PEDEVCO CORP. SERIES B CONVERTIBLE PREFERRED STOCK AND WARRANT SUBSCRIPTION AGREEMENT Series B Convertible Preferred Stock Shares and Warrants
EXHIBIT 10.1
SERIES B CONVERTIBLE PREFERRED STOCK AND WARRANT
Series B Convertible Preferred Stock Shares and
Warrants
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Date:
August 17, 2017
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Full
Subscription Commitment: USD12,000,000.00
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1.
Subscription:
(a) The
undersigned purchasers, namely (i) Dragon Gem Limited and (ii)
Absolute Frontier Limited (collectively, the “Participants” and each, a
“Participant”)
hereby apply to purchase restricted Series B Convertible Preferred
Stock (the “Series B
Preferred” or the “Shares”) of PEDEVCO Corp., a Texas
corporation (the “Company”), and warrants
exercisable for common stock of the Company (the
“Warrants”), in
the amounts set forth below its signature on this signature page of
this Agreement, in accordance with the terms and conditions of: (1)
this Subscription Agreement (the “Subscription” or
“Agreement”);
(2) the form of Warrant which is attached hereto as Exhibit A;
and (3) the Amended and Restated Certificate of Designations of
PEDEVCO Corp. Establishing the Designations, Preferences,
Limitations and Relative Rights of its Series B Convertible
Preferred Stock (the “Certificate”), which is attached
hereto as Exhibit
C.
(b) Before
this Subscription is considered, the Participant must complete,
execute and deliver to the Company the following:
(i) This
Subscription;
(ii) The
Warrant attached hereto as Exhibit
A;
(iii) The
Certificate of Accredited Investor Status And Investor Information,
attached hereto as Exhibit B,
and
(iv)
The Participant’s check in the amount set forth on the
signature page hereof in exchange for the Shares and the Warrants
purchased, or wire transfer sent according to the Company’s
instructions.
(c) This
Subscription is irrevocable by the Participant.
(d) This
Subscription is not transferable or assignable by the
Participant.
(e)
This Subscription may be rejected in whole or in part by the
Company in its sole discretion prior to the Closing (as defined in
Section 1(g) hereof), regardless of whether Participant’s
funds have theretofore been deposited by the Company.
Participant’s execution and delivery of this Subscription
will not constitute an agreement between the undersigned and the
Company until this Agreement has been accepted and executed by the
Company. In the event this Subscription is rejected by the Company,
all funds and documents tendered by the Participant shall be
returned and the parties' obligations hereunder, shall
terminate.
(f) The
Participant shall be issued on the Warrant Issuance Date (as
defined below) Warrants in substantially the form attached hereto
as Exhibit A to
acquire the number of shares of common stock of the Company as set
forth on the signature page hereto, provided that Warrants
exercisable for a maximum number of shares of common stock of the
Company equal to ten percent (10%) of the Company’s Issued
Shares (as defined below) as calculated as of the Warrant Issuance
Date shall be issued to Participants in this Offering. The Warrants
shall have a three (3) year term and be exercisable on a cash basis
at a price per share equal to the Warrant Exercise Price (as
defined below). The shares of common stock issuable upon exercise
of the Warrants shall be referred to herein as the
“Warrant
Shares”. The Shares, and the shares of common stock
issuable upon exercise of the Shares, the Warrants, and the Warrant
Shares collectively are referred to herein as the
“Securities”.
(g) For
purposes of this Agreement:
(i) “Affiliate”
means (x) any Person directly or indirectly controlling, controlled
by or under common control with another Person, or (y) any manager,
director, officer, partner or employee of a Person; a Person shall
be deemed to control another Person if such Person possesses,
directly or indirectly, the power to direct or cause the direction
of the management and policies of such other Person, whether
through ownership of voting securities, by contract, or
otherwise.
(ii) “Conversion
Terms” shall be the terms and conditions of the
conversion of the Company’s Shares into common stock of the
Company as set forth in the Certificate.
(iii) “Dividend
Forfeiture” shall mean the forfeiture of certain
dividend rights held by the Shares as set forth in the
Certificate.
(iv)
“Issued Shares”
shall mean the Company’s issued and outstanding shares of
common stock and preferred stock, on an as-converted to common
stock basis. For avoidance of doubt, for purposes of determining
the number of “Issued Shares,” the calculation shall
include the Shares (including Debt Conversion Shares) on an
as-converted to common stock basis (or shares of common stock
issued upon conversion of the Shares if already converted), but
shall not include the Warrants, or any other options, warrants,
convertible securities or non-issued shares under the New
Plan.
(v)
“Material Adverse
Effect” means any change, event, development or
occurrence, individually or with all other changes, events,
developments or occurrences, that has or is reasonably likely to
(a) have a material adverse effect on the business, prospects,
assets, results of operations or financial condition of the Company
or (b) prevent or materially delay consummation of the transactions
contemplated hereby or otherwise prevent the Company from
performing its obligations under this Agreement on a timely basis
in any material respect.
(i) “NYSE
American Approval” shall mean such approvals as may be
required by the NYSE American in connection with conversion of the
Shares into Company common stock, issuance of the Warrants and
Warrant Shares upon exercise thereof, and creation of the New Plan,
including, if necessary, initial listing approval of the shares of
common stock issuable upon conversion of the Shares and Warrant
Shares on the NYSE American.
