FOOTHILLS RESOURCES, INC. FORM OF SECURITIES PURCHASE AGREEMENT
EXHIBIT
10.9
FOOTHILLS
RESOURCES, INC.
FORM
OF SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “Agreement”) is dated as of September 8,
2006, by and among Foothills Resources, Inc., a Nevada corporation (the
“Company”), each institutional investor listed on Schedule
1
hereto
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Inc., a Texas corporation (the “Placement Agent”),
individually and as agent and attorney-in-fact for each retail investor listed
on Schedule
2
hereto
(each such institutional investor, retail investor and the Placement Agent
referred to herein as a “Purchaser,” and collectively, the
“Purchasers”).
WHEREAS,
the Company desires to issue and sell to the Purchasers, and the Purchasers
desire to purchase from the Company, such number of units of its securities
(the
“Units”) as is listed next to each Purchaser’s name on Schedule
1
and
Schedule
2
hereto,
at a purchase price of $2.25 per Unit, each Unit comprising one share of its
authorized but unissued shares of common stock, $0.001 par value per share,
of
the Company (including any securities into which or for which such shares may
be
exchanged for, or converted into, pursuant to any stock dividend, stock split,
stock combination, recapitalization, reclassification, reorganization or other
similar event the “Common Stock”), and a warrant (“Warrant”) to purchase one
half (½) of
a
share of Common Stock at an exercise price equal to $2.75 per whole share,
in
substantially the form attached to the Confidential Private Placement Memorandum
distributed to each such Purchaser (the “PPM”), for an aggregate purchase price
of up to $30,000,000 (the “Aggregate Proceeds”) on the terms and subject to the
conditions set forth in this Agreement and, for the retail Purchasers listed
on
Schedule
2,
the
Subscription Agreement, dated as of even date herewith, in substantially the
form attached to the PPM (the “Subscription Agreement”);
WHEREAS,
prior to entering into this Agreement, the Company, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
and Signature Bank, as Escrow Agent (the “Escrow Agent”), have entered into an
Escrow Agreement dated as of July 24, 2006 and attached hereto as Exhibit
A
(the
“Escrow Agreement”), pursuant to which the Company has deposited any Aggregate
Proceeds received by the Company into an escrow account (the “Escrow Account”)
for release to the Company subject to the conditions
therein contained;
WHEREAS,
simultaneously with entering into this Agreement, the Company and the Purchasers
are entering into that certain Registration Rights Agreement, dated as of the
date hereof and attached as an exhibit to the PPM (the “Registration Rights
Agreement”), pursuant to which the Company shall register for resale the
Securities (as defined below) on the terms set forth therein; and
WHEREAS,
simultaneously with the Closing (as defined herein), the Company and TARH
E&P Holdings L.P. (“TARH”) shall close on the Company’s acquisition of
TARH’s interests in four oil fields, including the Goose Creek Field and the
East Goose Creek Field, both located in ▇▇▇▇▇▇ County, Texas, the Cleveland
Field located in Liberty County, Texas, and the Saratoga Field located in ▇▇▇▇▇▇
County, Texas pursuant to two Purchase and Sale Agreements dated as of June
21,
2006, by and between Foothills Texas, Inc. and TARH.
NOW
THEREFORE, in consideration of the mutual agreements, representations,
warranties and covenants herein contained, the parties hereto agree as follows:
1. Definitions.
As used
in this Agreement, the following terms shall have the following respective
meanings:
(a) “Affiliate”
means
any Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, a Person, as such
terms are used and construed under Rule 144. With respect to any Purchaser,
any
investment fund or managed account that is managed on a discretionary basis
by
the same investment manager as such Purchaser will be deemed an Affiliate of
such Purchaser.
(b) “Board”
means
the board of directors of the Company.
(c) “Business
Day”
means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday or a day on which banking institutions in the State of New York are
authorized or required by law or other governmental action to close.
(d) “Closing”
means
the purchase and sale of the Securities hereunder.
(e) “Closing
Date”
means
the date of this Agreement, or such other time as the Closing shall occur in
accordance with the agreement of the parties.
(f) “Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and all of the rules and
regulations promulgated thereunder.
(g) “GAAP” means
generally accepted accounting principles as in effect from time to time in
the
United States of America.
(h) “Mandatory
Effective Date”
means
the earlier of (i) the date that is one hundred twenty (120) days after the
Closing Date or (ii) the date that the registration statement required to be
filed by the Company under the Securities Act pursuant to the terms of the
Registration Rights Agreement becomes effective.
(i) “Material
Adverse Effect”
means
any event, occurrence or development that has had, or that could reasonably
be
expected to have, individually or in the aggregate with other events,
occurrences or developments, a material adverse effect on the assets,
liabilities (contingent or otherwise), business, affairs, operations, prospects
or condition (financial or otherwise) of the Company.
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(j) “Person”
(whether or not capitalized) means an individual, entity, partnership, limited
liability company, corporation, association, trust, joint venture,
unincorporated organization, and any government, governmental department or
agency or political subdivision thereof.
(k) “Placement
Agent”
means
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
(l) “Rule
144”
means
Rule 144 as promulgated under the Securities Act and any successor or substitute
rule, law or provision.
(m) “SEC”
means
the Securities and Exchange Commission.
(n) “Securities”
means
the Shares, the Warrants and Warrant Shares.
(o) “Securities
Act”
means
the Securities Act of 1933, as amended, and all of the rules and regulations
promulgated thereunder.
(p) “Shares”
means
the shares of Common Stock issued and sold by the Company to the Purchasers
hereunder.
(q) “TARH
Acquisition”
means
the acquisition, from TARH, of TARH’s interests in four oil fields, including
the Goose Creek Field and the East Goose Creek Field, both located in ▇▇▇▇▇▇
County, Texas, the Cleveland Field located in Liberty County, Texas, and the
Saratoga Field located in ▇▇▇▇▇▇ County, Texas (collectively the “TARH
Interests”) pursuant to two Purchase and Sale Agreements dated as of June 21,
2006, by and between Foothills Texas, Inc. and TARH.
(r) “Trading
Market”
means
any of the New York Stock Exchange, the American Stock Exchange, the NASDAQ
SmallCap Market or the NASD Over-The-Counter Bulletin Board (the “OTC Bulletin
Board”) on which the Common Stock is or will be listed or quoted for trading on
the date in question.
(s) “Transaction
Documents”
means,
collectively, this Agreement, the Registration Rights Agreement, the
Subscription Agreement, the Warrant and the PPM, delivered to the Purchasers
in
connection with this Agreement.
(t) “Transfer
Agent Instructions”
means
the Irrevocable Transfer Agent Instructions, in substantially the form of
Exhibit
C,
executed by the Company and delivered to and acknowledged in writing by the
Company’s transfer agent.
(u) “Unit
Price”
means
$2.25 per Unit.
(v) “Warrant
Shares”
means
the shares of Common Stock issuable upon exercise of or otherwise pursuant
to
the Warrants.
2. Purchase
and Sale of Shares and Warrants.
3
2.1 Purchase
and Sale of Shares and Warrants.
Subject
to and upon the terms and conditions set forth in this Agreement, the Company
agrees to issue and sell to each Purchaser, and each Purchaser hereby agrees,
severally and not jointly, (i) to purchase from the Company, at the Closing,
the
number of Units representing the number of Shares and Warrants to acquire
Warrant Shares set forth opposite such Purchaser’s name on Schedule
1
and
Schedule 2
hereto,
at the Unit Price and (ii) to pay the purchase price set forth opposite such
Purchaser’s name on Schedule 1
and
Schedule
2
hereto.
The Purchasers and the Company agree that the Company may sell to other
investors capital stock or other securities of the Company in offerings (the
“Other Offerings”) concurrent with the sale by the Company to the Purchasers
hereunder.
2.2 Closing.
Subject
to and upon the terms and conditions set forth in this Agreement, the Closing
shall take place at the offices of McGuireWoods LLP, 1345 Avenue of the
Americas, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, on the Closing Date, or on such
other date and at such time as may be agreed upon between the Purchasers, on
the
one hand, and the Company, on the other hand. At the Closing, the Company shall
deliver to the Escrow Agent, on behalf of each Purchaser or at the direction
of
any Purchaser, or to such Purchaser directly, a single stock certificate and
a
Warrant (or more, if reasonably requested by the Purchaser), registered in
the
name of such Purchaser or such Purchaser’s designee, representing the number of
Shares and Warrants, respectively, purchased by such Purchaser against payment
of the purchase price by wire transfer of immediately available funds to the
Escrow Account designated by the Escrow Agent.
2.3 Placement
Agent’s Fee.
Upon
the release of funds from the Escrow Account in accordance with the Escrow
Agreement, the Company shall pay to the Placement Agent a placement agent fee
in
connection with the transactions contemplated hereunder in the amount of seven
percent (7%) of the Aggregate Proceeds attributable to any Purchaser other
than
▇▇▇▇▇▇▇,
Sachs & Co. or any affiliate thereof,
by wire
transfer in accordance with the engagement letter by and between the Company
and
the Placement Agent.
3. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to each Purchaser, as of the date hereof
and as of the Closing Date as follows:
3.1 Incorporation.
Each of
the Company and the Subsidiaries (as defined in Section 3.19 below) is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of the State of Nevada (or such other applicable
jurisdiction of incorporation or formation as is indicated on Schedule
3.19),
and is
in good standing as a foreign corporation or other entity in each jurisdiction
in which the nature of the business conducted or the character of the property
owned by it makes such qualification necessary, except where the failure to
be
so qualified or in good standing, as the case may be, would not result in a
Material Adverse Effect. Each of the Company and the Subsidiaries has all
requisite corporate power and authority to own its properties, to carry on
its
business as now conducted, to enter into the Transaction Documents to which
it
is a party and to carry out the transactions contemplated hereby and thereby.
