any objection to the filing of such
registration statement or other document enumerated above, shall suspend from
occurring any of the "Events" listed above in Section 6.1 ((e) i.-iv.) for the
period of time during which the objection remains, but in no case will the
period of suspension exceed ten Trading Days.
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(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within ten Business
Days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as reasonably
practicable provide the Purchasers true and complete copies of all
correspondence from and to the Commission relating to the Registration
Statement; and . (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Purchasers thereof set forth in the Registration Statement as so amended or in
such Prospectus as so supplemented.
(c) Notify the Purchasers of Registrable Securities to be sold and
each Purchaser Counsel as promptly as reasonably practicable, and (if requested
by any such Person) confirm such notice in writing no later than two Trading
Days thereafter, of any of the following events: (i) the Commission notifies the
Company whether there will be a "review" of any Registration Statement; (ii) the
Commission comments in writing on any Registration Statement (in which case the
Company shall deliver to each Purchaser a copy of such comments and of all
written responses thereto); (iii) any Registration Statement or any
post-effective amendment is declared effective; (iv) the Commission or any other
Federal or state governmental authority requests any amendment or supplement to
any Registration Statement or Prospectus or requests additional information
related thereto; (v) the Commission issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (vi) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities for
sale in any jurisdiction, or the initiation or threat of any Proceeding for such
purpose; or (vii) the financial statements included in any Registration
Statement become ineligible for inclusion therein or any statement made in any
Registration Statement or Prospectus or any document incorporated or deemed to
be incorporated therein by reference is untrue in any material respect or any
revision to a Registration Statement, Prospectus or other document is required
so that it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(d) Use its reasonable efforts to avoid the issuance of or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
any Registration Statement, or . (ii) any suspension of the qualification (or
exemption from qualification) of any of theRegistrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) Furnish to each Purchaser and each Purchaser Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, . including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) as promptly as practicable after the filing of such
documents with the Commission.
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(f) Promptly deliver to each Purchaser and each Purchaser Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request within two Business Days of such request. The Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by each of the selling Purchasers in connection with the offering and sale of
the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(g) (i) In the time and manner required by each Trading Market,
prepare and file with such Trading Market an additional shares listing
application covering all of the Registrable Securities; (ii) take all steps
necessary to cause such Registrable Securities to be approved for listing on
each Trading Market as soon as practicable thereafter; (iii) provide to the
Purchasers evidence of such listing; and (iv) maintain the listing of such
Registrable Securities on each such Trading Market or another Eligible Market.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Purchasers and
each applicable Purchaser Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions within the United States as any Purchaser requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise subject.
(i) Cooperate with the Purchasers to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by this Agreement, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Purchasers may request.
(j) Upon the occurrence of any event described in Section
6.2(c)(vii), as promptly as reasonably practicable, prepare a supplement or
amendment, including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain 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, in the light of the circumstances under which they were
made, not misleading.
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(k) Reasonably cooperate with any due diligence investigation
undertaken by the Purchasers in connection with the sale of Registrable
Securities, including without limitation by making available any documents and
information; provided that the Company will not deliver or make available to any
Purchaser material, nonpublic information unless such Purchaser specifically
requests in advance to receive material, nonpublic information in writing.
(l) If Holders of a majority of the Registrable Securities being
offered pursuant to a Registration Statement select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form reasonably acceptable to the
Company, including, without limitation, by providing customary legal opinions,
comfort letters and indemnification and contribution obligations; provided, that
no such agreement shall obligate the Company to pay any amount not otherwise
contemplated by this Article VI.
(m) Comply with all applicable rules and regulations of the
Commission.
6.3 Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all fees and expenses incident to the performance of or
compliance with this Agreement by the Company, including without limitation (a)
all registration and filing fees and expenses, including without limitation
those related to filings with the Commission, any Trading Market and in
connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the
Purchasers), (c) messenger, telephone and delivery expenses incurred by the
Company, (d) fees and disbursements of counsel for the Company and up to $5,000
in the aggregate for the Purchaser Counsels (incurred in preparing the initial
filing of the registration statement for the Registrable Securities and all
amendments thereto prior to it being declared effective), (e) fees and expenses
of all other Persons retained by the Company in connection with the consummation
of the transactions contemplated by this Agreement, and (f) all listing fees to
be paid by the Company to the Trading Market. In all events, the Purchasers
shall be solely responsible for paying all brokerage fees, underwriter
commissions or similar compensation relating to their sale of Registrable
Securities and any income taxes resulting from any such sale of Registrable
Securities.
