EXHIBIT 10.11
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY APPLICABLE STATE "BLUE SKY" OR SECURITIES LAWS, AND CANNOT BE SOLD,
TRANSFERRED, ASSIGNED, OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH
APPLICABLE FEDERAL AND STATE SECURITIES LAWS AND ANY RESTRICTIONS IMPOSED
HEREBY, AND WILL NOT BE TRANSFERRED OF RECORD UNLESS COMPLIANCE WITH SUCH
LAWS AND RESTRICTIONS IS MET.
April 13, 2007
AGREEMENT TO ISSUE WARRANTS
CapWest Resources, Inc. ("CapWest")
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
Chancellor Group, Inc., a Nevada corporation (the "Company"), agrees to
issue to CapWest warrants (the "Warrants") to purchase Two Million (2,000,000)
shares of the Company as set forth herein, subject to the terms and conditions
contained herein.
1. Issuance of Warrants. The Warrants, which shall be in the form attached
hereto as Exhibit A, shall be issued to you on the date hereof (the "Closing
Date") concurrently with the execution hereof in consideration of the loan (the
"Loan") made by CapWest to the Company contemporaneously herewith pursuant to
the terms of that certain Loan Agreement, dated of even date herewith (the "Loan
Agreement"), between CapWest, as lender, and the Company, Gryphon Production
Company, LLC, and Gryphon Field Services, LLC, as borrowers (the "Borrowers"),
said Loan being evidenced by that certain Advancing Line of Credit/Term Note,
dated of even date herewith, made payable by the Borrowers, as Makers to the
order of CapWest in the original principal amount of $10,000,000.00 (the
"Note"). The Warrants shall provide that CapWest, or such other holder or
holders of the Warrants to whom transfer is authorized in accordance with the
terms of this Agreement, shall have the right to purchase 2,000,000 shares of
the common stock of the Company for a purchase price of $0.001 per share (the
"Purchase Price") within five (5) years of the date of this Agreement. The term
"common stock" shall mean the common stock of the Company, as constituted on the
date hereof, and any shares, units, or other securities into which such common
stock shall have been changed or any shares or other securities resulting from
any reclassification of such common stock. The common stock purchasable upon
exercise of the Warrants are sometimes herein called the "Warrant Shares."
2. Private Placement: Restricted Transferability.
(a) The holder of the Warrants acknowledges that the Warrants and the
Warrant Shares have not been registered under the Securities Act of 1933, as
amended (the "Act"), or any applicable state blue sky or securities laws and
that the Warrants and the Warrant Shares, or any part thereof, can be sold,
transferred, assigned or otherwise disposed of only in compliance with
applicable federal and state securities laws, and subject to the other
restrictions contained herein.
(b) The holder of the Warrants represents and warrants that the Warrants
and the Warrant Shares are being or will be purchased without a view to
distribution or resale thereof in violation of the registration requirements of
the Act. It is understood that a subsequent sale of the Warrants or Warrant
Shares under certain circumstances might be deemed to constitute a distribution
within the meaning of and require registration under the provisions of the Act.
(c) The holder of the Warrants agrees not to make any sale or other
disposition of either the Warrants or the Warrant Shares except pursuant to a
registration statement which has become effective under the Act, setting forth
the terms of such offering, the underwriting discount and the commissions and
any other pertinent data with respect thereto, unless the holder of the Warrants
has provided the Company with an opinion of counsel reasonably acceptable to the
Company that such registration is not required.
(d) Any certificates for Warrant Shares may have affixed thereon an
appropriate legend as to the restrictions on transferability contained herein
and in the Warrants unless, in the opinion of counsel for the Company, such
legend would not be necessary and appropriate.
(e) Notwithstanding anything herein to the contrary, each certificate for
Warrant Shares issued hereunder shall bear a legend reading substantially as
follows (unless the Company receives an opinion of counsel reasonably
satisfactory to it that such legend is not required in order to assure
compliance with the Act or unless such registration(s) as would cause such
shares to no longer be restricted have been effectuated):
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT REGISTRATION UNDER
THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
3. Exercise of Warrants.
(a) During the period commencing on the date of this Agreement and ending
at 5:00 p.m., Texas time on April 13, 2012, CapWest may exercise the Warrants
from time to time only as to the whole number of shares of Warrant Shares upon
surrender of the Warrants by the holder thereof, accompanied by a subscription
for shares to be purchased in the form attached hereto as Exhibit B and by cash
or by a certified or bank cashier's check payable to the order of the Company in
the amount of $0.001 multiplied by the number of Warrant Shares for which
CapWest exercises the Warrants, delivered to the Company at its principal office
at ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and such holder shall thereupon be
entitled to receive the whole number of units of Warrant Shares to which such
holder is entitled pursuant to this Agreement.
(b) Each exercise of Warrants shall be deemed to have been effected
immediately prior to the close of business on the date on which the Warrants
shall have been surrendered to the Company in accordance with this Section 3,
and at such time the person or persons in whose name or names any certificate
for Warrant Shares shall be issuable upon such exercise shall be deemed to have
become the holder or holders of record thereof.
