Exhibit 10.1
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SECURITIES PURCHASE AGREEMENT
By and Between
XXXXXX EXPLORATION COMPANY
and
GUARDIAN ENERGY MANAGEMENT CORP.
July 11, 2000
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.....................................................1
Section 1.2 References and Titles...........................................7
ARTICLE II
PURCHASE OF COMMON STOCK
Section 2.1 Purchase of Securities; Issuance of Convertible Note............8
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Company...................8
Section 3.2 Representations and Warranties of Purchaser....................22
ARTICLE IV
COVENANTS
Section 4.1 Furnishing of Information......................................24
Section 4.2 Stockholder Approval; Proxy Statement..........................24
Section 4.3 Nasdaq Listing.................................................24
Section 4.4 Approvals......................................................25
Section 4.5 HSR Act Notification...........................................25
Section 4.6 Board of Directors.............................................25
Section 4.7 Right of First Offer...........................................25
Section 4.8 Concurrent Deliveries..........................................27
ARTICLE V
INDEMNIFICATION
Section 5.1 Indemnification of Purchaser...................................27
Section 5.2 Indemnification of Company.....................................27
Section 5.3 Defense of Third-Party Claims..................................27
Section 5.4 Direct Claims..................................................29
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Section 5.5 Limitations....................................................29
ARTICLE VI
MISCELLANEOUS
Section 6.1 Survival of Provisions........................................29
Section 6.2 No Waiver; Modification in Writing............................29
Section 6.3 Specific Performance..........................................30
Section 6.4 Severability..................................................30
Section 6.5 Parties in Interest...........................................30
Section 6.6 Notices.......................................................30
Section 6.7 Counterparts..................................................32
Section 6.8 Shared Expenses...............................................32
Section 6.9 Entire Agreement..............................................32
Section 6.10 Governing Law.................................................32
Section 6.11 Public Announcements..........................................32
Section 6.12 Assignment....................................................32
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT, dated as of July 11, 2000, by and between
Xxxxxx Exploration Company, a Delaware corporation (the "Company"), and Guardian
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Energy Management Corp., a Michigan corporation ("Purchaser").
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In consideration of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
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Section 1.1 Definitions. As used in this Agreement, and unless the
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context requires a different meaning, the following terms have the meanings
indicated:
"Additional Securities" has the meaning set forth in Section 4.7.
"Affiliate" means, with respect to any Person, any other Person directly,
or indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person. For purposes of this definition and this
Agreement, the term "control" (and correlative terms) means the power, whether
by contract, equity ownership or otherwise, to direct the policies or management
of a Person.
"Agreement" means this Securities Purchase Agreement, as the same may be
amended, supplemented or modified from time to time in accordance with the terms
hereof.
"Approval" means any approval, authorization, grant of authority, consent,
order, qualification, permit, license, variance, exemption, franchise,
concession, certificate, filing or registration, or any waiver of the foregoing,
or any notice, statement or other communication required to be filed with or
delivered to any Governmental Entity or any other Person.
"Authorized Preferred Stock" has the meaning set forth in Section
3.1(c)(i).
"Board" means the Board of Directors of the Company or any committee
authorized by such Board of Directors to perform any of its obligations
thereunder.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in New York, New
York or Detroit, Michigan generally are authorized or required by law or other
government actions to close.
"Bylaws" means the bylaws of the Company, as amended to the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder.
"Common Stock" means the Company's common stock, par value $.01 per share.
"Company" has the meaning set forth in the introductory paragraph hereof.
"Company Disclosure Schedule" has the meaning set forth in Section 3.1.
"Company Indemnified Costs" means any and all damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs and expenses (including
court costs and reasonable legal fees and expenses incurred in investigating and
preparing for any litigation or proceeding) that any of the Company Indemnified
Parties incurs and that arise out of (i) any breach or default by Purchaser of
any of the representations or warranties under this Agreement or any agreement
or document executed in connection herewith or (ii) any breach by Purchaser of
any of the covenants or agreements under this Agreement or any other Transaction
Documents.
"Company Indemnified Parties" means each of the Company and its
Subsidiaries and each officer, director, employee, stockholder and Affiliate of
the Company.
"Company Options" has the meaning set forth in Section 3.1(c).
"Company SEC Documents" has the meaning set forth in Section 3.1(e).
"Contracts" means all agreements, contracts, or other binding commitments,
arrangements or plans written to which the Company or any of its Subsidiaries is
a party or is otherwise bound.
"Conversion Shares" means the shares of Common Stock issuable upon the
conversion of the Convertible Note or issuable upon the exercise of any of the
Warrants.
"Convertible Note" means that certain subordinated convertible promissory
note in principal amount of $5,000,000 issued by the Company to Purchaser
concurrently with the execution hereof.
"Debt", without duplication, means (a) all indebtedness (including the
principal amount thereof or, if applicable, the accreted amount thereof and the
amount of accrued and unpaid interest thereon) of the Company and its
Subsidiaries, whether or not represented by bonds, debentures, notes or other
securities, for the repayment of money borrowed, (b) all deferred indebtedness
of the Company and its Subsidiaries for the payment of the purchase price of
property or assets purchased, (c) all obligations of the Company and its
Subsidiaries to pay rent or other payment amounts under a lease of real or
personal property which is required to be classified as a capital lease or a
liability on the face of a balance sheet prepared in accordance with GAAP, (d)
any outstanding reimbursement obligation of the Company or its Subsidiaries
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with respect to letters of credit, bankers' acceptances or similar facilities
issued for the account of the Company or its Subsidiaries, (e) any payment
obligation of the Company or its Subsidiaries under any interest rate swap
agreement, forward rate agreement, interest rate cap or collar agreement or
other financial agreement or arrangement entered into for the purpose of
limiting or managing interest rate risks, (f) all indebtedness for borrowed
money secured by any Lien existing on property owned by the Company or its
Subsidiaries, whether or not indebtedness secured thereby shall have been
assumed, (g) all guaranties, endorsements, assumptions and other contingent
obligations of the Company or its Subsidiaries in respect of, or to purchase or
to otherwise acquire, indebtedness for borrowed money of others, (h) all off
balance sheet items such as, by way of example, sale/lease backs that are not
Capital Leases, repurchase obligations re: accounts receivable sold, or
synthetic leases, (i) all other short-term and long-term liabilities of the
Company or its Subsidiaries of any nature, other than accounts payable and
accrued liabilities incurred in the ordinary course of business, and (j) all
premiums, penalties and change of control payments required to be paid or
offered in respect of any of the foregoing as a result of the consummation of
the transactions contemplated by the Transaction Documents regardless if any of
such are actually paid.
"Effective Date" means the first date on which Common Stock may be issued
based on the conversion of the Convertible Note or the exercise of the Warrants.
"Employee Benefit Plans" means any "employee benefit plan" within the
meaning of Section 3(3) of ERISA and any bonus, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
vacation, severance, disability, death benefit, hospitalization or insurance
plan providing benefits to any present or former employee or contractor of
Seller or any member of the ERISA Group maintained by any such entity.
"Encumbrances" means any and all claims, liens, pledges, charges,
encumbrances, security interests, options, trusts, commitments or other
restrictions of any kind whatsoever.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"GAAP" has the meaning set forth in Section 3.1(e).
"Governmental Entity" means any agency, bureau, commission, court,
authority, department, official, political subdivision, tribunal or other
instrumentality of any government, whether (i) regulatory, administrative or
otherwise, (ii) federal, state or local or (iii) domestic or foreign.
