Exhibit 10.1
SECURITIES PURCHASE
AGREEMENT
Dated as of March 10,
2005
By and Between
CAPCO ENERGY, INC.
and
JVL Global Energy (QP),
LP
JVL Global Energy, LP
Navitas Fund, LP
Peninsula Fund, LP
Peninsula Catalyst Fund,
LP
Peninsula Catalyst QP Fund,
LP
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS
1
Section 1.1 - Definitions
1
Section 1.2 - Other Definitions
3
Section 1.3 - Construction
3
ARTICLE II ISSUANCE AND PURCHASE OF
STOCK
3
Section 2.1 - Issuance and Purchase of Stock
3
Section 2.2 - The Closing
3
ARTICLE III REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
3
Section 3.1 - Organization
3
Section 3.2 - Due Authorization
4
Section 3.3 - Non-Contravention
4
Section 3.4 –
Consents
4
Section 3.5 - Capitalization
4
Section 3.6 - Legal Proceedings
5
Section 3.7 - No Violations
5
Section 3.8 - Permits
5
Section 3.9 - Financial Statements
5
Section 3.10
-
No Material Adverse Change
6
Section 3.11
-
Disclosure
6
Section 3.12
-
Compliance
6
Section 3.13
-
Reporting Status
7
Section 3.14
-
Properties
7
Section 3.15
-
Contracts
7
Section 3.16
-
Environmental Matters
8
Section 3.17 – Tax
Returns
8
Section 3.18
-
Insurance
8
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS
8
Section 4.1 - Authority
8
Section 4.2 - Consents and Approval; No Violation
9
Section 4.3 - Securities Laws
9
ARTICLE V ADDITIONAL
AGREEMENTS
12
Section 5.1 - Use of Proceeds
12
Section 5.2 - Access to Information
12
Section 5.3 - Reservation of Common Stock
12
Section 5.4 - Market for Common Stock
12
Section 5.5 - Best Efforts
13
Section 5.6 - Public Announcements
13
Section 5.7 - Restrictive Legends
13
Section 5.8 - Registration Rights
13
Section 5.9 - Indemnification
16
ARTICLE VI PURCHASERS'
CONDITIONS
17
Section 6.1 - Representations and Covenants
17
Section 6.2 - Required Consents and Approvals
17
Section 6.3 - Additional Documents
17
ARTICLE VII COMPANY’S
CONDITIONS
17
Section 7.1 - Representations and Covenants
17
Section 7.2 - Required Consents and Approvals
17
Section 7.3 - Additional Documents
17
ARTICLE VIII TERMINATION AND
SURVIVAL
18
Section 8.1 - Termination
18
Section 8.2 - Survival; Failure to Close
18
ARTICLE IX MISCELLANEOUS
18
Section 9.1 - Entire Agreement
18
Section 9.2 - Notices
18
Section 9.3 - Governing Law
20
Section 9.4 - Severability
20
Section 9.5 - Expenses
20
Section 9.6 - Descriptive Headings
20
Section 9.7 - Counterparts
20
Section 9.8 - Assignment
21
Section 9.9 - Amendments; Waivers
21
Schedule 3.1 – Subsidiaries of the
Company
Schedule 3.5 –
Capitalization
Schedule 3.6 – Legal
Proceedings
Schedule 4.3(b) – Risk
Factors
Exhibit "A" – Form of
Warrant
SECURITIES PURCHASE
AGREEMENT
This Securities Purchase Agreement (the "
Agreement ") is made and entered into as of the 10
th day of March, 2005, by and among Capco Energy,
Inc., a Colorado corporation (the " Company "), JVL
Global Energy (QP), LP, JVL Global Energy, LP, Navitas Fund, LP,
Peninsula Fund, LP, Peninsula Catalyst Fund, LP, and Peninsula
Catalyst QP Fund, LP (individually, a " Purchaser ",
and collectively, the " Purchasers ").
ARTICLE I
DEFINITIONS
Section 1.1 - Definitions
. As used in this Agreement, the
following terms have the meanings indicated:
" Agreement " has the
meaning ascribed to such term in the first paragraph
hereof.
" Closing " has the meaning
ascribed to such term in Section 2.2.
