Exhibit 10.3
MEMBERSHIP INTEREST PURCHASE AGREEMENT
by and between
PGR Partners, LLC,
Seller,
and
Teton Petroleum Company,
Purchaser
Effective as of 12:01 A.M. MST,
February 15, 2005
MEMBERSHIP INTEREST PURCHASE AGREEMENT
This Membership Interest Purchase Agreement (the "Agreement") is made and
entered this 15th day of February, 2005, with the transaction contemplated
hereby to be consummated on the Closing Date (as defined below) and effective as
of 12:01 a.m. MST on the 15th day of February, 2005 (the "Effective Date"), by
and between PGR Partners, LLC, a Colorado limited liability company (the
"Seller") and Teton Petroleum Company, a Delaware corporation or its affiliated
designee (the "Purchaser").
RECITALS
A. WHEREAS, Seller owns a one hundred percent (100%) membership interest
(herein, "Seller Membership Interest") in Piceance Gas Resources, LLC , a
Colorado limited liability company ("Piceance"); and
B. WHEREAS, Piceance has acquired certain oil and gas rights and leasehold
assets covering approximately 6,314 gross and net acres, more or less, from
Petroleum Development Corporation effective January 24, 2005; and
C. WHEREAS, Seller desires to sell an undivided twenty-five percent (25%)
of the Seller Membership Interest, and Purchaser desires to purchase such
Membership Interests thereby acquiring twenty-five percent (25%) of the
membership interests in Piceance ("Membership Interests") for the Consideration
(defined below) in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, the agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Agreement of Sale and Purchase of Membership Interests. Subject to the
terms and conditions contained in this Agreement, Seller shall sell to Purchaser
and Purchaser shall purchase from Seller the Membership Interests.
2. Time and Place of Closing. The consummation of the transaction
contemplated hereby shall be at a closing of this transaction to be held at
10:00 a.m. on February 15, 2005, in the offices of Seller's counsel, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or on such other date, time or place
to be mutually agreed upon by the parties (hereinafter, the "Closing" or
"Closing Date"), provided that the transaction shall be effective as of the
Effective Date. Notwithstanding the foregoing, the Closing may occur via
facsimile and overnight delivery at the election of the parties.
3. Consideration. In exchange for the delivery of the Membership Interests
by Seller to Purchaser on the Closing Date, with such transfer effective as of
the Effective Date, Seller shall receive from Purchaser on the Closing Date the
sum of Five Million Two Hundred Fifty Thousand Dollars ($5,250,000.00), in cash
or by wire transfer in immediately available funds, 450,000 shares of
Purchaser's common stock and 200,000 warrants to purchase common stock of the
Purchaser, the terms of which shall be defined in a separate warrant agreement,
a form of which is attached hereto as Exhibit C (the "Warrant Agreement")
(herein, collectively the "Consideration").
4. Seller's Representations and Warranties. Seller hereby represents and
warrants to Purchaser as of the date hereof and as of Closing, as follows:
a. Organization and Standing. Seller is a limited liability company
formed under the laws of the State of Colorado and is duly organized,
validly existing and in good standing under the laws of the state of
organization and in such other jurisdictions necessary for the consummation
of this Agreement.
b. Power. Seller has all requisite power and authority to carry on its
business as presently conducted and to enter into this Agreement. The
execution and delivery of this Agreement does not, and the fulfillment of
and compliance with the terms and conditions hereof will not, as of
Closing, violate, or be in conflict with, any material provision of its
governing documents, when applicable, or any material provision of any
agreement or instrument to which it is a party or by which it is bound, or
to any judgment, decree, order, statute, rule or regulation applicable to
it.
c. Authorization and Enforceability. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby have
been duly and validly authorized by all requisite action of the Seller.
This Agreement constitutes the legal, valid and binding obligation of the
Seller, is enforceable in accordance with its terms, subject, however, to
the effects of bankruptcy, insolvency, reorganization, moratorium and other
laws for the protection of creditors, as well as to general principles of
equity, regardless whether such enforceability is considered in a
proceeding in equity or at law.
d. Title. Seller will convey title to the Membership Interest to
Purchaser free and clear of any and all liens, claims, encumbrances, other
pledges or security interests and all other defects of title or other
matters of whatsoever nature. To Seller's knowledge, Seller has delivered
to Purchaser copies of all material agreements affecting or relating to
Piceance's acquisition and ownership of the oil and gas leases acquired
from Petroleum Development Corporation.
e. Litigation/Claims. Seller has not received written notice of any
suit, claim, action or other proceeding pending, or to the Seller's
knowledge, threatened, before any court, agency, panel or regulatory body
that relates to Seller, the Membership Interest or which would impair
Seller's ability to close this transaction.
f. Liability for Brokers' Fees. Seller has not incurred any liability,
contingent or otherwise, for brokers' or finders' fees relating to the
transaction contemplated by this Agreement for which Purchaser shall have
any responsibility.
g. Effectiveness at Closing. All representations and warranties
contained herein shall be correct, accurate and effective at Closing.
5. Purchaser's Representations. Purchaser hereby represents and warrants to
Seller as of the date hereof and as of Closing as follows:
a. Organization and Standing. Purchaser is a corporation formed under
the laws of the State of Delaware, is duly organized, validly existing and
in good standing under the laws of such state, the State of Colorado and in
any other jurisdictions necessary for the consummation of this Agreement.