(ii) “New
Plan” shall mean the Company’s equity incentive
plan as adopted or amended by the Board of Directors prior to
Closing, subject to receipt of Shareholder Approval and NYSE
American Approval post-Closing.
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(iii)
“Person” means
any individual, corporation, partnership, joint venture, limited
liability company, trust, unincorporated organization or
governmental entity.
(iv) “Placement
Agent” means Somerley International (Beijing)
Limited.
(v) “Shareholder
Approval” shall mean the receipt of the requisite
approval from the Company’s shareholders necessary to approve
the Conversion Terms (defined below), Dividend Forfeiture (defined
below), creation of the New Plan (defined below), and such other
matters that are required to be approved by the shareholders of the
Company pursuant to applicable NYSE American and SEC rules and
regulations.
(vi)
“Warrant Issuance
Date” shall mean the date five (5) business days
following the later to occur of (x) the Company’s receipt of
Shareholder Approval (as defined below) and (y) the Company’s
receipt of NYSE American Approval (as defined below).
(vii) “Warrant
Exercise Price” shall mean the five (5) day trailing
average closing price (or the closing bid, if no sales were
reported) of the Company’s publicly-traded common stock on
the Warrant Issuance Date as quoted on the NYSE American (or other
quotation system if not traded on the NYSE American).
(b) The
closing (the “Closing”) of this offering (the
“Offering”) is
scheduled to occur as soon as possible, but no later than September
30, 2017, unless extended upon mutual written agreement by the
Participants and the Company. The Closing of this Offering will be
for a minimum of 542,790 Shares (the “Aggregate Shares”) representing
53.68% of the Company’s Issued Shares at Closing (the
“Company
Percentage”) (subject to increase as set forth below),
accompanied by the Company’s obligation to issue the Warrants
as set forth on the signature page hereto, provided that Warrants
exercisable for a maximum number of shares of common stock of the
Company not to exceed ten percent (10%) of the Company’s
Issued Shares as calculated as of the Warrant Issuance Date,
resulting in at least USD 12,000,000 of gross proceeds to the
Company. The number of Shares issuable to Absolute Frontier Limited
shall be increased by 26,480 Shares, with a corresponding
proportional increase to the Company Percentage, in the event
$500,000 of the gross proceeds received by the Company in the
Offering is used by the Company to repay existing Company debt
pursuant to the Debt Conversion Agreement. The number of Aggregate
Shares issuable at Closing collectively to the Participants shall
be adjusted based on the Company’s Issued Shares as
calculated immediately prior to Closing such that the Aggregate
Shares issuable collectively to the Participants shall equal the
Company Percentage as calculated at such time; provided, however,
the number of Shares issuable to Dragon Gem Limited shall not
exceed 49.0% of the Company’s Issued Shares at Closing, with
any and all additional Shares to be issued to Absolute Frontier
Limited at Closing.
(c) Conditions
to Closing. Closing shall be conditioned upon the following,
unless waived in writing by the Company and the
Participant:
(i) Series
A Convertible Preferred Stock Conversion: On or prior to
Closing, the Company shall have taken such actions as are necessary
or required to complete the Series A Conversion and all of the
issued and outstanding shares of Series A Convertible Preferred
Stock of the Company (the “Series A Preferred”) shall have
converted into common stock of the Company or forfeited and
cancelled (the “Series A
Conversion”).
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(ii) Debt
Restructuring: On or prior to Closing, the Company shall
have completed the conversion, satisfaction and/or discharge of all
Company debt other than the Permitted Debt. For purposes of this
Agreement, “Permitted
Debt” shall mean: (x) those certain Senior Secured
Promissory Notes, dated May 12, 2016, entered into with each of
BBLN-PEDCO Corp. and BHLN-PEDCO Corp., with an aggregate
outstanding principal amount not to exceed USD 5.8 million at
Closing (the “Tranche A
Debt”); (y) seven (7) secured promissory notes, dated
March 22, 2013, as amended to date, with an aggregate outstanding
principal amount not to exceed USD 475,000 at Closing. All Company
debt to be converted into Shares shall be converted simultaneously
with the Closing of the Offering pursuant to the terms of a Debt
Repayment and Conversion Agreement (the “Debt Conversion Shares” and the
“Debt Conversion
Agreement”), with no Shares to be issued and
outstanding immediately prior to Closing. In addition, on or prior
to Closing, the Company shall have completed the restructure of the
Tranche A Debt on terms acceptable to Participant.
(iii) Voting
Agreements: The Company shall have entered into voting
agreements with key shareholders of the Company necessary to secure
Shareholder Approval.
(iv) Certificate:
The Company shall have filed the Certificate with the Secretary of
State of the State of Texas, which Certificate provides for, in
part, the automatic conversion of all Shares, including the Debt
Conversion Shares, into common stock of the Company upon
Shareholder Approval and NYSE American Approval and shall continue
to be in full force and effect.
(v) NYSE
American Confirmation: The Company shall have received
confirmation that issuance of the Shares and the Warrants at
Closing shall not require Company shareholder approval prior to
Closing, and that the additional listing on the NYSE American of
the shares of Company common stock upon conversion of the Shares
pursuant to the Certificate is approved pending receipt of
Shareholder Approval (the “NYSE American Closing
Approval”).