" Closing Date " has the
meaning ascribed to such term in Section 2.2.
" Common Stock " means the
common stock, $0.001 par value per share, of the
Company.
" Company " has the meaning
ascribed to such term in the first paragraph hereof.
" Contracts " means any
indenture, mortgage, deed of trust, loan agreement, note, lease
(other than oil and gas leases), license, franchise agreement,
permit, certificate, contract or other agreement or instrument to
which the Company or any of its Subsidiaries is a party or to which
their respective material properties or assets are
subject.
" Dolphin Transaction "
means the transaction(s) among the Company, Hoactzin Partners, L.P.
and Dolphin Direct Equity Partners, LP pursuant to that certain
Amended Memorandum of Terms for Investment in Certain Oil and Gas
Projects dated February 7, 2005 and the documents and
instruments related thereto.
" Environmental Laws "
means all (i) all federal statutes regulating or prescribing
restrictions regarding the use of property or other activities
affecting the environment (air, water, land, animal and plant
life), including but not limited to the following: the Clean
Air Act, Clean Water Act, Comprehensive Environmental Response,
Compensation and Liability Act, Emergency Planning and Community
Right-to-Know Act, Hazardous Materials Transportation Act, National
Environmental Policy Act, Occupational Safety and Health Act, Oil
Pollution Act of 1990, Resource Conservation and Recovery Act, Safe
Drinking Water Act, and Toxic Substances Control Act; (ii) all
regulations promulgated under such federal statutes, (iii) all
local and state laws, rules and regulations regulating the use of
or relating to or affecting the environment, and (iv) all common
law rights, duties and obligations relating to the use of or
matters affecting the environment.
" Exchange Act " means the
Securities Exchange Act of 1934, as amended.
" Governmental Authority "
means the United States, any foreign country, state, county, city
or other political subdivision, agency or instrumentality
thereof.
" 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 the Company and its Subsidiaries, taken as a
whole.
" Permits " means any
licenses, permits, certificates, consents, orders, approvals and
other authorizations from, and all declarations and filings with,
all federal, state, local and other Governmental Authorities, all
self-regulatory organizations and all courts and other tribunals
presently required or necessary to own or lease, as the case may
be, and to operate the properties of the Company and its
Subsidiaries and to carry on the business of the Company and the
Subsidiaries as now or proposed to be conducted as set forth in the
SEC Filings.
" Purchaser " and "
Purchasers " have the meanings ascribed to such terms
in the first paragraph hereof.
" SEC " means the
Securities and Exchange Commission.
" SEC Filings " means the
Company’s reports and other filings made with the SEC for a
period of twelve (12) months prior to the date hereof and all
exhibits thereto.
" Securities " means the
Common Stock and the Warrants being purchased pursuant to this
Agreement and the Warrant Shares issuable upon exercise of the
Warrants.
" Securities Act " means
the Securities Act of 1933, as amended.
" Subsidiary " 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. With respect to the Company, as of
the date of this Agreement, the Company’s Subsidiaries are
set forth on Schedule 3.1 attached hereto.
" Transactions " means the
issuance and sale of the Units to the Purchasers and the other
transactions and obligations contemplated by this
Agreement.
" Unit " means one share of
Common Stock and one-half of a Warrant.
" Warrant " or "
Warrants " means the Company’s Common Stock
Purchase Warrants, each initially exercisable within five (5) years
for one share of Common Stock at a purchase price of $0.45 per
share and having terms substantially as set forth in Exhibit
"A" attached hereto.
" Warrant Certificate "
means a certificate evidencing a Warrant in substantially the form
attached hereto as Exhibit "A" .
" Warrant Shares " means
the shares of Common Stock purchased or purchasable upon the
exercise of the Warrants pursuant to the terms thereof, initially
being 5,000,000 shares of Common Stock.
Section 1.2 - Other Definitions
. Other terms defined in this
Agreement have the meanings so given them.
Section 1.3 - Construction
. Whenever the context
requires, the gender of all words used in this Agreement includes
the masculine, feminine, and neuter. Except as specified
otherwise, all references to Articles and Sections refer to
articles and sections of this Agreement, and all references to
exhibits and schedules are to Exhibits and Schedules attached to
this Agreement, each of which is made a part of this Agreement for
all purposes. The word "including" shall mean "including,
without limitation" unless the context otherwise
requires.