Purchaser's designee is a limited liability company formed under the laws
of the State of Colorado and is duly organized, validly existing and in
good standing under the laws of the state of organization and in such other
jurisdictions necessary for the consummation of this Agreement, and is a
wholly owned subsidiary of the Purchaser. Purchaser has full authority to
issue the shares of common stock and the warrants to Seller which are
portions of the Consideration as described in Section 3.
b. Power. Purchaser has all requisite power and authority to carry on
its business as presently conducted and to enter into this Agreement. The
execution and delivery of this Agreement does not, and the fulfillment of
and compliance with the terms and conditions hereof will not, as of
Closing, violate, or be in conflict with, any material provision of its
governing documents, when applicable, or any material provision of any
agreement or instrument to which it is a party or by which it is bound, or
to any judgment, decree, order, statute, rule or regulation applicable to
it.
c. Authorization and Enforceability. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby and
the Agreements attached as Exhibits B and C hereto have been duly and
validly authorized by all requisite action of the Purchaser. These
Agreements constitute the legal, valid and binding obligation of the
Purchaser, are enforceable in accordance with its terms, subject, however,
to the effects of bankruptcy, insolvency, reorganization, moratorium and
other laws for the protection of creditors, as well as to general
principles of equity, regardless whether such enforceability is considered
in a proceeding in equity or at law.
d. Litigation/Claims. Purchaser has not received written notice of any
suit, claim, action or other proceeding pending, or to the Purchaser's
knowledge, threatened, before any court, agency, panel or regulatory body
that relates to Purchaser, the non-cash portion of the Consideration, or
which would impair Purchaser's ability to close or to issue the securities
which comprise portions of the Consideration.
e. Liability for Brokers' Fees. Purchaser has not incurred any
liability, contingent or otherwise, for brokers' or finders' fees relating
to the transaction contemplated by this Agreement for which the Seller
shall have any responsibility.
f. Effectiveness at Closing. All representations and warranties
contained herein shall be correct, accurate and effective at Closing.
g. Existing Contracts. Buyer recognizes that by virtue of its
acquisition of the Membership Interest of Piceance, it is generally subject
to existing contractual relationships as more particularly set forth on
Exhibit A.
6. Obligations of the Parties at Closing.
a. Seller's Actions at Closing. At Closing, Seller shall execute,
acknowledge and deliver to Purchaser the following:
(i) Transfer of Membership Interests. An original certificate
representing the Membership Interests, duly endorsed or accompanied by
duly executed power;
(ii) Certificate. Seller shall certify that the representations
and warranties provided hereunder are accurate and true as of the
Closing;
(iii) Board of Managers' Appointee. Seller shall cause the
appointment of the Purchaser's President and CEO to the Board of
Managers of Piceance;
(iv) Other Necessary Instruments. The parties shall initial a
summary of general terms for the Piceance Operating Agreement
("Operating Agreement") which shall include accounting provisions
necessary for Purchaser to comply with its audit and reporting
requirements, management provisions, allocations of costs and
proceeds, other regulatory requirements given Purchaser's status as a
public company, and mandatory oil and gas operations to be conducted
during the life of Piceance ("Mandatory Operations"), as well as other
customary terms as mutually agreed upon by the Members. The parties
agree to memorialize those critical items in a term sheet to be
initialed at Closing. The Operating Agreement shall be executed by the
Members of Piceance within thirty (30) days after Closing. In
addition, the parties will agree on the form of a 1989 AAPL Model form
Joint Operating Agreement ("JOA") which shall be utilized by the
parties to conduct operations on the properties held by Piceance. The
parties will also agree upon a Services Agreement ("Services
Agreement") whereby the terms under which Orion Energy Partners, L.P.
will provide management, accounting and other services to Piceance
which will be executed within thirty (30) days after Closing. The
parties will also execute all other instruments as may be reasonably
required to consummate the agreements of the parties hereunder,
including written consent from all other Members of Piceance to the
sale hereunder.
b. Purchaser's Actions at Closing. At Closing, Purchaser shall deliver
the following:
(i) Payment at Closing. The cash consideration, the common stock
certificate(s) (or copies of confirmations of requests for such
certificates), subject to the Registration Rights Agreement, a form of
which is attached hereto as Exhibit B, duly endorsed or accompanied by
duly enclosed stock powers, and the warrants, subject to the Warrant
Agreement, a form of which is attached as Exhibit C, all as set forth
in Section 3;
(ii) Certificate. Purchaser shall certify that the
representations and warranties provided hereunder are accurate and
true as of the Closing;
(iii) Other Necessary Instruments. The parties shall initial a
summary of general terms for an Operating Agreement to be executed by
the Members of Piceance within thirty (30) days after Closing. The
form of the JOA and the material terms of the Services Agreement will
also be agreed upon at Closing. All other instruments as may be
reasonably required to consummate the agreements of the parties
hereunder, including written consent from any other Member of Piceance
to the sale hereunder.