Neither the Company nor any of the Subsidiaries is in violation of any of the
provisions of its Certificate or Articles of Incorporation, as the case may
be
(or other charter document) or By-laws.
4
3.2 Capitalization.
Immediately prior to the consummation of the transactions to be effected at
the
Closing, the authorized capital stock of the Company consists of (a) 100,000,000
shares of Common Stock, of which 48,582,104 shares
are issued and outstanding as of the date hereof, and (b) 10,000,000 shares
of
Preferred Stock, of which no shares are issued and outstanding as of the date
hereof. Immediately after the consummation of the sale of the Units to the
Purchasers hereunder, and the issuance of 1,605,345 shares of Common Stock
in
the TARH Acquisition, assuming all 13,333,333 Units
being offered for sale are purchased by the Purchasers, and assuming no
outstanding warrants or options to acquire Common Stock are exercised before
the
Closing Date, there will be 63,520,782 shares of Common Stock issued and
outstanding. After giving effect to the transactions contemplated hereby, all
shares of the Company’s issued and outstanding capital stock have been duly
authorized, are validly issued and outstanding, are fully paid and
nonassessable, have been issued in compliance with all applicable securities
laws, were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities, and conform in all
material respects to the description thereof contained in the SEC Documents
(as
defined in Section 3.7). Except as set forth in Schedule
3.2
to the
Disclosure Schedule attached hereto as Schedule 3
(the
“Disclosure Schedule”), there are no existing options, warrants, calls, puts,
preemptive (or similar) rights, subscriptions or other rights, agreements,
arrangements or commitments of any character obligating the Company to issue,
transfer or sell, or cause to be issued, transferred or sold, any shares of
the
capital stock of the Company or other equity interests in the Company or any
securities convertible into or exchangeable for such shares of capital stock
or
other equity interests, including the Securities, and there are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of its capital stock or other equity interests. The issue
and
sale of the Securities will not obligate the Company to issue or sell, pursuant
to any pre-emptive right or otherwise, shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in
a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. With respect to each Subsidiary,
(i) all of the issued and outstanding shares of the Subsidiary’s capital stock
have been duly authorized, are validly issued and outstanding, are fully paid
and nonassessable, have been issued in compliance with applicable securities
laws, were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities, and (ii) there are no
outstanding options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into,
or
any contracts or commitments to issue or sell, shares of the Subsidiary’s
capital stock or any such options, rights, convertible securities or
obligations. There are no agreements of which the Company is aware, other than
the Transaction Documents and other than as set forth in Schedule
3.2
to the
Disclosure Schedule, relating to the voting of the Company’s voting securities
or restrictions on the transfer of the Company’s capital stock. The Company has
reserved and set aside from its duly authorized capital stock a sufficient
number of shares to satisfy in full the Company’s obligations under these
options, warrants and other rights to acquire shares of capital stock described
on Schedule
3.2
of the
Disclosure Schedule.
5
3.3 Registration
Rights.
Except
as set forth on Schedule
3.3
to the
Disclosure Schedule, the Company has not granted or agreed to grant to any
Person any right (including “piggy-back” and demand registration rights) to have
any capital stock or other securities of the Company registered with the SEC
or
any other government authority.
3.4 Authorization.
All
corporate action on the part of the Company, its officers and directors and
its
stockholders necessary for the authorization, execution, delivery and
performance of the Transaction Documents and the consummation of the
transactions (including, without limitation, the sale and delivery of the Shares
and Warrants and upon exercise of the Warrants, the issuance of the Warrant
Shares) contemplated herein and therein has been taken. When executed and
delivered by the Company, each of the Transaction Documents shall constitute
a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights
generally and by general equitable principles. The Company has all requisite
corporate power and authority to enter into the Transaction Documents and to
carry out and perform its obligations under their respective terms.
3.5 Valid
Issuance of the Shares, the Warrants and the Warrant Shares.
The
Shares and Warrants have been duly authorized and will be validly issued, fully
paid and nonassessable and not subject to any encumbrances, preemptive rights
or
any other similar contractual rights of the stockholders of the Company or
any
other Person. The Warrant Shares have been duly authorized and when issued
and
paid for in accordance with its terms will be validly issued, fully-paid and
non-assessable and not subject to any encumbrances, preemptive rights or any
other similar contractual rights of the stockholders of the Company or any
other
Person. The Company has reserved from its duly authorized capital stock the
number of shares of Common Stock issuable upon execution of this Agreement
and
upon proper exercise of the Warrants.
3.6 Financial
Statements.
The
Company has made available to the Purchasers true and complete copies of the
unaudited consolidated balance sheet of the Company and the Subsidiaries as
of
June 30, 2006 (the “Balance Sheet”) and the related consolidated income
statement, consolidated statement of cash flows and consolidated statement
of
stockholders’ equity of the Company for the six (6) months then ended. The
Company has made available to the Purchasers true and complete copies of the
audited consolidated balance sheet of the Company and the Subsidiaries as of
December 31, 2005 and the related financial statements of the Company for the
twelve (12) months then ended. All of the financial statements described above
are hereinafter referred to, collectively, as the “Financial Statements.” The
Financial Statements have been prepared in accordance with GAAP applied on
a
consistent basis during the periods covered thereby, subject, to normal year-end
adjustments (which individually and in the aggregate are not material) and
to
the absence of footnotes thereto, and present fairly, in all material respects,
the financial position of the Company and the Subsidiaries and the results
of
operations and cash flows as of the date and for the periods indicated therein.
The firm of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Chartered Accountants, which has expressed its
opinion with respect to the consolidated financial statements included in the
Company’s Annual Report on Form 10-KSB/A for the fiscal year ended December 31,
2005, is an independent accountant as required by the Exchange Act and the
rules
and regulations promulgated thereunder.
6
3.7 SEC
Documents.
(a) The
Company has filed all reports (the “SEC Documents”) required to be filed by it
under the Securities Act and the Exchange Act on a timely basis or has timely
filed for a valid extension of such time of filing and has filed any such SEC
Documents prior to the expiration of any such extension. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of
the
SEC promulgated thereunder, and none of the SEC Documents, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with thereto as in effect
at the time of filing. Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto, and fairly present in all material respects the financial position
of
the Company and its Subsidiaries as of and for the dates thereof and the results
of operations and cash flows for the periods then ended, subject, in the case
of
unaudited statements, to normal, immaterial, year-end audit adjustments. All
material agreements to which the Company is a party or to which the property
or
assets of the Company are subject are included as part of or specifically
identified in the SEC Documents to the extent required by the rules and
regulations of the SEC as in effect at the time of filing. The Company has
prepared and filed with the SEC all filings and reports required by the
Securities Act and the Exchange Act to make the Company’s filings and reports
current in all respects.
3.8 Consents.
Except
for (a) the filing and effectiveness of any registration statement required
to
be filed by the Company under the Securities Act pursuant to the terms of the
Registration Rights Agreement and (b) any required state “blue sky” law filings
in connection with the transactions contemplated under the Transaction
Documents, all consents, approvals, orders and authorizations required on the
part of the Company in connection with the execution or delivery of, or the
performance of the obligations under the Transaction Documents, and the
consummation of the transactions contemplated herein and therein, have been
obtained and will be effective as of the date hereof. The execution and delivery
by the Company of the Transaction Documents, the consummation of the
transactions contemplated herein and therein, and the issuance of the
Securities, do not require the consent or approval of the stockholders of,
or
any lender to, the Company.
3.9 No
Conflict; Compliance With Laws.
7
(a) The
execution, delivery and performance by the Company of the Transaction Documents,
and the consummation of the transactions contemplated hereby and thereby,
including the issuance of the Securities, do not and will not (i) conflict
with
or violate any provision of the Articles of Incorporation (or other charter
documents) or By-laws of the Company or any of the Subsidiaries, (ii) breach,
conflict with or result in any violation of or default (or an event that with
notice or lapse of time or both would become a default) or cause the creation
of
any lien or encumbrance upon any assets of the Company under, or give rise
to a
right of termination, amendment, acceleration or cancellation (with or without
notice or lapse of time, or both) of any obligation, contract, commitment,
lease, agreement, mortgage, note, bond, indenture or other instrument or
obligation to which the Company or any of the Subsidiaries is a party or by
which they or any of their properties or assets are bound, except in each case
to the extent such breach, conflict, violation, default, termination, amendment,
acceleration or cancellation does not, and could not reasonably be expected
to
have, individually or in the aggregate, a Material Adverse Effect, (iii) breach,
conflict with or result in any violation of or default (or an event that with
notice or lapse of time or both could become a default) of any statute, law,
rule, regulation, order, ordinance or restriction applicable to the Company,
the
Subsidiaries or any of their properties or assets, or any judgment, writ,
injunction or decree of any court, judicial or quasi-judicial tribunal
applicable to the Company, the Subsidiaries or any of their properties or
assets, or (iv) require from the Company any notice to, declaration or filing
with, or consent or approval of any governmental authority or other third party
other than pursuant to federal or state securities or blue sky
laws.
(b) Neither
the Company nor any of the Subsidiaries (i) is in default under or in violation
of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any of the
Subsidiaries), nor has the Company or any of the Subsidiaries received written
notice of a claim that it is in default under or that it is in violation of,
any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties or assets is bound
(whether or not such default or violation has been waived), or (ii) is in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws relating
to taxes, environmental protection, occupational health and safety, product
quality and safety and employment and labor matters, except in each case as
does
not, and could not, reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(c) Neither
the Company nor its Subsidiaries is conducting its business in violation of
any
applicable law, rule or regulation of the jurisdictions in which it is
conducting its business, including, without limitation, any applicable
Environmental Laws (as defined below) or regulations, except any violations
which would not have a Material Adverse Effect.