ARTICLE II
ISSUANCE AND
PURCHASE OF STOCK
Section 2.1 - Issuance and Purchase of Stock
. Subject to the terms and
conditions of this Agreement, the Company agrees to issue and
sell to the Purchasers, and the Purchasers agree to subscribe for
and purchase from the Company, a total of 10 million Units for an
aggregate purchase price of $3,000,000 in cash (the "
Purchase Price "). The number of Units to be
purchased by each Purchaser will be specified in writing to the
Company at least three days prior to Closing.
Section 2.2 - The Closing
. Subject to the terms and
conditions of this Agreement, the issuance and purchase of the
Units shall take place at a closing (the " Closing ")
to be held at the offices of the Company, 5555 San Felipe., Suite
725, Houston, Texas 77056, at 10:00 a.m. (Central time) on
March 10, 2005, or such other place or time as may be agreed
by the parties. The date on which the Closing occurs is
referred to herein as the " Closing Date ." At
the Closing, the Company will deliver to Purchasers stock
certificates representing the Common Stock purchased and Warrant
Certificates for the Warrants Purchased, registered in the name of
each Purchaser as specified in accordance with Section 2.1 upon
receipt of the Purchase Price by wire transfer of immediately
available funds to an account designated by the Company, or by such
other method as is mutually agreed to by Purchasers and the
Company. Such certificates shall bear appropriate restrictive
legends deemed necessary by the Company to comply with applicable
securities and corporate laws, including without limitation those
set forth in Section 5.9.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company represents and warrants to
Purchasers as of the date hereof as follows:
Section 3.1 - Organization
. Each of the Company and its
Subsidiaries (i) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
organization, (ii) has full power and authority to own,
operate and occupy its properties and to conduct its business as
presently conducted, and (iii) is registered or qualified to
do business and in good standing in each jurisdiction in which it
owns or leases property or transacts business, except where the
failure to be so qualified would reasonably be expected to have a
Material Adverse Effect, and no proceeding has been instituted in
any such jurisdiction revoking, limiting or curtailing, or seeking
to revoke, limit or curtail, such power and authority or
qualification. Schedule 3.1 contains a list of the
Company’s Subsidiaries, including the jurisdiction of
organization of, and direct and indirect ownership of the Company
in, each Subsidiary (and whether such ownership is subject to a
lien, security interest or other encumbrance).
Section 3.2 - Due Authorization
. The Company has all requisite
power and authority to execute, deliver and perform its obligations
under this Agreement, and this Agreement has been duly authorized
and validly executed and delivered by the Company and constitutes a
legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, except as rights
to indemnity and contribution may be limited by state or federal
securities laws or the public policy underlying such laws, and
except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally
and general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
Section 3.3 - Non-Contravention
. The execution and delivery of
this Agreement, the issuance and sale of the Securities and the
consummation of the Transactions will not (assuming the consents
referred to in Section 3.4 and the waiver of any pre-emptive rights
identified in Schedule 3.5 are obtained) conflict with or
constitute a violation of, or default or result in the creation or
imposition of any lien or encumbrance on any material asset of the
Company or its Subsidiaries under (i) any material Contracts,
(ii) the charter, by-laws or other organizational documents of
the Company or any of its Subsidiaries, or (iii) to its
knowledge, any law, regulation, ordinance or order of any court or
governmental agency, arbitration panel or authority binding upon
the Company or any of its Subsidiaries or their respective
properties, in each case except those that would not reasonably be
expected to have a Material Adverse Effect.
Section 3.4 –
Consents
. No consent, approval,
authorization or other order of, or registration, qualification or
filing with, any regulatory body, administrative agency, or other
governmental body in the United States is required for the
execution and delivery of this Agreement and the valid issuance and
sale of the Units, other than such as have been made or obtained,
except for those in connection with the Dolphin Transaction, for
any filings required to be made under federal or state securities
laws, and where any failure to make or obtain any of the foregoing
would not reasonably be expected to have a Material Adverse
Effect.