(vi) Board
Approval: The Company shall have delivered a certificate,
executed on behalf of the Company by its Secretary, dated as of the
Closing, certifying the resolutions adopted by the Board of
Directors of the Company approving the transactions contemplated by
this Subscription, the Certificate, the Warrants and the other
transaction documents and the issuance (or reservation of) of the
Securities and an increase in the authorized number of members of
the Board of Directors of the Company. The Company shall have
performed in all material respects all obligations and covenants
herein required to be performed by it on or prior to the
Closing.
(vii) Regulatory
Approval. The Company shall have received approval for the
transactions contemplated herein by such U.S. regulatory committees
as may be required by Participant and the Company upon mutual
agreement prior to Closing.
(d) The
Company shall pay to the Placement Agent, the Company’s
financial advisor in the Offering, a cash commission equal to 7.0%
of the cash investment received from the Participant in the
Offering, excluding any consideration received by the Company upon
future exercise of the Warrants (the “Placement Agent Fee”).
(e) The
Company plans to use the proceeds from the Offering as follows: (i)
fund development of the Company’s existing oil and gas
assets; (ii) fund additional asset acquisitions and business
combinations consistent with the Participants’ vision for
growing the Company; (iii) for general working capital, including
funding expenses related to the Offering; (iv) repayment of not to
exceed $500,000 in existing Company debt at Closing; and (v) fund
such additional Company debt repayment and/or repurchase or
redemption of Debt Conversion Shares at or following Closing as
approved by the Participants and the Company’s Board of
Directors.
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(f) Participant
hereby agrees not to, and will cause its Affiliates not to, enter
into any “put equivalent position” as such term is
defined in Rule 16a-1 under the Securities Exchange Act of 1934, as
amended, or short sale position with respect to the
Securities.
(g) Post-Closing
Covenants.
(i) It
is the parties’ intention that upon Closing, existing Company
management shall remain in place and will continue to oversee the
post-Closing company’s operations, subject to Board of
Directors approval. Upon Closing, the Company Board of
Directors shall be composed of six (6) members, comprised of
existing Board members ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, and
▇▇▇▇ ▇▇▇▇▇▇, and up to three (3) designees of the Participant, at
least two (2) of whom shall be “independent” as defined
under applicable NYSE American and SEC regulations. In addition,
upon receipt of Board and Shareholder Approval, the Company shall
be renamed and rebranded as mutually agreed by the Company and the
Participant.
(ii)
Within sixty (60) days of the Closing, the Company shall use
commercially reasonable efforts to file all the required documents
with the Securities and Exchange Commission (the
“SEC”) necessary
to seek Shareholder Approval.
(iii)
The Company shall use commercially reasonable efforts to file all
the required documents with the SEC to raise funds through a
registered public offering (a “Secondary Offering”), pursuant to
the terms and conditions set forth in the Debt Conversion
Agreement, which terms and conditions shall be approved by the
Participant.
(iv)
After Closing, the then-constituted Board of Directors of the
Company shall confer on the New Plan to be proposed as follows: (x)
Upon receipt of Shareholder Approval and NYSE American Approval,
the Company may issue fully-vested restricted stock (the
“Vested Shares”)
equal to 5% of the Company’s Issued Shares as calculated
immediately following the later to occur of (i) Shareholder
Approval and (ii) NYSE American Approval, to designated
then-current members of Company management. In order to satisfy the
recipients’ tax obligations with respect to the receipt of
the Vested Shares, the Company may withhold otherwise deliverable
shares having a value equal to the amount required to be withheld,
and shall remit the required amounts to the taxing authorities as
permitted under the New Plan on behalf of the recipients. At or
before the Closing, designated current members of Company
management shall enter into side letters with the Company providing
that, in the event the Company does not grant the Vested Shares as
described above to such management members by the earlier to occur
of (i) the date of approval of the New Plan by shareholders of the
Company, and (ii) the date that is 180 days following the Closing
(such date, the “Trigger
Date”), then the Company shall pay to each such
management member a cash bonus amount equal to the value that such
Vested Shares would have had as calculated on the Trigger Date.
Upon the later to occur of receipt of (i) Shareholder Approval and
(ii) NYSE American Approval, in order to incentivize Company
management, new oil and gas operational team members, employees,
Board members and designated advisors going forward, the Company
shall grant additional awards available under the New Plan as
options and restricted stock subject to future vesting, with
existing Company management receiving restricted stock of the
Company (the “Unvested
Management Shares”) immediately following Shareholder
Approval, that together with the Vested Shares would equal 10% of
the Issued Shares. The Unvested Management Shares will vest on a
schedule to be determined by the Board of Directors. New oil and
gas operational team members and other employees will receive
restricted stock or options of the Company from the remaining
available shares in the New Plan per the recommendations of the
Board of Directors.
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2.
Representations by
Participant. In consideration of the Company’s
potential acceptance of the Subscription, each Participant
individually, and not jointly or severally, makes the following
representations and warranties to the Company, which warranties and
representations shall survive any acceptance of the Subscription by
the Company:
(a)
Without limiting its right to rely upon the
representations and warranties of the Company in Section 4, prior
to the time of purchase of the Shares, Participant has had an
opportunity to review the Certificate and the Company’s
reports, schedules, forms, statements and other documents filed by
it with the United States Securities and Exchange Commission (the
“SEC Reports”),
and Participant has had the opportunity to ask questions and
receive any additional information from persons acting on behalf of
the Company to verify Participant’s understanding of the
terms thereof and of the Company’s business and status
thereof. Participant acknowledges that no officer, director,
broker-dealer, placement agent, finder or other person affiliated
with the Company has given Participant any information or made any
representations, oral or written, other than as provided in the SEC
Reports and herein, on which Participant has relied upon in
deciding to invest in the Securities, including without limitation,
any information with respect to future acquisitions, mergers or
operations of the Company or the economic returns which may accrue
as a result of the acquisition of the Securities.
