Exhibit 10.1
SECURITIES PURCHASE
AGREEMENT
by and among
CERTAIN MEMBERS OF
SFF PRODUCTION, LLC
as Sellers,
and
AMEN PROPERTIES,
INC.
as Buyer
dated as of
December 22, 2008
SECURITIES PURCHASE
AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this
"Agreement" ), dated as of December 22, 2008, is
entered into by and among Amen Properties, Inc. (
"Buyer" ) and the members identified on
Schedule 2.1 (the "Sellers" ) of SFF
Production, LLC (the "Company" ). All of
the foregoing are each sometimes referred to herein individually as
a "Party" and collectively as the
"Parties . "
RECITALS
:
A. Sellers own the
membership interests (the "Interests" ) in the
Company described on Schedule 2.1 .
B. Sellers have
agreed to sell, and Buyer has agreed to purchase, the Interests
pursuant to the terms hereof.
C. Buyer is currently
a member of the Company, owning a 33.3% membership
interest.
NOW, THEREFORE, in consideration of the mutual
benefits to be derived from this Agreement and other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Parties hereby agree as
follows:
ARTICLE 1. — DEFINITIONS
1.1.
Certain Defined Terms . As used in this
Agreement, each of the following terms is defined below:
"Affiliate" means, with respect to any Person, any other
Person that, directly or indirectly, through one or more
intermediaries or otherwise, controls, is controlled by, or is
under common control with, such Person.
"Agreement" is defined in the preamble hereto.
"Applicable Environmental Laws"
means all Applicable Laws in effect
at any time pertaining to pollution or the protection of the
environment, including those relating to waste materials and/or
hazardous substances.
"Applicable Law" means any statute, law, rule, or regulation or
any judgment, order, writ, injunction, or decree of any
Governmental Entity to which a specified Person or property is
subject.
"Appraisal" means that certain appraisal of the assets of the
Company prepared by Ryder Scott Company LP ( "Ryder
Scott" ) to be completed after Closing.
"Balance Sheet Date" is defined in Section 4.8 .
"Buyer" is defined in the preamble hereto.
"Buyer Indemnified Parties"
is defined in Section 9.3
.
"Certificate of Designation"
means the Certificate of Designations
of Series E Preferred Stock of Buyer in substantially the form
attached hereto as Exhibit "A" .
"Closing" is defined in Section 3.1 .
"Closing Date" is defined in Section 3.1 .
"Common Stock" means the common stock, $0.01 par value per
share, of Buyer.
"Common Stock Cap" is defined in Section 6.12(a) .
"Company" is defined in the Recitals.
"Confidential Information"
is defined in Section 6.6
.
"Conversion Shares" means the shares of Common Stock into which the
Series E Preferred Stock is convertible.
"Damages" means losses, claims, damages, judgments,
settlements, penalties, obligations, costs, liabilities and
expenses (including reasonable attorneys’ fees and expenses),
of any nature whatsoever, which result from or arise out of an
action, petition, plea, charge, complaint, suit, litigation,
arbitration, mediation, hearing or similar event, occurrence or
Proceeding.
"Effective Date" means 11:59 p.m., Central Time, on
December 31, 2008.
"Encumbrances" means liens, charges, pledges, options,
mortgages, deeds of trust, security interests, claims, restrictions
(whether on voting, sale, transfer, disposition, or otherwise),
easements, and other encumbrances of every type and description,
whether imposed by law, agreement, understanding, or
otherwise.
"Equity Securities" means the Series E Preferred Stock and the
Conversion Shares.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Financial Statements"
is defined in Section 4.7
.
"Governmental Entity" means any court or tribunal in any jurisdiction
(domestic or foreign) or any public, governmental, or regulatory
body, agency, department, commission, board, bureau, or other
authority or instrumentality (domestic or foreign).
"Hazardous Substance" means any substance defined as a hazardous
substance under any Applicable Environmental Law.
"Inside Investors" means the Sellers who are officers, directors,
employees or consultants of Buyer, which shall be specified on each
such Seller's Signature Page.
"Interests" is defined in the Recitals.
"Material Adverse Effect"
means any event or condition which,
individually or in the aggregate, would reasonably be expected to
have a material adverse effect on the business, financial condition
or results of operations of Buyer and its Subsidiaries, taken as a
whole.
"Material Contracts" is defined in Section 4.12 .
"Nasdaq Stock Market" is defined in Section 5.11 .
"Net Revenue Interest"
means as to any of the Properties
constituting an oil and gas interest, the "net revenue interest" of
the Company in such Property set forth in the books and records of
the Company provided to Buyer prior to Closing.
"Organizational Documents"
is defined in Section 4.1
.
"Permits" is defined in Section 4.16 .
"Party" and "Parties" are defined in the
preamble hereto.