7. General Provisions.
a. Purchaser acknowledges that Seller intends to sell an additional
undivided 50% of the Seller Membership Interest to a third party and that
upon consummation of the sale of such 50% Seller Membership Interest, such
third party will be designated as operator of the oil and gas leasehold
assets owned by Piceance. Purchaser hereby consents to this additional
third-party sale and to the designation of such third party as operator of
the leasehold assets. Except for the sale of this 50% Seller Membership
Interest to such third party, Seller will not sell or create any additional
Seller Membership Interest which would result in a dilution of Purchaser's
Membership Interest.
b. Entire Agreement. This Agreement, together with any other
agreements executed contemporaneously herewith or at Closing , contain the
entire understanding of the parties with regard to the subject matter
hereof and no warranties, representations, promises or agreements have been
made between the parties other than as expressly herein set forth. This
Agreement supersedes any previous agreement or understanding and cannot be
modified except in writing by all of the parties hereto. Notwithstanding
anything to the contrary contained in this Agreement, the parties hereby
agree that the continuing effectiveness of the transactions to be
consummated at Closing is not contingent upon execution of the Operating
Agreement within 30 days of Closing. In the event the parties are unable to
agree upon the final terms of the Operating Agreement, and the Operating
Agreement is not mutually executed within 30 days of Closing, the parties
agree to conduct operations on the properties owned by Piceance under the
terms of the JOA until such time as the Operating Agreement is executed by
the parties, if ever.
c. Waiver of Claims. Each party to this Agreement waives and releases
any claim it may have that, by entering into this Agreement, the requisite
procedures of the Colorado Limited Liability Company Act (C.R.S.ss.7-80-101
et. seq.) concerning the sale or transfer of Membership Interests may not
have been or were not followed.
d. Further Assurances. All parties hereto, at any time after the
Closing Date, will promptly execute, acknowledge and deliver any further
documents and instruments reasonably requested by the other parties and
necessary to comply with the representations, warranties and covenants
contained herein and will take any action consistent with the terms of this
Agreement that may reasonably be requested by the other parties as may be
necessary or reasonably appropriate to more fully consummate the
transactions contemplated hereby.
e. Transaction Costs. Each party shall be solely responsible for its
own transaction costs relating to this Agreement and closing.
f. Assignment. Neither Purchaser nor Seller may assign their rights or
delegate their duties arising under this Agreement without the prior,
written consent of the non-assigning party; provided, however, that Seller
may assign its rights and delegate its duties arising under this Agreement
to an entity formed for the purpose of accepting assignment of the non-cash
interests to be conveyed to Seller as part of the Consideration set forth
herein without the prior written consent of Purchaser and Purchaser may
assign its rights and delegate its duties arising under this Agreement to a
wholly owned entity formed for the purpose of accepting assignment of the
interests to be conveyed to Purchaser as set forth herein without the prior
written consent of Seller.
g. Binding Effect. Upon execution, this Agreement shall be binding and
fully enforceable and shall inure to the benefit of the parties hereto,
their successors, assigns, personal representatives and heirs.
h. Notices. All notices as may be required by this Agreement shall be
sent to the respective parties by U.S. Mail (in such case sent both regular
and certified mail), overnight courier or hand delivery at the addresses
set forth below.
To Seller: PGR Partners, LLC
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Manager
To Purchaser: Teton Petroleum Company
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, President
i. Severability. In the event that any of the provisions, or portions
thereof, of this Agreement are held to be unenforceable or invalid by any
court of competent jurisdiction, the validity and enforceability of the
remaining provisions, or portions thereof, shall not be affected thereby
and effect shall be given to the intent manifested by the provisions, or
portions thereof, held to be enforceable and valid.
j. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Colorado without regard to its choice of law
provisions.
k. Facsimile Signatures. This Agreement may be executed and delivered
using facsimiled signatures and such facsimiled signatures shall be legally
enforceable against the party providing same.
l. Counterparts. This Agreement may be executed in any number of
counterparts and each such counterpart shall be considered an original and
an enforceable agreement.
m. Public Announcements. Neither Seller nor Purchaser shall issue a
press release with respect to the transaction contemplated herein
(including the purchase price and other terms) without the prior written
consent of the other party, except as required by law or listing agreement
with a self regulatory organization, stock market, or exchange and then
only after prior notification to the other party. The Seller shall be
entitled to reasonable comment on all public announcements required to be
made by the Purchaser, but understands that Purchaser shall have final
editorial approval on all matters governing or otherwise affecting its
regulatory disclosure obligations.
IN WITNESS WHEREOF, the parties, intending to be bound, have caused this
Agreement to be executed below by their duly authorized representatives.
PURCHASER: SELLER:
TETON PETROLEUM COMPANY, PGR PARTNERS, LLC, a Colorado limited
a Delaware corporation liability company
By: By:
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Financial ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Manager
Officer
Date: Date:
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EXHIBIT A
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Existing Contractual Agreements
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1. The terms and conditions of all oil and gas leases held by Piceance.
2. The terms and conditions of all agreements through which Piceance
acquired its real and personal property interests.
3. All matters of record burdening the real property held by Piceance.
4. A 2.5% proceeds interest held by Lynx Energy Company, Inc. burdening
production revenues earned by Piceance.
EXHIBIT B
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Form of Registration Rights Agreement
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AGREEMENT dated as of February15, 2005, among the Persons and/or Entities
listed on Schedule A annexed hereto (each a "Holder" and collectively, the
"Holders"), and Teton Petroleum Company, a Delaware corporation (the "Company").