Section 3.5 - Capitalization
. The capitalization of the Company
as of December 31, 2004 is as set forth in Schedule 3.5
attached hereto and in the SEC Filings. The Company has not
issued any capital stock since that date, except for the issuance
of 25,000 shares on February 9, 2005, upon the exercise of a stock
option. The Units have been duly authorized, 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 the Company 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 set forth in Schedule 3.5 or disclosed in
the SEC Filings, there are no outstanding rights, warrants or
options to acquire, or instruments convertible into or exchangeable
for, any unissued shares of capital stock or other equity interest
in the Company, or any contracts, commitments, agreements,
understandings or arrangements of any kind to which the Company is
a party relating to such issuance of capital stock or other equity
interest in the Company. Except as disclosed in the SEC
Filings, there are no stockholders agreements, voting agreements or
other similar agreements with respect to the Common Stock to which
the Company is a party.
Section 3.6 - Legal Proceedings
. Except as disclosed in
Schedule 3.6 or in the SEC Filings, there is no material
legal or governmental proceedings pending, or to the knowledge of
the Company, threatened to which the Company or any of its
Subsidiaries is a party or of which the business or property of the
Company or any of its Subsidiaries is subject, which would be
reasonably likely to have a Material Adverse Effect on the
Company.
Section 3.7 - No Violations
. Neither the Company nor any of
its Subsidiaries is (i) in violation of its charter, bylaws or
other organizational document, or to its knowledge, (ii) in
violation of any law, administrative regulation, ordinance or order
of any court or Governmental Authority, arbitration panel or
authority applicable to the Company or any of its Subsidiaries,
which would be reasonably likely to have a Material Adverse Effect,
or (iii) in default in the performance of any material
Contracts, which would be reasonably likely to have a Material
Adverse Effect.
Section 3.8 - Permits
. Each of the Company and its
Subsidiaries has all necessary Permits that are currently necessary
for the operation of the business of the Company and its
Subsidiaries as currently conducted and as described in the SEC
Filings, except where the failure to currently possess such Permits
would not reasonably be expected to have a Material Adverse
Effect.
Section 3.9 - Financial Statements
. The financial statements of the
Company and the related notes contained in the SEC Filings present
fairly in all material respects, in accordance with generally
accepted accounting principles, the consolidated financial position
of the Company and its Subsidiaries as of the dates indicated (the
" Financial Statements "). Such Financial
Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the
periods therein specified.
Section 3.10 - No Material Adverse Change
. Except as disclosed in the SEC
Filings, since September 30, 2004, there has not been
(i) any change in the business, financial condition,
operation, or prospects of the Company which would reasonably
be expected to have a Material Adverse Effect, (ii) any
obligation, direct or contingent, that is material to the Company
and its Subsidiaries considered as one enterprise, incurred by the
Company or its Subsidiaries, except obligations incurred in the
ordinary course of business, (iii) any dividend or
distribution of any kind declared, paid or made on the capital
stock of the Company, or (iv) any loss or damage (whether or
not insured) to the physical property of the Company or any of its
Subsidiaries which would reasonably be expected to have a Material
Adverse Effect.
Section 3.11 - Disclosure
. The information contained in the
SEC Filings as of the date of such information, and the information
contained in this Agreement, including any schedule or exhibit
attached hereto, does not and did not, as of the date of such
information, 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 herein or therein, in light of the
circumstances under which they were made, not
misleading.
Section 3.12 - Compliance
.
(a)
The Common Stock is registered pursuant
to the Exchange Act and is quoted on the OTC Bulletin Board (the "
OTCBB "), and the Company 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 the quotation of the Common Stock from the OTCBB, nor has
the Company received any notice within the 12 months preceding the
date of this Agreement regarding the termination of such
registration or quotation.
(b)
As long as any Purchaser owns Common
Stock, Warrants or Warrant Shares, the Company covenants 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 Section 13(a) or 15(d) of
the Exchange Act. As long as any Purchaser owns Common Stock,
Warrants or Warrant Shares, if the Company is not required to file
reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it
will prepare and furnish to the Purchasers annual and quarterly
financial statements, together with a discussion and analysis of
such financial statements in form and substance substantially
similar to those that would otherwise be required to be included in
reports required by Section 13(a) or 15(d) of the Exchange Act, as
well as any other information required thereby, in the time period
that such filings would have been required to have been made under
the Exchange Act. The Company further covenants that it will take
such further action as any Purchaser may reasonably request, all to
the extent required from time to time to enable such person to sell
Common Stock and Warrant Shares without registration under the
Securities Act. Upon the request of any Purchaser, the Company
shall deliver to such Holder a written certification of a duly
authorized officer as to whether it has complied with such
requirements.