"Permitted Encumbrance"
means (i) royalties, overriding
royalties, net profits interests, production payments and other
burdens on production which do not reduce the Company's Net Revenue
Interest in any of the Properties to less than the Net Revenue
Interest designated in the books and records of the Company
provided to Buyer; (ii) liens for Taxes and assessments not
yet delinquent, or, if delinquent, that are being contested in good
faith in the ordinary course of business and for which adequate
reserves have been established; (iii) undetermined or inchoate
liens or charges constituting or securing the payment of expenses
that were incurred incidental to the maintenance, development,
production or operation of the Properties, which are not yet
delinquent, or, if delinquent, that are being contested in good
faith in the ordinary course of business and for which adequate
reserves have been established; (iv) materialman’s,
mechanic’s, repairman’s, employee’s,
contractor’s and operator’s liens or other similar
liens or charges for amounts arising in the ordinary course of
business which are not yet delinquent, or, if delinquent, that are
being contested in good faith in the ordinary course of business
and for which adequate reserves have been established; (v)
obligations or duties affecting the Properties to any governmental
authority with respect to any franchise, grant, license or permit
and all Applicable Laws, rules, regulations and orders of all
governmental authorities; (vi) easements, rights of way,
servitudes, permits, surface leases and other rights in respect of
surface operations, office leases, pipelines, plat restrictions and
similar encumbrances, provided that they do not materially detract
from the value, or materially increase the cost of operation of the
Properties; (vii) the Material Contracts; and
(viii) liens, charges and other Encumbrances and
irregularities in the chain of title which, because of remoteness
in or passage of time, statutory cure periods, marketable title
acts or other similar reasons, have not affected or interrupted,
and are not reasonably expected to affect or interrupt, the claimed
ownership of the Company to any of the Properties or the receipt of
production revenues from the Properties affected
thereby.
"Person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, enterprise,
unincorporated organization, or Governmental Entity.
"Proceedings" means all proceedings, actions, claims, suits,
investigations, and inquiries by or before any arbitrator or
Governmental Entity.
"Properties" means, collectively, the properties, assets,
rights, and interests owned by the Company.
"Purchase Price" is defined in Section 2.2
.
"Required Consent" means the approval of Sellers owning in excess of
50% of the total Interests.
"SEC" means the Securities and Exchange
Commission.
"SEC Filings" means Buyer's reports and other filings made with
the SEC for a period of two (2) years prior to the date hereof and
all exhibits thereto.
"Securities Act" means the Securities Act of 1933, as
amended.
"Seller" and "Sellers" are defined in the
recitals.
"Seller Indemnified Parties"
is defined in Section 9.2
.
"Seller Parties" and "Seller Party" means the
Company and Sellers.
"Series E Preferred Stock"
means the Series E Preferred Stock of
Buyer, par value $0.001 per share, having the rights and
preferences substantially as set forth in the Certificate of
Designations.
"Signature Page" means the counterpart signature page of this
Agreement signed by each Seller.
"Stockholder Approval"
has the meaning set forth in Section
6.12.
"Subsidiaries" means, when used with reference to an entity, any
corporation, a majority of the outstanding voting securities of
which are owned directly or indirectly by such
entity. Such term shall also refer to any other
partnership, limited partnership, limited liability company, joint
venture, trust, or other business entity in which such entity has a
material interest.
"Taxes" means any federal, state, local, or foreign
income taxes or similar assessments, or any sales, use, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs, ad
valorem, duties, capital stock, franchise, profits, withholding,
social security, unemployment, disability, real property, personal
property, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether
disputed or not.
"Working Interest" means as to any of the Properties constituting an
oil or gas interest, the "working interest" of the Company in such
Property as set forth in the books and records of the Company
provided to Buyer prior to Closing.
ARTICLE 2. —
TRANSACTION
2.1.
Agreement
to Sell and Purchase . At the Closing, but effective
as of the Effective Date, and on the terms and subject to the
conditions set forth in this Agreement, each Seller will transfer
to Buyer the Interests owned by such Seller as set forth on
Schedule 2.1 , free and clear of all
Encumbrances.
2.2.
Purchase
Price . In consideration of the sale of the
Interests hereunder, Buyer will deliver to Sellers an aggregate
purchase price of $6,827,576.00 (the "Purchase Price"
) , subject to adjustment as provided in
Section 2.3, consisting of (a) an aggregate of
$1,365,515.00 in cash or cash equivalent payable at Closing, and
(b) an aggregate of 546,206 shares of Series E Preferred
Stock. The Purchase Price will be allocated among the
Sellers as set forth on Schedule 2.1 .
2.3. A
djustment to Purchase Price . The Purchase Price
shall be adjusted as follows:
(a) adjusted upward by
(i) the amount as of the Effective Date of all prepaid ad valorem,
property or similar Taxes and assessments based upon or measured by
ownership of the Properties, insofar as such prepaid Taxes relate
to periods of time after the Effective Date; (ii) an amount equal
to all costs and expenses paid by the Company prior to the
Effective Date but are attributable to the period of time from and
after the Effective Date; (iii) an amount equal to the
proceeds from the sale of hydrocarbons received by the Company
after the Effective Date but attributable to hydrocarbons produced
prior to the Effective Date; (iv) an amount equal to the
amount of cash of the Company on the Effective Date; (v) an
amount equal to the amount, if any, that the product of the
PV 10-value of the Properties set forth in the Appraisal
multiplied by the amount of the Interests (expressed as a
percentage) exceeds the Purchase Price; and (vi) any other
amount provided for in this Agreement or agreed upon by Buyer and
Sellers.