WHEREAS, in partial consideration of the purchase of a 25% interest in
Piceance Gas Resources, LLC., a Colorado limited liability company, the Company
has agreed to issue to the Holders, 450,000 shares of common stock of the
Company, par value $0.001 per share (the "Common Stock") and 200,000 warrants
(the "Warrants") to purchase Common Stock of the Company, on the terms and
conditions set forth in those certain Warrants dated of even date herewith by
and among the Company and the Holders, as amended from time to time; and
WHEREAS, the Company desires to grant to the Holders the registration
rights set forth herein with respect to the "Registrable Securities" hereinafter
defined.
NOW, THEREFORE, the parties hereto mutually agree as follows:
1. Registrable Securities. As used herein the terms "Registrable Security"
means each of (i) the 450,000 Holders' Shares and (ii) all 200,000 shares of
Common Stock issuable upon exercise of the Warrants, subject to the
anti-dilution adjustments set forth therein (the "Warrant Shares") (in the
aggregate, the "Registrable Securities"; provided, however, that with respect to
any particular Registrable Security, such security shall cease to be a
Registrable Security when, as of the date of determination that (a) it has been
effectively registered under the Securities Act of 1933, as amended (the
"Securities Act"), and disposed of pursuant thereto, or (b) registration under
the Securities Act is no longer required for the immediate public distribution
of such security. In the event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting the Common
Stock, such adjustment shall be made in the definition of "Registrable Security"
as is appropriate in order to prevent any dilution or enlargement of the rights
granted pursuant to this Section 1.
2. Registration.
(a) After one year from the date hereof, the Holder, shall have a
collective right by written notice to the Company (a "Demand Notice") to
require the Company to file a registration statement (a "Registration
Statement") on an appropriate form under the Securities Act registering for
resale up to 50% of the shares of Common Stock issued in respect of the
Purchase Price and 100% of the Warrant Shares. Upon receipt of a Demand
Notice, the Company shall use its commercially reasonable efforts to file
such Registration Statement and cause it to be declared effective as soon
as practicable.
(b) If at any time after six months but prior to the end of the one
year period from the date hereof, the Company proposes to file a
Registration Statement with respect to an offering of the Company Common
Stock (except on Form ▇-▇, ▇▇▇▇ ▇-▇ or any successor form thereto), for its
own account for cash, then the Company shall give written notice of such
proposed filing to holders of the Registrable Securities at least fifteen
days before the anticipated filing date (the "Piggyback Notice"). The
Piggyback Notice shall offer the Holders the opportunity to register 50% of
all of the Registrable Securities (representing the Common Stock but not
the Warrant Shares) on the Registration Statement (a "Piggyback
Registration"). If the Holder requests such Piggyback Registration, the
Company shall, subject to the limitation set forth in Section 2(c) below,
include in the Piggyback Registration the requested number of Registrable
Securities.
(c) If the Company is undertaking a Piggyback Registration, the
Company shall use its commercially reasonable efforts to cause the managing
underwriters of a proposed underwritten offering of equity securities to
include all requested Registrable Securities on the same terms and
conditions as any similar equity securities of the Company included
therein. Notwithstanding the foregoing, if the managing underwriters of
such underwritten offering determine in good faith that the total number of
securities that the Holder and the Company propose to include in such
offering is such as to materially and adversely affect the success of such
offering, then the securities to be offered for the account of the Holder
shall be reduced or limited to the amount recommended by such managing
underwriters.
3. Covenants of the Company with Respect to Registration.
The Company covenants and agrees as follows:
(a) The Company shall use commercially reasonable efforts to cause the
Registration Statement to become effective with the Commission as promptly
as possible and in no event more than 120 days after the date of this
Agreement (provided, however, that the Company shall not be liable to the
Holders or in default of this covenant in event that the Commission's
review process delays such effectiveness). If any stop order shall be
issued by the Commission in connection therewith, the Company shall use
commercially reasonable efforts to obtain promptly the removal of such
order. Following the effective date of the Registration Statement, the
Company shall, upon the request of any Holder, forthwith supply such
reasonable number of copies of the Registration Statement, preliminary
prospectus and prospectus meeting the requirements of the Securities Act,
and any other documents necessary or incidental to the public offering of
the Registrable Securities, as shall be reasonably requested by the Holders
to permit the Holders to make a public distribution of the Holder's
Registrable Securities. The obligations of the Company hereunder with
respect to the Holder's Registrable Securities are subject to the Holder's
furnishing to the Company such appropriate information concerning the
Holders, the Holder's Registrable Securities and the terms of the Holder's
offering of such Registrable Securities as the Company may reasonably
request in writing.
(b) The Company shall pay all costs, fees and expenses in connection
with the Registration Statement filed pursuant to Section 2 hereof
including, without limitation, the Company's legal and accounting fees,
printing expenses, and blue sky fees and expenses; provided, however, that
Holders shall be solely responsible for the fees of any counsel retained by
the Holders in connection with such registration and any transfer taxes or
underwriting discounts, commissions or fees applicable to the Registrable
Securities sold by the Holders pursuant thereto.
