Agreement for Change of Control And Recapitalization Of Paxton Energy, Inc.
Exhibit
10.23
Agreement
for Change of Control
And
Recapitalization
Of
▇▇▇▇▇▇
Energy, Inc.
This Agreement (the “Agreement”) is
entered into effective March 17, 2010 by and among ▇▇▇▇▇▇▇ ▇▇▇▇
(‘▇▇▇▇”), ▇▇▇▇▇▇ Energy, Inc., a Nevada corporation (“▇▇▇▇▇▇”), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(“▇▇▇▇▇▇▇▇”) and ▇▇▇ ▇▇▇▇ (“▇▇▇▇”).
The parties have agreed that it would
be beneficial to institute a change of control and recapitalization of
▇▇▇▇▇▇. Effective upon the satisfaction of the conditions precedent
set forth below Freiheit and ▇▇▇▇ will resign as directors and
officers of ▇▇▇▇▇▇ and be replaced by ▇▇▇▇, ▇▇▇ Burden, and ▇▇▇▇▇ ▇▇▇▇▇. As preliminary steps to
undertaking this transaction, ▇▇▇▇▇▇ represents to ▇▇▇▇ that ▇▇▇▇▇▇ has obtained
the agreement of the substantial majority of the holders of: (i) $637,689 of
registration and accrued interest debt, and (ii) 1,644,250 common stock purchase
options to settle for shares of common stock. In consideration of the
following representations, promises, and undertakings, the parties agree as
follows:
1. The
Current Board of Directors will adopt the following
resolutions: (i) reverse split of the Company’s current
outstanding stock of 23,586,139 shares to 7,862,070 shares, (ii) conversion of
the $637,869 registration and accrued interest debt accrued through June 30,
2009 to restricted common shares at the rate of $0.05 per share or a total
issuance of 12,757,380 shares, (iii)conversion of the current total options
outstanding of 1,644,250 options to common stock on a 1 for 1 basis
for a total issuance of 1,644,250 restricted common shares, (iv) approve the
issuance, upon appointment of ▇▇▇▇▇ and Burden, of 300,000 shares of restricted
common stock of ▇▇▇▇▇▇ each after completing items (i) through (iii) set forth
above whereby the total issued and outstanding would be 22,863,700 shares with
no warrants or options outstanding and debt would be reduced by $637,869. (vi) a
second reverse split of the issued and outstanding shares of ▇▇▇▇▇▇ of
approximately a one for 2.8 reverse (or whatever reverse is necessary) of the
common stock consolidation so that the total shares outstanding would then be
10,000,000 (or one reverse split to achieve the same outcome).
2. ▇▇▇▇▇▇
represents that it will obtain the agreement of the holders of $300,000 of
secured debt, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, holder of $15,000 of unsecured debt and ▇▇▇ ▇▇▇▇,
holder of $15,000 of unsecured debt (and will provide an executed copy of such
Agreement with the holders to ▇▇▇▇) to grant to ▇▇▇▇▇▇ a six month extension for
the payment of the debt to August 31, 2010 in exchange for bringing interest
current on the debt through January 31,2010 ( a total of $24,787.40) and for the
right of the Holders of the secured debt to convert their notes into ▇▇▇▇▇▇
common stock on the same terms as the private placement offering of 20,000,000
shares at $.15 except if converted and to the extent legally
permissable the common stock will be issued without restriction, as
set forth below in section 4.
1
3. Paxton,
Freiheit, and ▇▇▇▇ shall take the following actions after completion of Board
Resolutions in Section 1 and after obtaining the agreement of Secured Debt
Holders: (i) ▇▇▇▇ shall resign as a director of ▇▇▇▇▇▇, (ii) ▇▇▇▇▇▇▇▇ shall
elect ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ as directors to fill the vacancies created by ▇▇▇▇’▇
resignation and the earlier resignation of the former director who resigned,
(iii) Freiheit then shall resign as a director and officer, (iv) ▇▇▇▇ and Burden
shall elect ▇▇▇▇▇ ▇▇▇▇▇ as a director to fill the vacancy created by ▇▇▇▇’▇
resignation. Volk, Burden, and ▇▇▇▇▇ are referred to below as the
“New Board of Directors.” Freiheit, ▇▇▇▇ and ▇▇▇▇▇▇ will sign appropriate mutual
release agreements whereby Freiheit and ▇▇▇▇ will release any claims
Freiheit or ▇▇▇▇ have against ▇▇▇▇▇▇ except for the debt and share delivery owed
them as described above and ▇▇▇▇▇▇ will release any claims it may have against
Freiheit and ▇▇▇▇ except by reason fraud, gross negligence or willful
conduct
4. The
New Board of Directors shall take the following minimum actions following
election and acceptance of the directorships: (i) take all reasonable and
necessary actions to complete the corporate actions approved in the resolutions
adopted by the prior Board of Directors, (ii) approve and complete a
$200,000 convertible note placement with $25,000 of the proceeds delivered to
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ enabling a completion of the 2009 audit, (iii)
approve 62,700,000 newly-issued, post stock-consolidation shares of its common
stock to ▇▇▇▇, registered in whatever persons
▇▇▇▇ designate so long as ▇▇▇▇▇▇ receives, in exchange for the