(b) adjusted downward
by (i) an amount equal to all unpaid ad valorem, property,
production, severance and similar Taxes and assessments based upon
or measured by the ownership of property or the production of
hydrocarbons or the receipt of proceeds therefrom accruing to the
Properties prior to the Effective Date; (iii) an amount equal
to all expenditures, liabilities and costs relating to the
Properties that are unpaid as of the Effective Date and assessed
for or attributable to periods of time or the ownership of
production prior to the Effective Date; (iv) an amount equal
to all income, employment, franchise and other Taxes, and penalties
and interest related thereto, paid or payable by Company after the
Effective Date but attributable to periods on or prior to the
Effective Date; (v) an amount equal to all other liabilities
of the Company not otherwise included in adjustment to the Purchase
Price pursuant to this Section 2.3(b), paid or payable after
the Effective Date but attributable to periods on or prior to the
Effective Date; (vi) an amount equal to all cash in, or
attributable to, third party suspense accounts held by the Company
as of the Effective Date; (vii) an amount equal to the amount,
if any, that the Purchase Price exceeds the product of the PV-10
value of the Properties set forth in the Appraisal multiplied by
the amount of the Interests (expressed as a percentage); and
(viii) any other amount provided for in this Agreement or
agreed upon by Buyer and Sellers.
ARTICLE 3. —
CLOSING
3.1. C
losing . The closing of the transactions
contemplated hereby (the "Closing" ) will take place
on December 31, 2008 at the principal office of Buyer, or at
such earlier time as selected by Buyer or at such other time or
place or on such other date as the Parties may
agree. The date on which the Closing occurs is herein
referred to as the "Closing Date , "
but the transaction described herein shall be effective as of the
Effective Date.
3.2.
Closing
Deliveries . At the Closing,
(a) Buyer will
(i) deliver the Purchase Price, as adjusted by the Preliminary
Settlement Statement (as defined below), to Sellers, and
(ii) deliver to Sellers the various certificates, instruments,
and documents referred to in Section 7.1
. Sellers shall be solely responsible for providing the
allocation of the Purchase Price among them as set forth on
Schedule 2.1 , and Buyer shall not be responsible for
nor have any liability with respect to such allocation.
(b) Each Seller (i)
will execute and deliver to Buyer an Assignment of Membership
Interest in substantially the form attached hereto as Exhibit
"B" conveying to Buyer all of such Seller’s right, title
and interest in and to the Interests; (ii) will execute and
deliver to Buyer, to the extent the Organizational Documents
provide that the Interests are to be represented by
certificates, certificate(s) representing all of the
Interests; and (iii) will execute and deliver the various
certificates, instruments, and documents referred to in Section
7.2 .
(c)
Sellers
and Buyer shall execute and deliver a settlement statement (the
"Preliminary Settlement Statement" ) that shall set
forth each adjustment to the Purchase Price and the calculation of
such adjustments to the extent known or estimated at
Closing. All adjustments to the Purchase Price shall be
made first to the cash portion of the Purchase Price and only if
such adjustments exceed said cash portion will any adjustment be
made to the remaining Purchase Price.
ARTICLE 4. —
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller represents and warrants to Buyer as
of the date hereof and as of the Closing Date, that:
4.1.
Organizational Matters . Each Seller Party that
is an entity is duly organized, validly existing, and in good
standing under the laws of its state of organization. No
Proceeding to dissolve any Seller Party that is an entity is
pending or, to the best knowledge of the Seller Parties,
threatened. Each Seller Party is duly authorized to
conduct its business and is in good standing under the laws of each
jurisdiction where such qualification is required. Each
Seller Party has the requisite power and authority necessary to own
or lease its properties and to carry on its businesses as currently
conducted and any business in which it currently proposes to
engage. Sellers have delivered to Buyer correct and
complete copies of each of the operating agreements of the Company,
the certificates of formation of the Company, and all other similar
documents, instruments or certificates executed, adopted, or filed
in connection with the creation, formation, or organization of the
Company, including any amendments thereto (collectively as provided
to Buyer, the "Organizational Documents" ). No Seller
Party is in breach of any provision of the Organizational
Documents. The Company does not own any equity interests
in any Person.
4.2.