"HSR Act" has the meaning set forth in Section 3.1(d)(iii).
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"Indemnified Parties" means the Purchaser Indemnified Parties or the
Company Indemnified Parties, as the case may be.
"Indemnifying Party" means any person who is obligated to provide
indemnification hereunder.
"Intangible Property" has the meaning set forth in Section 3.1(t).
"IRS" has the meaning set forth in Section 3.1(p)(ii).
"Knowledge" has the meaning set forth in Section 3.1(j).
"Law" means any constitutional provision, statute or other law, ordinance,
rule, regulation or interpretation of any thereof and any Order of any
Governmental Entity (including environmental laws).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or security interest of any kind in or on such asset or the
revenues or income thereon or therefrom.
"Litigation" has the meaning set forth in Section 3.1(k).
"Material Adverse Effect" or "Material Adverse Change" means any effect,
change, event or occurrence that is materially adverse to the business,
operations, properties, condition (financial or otherwise), results of
operations, assets, or liabilities of the Company and its Subsidiaries taken as
a whole.
"Material Contracts" has the meaning given it in Section 3.1(l)(i).
"Nasdaq" means the Nasdaq Stock Market.
"Offer Notice" has the meaning set forth in Section 4.7.
"Offer Price" has the meaning set forth in Section 4.7.
"Offered Securities" has the meaning set forth in Section 4.7.
"Oil and Gas Properties" has the meaning set forth in Section 3.1(z).
"Order" means any decree, injunction, judgment, order, ruling, assessment
or writ.
"Per Share Acquisition Price" means an amount equal to the Offer Price
divided by the number of shares of Common Stock acquired, or acquirable upon
exercise or conversion of other securities acquired, pursuant to a Private
Placement.
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"Permitted Assignee" shall have the meaning set forth in Section 6.11
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, limited liability company, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Private Placement" means any issuance or sale by the Company of shares of
Common Stock or other securities exercisable for or convertible into shares of
Common Stock pursuant to a bona fide offer to a person who is not an Affiliate,
director, officer or employee of the Company and who is not related by blood,
marriage or affinity to any director, officer or employee of the Company or of
an Affiliate of the Company, other than (i) pursuant to a registered
underwritten public offering under the Securities Act, (ii) pursuant to a merger
of the Company or a Subsidiary of the Company into or with another entity or an
acquisition by the Company or a Subsidiary of the Company of another business or
corporation or the assets thereof, provided that such entity is not an Affiliate
of the Company or of any officer, director or beneficial owner of ten percent or
more of the outstanding capital stock of the Company, (iii) issuances or sales
of Common Stock or Common Stock equivalents to any Person who is an employee,
officer, and/or director of the Company and/or any of its Subsidiaries pursuant
to employee benefit or similar plans or arrangements of the Company and/or its
Subsidiaries, that have been approved by the Board and the stockholders of the
Company (or to issuances of Common Stock upon the exercise or conversion of any
such Common Stock equivalents), (iv) issuances or sales of Common Stock of the
Company upon exercise of any Common Stock equivalents (A) outstanding on the
date hereof (including the Veritas warrant as described in Schedule 3.1(c)(iii))
or (B) with respect to which Purchaser has received an Offer Notice pursuant to
Section 4.7(a) hereof, (v) securities distributed or set aside ratably to all
holders of capital stock of the Company on a per share equivalent basis, or (vi)
subject to approval by the Board and stockholders of the Company, issuances or
sales of approximately two million five hundred thousand dollars ($2,500,000.00)
worth of Common Stock or Common Stock equivalents to Eagle Investments, Inc.
("Eagle") as consideration for two million five hundred thousand dollars
($2,500,000.00) in property and/or cash from Eagle, as previously disclosed to
the Purchaser.
"Proxy Statement" has the meaning set forth in Section 3.1(d)(iii).
"Purchase Price" has the meaning set forth in Section 2.1(b).
"Purchaser" has the meaning set forth in the introductory paragraph hereto.
"Purchaser Indemnified Costs" means any and all damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs and expenses (including
court costs and reasonable legal fees and expenses incurred in investigating and
preparing for any litigation or proceeding) that any of the Purchaser
Indemnified Parties incurs and that arise out of (i) any breach or default by
the Company of any of the representations or warranties under this Agreement or
any agreement or document executed in connection herewith, (ii) any breach by
the Company of any of the
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covenants or agreements (other than breaches of covenants to be performed by the
Company after the date hereof) of the Company under this Agreement or any other
Transaction Document executed in connection herewith or (iii) are incurred in
connection with any litigation or proceedings brought by any stockholder of the
Company (whether such action is brought in such stockholder's name or
derivatively on behalf of the Company) in respect of the transactions
contemplated by this Agreement.
"Purchaser Indemnified Parties" means Purchaser and each officer, director,
employee, stockholder and Affiliate of Purchaser.
"Reserve Report" means the most recent reserve information prepared by the
Company's engineers estimating the proved reserves attributable to the Oil and
Gas Properties as of March 1, 2000 and described in the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 2000.
"ROFO Acceptance Notice" shall have the meaning set forth in Section 4.7.
"ROFO Acceptance Period" shall have the meaning set forth in Section 4.7.
"ROFO Acceptance Securities" shall have the meaning set forth in Section
4.7.
"ROFO Closing" shall have the meaning set forth in Section 4.7.
"ROFO Closing Period" shall have the meaning set forth in Section 4.7.
"Rule 144" means Rule 144 under the Securities Act of 1933, as amended, and
any successor rule thereto.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Convertible Note and the Warrants.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Stockholders' Meeting" has the meaning set forth in Section 4.2.
"Share Issuance" has the meaning set forth in Section 3.1(d).
"Stock Plans" means the Company's 1997 Stock Option and Restricted Stock
Plan, as amended, and the Equity Compensation Plan for Non-Employee Directors,
as amended.
"Stockholder Approval" shall have the meaning set forth in Section 4.7.
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"Subsidiary" means, (i) a corporation, a majority of whose stock with
voting power, under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by the Company, by a Subsidiary of the Company or
by the Company and another Subsidiary, or (ii) any other Person (other than a
corporation) in which the Company, a Subsidiary or the Company and a Subsidiary,
directly or indirectly, at the date of determination thereof has at least a
majority ownership interest.
"Tax" or "Taxes" has the meaning set forth in Section 3.1(p).
"Tax Return" has the meaning set forth in Section 3.1(p).
"Transaction Documents" means this Agreement, the Convertible Note, the
Warrants, the Voting Agreement, the Registration Rights Agreements and any other
documents or instruments executed or delivered in connection herewith or
therewith.
"Transfer" has the meaning set forth in Section 3.2(e).
"Voting Agreement" means that certain voting agreement of even date
herewith by and among the Company, Purchaser and certain stockholders of the
Company.
"Warrants" means those certain common stock purchase warrants issued by the
Company to Purchaser concurrently with execution of the Agreement.
Section 1.2 References and Titles. All references in this Agreement to
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Exhibits, Schedules, Articles, Sections, subsections, and other subdivisions
refer to the corresponding Exhibits, Schedules, Articles, Sections, subsections,
and other subdivisions of this Agreement unless expressly provided otherwise.
