SECURITIES PURCHASE
AGREEMENT
SECURITIES
PURCHASE AGREEMENT (the “Agreement”), dated as of
March 23, 2009, by and among Infinity Energy Resources, Inc.,
a Delaware corporation, with headquarters located at 11900 College
Blvd., Suite 204, Overland Park, Kansas 66210 (the
“Company”) and Off-Shore Finance, LLC, a Nevada limited
liability company (the “Buyer”), 11900 College Blvd.,
Suite 310, Overland Park, Kansas 66210.
A. The
Company and Buyer are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the
“1933 Act”), and Rule 506 of Regulation D
(“Regulation D”) thereunder, as promulgated by the
United States Securities and Exchange Commission (the
“SEC”) under the 1933 Act.
B. The
Company has authorized the issuance of (i) a subordinated
secured promissory note in the aggregate principal amount of
$1,275,000 due March 23, 2012 (the “Note”), and
(ii) a one percent (1%) revenue sharing interest with respect
to the Company’s Nicaragua concessions in the Tyra and Perlas
Blocks, offshore Nicaragua (the “Concessions”) (the
“Revenue Sharing Interest”).
C. The Buyer
wishes to purchase, and the Company wishes to sell, upon the terms
and conditions stated in this Agreement, (i) the Note, in
substantially the form attached hereto as Exhibit A,
and (ii) the Revenue Sharing Interest.
D. The Note
and the Revenue Sharing Interest are collectively referred to
herein as the “Securities.”
NOW,
THEREFORE , the Company and Buyer hereby agree as
follows:
1.
PURCHASE AND SALE OF NOTE AND REVENUE SHARING INTEREST
.
(a)
Amount . Upon the terms and conditions set forth herein, the
Company hereby agrees to issue and sell to Buyer, and Buyer hereby
agrees to purchase from the Company at the Closing (as defined
below), the Securities.
(b)
Closing . The closing (the “Closing”) of the
purchase and sale of the Securities will occur at the offices of
Davis Graham & Stubbs LLP, 1550 17 th Street, Denver Colorado, 80202 at
10:00 a.m., Denver Time, on the date hereof (“Closing
Date”). At the Closing, the parties shall take the actions
and make such deliveries as are provided in Article 5
below.
(c)
Purchase Price . The purchase price (the “Purchase
Price”) of the Securities is $1,275,000. The Buyer agrees, on
the terms and conditions set forth herein and in the Note, to make
loans to the Company upon the Company’s request from time to
time, provided that in no event shall the aggregate principal
amount of such loans at any time exceed $1,275,000. On the Closing
Date, (i) Buyer shall deposit the Purchase Price into an
escrow account (the “Off-Shore Escrow Account”) at
Amegy Bank National Association (“Amegy”) which is the
subject of the escrow agreement
between the
Buyer, Amegy and Amegy Bank National Association as escrow agent,
of even date herewith (the “Off-Shore Escrow
Agreement”), by wire transfer of immediately available funds,
and (ii) the Company shall deliver to Buyer the Note and the
Revenue Sharing Agreement.
(d)
Fees . In consideration of efforts made by the Buyer in
advance of the date of this Agreement, and for other valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company agrees to pay Buyer a loan origination
fee of $17,912.50 (the “Loan Origination Fee”). The
Company further agrees to pay a commitment fee on unborrowed
amounts under the Note at a rate of 6.0% per annum, to be computed
on the basis of a 360-day year and actual days elapsed, commencing
on the Closing Date, until such funds are borrowed under the Note,
with such amounts to be assessed against the Company on the last
day of each fiscal quarter (the “Commitment Fee”,
together with the Loan Origination Fee, the “Fees”).
The Fees shall be deemed accrued interest under the Note;
provided, however, that any Commitment Fees shall be offset
by any interest earned on funds held in the Off-Shore Escrow
Account. The Loan Origination Fee is non-refundable and earned by
Buyer upon execution of the Note; the Commitment Fee when assessed
against the Company each quarter is thereby non-refundable and
deemed earned by Buyer.