Interests . Each Seller is the record and
beneficial owner of the Interest owned by such Seller as designated
on Schedule 2.1 , and upon consummation of the
transactions contemplated hereby, Buyer will acquire, good, valid,
and marketable title to all of the Interests, free and clear of all
Encumbrances. No other Person owns or has any right to
own any of the Interests. Sellers possess full authority
and legal right to sell, transfer and assign to Buyer such
Interests. There are no claims pending, or, to the
knowledge of Sellers, threatened against either the Company or
Sellers that concern or affect title to such Interests, or that
seek to compel the issuance of membership interests or other
securities of the Company. The Interests are duly
authorized, validly issued, fully paid and non-assessable and are
not subject to preemptive rights. Except as otherwise
provided in the Organizational Documents, (i) there are no
existing warrants, options, conversion rights, calls or other
commitments of any character pursuant to which the Company, or any
member thereof, may become obligated to increase or decrease any
Person’s member interest or admit any Person as a member;
(ii) the Company does not have any commitment or obligation
(contingent or otherwise) to increase or decrease any
Person’s member interest or admit any Person as a member; and
(iii) the Interests are not subject to any agreements or
understandings among any Persons with respect to the voting or
transfer thereof.
4.3.
Authority Relative to this Agreement . Each
Seller Party has full power and authority to execute, deliver, and
perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery, and
performance by such Seller Party of this Agreement, and the
consummation by it of the transactions contemplated hereby, have
been duly authorized by all necessary action of such Seller
Party. This Agreement has been duly executed and
delivered by each Seller Party and constitutes, and each other
agreement, instrument, or document executed or to be executed by
such Seller Party in connection with the transactions contemplated
hereby has been, or when executed will be, duly executed and
delivered by such Seller Party and constitutes, or when executed
and delivered will constitute, a valid and legally binding
obligation of each such Seller Party, enforceable against such
Seller Party in accordance with their respective terms.
4.4.
Noncontravention . The execution, delivery, and
performance by each Seller Party of this Agreement and the
consummation by it of the transactions contemplated hereby do not
and will not (a) conflict with or result in a violation of any
provision of the Organizational Documents or the governing
documents of such Seller Party (if such Seller is an entity),
(b) conflict with or result in a violation of any provision
of, or constitute (with or without the giving of notice or the
passage of time or both) a default under, or give rise (with or
without the giving of notice or the passage of time or both) to any
right of termination, cancellation, or acceleration under, any
material bond, debenture, note, mortgage, indenture, lease,
contract, agreement, or other material instrument or obligation to
which any Seller Party is a party, (c) result in the creation
or imposition of any Encumbrance upon the Interests or the
Properties, or (d) violate any Applicable Law binding upon any
Seller Party or require a consent, approval, order or authorization
of, or declaration, filing, or registration with, any Governmental
Entity.
4.5. Brokers
or Finders . No Seller Party has incurred, and no
Seller Party will incur, directly or indirectly, as a result of any
action taken by any Seller Party under this Agreement, any
liability for brokerage or finders’ fees or commissions or
any similar charges in connection with this Agreement, for which
Buyer or the Company will have any liability.
4.6.
Compliance with Laws . The Company and its
predecessors and Affiliates have complied with all Applicable Laws,
and each Seller Party is not aware of any violations, whether
alleged or acknowledged, of any applicable regulations, rules or
orders promulgated by any federal or state regulatory agency, or
any of their predecessor agencies, which affect in any respect the
operation or value of the Company or the Properties.
4.7.
Financial Statements . The financial statements
for the Company which have been provided to Buyer (the
"Financial Statements" ) were prepared in accordance
with generally accepted accounting principles consistently applied,
and accurately and completely represent the financial condition of
the Company, as of the dates set forth therein, and are consistent
with the books and records of the Company.
4.8.
Subsequent Events . Since the date of the most
recent Financial Statements which include a balance sheet (the
"Balance Sheet Date" ) the Company has operated in
the ordinary course of business and there has not been any material
adverse change with respect to the Company. Without
limiting the foregoing, since that date, none of the following have
occurred:
(a) the Company
has not sold, leased, transferred, or assigned any assets other
than for a fair consideration in the ordinary course of
business;
(b) the
Company has not entered into any contract or agreement (or series
of related contracts or agreements), or any amendment or
modification of any contract or agreement, either involving more
than $50,000 or outside the ordinary course of business;
(c) no
Encumbrance has been imposed upon any of the Properties;
(d) the
Company has not made any capital expenditure (or series of related
capital expenditures) involving more than $25,000 individually,
$50,000 in the aggregate, or outside the ordinary course of
business;
(e) the
Company has not issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any liability for
borrowed money or capitalized lease;
(f) the
Company has not delayed or postponed the payment of accounts
payable or other liabilities outside the ordinary course of
business;
(g) the
Company has not canceled, compromised, waived, or released any
claim or cause of action (or series of related claims or causes of
action) outside the ordinary course of business;
(h) there
has been no change made or authorized to the Organizational
Documents of the Company;
(i) the
Company has not issued, sold, or otherwise disposed of any of its
member interests;
(j) the
Company has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its Properties in excess
of $25,000;
(k) the
Company has not made any material change in any of the accounting
principles followed by it or the method of applying such
principles;
(l) the
Company has not made any change in any material Tax election or the
manner Taxes are reported;
(m) there
has not been any other occurrence, event, incident, action, failure
to act, or transaction with respect to the Company either involving
more than $25,000 (individually or in the aggregate) or outside the
ordinary course of business; and
(n) the
Company has not committed to any of the foregoing.