Titles appearing at the beginning of any Articles, Sections, subsections, or
other subdivisions of this Agreement are for convenience only, do not constitute
any part of such Articles, Sections, subsections or other subdivisions, and
shall be disregarded in construing the language contained therein. The words
"this Agreement," "herein," "hereby," "hereunder," and "hereof," and words of
similar import, refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. The words "this Section," "this
subsection," and words of similar import, refer only to the Sections or
subsections hereof in which such words occur. The word "including" (in its
various forms) means "including without limitation." Pronouns in masculine,
feminine, or neuter genders shall be construed to state and include any other
gender and words, terms, and titles (including terms defined herein) in the
singular form shall be construed to include the plural and vice versa, unless
the context otherwise expressly requires. Unless the context otherwise
requires, all defined terms contained herein shall include the singular and
plural and the conjunctive and disjunctive forms of such defined terms.
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ARTICLE II
PURCHASE OF COMMON STOCK
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Section 2.1 Purchase of Securities; Issuance of Convertible Note.
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(a) Subject to the terms and conditions herein set forth, concurrently
with the execution hereof the Company is issuing and selling to Purchaser, and
Purchaser is purchasing from the Company, the Convertible Note and the Warrants.
(b) The purchase price payable for the Securities to be purchased
hereunder shall be $5,000,000.00 (the "Purchase Price").
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
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Section 3.1 Representations and Warranties of the Company. The Company
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represents and warrants to Purchaser as follows (in each case as qualified by
matters reflected on the disclosure schedule dated as of the date hereof and
delivered by the Company to Purchaser concurrently herewith (the "Company
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Disclosure Schedule") and made a part hereof by reference):
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(a) Organization, Standing and Power. The Company and each of
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its Subsidiaries is a corporation or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized and has the requisite corporate or other such entity
power and authority to carry on its business as now being conducted. Each of the
Company and each of its Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed or to be in good standing, individually or in the
aggregate, has not had and could not reasonably be expected to have a Material
Adverse Effect on the Company. The Company has delivered (or, in the case of the
Company's Subsidiaries, made available) to Purchaser prior to the execution of
this Agreement complete and correct copies of its Certificate of Incorporation
and Bylaws, as in effect on the date hereof, and the certificate of
incorporation and bylaws (or comparable organizational documents) of its
Subsidiaries, in each case as amended to the date hereof.
(b) Subsidiaries. Schedule 3.1(b) of the Company Disclosure
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Schedule sets forth a true and complete list, as of the date hereof, of each
Subsidiary of the Company, together with the jurisdiction of incorporation or
organization. All the outstanding shares of capital stock (or other voting or
equity securities or interests, as applicable) of each Subsidiary of the Company
have been validly issued and are fully paid and nonassessable and are owned
directly
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or indirectly by the Company, free and clear of all Liens. Except for
the capital stock of its Subsidiaries and the partnership interests listed in
Schedule 3.1(b) of the Company Disclosure Schedule, the Company does not own,
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directly or indirectly, any capital stock (or other voting or equity securities
or interests, as applicable) of any corporation, limited liability company,
partnership, joint venture or other entity.
(c) Capital Structure.
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(i) The authorized capital stock of Company consists of
40,000,000 shares of Common Stock and 2,000,000 shares of preferred stock,
par value $.01 per share (the "Authorized Preferred Stock"). Of these
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amounts: (A) 12,704,208 shares of Common Stock are issued and outstanding,
(B) no shares of Authorized Preferred Stock are issued and outstanding, (C)
no shares of Common Stock are held by the Company in its treasury and (D)
no shares of Common Stock are held by any of the Company's Subsidiaries.
(ii) There are no bonds, debentures, notes or other
indebtedness issued or outstanding having the right to vote on any matters
on which holders of Common Stock or Authorized Preferred Stock may vote.
(iii) Except for rights under the Stock Plans and as set forth
in Schedule 3.1(c)(iii) of the Company Disclosure Schedule, there are no
outstanding warrants, stock options, stock appreciation rights or other
rights to receive any capital stock of the Company. Schedule 3.1(c)(iii) of
the Company Disclosure Schedule sets forth a complete and correct list,
including the aggregate amount of shares reserved for issuance under the
Stock Plans, as of the date hereof, of the number, class and series of
shares subject to all warrants, options, stock appreciation rights or other
rights to receive any of the capital stock of the Company (collectively,
"Company Options"), and the exercise or base prices thereof. Except for the
Company Options and, except as set forth above or in Schedule 3.1(c)(iii)
of the Company Disclosure Schedule, there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or any of its Subsidiaries is
a party or by which any of them is bound obligating the Company or any of
its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock (or other voting or
equity securities or interests, as applicable) of the Company or of any of
its Subsidiaries or obligating the Company or any of its Subsidiaries to
issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking. Except as
set forth in Schedule 3.1(c)(iii) of the Company Disclosure Schedule, there
are no outstanding contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock (or other voting or equity securities or interests, as
applicable) of the Company or any of its Subsidiaries.
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(iv) All outstanding shares of capital stock (or other voting
or equity securities or interests, as applicable) of the Company and its
Subsidiaries are, and all shares which may be issued will be, when issued,
duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive or similar rights.
(v) Except as contemplated by the Voting Agreement or in the
other Transaction Documents or as set forth in Schedule 3.1(c)(iii) of the
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Company Disclosure Schedule, there are not any stockholder agreements,
voting agreements or trusts, proxies or other agreements or contractual
obligations to which the Company or any Subsidiary is a party or bound with
respect to the voting or disposition of any shares of the capital stock (or
other voting or equity securities or interests, as applicable) of the
Company or any of its Subsidiaries and, to the Company's knowledge, there
are no other stockholder agreements, voting agreements or trusts, proxies
or other agreements or contractual obligations among the stockholders of
the Company with respect to the voting or disposition of any shares of the
capital stock (or other voting or equity securities or interests, as
applicable) of the Company or any of its Subsidiaries.
(d) Authority; No Violations; Approvals.
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(i) The Board has approved this Agreement and each of the
transactions contemplated hereby, and declared this Agreement to be in the
best interests of the stockholders of the Company. The Company has all
requisite corporate power and authority to enter into this Agreement and to
consummate each of the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of each of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of the Company, other than the approval of the issuance
of the Conversion Shares (the "Share Issuance") by a majority of the votes
cast on such matter at the meeting of stockholders called for such purposes
as provided in Section 4.2. This Agreement has been duly executed and
delivered by the Company and, assuming this Agreement constitutes the valid
and binding obligation of Purchaser, constitutes a valid and binding
obligation of Company enforceable in accordance with its terms, subject, as
to enforceability, to bankruptcy, insolvency, reorganization, moratorium
and other laws of general applicability relating to or affecting creditors'
rights and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(ii) Except as set forth in Schedule 3.1(d)(ii) of the Company
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Disclosure Schedule, the execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated hereby and compliance
with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration
of any material obligation or to the loss of a material benefit under, or
give rise to a right of purchase under, result in the creation of any Lien
upon any of the properties or assets of the Company or any of its
Subsidiaries under, or otherwise
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result in a material detriment to the Company or any of its Subsidiaries
under, any provision of (A) the Certificate of Incorporation or Bylaws of
the Company or any provision of the comparable charter or organizational
documents of any of its Subsidiaries, (B) any loan or credit agreement,
note, bond, mortgage, indenture, lease, other agreement or Approval
applicable to the Company or any of its Subsidiaries, (C) any joint venture
or other ownership arrangement or (D) assuming the Approvals referred to in
Section 3.1(d)(iii) are duly and timely obtained or made, any Law or Order
applicable to the Company or any of its Subsidiaries or any of their
respective properties or assets, other than, in the case of clause (B) or
(D), any such conflicts, violations, defaults, rights, Liens, detriments,
Laws or Orders that, individually or in the aggregate, have not had and
could not reasonably be expected to (x) have a Material Adverse Effect on
the Company, (y) impair the ability of the Company to perform its material
obligations under any of the Transaction Documents, or (z) delay or prevent
the consummation of any of the transactions contemplated by any of the
Transaction Documents.