(b)
Participant acknowledges that Participant
has not seen, received, been presented with, or been solicited by
any leaflet, public promotional meeting, newspaper or magazine
article or advertisement, radio or television advertisement, or any
form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) with respect to
the Securities.
(c)
The Securities are being acquired for Participant’s own
account and not with a view to immediately resale the Securities in
violation of the Securities Act.
(d) Participant
acknowledges that the Securities have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or qualified under any
blue sky laws, in reliance, in part, on Participant’s
representations, warranties and agreements made
herein.
(e) Other
than the rights specifically set forth in this Subscription and
disclosed in the SEC Reports, Participant represents, warrants and
agrees that the Company and the officers of the Company (the
“Company’s
Officers”) are under no obligation to register or
qualify the Securities under the Securities Act or under any state
securities law, or to assist the undersigned in complying with any
exemption from registration and qualification.
(f)
Participant represents that Participant meets the
criteria for participation because: (i) Participant has a
pre-existing personal or business relationship with the Company or
one or more of its partners, officers, directors or controlling
persons; or (ii) by reason of Participant’s business or
financial experience, or by reason of the business or financial
experience of its financial advisors who are unaffiliated with, and
are not compensated, directly or indirectly, by the Company or any
affiliate or selling agent of the Company, Participant is capable
of evaluating the risk and merits of an investment in the
Securities and of protecting its own interests;
(g)
Participant represents that Participant
is an “accredited investor” as such term is defined in
Rule 501 of the Securities Act, and has executed the Certificate of
Accredited Investor Status and Investor Information, attached
hereto as Exhibit
B.
6
(h)
Participant understands that the right to transfer the Securities
will be restricted unless the transfer is not in violation of the
Securities Act and any other applicable state or foreign securities
laws (including investment suitability standards), that the Company
will not consent to a transfer of the Securities unless the
transferee represents that such transferee meets the financial
suitability standards required of an initial participant, and that
the Company has the right, in its absolute discretion, to refuse to
consent to such transfer; provided that the Securities
may be transferred to Permitted Transferees (as defined in the
Certificate) without Company consent.
(i) Participant
has been advised to consult with its own attorney or attorneys
regarding all legal matters concerning an investment in the Company
and the tax consequences of purchasing the Securities, and has done
so, to the extent Participant considers necessary.
(j) Participant
acknowledges that the tax consequences of investing in the Company
will depend on particular circumstances, and neither the Company,
the Company’s Officers, any other investors, nor the
partners, shareholders, members, directors, agents, officers,
employees, affiliates or consultants of any of them, will be
responsible or liable for the tax consequences to Participant of an
investment in the Company. Participant will look solely to and rely
upon its own advisers with respect to the tax consequences of this
investment.
(k) All
information which Participant has provided to the Company
concerning Participant, its financial position and its knowledge of
financial and business matters, and any information found in the
Certificate of Accredited Investor Status and Investor Information,
is truthful, accurate, correct, and complete as of the date set
forth herein.
(m)
Each certificate or instrument representing securities issuable
pursuant to this Agreement will be endorsed with the following
legend:
THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE
TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH
ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF
THESE SECURITIES WHICH IS REASONABLY SATISFACTORY TO THE COMPANY,
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF SUCH ACT.
3.
Representations and Warranties by
the Company. The Company represents and warrants to
Participant that:
(a) Due
Formation. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate
power and authority to own or lease its properties and assets and
to carry on its business as now being conducted. The Company is
duly qualified as a foreign entity to do business and is in good
standing in each jurisdiction where the nature of the business
conducted or property owned by it makes such qualification
necessary, other than those jurisdictions in which the failure to
so qualify would not have a Material Adverse Effect on the
business, operations or financial condition of the
Company.
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(b) Capitalization.
The Company is authorized under its Certificate of Formation, as
amended, to issue 200,000,000 shares of common stock. The
Company’s disclosure of its issued and outstanding capital
stock in its most recent SEC Filing containing such information is
accurate in all material respects as of the date indicated in such
SEC Filing. All of the issued and outstanding shares of the
Company’s capital stock have been duly authorized and validly
issued and are fully paid and nonassessable; none of such shares
were issued in violation of any pre-emptive rights; and such shares
were issued in compliance in all material respects with applicable
state and federal securities law and any rights of third parties.