(c) The Company will take all necessary action which may be required
to qualify or register the Registrable Securities included in the
Registration Statement for the offer and sale under the securities or blue
sky laws of such states as are reasonably requested by Holders of such
securities, provided that the Company shall not be obligated to execute or
file any general consent to service of process or to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.
4. Additional Terms.
(a) The Company shall indemnify and hold harmless the Holders and each
underwriter, within the meaning of the Securities Act, who may purchase
from or sell for any Holder, any Registrable Securities, from and against
any and all losses, claims, damages and liabilities caused by any untrue
statement of a material fact contained in the Registration Statement, any
other registration statement filed by the Company under the Securities Act
with respect to the registration of the Registrable Securities, any
post-effective amendment to such registration statements, or any prospectus
included therein or caused by any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission based upon
information furnished or required to be furnished in writing to the Company
by the Holders or underwriter expressly for use therein, which
indemnification shall include each person, if any, who controls any Holder
or underwriter within the meaning of the Securities Act and each officer,
director, employee and agent of Holders and underwriter; provided, however,
that the indemnification in this Section 4(a) with respect to any
prospectus shall not inure to the benefit of any Holder or underwriter (or
to the benefit of any person controlling any Holder or underwriter) on
account of any such loss, claim, damage or liability arising from the sale
of Registrable Securities by the Holders or underwriter, if a copy of a
subsequent prospectus correcting the untrue statement or omission in such
earlier prospectus was provided to such Holders or underwriter by the
Company prior to the subject sale and the subsequent prospectus was not
delivered or sent by the Holders or underwriter to the Holders prior to
such sale and provided further, that the Company shall not be obligated to
so indemnify any Holder or any such underwriter or other person referred to
above unless the Holders or underwriter or other person, as the case may
be, shall at the same time indemnify the Company, its directors, each
officer signing the Registration Statement and each person, if any, who
controls the Company within the meaning of the Securities Act, from and
against any and all losses, claims, damages and liabilities caused by any
untrue statement of a material fact contained in the Registration
Statement, any registration statement or any prospectus required to be
filed or furnished by reason of this Agreement or caused by any omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission based
upon information furnished in writing to the Company by the Holders or
underwriter expressly for use therein.
(b) If for any reason the indemnification provided for in the
preceding section is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, claim,
damage, liability or expense referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by the indemnified party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations.
(c) Neither the filing of a Registration Statement by the Company
pursuant to this Agreement nor the making of any request for prospectuses
by the Holders shall impose upon any Holder any obligation to sell the
Holder's Registrable Securities.
(d) Holders, upon receipt of notice from the Company that an event has
occurred which requires a Post-Effective Amendment to the Registration
Statement or a supplement to the prospectus included therein, shall
promptly discontinue the sale of Registrable Securities until the Holders
receives a copy of a supplemented or amended prospectus from the Company,
which the Company shall provide as soon as practicable after such notice.
(e) If the Company fails to keep the Registration Statement referred
to above continuously effective during the requisite period, then the
Company shall, promptly upon the request of any Holder, use commercially
reasonable efforts to update the Registration Statement or file a new
registration statement covering the Registrable Securities remaining
unsold, subject to the terms and provisions hereof.
(f) Holders agree to provide the Company with any information or
undertakings reasonably requested by the Company in order for the Company
to include any appropriate information concerning the Holders in the
Registration Statement or in order to promote compliance by the Company or
the Holders with the Securities Act.
(g) Holders agree with the Company that such Holders will not short
sell the Company's shares of Common Stock, either before or after the
effective date of the Registration Statement, and the Holders agree that
they will not collectively sell on any given day a number of shares of
Common Stock in excess of fifteen percent (15%) of the Average Dollar Daily
Trading Volume for the prior fifty (50) trading days as reported by
▇▇▇▇▇▇▇▇▇.▇▇▇ or an other nationally recognized reporting service. This
covenant shall terminate concurrently with the termination of the Company's
obligation to maintain the effectiveness of the Registration Statement
pursuant to Section 2(a).
5. Amendment. This Agreement may only be amended by a written instrument
executed by the Company and the Holders.
6. Entire Agreement. This Agreement constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
7. Execution in Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
8. Notices. Any notice, payment or other communication hereunder shall be
given in writing and delivered by hand, by registered air mail, facsimile, or by
overnight courier. Any such notice shall be given to each of the Parties at
their following addresses:
To Holder: PGR Partners, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Manager
To the Company: Teton Petroleum Company
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, President
9. Binding Effect; Benefits. Any Holder may assign its rights hereunder.
This Agreement shall inure to the benefit of, and be binding upon, the parties
hereto and their respective heirs, legal representatives, successors and
assigns. Nothing herein contained, express or implied, is intended to confer
upon any person other than the parties hereto and their respective heirs, legal
representatives and successors, any rights or remedies under or by reason of
this Agreement.
10. Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
11. Severability. Any provision of this Agreement which is held by a court
of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
12. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. Each of the parties
irrevocably agrees that any and all suits or proceedings based on or arising
under this Agreement may be brought only in and shall be resolved in the federal
or state courts located in the City of Denver, State of Colorado and consents to
the jurisdiction of such courts for such purpose. Each of the parties
irrevocably waives the defense of an inconvenient forum to the maintenance of
such suit or proceeding in any such court. Each of the parties further agrees
that service of process upon such party mailed by first class mail to the
address set forth in Section 8 shall be deemed in every respect effective
service of process upon such party in any such suit or proceeding. Nothing
herein shall affect the right of a party to serve process in any other manner
permitted by law. Each of the parties agrees that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.