3.10 Brokers
or Finders.
Except
as provided in Section 2.3, neither the Company nor any of the Subsidiaries
owes
any fee to any broker or finder in connection with the sale of Securities to
the
Purchasers hereunder, and neither the Company nor any of the Subsidiaries has
incurred, or shall incur, directly or indirectly, any liability for any
brokerage or finders’ fees or agents’ commissions or any similar charges in
connection with the sale of Securities to Purchasers hereunder.
3.11 OTC
Bulletin Board.
The
Company’s Common Stock is currently quoted on the OTC Bulletin Board.
8
3.12 No
Actions.
Except
as described in the SEC Documents, there are no legal or governmental actions,
suits or proceedings pending and, to the Company’s knowledge, there are no
governmental or regulatory inquiries or investigations, nor are there any legal
or governmental threatened actions, suits, claims, proceedings or investigations
against or involving the Company or any of the Subsidiaries.
3.13 No
Undisclosed Liabilities; Indebtedness.
Since
the date of the Balance Sheet, the Company and the Subsidiaries have incurred
no
liabilities or obligations, whether known or unknown, asserted or unasserted,
fixed or contingent, accrued or unaccrued, matured or unmatured, liquidated
or
unliquidated, or otherwise, except for liabilities or obligations that,
individually or in the aggregate, do not or would not reasonably be expected
to
have a Material Adverse Effect and other than liabilities and obligations
arising in the ordinary course of business. Except for indebtedness reflected
in
the Balance Sheet, the Company has no indebtedness outstanding as of the date
hereof. The Company is not in default with respect to any outstanding
indebtedness or any instrument relating thereto.
3.14 Environmental.
Except
as disclosed in Schedule
3.14
of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is in
violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to
the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous
or
toxic substances (collectively, “Environmental Laws”), owns or operates any real
property contaminated with any substance that is subject to any Environmental
Laws, is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, or is subject to any claim relating to any Environmental
Laws, which violation, contamination, liability or claim would individually
or
in the aggregate have a Material Adverse Effect; and the Company is not aware
of
any pending investigation which might lead to such a claim.
3.15 Contracts.
There
is no material contract or agreement required by the Exchange Act and the rules
or regulations promulgated thereunder to be described in or filed as an exhibit
to the SEC Documents that the Company was required to file with the SEC pursuant
to the reporting requirements which is not described or filed therein as
required. All contracts, agreements, instruments and other documents filed
as an
exhibit to the SEC Documents are legal, valid, and binding obligations and
in
full force and effect and are enforceable by the Company in accordance with
their respective terms as of the date hereof, except as such may be limited
by
bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights
generally and by general equitable principles. As of the date hereof, neither
the Company nor, to the Company’s knowledge, any other party is in breach of or
default under any of such contracts, agreements, instruments or documents,
except for such failures to be in full force and effect and such breaches or
defaults that would not reasonably be expected to have a Material Adverse
Effect.
3.16 Title
to Assets.
The
Company and its Subsidiaries have (1) good and indefeasible title to all of
their owned interests in the oil and gas properties described in the SEC
Documents, (2) good and indefeasible title in fee simple to all other real
property owned by the Company or any of its Subsidiaries and (3) good title
to
all personal property owned by the Company or any of its Subsidiaries, in each
case, free and clear of all liens, encumbrances and defects, except (i) as
described in Schedule
3.16
to the
Disclosure Schedule, (ii) liens securing taxes and other governmental charges
not at the time delinquent or thereafter payable without penalty or being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books, or inchoate and unperfected liens securing claims of materialmen,
mechanics and similar persons, arising in the ordinary course of business for
amounts not overdue or being diligently contested in good faith by appropriate
proceedings, (iii) liens and encumbrances under oil and gas leases, options
to
lease, operating agreements, utilization and pooling agreements, participation
and drilling concessions agreements and gas sales contracts, securing payment
of
amounts not yet due and payable and of a scope and nature customary in the
oil
and gas industry and (iv) liens, encumbrances and defects that do not,
individually or in the aggregate, materially affect the value of such
properties, taken as a whole, or materially interfere with the use made or
proposed to be made of such properties, taken as a whole, by the Company or
its
Subsidiaries; except as described in Schedule
3.16
in the
Disclosure Schedule, the leases, options to lease, drilling concessions or
other
arrangements held by the Company and its Subsidiaries reflect in all material
respects the right of the Company and its Subsidiaries to explore the unexplored
and undeveloped acreage described in the SEC Documents, and the care taken
by
the Company and its Subsidiaries with respect to acquiring or otherwise
procuring such leases, options to lease, drilling concessions and other
arrangements was generally consistent with standard industry practices for
acquiring or procuring leases to explore acreage for hydrocarbons; and any
real
property and buildings held under lease by the Company and its Subsidiaries
are
held by them under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made or proposed to be
made of such real property and buildings by the Company or its Subsidiaries
with
which the Company and the Subsidiaries are in compliance in all material
respects.
9
3.17 Labor
Relations.
No
labor or employment dispute exists or, to the knowledge of the Company, is
imminent or threatened, with respect to any of the employees or consultants
of
the Company that has, or could reasonably be expected to have, individually
or
in the aggregate, a Material Adverse Effect.
3.18 Intellectual
Property.
The
Company is the sole and exclusive owner of, or has the exclusive right to use,
all right, title and interest in and to all material foreign and domestic
patents, patent rights, trademarks, service marks, trade names, brands,
copyrights (whether or not registered and, if applicable, including pending
applications for registration) and other proprietary rights or information,
owned or used by the Company (collectively, the “Rights”), and in and to each
material invention, software, trade secret, and technology used by the Company
or any of the Subsidiaries (the Rights and such other items, the
“Intellectual Property”),
and the Company owns and has the right to use the same, free and clear of any
claim or conflict with the rights of others (subject to the provisions of any
applicable license agreement). Except as set forth on Schedule
3.18
to the
Disclosure Schedule, there have been no written claims made against the Company
or any of the Subsidiaries asserting the invalidity, abuse, misuse, or
unenforceability of any of the Intellectual Property, and, to the Company’s
knowledge, there are no reasonable grounds for any such claims.
10
3.19 Subsidiaries;
Joint Ventures.
Except
for the subsidiaries listed on Schedule
3.19
to the
Disclosure Schedule (the “Subsidiaries”), the Company has no subsidiaries and
(i) does not otherwise own or control, directly or indirectly, any other Person
and (ii) does not hold equity interests, directly or indirectly, in any other
Person. Except as described in the SEC Documents or on Schedule
3.19,
the
Company is not a participant in any joint venture, partnership, or similar
arrangement material to its business.
3.20 Taxes.
The
Company and each of the Subsidiaries has filed (or has had filed on its behalf),
will timely file or will cause to be timely filed, or has timely filed for
an
extension of the time to file, all material Tax Returns (as defined below)
required by applicable law to be filed by it or them prior to or as of the
date
hereof, and such Tax Returns are, or will be at the time of filing, true,
correct and complete in all material respects. Each of the Company and the
Subsidiaries has paid (or has had paid on its behalf) or, where payment is
not
yet due, has established (or has had established on its behalf and for its
sole
benefit and recourse) or will establish or cause to be established in accordance
with GAAP on or before the date hereof an adequate accrual for the payment
of,
all material Taxes (as defined below) due with respect to any period ending
prior to or as of the date hereof. “Taxes” shall mean any and all taxes,
charges, fees, levies or other assessments, including income, gross receipts,
excise, real or personal property, sales, withholding, social security,
retirement, unemployment, occupation, use, goods and services, license, value
added, capital, net worth, payroll, profits, franchise, transfer and recording
taxes, fees and charges, and any other taxes, assessment or similar charges
imposed by the Internal Revenue Service or any taxing authority (whether state,
county, local or foreign) (each, a “Taxing Authority”), including any interest,
fines, penalties or additional amounts attributable to or imposed upon any
such
taxes or other assessments. “Tax Return” shall mean any report, return,
document, declaration or other information or filing required to be supplied
to
any Taxing Authority, including information returns, any documents with respect
to accompanying payments of estimated Taxes, or with respect to or accompanying
requests for extensions of time in which to file any such return, report,
document, declaration or other information. There are no claims or assessments
pending against the Company or any of the Subsidiaries for any material alleged
deficiency in any Tax, and neither the Company nor any of the Subsidiaries
has
been notified of any material proposed Tax claims or assessments against the
Company or any of the Subsidiaries. No Tax Return of the Company or any of
the
Subsidiaries is or has been the subject of an examination by a Taxing Authority.
Each of the Company and the Subsidiaries has withheld from each payment made
to
any of its past or present employees, officers and directors, and any other
person, the amount of all material Taxes and other deductions required to be
withheld therefrom and paid the same to the proper Taxing Authority within
the
time required by law.
3.21 Transfer
Taxes.
On the
Closing Date, all stock transfer or other Taxes (other than income taxes) which
are required to be paid in connection with the sale and transfer of the Shares
to the Purchasers hereunder, will be, or will have been, fully paid or provided
for by the Company and all laws imposing such taxes will be or will have been
complied with.
3.22 Pensions
and Benefits.
11
(a) Schedule
3.22(a)
to the
Disclosure Schedule contains a true and complete list of each “employee benefit
plan” within the meaning of Section 3(3) of the United States Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), including, without
limitation, multiemployer plans within the meaning of Section 3(37) of ERISA,
and all retirement, profit sharing, stock option, stock bonus, stock purchase,
severance, fringe benefit, deferred compensation, and other employee benefit
programs, plans, or arrangements, whether or not subject to ERISA, under which
(i) any current or former directors, officers, employees or consultants of
the
Company has any present or future right to benefits and which are contributed
to, sponsored by or maintained by the Company or any of the Subsidiaries, or
(ii) the Company or any of the Subsidiaries has any present or future liability.