issuance, properties and assets which have at least a $2,000,000 tangible net
worth, produce an annual net cash flow to ▇▇▇▇▇▇ of at least $1,000,000 and are
audited in a manner meeting SEC requirements, (iv) approve
3,300,000 shares to the Investment Banker of ▇▇▇▇▇▇ (v) a Rule 506
private placement of up to 4,000,000 Units at $0.05 a Unit, each Unit
consisting of one newly-issued, post stock-consolidation share
of common stock and one-half a Common Stock Purchase Warrant
exercisable at $0.15 for payment of transaction expenses and regulatory filings,
including $25,000 delivered to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ enabling a completion
of the 2009 audit and followed by a second Rule 506
private placement of up to 20,000,000 Units at $0.15 a Unit, each Unit
consisting of one newly-issued, post stock-consolidation share of common stock
and one-half a post stock-consolidation share of Common Stock Purchase Warrant
exercisable at $0.45 to be issued in exchange for up
to $3,200,000 to be wire-transferred or deposited to the
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Client Trust Account, maintained by Kenan at BancFirst in
Oklahoma City, Oklahoma (wire transfer instructions will be provided by Kenan),
this $3,200,000 to be referred to herein as the “FTB&K Escrow Account”.
Disbursements from the FTB&K Escrow Account will be made by Kenan only upon
the written authorization of Board of Directors of ▇▇▇▇▇▇.
5. ▇▇▇▇▇▇
hereby represents and warrants to Volk, Burden, and ▇▇▇▇▇ as follows, which
representations and warranties shall continue through the Closing:
5.1.
Financial
Statements. ▇▇▇▇▇▇’▇ financial statements, as filed
with the Securities and Exchange Commission in a Form 10-K for the fiscal period
ended December 31, 2008, and the interim periods ended March 31,
2009, June 30, 2009 and September 30, 2009 in forms 10-Q
are correct in all material respects.
5.2.
Articles and
Bylaws. Complete and accurate copies of the Certificate and
Articles of Incorporation and Bylaws of ▇▇▇▇▇▇ together with all amendments
thereto to the date hereof will be delivered to ▇▇▇▇ before the
Closing.
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5.3 Shareholders. A
complete list of all persons or entities holding capital stock of ▇▇▇▇▇▇ or any
rights to subscribe for, acquire, or receive shares of the capital stock ▇▇▇▇▇▇
(whether warrants, calls, options, or conversion rights), including copies of
all stock option plans whether qualified or non qualified, and other similar
agreements will be provided to ▇▇▇▇ at a time and place of its
choosing.
5.4 Officers and
Directors. A complete and current list of all current officers
and Directors of ▇▇▇▇▇▇ is set forth in its filed Form 10-K for the year-end
fiscal period ended December 31, 2008.
5.5 Tax
Returns. Accurate copies of Federal and State tax returns for
▇▇▇▇▇▇ for at least the last six taxable years will be delivered to ▇▇▇▇ at a
time of his choosing.
5.6 Organization, Standing and
Power. ▇▇▇▇▇▇ is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada with all
requisite corporate power to own or lease its properties and carry on its
businesses as is now being conducted.
5.7 Authority. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been duly authorized by all necessary
corporate action including, but not limited to, duly and validly authorized
action and approval by the Board of Directors on the part of
▇▇▇▇▇▇. This Agreement constitutes valid and binding obligations of
▇▇▇▇▇▇ and is enforceable against it, including the availability of the remedy
of specific performance. This Agreement executed by ▇▇▇▇▇▇ and the
execution of the actions and the transactions contemplated hereunder shall not
result in any breach of any terms or provisions of ▇▇▇▇▇▇’▇ Certificate and
Articles of Incorporation or Bylaws or of any other agreement, court order or
instrument to which ▇▇▇▇▇▇ is a party or is bound by.
5.8.
Absence of
Changes. Since September 30, 2009, there will not have been any material
adverse change in the condition (financial or otherwise), assets, liabilities,
earnings or business of ▇▇▇▇▇▇.
5.9.
Tax
Matters. All taxes and other assessments and levies which
▇▇▇▇▇▇ is required by law to withhold or to collect will have been duly withheld
and collected, and have been paid over to the proper government authorities.
There must be no known deficiencies in income taxes for any periods and further,
the representations and warranties as to the absence of undisclosed liabilities
contained in Paragraph 5.8 above include any and all tax liabilities
of whatsoever kind or nature (including, without limitation, all federal, state,
local and foreign income, profit, franchise, sales, use and property taxes) due
or to become due, incurred in respect of or measured by ▇▇▇▇▇▇ income or
business prior to the Closing Date.