13. Attorneys' Fees and Disbursements. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party or parties shall be entitled to receive from the other party or parties
reasonable attorneys' fees and disbursements in addition to any other relief to
which the prevailing party or parties may be entitled.
EXHIBIT C
---------
Form of Warrant Agreement
-------------------------
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE
SOLD, OFFERED FOR SALE OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN
ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS
IS AVAILABLE WITH RESPECT THERETO.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK OF
TETON PETROLEUM COMPANY
Issue Date: February 15, 2005
Warrant No. ______ _______ Shares of Common Stock
1. Issuance. This Warrant is issued to Castle Rock Resources II, LLC (the
"Holder"), by Teton Petroleum Company, a Delaware corporation (hereinafter with
its successors called the "Company") pursuant to the Membership Interest
Purchase Agreement of even date herewith (the "Purchase Agreement"). Capitalized
terms used but not otherwise defined herein shall have the meanings ascribed to
them in the Purchase Agreement.
2. Purchase Price; Number of Shares. Subject to the exercise limitations
and restrictions provided for herein, this Warrant certifies that, for value
received, the Holder of this Warrant is entitled upon surrender of this Warrant
with the subscription form annexed hereto as Appendix 1 duly executed, at the
principal office of the Company, to purchase from the Company ______ fully paid
and nonassessable shares of Common Stock of the Company (the "Common Stock") at
a price per share (the "Purchase Price") of $2.00, subject to adjustment
pursuant to Sections 8 and 9 below.
3. Payment of Purchase Price. The Purchase Price may be paid (i) in cash,
(ii) by certified check, or (iii) wire transfer.
4. Fractional Shares. No fractional shares shall be issued upon exercise of
this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Purchase Price.
5. Exercise.
(a) Expiration Date. Holder's rights under this Warrant expire at 5:00
p.m. Rocky Mountain Time on the fifth anniversary of the date of this
Warrant (the "Expiration Date") and shall be void thereafter.
(b) Delivery. Upon the exercise of the rights represented by this
Warrant, the Company shall use good faith efforts to issue and deliver to
the Holder a certificate or certificates for the shares of Common Stock
issuable upon exercise of this Warrant so purchased, in the name of the
Holder within a reasonable time after the rights represented by this
Warrant shall have been so exercised and in any event within twenty (20)
days after receipt of the Notice of Exercise and, unless the Warrant has
been fully exercised or expired, a new warrant representing the remaining
portion of the Warrant and the underlying Common Stock, if any, with
respect to which this Warrant shall not have been exercised shall also be
issued to the Holder as soon as possible and in any event within such
twenty (20) day period.
6. Reserved Shares; Valid Issuance. The Company covenants that it will at
all times from and after the date hereof reserve and keep available such number
of its authorized shares of Common Stock of the Company, free from all
preemptive or similar rights therein, as will be sufficient to permit the
exercise of this Warrant in full. If at any time between the date hereof and the
Expiration Date, the number of authorized but unissued shares of Common Stock
shall not be sufficient to permit exercise of this Warrant, the Company will
take such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes. The Company further covenants that such shares as may be
issued pursuant to such exercise will, upon issuance, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof.
7. Registration Rights. The Company agrees that the Common Stock shall have
certain registration rights pursuant to and as set forth in that certain
Registration Rights Agreement between the Company and Holder, dated as of the
date hereof.
8. Stock Splits and Dividends. If after the date hereof the Company shall
subdivide the Common Stock, by stock split or otherwise, or combine the Common
Stock, or issue additional shares of Common Stock in payment of a stock dividend
on the Common Stock, the number of shares of Common Stock issuable on the
exercise of this Warrant shall forthwith be proportionately increased in the
case of a subdivision or stock dividend, or proportionately decreased in the
case of a combination, and the Purchase Price shall forthwith be proportionately
decreased in the case of a subdivision or stock dividend, or proportionately
increased in the case of a combination.
9. Mergers and Reclassifications. If after the date hereof the Company
shall enter into any Reorganization (as hereinafter defined), then, as a
condition of such Reorganization, lawful provisions shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall thereafter have the right
to purchase, at a total price not to exceed that payable upon the exercise of
this Warrant in full, the kind and amount of shares of stock and other
securities and property receivable upon such Reorganization by a holder of the
number of shares of Common Stock which might have been purchased by the Holder
immediately prior to such Reorganization, and in any such case appropriate
provisions shall be made with respect to the rights and interest of the Holder
to the end that the provisions hereof (including without limitation, provisions
for the adjustment of the Purchase Price and the number of shares issuable
hereunder) shall thereafter be applicable in relation to any shares of stock or
other securities and property thereafter deliverable upon exercise hereof. For
the purposes of this Section 9, the term "Reorganization" shall include without
limitation any reclassification, capital reorganization or change of the Common
Stock (other than as a result of a subdivision, combination or stock dividend
provided for in Section 8 hereof), or any consolidation of the Company with, or
merger of the Company into, another corporation or other business organization
(other than a merger in which the Company is the surviving corporation and which
does not result in any reclassification or change of the outstanding Common
Stock), or any sale or conveyance to another corporation or other business
organization of all or substantially all of the assets of the Company.