4.9.
Liabilities . The Company does not have any
liability (and there is no basis for any present or future claims,
causes of action or orders against it giving rise to any
liability), except for (a) liabilities quantified on the face
of the Financial Statements (rather than in any notes thereto) and
not heretofore paid or discharged, and (b) liabilities which
have arisen after the Balance Sheet Date in the ordinary course of
business which, individually or in the aggregate, are not material
and are of the same character and nature as the liabilities
quantified on the face of the Financial Statements as of the
Balance Sheet Date, none of which results from or relates to any
breach of contract, breach of warranty, tort, infringement, or
breach of law or arose out of any claim, cause of action or
order.
4.10.
Insurance . The Company carries insurance in such
amounts and covering such risks as is customary for Persons of
similar size in the business in which they engage.
4.11.
Title to and Condition of Properties . The
Properties owned by the Company are included in the Financial
Statements and the Properties constituting oil and gas interests
are listed in the Appraisal. The Company has good,
marketable, and indefeasible title to the Properties free and clear
of all Encumbrances, other than Permitted
Encumbrances. The Properties have been maintained in
accordance with normal industry practice and are in good operating
condition (as applicable). There exists no unrecorded
document or agreement that would result in the impairment or loss
of the Company's title to any of the Properties or the value
therefore or impede the operations thereof by the
Company. The Net Revenue Interest and Working Interest,
as applicable, for each of the Properties constituting oil and gas
interests set forth in the Appraisal are complete and
accurate.
4.12.
Material Contracts . Seller Parties have provided
to Buyer true and correct copies of all material contracts,
agreements, leases, mortgages, instruments or other documents to
which the Company or its respective Properties are
subject or bound (the "Material Contracts"
). The Company, each Seller and, to the Seller Parties'
knowledge, each other party thereto, has complied with and is not
in default under any such Material Contracts. No event
has occurred which, with notice or lapse of time, would constitute
a breach or default under any Material Contract, and no party has
repudiated any provision of the contracts. Without
limiting the generality of the foregoing, the Company does not have
any obligation or liability to refund or reimburse any funds
received. All Material Contracts are in full force and
effect and will not be terminated or give rise to a termination
right or otherwise be effected by this Agreement or the
transactions contemplated hereby.
4.13.
Taxes . The Company has filed all federal, state
and other tax reports or returns, if any, required to be filed by
the Company. All Taxes shown on such tax reports or
returns and all other Taxes and assessments owed by the Company
have been properly and timely paid. Company has made all
required deposits for Taxes and has established adequate reserves
for Taxes. No taxing authority or agency is now
asserting or, to the knowledge of any Seller Party, threatening to
assert against the Company any deficiency or claim for additional
Taxes or interest thereon or penalties in connection
therewith. Company has not granted any waiver of any
statute of limitations with respect to, or any extension of a
period of assessment of, any Taxes.
4.14.
Consents . There are no preferential rights of
purchase or consents to assign in favor of third parties with
respect to any of the Interests and no consents to transfers
thereof are required, except as may be contained in the
Organizational Documents, all of which have been waived or
obtained. There are no preferential rights or consents
required with respect to any of the Properties due to or resulting
from the transaction contemplated by this Agreement.
4.15.
Environmental . The Company, and to the knowledge
of each Seller the predecessors in interest to the Company, have
complied and are in compliance with all Applicable Environmental
Laws. At no time during the Company's ownership thereof
have the Properties been used by the Company or by anyone else
during any period of time for the generation, storage, or disposal
of a Hazardous Substance or as a landfill or a waste disposal site
for regulated waste. With respect to the Properties,
Company has not entered into, and, to the best knowledge of each
Seller, no predecessor to the Company or operator of any Properties
has entered into, or is subject to, any contracts, agreements or
Applicable Environmental Laws that relate to the future use of any
of the Properties or that require any change in the present
condition of any of the Properties. Neither the
execution of this Agreement nor the consummation of the
transactions contemplated by this Agreement will violate any
agreements, consents, orders, decrees, judgments, license, or
permit conditions, or, to the best knowledge of each Seller,
require the consent or approval of any agency charged with
enforcing any Applicable Environmental Law.
4.16.
Licenses and Permits . The Company has obtained
and holds in good standing all licenses, permits, variances,
exemptions, orders, franchises, approvals and authorizations of all
Governmental Entities necessary for the lawful conduct of its
business and the lawful ownership, use and operation of its assets
( "Permits" ). None of the Permits will be
adversely affected by the consummation of the transactions
contemplated under this Agreement or requires any filing or consent
in connection therewith. The Company is in compliance
with the terms of the Permits and no investigation or review by any
Governmental Entity with respect to the Company is pending or, to
the knowledge of the Seller Parties, threatened.