All such programs, plans, or arrangements shall be collectively referred to
as
the “Company Plans.” Each Company Plan is included as part of or specifically
identified in the SEC Documents to the extent required by the rules and
regulations of the SEC as in effect at the time of filing.
(b) (i)
Each
Company Plan has been established and administered in all material respects
in
accordance with its terms and in compliance with the applicable provisions
of
ERISA, the Internal Revenue Code of 1986, as amended (the “Code”), and other
applicable laws, rules and regulations; (ii) each Company Plan which is intended
to be qualified within the meaning of Section 401(a) of the Code is so qualified
and has received a favorable determination letter as to its qualification (or
if
maintained pursuant to a prototype form of instrument the sponsor thereof has
received a favorable opinion letter as to its qualification), and to the
Company’s knowledge nothing has occurred, whether by action or failure to act,
that could reasonably be expected to cause the loss of such qualification;
and
(iii) no Company Plan provides retiree health or life insurance benefits
(whether or not insured), and neither the Company nor the Subsidiaries have
any
obligations to provide any such retiree benefits other than as required pursuant
to Section 4980B of the Code or other applicable law.
(c) No
Company Plan is a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA
or a plan subject to the minimum funding requirements of Section 302 or ERISA
or
Section 412 of the Code or Title IV of ERISA, and neither the Company, the
Subsidiaries, nor any member of their Controlled Group has any liability or
obligation in respect of, any such multiemployer plan or plan. With respect
to
any Company Plan and to the Company’s knowledge, (i) no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are pending
or
threatened, and (ii) no administrative investigation, audit or other
administrative proceeding by the Department of Labor, the Pension Benefit
Guaranty Corporation, the Internal Revenue Service or other governmental
agencies are pending, threatened or in progress.
3.23 Private
Placement; Communications with Purchasers; Press Releases.
(a) Assuming
the correctness of the representations and warranties of the Purchasers set
forth in Section 4 hereof, the offer, issuance, sale and delivery of the
Securities to the Purchasers as contemplated hereby is exempt from the
registration requirements of the Securities Act and the qualification or
registration provisions of applicable state securities laws.
12
(b) Neither
the Company nor any person acting on the Company’s behalf has sold or offered to
sell or solicited any offer to buy the Securities by means of any form of
general solicitation or advertising. None of the Company, any of its Affiliates
or any person acting on the Company’s behalf has taken, directly or indirectly,
at any time within the past six (6) months, and will not hereafter take, any
action independent of the Placement Agent, to sell, offer for sale or solicit
any offers to buy any security under circumstances that would (i) eliminate
the availability of the exemption from registration under Regulation D under
the
Securities Act in connection with the sale or issuance of the Securities, as
contemplated hereby or (ii) cause the offering or issuance of the Securities
pursuant to any of the Transaction Documents to be integrated with prior
offerings by the Company for purposes of any applicable law, regulation or
stockholder approval provisions. None of the Company or any of the Subsidiaries
is a United States real property holding corporation within the meaning of
the
Foreign Investment in Real Property Tax Act of 1980. No consent, license,
permit, waiver, approval or authorization of, or designation, declaration,
registration or filing with, the SEC or any state securities regulatory
authority is required in connection with the offer, sale, issuance or delivery
of the Securities other than the filing of Form D, and a Current Report on
Form
8-K, with the SEC. The Company does not have any agreement or understanding
with
any Purchaser with respect to the transactions contemplated by this Agreement,
the Registration Rights Agreement and the Escrow Agreement, other than as
specified in this Agreement, the Registration Rights Agreement or the Escrow
Agreement.
(c) The
press
releases disseminated by the Company during the twelve months preceding the
date
of this Agreement taken as a whole do not contain any untrue statement of
material fact or omit to state a material fact required to be stated therein
or
necessary in order to make the statements therein, in light of the circumstances
under which they were made and when made, not misleading.
3.24 Material
Changes.
Except
as set forth on Schedule
3.24
to the
Disclosure Schedule, since the date of the Balance Sheet, the Company has
conducted its business only in the ordinary course, consistent with past
practice, and since such date there has not occurred: (i) any event that
has had or is expected to have a Material Adverse Effect on the Company;
(ii) any amendments or changes in the charter documents or by-laws of the
Company or the Subsidiaries; (iii) any: (A) incurrence, assumption or guarantee
by the Company or the Subsidiaries of any debt for borrowed money other than
(1)
equipment leases made in the ordinary course of business, consistent with past
practice and (2) any such incurrence, assumption or guarantee with respect
to an
amount of $50,000 or more that has been disclosed in the SEC Documents; (B)
issuance or sale of any securities convertible into or exchangeable for
securities of the Company other than to directors, employees and consultants
pursuant to existing equity compensation or stock purchase plans of the Company;
(C) issuance or sale of options or other rights to acquire from the Company
or
the Subsidiaries, directly or indirectly, securities of the Company or any
securities convertible into or exchangeable for any such securities, other
than
options issued to directors, employees and consultants in the ordinary course
of
business, consistent with past practice; (D) issuance or sale of any stock,
bond
or other corporate security other than to directors, employees and consultants
pursuant to existing equity compensation or stock purchase plans of the Company;
(E) acquisition of any assets, or sale, assignment or transfer of any of its
intangible assets, except in the ordinary course of business, consistent with
past practice, or cancellation of any debt or claim except in the ordinary
course of business, consistent with past practice; (F) waiver of any right
of
substantial value whether or not in the ordinary course of business; (G)
material change in officer compensation, except in the ordinary course of
business and consistent with past practice; or (H) other commitment (contingent
or otherwise) to do any of the foregoing; (iv) loss, destruction or damage
to
any property of the Company, whether or not insured; (v) any creation,
sufferance or assumption by the Company or any of the Subsidiaries of any lien
on any asset or any making of any loan, advance or capital contribution to
or
investment in any Person, in an aggregate amount which exceeds $50,000
outstanding at any time; (vi) any entry into, amendment of, relinquishment,
termination or non-renewal by the Company or the Subsidiaries of any material
contract, license, lease, transaction, commitment or other right or obligation,
other than in the ordinary course of business, consistent with past practice;
(vii) any transfer or grant of a right with respect to the intellectual property
rights owned or licensed by the Company or the Subsidiaries, except as among
the
Company and the Subsidiaries; or (viii) any commitment (contingent or otherwise)
to do any of the foregoing.
13
3.25 Regulatory
Permits.
The
Company and the Subsidiaries possess all certificates, approvals, authorizations
and permits issued by the appropriate federal, state, local or foreign
governmental or regulatory authorities necessary to conduct their businesses
as
described in the SEC Documents, except where the failure to possess such permits
does not, and could not have, individually or in the aggregate, a Material
Adverse Effect (the “Material Permits”), and all such permits, licenses, orders,
franchises and other rights and privileges are in full force and effect and,
to
the knowledge of the Company, no suspension or cancellation of any of them
is
threatened, and none of such permits, licenses, orders, franchises or other
rights and privileges will be affected by the consummation of the transactions
contemplated by the Transaction Documents, and the Company has not received
any
written notice of proceedings relating to the revocation or modification of
any
Material Permits except as described in the SEC Documents.
3.26 Transactions
with Affiliates and Employees.
Except
as set forth in the SEC Documents or on Schedule
3.26
to the
Disclosure Schedule, none of the officers or directors of the Company and,
to
the knowledge of the Company, none of the employees of the Company, is presently
a party to any transaction or agreement with the Company (other than for
services as employees, officers and directors) exceeding $60,000, including
any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or
from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner. There is no transaction, arrangement, or other
relationship between the Company and an unconsolidated or other off balance
sheet entity that is required to be disclosed by the Company in the SEC
Documents and is not so disclosed.
3.27 Insurance.
The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary for the business in which the Company and the Subsidiaries are
engaged. The Company has no reason to believe that it will not be able to renew
existing insurance coverage for itself and the Subsidiaries as and when such
coverage expires or to obtain similar coverage from similar insurers as may
be
necessary or appropriate to continue business.
14
3.28 Solvency.
Based
on the consolidated financial condition of the Company and the Subsidiaries
as
of the date hereof, (i) the fair saleable value of the Company’s assets exceeds
the amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known and contingent
liabilities) as they mature; (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business for the current fiscal
year
as now conducted and as proposed to be conducted, including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debts when such amounts
are required to be paid. The Company has no present intention to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt).
3.29 Internal
Accounting Controls.
Except
as disclosed in the SEC Documents, the Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with United States generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorizations, (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken
with respect to any differences, and (v) the Company is otherwise in compliance
with the Securities Act, the Exchange Act and all other rules and regulations
promulgated by the SEC and applicable to the Company, including such rules
and
regulations to implement the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended.
3.30 Investment
Company.
The
Company is not an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for an investment company, within the
meaning of the Investment Company Act of 1940, as amended.
3.31 Questionable
Payments.
Neither
the Company nor, to the Company’s knowledge, any of its Subsidiaries or current
or former stockholders, directors, officers, employees, agents or other persons
acting on behalf of the Company, has on behalf of the Company or in connection
with its businesses (a) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity;
(b) made any direct or indirect unlawful payments to any governmental officials
or employees from corporate funds; (c) established or maintained any unlawful
or
unrecorded fund of corporate monies or other assets; (d) made any false or
fictitious entries on the books and records of the Company; or (e) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment of any nature.
15
3.32 Changes
in Governmental or Political Climates.
To the
Company’s knowledge, there have not been any changes
in laws and regulations, including those related to taxes, royalty rates,
permitted production rates, import, export and use of products, and
environmental protection, expropriation or reduction of entitlements to produce
oil and natural gas, or refusal to extend exploration, production or development
contracts, or any proposals for the foregoing, which would have a Material
Adverse Effect on the Company in any of the locations where the Company conducts
its business or in which the assets relating to the TARH Acquisition are located
or the business of the TARH Acquisition is conducted.