(iii) No Approval from any Governmental Entity is required by or
with respect to the Company or any of its Subsidiaries in connection with
the execution and delivery of this Agreement or any other Transaction
Document by the Company or the consummation by the Company of the
transactions contemplated hereby or thereby, except for: (A) if
applicable, the filing of a notification report by the Company under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
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Act"), and the expiration or termination of the applicable waiting period
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with respect thereto prior to the exercise of the Warrants; (B) the filing
with the SEC of (x) a proxy statement in preliminary and definitive form
relating to the meeting of the stockholders of the Company to be held in
connection with the approval of the Share Issuance (the "Proxy Statement")
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and (y) such reports under Section 13(a) of the Exchange Act and such other
compliance with the Exchange Act and the rules and regulations thereunder,
as may be required in connection with this Agreement, the other Transaction
Documents and the transactions contemplated hereby and thereby; (C) such
Approvals as may be required by any applicable state securities or "blue
sky" laws; (D) such Approvals as may be required by any foreign securities,
corporate or other Laws; and (E) any such Approval the failure of which to
be made or obtained has not had and could not reasonably be expected to (1)
impair the ability of the Company to perform its material obligations under
any of the Transaction Documents or (2) delay or prevent the consummation
of any of the transactions contemplated by any of the Transaction
Documents.
(e) SEC Documents. The Company has made available to Purchaser a true
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and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by the Company with the SEC since March 31,
1998 (the "Company SEC Documents"), which are all the documents (other than
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preliminary materials) that the Company was required to file with the SEC
between March 31, 1998 and the date hereof. As of their respective dates, the
Company SEC Documents complied in all material respects with the requirements of
the Securities Act, or the Exchange Act, as the case may be, and the rules and
regulations of the SEC
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thereunder applicable to such Company SEC Documents, and none of the Company SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the Company
SEC Documents complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles of the United States of
America ("GAAP") applied on a consistent basis during the periods involved
----
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the SEC)
and fairly present in accordance with applicable requirements of GAAP (subject,
in the case of the unaudited statements, to normal, recurring adjustments, none
of which are material) the consolidated financial position of the Company and
its consolidated Subsidiaries as of their respective dates and the consolidated
results of operations and the consolidated cash flows of the Company and its
consolidated Subsidiaries for the periods presented therein. Except as disclosed
in the Company SEC Documents, there are no agreements, arrangements or
understandings between the Company and any party who is or was at any time prior
to the date hereof but after March 31, 1998 an Affiliate of the Company that are
required to be disclosed in the Company SEC Documents.
(f) Information Supplied. None of the information included or
--------------------
incorporated by reference in the Proxy Statement will, at the date mailed to
stockholders of the Company or at the time of the Stockholders' Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Stockholders' Meeting any event with
respect to the Company or any of its Subsidiaries, or with respect to other
information in the Proxy Statement, shall occur which is required to be
described in an amendment of, or a supplement to, the Proxy Statement, such
event shall be so described, and such amendment or supplement shall be promptly
filed with the SEC and, as required by Law, disseminated to the stockholders of
the Company. The Proxy Statement, insofar as it relates to the Company or its
Subsidiaries, will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
(g) Absence of Certain Changes or Events. Except as disclosed in
------------------------------------
Schedule 3.1(g) of the Company Disclosure Schedule, or except as contemplated by
---------------
this Agreement, since December 31, 1999, each of the Company and its
Subsidiaries have conducted their business only in the ordinary course
consistent with past practice, and there has not occurred: (i) any material
casualties affecting the Company or any of its Subsidiaries or any material
loss, damage or destruction to any of their respective properties or assets,
including the Oil and Gas Properties; or (ii any event, circumstance or fact
that has had or could reasonably be expected to (x) have a Material Adverse
Effect on the Company, (y) impair the ability of the Company to perform its
material obligations under any of the Transaction Documents, or (z) delay or
prevent the consummation of any of the transactions contemplated by any of the
Transaction Documents.
-12-
(h) No Undisclosed Material Liabilities. Except as set forth on
-----------------------------------
Schedule 3.1(h) of the Company Disclosure Schedule, there are no material
---------------
liabilities or obligations of the Company or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, required by GAAP to be recognized or disclosed on a consolidated
balance sheet of the Company and its consolidated Subsidiaries or in the notes
thereto, other than: (i) liabilities adequately provided for on the balance
sheet of the Company dated as of March 31, 2000 (including the notes thereto)
contained in the Company's Quarterly Report on Form 10-Q for the three months
ended March 31, 2000; (ii liabilities incurred in the ordinary course of
business consistent with past practice since March 31, 2000; and (ii liabilities
arising under the Transaction Documents.
(i) No Default. Neither the Company nor any of its Subsidiaries is in
----------
default or violation (and no event has occurred which, with notice or the lapse
of time or both, would constitute a default or violation) of any term, condition
or provision of (i) the Certificate of Incorporation or Bylaws of the Company or
the comparable charter or organizational documents of any of its Subsidiaries,
(ii any loan or credit agreement, note, bond, mortgage, indenture, lease,
instrument, permit, concession, franchise, license or any other contract,
agreement, arrangement or understanding to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective properties or assets is bound, or (ii any Law applicable
to the Company or any of its Subsidiaries, except in the case of clause (ii) and
(iii), for violations or defaults that, individually or in the aggregate, have
not had and could not reasonably be expected to (x) have a Material Adverse
Effect on the Company, (y) impair the ability of the Company to perform its
material obligations under any of the Transaction Documents, or (z) delay or
prevent the consummation of any of the transactions contemplated by any of the
Transaction Documents.
(j) Compliance with Applicable Laws. The Company and each of its
-------------------------------
Subsidiaries has in effect all Approvals of all Governmental Entities necessary
for the lawful conduct of their respective businesses, and there has occurred no
default or violation (and no event has occurred which, with notice or the lapse
of time or both, would constitute a default or violation) under any such
Approval, except for failures to obtain, or for defaults or violations under,
Approvals which failures, defaults or violations, individually or in the
aggregate, have not had and could not reasonably be expected to (i) have a
Material Adverse Effect on the Company, (ii impair the ability of the Company to
perform its material obligations under any of the Transaction Documents, or (ii
delay or prevent the consummation of any of the transactions contemplated by any
of the Transaction Documents. Except as set forth in Schedule 3.1(j) of the
---------------
Company Disclosure Schedule, the businesses of the Company and its Subsidiaries
are in compliance with all applicable Laws and Orders, except for possible
noncompliance, which individually or in the aggregate, has not had and could not
reasonably be expected to have any effect referred to in clause (i), (ii) or
(iii) above. No investigation or review by any Governmental Entity with respect
to the Company, any of its Subsidiaries, the transactions contemplated by this
Agreement and the other Transaction Documents, is pending or, to the best
knowledge of the Company, threatened, nor has any Governmental Entity indicated
to the Company or any of its Subsidiaries any intention to conduct the same,
other than those the
-13-
outcome of which, individually or in the aggregate, has not had and could
not reasonably be expected to have any effect referred to in clause (i), (ii) or
(iii) above. For purposes of this Agreement "knowledge" means the actual
---------
knowledge of the officers, directors or senior managers of Purchaser or the
Company, as the case may be, after reasonable inquiry.