No Person is entitled to pre-emptive or similar statutory or
contractual rights with respect to the issuance by the Company of
any securities of the Company, including, without limitation, the
Securities. Except for stock options, warrants and other
convertible securities described in the SEC Filings, there are no
outstanding warrants, options, convertible securities or other
rights, agreements or arrangements of any character under which the
Company is or may be obligated to issue any equity securities of
any kind, except as contemplated by this Agreement. Except for
voting agreements contemplated to be entered into in favor of the
Participant at or around the Closing, there are no voting
agreements, buy-sell agreements, option or right of first purchase
agreements or other agreements of any kind among the Company and
any of the securityholders of the Company relating to the
securities of the Company held by them. Except as provided in the
Debt Conversion Agreement, no Person has the right to require the
Company to register any securities of the Company under the
Securities Act, whether on a demand basis or in connection with the
registration of securities of the Company for its own account or
for the account of any other Person. The issuance and sale of the
Shares and Warrants hereunder will not obligate the Company to
issue shares of common stock or other securities to any other
Person (other than the Participant and the holders of the debt who
will be issued the Debt Conversion Shares) and will not result in
the adjustment of the exercise, conversion, exchange or reset price
of any outstanding security. The Company does not have outstanding
stockholder purchase rights or “poison pill” or any
similar arrangement in effect giving any Person the right to
purchase any equity interest in the Company upon the occurrence of
certain events.
(c) Authority;
Enforceability. This Subscription, the Certificate, and the
Warrants delivered together with this Subscription or in connection
herewith have been duly authorized, executed, and delivered by the
Company and are legal, valid and binding agreements, enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, and similar laws
of general applicability relating to or affecting creditors' rights
generally and to general principles of equity; and the Company has
the requisite corporate power and authority and has taken all
requisite corporate action necessary for, and no further action on
the part of the Company, its officers, directors and stockholders
is necessary for, (i) the authorization, execution and delivery of
this Subscription, the Certificate, and the Warrants, (ii) the
authorization of the performance of all obligations of the Company
hereunder or thereunder, and (iii) the authorization, issuance (or
reservation for issuance) and delivery of the Shares and
Warrants.
(d)
No General
Solicitation. Neither the Company, nor any of its
affiliates, nor to its knowledge, any person acting on its or their
behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the
Securities Act) in connection with the offer or sale of the
Securities.
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(e)
Governmental
Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing
with, any federal, state or local governmental authority on the
part of the Company is required in connection with the consummation
of the transactions contemplated by this Subscription, except for
the approval of the NYSE American, the filing of the Certificate
and the amended Series A Preferred Certificate of Designations with
the Secretary of State of Texas, applicable state securities laws
and Regulation D of the Securities Act. Subject to the
accuracy of the representations and warranties of the Participant
set forth in Section 2 hereof, the Company has taken all action
necessary to exempt (i) the issuance and sale of the Shares and
Warrants and (ii) the other transactions contemplated by this
Subscription, the Certificate and the Warrants from the provisions
of any stockholder rights plan or other “poison pill”
arrangement, any anti-takeover, business combination or control
share law or statute binding on the Company or to which the Company
or any of its assets and properties is subject that is or could
reasonably be expected to become applicable to the Participant as a
result of the transactions contemplated hereby, including without
limitation, the issuance of the Shares and the Warrants and the
ownership, disposition or voting of the Securities by the
Participant or the exercise of any right granted to the Participant
pursuant to this Subscription or the other transaction documents
relating hereto.
(f) No
Litigation. There is no action, suit, proceeding or
investigation pending or, to the Company’s knowledge,
currently threatened against the Company or any of its subsidiaries
that questions the validity of this Subscription or the right of
the Company to enter into it, or to consummate the transactions
contemplated hereby or thereby, or that might result, either
individually or in the aggregate, in any material adverse changes
in the assets, condition or affairs of the Company, financially or
otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for the
foregoing. Neither the Company nor any of its subsidiaries is a
party or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or
investigation by the Company or any of its subsidiaries currently
pending or which the Company or any of its subsidiaries intends to
initiate. The foregoing includes, without limitation, actions,
suits, proceedings or investigations pending or threatened in
writing (or any basis therefor known to the Company) involving the
prior employment of any of the Company’s employees, their use
in connection with the Company’s business, or any information
or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior
employers.
(g) Compliance
with Other Instruments.
(i) The
Company is not in violation or default (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), of any provisions
of its formation documents, bylaws or of any instrument, judgment,
order, writ, decree or contract to which it is a party or by which
it is bound or, to its knowledge, of any provision of federal or
state statute, rule or regulation applicable to the Company, nor
has the Company 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 is bound
(whether or not such default or violation has been waived). The
execution, delivery and performance of this Subscription, the
Certificate and the Warrants, and the consummation of the
transactions contemplated hereby will not result in any such
violation or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a breach or default
under any such provision, instrument, judgment, order, writ, decree
or contract or an event which results in the creation of any lien,
charge or encumbrance upon any assets of the Company.
(ii) To
its knowledge, the Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the
Company’s loss of any right granted under any license,
distribution agreement or other agreement.
9
(h)
Tax Returns
and Payments. The Company has filed all tax returns and
reports as required by law. These returns and reports are true and
correct in all material respects. The Company has paid all taxes
and other assessments due.
(i) Permits.
The Company and each of its subsidiaries has all franchises,
permits, licenses and any similar authority necessary for the
conduct of its business, the lack of which could materially and
adversely affect the business, properties, prospects, or financial
condition of the Company. The Company is not in default in any
material respect under any of such franchises, permits, licenses or
other similar authority.
(j) Offering
Valid. Assuming the accuracy of the representations and
warranties of Participant contained in Section 2 hereof, the offer,
sale and issuance of the Securities will be exempt from the
registration requirements of the Securities Act, and will have been
registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification
requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit
any offers to sell or has offered to sell or will offer to sell all
or any part of the Shares to any person or persons so as to bring
the sale of such Shares by the Company within the registration
provisions of the Securities Act or any state securities laws.