4.17. Proceedings
. There is no claim, dispute, suit, action,
investigation, or other Proceeding before any Governmental Entity,
nor threatened, against the Company or any of the Properties that
has or might result in the impairment or loss of the Company's
title to any of the Properties or the value thereof or impede the
operation of the Properties.
4.18.
Certain Business Relationships . None of the
Sellers nor any of their Affiliates (a) have been involved in
any business arrangement or relationship with the Company within
the past twelve (12) months, (b) own any asset that is used in
the Company's business, and (c) has any claim or cause of
action against the Company.
4.19.
Securities Law Representations . Each Seller
makes the following representations with respect to the Equity
Securities received by such Seller as part of the Purchase
Price:
(a) EACH SELLER
IS ABLE TO BEAR THE ECONOMIC RISK OF ITS INVESTMENT IN THE EQUITY
SECURITIES FOR AN INDEFINITE PERIOD OF TIME. THE EQUITY
SECURITIES HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE, AND THEREFORE
CANNOT BE TRANSFERRED OR SOLD UNLESS THE EQUITY SECURITIES IS
SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT, AND ANY
APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION OR
EXCEPTION FROM SUCH REGISTRATION IS AVAILABLE AND SUCH AVAILABILITY
OF THE EXEMPTION SHALL BE ESTABLISHED TO THE SATISFACTION OF BUYER
AND ITS COUNSEL. EACH SELLER ALSO RECOGNIZES THAT NO
FEDERAL OR STATE AGENCY HAS PASSED UPON THE EQUITY SECURITIES OR
MADE ANY FINDING OR DETERMINATION AS TO THE FAIRNESS OF THE
ACCEPTANCE OF THE EQUITY SECURITIES. Each Seller
acknowledges and understands that there is no public market for the
Equity Securities and that no market for the Equity Securities is
likely to develop.
(b) Each
Seller recognizes that his acceptance of the Equity Securities
involves a high degree of risk which may result in the loss of the
total amount of the principal thereof. Each Seller
acknowledges that such Seller is aware of and has carefully
considered all risks incident to the acquisition of the Equity
Securities, including without limitation the risks set forth in the
SEC Filings. Each Seller has carefully considered and
understands and accepts all such risks.
(c) Each
Seller is acquiring the Equity Securities for such Seller’s
own account (as principal) for investment and not with a view to
the distribution or resale thereof, and has not offered or sold any
portion of the Equity Securities and has no present intention of
dividing the Equity Securities with others or of reselling or
otherwise disposing of any portion of the Equity
Securities.
(d) Each Seller
has had the opportunity to review the SEC Filings and other
publicly available information concerning Buyer and has determined
that such information is sufficient to make an informed investment
decision. While Buyer has attempted to provide
information that is as accurate as possible, Investor acknowledges
and agrees that Buyer and its representatives cannot and do not
make any assurances, representations or warranties with respect to
any such information, except for the representations expressly set
forth herein concerning information included in the SEC
Filings. All such information, including without
limitation the information included in the SEC Filings, is
qualified in all respects by the risk factors discussed in the SEC
Filings. Investor acknowledges and understands that none
of the information provided or made available by or on behalf of
Buyer constitutes any legal, tax or investment
advice. Each Seller has sufficient knowledge and
experience in financial and business matters to enable such Seller
to evaluate the merits and risks of an investment in the Equity
Securities. In addition, in reaching the conclusion that
each Seller desires to accept the Equity Securities, such Seller
has carefully evaluated its financial resources and investments,
has consulted with such legal, accounting and other experts as
necessary, and acknowledges that such Seller is able to bear the
economic risks of this investment.
(e) Each
Seller is an "accredited investor" as such term is defined in Rule
501 under the Securities Act. Each Seller will provide
to Buyer such information as may be reasonably requested by Buyer
to enable it to satisfy itself as to accredited status of the each
Seller and the knowledge and experience of each Seller and his
ability to bear the economic risk of an investment in the Equity
Securities.
(f) The
address and social security number or federal tax identification
number set forth on the Sellers' Signature Page are his true and
correct state (or other jurisdiction) of residence and social
security number or federal tax identification
number. Sellers have no present intention of becoming a
resident of any other state or jurisdiction. Sellers are
not subject to backup withholding and will provide such forms and
documents as may be required by Buyer to evidence his exemption
from backup or other withholding Taxes and hereby consents to
withholding of any applicable Taxes from any dividends from
Buyer.
(g) Sellers
acknowledge and understand that certain of the information that
they have received regarding Buyer and its Subsidiaries may be
material, non-public information, and that Sellers will not be able
to trade in the Common Stock while in possession of such
information until that information has been properly disseminated
to the public or becomes immaterial to Buyer and its
Subsidiaries.
(h) Sellers
acknowledge that they understand the meaning and legal consequences
of the representations, warranties and covenants set forth in this
Section 4.19 and that Buyer has relied and will rely upon such
representations, warranties, covenants and
certifications.
4.20.
Information Provided . All representations and
warranties made by each Seller Party and all other oral or written
information provided by each Seller Party to Buyer and by the
Company to Ryder Scott is and are true, correct and complete in all
material respects.