(k) Litigation. Except as disclosed on Schedule 3.1(k) of the Company
---------- ---------------
Disclosure Schedule, there is no suit, action, proceeding or indemnification
claim, at law or in equity, pending before any Governmental Entity, or, to the
best knowledge of the Company, threatened, against or affecting the Company or
any of its Subsidiaries ("Litigation"), and the Company is not a party to any
----------
Litigation, and the Company and its Subsidiaries have no knowledge of any facts
that are likely to give rise to any Litigation, that (in any case) has had or
could reasonably be expected to (i) have a Material Adverse Effect on the
Company, (ii impair the ability of the Company to perform its material
obligations under any of the Transaction Documents, or (ii delay or prevent the
consummation of any of the transactions contemplated by any of the Transaction
Documents, nor is there any Order of any Governmental Entity or arbitrator
outstanding against the Company or any of its Subsidiaries which has had or
could reasonably be expected to have any effect referred to in clause (i), (ii)
or (iii) above.
(l) Certain Agreements; Contract Interests.
--------------------------------------
(i) Except as disclosed on Schedule 3.1(l) of the Company
---------------
Disclosure Schedule, there are no (A) employment or consulting Contracts
(unless such employment or consulting Contracts are terminable without
liability or penalty on 30 days or less notice), (B) Contracts under which
any party thereto remains obligated to provide goods or services having a
value, or to make payments aggregating (for Debt or otherwise), in excess
of $500,000 per year, (C) other Contracts that are material to the Company
and its Subsidiaries, taken as a whole, or their respective business, and
(D) Contracts with Affiliates, in any such case, to which the Company or
any Subsidiary is a party or to which the Company or any Subsidiary or
their respective assets is bound (such Contracts disclosed or required to
be disclosed, the "Material Contracts"). Each Material Contract is a valid
------------------
and binding obligation of the Company or one of its Subsidiaries and, to
the best knowledge of the Company, of each party thereto other than the
Company or its respective Subsidiary and is in full force and effect
without amendment.
(ii) The Company or the relevant Subsidiary and, to the best
knowledge of the Company, each other party to the Material Contracts, has
performed in all material respects the obligations required to be performed
by it under the Material Contracts and is not (with or without lapse of
time or the giving of notice, or both) in breach or default thereunder.
(iii) The Company has made available to Purchaser (A) true and
correct copies of all loan or credit agreements, notes, bonds, mortgages,
indentures and other agreements and instruments pursuant to which any Debt
of the Company or any of its
-14-
Subsidiaries is outstanding or may be incurred and (B) accurate information
regarding the respective principal amounts currently outstanding
thereunder.
(m) Title to Properties. Except as disclosed in Schedule 3.1(m) to
------------------- ---------------
the Company Disclosure Schedule, the Company and its Subsidiaries have good and
defensible title to all the producing oil and gas properties described in the
Company SEC Documents as being owned by them or to be owned by them on the date
hereof, title investigations have been conducted with respect to such properties
in accordance with customary practices in the oil and gas industry, and such
properties are free and clear of any Liens except for (i) Liens for taxes not
yet due, and (ii other Liens that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(n) Intentionally omitted.
---------------------
(o) Status of Shares. Subject to receipt of the approval of the Share
----------------
Issuance by the Company's stockholders as contemplated by Section 4.2, the
issuance of the Conversion Shares has been duly authorized by all necessary
corporate action on the part of the Company and such Conversion Shares, when
delivered to Purchaser against payment therefor as provided herein, will be
validly issued, fully paid and non-assessable and the issuance and sale of the
Shares is not and will not be subject to preemptive rights of any other
stockholder of the Company.
(p) Taxes. Except as disclosed in Schedule 3.1(p) of the Company
----- ---------------
Disclosure Schedule:
(i) Each of the Company, each of its Subsidiaries and any
affiliated, consolidated, combined, unitary or similar group of which the
Company or any of its Subsidiaries is or was a member has (A) duly filed on
a timely basis (taking into account any extensions) all U.S. federal income
Tax Returns (as hereinafter defined), and all other material Tax Returns,
required to be filed or sent by or with respect to it, and all such Tax
Returns are true, correct and complete in all material respects, (B) duly
paid or deposited on a timely basis all Taxes (as hereinafter defined) that
are shown to be due and payable on or with respect to such Tax Returns
(including all required estimated Tax payments sufficient to avoid material
under-payment penalties), and all material Taxes that are otherwise due and
payable (except for audit adjustments not material in the aggregate or to
the extent that liability therefor is reserved for in the Company's most
recent audited financial statements) for which the Company or any of its
Subsidiaries may be liable, (C) established reserves that are adequate for
the payment of all material Taxes not yet due and payable with respect to
the results of operations of the Company and its Subsidiaries through the
date hereof, and (D) complied in all material respects with all applicable
Laws relating to the reporting, payment and withholding of Taxes that are
required to be withheld from payments to employees, independent
contractors, creditors, stockholders or any other third party and has in
all material respects timely withheld from employee
-15-
wages and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over.
(ii) No audits or other administrative proceedings or court
proceedings are presently pending, or to the best knowledge of the Company,
threatened, with regard to any Taxes for which the Company or any of its
Subsidiaries would be liable, and no material deficiency for any Taxes has
been proposed, asserted or assessed (whether by examination report or prior
to completion of examination by means of notices of proposed adjustment or
other similar requests or notices) pursuant to such examination against the
Company or any of its Subsidiaries by any taxing authority with respect to
any period.
(iii) Neither the Company nor any of its Subsidiaries has
executed or entered into with the IRS or any taxing authority (A) any
agreement or other document extending or having the effect of extending the
period for assessment or collection of any income or franchise Taxes for
which the Company or any of its Subsidiaries would be liable or (B) a
closing agreement pursuant to Section 7121 of the Code or any similar
provision of state, local, foreign or other income tax Law, which will
require any increase in taxable income or alternative minimum taxable
income, or any reduction in tax credits, for the Company or any of its
Subsidiaries for any taxable period ending after the date hereof.
(iv) Neither the Company nor any of its Subsidiaries is a party
to an agreement that provides for the payment of any amount that would
constitute a "parachute payment" within the meaning of Section 280G of the
Code or that would constitute compensation whose deductibility is limited
under Section 162(m) of the Code.
(v) Neither the Company nor any of its Subsidiaries is a party
to, is bound by or has any obligation under, any tax sharing or allocation
agreement or similar agreement or arrangement.
(vi) There are no requests for rulings or outstanding subpoenas
from any taxing authority for information with respect to Taxes of the
Company or any of its Subsidiaries and, to the best knowledge of the
Company, no material reassessments (for property or ad valorem tax
purposes) of any assets or any property owned or leased by the Company or
any of its Subsidiaries have been proposed in written form.