6.4 Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Purchaser, the officers, directors, partners, members, agents, brokers
(including brokers who offer and sell Registrable Securities as principal as a
result of a pledge or any failure to perform under a margin call of Common
Stock), investment advisors and employees of each of them, each Person who
controls any such Purchaser (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, partners,
members, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all Losses, as
incurred, arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any Prospectus or
27
any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that . (i)
such untrue statements, alleged untrue statements, omissions or alleged
omissions arebased solely upon information regarding such Purchaser furnished in
writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. The
Company shall notify the Purchasers promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Indemnification by Purchasers. Each Purchaser shall, severally
and not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of any untrue statement of a material
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
any omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or form of prospectus
or supplement thereto, in the light of the circumstances under which they were
made) not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Purchaser to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (i) such untrue statements or
omissions are based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. In no
event shall the liability of any selling Purchaser hereunder be greater in
amount than the dollar amount of the net proceeds received by such Purchaser
upon the sale of the Registrable Securities giving rise to such indemnification
obligation. . (c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
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An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (iii) the
named parties to any such Proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten Trading
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. Subject to the Limit set forth in Section 4.8, if
a claim for indemnification under Section 6.4(a) or (b) is unavailable to an
Indemnified Party (by reasons other than the specified exclusions to
indemnification), then each 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, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
29
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 6.4(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.4(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.4(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6.5 Dispositions. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Sections
6.2(c)(v), (vi) or (vii), such Purchaser will discontinue disposition of such
Registrable Securities under the Registration Statement until such Purchaser's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 6.2(j), or until it is advised in writing (the
"ADVICE") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
6.6 No Piggyback on Registrations. Except as set forth on Schedule 6.6,
neither the Company nor any of its security holders (other than the Purchasers
in such capacity pursuant hereto) may include securities of the Company in the
Registration Statement other than Common Stock issuable pursuant to the Offering
or the Registrable Securities. In addition, the Company shall not after the date
hereof enter into any agreement providing any such right to any of its security
holders.
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6.7 Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
ARTICLE
VII MISCELLANEOUS
7.1 Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third Trading Day following the date of this Agreement;
provided that no such termination will affect the right of any party to sue for
any breach by the other party (or parties).
7.2 Fees and Expenses. At the Closing, and only upon Closing, the Company
shall pay the reasonable fees and expenses of legal counsel to Smithfield
Fiduciary LLC incurred in connection with the preparation and negotiation of the
Transaction Documents. In lieu of the foregoing payment, Smithfield Fiduciary
LLC may retain such amount at the Closing or require the Company to pay such
amount directly to Schulte Roth & Zabel LLP. Except as expressly set forth in
the Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied
in connection with the issuance of the Securities.
7.3 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents. Notwithstanding anything to the contrary
herein, the Securities may be assigned to any Person in connection with a bona
fide margin account or other loan or financing arrangement secured by such
Securities.
31
7.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognizedovernight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The addresses and facsimile numbers for such notices and communications are
those set forth on the signature pages hereof, or such other address or
facsimile number as may be designated in writing hereafter, in the same manner,
by such Person.
7.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Purchasers under Article VI and
that does not directly or indirectly affect the rights of other Purchasers may
be given by Purchasers holding at least a majority of the Registrable Securities
to which such waiver or consent relates.
7.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
7.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights (except those of indemnification or reimbursement) under this
Agreement to any Person to whom such Purchaser assigns or transfers any
Securities, provided such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions hereof that apply to the
"Purchasers." Notwithstanding anything to the contrary herein, Securities may be
assigned to any Person in connection with a bona fide margin account or other
loan or financing arrangement secured by such Securities.
7.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of Section 4.8 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
32
7.9 Governing Law; Venue; Waiver Of Jury Trail. ALL QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY SUBMIT TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY
THE COMPANY OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO
THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE
COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY AND PURCHASERS HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY.
7.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and/or exercise of
the Securities, as applicable.
7.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
7.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
7.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
33
7.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. The Purchaser
agrees that the loss, mutilation, theft, or destruction of any certificate shall
not trigger the occurrence of an Event as defined in Section 6.1 (e) sections
i-iv, unless such loss, mutilation, theft, or destruction is directly caused by
the negligence of the Company. The phrase "directly" specifically excludes any
persons or parties who are agents of the Company.
7.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
7.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser hereunder or any Purchaser enforces or exercises its
rights hereunder or thereunder, and such payment or payments or the proceeds of
such enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company
by a trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
7.17 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.
