Exhibit 10.5
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS Will
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS MUST
RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED.
Warrant to Purchase
1,000,000 Common Shares
Warrant to Purchase Common Stock
Of
TIDELANDS OIL & GAS CORPORATION
(One Warrant required for the purchase of one share of Common Stock)
This certifies that MARGAUX INVESTMENT MANAGEMENT GROUP,S.A., of Geneva,
Switzerland, is entitled to purchase ONE MILLION (1,000,000) fully paid and
non-assessable Common Shares of Tidelands Oil & Gas Corporation, a Nevada
corporation (herein called "the Company") for Two Dollars Fifty Cents ($2.50)
per share during the period commencing October 26, 2004 and ending October 26,
2007, the purchase price to be completed upon surrender of this certificate
together with payment on the purchase price plus an amount equal to all
applicable stock transfer taxes, at the Warrant agent's office and subject to
the following conditions:
1. Exercise Price Payable and Call Provision. (a) The exercise price is
Two Million Five Hundred Thousand ($US 2,500,000) Dollars payable in cash,
certified check or bank draft. No adjustments shall be made for any dividends on
any shares of stock issuable upon exercise of this Warrant. (b) the Company has
the right to call the exercise of the warrants upon ten (10) calendar days
notice and at any time after the date of the issuance of the warrants; provided
that the closing market price of the Company's common stock on the NASD
Over-the-Counter Bulletin Board, or other exchange on which the Company is
listed, exceeds $2.50 per share.
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2. Representations and Warranties of the Undersigned. The undersigned
represents, warrants, and agrees as follows:
a. The undersigned understands that the Warrant and Warrant
Shares are being offered and sold under the exemption from registration provided
for in Section 4(2) of the Securities Act of 1933, as amended, and applicable
state securities act, as amended, that he/she is purchasing the Warrant and
Warrant Shares without being furnished any offering literature or, that this
transaction has not been scrutinized by the United States Securities and
Exchange Commission or by any administrative agency charged with the
administration of the securities laws of any state because of the private
aspects of the offering, that all documents, records, and books pertaining to
this investment, have been made available to the undersigned and its
representatives, if any, and that the books and records of the Company are and
will be available upon reasonable notice for inspection by investors during
reasonable business hours at its principal place of business.
b. The undersigned (i) is a citizen of the United States, and
at least 21 years of age, and (ii) is a bona fide resident and domiciliary (not
a temporary or transient resident) of Switzerland and has no present intention
of becoming a resident of any United State of America or other jurisdiction;
c. The undersigned is an "accredited investor" as defined in
the by federal securities laws; and if not then the purchaser represents that by
virtue of his/her business and financial experience or financial experience of
his or her professional advisors who are unaffiliated with and who are not
compensated, to the best of his or her knowledge, by the issuer or any affiliate
or selling agent of the issuer, directly or indirectly, can be reasonably
assumed to have the capacity to protect his or her own interests in connection
with this transaction.
d. The undersigned understands and has fully considered for
purposes of this investment the associated risks and the restricted
transferability of Warrant and Warrant Shares, and that (i) the Warrant and
Warrant Shares are a speculative investment which involve a high degree of risk
of loss by the undersigned of his or her investment therein, and (ii) there are
substantial restrictions on the transferability of, and there will be no public
market for the Warrant and accordingly, it may not be possible for him or her to
liquidate his or her investment in the Warrant and Warrant Shares in case of
emergency;
e. The undersigned is able (i) to bear the economic risk of
his or her investment for an indefinite period, and (ii) to afford a complete
loss of his or her investment;
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f. The undersigned, in making his or her decision to purchase
the Warrant and Warrant Shares, has relied solely upon independent
investigations made by him or her and/or his or her representative(s) and
advisors, and the undersigned and any such witnesses have been given the
opportunity to ask questions of, and to receive answers from, persons acting on
behalf of the Company concerning the Company and the terms and conditions of
this offering, and to obtain any additional information, to the extent such
persons possess such information or can acquire it without unreasonable effort
or expense.