Section 3.13 - Reporting Status
. The Company has filed all
documents that the Company was required to file under the Exchange
Act during the 12 months preceding the date of this Agreement.
Copies of such documents have been made available to the
Purchasers.
Section 3.14 - Properties
. Each of the Company and its
Subsidiaries has good and defensible title to all property included
in the Financial Statements, free and clear of all liens, charges,
encumbrances or restrictions, except for Permitted Encumbrances.
As used herein, the term "G ood and Defensible
Title " means, as to the oil and gas properties of the
Company or its Subsidiaries (the " Oil and Gas
Properties "), such right, title and interest that is (i)
owned or deducible of record (either from the records of the
applicable county, parish, country and/or, in the case of Federal
leases, from the records of the applicable office in the Bureau of
Land Management or Minerals Management Service and/or, in the case
of Indian leases, from the applicable office of the Bureau of
Indian Affairs, and state leases, from the records of the
applicable state land office), or (ii) such that a reasonably
prudent purchaser of oil and gas properties would accept the same.
As used herein, the term " Permitted
Encumbrances " means: (i) matters described in the SEC
Filings or reflected in the Financial Statements; (ii) royalties,
overriding royalties, net profits interests, production payments
and other burdens on production which do not materially reduce the
Company's or its Subsidiaries' net revenue interest in any of the
Oil and Gas Properties to less than the interest included in the
information in the Financial Statements, (iii) liens for taxes,
assessments, labor and materials where payment is not delinquent,
(iv) operating agreements, unit agreements, unitization and
pooling designations and declarations, gathering and transportation
agreements, processing agreements, gas, oil and liquids purchase,
sale and exchange agreements, exploration and development
agreements, surface agreements, farmout agreements and other
similar agreements, provided they do not have a material adverse
effect on the ownership of the Oil and Gas Properties or increase
the cost burden applicable to any such property in excess of the
cost burden included in the information in the Financial
Statements, (v) regulatory authority of governmental agencies not
presently or previously materially violated, (vi) easements,
surface leases and rights, plat restrictions and similar
encumbrances, provided that they do not detract from the value, or
materially increase the cost of operation of any of the Oil and Gas
Properties, (vii) liens, encumbrances and rights granted or
arising in connection with the Dolphin Transaction; and
(viii) liens, charges, 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 or the receipt of production revenues from the Oil and Gas
Properties affected thereby, and any other encumbrance or claim
which would not reasonably be expected to have a Material Adverse
Effect.
Section 3.15 - Contracts
. All material Contracts are valid,
binding and enforceable against the Company or its Subsidiaries, as
applicable, and, to the knowledge of the Company, are valid,
binding and enforceable against the other party or parties thereto
and are in full force and effect with only such exceptions as would
not reasonably be expected to have a Material Adverse Effect.
The Company and its Subsidiaries, and to the knowledge of the
Company, the other parties thereto,
are not in default under any of the
material Contracts, which default would reasonably be expected to
have a Material Adverse Effect.
Section 3.16 - Environmental Matters
. Except as would not reasonably be
expected to have a Material Adverse Effect and except as disclosed
in the SEC Filings, (i) each of the Company and its Subsidiaries is
in compliance with and not subject to liability under applicable
Environmental Laws, (ii) each of the Company and its Subsidiaries
has made all filings and provided all notices required under any
applicable Environmental Law, and has in full force and effect and
is in compliance with all Permits required under any applicable
Environmental Laws, (iii) there is no civil, criminal or
administrative action, suit, demand, hearing, notice of violation,
proceeding, notice or demand letter or request for information
pending or, to the knowledge of the Company, threatened against the
Company or its Subsidiaries under any Environmental Law, (iv)
no lien, charge, encumbrance or restriction has been recorded under
any Environmental Law with respect to any assets, facility or
property owned, operated, leased or controlled by the Company or
its Subsidiaries, and (v) neither the Company nor its
Subsidiaries has received notice that it has been identified as a
potentially responsible party under any Environmental
Law.