4. Delivery of Stock Certificates, etc. on Exercise. As soon as
practicable after the exercise of the Warrants, and in any event within 21 days
thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the holder thereof, or as such holder (upon payment by such holder of any
applicable transfer taxes) may direct, a certificate or certificates for the
number of fully paid and nonassessable Warrant Shares to which such holder shall
be entitled upon such exercise.
5. Payment of Taxes, etc. The Company covenants and agrees that the units
of Warrant Shares delivered upon exercise of the Warrants shall, at the time of
delivery for such shares of Warrant Shares, be validly issued and outstanding
and fully paid and nonassessable shares of common stock. The Company further
covenants and agrees that it will pay when due and payable any and all federal
and state original issue taxes which may be payable in respect of the issue of
the Warrants or any Warrant Shares issuable upon the exercise of the Warrants.
6. Put Option. CapWest shall have the Option (the "Put Option") during the
period (the "Put Option Period") beginning on the first to occur of the
following dates (a) the second anniversary of this Agreement; or (b) the date
when the Borrowers have paid the Loan in full, including all outstanding
principal, and accrued, unpaid interest, to put the Warrants to the Company for
repurchase at an exercise price of $1,000,000.00 (the "Exercise Price"). The Put
Option will automatically expire upon the expiration of the Put Option Period,
as the same may be extended from time to time by written agreement between
CapWest and the Company. The Company shall pay all costs and expenses incurred
by the Company and the holder of the Warrants in connection with CapWest's
exercise of the Put Option, including, without limitation, all attorneys' fees
incurred by the holder of the Warrants. To exercise the Put Option, CapWest must
deliver or cause to be delivered to the Company on or before the expiration of
the Put Option Period, written notice of its desire to exercise the Put Option.
Within thirty (30) days of its receipt of such written notice, the Company shall
transmit the Exercise Price to CapWest, and Capwest will transmit the Warrants
to the Company.
7. No Impairment. The Company will not, by amendment of its articles or
incorporation or certificate of organization or through any reorganization,
transfer of assets, consolidation, merger, dissolution or similar action, avoid
or seek to avoid the observance or performance of any of the terms of this
Agreement or of the Warrants, but will at all times in good faith assist in the
carrying out of such terms to the extent necessary or appropriate in order to
protect the rights of the holders under the terms of this Agreement and the
Warrants. In this regard, the Company (a) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable common shares upon the exercise of the Warrants,
and (b) will not transfer all or substantially all of its properties and assets
to any other person (corporate or otherwise), or consolidate with or merge or
liquidate into any other person or permit any other person to consolidate with
or merge into the Company (if the Company is not the surviving entity), unless
such other entity shall expressly assume in writing and be bound by all the
terms of this Agreement and the Warrants.
8. Reservation of Shares, etc. The Company will at all times reserve and
keep available, solely for issuance and delivery upon exercise of the Warrants,
all of the Warrant Shares that are issuable upon the exercise of the Warrants at
the time outstanding. All of the Warrant Shares issuable upon the exercise of
the Warrants shall be duly authorized, validly issued, fully paid and
nonassessable with no liability on the part of the holders thereof.
9. Exchange of Warrants. Upon the surrender for exchange of the Warrants,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or upon the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of Warrant Shares called for on the
face or faces of the Warrant or Warrants so surrendered.
10. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrants and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity bond or, in the case of any banking or other financial
institution, an indemnity agreement, reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, upon surrender and
cancellation of the Warrants, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant or Warrants of like tenor.
11. Indemnification.
(a) The Company will indemnify and hold harmless CapWest and each holder
of Warrant Shares against any losses, claims, damages or liabilities, joint or
several, to which such holder may become subject under the Act or otherwise, and
will reimburse each such holder for any legal or other expenses reasonably
incurred by such holder in connection with investigating or defending any such
action or claim.
(b) Promptly after receipt by an indemnified party under subsection (a) of
this Section 11 of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the Company
under subsection (a), notify the Company in writing of the commencement thereof;
but the omission so to notify the Company shall not relieve the Company from any
liability which it may have to any indemnified party otherwise than under
subsection (a). In case any such action shall be brought against any indemnified
party and it shall notify the Company of the commencement thereof, the Company
shall be entitled to assume the defense thereof by notice in writing to the
indemnified party. After receipt of written notice from the Company to such
indemnified party of its election to assume the defense thereof, the Company
shall not be liable to such indemnified party under subsection (a) for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation incurred prior to the assumption by the
Company.
(c) The obligations of the Company under this Section 11 shall be in
addition to any liability which the Company may otherwise have at law or in
equity.
12. Remedies. The Company stipulates that the remedies at law of CapWest
or any other holder of the Warrants in the event of any default or threatened
default by the Company in the performance of or compliance with any of the terms
of this Agreement or the Warrants may not be adequate, and that such terms may
be specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of any of the
terms hereof or otherwise.