(vii) No consent to the application of Section 341(f)(2) of the
Code has been made or filed by or with the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries has agreed
to make any adjustment pursuant to Section 481(a) of the Code (or any
predecessor provision) by reason of any change in any accounting method of
the Company or any
-16-
of its Subsidiaries, and neither the Company nor any of its Subsidiaries
has any application pending with any taxing authority requesting permission
for any changes in any accounting method of the Company or any of its
Subsidiaries. To the best knowledge of the Company, neither the IRS nor any
other taxing authority has proposed in writing, and neither the Company nor
any of its Subsidiaries is otherwise required to make, any such adjustment
or change in accounting method.
For purposes of this Agreement, "Tax" (and, with correlative meaning,
---
"Taxes") means (i) any net income, alternative or add-on minimum tax, gross
-----
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid by the Company or any
of its Subsidiaries, payroll, employment, excise, production, severance, stamp,
occupation, premium, property, environmental or windfall profit tax, custom,
duty or other tax, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest and/or any penalty, addition to tax
or additional amount imposed by any taxing authority, (ii) any liability of the
Company or any of its Subsidiaries for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated or consolidated
group, or arrangement whereby liability of the Company or any of its
Subsidiaries for payment of such amounts was determined or taken into account
with reference to the liability of any other person for any period and (iii)
liability of the Company or any of its Subsidiaries with respect to the payment
of any amounts of the type described in (i) or (ii) as a result of any express
or implied obligation to indemnify any other Person.
"Tax Return" means all returns, declarations, reports, estimates,
----------
information returns and statements required to be filed by or with respect to
the Company or any of its Subsidiaries in respect of any Taxes, including (i)
any consolidated federal income tax return in which the Company or any of its
Subsidiaries is included and (ii) any state, local or foreign income tax returns
filed on a consolidated, combined or unitary basis (for purposes of determining
Tax liability) in which the Company or any of its Subsidiaries is included.
(q) Employee Benefit Plans. The terms of each of the Employee Benefit
----------------------
Plans that is intended to qualify under Section 401(a) of the Code, are in
substantial compliance with the applicable qualifications requirements of the
Code. To the best knowledge of the Company, neither the Company nor any officer
of the Company nor any Employee Benefit Plan or trust created thereunder, has
engaged in any uncorrected "prohibited transaction," as defined in Code section
4975 or ERISA section 406 which could reasonably be expected to result in
material liability to the Company. The Company is not a contributing employer
to any "multiemployer plan," as defined in ERISA sections 3(37) or 4001(a)(3).
There is no pending or, to the Company's best knowledge, threatened Litigation
(other than routine claims for benefits made in the ordinary course of plan
administration) relating to any Employee Benefit Plan or fiduciary with respect
to any Employee Benefit Plan in connection with such fiduciaries actions or
omissions in connection with such Employee Benefit Plan. With respect to all
Employee Benefit Plans, the Company is in material compliance with the
requirements of ERISA concerning the filing of annual reports and the
distribution of descriptions and the continuation coverage requirements of COBRA
set forth in ERISA sections 601-608 and Code section 4980B(f).
-17-
(r) Employees. Schedule 3.1(r) of the Company Disclosure Schedule
----------- ----------------
sets forth by number and employment classification the approximate numbers of
employees employed by the Company as of the Date hereof, and, except as set
forth therein, none of said employees are subject to union or collective
bargaining agreements with the Company. Except as otherwise set forth in
Schedule 3.1(r) of the Company Disclosure Schedule, the Company has not at any
---------------
time on or after January 1, 1998 had or, to the best knowledge of Company, been
threatened with any work stoppages or other labor disputes or controversies with
respect to its employees which had a Material Adverse Effect on the Company.
(s) Labor Matters. Except as disclosed on Schedule 3.1(s) of the
------------- ---------------
Company Disclosure Schedule:
(i) neither the Company nor any of its Subsidiaries is a party
to any collective bargaining agreement or other current labor agreement
with any labor union or organization, and there is no current union
representation question involving employees of the Company or any of its
Subsidiaries, nor does the Company or any of its Subsidiaries know of any
activity or proceeding of any labor organization (or representative
thereof) or employee group (or representative thereof) to organize any such
employees;
(ii) there is no unfair labor practice charge or grievance
arising out of a collective bargaining agreement or other grievance
procedure against the Company or any of its Subsidiaries pending, or, to
the best knowledge of the Company or any of its Subsidiaries, threatened,
that, individually or in the aggregate, has had or could reasonably be
expected to (A) have a Material Adverse Effect on the Company, (B) impair
the ability of the Company to perform its material obligations under any of
the Transaction Documents, or (C) delay or prevent the consummation of any
of the transactions contemplated by any of the Transaction Documents;
(iii) there is no complaint, lawsuit or proceeding in any forum
by or on behalf of any present or former employee, any applicant for
employment or any classes of the foregoing alleging breach of any express
or implied contract of employment, any Law governing employment or the
termination thereof or other discriminatory, wrongful or tortious conduct
in connection with the employment relationship against the Company or any
of its Subsidiaries pending, or, to the best knowledge of the Company or
any of its Subsidiaries, threatened, that, individually or in the
aggregate, has had or could reasonably be expected to (A) have a Material
Adverse Effect on the Company, (B) impair the ability of the Company to
perform its material obligations under any of the Transaction Documents, or
(C) delay or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents;
(iv) there is no strike, dispute, slowdown, work stoppage or
lockout pending, or, to the best knowledge of the Company or any of its
Subsidiaries, threatened, against or involving the Company or any of its
Subsidiaries that, individually or in the
-18-
aggregate, has had or could reasonably be expected to (A) have a Material
Adverse Effect on the Company, (B) impair the ability of the Company to
perform its material obligations under any of the Transaction Documents, or
(C) delay or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents;
(v) The Company and each of its Subsidiaries are in compliance
with all applicable Laws respecting employment and employment practices,
terms and conditions of employment, wages, hours of work and occupational
safety and health, except for non-compliance that, individually or in the
aggregate, has not had and could not reasonably be expected to (A) have a
Material Adverse Effect on the Company, (B) impair the ability of the
Company to perform its material obligations under any of the Transaction
Documents, or (C) delay or prevent the consummation of any of the
transactions contemplated by any of the Transaction Documents; and
(vi) There is no proceeding, claim, suit, action or
governmental investigation pending or, to the best knowledge of the Company
or any of its Subsidiaries, threatened, in respect to which any current or
former director, officer, employee or agent of the Company or any of its
Subsidiaries is or may be entitled to claim indemnification from the
Company or any of its Subsidiaries pursuant to the Certificate of
Incorporation or Bylaws of the Company or any provision of the comparable
charter or organizational documents of any of its Subsidiaries, as provided
in any indemnification agreement to which the Company or any Subsidiary of
the Company is a party or pursuant to applicable Law that, individually or
in the aggregate, has had or could reasonably be expected to (A) have a
Material Adverse Effect on the Company, (B) impair the ability of the
Company to perform its material obligations under any of the Transaction
Documents, or (C) delay or prevent the consummation of any of the
transactions contemplated by any of the Transaction Documents.