5.10.
Options, Warrants,
etc. Except as set forth in paragraph 1 and3 and rights to participate in future
financing held by Iriquois and Cranshire, there are no
outstanding options, warrants, calls, commitments, or agreements of any
character to which ▇▇▇▇▇▇ or its shareholders are a party or by which ▇▇▇▇▇▇ or
its shareholders are bound, or are a party, calling for the issuance of shares
of capital stock of ▇▇▇▇▇▇ or any securities representing the right to purchase
or otherwise receive any such capital stock of ▇▇▇▇▇▇.
5.11.
Title to
Assets. Except for the holders of secured debt of Paxton, Paxton is the
sole and unconditional owner of, with good and marketable title to, all the
assets listed in its financial statements
as owned by them and all other property and assets must be free and clear of all
mortgages, liens, pledges, charges, or encumbrances of any nature
whatsoever.
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5.12.
Legal Proceedings,
etc. There are no civil, criminal, administrative,
arbitration, or other such proceedings or investigations pending or, to the
knowledge of either ▇▇▇▇▇▇ or the shareholders thereof, threatened, in which,
individually or in the aggregate, an adverse determination would materially and
adversely affect ▇▇▇▇▇▇, its properties, business, or income. ▇▇▇▇▇▇
has substantially complied with, and is not in default in any material respect
under, any laws, ordinances, requirements, regulations, or orders applicable to
its businesses.
5.13.
Governmental
Regulation. ▇▇▇▇▇▇ is not in violation of or in default with respect to
any applicable law or any applicable rule, regulation, order, writ, or decree of
any court or any governmental commission, board, bureau, agency, or
instrumentality, or delinquent with respect to any report required to be filed
with any governmental commission, board, bureau, agency or instrumentality,
which violation or default could have a material adverse effect upon the
business, operations, or financial condition of ▇▇▇▇▇▇.
5.14
Brokers and
Finders. ▇▇▇▇▇▇ has not retained any broker or finder, nor is
it obligated to pay any brokerage fees, commissions, or finders' fees in
connection with the transactions contemplated herein.
5.15
Accuracy of
Information. No representation or warranty by ▇▇▇▇▇▇ contained
in this Agreement, and no statement contained in any certificate, document, or
other instrument delivered or to be delivered to ▇▇▇▇ pursuant to this Agreement
or in connection with the transactions contemplated therein, including the list
of accounts payables and obligations of ▇▇▇▇▇▇ previously delivered to ▇▇▇▇,
will contain any untrue statement of material fact or omits or will omit to
state any material fact necessary in order to make the statements and
information contained herein or therein not misleading.
5.16.
Subsidiaries.
▇▇▇▇▇▇ does not have any subsidiaries nor does it own any capital stock of any
other corporation.
5.17.
Improper
Payments. No person acting on behalf of ▇▇▇▇▇▇ has made any
payment or otherwise transmitted anything of value, directly or indirectly, to:
(a) any official or any government or agency or political subdivision thereof
for the purpose of influencing any decision affecting the business of ▇▇▇▇▇▇,
(b) any customer, supplier, or competitor of ▇▇▇▇▇▇, or employee of such
customer, supplier, or competitor, for the purposes of obtaining or, retaining
business for ▇▇▇▇▇▇, or (c) any political party or any candidate for elective
political office nor will any fund or other asset of ▇▇▇▇▇▇ been maintained that
was not fully and accurately recorded on the books of account of
▇▇▇▇▇▇.
5.19.
Copies of
Documents. ▇▇▇▇▇▇ will make available for inspection and
copying by ▇▇▇▇ and his duly authorized representatives, and will continue to do
so at all times, true and correct copies of all documents that it has filed with
governmental agencies, which are material to the terms and conditions contained
in this Agreement. Furthermore, all filings by ▇▇▇▇▇▇ with
governmental agencies, including but not limited to the Internal Revenue
Service, contained information that is true and correct in all material respects
and does not contain any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements made therein not misleading or could have any material adverse effect
upon the financial condition or operations of ▇▇▇▇▇▇ or adversely effect the
objectives of this Agreement.
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6.
This
Agreement shall be interpreted and construed in accordance with the laws of the
State of Nevada. This Agreement represents the entire agreement of
the parties with respect to the subject matter contained herein. Any
disputes among the parties arising from the performance or non-performance of a
party shall be resolved in binding arbitration in accordance with the
arbitration procedures of the American Arbitration Association Commercial
Rules.
7.
▇▇▇▇▇▇
hereby approves and authorizes the filing of a Form 8-K with the SEC and news
release containing the particulars of this Agreement.
▇▇▇▇▇▇
Energy, Inc.
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇ ▇▇▇▇
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By:
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, CEO
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇ ▇▇▇▇
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3/16/10
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3/16/2010
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▇▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇▇
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3/17/2010
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