10. No Rights as Shareholder Until Exercise. Nothing contained in this
Warrant shall be construed as conferring upon the Holder hereof the right to
vote or to consent or to receive notice as a shareholder of the Company or any
other matters or any rights whatsoever as a shareholder of the Company prior to
the exercise of the Holder's rights to purchase shares of Common Stock as
provided for herein. No dividends or interest shall be payable or accrued in
respect of this Warrant or the interest represented hereby or the shares
purchasable hereunder until, and only to the extent that, this Warrant shall
have been exercised.
11. Amendment. The terms of this Warrant may be amended, modified or waived
only with the written consent of the Company and the Holder.
12. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
13. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.
14. Notices, Etc. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given (i) upon receipt if personally delivered, (ii) three (3) days after being
mailed by registered or certified mail, postage prepaid, or (iii) one day after
being sent by recognized overnight courier or by facsimile, if to Holder, at ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or at such other address or number as
Holder shall have furnished to Company in writing, or if to Company, at ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or at such other address or number
as Company shall have furnished to Holder in writing.
13. Descriptive Headings and Governing Law. The descriptive headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant and all actions
arising out of or in connection with this Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the conflicts of law provisions of the State of Delaware.
14. Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.
15. Successors and Assigns. Holder may not sell, transfer or otherwise
dispose of the Securities except in accordance with the restrictions set out in
the Purchase Agreement. The rights and obligations of Company and Holder shall
be binding upon and benefit the successors, assigns, heirs, administrators and
transferees of the parties.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Dated February 15, 2005
TETON PETROLEUM COMPANY
By: _________________________
Its: _________________________
Date: ________________________
APPENDIX 1
FORM OF ELECTION TO PURCHASE
Date: _____________
Teton Petroleum Company
▇▇▇▇ ▇▇▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
The undersigned hereby elects to exercise the warrant issued to it by Teton
Petroleum Company (the "Company") and dated February __, 2005 (the "Warrant")
and to purchase ____________ shares of the Common Stock of the Company (the
"Shares") purchasable thereunder at a purchase price of two ($2.00) per Share
(the "Purchase Price") pursuant to the terms of the Warrant and the undersigned
delivers the Purchase Price herewith in full in cash or by certified check or
wire transfer or as otherwise permitted pursuant to Section 3 of the Warrant.
The undersigned also makes the representations set forth on Appendix 2 attached
to the Warrant.
The certificate(s) for such shares shall be issued in the name of the
undersigned or as otherwise indicated below:
Very truly yours,
[Purchaser]
---------------------------
APPENDIX 2
WARRANT CERTIFICATE
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO TETON PETROLEUM COMPANY
ALONG WITH THE FORM OF ELECTION TO PURCHASE BEFORE THE SHARES ISSUABLE UPON
EXERCISE OF THE WARRANT CERTIFICATE WILL BE ISSUED.
Date: _____________
Teton Petroleum Company
▇▇▇▇ ▇▇▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The undersigned, ("Purchaser"), intends to acquire _______ shares of the
Common Stock (the "Shares") of Teton Petroleum Company (the "Company") from the
Company pursuant to the exercise of a certain Warrant to purchase Shares held by
Purchaser. The Shares will be issued to Purchaser in a transaction not involving
a public offering and pursuant to an exemption from registration under the
Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by the Company, Purchaser
represents, warrants and agrees as follows:
1. Purchaser is acquiring the Shares for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other
disposition of the Shares in violation of the 1933 Act or the General Rules
and Regulations promulgated thereunder by the Securities and Exchange
Commission (the "SEC") or in violation of any applicable state securities
law;
2. Purchaser has been advised that the Shares have not been registered
under the 1933 Act or state securities laws on the ground that this
transaction is exempt from registration, and that reliance by the Company
on such exemptions is predicated in part on Purchaser's representations set
forth in this letter;
3. Purchaser has been informed that under the 1933 Act, the Shares
must be held indefinitely unless it is subsequently registered under the
1933 Act or unless an exemption from such registration (such as Rule 144)
is available with respect to any proposed transfer or disposition by
Purchaser of the Shares;
4. The Company may refuse to permit Purchaser to sell, transfer or
dispose of the Shares (except as permitted under Rule 144) unless there is
in effect a registration statement under the 1933 Act and any applicable
state securities laws covering such transfer, or unless Purchaser furnishes
an opinion of counsel reasonably satisfactory to counsel for the Company,
to the effect that such registration is not required;
Purchaser also understands and agrees that, in the absence of an effective
registration statement under the 1933 Act, there will be placed on the
certificate(s) for the Shares, or any substitutions therefor, legends
stating in substance:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE SOLD, OFFERED FOR SALE OR TRANSFERRED UNLESS SUCH SALE
OR TRANSFER IS IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND APPLICABLE LAWS OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS AVAILABLE WITH RESPECT
THERETO.
Any legend required pursuant to applicable state securities laws.
Purchaser has carefully read this letter and has discussed its requirements
and other applicable limitations upon Purchaser's resale of the Shares with
Purchaser's counsel.