7.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
34
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase the Securities pursuant to this Agreement has been made by such
Purchaser independently of any other Purchaser and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or of the Subsidiary which
may have been made or given by any other Purchaser or by any agent or employee
of any other Purchaser, and no Purchaser or any of its agents or employees shall
have any liability to any other Purchaser (or any other Person) relating to or
arising from any such information, materials, statements or opinions. Nothing
contained herein or in any Transaction Document, and no action taken by any
Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
[SIGNATURE PAGES TO FOLLOW]
35
IN WITNESS WHEREOF, each of the parties hereto have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
CADENCE RESOURCES CORPORATION
By: __________________________
Name: John P. Ryan
Title: Vice President
Address for Notice:
6 East Rose Street
P.O. Box 2056
Walla Walla, WA 99362
Facsimile No.: (509) 526-3492
Telephone No.: (509) 526-3491
Attn: Howard Crosby
With a copy to: Jenkens & Gilchrist Parker Chapin LLP
The Chrysler Building
New York, New York 10174
Facsimile No.: (212) 704-6288
Telephone No.: (212)704-6000
Attn: Henry I Rothman, Esq.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
36
IN WITNESS WHEREOF, each of the parties hereto have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
SMITHFIELD FIDUCIARY LLC
By: __________________________
Name: Adam J. Chill
Title: Authorized Signatory
Purchase Price: $2,000,000
Principal Amount of Senior Secured Notes: $2,000,000
Number of Warrant Shares to be acquired: 255,000
Address for Notice:
Smithfield Fiduciary LLC
c/o Highbridge Capital Management, LLC
9 West 57th Street, 27th Floor
New York, New York 10019
Facsimile No.: (212) 751-0755
Telephone No.: (212) 287-4720
Attn: Ari J. Storch / Adam J. Chill
With a copy to: Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Facsimile No.: (212) 593-5955
Telephone No.: (212) 756-2000
Attention: Eleazer Klein, Esq.
37
IN WITNESS WHEREOF, each of the parties hereto have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
OMICRON CAPITAL
By: __________________________
Name: Bruce Bernstein
Title: Managing Partner
Purchase Price: $1,000,000
Principal Amount of Senior Secured Notes: $1,000,000
Number of Warrant Shares to be acquired: 127,500
Address for Notice:
Omicron Capital
810 Seventh Avenue
39th Floor
New York, New York 10019
Facsimile No.: (212) 803-5263
Telephone No.: (212) 803-5269
Attn: Brian Daly
38
IN WITNESS WHEREOF, each of the parties hereto have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
PORTSIDE GROWTH AND OPPORTUNITY FUND
By: __________________________
Name:
Title:
Purchase Price: $1,000,000
Principal Amount of Senior Secured Notes: $1,000,000
Number of Warrant Shares to be acquired: 127,500
Address for Notice:
Portside Growth and Opportunity Fund
c/o Ramius Capital Group, LLC
666 Third Avenue
26th Floor
New York, New York 10006
Facsimile No.: (212) 845-7999
Telephone No.: (212) 845-7917
Attn: Roger Anscher
Jeffrey Smith
39
IN WITNESS WHEREOF, each of the parties hereto have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
LISA LOW AS CUSTODIAN FOR GABRIEL S. LOW
UNYGMA
By: __________________________
Name:
Title:
Purchase Price: $450,000
Principal Amount of Senior Secured Notes: $450,000
Number of Warrant Shares to be acquired: 57,375
Address for Notice:
Lisa Low as Custodian for Gabriel S. Low UNYGMA
c/o Sunrise Securities Corp.
641 Lexington Avenue, 25th Floor
New York, NY 10024
Facsimile No.: (212) 750-7277
Phone No.: (212) 421-1616
Attn: Nathan Low
40
IN WITNESS WHEREOF, each of the parties hereto have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
BEAR STEARNS AS CUSTODIAN FOR NATHAN A. LOW
ROTH IRA
By: __________________________
Name:
Title:
Purchase Price: $250,000
Principal Amount of Senior Secured Notes: $250,000
Number of Warrant Shares to be acquired: 31,875
Address for Notice:
Bear Stearns as Custodian for Nathan A. Low Roth IRA
c/o Sunrise Securities Corp.
641 Lexington Avenue
25th Floor
New York, NY 10024
Facsimile No.: (212) 750-7277
Phone No.: (212) 421-1616
Attn: Nathan Low
41
IN WITNESS WHEREOF, each of the parties hereto have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
________________________
RUTH LOW
Purchase Price: $300,000
Principal Amount of Senior Secured Notes: $300,000
Number of Warrant Shares to be acquired: 38,250
Address for Notice:
Ruth Low
614 Trenton Drive
Beverly Hills, CA 90210
Facsimile No.: (212) 750-7277
Telephone No.: (212) 421-1616
Attn: Nathan Low
42
IN WITNESS WHEREOF, each of the parties hereto have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
___________________________
MOSHE AZOULAY
Purchase Price: $1,000,000
Principal Amount of Senior Secured Notes: $1,000,000
Number of Warrant Shares to be acquired: 127,500
Address for Notice:
Moshe Azoulay
c/o Skyrise Properties
18111 Preston Road, Suite 1000
Dallas, TX
75252 Facsimile No.: (972) 733-3920
Attn: Peter Kaufman
43
Exhibits:
A Form of Senior Secured Note
B Form of Warrant
C Form of Security Agreement
D Form of Transfer Agent Instructions
E Form of Opinion of Company Counsel
F Officer's Certificate
G Plan of Distribution
44