Subject to receipt of required NYSE American Closing Approval, at
or prior to Closing the issuance and sale of the Securities does
not contravene the rules and regulations of the NYSE
American.
(k)
Valid
Issuance. The Shares and the Warrants have been duly and
validly authorized and, when issued and paid for pursuant to this
Subscription, will be validly issued, fully paid and nonassessable,
and shall be free and clear of all encumbrances and restrictions
(other than those created by the Participant), except for
restrictions on transfer set forth in the transaction documents or
imposed by applicable securities laws.
(l) SEC
Filings. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the
Company under the Securities Act and the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the one year
preceding the date hereof (collectively, the “SEC
Filings”). At the time of filing thereof, the SEC
Filings complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as applicable, and the
rules and regulations of the SEC thereunder. All material
agreements to which the Company is a party or to which the property
or assets of the Company is subject are included as part of or
identified in the SEC Filings, to the extent such agreements are
required to be included or identified pursuant to the rules and
regulations of the SEC.
(m)
Title to
Properties. The Company and its subsidiaries have good and
marketable title to all real properties and all other properties
and assets owned by them, in each case free from liens,
encumbrances and defects, except such as would not reasonably be
expected, individually or in the aggregate, to have a Material
Adverse Effect; and the Company and its subsidiaries hold any
leased real or personal property under valid and enforceable leases
with no exceptions, except such as would not reasonably be
expected, individually or in the aggregate, to have a Material
Adverse Effect.
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Subscription
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Participant’s
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PEDEVCO
Corp.
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10
(n) Financial
Statements. The financial statements included in each SEC
Filing comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing (or to the extent
corrected by a subsequent restatement) and present fairly, in all
material respects, the consolidated financial position of the
Company as of the dates shown and its consolidated results of
operations and cash flows for the periods shown, subject in the
case of unaudited financial statements to normal, immaterial
year-end audit adjustments, and such consolidated financial
statements have been prepared in conformity with United States
generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”)
(except as may be disclosed therein or in the notes thereto, and
except that the unaudited financial statements may not contain all
footnotes required by GAAP, and, in the case of quarterly financial
statements, except as permitted by Form 10-Q under the Exchange
Act). Except as set forth in the financial statements of the
Company included in the SEC Filings filed prior to the date hereof,
the Company has not incurred any liabilities, contingent or
otherwise, except those incurred in the ordinary course of
business, consistent (as to amount and nature) with past practices
since the date of such financial statements, none of which,
individually or in the aggregate, have had or would reasonably be
expected to have a Material Adverse Effect.
(o) Brokers
and Finders. Other than the Placement Agent, no Person will
have, as a result of the transactions contemplated by this
Subscription, the Certificate and the Warrants, any valid right,
interest or claim against or upon the Company or Participant for
any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on
behalf of the Company. No Participant shall have any obligation
with respect to any fees, or with respect to any claims made by or
on behalf of other Persons for fees, in each case of the type
contemplated by this Section 3(o) that may be due in connection
with the transactions contemplated by this Subscription, the
Certificate or the Warrants.
(p)
Transactions with Affiliates.
None of the executive officers or directors of the Company and, to
the Company’s knowledge, none of the employees of the Company
is presently a party to any transaction with the Company (other
than as holders of stock options, and for services as employees,
officers and directors), 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 Company’s knowledge, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or
partner.
(q) Disclosures.
Neither the Company nor any Person acting on its behalf has
provided the Participant or their agents or counsel with any
information that constitutes or would reasonably be expected to
constitute material, non-public information concerning the Company
or its subsidiaries, other than with respect to the transactions
contemplated hereby which will be disclosed in a Current Report on
Form 8-K within four business days of the Closing. The SEC Filings
do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they
were made, not misleading. The Company understands and confirms
that the Participant will rely on the foregoing representations in
effecting transactions in securities of the Company.
(r)
Required Filings.
Except for the transactions contemplated by this Subscription,
including the acquisition of the Securities contemplated hereby, no
event or circumstance has occurred or information exists with
respect to the Company or its business, properties, operations or
financial condition, 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.
(s)
Manipulation of
Price. The Company has not, and, to the Company’s
knowledge, no Person acting on its behalf has taken, directly or
indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the
Securities.
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Subscription
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Participant’s
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PEDEVCO
Corp.
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11
4.
Agreement to Indemnify. The
Company agrees to indemnify and hold harmless each Participant and
its Affiliates, and their respective directors, officers, members,
managers, employees, and agents, from and against any and all
losses, claims, damages, liabilities and expenses (including
without limitation reasonable and documented attorney fees and
disbursements and other documented out-of-pocket expenses
reasonably incurred in connection with investigating, preparing or
defending any action, claim or proceeding, pending or threatened
and the costs of enforcement thereof) (collectively,
“Losses”)
to which such Person may become subject as a result of any breach
of representation, warranty, covenant or agreement made by or to be
performed on the part of the Company under this Subscription, the
Certificate and the Warrants, and will reimburse any such Person
for all such amounts as they are incurred by such Person solely to
the extent such amounts have been finally judicially determined not
to have resulted from such Person’s fraud or willful
misconduct.
5.