Section 3.17 – Tax
Returns
. Each of the Company and its
Subsidiaries has filed all returns and reports of or relating to
any federal, state, local or foreign income, franchise,
ad valorem, excise, withholding or other taxes (" Tax
Returns ") required to be filed on or before the date
hereof, except where the failure to so file such Tax Returns would
not reasonably be expected to have a Material Adverse Effect, and
has paid all taxes shown as due on such Tax Returns, except those
contested in good faith by appropriate proceedings. To the
knowledge of the Company, other than taxes which the Company or its
Subsidiaries are contesting in good faith and for which the Company
or such Subsidiaries have provided adequate reserves, there is no
claim against the Company or its Subsidiary for any taxes
(including any penalties and interest), and no assessment,
deficiency or adjustment has been asserted or proposed that would
reasonably be expected to have a Material Adverse
Effect.
Section 3.18 - Insurance
. Each of the Company and its
Subsidiaries carries insurance in such amounts and covering such
risks as is customary for persons of a similar size in the
businesses in which they are engaged.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and
warrants to the Company as follows:
Section 4.1 - Authority
. The Purchaser has all requisite
organizational power and authority, to execute and deliver this
Agreement and to consummate the Transactions to be performed by the
Purchaser. The execution and delivery of this Agreement and
the consummation of the Transactions to be performed by the
Purchaser have been duly and validly authorized by all necessary
action on the
part of the partners of the Purchaser,
and no other partnership proceedings are necessary to authorize the
execution and delivery of this Agreement by the Purchaser or to
consummate the Transactions to be performed by the Purchaser.
This Agreement has been duly and validly executed and
delivered by the Purchaser and, assuming this Agreement constitutes
valid and binding obligations of the Company, this Agreement
constitutes a valid and binding agreement of the Purchaser,
enforceable against him in accordance with its terms, except that
the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles of equity
and the discretion of the court before which any proceeding
therefor may be brought (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
Section 4.2 - Consents and Approval; No Violation
. Neither the execution and
delivery of this Agreement by the Purchaser, the consummation of
the Transactions to be performed by the Purchaser, nor compliance
by the Purchaser, with any of the provisions hereof will
(i) conflict with or result in any breach of any provisions of
the Purchaser’s organizational documents, (ii) require any
material consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Authority, except for
consents, approvals, authorizations, permits, filings or
notifications which have been obtained or made, or
(iii) result in a default (with or without due notice or lapse
of time or both) or give rise to any right of termination,
cancellation or acceleration under any of the terms, conditions or
provisions of any material agreements or violate any material
order, writ, injunction, decree, statute, rule or regulation
applicable to the Purchaser, which may adversely effect the
Transactions or Purchaser's performance hereunder.
Section 4.3 - Securities Laws
. Each Purchaser hereby represents
and warrants to and covenants with the Company that:
(a)
Purchaser has adequate means of providing
for its current needs and possible contingencies, and has no need
now, and anticipates no need in the foreseeable future, to sell the
Securities. Purchaser is able to bear the economic risks of
this investment, and consequently, without limiting the generality
of the foregoing, Purchaser is able to hold the Securities for an
indefinite period of time and has sufficient net worth to sustain a
loss of the entire investment in the Securities in the event such
loss should occur.
(b)
Purchaser recognizes that its investment
in the Securities involves a high degree of risk which may result
in the loss of the total amount of the investment. Purchaser
acknowledges that it is aware of and has carefully considered all
risks incident to the purchase of the Securities, including without
limitation those discussed in Schedule 4.3(b)
.
(c)
Purchaser is acquiring the Securities for
its own account (as principal) for investment and not with a view
to the distribution or resale thereof. Purchaser has not
offered or sold any portion of the Securities and has no present
intention of dividing the Securities with others or of reselling or
otherwise disposing of any portion of the Securities.