g. The Warrant and Warrant Shares are being acquired by the
undersigned in good faith solely for his or her own personal account, for
investment purposes only, and not with a view to or for the resale,
distribution, subdivision, or fractionalization thereof; the undersigned has no
contract, undertaking, understanding, agreement, or arrangement, formal or
informal, with any person to sell, transfer, or pledge to any person the Warrant
and Warrant Shares, or any part thereof; the undersigned has no present plans to
enter into any such contract, undertaking, agreement, or arrangement; and he or
she understands that the legal consequences of the foregoing representations and
warranties to mean that he or she must bear the economic risk of the investment
for an indefinite period of time because the Warrant and Warrant Shares have not
been registered under applicable securities laws, and, therefore, cannot be sold
unless they are subsequently registered under such laws (which the Company is
not obligated to do) or an exemption from such registration is available;
h. The undersigned understands that the Company is relying on
the truth and accuracy of the representations, declarations, and warranties
herein made by him or her in offering the Warrant and Warrant Shares for sale to
him or her without having first registered the same under the Act;
i. The undersigned consents to the placement of a legend on
the certificate for his or her Warrant and Warrant Shares, which legend shall be
in form substantially as follows:
THIS WARRANT AND WARRANT SHARES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 ("1933 ACT"), AS AMENDED, OR UNDER
ANY STATE SECURITIES ACT, OR UNDER ANY OTHER STATE OR FOREIGN
GOVERNMENT SECURITIES LAWS. THIS WARRANT AND WARRANT SHARES
MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED WITHOUT REGISTRATION UNDER THE 1933 ACT, THE
SECURITIES ACT OF NEW YORK, AND ANY OTHER APPLICABLE STATE
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SECURITIES LAWS UNLESS THE COMPANY RECEIVES AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
TRANSFER DOES NOT REQUIRE REGISTRATION UNDER THE 1933 ACT, THE
SECURITIES ACT OF NEVADA, OR ANY OTHER STATE OR FOREIGN
GOVERNMENT SECURITIES LAWS;
j. The undersigned further consents to the placing of a stop
transfer order on the books of the Company, and with any transfer agents,
against the Warrant and Warrant Shares, in accordance with the restrictions set
out in the above legend; and
k. If the undersigned is a corporation, partnership, or other
entity, the undersigned and the individual representative of the undersigned who
is executing this Agreement each hereby represent and warrant that the purchase
of the Warrant and Warrant Shares of Common Stock pursuant to this Warrant
Agreement has been duly authorized by all necessary corporate, partnership, or
other action; that such individual is duly authorized to bind the undersigned to
this Agreement; and that the undersigned was not organized for the purpose of
investing in the Company.
The foregoing representations, and warranties, and undertakings are
made by the undersigned with the intent that they be relied upon in determining
his or her suitability as a purchaser of Warrant and Warrant Shares and the
undersigned hereby agrees that such representations and warranties shall survive
the delivery of the certificate for such Warrant and Warrant Shares.
3. Transferability. The undersigned agrees not to transfer or assign
this Agreement, or any of his interest herein, and any such transfer shall be
void.
4. Revocation. The undersigned agrees that he or she may not cancel,
terminate, or revoke this Agreement or any agreement of the undersigned made
hereunder and that this Agreement shall survive the death or disability of the
undersigned and shall be binding upon the undersigned's heirs, executors,
administrators, successors, and assigns.
5. No Waiver. Notwithstanding any of the representations, warranties,
acknowledgments, or agreements made herein by the undersigned, the undersigned
does not waive any right granted to him or her under federal or state securities
laws.
6. Incidental Registration. If the Company, at any time, proposes for
itself or any other person, the registration under the Securities Act of 1933,
as amended, of any securities of the Company on any appropriate form such as
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SB-2, or otherwise, the Company will give the Subscriber written notice of the
proposed registration statement. The Company will include the Subscribers shares
in any such Registration Statement and any related underwriting agreements, if
the Subscriber so requests within 30 days of the Company notice. This incidental
registration right is subject to the execution of a definitive registration
rights agreement.
7. Miscellaneous
a. All notices or other communications given or made hereunder
shall be sufficiently given if hand-delivered or mailed by registered or
certified mail return receipt requested, postage prepaid, to the undersigned or
to the Company at the respective addresses set forth herein, or such other
addresses as the undersigned or the Company shall designate to the other by
notice in writing.
b. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Texas.
c. This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and may be amended only
by a writing executed by all parties.
d. If more than one person is signing this Agreement, each
representation, and warranty, and undertaking made herein shall be a joint and
several representation, warranty, or undertaking of each person.
8. Continuing Effect of Representations and Warranties. The
representations and warranties of Paragraph 2 are true and accurate as of the
date of this Warrant Agreement and shall be true and accurate as of the date of
delivery of the Funds, and shall survive such delivery. If in any respect, such
representations and warranties shall not be true and accurate prior to the
issuance of Warrant and Warrant Shares to the undersigned, the undersigned shall
give immediate written notice of such fact to the Company specifying which
representations and warranties are not true and accurate and in what respects
they are not accurate.
9. Indemnification. The undersigned acknowledges that he or she
understands the meaning and legal consequences of the representations and
warranties contained in Paragraph 2 and he or she hereby agrees to defend,
indemnify, and hold harmless the Company and its officers, directors, employees,
and agents, and their successors and assigns, from and against any and all loss,
damage, liability, or expense, including without limitation attorneys' fees, due
to or arising out of the inaccuracy of any representation or acknowledgment, or
the breach of any agreement, warranty, or undertaking of the undersigned
contained in this Warrant Agreement.
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IN WITNESS WHEREOF, the undersigned has executed this Warrant Agreement
as set forth below:
TIDELANDS OIL & GAS CORPORATION
By: ________________________________ Date:____________
▇▇▇▇▇▇▇ ▇▇▇▇, President
WARRANT HOLDER:
MARGAUX INVESTMENT MANAGEMENT GROUP
____________________________________ Date:____________
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: MANAGING DIRECTOR
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