ARTICLE 5. — REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers
that:
5.1.
Organization; Existence; Qualification . Buyer is
a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
5.2.
Authority Relative to this Agreement . Buyer has
full corporate power and authority to execute, deliver, and perform
this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery, and performance by
Buyer of this Agreement, and the consummation by it of the
transactions contemplated hereby, have been duly authorized by all
necessary corporate action of Buyer. This Agreement has
been duly executed and delivered by Buyer and constitutes, and each
other agreement, instrument, or document executed or to be executed
by Buyer in connection with the transactions contemplated hereby
has been, or when executed will be, duly executed and delivered by
Buyer and constitutes, or when executed and delivered will
constitute, a valid and legally binding obligation of Buyer,
enforceable against Buyer in accordance with their respective
terms.
5.3.
Noncontravention . The execution, delivery, and
performance by Buyer of this Agreement and the consummation by it
of the transactions contemplated hereby do not and will not
(a) conflict with or result in a violation of any provision of
the organizational documents of Buyer, (b) conflict with or result
in a violation of any provision of, or constitute (with or without
the giving of notice or the passage of time or both) a default
under, or give rise (with or without the giving of notice or the
passage of time or both) to any right of termination, cancellation,
or acceleration under, any bond, debenture, note, mortgage,
indenture, lease, contract, agreement, or other instrument or
obligation to which Buyer is a party, or (c) violate any Applicable
Law binding upon Buyer or require a consent, approval, order or
authorization of, or declaration, filing or registration with, any
Governmental Entity.
5.4.
Brokers or Finders . Buyer has not incurred, and
will not incur, directly or indirectly, as a result of any action
taken by Buyer under this Agreement, any liability for brokerage or
finders’ fees or commissions or any similar charges in
connection with this Agreement, for which any Seller has or will
have any liability.
5.5.
Capitalization . The capitalization of Buyer as
of September 30, 2008 is as set forth in the SEC
Filings. Buyer has not issued any capital stock since
that date, except for shares of Common Stock issued as compensation
pursuant to employment agreements described in the SEC
Filings. The Equity Securities have been duly
authorized, and if and when issued and paid for in accordance with
the terms of this Agreement, will be duly and validly issued, fully
paid and non-assessable. The outstanding shares of
capital stock of Buyer have been duly and validly issued and are
fully paid and non-assessable, have been issued in compliance with
all federal and state securities laws, and were not issued in
violation of any preemptive rights or similar rights to subscribe
for or purchase securities. Except as disclosed in the
SEC Filings (including without limitation under employee benefit
plans and employment agreements referred to in such SEC Filings),
there are no outstanding rights (including without limitation,
preemptive rights), warrants or options to acquire, or instruments
convertible into or exchangeable for, any unissued shares of
capital stock or other equity interest in Buyer, or any contracts,
commitments, agreements, understandings or arrangements of any kind
to which Buyer is a party relating thereto. Buyer owns
the equity interest in each of its Subsidiaries specified in
Schedule 5.5 , free and clear of any pledge, lien,
security interest, encumbrance or claim, other than as described in
Schedule 5.5 . There are no stockholders
agreements, voting agreements or other similar agreements with
respect to the Common Stock to which Buyer is a party, except as
disclosed in the SEC Filings and except for voting agreements
related to the Stockholder Approval.
5.6.
Legal Proceedings . There is no material legal or
governmental Proceedings pending to which Buyer or any of its
Subsidiaries is a party or of which the business or property of
Buyer or any of its Subsidiaries is subject.
5.7.
No Violations . Neither Buyer nor any of its
Subsidiaries is (a) in violation of its charter, bylaws or other
organizational documents, or (b) to its knowledge, (i) in violation
of any law, administrative regulation, ordinance or order of any
court or Governmental Entity, arbitration panel or authority
applicable to Buyer or any of its Subsidiaries, which violation,
individually or in the aggregate, would be reasonably likely to
have a Material Adverse Effect, or (ii) in default (and there
exists no condition which, with the passage of time or otherwise,
would constitute a default) in the performance of any Material
Contracts, which would be reasonably likely to have a Material
Adverse Effect.
5.8.
Financial Statements . The financial statements
of Buyer and the related notes contained in the SEC Filings present
fairly, in accordance with generally accepted accounting
principles, the consolidated financial position of Buyer and its
Subsidiaries as of the dates indicated. Such financial
statements (including the related notes) have been prepared in
accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods therein
specified.
5.9.
No Material Adverse Change . Except as disclosed
in the SEC Filings or as provided in this Agreement, since
September 30, 2008, there has not been (i) any change in the
business, financial condition or operation of Buyer which would
reasonably be expected to have a Material Adverse Effect, (ii) any
obligation, direct or contingent, that is material to Buyer and its
Subsidiaries considered as one enterprise, incurred by Buyer or its
Subsidiaries, except obligations incurred in the ordinary course of
business or related to this transaction, (iii) any dividend or
distribution of any kind declared, paid or made on the capital
stock of Buyer, or (iv) any loss or damage (whether or not
insured) to the physical property of Buyer or any of its
Subsidiaries which would reasonably be expected to have a Material
Adverse Effect.