(d)
PURCHASER IS AWARE THAT IT MUST BEAR THE
ECONOMIC RISK OF ITS INVESTMENT IN THE SECURITIES FOR AN INDEFINITE
PERIOD OF TIME BECAUSE THE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OR UNDER THE SECURITIES LAWS OF ANY STATE,
AND THEREFORE CANNOT BE SOLD UNLESS THEY ARE SUBSEQUENTLY
REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR UNLESS AN EXEMPTION OR EXCEPTION FROM SUCH
REGISTRATION IS AVAILABLE AND, FURTHER, THAT ONLY THE COMPANY CAN
TAKE ACTION TO REGISTER THE SECURITIES. PURCHASER ALSO RECOGNIZES
THAT NO FEDERAL OR STATE AGENCY HAS PASSED UPON THE SECURITIES OR
MADE ANY FINDING OR DETERMINATION AS TO THE FAIRNESS OF AN
INVESTMENT IN THE SECURITIES.
(e)
Purchaser (i) acknowledges receipt
of sufficient information from the Company concerning the business
of the Company and its Subsidiaries in order for Purchaser to make
a fully informed investment decision, (ii) has had the
opportunity to review and obtain copies of any information which
the Company possesses and is desired by Purchaser relating to the
Securities and the Company and its Subsidiaries (including without
limitation copies of the SEC Filings), and (iii) has been
given the opportunity to meet with officials of the Company and to
have said officials answer any questions regarding the terms and
conditions of this particular investment, and all such questions
have been answered to Purchaser’s full satisfaction.
While the Company has attempted to provide information that
is as accurate as possible, Purchaser acknowledges and agrees that
the Company 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. All information described in this Section 4.3(e) and
otherwise reviewed by Purchaser concerning the Company and its
Subsidiaries, including without limitation the information included
in the SEC Filings, is qualified in all respects by the Risk
Factors discussed in Schedule 4.3(b) . The Purchaser
has sufficient knowledge and experience in financial and business
matters to enable it to evaluate the merits and risks of an
investment in the Securities. In addition, in reaching the
conclusion that it desires to acquire the Securities, Purchaser has
carefully evaluated its financial resources and investments, has
consulted with such legal, accounting and other experts as
necessary or appropriate, and acknowledges and represents that
Purchaser is able to bear the economic risks of this investment.
Purchaser acknowledges and understands that none of the
information provided or made available by or on behalf of the
Company constitutes any legal, tax or investment advice.
(f)
Purchaser is an " accredited
investor " as such term is defined in Rule 501 under the
Securities Act. Purchaser will provide to the Company such
information as may be reasonably requested by the Company to enable
it to satisfy itself as to such status and the knowledge and
experience of Purchaser and its ability to bear the economic risk
of an investment in the Shares.
(g)
All representations and warranties made
by Purchaser in this Agreement and all other oral or written
information provided by Purchaser to the Company is and are true,
correct and complete in all material respects, and, if there should
be any material change in such information prior to the acceptance
of this Agreement, Purchaser will immediately furnish such revised
or corrected information to the Company.
(h)
The address and social security number or
federal tax identification number set forth on the signature page
hereof is its true and correct state (or other jurisdiction) of
residence and social security number or federal tax identification
number. Purchaser has no present intention of becoming a
resident of any other state or jurisdiction. Purchaser is not
subject to backup withholding and will provide such forms and
documents as may be required by the Company to evidence its
exemption from backup or other withholding taxes and hereby
consents to withholding of any applicable taxes from its
distributions from the Company.
(i)
Purchaser acknowledges and understands
that certain of the information that it has received regarding the
Company and its Subsidiaries may be material, non-public
information, and that Purchaser 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 the Company and its Subsidiaries.
(j)
Purchaser acknowledges and agrees that if
Purchaser is purchasing the Units in a fiduciary capacity, the
representations, warranties and agreements contained herein shall
be deemed to have been made on behalf of the person or persons for
whom the Purchaser is so purchasing and that the representations
and warranties of the Purchaser as set forth herein shall continue
in effect following the sale of the Units pursuant hereto. In
the event that execution hereof by Purchaser is performed by any
person as agent for or other representative of the Purchaser, such
person represents that he is duly authorized and empowered to sign
and deliver this document on behalf of the Purchaser in the
capacity stated and that the Purchaser will be bound by this
Agreement.