3.33 Price
of Common Stock.
The
Company has not taken, and will not take any action designed to cause or result
in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the shares of
Common Stock to facilitate the sale or resale of the Securities.
3.34 Acquisitions.
The
purchase agreements or other relevant transaction documents for the TARH
Acquisition have
been
duly executed and are in full force and effect. No default has occurred or
is
continuing thereunder, and, to the best of the Company’s knowledge, all of the
conditions precedent to the closing of the TARH Acquisition for each of the
parties thereto can be satisfied promptly after the Closing Date with no
material waiver granted.
3.35 Certain
Registration Matters.
Assuming the accuracy of the Purchasers’ representations and warranties set
forth in Section 4 of this Agreement, no registration under the Securities
Act
is required for the offer and sale of the Securities by the Company to the
Purchasers under the Transaction Documents. The Company is eligible to register
its Common Stock for resale by the Purchasers on Form SB-2 promulgated under
the
Securities Act. Except as set forth in Schedule
3.3
of the
Disclosure Schedule and except with respect to the Purchasers and
the
investors in Other Offerings contemplated by Section 2.1,
the
Company has not granted or agreed to grant to any Person any rights (including
“piggy-back” registration rights) to have any securities of the Company
registered with the SEC or any other governmental authority that have not been
satisfied.
3.36 Listing
Requirements.
The
Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, eligible for quotation of the Common Stock on a Trading
Market. The issuance and sale of the Securities under the Transaction Documents
does not contravene the rules and regulations of the Trading Market.
16
3.37 Disclosure.
Neither
the Company nor, to the Company’s knowledge, any other Person acting on its
behalf and at the direction of the Company, has provided to any Purchaser or
its
agents or counsel any information that in the Company’s reasonable judgment, at
the time such information was furnished, constitutes material, non-public
information, except such information as may have been disclosed to certain
Board
members, who are affiliated with certain Purchasers in their capacity as
directors of the Company and except such information set forth in a management
presentation of the Company which will be disclosed publicly on the Company’s
web site prior to the Closing Date. On or before 9:00 a.m., Eastern time, on
the
first Business Day after the Closing Date, the Company shall issue a press
release announcing the execution of the Transaction Documents, and on or before
5:30 p.m., Eastern time, on the first Business Day after the Closing Date,
the
Company shall file a Current Report on Form 8-K describing the material terms
of
the transactions contemplated by the Transaction Documents, and attaching as
an
exhibit to such Form 8-K a form of this Agreement. Other than with respect
to
certain Board members who are affiliated with certain Purchasers in their
capacity as directors of the Company, or to any Purchaser who has executed
a
confidentiality agreement between such Purchaser and the Company, no Purchaser
will to the Company’s knowledge be in possession of material, non-public
information concerning the Company after the issuance of the press release
and
filing of the Current Report on Form 8-K. The Company understands and confirms
that each Purchaser will rely on the representations and covenants contained
herein in effecting the transactions contemplated by the Transaction Documents,
and in the securities of the Company after the Closing Date. All disclosures
provided to the Purchasers regarding the Company, its business and the
transactions contemplated hereby, including the Transaction Documents and the
Schedules to this Agreement furnished by or on behalf of the Company, are true
and correct and do not contain any untrue statements of material fact or omit
to
state any material facts necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
No
event or circumstance has occurred or information exists with respect to the
Company or the Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed. The Company acknowledges and
agrees that no Purchaser makes or has made any representations or warranties
with respect to the transactions contemplated hereby other than those
specifically set forth in Section 4.
4. Representations
and Warranties of the Purchasers.
Each
Purchaser represents and warrants, severally (as to itself) and not jointly,
to
the Company as follows:
4.1 Authorization.
All
action on the part of such Purchaser and, if applicable, its officers,
directors, managers, members, shareholders and/or partners necessary for the
authorization, execution, delivery and performance of this Agreement and the
Registration Rights Agreement, and the consummation of the transactions
contemplated herein and therein, has been taken. When executed and delivered,
each of the Transaction Documents will constitute the legal, valid and binding
obligation of such Purchaser, enforceable against such Purchaser in accordance
with its terms, except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors’ rights generally and by
general equitable principles. Such Purchaser has all requisite corporate or
limited partnership, as the case may be, power and authority to enter into
each
of the Transaction Documents, and to carry out and perform its obligations
under
the terms of hereof and thereof.
4.2 Purchase
Entirely for Own Account.
Such
Purchaser certifies and represents to the Company that the Securities to be
received by the Purchaser hereunder will be acquired for the Purchaser’s own
account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of the Securities Act, and the
Purchaser has no present intention of selling, granting any participation in
or
otherwise distributing the same, in violation of the Securities Act. Such
Purchaser is not a registered broker dealer or an entity engaged in the business
of being a broker dealer. Such Purchaser and the Company acknowledge that
nothing contained in this Section 4.2 shall be construed as a restriction or
other limitation on such Purchaser’s ability to sell or hedge the Securities
purchased hereunder at any time following the Closing Date other than for
restrictions or limitations imposed by the Securities Act or applicable state
securities laws.
17
4.3 Reliance
on Exemptions.
Such
Purchaser understands that the Securities are being offered and sold to it
in
reliance upon specific exemptions from the registration requirements of federal
and state securities laws and that the Company is relying upon the truth and
accuracy of, and the Purchaser’s compliance with, the representations,
warranties, agreements, acknowledgements and understandings of the Purchaser
set
forth in this Agreement in order to determine the availability of such exemption
and the eligibility of the Purchaser to acquire the Securities.
4.4 Investor
Status; Etc.
Such
Purchaser certifies and represents to the Company that it is an “accredited
investor” as defined in Rule 501 of Regulation D promulgated under the
Securities Act and was not organized for the purpose of acquiring any of the
Shares. Such Purchaser’s financial condition is such that it is able to bear the
risk of holding the Shares for an indefinite period of time and the risk of
loss
of its entire investment. Such Purchaser has sufficient knowledge,
sophistication and experience in business and financial matters so as to be
able
to evaluate the risks and merits of its investment in the Securities, and has
so
evaluated the merits and risks of such investment.
4.5 Independent
Investment Decision.
Such
Purchaser has independently evaluated the merits of its decision to purchase
Securities pursuant to this Agreement, such decision has been independently
made
by such Purchaser and such Purchaser confirms that it has only relied on the
advice of its own business and/or legal counsel and not on the advice of any
other Purchaser’s business and/or legal counsel in making such decision.
4.6 Disclosure
of Information.
Such
Purchaser acknowledges that it has reviewed all disclosure materials provided
by
the Company in connection with this Agreement and has been afforded (a) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Securities and the merits and risks of investing therein;
(b) access to publicly available information about the Company and the
Subsidiaries and their respective financial conditions, results of operations,
businesses, properties, management and prospects sufficient to enable it to
evaluate its investment; (c) the opportunity to obtain such additional public
information that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision
with
respect to the investment. Neither such inquiries nor any other investigation
conducted by or on behalf of such Purchaser or its representatives or counsel
shall modify, amend or affect such Purchaser’s right to rely on the truth,
accuracy and completeness of the Company’s disclosures and the Company’s
representations and warranties contained herein.
4.7 Securities
Not Registered.
Such
Purchaser understands that the Securities have not been registered under the
Securities Act, by reason of their issuance by the Company in a transaction
exempt from the registration requirements of the Securities Act, and that the
Securities must continue to be held by such Purchaser unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
such registration. Such Purchaser understands that the exemptions from
registration afforded by Rule 144 (the provisions of which are known to it)
promulgated under the Securities Act depend on the satisfaction of various
conditions, and that, if applicable, Rule 144 may afford the basis for sales
only in limited amounts.
18
4.8 Acknowledgement
of Risk.
Such
Purchaser acknowledges and understands that its investment in the Securities
involves a significant degree of risk and in the event of a disposition of
the
Securities, the Purchaser could sustain the loss of its entire investment.
4.9 No
Conflict.
The
execution and delivery of the Transaction Documents by such Purchaser, and
the
consummation of the transactions contemplated hereby and thereby, will not
conflict with or result in any violation of or default by such Purchaser (with
or without notice or lapse of time, or both) under, or give rise to a right
of
termination, cancellation or acceleration of any obligation or to a loss of
a
material benefit under (i) any provision of the organizational documents of
such
Purchaser or (ii) any agreement or instrument, permit, franchise, license,
judgment, order, statute, law, ordinance, rule or regulations, applicable to
such Purchaser.
4.10 Brokers.
Such
Purchaser has not retained, utilized or been represented by any broker or finder
in connection with the transactions contemplated by this Agreement.
4.11 Consents.
All
consents, approvals, orders and authorizations required on the part of such
Purchaser in connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated herein by such
Purchaser have been obtained and are effective as of the date hereof.
4.12 Short
Sale.
Such
Purchaser represents that after the date that such Purchaser learned of the
terms of this transaction and prior to the date hereof, neither it nor any
Person over which the Purchaser has direct control, have made any net short
sales of, or granted any option for the purchase of or entered into any hedging
or similar transaction with the same economic effect as a net short sale, in
the
Common Stock.
4.13 Employee
Benefit Plans.