13. Negotiability, etc. The Warrants are issued upon the following terms,
to all of which CapWest or any other holder or owner thereof by the receipt and
holding thereof consents and agrees:
(a) subject to Section 2 hereof, title to the Warrants and all rights
thereunder may be transferred only in whole, without charge to the holder
thereof (except for transfer taxes), by endorsement (by the holder thereof
executing the form of assignment at the end thereof) and delivery in the same
manner as in the case of a negotiable instrument transferable by endorsement and
delivery;
(b) subject to Section 2 hereof, any person in possession of Warrants
properly endorsed is authorized to represent himself as absolute owner thereof
and is empowered to transfer absolute title thereto by endorsement and delivery
thereof to a bona fide purchaser thereof for value; each prior taker or owner
waives and renounces all of his or its equities or rights in the Warrants in
favor of each such bona fide purchaser, and each bona fide purchaser shall
acquire absolute title thereto and to all rights represented thereby; and
(c) until the Warrants are transferred on the books of the Company, the
Company may treat the registered holder thereof as the absolute owner thereof
for all purposes, notwithstanding any notice to the contrary.
14. Notices. All notices and other communications from the Company to the
holder of the Warrants shall be mailed by first class mail, postage prepaid, at
such address as may have been furnished to the Company in writing by CapWest or
any other holder, or, until an address is so furnished, to and at the address of
the last holder of the Warrants who has so furnished an address to the Company.
15. Successors and Assigns; Binding Effect. This Agreement shall be
binding upon and inure to the benefit of the Company, CapWest, and their
respective successors and permitted assigns.
16. Severability. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the remainder of this
Agreement.
17. Miscellaneous. This Agreement and the Warrants and any term hereof or
thereof may be changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. This Agreement and the Warrants shall be
construed and enforced in accordance with and governed by the laws of the State
of Texas. The headings in this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.
18. Definition. All references to the word "you" and to "CapWest
Resources, Inc." or "CapWest" in this Agreement shall be deemed to apply with
equal respect to any persons or entities to whom Warrants have been transferred
in accordance with the terms hereof, and, where appropriate, to any persons or
entities holding the Warrant Shares upon exercise of the Warrants.
[Signatures on Following Page]
Dated: April 13, 2007
CHANCELLOR GROUP, INC.
a Nevada corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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ACCEPTED as of the 13th day of April 2007.
CAPWEST RESOURCES, INC.
a Texas corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
EXHIBIT A
THESE UNITS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT REGISTRATION UNDER
THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
Warrant No. _____________
CAPWEST RESOURCES, INC.
PURCHASE WARRANT FOR COMMON STOCK
THIS IS TO CERTIFY that CapWest Resources, Inc., or its assigns
(collectively, "CapWest"), as permitted in that certain Agreement to Issue
Warrants, dated April 9, 2007 (the "Warrant Agreement"), between the Company (as
defined below) and CapWest, is entitled to purchase at any time or from time to
time on and after April 9, 2012, until 5:00 p.m., Texas time, Two Million
(2,000,000) shares of the common stock of the Company (the "Company"), at a
Purchase Price per unit as set forth in the Warrant Purchase Agreement. This
Warrant is issued pursuant to the Warrant Agreement and all rights of the holder
of this Warrant are further governed by, and subject to, the terms and
provisions of such Warrant Purchase Agreement, copies of which are available
upon written request to the Company. The holder of this Warrant and the shares
of common stock issuable upon the exercise hereof shall be entitled to the
benefits, rights and privileges and subject to the obligations, duties and
liabilities provided in the Warrant Purchase Agreement.
Subject to the provisions of the Warrant Purchase Agreement, and hereof,
this Warrant and all rights hereunder are transferable only in whole and only to
the extent expressly permitted in the Warrant Purchase Agreement and herein and
then only at the principal office of the Company at ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ (or at any other principal office of the Company of which the
Company shall have provided written notice to the holder hereof), by the holder
hereof or by a duly authorized attorney-in-fact, upon surrender of this Warrant
duly endorsed, together with an Assignment hereof. Until transfer hereof on the
books of the Company, the Company may treat the registered holder hereof as the
sole owner hereof for all purposes.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and
its by its proper officers thereunto duly authorized.
CHANCELLOR GROUP, INC.
a Nevada corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
FORM OF ASSIGNMENT
[To be signed only upon transfer of Warrant]
For value received, the undersigned hereby sells, assigns and transfers
unto ________ _______________________________ the right represented by the
within Warrant to purchase Two Million (2,000,000) shares of the common stock of
Chancellor Group, Inc., a Nevada corporation, to which the within Warrant
relates, and appoints ___________________________________ his attorney-in-fact
to transfer such right on the books of Chancellor Group, Inc. with full power of
substitution in the premises.
Dated: __, 200__.
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EXHIBIT B
FORM OF SUBSCRIPTION
[To be signed only upon exercise of the Warrant]
To Chancellor Group, Inc.:
The undersigned, as the holder of Warrant No. _______________, hereby
irrevocably elects to exercise the purchase right represented by such Warrant,
and to purchase thereunder [up to] Two Million (2,000,000) shares of the common
stock of Chancellor Group, Inc. and herewith makes payment in cash or by
certified check or bank cashier's check of [$0.0001 multiplied by the number of
shares for which this Warrant is exercised], and requests that a certificate for
such shares be issued in the name of, and delivered to the undersigned.
Dated: ______________
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(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
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(Address)