(t) Intangible Property. The Company and its Subsidiaries possess or
-------------------
have adequate rights to use all material trademarks, trade names, patents,
service marks, brand marks, brand names, computer programs, databases,
industrial designs and copyrights necessary for the operation of the businesses
of each of the Company and its Subsidiaries (collectively, the "Intangible
----------
Property"), except where the failure to possess or have adequate rights to use
--------
such properties, individually or in the aggregate, has not had and could not
reasonably be expected to (i) have a Material Adverse Effect on the Company, (ii
impair the ability of the Company to perform its material obligations under any
of the Transaction Documents, or (ii delay or prevent the consummation of any of
the transactions contemplated by any of the Transaction Documents. All of the
Intangible Property is owned or licensed by the Company or its Subsidiaries free
and clear of any and all Liens, except those that, individually or in the
aggregate, have not had and could not reasonably be expected to (i) have a
Material Adverse Effect on the Company, (ii) impair the ability of the Company
to perform its material obligations under any of the Transaction Documents, or
(iii) delay or prevent the consummation of any of the transactions contemplated
by any of the Transaction Documents, and neither the Company nor any such
-19-
Subsidiary has forfeited or otherwise relinquished any Intangible Property which
forfeiture, individually or in the aggregate, has had or could reasonably be
expected to have any effect referred to in clause (i), (ii) or (iii) above. To
the best knowledge of the Company, the use of the Intangible Property by the
Company or its Subsidiaries does not, in any material respect, conflict with,
infringe upon, violate or interfere with or constitute an appropriation of any
right, title, interest or goodwill, including any intellectual property right,
trademark, trade name, patent, service xxxx, brand xxxx, brand name, computer
program, database, industrial design, copyright or any pending application
therefor of any other Person and there have been no claims made and neither the
Company nor any of its Subsidiaries has received any notice of any claim or
otherwise knows that any of the Intangible Property is invalid or conflicts with
the asserted rights of any other Person or has not been used or enforced or has
failed to have been used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of any of the Intangible Property,
except for any such conflict, infringement, violation, interference, claim,
invalidity, abandonment, cancellation or unenforceability that, individually or
in the aggregate, has not had and could not reasonably be expected to (i) have a
Material Adverse Effect on the Company, (ii) impair the ability of the Company
to perform its material obligations under any of the Transaction Documents, or
(iii) delay or prevent the consummation of any of the transactions contemplated
by any of the Transaction Documents.
(u) Environmental Matters. To the best knowledge of the Company,
---------------------
there are no hazardous substances in, on or under its properties that are in a
condition or location that violates any applicable Laws or that has required or
would require remediation under applicable Laws or give rise to a claim for
damages or compensation by any affected Person or that would cause any material
loss, cost, liability or expense in connection with any violation of any
applicable Law, any order of any Governmental Entity or any claim by any private
or public Person arising out of any exposure of any Person or property to any
hazardous substance, except for any violation, remediation, damages,
compensation, loss, cost, liability or expense that would not have a Material
Adverse Effect on the Company.
(v) Insurance. The Company maintains insurance in such amounts and
---------
covering such risks as are in accordance with normal industry practice for
companies engaged in businesses similar to those of the Company and each of its
Subsidiaries (taking into account the cost and availability of such insurance).
(w) Vote. There are no approvals required of the holders of any class
----
or series of capital stock of the Company necessary to approve this Agreement
and the transactions contemplated hereby other than the approval of the
stockholders of the Company of the Share Issuance by the affirmative vote of a
majority of the total votes cast by the holders of Common Stock at a
stockholders meeting.
(x) No Brokers or Finders. Except as set forth on Schedule 3.1(x), no
--------------------- ---------------
agent, broker, finder or investment or commercial banker, or other Person or
firm engaged by or acting on behalf of the Company in connection with the
negotiation, execution or performance of this Agreement is or will be entitled
to any brokerage or finder's or similar fee or other commission
-20-
as a result of this Agreement, other than any such fees or commissions that have
been disclosed to Purchaser and as to which the Company shall have full
responsibility.
(y) Oil and Gas Operations. In those instances in which the Company
----------------------
serves as operator of a well that is currently a producing well or undergoing
drilling operations, it has drilled and completed (if applicable) such well, and
operated and produced such well, in accordance with generally accepted oil and
gas field practices and in compliance in all material respects with applicable
oil and gas leases, applicable contracts, and all applicable Laws, except where
any failure or violation could not reasonably be expected to have a Material
Adverse Effect on the Company. All proceeds from the sale of oil, gas and other
hydrocarbons produced by the Company are being received by the Company in a
timely manner and are not being held in suspense for any reason (except for
amounts, individually or in the aggregate, not in excess of $2,000,000 and held
in suspense in the ordinary course of business).
(z) Marketing of Production. Except for Contracts listed in the
-----------------------
Company SEC Documents or on Schedule 3.1(z) of the Company Disclosure Schedule
---------------
(with respect to all of which Contracts the Company represents that it or its
Subsidiaries are receiving a price for all production sold thereunder which is
computed in accordance with the terms of the relevant Contract), there exist no
Material Contracts for the sale of production from the leasehold and other
interests in oil gas and other mineral properties owned by the Company or its
Subsidiaries (collectively, the "Oil and Gas Properties") other than (i)
----------------------
Contracts pertaining to the sale of production at a price equal to or greater
than a price that is the market price from time to time existing in the areas
where the Oil and Gas Properties subject to such agreement or arrangement are
located, and (ii Contracts that are cancelable on 60 days notice or less without
penalty or detriment.
(aa) Prepayments. Neither the Company nor any Subsidiary is
-----------
obligated, by virtue of a prepayment arrangement, make-up right under a
production sales Contract containing a "take or pay" or similar provision,
production payment or any other arrangement, to deliver hydrocarbons, or
proceeds from the sale thereof, attributable to any of its properties at some
future time without then or thereafter being entitled to received payment of the
contract price therefor, except where any such arrangement would not have a
Material Adverse Effect.
(bb) Reserve Report. The Company acknowledges and agrees that
--------------
Purchaser has been provided with a copy of the Reserve Report. The Company's
and each Subsidiary's ownership of the Oil and Gas Properties described in the
Reserve Report entitle the respective owner to receive a percentage of the oil,
gas and other hydrocarbons produced from each well or unit equal to not less
than the percentage set forth in the Reserve Report as the "Net Revenue
Interest" for such well or unit and cause the respective owner to be obligated
to bear a percentage of the cost of operation of such well or unit not greater
than the percentage set forth in the Reserve Report as the "Working Interest"
for such well or unit, and to the extent such percentages of production which
the respective owner is entitled to receive, and shares of expenses which the
respective owner is obligated to bear, may change after the date of such
reports, such changes were properly reflected (based on reasonable assumptions)
in preparing
-21-
such report. The underlying historical information used for preparation of the
Reserve Report was, at the time of delivery, true and correct in all material
respects.
Section 3.2 Representations and Warranties of Purchaser.
-------------------------------------------
(a) Organization, Standing and Power. Purchaser is a corporation
--------------------------------
duly organized, validly existing, and in good standing under the laws of the
State of Michigan and has all requisite corporate power and authority to own,
lease, and operate its properties and to carry on its business as now being
conducted.
(b) Authority. Purchaser represents and warrants to the Company
---------
that, assuming the accuracy of the representations and warranties of the Company
in Section 3.1(d) hereof, (i) the purchase of the Securities and the Conversion
Shares to be purchased by it has been duly and properly authorized and this
Agreement has been duly executed and delivered by it or on its behalf and
constitutes the valid and legally binding obligation of Purchaser, enforceable
against it in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity; (ii) the purchase of the Securities and the
Conversion Shares to be purchased by it does not conflict with or violate (A)
its certificate of incorporation or bylaws or (B) any law applicable to it in a
manner that could materially hinder or impair the completion of any of the
transactions contemplated hereby; and (iii) the purchase of Securities and the
Conversion Shares to be purchased by it does not impose any penalty or other
onerous condition on Purchaser that could materially hinder or impact the
completion of any of the transactions contemplated hereby.