(e)
Subordinated Secured Promissory Note . Payment of the Note
will be secured by (i) two second-lien Deeds of Trust and Security
Agreements, each dated March 23, 2009 (collectively, the
“Security Agreement”), by and between Infinity Texas
and Infinity Wyoming, respectively, and the Buyer, covering certain
collateral as more particularly described therein and (ii) a
Commercial Guaranty by each of Infinity Oil and Gas of Texas, Inc.
(“Infinity Texas”) and Infinity Oil & Gas of
Wyoming, Inc. (“Infinity Wyoming”) in favor of Buyer
(the “Commercial Guaranties”), and the Note is further
subject to a Subordination and Intercreditor Agreement dated
March 23, 2009 (the “Subordination Agreement”), by
and among the Buyer, the Company and Amegy.
(f)
Revenue Sharing Interest . The Revenue Sharing Interest
shall be reflected in the Revenue Sharing Agreement, in
substantially the form attached hereto as Exhibit B .
In the event that Buyer breaches its funding obligations under the
Note, the Revenue Sharing Interest shall terminate and be of no
further force and effect.
(g)
Transaction Documents . The Note, the Security Agreement,
the Commercial Guaranties, the Off-Shore Escrow Agreement, the
Subordination Agreement, the Revenue Sharing Agreement and the
other agreements entered into or to be entered into by the parties
hereto in connection with the transactions contemplated by this
Agreement shall constitute the “Transaction
Documents”.
2.
BUYER’S REPRESENTATIONS AND WARRANTIES . Buyer
represents and warrants to the Company that the following
representations and warranties are true and correct in all material
respects as of the date hereof:
(a)
Organization and Good Standing . Buyer is duly organized,
validly existing, and in good standing under the laws of the State
of Nevada. The Buyer has all requisite limited liability company
power and authority to own and operate its assets and to carry on
its business as presently conducted.
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(b)
Validity; Enforcement . The Buyer has the requisite power
and authority to enter into and perform its obligations under this
Agreement and the other Transaction Documents to which it is or may
be a party. The execution and delivery of such Transaction
Documents by the Buyer and the consummation by the Buyer of the
transactions contemplated hereby and thereby, including, without
limitation, the receipt of the Note and the Revenue Sharing
Interest with respect thereto, have been duly authorized by the
Buyer’s Managing Member and Members. This Agreement and the
other Transaction Documents of even date herewith to which it is a
party have been duly executed and delivered by the Buyer, and
constitute the legal, valid and binding obligations of the Buyer,
enforceable against the Buyer in accordance with their respective
terms, except as (i) such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating
to, or (ii) general principles of equity that restrict the
enforcement and availability of applicable creditors’ rights
and remedies.
(c)
No Conflicts . The execution, delivery and performance by
Buyer of this Agreement and the other Transaction Documents to
which it is or may be a party and the consummation by Buyer of the
transactions contemplated hereby and thereby will not
(i) result in a violation of the organizational documents of
Buyer, or (ii) conflict with, or constitute a default (or an
event which 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 of, any agreement,
indenture or instrument to which Buyer is a party, or
(iii) result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities
laws) applicable to Buyer, except in the case of clauses
(ii) and (iii) above, for such conflicts, defaults,
rights or violations which would not, have a material adverse
effect on the ability of Buyer to perform its obligations
hereunder.
(d)
No Public Sale or Distribution . Buyer is acquiring the
Securities for its own account and for investment purposes only and
not with a view towards, or for resale in connection with, the
public sale or distribution thereof in a manner that would violate
the 1933 Act, except pursuant to sales registered or exempted under
the 1933 Act. Buyer does not presently have any agreement or
understanding, directly or indirectly, with any person to
distribute any of the Securities.
(e)
Access to Information. Buyer and its advisors, if any, have
been furnished with all materials relating to the business,
finances and operations of the Company and materials relating to
the offer and sale of the Securities that have been requested by
Buyer. Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and receive answers
concerning the business and affairs of the Company and the terms
and conditions of the sale of the Securities as contemplated by
this Agreement, and to obtain any additional information as may be
necessary to verify the accuracy of information furnished to Buyer.