Very truly yours,
[Purchaser]
----------------------------------
APPENDIX 3
ADJUSTMENTS FOR DILUTING ISSUANCES
1. Capitalized Terms. Capitalized terms used in this Appendix III that are not
otherwise defined herein shall have the respective meanings assigned to them in
the Warrant to which this Appendix III is attached.
2. Adjustment of Purchase Price upon Issuance of Additional Stock. The Purchase
Price shall be subject to adjustment from time to time as follows:
a. Upon each issuance by the Company of any Additional Stock without
consideration or for a consideration per share less than the Purchase Price
in effect immediately prior to the issuance of such Additional Stock, the
Purchase Price in effect immediately prior to each such issuance shall
forthwith (except as otherwise provided in this Section 2) be adjusted to a
price determined by multiplying the Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding or deemed to be outstanding immediately prior to such issuance
plus the number of shares of Additional Stock which could be purchased were
the then Purchase Price used instead (calculated by dividing the total
consideration to be received by the Company in such issuance by the then
Purchase Price) and the denominator of which shall be the number of shares
of Common Stock outstanding or deemed to be outstanding immediately prior
to such issuance plus the number of shares of such Additional Stock issued
in such issuance. For purposes of this Section 2, the number of shares of
Common Stock outstanding or deemed to be outstanding shall be calculated on
a fully diluted basis, as if all convertible securities had been fully
converted into shares of Common Stock immediately prior to such issuance
and any outstanding warrants, options or other rights for the purchase of
shares of common stock or convertible securities had been fully exercised
immediately prior to such issuance (and the resulting securities fully
converted into shares of Common Stock, if so convertible) as of such date.
b. No adjustment of the Purchase Price shall be made in an amount less
than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior
to one (1) year from the date of the event giving rise to the adjustment
being carried forward, or shall be made at the end of one (1) year from the
date of the event giving rise to the adjustment being carried forward.
Except to the limited extent provided for in subsections 2(d)(iii) and
2(d)(iv) below, no adjustment of the Purchase Price pursuant to subsection
2(a) of this Appendix III shall have the effect of increasing the Purchase
Price above the Purchase Price in effect immediately prior to such
adjustment.
c. In the case of issuance by the Company of Additional Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined in
good faith by the Board of Directors of the Company.
d. In the case of the issuance (whether before, on or after the Issue
Date) of options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common Stock
or options to purchase or rights to subscribe for such convertible or
exchangeable securities, the following provisions shall apply for all
purposes of this Section 2:
i. The aggregate maximum number of shares of Common Stock
deliverable upon exercise (to the extent then exercisable)
of such options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued at the time
such options or rights were issued and for a consideration
equal to the consideration (determined in a manner
consistent with subsection 2(c) of this Appendix III), if
any, received by the Company upon issuance of such options
or rights plus the minimum Purchase Price provided in such
options or rights (without taking into account potential
antidilution adjustments) for the Common Stock covered
thereby. ii. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange
for (to the extent then convertible or exchangeable)
convertible or exchangeable securities or upon exercise of
options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such
options or rights were issued and for a consideration equal
to the consideration, if any, received by the Company for
any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if
any, to be received by the Company (without taking into
account potential antidilution adjustments) upon the
conversion or exchange of such securities or the exercise of
any related options or rights (the consideration in each
case to be determined in a manner consistent with subsection
2(c) of this Appendix III). iii. In the event of any change
in the number of shares of Common Stock deliverable or in
the consideration payable to the Company upon exercise of
such options or rights or upon conversion of or in exchange
for such convertible or exchangeable securities, excluding a
change resulting from antidilution provisions thereof, the
Purchase Price, to the extent in any way affected by or
computed using such options, rights or securities, shall be
adjusted based upon the actual issuance of Common Stock or
any payment of such consideration upon the exercise of any
such options or rights or the conversion or exchange of such
securities. iv. Upon the expiration of any such options or
rights, the termination of any such options or rights to
convert or exchange, or the expiration of any options or
rights related to such convertible or exchangeable
securities, the Purchase Price, to the extent in any way
affected by or computed using such options, rights or
securities or options or rights related to such securities,
shall be recomputed to reflect the issuance of only the
number of shares of Common Stock (and convertible or
exchangeable securities which remain in effect) actually
issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the
exercise of the options or rights related to such
securities. v. The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant
to subsections 2(d)(i) and 2(d)(ii) of this Appendix III
shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either
subsection 2(d)(iii) or 2(d)(iv) hereof.
e. "Additional Stock" shall mean any shares of Common Stock issued (or
deemed to have been issued pursuant to subsection 2(d) of this Appendix
III) by this Company after the Issue Date other than:
i. Shares of Common Stock issued pursuant to a transaction
described in Sections 9 and 11 of the Warrant,
ii. upon exercise or conversion of outstanding options or
warrants, or
iii. Shares of Common Stock issuable or issued to officers,
employees, consultants or directors of the Company pursuant
to a compensatory benefit plan.
f. Upon each adjustment of the Purchase Price pursuant to this Section
2, the number of shares of Common Stock issuable upon exercise hereof shall
be equal to (x) the product of the number of shares of Common Stock the
holder was entitled to purchase immediately before such adjustment times
the Purchase Price in effect immediately before such adjustment divided by
(y) the Purchase Price in effect after giving effect to such adjustment.