(k)
Purchaser acknowledges that it
understands the meaning and legal consequences of the
representations, warranties and covenants set forth in this Section
4.3 and that the Company has relied and will rely upon such
representations, warranties, covenants and certifications, AND
PURCHASER HEREBY AGREES TO INDEMNIFY, DEFEND AND HOLD HARMLESS THE
COMPANY AND ITS OFFICERS, DIRECTORS, CONTROLLING PERSONS, AGENTS
AND EMPLOYEES, FROM AND AGAINST ANY AND ALL LOSS, DAMAGE OR
LIABILITY, JOINT OR SEVERAL, AND ANY ACTION IN RESPECT THEREOF, TO
WHICH ANY SUCH PERSON MAY BECOME SUBJECT DUE TO OR ARISING OUT OF A
BREACH OF ANY OF PURCHASER’S REPRESENTATIONS, WARRANTIES OR
COVENANTS.
ARTICLE V
ADDITIONAL
AGREEMENTS
Section 5.1 - Use of Proceeds
. The cash proceeds to the Company
from the issuance of the Units shall be used by the Company on and
after the Closing Date to acquire and develop oil and gas
properties and for general corporate purposes.
Section
5.2 - Access to Information
(a)
Between the date hereof and the Closing
Date, the Company will afford to Purchasers and their authorized
representatives full access during normal business hours to the
facilities and properties and to the books and records of the
Company and its Subsidiaries, will permit Purchasers and their
authorized representatives to make reasonable inspections and will
cause its officers and those of its Subsidiaries to furnish
Purchasers and their authorized representatives with such financial
and operating data and other information with respect to the
business, assets and properties of the Company and its
Subsidiaries, as applicable, as Purchasers and their authorized
representatives may from time to time request.
(b)
Purchasers and their representatives
shall hold strictly confidential all information they obtain with
respect to the Company or its Subsidiaries; provided, that
Purchasers shall not be obligated to hold confidential information
which (i) was or becomes generally available to the public
other than as a result of a disclosure by any Purchaser or its
representatives, (ii) was or becomes available to Purchasers
on a non-confidential basis from a source other than the Company or
its representatives, so long as such source is not bound by a
confidentiality agreement with the Company or otherwise prohibited
from transmitting the information to Purchasers, or (iii) is
required to be disclosed in order to comply with any applicable
law, order, regulation or ruling; provided further, that Purchasers
shall notify the Company prior to any disclosure under (iii) above
and provide the Company the opportunity to dispute or contest such
disclosure before any disclosure is made.
Section 5.3 - Reservation of Common Stock
. The Company will reserve and keep
reserved for issuance, out of the authorized and unissued shares of
the Common Stock, a number of shares of Common Stock sufficient to
provide for issuance upon exercise of the outstanding Warrants and
shall keep such shares free of any legal or contractual preemptive
rights. The Company will take all steps necessary to keep the
Warrant Shares duly authorized for issuance by all requisite
corporate and other action, and to assure that such Warrant Shares
when issued upon exercise of the Warrants, as the case may be, will
be validly issued, fully paid and non-assessable.
Section 5.4 - Market for Common Stock
. The Company shall use its
commercially reasonable efforts to satisfy the requirements within
the control of the Company for its Common Stock to be quoted on the
OTCBB or, at the option of the Company, listed on a recognized
stock exchange.
Section 5.5 - Best Efforts
. Subject to the terms and
conditions herein provided, the Company and Purchasers agree to use
their best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and
make effective the Transactions.
Section 5.6 - Public Announcements
. Purchasers shall not issue any
press release or otherwise make any public statements with respect
to the existence of this Agreement or the Transactions, and the
Company shall issue such press releases or make such public
statements as may be required by law.
Section
5.7 - Restrictive Legends
. Unless counsel to the Company
shall have advised the Company that such legend is no longer
needed, each certificate evidencing the Securities shall bear a
legend in substantially the following form:
"THE SECURITIES EVIDENCED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW, AND SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS THE SAME ARE REGISTERED AND QUALIFIED IN ACCORDANCE WITH
APPLICABLE STATE AND FEDERAL SECURITIES LAWS, OR IN THE OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY SUCH REGISTRATION
AND QUALIFICATION ARE NOT REQUIRED."
Section 5.