Buyer further acknowledges that it was encouraged by the Company to
request all additional information that might be material or
important in order for Buyer to make an informed investment
decision with respect to the purchase of the Securities and has
carefully read this Agreement and the other Transaction Documents
and all other information furnished to Buyer by the Company in
connection with this Agreement.
(f)
Acknowledgement of Risk . Buyer acknowledges and warrants
that, in making this investment decision, it has made its own
independent assessment of the merits and risks of an investment in
the Securities based on its examination and evaluation of Company,
its business,
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operations,
financial condition, future prospects and the skills and
qualifications of its officers, directors and employees. Buyer has
sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to
its acquisition of the Securities and has not relied on Company or
its respective agents or representatives. Buyer understands that
its investment in the Securities involves a high degree of risk and
understands that the Company is currently experiencing substantial
liquidity problems. Buyer acknowledges the risks, including,
without limitation, the risks set forth in the “Risk
Factors” attached hereto as Exhibit C relating to
the Company and an investment in the Securities, and in particular,
the risks related to the Company’s risk of default under the
loan agreement with Amegy, dated January 9, 2007, as amended
and supplemented by the First, Second and Third Forbearance
Agreements. Buyer further represents it: (i) is able to bear
the loss of Buyer’s entire investment without any material
adverse effect on Buyer’s economic condition or stability and
(ii) has, alone or together with its advisors, such knowledge
and experience in financial and business matters as to be capable
of evaluating the merits and risks of the investment to be made by
Buyer pursuant to this Agreement.
(g)
Investor Status . Buyer understands that the Securities are
being offered and sold only to “accredited investors”
(as that term is defined under Rule 501(a) of Regulation D),
and Buyer represents that Buyer is an accredited investor by virtue
of the fact that it is an entity in which all of the equity owners
are accredited investors. Buyer understands that the Company is
relying on Buyer with respect to the accuracy of this
representation. Buyer and each of its equity investors has
completed and returned a copy of the investor questionnaire, and
Buyer represents that the statements made therein are complete and
accurate.
(h)
General Solicitation . Buyer is not purchasing the
Securities as a result of any advertisement, article, notice or
other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television
or radio or presented at any seminar or any other general
solicitation or general advertisement.
(i)
Additional Information . Buyer represents and warrants that,
except as set forth in this Agreement and in the Transaction
Documents, no representations or warranties have been made to
Buyer, by the Company or any agent, employee, representative or
affiliate of the Company and that, in entering into this
transaction for the Securities, Buyer is not relying on any
information other than that contained in this Agreement, the other
Transaction Documents, and other written information obtained from
the Company in the course of the independent investigation by
Buyer, and has been based solely on the independent evaluation by
the Buyer and its representatives.
(j)
Reliance on Exemptions . Buyer understands that the
Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and Buyer’s
compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Buyer set forth herein in
order to determine the availability of such exemptions and the
eligibility of Buyer to acquire the Securities. Buyer understands
that the Securities have not been registered under the Securities
Act or any state securities laws by reason of their contemplated
issuance in transactions exempt from the registration requirements
of the Securities Act and applicable state securities laws, and
that the reliance of Company and others upon these exemptions is
predicated in part upon the representations by Buyer in this
Agreement.
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(k)
Acknowledgment Regarding Buyer’s Purchase of
Securities . The Buyer acknowledges and agrees that Buyer and
any person acting as an affiliate of Buyer is acting solely in the
capacity of an arm’s length purchaser with respect to the
Securities and the negotiation of the Transaction Documents and
that Buyer is not: (i) an officer or director of the Company,
(ii) acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the purchase and sale
of the Securities and the negotiation of the Transaction
Documents.
(l)
No Governmental Review . Buyer understands that no United
States federal or state agency or any other government or
governmental agency has passed on or made any recommenda
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