If the
Purchaser is an employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”): (i) the
Purchaser and its plan fiduciaries are not affiliated with, and are independent
of the Company, and are informed of and understand the Company’s investment
objectives, policies, and strategies; (ii) the Purchaser represents that
the purchase of the Units will not involve any transaction that is subject
to
the prohibition of Section 406 of ERISA or in connection with which a penalty
could be imposed under Section 502(i) of ERISA or a tax could be imposed
pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended (the
“Code”); (iii) the trustee or other plan fiduciary directing the
investment, in making the proposed investment, is aware of and has taken into
consideration the diversification requirements of Section 404(a)(1)(C) of ERISA
and has concluded that the proposed investment in the Units is prudent and
is
consistent with the other applicable fiduciary responsibilities under ERISA;
(iv) this Agreement has been duly executed on the Purchaser’s behalf by a
duly designated Named Fiduciary (within the meaning of Section 402(a)(2) of
ERISA); and (v) if the Purchaser is an individual retirement account or
employee benefit plan not subject to Title I of ERISA, such as a governmental
or
church plan, the owner of the individual retirement account or other fiduciary
directing the investment of the plan has concluded that the proposed investment
in the Units is prudent and consistent with its fiduciary responsibilities,
if
any.
19
5. Conditions
Precedent.
5.1. Conditions
to the Obligation of the Purchasers to Consummate the Closing.
The
obligation of each Purchaser to consummate the Closing and to purchase and
pay
for the Shares and Warrants to be purchased by it is subject to the satisfaction
(or waiver by such Purchaser) of the following conditions precedent:
(a) The
representations and warranties of the Company contained herein shall be true
and
correct on and as of the date hereof and as of the Closing Date. The Company
shall have performed or complied with all obligations and conditions herein
required to be performed or complied with by the Company on or prior to the
Closing Date.
(b) There
shall have been no material adverse change (actual or threatened) in the assets,
liabilities (contingent or otherwise), affairs, business, operations, prospects,
or condition (financial or otherwise) of the Company prior to the Closing
Date.
(c) There
shall have been sold to Purchasers Units for an aggregate purchase price of
at
least $19,999,998 and no more than $30,000,001.
(d)
No
proceeding challenging the Transaction Documents, or the transactions
contemplated hereby or thereby, or seeking to prohibit, alter, prevent or
materially delay the Closing Date, shall have been instituted before any court,
arbitrator or governmental body, agency or official or shall be pending against
or involving the Company.
(e) The
sale
of the Securities to the Purchasers shall not be prohibited by any law, rule,
governmental order or regulation. All necessary consents, approvals, licenses,
permits, orders and authorizations of, or registrations, declarations and
filings with, any governmental or administrative agency or of or with any other
Person with respect to any of the transactions contemplated hereby or under
any
Transaction Document (including, without limitation, all filings and approvals,
if any, required by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as
amended) shall have been duly obtained or made and shall be in full force and
effect.
(f) All
instruments and corporate proceedings of the Company in connection with the
transactions contemplated by the Transaction Documents shall be satisfactory
in
form and substance to such Purchaser, and such Purchaser shall have received
copies (executed or certified, as may be appropriate) of all documents which
any
Purchaser may have reasonably requested in connection with such transactions.
20
(g) Such
Purchaser shall have received from McGuireWoods LLP and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, outside counsel to the Company, opinions addressed to
the Purchasers, dated the Closing Date and substantially in the form of
Exhibits
B1 and B2
hereto.
(h) The
Registration Rights Agreement shall have been duly executed and delivered to
such Purchaser by the Company. Unless otherwise waived by the Company and such
Purchaser, the Escrow Agreement shall have been duly executed and delivered
to
such Purchaser by the Company and the Escrow Agent.
(i) The
Company shall have delivered the Transfer Agent Instructions acknowledged by
its
transfer agent, to issue to the Purchaser a stock certificate evidencing the
number of Shares of Common Stock set forth opposite such Purchaser’s name on
Schedule
1
and
Schedule
2
hereto.
(j) The
Company shall have delivered, in form and substance satisfactory to such
Purchaser, a certificate dated the Closing Date and signed by the secretary
or
another appropriate executive officer of the Company, certifying (i) that
attached copies of the Certificate of Incorporation, the By-laws and resolutions
of the Board approving the Transaction Documents and the transactions
contemplated thereby, are all true, complete and correct and remain in full
force and effect as of the date hereof and as of the Closing Date, and (ii)
as
to the incumbency and specimen signature of each officer of the Company
executing the Transaction Documents and any other document delivered in
connection herewith on behalf of the Company.
(k) The
Company shall deliver to such Purchaser a certificate, in form and substance
satisfactory to such Purchaser, dated the Closing Date and signed by the
Company’s chief executive officer, certifying that (i) the representations and
warranties of the Company contained in Section 3 hereof are true and correct
in
all respects on the Closing Date and (ii) the Company has performed and complied
with all of the agreements and conditions set forth or contemplated herein
that
are required to be performed or complied with by the Company on or before the
Closing Date.
(l) The
Company shall have undertaken to deliver to each Purchaser, no later than 5
business days following the Closing Date, an original Warrant evidencing the
number of Warrant Shares set forth opposite such Purchaser’s name on
Schedule
1
and
Schedule 2
hereto.
(m) The
TARH
Acquisition shall
close simultaneously with the Closing on the Closing
Date,
and all
of the conditions precedent to the TARH Acquisition for each of the parties
to
the purchase agreements for the TARH Acquisition shall have been satisfied
with
no material waiver granted as
of the
Closing Date.
(n) All
Financial Statements of the Company and each of its Subsidiaries shall have
been
provided or made available to such Purchaser on or before the Closing
Date.
21
5.2. Conditions
to the Obligation of the Company to Consummate the Closing.
The
obligation of the Company to consummate the Closing and to issue and sell the
Shares and Warrants to each Purchaser at the Closing is subject to the
satisfaction of the following conditions precedent:
(a)
Delivery
of the purchase price of the Units to the Escrow Agent.
(b) The
representations and warranties of such Purchaser contained herein shall be
true
and correct in all respects on and as of the Closing Date.
(c) The
Registration Rights Agreement shall have been executed and delivered by the
Purchasers.
(d) Each
Purchaser shall have performed all obligations and conditions herein required
to
be performed or complied with by such Purchaser on or prior to the Closing
Date.
(e) No
proceeding challenging the Transaction Documents, or the transactions
contemplated hereby or thereby, or seeking to prohibit, alter, prevent or
materially delay the Closing, shall have been instituted before any court,
arbitrator or governmental body, agency or official or shall be pending against
or involving such Purchaser.
(f) The
sale
of the Securities by the Company shall not be prohibited by any law, rule,
governmental order or regulation. All necessary consents, approvals, licenses,
permits, orders and authorizations of, or registrations, declarations and
filings with, any governmental or administrative agency or of any other Person
with respect to any of the transactions contemplated hereby by such Purchaser
shall have been duly obtained or made and shall be in full force and effect.
(g) All
instruments and corporate proceedings in connection with the transactions
contemplated by this Agreement to be consummated by such Purchaser at the
Closing shall be satisfactory in form and substance to the Company, and the
Company shall have received counterpart originals, or certified or other copies
of all documents, including without limitation records of corporate or other
proceedings, with respect to such Purchaser, which it may have reasonably
requested in connection therewith.
6.
Certain
Covenants and Agreements.
6.1. Transfer
of Securities.
(a) Other
than as set forth in Section 6.1(b) below, each Purchaser agrees severally
(as
to itself only) and not jointly that it shall not sell, assign, pledge, transfer
or otherwise dispose of or encumber any of the Securities, except (i) pursuant
to an effective registration statement under the Securities Act, (ii) to an
Affiliate (so long as such Affiliate agrees to be bound by the terms and
provisions of this Agreement as if, and to the fullest extent as, such
Purchaser), or (iii) pursuant to an available exemption from registration under
the Securities Act (including sales permitted pursuant to Rule 144) and
applicable state securities laws and, if requested by the Company, upon delivery
by such Purchaser of either an opinion of counsel of such Purchaser reasonably
satisfactory to the Company to the effect that the proposed transfer is exempt
from or does not require registration under the Securities Act and applicable
state securities laws or a representation letter of such Purchaser reasonably
satisfactory to the Company setting forth a factual basis for concluding that
such proposed transfer is exempt from or does not require registration under
the
Securities Act and applicable state securities laws. Any transfer or purported
transfer of the Securities in violation of this Section 6.1 shall be void.
The
Company shall not register any transfer of the Securities in violation of this
Section 6.1. The Company may, and may instruct any transfer agent for the
Company, to place such stop transfer orders as may be required on the transfer
books of the Company in order to ensure compliance with the provisions of this
Section 6.1.
22
(b) The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject
to
approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection therewith. Further,
no
notice shall be required of such pledge. At the appropriate Purchaser’s expense,
the Company will execute and deliver such reasonable documentation as a pledgee
or secured party of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including, if the Securities are subject
to registration pursuant to the Registration Rights Agreement, the preparation
and filing of any required prospectus supplement under Rule 424(b)(3) under
the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of selling stockholders thereunder.
6.2. Legends.
(a) To
the
extent applicable, each certificate or other document evidencing the Shares
and
the Warrant Shares shall be endorsed with a legend substantially in the form
set
forth below, and each Purchaser covenants that, except to the extent such
restrictions are waived by the Company, it shall not transfer the shares
represented by any such certificate without complying with the restrictions
on
transfer described in this Agreement and the legends endorsed on such
certificate (and a stop-transfer order may be placed against the Warrants):
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THE ISSUANCE TO THE HOLDER OF
SHARES REPRESENTED BY THIS CERTIFICATE IS NOT COVERED BY A REGISTRATION
STATEMENT UNDER THE ACT. THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED, AND SUCH SHARES MUST BE ACQUIRED, FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED UNLESS (1) THEIR RESALE IS REGISTERED UNDER THE ACT,
OR
(2) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY
IN
FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.”
23
The
Purchaser further acknowledges and agrees that the Warrants shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against the Warrants):
“THIS
WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS (1) THE RESALE
HEREOF IS REGISTERED UNDER THE ACT, OR (2) THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL REASONABLY SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.”