Subscription Binding on Heirs,
etc. This Subscription, upon acceptance by the Company,
shall be binding upon the heirs, executors, administrators,
successors and assigns of the Participant. If the undersigned is
more than one person, the obligations of the undersigned shall be
joint and several and the representations and warranties shall be
deemed to be made by and be binding on each such person and his or
her heirs, executors, administrators, successors, and
assigns.
6.
Execution Authorized. If
this Subscription is executed on behalf of a corporation,
partnership, trust or other entity, the undersigned has been duly
authorized and empowered to legally represent such entity and to
execute this Subscription and all other instruments in connection
with the Securities and the signature of the person is binding upon
such entity.
7.
Governing
Law. This Subscription shall be construed in accordance with
the laws of the State of Texas.
8.
Dispute Resolution. In the
event of any dispute arising out of or relating to this
Subscription, then such dispute shall be submitted to binding
arbitration with the Houston, Texas branch of the American
Arbitration Association (“AAA”) to be governed by
AAA’s Commercial Rules of Arbitration (the
“AAA Rules”) and
heard before one arbitrator. The parties shall attempt to mutually
select the arbitrator. In the event they are unable to mutually
agree, the arbitrator shall be selected by the procedures
prescribed by the AAA Rules. Notwithstanding anything in the AAA
Rules to the contrary, discovery shall be limited exclusively to
the mutual production of documents, and written submissions to the
arbitrator shall be limited to one brief from each party and one
responsive brief from each party.
9.
Further Assurances. The
Company and Participant hereby covenant that they will, whenever
and as reasonably requested by the other party, do, execute,
acknowledge and deliver any and all such other and further acts,
deeds, confirmations, and any instruments of further assurance,
approvals and consents as may reasonably be requested in order to
complete, insure and perfect the transactions contemplated
herein.
10.
Commercially Reasonable
Efforts. Each party shall use commercially reasonable
efforts to timely satisfy each of the conditions to the Closing. No
party shall intentionally perform or fail to perform any act that,
if performed or omitted to be performed, would prevent or excuse
the performance of this Agreement or any of the transactions
contemplated hereby.
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Participant’s
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PEDEVCO
Corp.
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12
11.
Severability. If any term or
other provision of this Agreement is invalid, illegal or incapable
of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected
in any manner adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of
being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to affect the original intent of the
parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent
possible.
12.
Entire Agreement, Amendments and
Waivers. This Agreement constitutes the entire agreement of
the parties regarding the subject matter of the Agreement and
expressly supersedes all prior and contemporaneous understandings
and commitments, whether written or oral, with respect to the
subject matter hereof. No variations, modifications, changes or
extensions of this Agreement or any other terms hereof shall be
binding upon any party hereto unless set forth in a document duly
executed by such party or an authorized agent of such
party.
13.
Counterparts, Effect of Facsimile,
Emailed and Photocopied Signatures. This Agreement and any
signed agreement or instrument entered into in connection with this
Agreement, and any amendments hereto or thereto, may be executed in
one or more counterparts, all of which shall constitute one and the
same instrument. Any such counterpart, to the extent delivered by
means of a facsimile machine or by .pdf, .tif, .gif, .peg or
similar attachment to electronic mail (any such delivery, an
“Electronic
Delivery”) shall be treated in all manner and respects
as an original executed counterpart and shall be considered to have
the same binding legal effect as if it were the original signed
version thereof delivered in person. At the request of any party,
each other party shall re execute the original form of this
Agreement and deliver such form to all other parties. No Party
shall raise the use of Electronic Delivery to deliver a signature
or the fact that any signature or agreement or instrument was
transmitted or communicated through the use of Electronic Delivery
as a defense to the formation of a contract, and each such party
forever waives any such defense, except to the extent such defense
relates to lack of authenticity.
[Remainder
of page left intentionally blank. Signature pages
follow.]
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Subscription
Agreement
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Participant’s
Initials
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PEDEVCO
Corp.
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13
Subject
to acceptance by the Company, the undersigned has completed this
Subscription Agreement to evidence his/her/its subscription for the
purchase of Shares of the Company, this 17th day of August,
2017.
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PARTICIPANT
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DRAGON
GEM LIMITED
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/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
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(Signature
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By:
▇▇▇▇▇▇▇ ▇. ▇▇▇
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Its:
Director’s Representative
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Shares
Purchased: _________________
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Wire
Transfer Sent in the Amount of:
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$_________________________________
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ABSOLUTE
FRONTIER LIMITED
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/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
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(Signature
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By:
▇▇▇▇▇▇▇ ▇. ▇▇▇
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Its:
Director’s Representative
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Shares
Purchased:___________________
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Wire
Transfer Sent in the Amount of:
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$_________________________________
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Subscription
Agreement
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Participant’s
Initials
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PEDEVCO
Corp.
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14
The
Company has accepted this subscription this 17th day of August,
2017
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“COMPANY”
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PEDEVCO
CORP.,
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a
Texas corporation
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By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
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President and Chief
Executive Officer
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Address
for notice:
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PEDEVCO
Corp.
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▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
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▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Attn:
Corporate Counsel
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Subscription
Agreement
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Participant’s
Initials
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PEDEVCO
Corp.
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15
Exhibit A
Form of Warrant
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Subscription
Agreement
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Participant’s
Initials
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PEDEVCO
Corp.