5.10.
Disclosure . The information contained in the SEC
Filings as of the date of such information did not 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 light of the circumstances under which they
were made, not misleading.
5.11.
Compliance . The Common Stock is registered
pursuant to the Exchange Act and is listed on the Nasdaq Capital
Market of the Nasdaq Stock Market (the "Nasdaq Stock
Market" ), and Buyer has taken no action designed to, or to
its knowledge likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or
de-listing the Common Stock from the Nasdaq Stock Market, nor has
Buyer received any notification within the twelve (12) months
preceding the date of this Agreement that the SEC or the Nasdaq
Stock Market is contemplating terminating such registration or
listing.
5.12.
Reporting Status . Buyer has filed all documents
that Buyer was required to file under the Exchange Act during the
twelve (12) months preceding the date of this
Agreement. Copies of such documents have been made
available to each of the Sellers.
ARTICLE 6. — COVENANTS OF
SELLER PARTIES AND BUYER
6.1.
General . Buyer and each Seller Party will use
their reasonable best efforts to take all action and to do all
things necessary in order to consummate and make effective the
transactions contemplated by this Agreement, and each Seller Party
agrees not to take any action which might effect any Interest and
not to vote, consent, act or determine not to act under the
Organizational Documents without the prior written consent of
Buyer. Sellers will operate, manage and administer the
Company in a good and workmanlike manner consistent with past
practices, and cause the Company to carry on the business of the
Company in substantially the same manner as before execution of
this Agreement, including without limitation maintaining all
insurance, Permits and Material Contracts in full force and effect
and maintaining the Properties in accordance with industry
standards. Sellers will, except for emergency action
taken in the face of serious risk to life, property or the
environment (a) submit to Buyer, for prior written approval,
all requests for operating or capital expenditures and all proposed
contracts, agreements and actions relating to (i) any
indebtedness to be incurred by the Company or any sale of any of
the Properties, (ii) the Interests, the Company or the
Properties which involve individual commitments of more than
$10,000 or which would create any burdens on the Company, the
Interests or the Properties, or (iii) all activities described
in Section 4.8 or outside the ordinary course of business of
the Company; (b) consult with, inform and advise Buyer
regarding all material matters concerning the operation, management
and administration of the Company and the Properties; and
(c) obtain Buyer's written approval prior to voting,
consenting, acting or determining not to act under any operating,
unit, joint venture, partnership or similar agreement, including
the Organizational Documents. No Seller Party will take
any action that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other
business associate of the Company from maintaining at least as
favorable business relationships with the Company after the Closing
as it maintained with the Company prior to the
Closing. Each of the Seller Parties will, and will cause
its Affiliates to, refer all customer inquiries relating to the
business of the Company to Buyer, or an Affiliate thereof, from and
after the Closing.
6.2.
Consents and Approvals .
(a) Following
the execution of this Agreement, each Seller Party will use its
reasonable best efforts to obtain as soon as practicable (but in
any event prior to the Closing) all consents necessary for each
Seller Party to consummate the transactions contemplated hereby and
to perform its obligations hereunder. Each Seller Party
will use its reasonable best efforts to satisfy or cause to be
satisfied each of the conditions to the Closing set forth in
Article 7 .
(b) Following
the execution of this Agreement, Buyer will use reasonable best
efforts to obtain as soon as practicable (but in any event prior to
the Closing) all consents necessary for Buyer to consummate the
transactions contemplated hereby and to perform its other
obligations hereunder. Buyer will use reasonable best efforts to
satisfy or cause to be satisfied each of the conditions to the
Closing set forth in Article 7 .
6.3.
Full Access and Due Diligence .
(a) At
all times during the term of this Agreement, the Company will
permit representatives of Buyer to have full access at all
reasonable times to all premises, Properties, personnel, books,
records (including Tax records), contracts, and documents of or
pertaining to the Company to conduct due diligence reviews
(including without limitation to conduct an audit of the Financial
Statements and other financial information), together with the
opportunity to discuss the Company and its business with the
Company or its officers, accountants, employees, consultants,
agents and counsel, all as Buyer deems reasonably necessary or
appropriate for a due diligence review of the Company and its
business. Buyer may make copies of such records, at
their expense, but shall immediately return all such copies so made
if this Agreement is terminated.
(b) Without
limiting the foregoing, the Company shall provide to Buyer promptly
on or before execution of this Agreement copies of the Financial
Statements and Material Contracts and other information requested
by Buyer for the purpose of conducting a due diligence review of
the Company, the Properties and the Interests.
6.4.
Notice of Developments . Each Party will give
prompt written notice to the others of any material adverse
development causing a breach of any such Party’s
representations and warranties herein. No disclosure by
any Party pursuant to this Section 6.4 will be deemed to
amend or supplement any of the schedules or to prevent
or
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