(b) The
legends set forth in Section 6.2(a) shall be removed from the certificates
evidencing the Securities, (i) while a registration statement covering the
resale of such Securities is effective under the Securities Act, (ii) following
any sale of such Securities pursuant to Rule 144, (iii) if such Securities
are
eligible for sale under Rule 144(k) (and the holder of such Securities has
submitted a written request for removal of the legend indicating that the holder
has complied with the applicable provisions of Rule 144 or such judicial
interpretation or pronouncement), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) and
the holder of such Securities has submitted a written request for removal of
the
legend indicating that such legend is not required under applicable requirements
of the Securities Act (including such judicial interpretations and
pronouncements). The Company shall cause its counsel to issue a legal opinion
to
the Company’s transfer agent promptly upon the occurrence of any of the events
in clauses (i), (ii), (iii) or (iv) above to effect the removal of the legend
on
certificates evidencing the Securities and shall also cause its counsel to
issue
a “blanket” legal opinion to the Company’s transfer agent promptly after the
effective date of any registration statement covering the resale of the
Securities, if required by the Company’s transfer agent, to allow sales without
restriction pursuant to an effective registration statement. The Company agrees
that at such time as such legend is no longer required under this Section
6.2(b), it will, no later than three (3) Business Days following the delivery
by
a Purchaser to the Company or the Company’s transfer agent of a certificate
representing the Securities issued with a restrictive legend, deliver or cause
to be delivered to such Purchaser a certificate representing such Securities
that is free from all restrictive and other legends; provided that in the case
of removal of the legend for reasons set forth in clause (iii) above, the
holder of such Securities has submitted a written request for removal of the
legend indicating that the holder has complied with the applicable provisions
of
Rule 144. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.
24
(c) If
the
Company shall fail for any reason or for no reason to remove the legends set
forth in this Section 6.2 within three (3) Business Days following the delivery
by a holder to the Company or the Company’s transfer agent of a certificate
representing the Securities issued with a restrictive legend, and if on or
after
such Business Day the holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
holder of shares of Common Stock issuable upon such exercise that the holder
anticipated receiving from the Company (a “Buy-In”), then the Company shall,
within three (3) Business Days after the holder’s request and in the holder’s
discretion, either (i) pay cash to the holder in an amount equal to the holder’s
total purchase price (including brokerage commissions, if any) for the shares
of
Common Stock so purchased (the “Buy-In Price”), at which point the Company’s
obligation to deliver such certificate (and to issue such shares of Common
Stock) shall terminate, or (ii) promptly honor its obligation to deliver to
the
holder a certificate or certificates representing such shares of Common Stock
and pay cash to the holder in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock,
multiplied by (B) the Closing bid price of the Common Stock on the date of
exercise.
6.3 Publicity.
Except
to the extent required by applicable laws, rules, regulations or stock exchange
requirements or this Agreement, neither (i) the Company, the Subsidiaries or
any
of their Affiliates nor (ii) any Purchaser or any of its Affiliates shall,
without the written consent of the other, make any public announcement or issue
any press release with respect to the transactions contemplated by this
Agreement. Other than as provided in this Agreement, in no event will either
(A)
the Company, the Subsidiaries or any of their Affiliates or (B) any Purchaser
or
any of its Affiliates make any public announcement or issue any press release
with respect to the transactions contemplated by this Agreement without
consulting with the other party, to the extent feasible, as to the content
of
such public announcement or press release.
6.4 Material,
Nonpublic Information.
Except
as required by law or pursuant to an effective confidentiality agreement between
the Company and a Purchaser, the Company and its directors, officers, employees
and agents shall not provide any such Purchaser with any material nonpublic
information regarding the Company or any of the Subsidiaries at any time after
the Closing, except such information as may be required to be disclosed to
certain Board members who are affiliated with certain Purchasers in their
capacity as directors of the Company. In the event of a breach of the foregoing
covenant following the Mandatory Effective Date, or in the event that the
Company is legally required to make certain disclosures to any Purchaser (and
does so) following the Mandatory Effective Date, then in addition to any other
remedy provided in the Transaction Documents or in equity or at law, each
Purchaser to whom information has been disclosed (whether as a result of breach
or as required by law) may request, in writing, that the Company promptly (but
in no event more than five (5) Business Days after the date of such writing)
publicly disclose, by press release, SEC filing, or otherwise, an appropriate
summary of the information that, in such Purchaser’s reasonable judgment,
constitutes the then material non-public information. After such five (5)
business-day period, the Purchaser(s) who was or were in receipt of such
material non-public information shall be automatically authorized to make all
of
the information, or any portion thereof, available to the public generally,
without incurring any liability to the Company for such disclosure.
25
6.5 Filing
of Information.
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 pursuant to all applicable securities laws, including the Exchange
Act
for the two (2) year period following the Closing Date. At any time if the
Company is not required to file reports pursuant to such laws, it will prepare
and furnish to the Purchasers and make publicly available in accordance with
paragraph (c) of Rule 144 such information as is required for the Purchasers
to
sell the Securities under Rule 144. The Company further covenants that it will
take such further action as any holder of Shares may reasonably request to
satisfy the provisions of Rule 144 applicable to the issuer of securities
relating to transactions for the sale of securities pursuant to Rule 144.
6.6 Use
of
Proceeds.
The
Company covenants and agrees that all of the proceeds from the sale of the
Units, which shall initially be delivered into the Escrow Account in accordance
with the Escrow Agreement, shall be used by the Company to (i) fund the TARH
Acquisition, (ii) consummate other potential acquisitions and (iii) provide
for
general working capital purposes.
6.7 Integration.
Except
as contemplated elsewhere in this Agreement, the Company shall not sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the Securities
to the Purchasers.
6.8 Reservation
of Common Stock for Issuance; Listing of Shares.
The
Company agrees to reserve from its duly authorized capital stock the total
number of shares of Common Stock issuable upon execution of this Agreement
and
upon the exercise of the Warrants. The Company agrees that at any time, if
and
when its shares of Common Stock are listed on a national securities exchange,
that it will use reasonable efforts to promptly list and qualify the Shares
and
the Warrant Shares for trading on such exchange.
6.9 Required
Approvals.
As
promptly as practicable after the date of this Agreement, the Company shall
make, or cause to be made, all filings with any governmental or administrative
agency or any other Person necessary to consummate the transactions contemplated
hereby.
7. Indemnification.
7.1 By
the
Company.
The
Company agrees to indemnify, defend and hold harmless each Purchaser and its
Affiliates and their respective officers, directors, agents, employees,
subsidiaries, partners, members and controlling persons (collectively, the
“Purchaser Indemnitees”)
to the fullest extent permitted by law from and against any and all claims,
losses, liabilities, damages, deficiencies, judgments, assessments, fines,
settlements, costs or expenses (including interest, penalties and reasonable
fees, disbursements and other charges of counsel) (collectively, “Losses”) based
upon, arising out of or otherwise in respect of any breach by the Company of
any
representation, warranty, covenant or agreement of the Company contained in
the
Transaction Documents, or for any Losses claimed by the Company’s stockholders,
the Placement Agent or any other broker or placement agent.
26
7.2 Claims.
All
claims for indemnification by a Purchaser Indemnitee pursuant to this Section
7
shall be made as follows:
(a) If
a
Purchaser Indemnitee has incurred or suffered Losses for which it is entitled
to
indemnification under this Section 7, then such Purchaser Indemnitee shall
give
prompt written notice of such claim (a “Claim Notice”) to the Company. Each
Claim Notice shall state the amount of claimed Losses (the “Claimed Amount”), if
known, and the basis for such claim.
(b) Within
30
days after delivery of a Claim Notice, the Company shall provide to each
Purchaser Indemnitee (the “Indemnified Party”), a written response (the
“Response Notice”) in which the Company shall: (i) agree that all of the Claimed
Amount is owed to the Indemnified Party, (ii) agree that part, but not all,
of
the Claimed Amount (the “Agreed Amount”) is owed to the Indemnified Party, or
(iii) contest that any of the Claimed Amount is owed to the Indemnified Party.
The Company may contest the payment of all or a portion of the Claimed Amount
only based upon a good faith belief that all or such portion of the Claimed
Amount does not constitute Losses for which the Indemnified Party is entitled
to
indemnification under this Section 7. If no Response Notice is delivered by
the
Company within such 30-day period, then the Company shall be deemed to have
agreed that all of the Claimed Amount is owed to the Indemnified Party.
(c) If
the
Company in the Response Notice agrees (or is deemed to have agreed) that all
of
the Claimed Amount is owed to the Indemnified Party, then the Company shall
owe
to the Indemnified Party an amount equal to the Claimed Amount to be paid in
the
manner set forth in this Section 7. If the Company in the Response Notice agrees
that part, but not all, of the Claimed Amount is owed to the Indemnified Party,
then the Company shall owe to the Indemnified Party an amount equal to the
agreed amount set forth in such Response Notice to be paid in the manner set
forth in this Section 7. The parties agree that the foregoing shall not be
deemed to provide that the Company is entitled to make a binding determination
regarding any disputed amounts owed to an Indemnified Party, unless such
Indemnified Party accepts and agrees to such determination, and both the
Indemnified Party and Company shall retain all rights and remedies available
to
such party hereunder.
(d) No
delay
on the part of the Indemnified Party in notifying the Company shall relieve
the
Company of any liability or obligation hereunder except to the extent of any
actual prejudice caused by or arising out of such delay.
7.3. Payment
of Claims.
The
Company shall make payment of any portion of any Claimed Amount that the Company
has agreed in a Response Notice that it owes to an Indemnified Party, or that
the Company is deemed to have agreed it owes to such Indemnified Party, such
payment to be made within thirty (30) days after such Response Notice is
delivered by the Company or should have been delivered by the Company, as the
case may be.