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Exhibit B
CERTIFICATE OF ACCREDITED INVESTOR STATUS AND INVESTOR
INFORMATION
Except
as may be indicated by the undersigned below, the undersigned is an
“accredited investor,” as that term is defined in
Regulation D under the Securities Act of 1933, as amended (the
“Securities
Act”). The undersigned has initialed the box below
indicating the basis on which he is representing his status as an
“accredited investor”:
______
a bank as defined
in Section 3(a)(2) of the Securities Act, or any savings and loan
association or other institution as defined in Section 3(a)(5)(A)
of the Securities Act whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934, as amended (the
“Securities Exchange
Act”); an insurance company as defined in Section
2(13) of the Securities Act; an investment company registered under
the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that Act; a small
business investment company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; a plan established and maintained by a
state, its political subdivisions, or any agency or instrumentality
of a state or its political subdivisions, for the benefit of its
employees, and such plan has total assets in excess of $5,000,000;
an employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such
Act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000 or,
if a self-directed plan, with investment decisions made solely by
persons that are “accredited investors”;
____
a private business
development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940;
____
an organization
described in Section 501(c)(3) of the Internal Revenue Code,
corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of
$5,000,000;
____
a natural person
whose individual net worth, or joint net worth with the
undersigned’s spouse, at the time of this purchase exceeds
$1,000,000. For purposes of this item, "net worth" means the excess
of total assets at fair market value (including personal and real
property, but excluding the estimated fair market value of a
person's primary home) over total liabilities. Total liabilities
excludes any mortgage on the primary home in an amount of up to the
home's estimated fair market value as long as the mortgage was
incurred more than 60 days before the Securities are purchased, but
includes (i) any mortgage amount in excess of the home's fair
market value and (ii) any mortgage amount that was borrowed during
the 60-day period before the closing date for the sale of
Securities for the purpose of investing in the
Securities;
____
a natural person
who had an individual income in excess of $200,000 in each of the
two most recent years or joint income with the undersigned’s
spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the
current year;
____
a trust with total
assets in excess of $5,000,000, not formed for the specific purpose
of acquiring the securities offered, whose purchase is directed by
a person who has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and
risks of the prospective investment;
____
an entity in which
all of the equity holders are “accredited investors” by
virtue of their meeting one or more of the above standards;
or
____
an individual who
is a director or executive officer of PEDEVCO Corp.
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Subscription
Agreement
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Participant’s
Initials
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PEDEVCO
Corp.
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Investor Information: (This must be
consistent with the form of ownership selected below and the
information provided above)
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Name
(please print):
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If
entity named above,
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By:
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Its:
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Social
Security or Taxpayer I.D. Number:
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Business
Address (including zip code):
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Business
Phone:
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Residence
Address (including zip code):
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Email
Address:
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Residence
Phone:
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All
communications to be sent to:
________
Business or ________
Residence Address
________
Email
Please
indicate below the form in which you will hold title to your
interest in the Shares and Warrants. PLEASE CONSIDER CAREFULLY.
ONCE YOUR SUBSCRIPTION IS ACCEPTED, A CHANGE IN THE FORM OF TITLE
CONSTITUTES A TRANSFER OF THE INTEREST IN THE SHARES AND/OR
WARRANTS AND MAY THEREFORE BE RESTRICTED BY THE TERMS OF THIS
SUBSCRIPTION, AND MAY RESULT IN ADDITIONAL COSTS TO YOU.
Participants should seek the advice of their attorneys in deciding
in which of the forms they should take ownership of the interest in
the Shares and Warrants, because different forms of ownership can
have varying gift tax, estate tax, income tax, and other
consequences, depending on the state of the investor's domicile and
his or her particular personal circumstances.
________
INDIVIDUAL OWNERSHIP (one signature required)
________
JOINT TENANTS WITH RIGHT OF SURVIVORSHIP AND NOT AS TENANTS IN
COMMON (both or all parties must sign)
________
COMMUNITY PROPERTY (one signature required if interest held in one
name, i.e., managing spouse; two signatures required if interest
held in both names)
________
TENANTS IN COMMON (both or all parties must sign)
________
GENERAL PARTNERSHIP (fill out all documents in the name of the
PARTNERSHIP, by a PARTNER authorized to sign)
________
LIMITED PARTNERSHIP (fill out all documents in the name of the
LIMITED PARTNERSHIP, by a GENERAL PARTNER authorized to
sign)
________
LIMITED LIABILITY COMPANY (fill out all documents in the name of
the LIMITED LIABILITY COMPANY, by a member authorized to
sign)
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Subscription
Agreement
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Participant’s
Initials
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PEDEVCO
Corp.
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CORPORATION (fill out all documents in the name of the CORPORATION,
by the President or other officer authorized to sign)
________
TRUST (fill out all documents in the name of the TRUST, by the
Trustee, and include a copy of the instrument creating the trust
and any other documents necessary to show the investment by the
Trustee is authorized. The date of the trust must appear on the
Notarial where indicated.)
IN
WITNESS WHEREOF, the undersigned has executed this Certificate of
Accredited Investor Status and Investor Information effective as of
August ___,
2017.
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By:
________________________________
Signature
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Printed
Name:________________________
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Title:
________________________________________________________
(required for any
stockholder that is a corporation, partnership, trust or other
entity)
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________
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Subscription
Agreement
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Participant’s
Initials
|
PEDEVCO
Corp.
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