27
7.4. Limitations.
(a) Time
for Claims.
The
Company will not be liable for any Losses hereunder arising out of a breach
of
representation or warranty unless a written claim for indemnification is given
by the Indemnified Party to the Company on or prior to the third anniversary
of
the date on which the registration statement covering the resale of the Shares
initially became effective.
(b) Maximum
Amount.
Notwithstanding anything contained herein to the contrary, the Company will
not
be liable for any Losses to any Indemnified Party hereunder in excess of the
portion of the Aggregate Purchase Price actually paid by the related Purchaser
related to such Indemnified Party.
7.5 Applicability;
Exclusivity.
Notwithstanding any term to the contrary in this Section 7, the indemnification
and contribution provisions of the Registration Rights Agreement shall govern
any claim made with respect to registration statements filed pursuant thereto
or
sales made thereunder. The parties hereby acknowledge and agree that in addition
to remedies of the parties hereto in respect of any and all claims relating
to
any breach or purported breach of any representation, warranty, covenant or
agreement that is contained in this Agreement pursuant to the indemnification
provisions of this Section 7, all parties shall always retain the right to
pursue and obtain injunctive relief in addition to any other rights or remedies
hereunder.
8. Miscellaneous
Provisions.
8.1 Rights
Cumulative.
Each
and all of the various rights, powers and remedies of the parties shall be
considered to be cumulative with and in addition to any other rights, powers
and
remedies which such parties may have at law or in equity in the event of the
breach of any of the terms of this Agreement. The exercise or partial exercise
of any right, power or remedy shall neither constitute the exclusive election
thereof nor the waiver of any other right, power or remedy available to such
party.
8.2 Pronouns.
All
pronouns or any variation thereof shall be deemed to refer to the masculine,
feminine or neuter, singular or plural, as the identity of the person, persons,
entity or entities may require.
8.3 Notices.
(a) Any
notices, reports or other correspondence (hereinafter collectively referred
to
as “correspondence”) required or permitted to be given hereunder shall be given
in writing and shall be deemed given if sent by certified or registered mail
(return receipt requested), overnight courier or telecopy (with confirmation
of
receipt), or delivered by hand to the party to whom such correspondence is
required or permitted to be given hereunder. An electronic communication
(“Electronic Notice”) shall be deemed written notice for purposes of this
Section 8.3 if sent with return receipt requested to the electronic mail address
specified by the receiving party either in this Section 8.3 or on Schedule
1
and
Schedule
2
hereto.
Electronic Notice shall be deemed received at the time the party sending
Electronic Notice receives verification of receipt by the receiving
party.
28
(b) All
correspondence to the Company shall be addressed as follows:
Foothills
Resources, Inc.
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
W. ▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇.▇▇▇
with
copies to:
McGuireWoods
LLP
▇▇
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
(c) All
correspondence to the Purchasers shall be addressed pursuant to the contact
information set forth on Schedule
1
and
Schedule
2
attached
hereto.
(d) Any
entity may change the address to which correspondence to it is to be addressed
by notification as provided for herein.
8.4 Captions.
The
captions and paragraph headings of this Agreement are solely for the convenience
of reference and shall not affect its interpretation.
8.5 Severability.
Should
any part or provision of this Agreement be held unenforceable or in conflict
with the applicable laws or regulations of any jurisdiction, the invalid or
unenforceable part or provisions shall be replaced with a provision which
accomplishes, to the extent possible, the original business purpose of such
part
or provision in a valid and enforceable manner, and the remainder of this
Agreement shall remain binding upon the parties hereto.
8.6 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the internal
and
substantive laws of the State of New York and without regard to any conflicts
of
laws concepts which would apply the substantive law of some other jurisdiction.
8.7 Consent
to Jurisdiction; Venue.
Each
party
hereby irrevocably and unconditionally (i) agrees that any suit, action or
other
legal proceeding arising out of this Agreement shall be brought in a state
court
located in New York, New York; (ii) consents to the jurisdiction of any such
court in any suit, action or proceeding; and (iii) waives any objection which
such party may have to the laying of venue of any such suit, action or
proceeding in any such court.
29
8.8 Waiver.
No
waiver of any term, provision or condition of this Agreement, whether by conduct
or otherwise, in any one or more instances, shall be deemed to be, or be
construed as, a further or continuing waiver of any such term, provision or
condition or as a waiver of any other term, provision or condition of this
Agreement.
8.9 Expenses.
The
Company and the Purchasers shall be responsible for their respective expenses
(including, without limitation, their respective fees and expenses of their
counsel) incurred by them in connection with the negotiation and execution
of,
and closing under, this Agreement. Notwithstanding the foregoing, the Company
shall pay the expenses (including fees and expenses of counsel not in excess
of
$25,000) incurred by ▇▇▇▇▇▇▇,
▇▇▇▇▇ & Co. or any affiliate thereof
in
connection with the negotiation and execution of, and closing under, this
Agreement.
8.10 Assignment.
The
rights and obligations of any party hereto shall inure to the benefit of and
shall be binding upon the successors and permitted assigns of such party. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of Purchasers who hold a majority of the
outstanding Shares issued pursuant to this Agreement (the “Majority
Purchasers”). Each Purchaser may assign or transfer any or all of its rights
under this Agreement to any Person provided that such assignee or transferee
agrees in writing to be bound, with respect to the transferred Shares, Warrants
or Warrant Shares, by the provisions hereof that apply to such assigning or
transferring Purchaser; whereupon such assignee or transferee shall be deemed
to
be a “Purchaser” for all purposes of this Agreement.
8.11 Survival.
The
respective representations and warranties given by the parties hereto shall
survive the Closing Date and the consummation of the transactions contemplated
herein, without regard to any investigation made by any party. The respective
covenants and agreements agreed to by a party hereto shall survive the Closing
Date and the consummation of the transactions contemplated herein in accordance
with their respective terms and conditions.
8.12 Entire
Agreement.
This
Agreement and the other Transaction Documents executed by each Purchaser
constitute the entire agreement between the parties hereto respecting the
subject matter hereof and supersedes all prior agreements, negotiations,
understandings, representations and statements respecting the subject matter
hereof, whether written or oral.
8.13 Amendments.
Any
amendment, supplement or modification of or to any provision of this Agreement,
any waiver of any provisions of this Agreement shall be effective only if made
or given in writing and signed by the Company and the Majority Purchasers;
provided that any amendment, supplement, modification or waiver that is
materially and disproportionately adverse to any particular Purchaser (as
compared to all Purchasers as a group) shall require the consent of such
Purchaser.
8.14 No
Third Party Beneficiaries.
This
Agreement is intended solely for the benefit of the parties hereto and is not
intended to confer any benefits upon, or create any rights in favor of, any
Person (including, without limitation, any stockholder or debt holder of the
Company) other than the parties hereto; provided, that each retail Purchaser
listed on Schedule
2
hereto
is entitled to all rights and benefits of a Purchaser under this Agreement
even
though such Purchasers are not signatories hereto, and each Purchaser Indemnitee
that is not also a Purchaser is entitled to all rights and benefits as third
party beneficiaries of Article 7 of this Agreement.
30
8.15 Independent
Nature of Purchaser’s Obligations and Rights.
The
obligations of the Purchasers under this Agreement are several and not joint
with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under the Transaction Documents. Nothing contained herein, and no
action taken by any Purchaser pursuant hereto, shall be deemed to constitute
the
Purchasers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Purchasers are in any way acting
in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents, including a “group” (as that term is
used in Section 13(d) of the Exchange Act) in negotiating and entering into
this
Agreement or purchasing the Common Stock and the Warrants or acquiring,
disposing of or voting any of the Common Stock or the shares of Common Stock
issuable upon the exercise of the Warrants. The Company hereby confirms
that it understands and agrees that the Purchasers are not acting as part of
any
such group. Each Purchaser confirms that it has independently participated
in
the negotiation of the transaction contemplated hereby with the advice of its
own counsel and advisors. Each Purchaser shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising
out of this Agreement, and it shall be necessary for any other Purchaser to
be
joined as an additional party to any proceeding for such purpose. The language
used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rules of strict construction will be
applied against any party.
8.16 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
document. The parties hereto confirm that any facsimile copy of another party’s
executed counterpart of this Agreement (or its signature page thereof) will
be
deemed to be an executed original thereof.
8.17 Waiver
of Jury Trial.
Each of
the Company and the Purchasers hereby waives any right to a trial by jury in
any
action, lawsuit or proceeding to enforce or defend any right under this
Agreement or any amendment, instrument, document or agreement delivered or
to be
delivered in connection with this Agreement and agrees that any action, lawsuit
or proceeding will be tried before a court and not before a jury.
[Signature
Pages Follow]
31
IN
WITNESS WHEREOF, the parties hereto have executed this Securities Purchase
Agreement as of the day and year first above written.
| FOOTHILLS RESOURCES, INC. | ||
| |
|
|
| By: | _______________________ | |
| Chief Executive Officer | ||
[SIGNATURE
PAGE TO SECURITIES PURCHASE
AGREEMENT]
| PURCHASERS LISTED ON SCHEDULE 1: | ||
| _______________________ | ||
| [Purchaser’s Name] | ||
| By: _______________________ | ||
| Name:_____________________ | ||
| Title:______________________ |
[SIGNATURE
PAGE TO SECURITIES PURCHASE
AGREEMENT]
| PURCHASERS LISTED ON SCHEDULE 2: | ||
| On behalf of each of the retail Purchasers listed on Schedule 2 hereto: | ||
|
▇▇▇▇
▇. ▇▇▇▇▇▇▇, Attorney-in-Fact
|
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]