(c) Litigation. As of the date hereof, there is no claim,
----------
action, suit, inquiry, judicial or administrative proceeding pending or, to the
best knowledge of Purchaser, threatened against it relating to any of the
transactions contemplated by this Agreement or any other Transaction Document.
(d) Investment Intent. Purchaser represents and warrants to the
-----------------
Company that (other than to the extent that rights to acquire or to have an
interest in any of the Securities may be assigned to one or more of the
Permitted Assignees) the Securities, including the Conversion Shares to be
acquired upon conversion of the Securities, are being acquired for its own
account for investment and with no intention of distributing or reselling such
Securities, including the Conversion Shares to be acquired upon conversion of
such Securities or any part thereof or interest therein in any transaction which
would be in violation of the securities Laws of the United States of America or
any state or any foreign country or jurisdiction.
(e) Transfer Restrictions. If Purchaser should decide to dispose
---------------------
of any of the Warrants or the Conversion Shares other than pursuant to a sale or
transfer to a Permitted Assignee, Purchaser understands and agrees that it may
do so only pursuant to an effective registration statement under the Securities
Act or pursuant to an exemption from registration under the Securities Act. In
connection with any offer, resale, pledge or other transfer
-22-
(individually and collectively, a "Transfer") of any such securities other than
pursuant to a transfer to a Permitted Assignee or pursuant to an effective
registration statement, the Company may require that the transferor of such
securities provide to the Company an opinion of counsel which opinion shall be
reasonably satisfactory in form and substance to the Company, to the effect that
such Transfer is being made pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act and any
State or foreign securities Laws. Purchaser agrees to the imprinting, so long as
appropriate, of substantially the following legend on certificates representing
such securities:
THE SHARES OF COMMON STOCK (THE "SHARES") [WARRANTS] EVIDENCED
------
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
--------------
SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER AGREES THAT IT WILL NOT OFFER, RESELL, PLEDGE OR
OTHERWISE TRANSFER (INDIVIDUALLY AND COLLECTIVELY, A "TRANSFER") THE SHARES
--------
[WARRANTS] EVIDENCED HEREBY, EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR (B) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT SUCH AS THE EXEMPTION
SET FORTH IN RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE). IF THE
PROPOSED TRANSFER IS TO BE MADE OTHER THAN PURSUANT TO CLAUSE (A) ABOVE,
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AND THE
TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
THEY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR ANY STATE OR FOREIGN
SECURITIES LAW.
The legend set forth above may be removed if and when the Warrants or the
Conversion Shares, as the case may be, represented by such certificate are
disposed of pursuant to an effective registration statement under the Securities
Act or the opinion of counsel referred to above has been provided to the
Company. The share certificates shall also bear any additional legends required
by applicable federal, state or foreign securities Laws, which legends may be
removed when, in the opinion of counsel to the Company, the same are no longer
required under the applicable requirements of such securities Laws. Purchaser
agrees that, in connection with any Transfer of Warrants or Conversion Shares by
it pursuant to an effective registration statement under the Securities Act,
Purchaser will comply with all prospectus delivery requirements of the
Securities Act. The Company makes no representation, warranty or agreement as
to the availability of any exemption from registration under the Securities Act
with respect to any resale of the Conversion Shares.
(f) Purchaser Status. Purchaser represents and warrants to, and
----------------
covenants and agrees with the Company that (i) at the time it was offered the
Securities, it was, (ii) at the
-23-
Effective Date, it is, and (ii) at the at time of the issuance of my Conversion
Shares, it will be, an accredited investor as defined in Rule 501(a) under the
Securities Act, and has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the Company and
an investment in the Securities, and is able to bear the economic risk of such
investment.
ARTICLE IV
COVENANTS
---------
Section 4.1 Furnishing of Information. As long as Purchaser owns
-------------------------
Conversion Shares representing (or Securities convertible into or exercisable
for) at least 5% of the aggregate number of shares of Common Stock then
outstanding, from and after the Date hereof the Company will promptly furnish to
Purchaser all reports (including all exhibits thereto) filed by it pursuant to
Section 13(a) or 15(d) of the Exchange Act (or if the Company is not at the time
required to file reports pursuant to said Section 13(a) or 15(d), annual and
quarterly reports comparable to those required by Sections 13(a) or 15(d) of the
Exchange Act).
Section 4.2 Stockholder Approval; Proxy Statement. The Company shall
-------------------------------------
take all actions necessary or desirable, in the opinion of the Company and
Purchaser, in accordance with its Certificate of Incorporation, and Bylaws, the
rules of Nasdaq and other applicable Law to call a meeting of its stockholders
or by consent in lieu of such meeting (the "Stockholders' Meeting") to be held
---------------------
as promptly as practicable after the date hereof for the purpose of approving
the Share Issuance. The Company and Purchaser shall consult with each other in
connection with Stockholders' Meeting. The Company shall use its best efforts
to cause the Board (a) to recommend to the Company's stockholders approval of
the Share Issuance (b) not to withdraw, modify or change such recommendation and
(c) to continue to recommend to the stockholders of the Company the approval and
the adoption of such matters. As promptly as practicable after the date hereof,
the Company shall prepare and file with the SEC the Proxy Statement with respect
to the approval and adoption by the Company's stockholders of the Share
Issuance. As promptly as practicable after the clearance of the Proxy Statement
by the SEC, the Company shall mail the Proxy Statement to its stockholders of
record at least 10 calendar days prior to the Stockholders' Meeting and shall
use its reasonable best efforts to solicit and obtain the affirmative vote of
the requisite percentage of the stockholders of the Company with respect to
approval of the Share Issuance.
Section 4.3 Nasdaq Listing. The Company will file a listing
--------------
application with Nasdaq with respect to the Conversion Shares promptly following
after the date hereof and Purchaser shall be entitled to review and comment on
such listing application and the submission of any other materials to Nasdaq in
connection with the listing of the Conversion Shares. The Company shall use its
reasonable best efforts to cause the Conversion Shares to be approved for
listing on Nasdaq, subject to official notice of issuance.
-24-
Section 4.4 Approvals. The Company and Purchaser each agree to
---------
cooperate and use their best efforts to obtain (and will immediately prepare all
registrations, filings and applications, requests and notices preliminary to
all) Approvals that may be necessary or which may be reasonably requested by the
Company or Purchaser to consummate the transactions contemplated by this
Agreement and the other Transaction Documents.
Section 4.5 HSR Act Notification. To the extent it is determined that
--------------------
the HSR Act will be applicable to the acquisition of any of the Conversion
Shares by Purchaser, each of the parties hereto shall (a) file or cause to be
filed, as promptly as practicable after the Effective Date, with the Federal
Trade Commission and the United States Department of Justice, all reports and
other documents required to be filed by such party under the HSR Act concerning
the transactions contemplated hereby and (b) promptly comply with or cause to be
complied with any requests by the Federal Trade Commission or the United States
Department of Justice for additional information concerning the transactions
contemplated hereby, in each case so that the waiting period applicable to this
Agreement and the transactions contemplated hereby under the HSR Act shall
expire as soon as practicable after the execution and delivery of this
Agreement. Each party hereto agrees to request, and to cooperate with the other
party or parties in requesting, early termination of any applicable waiting
period under the HSR Act.
Section 4.6 Board of Directors. As of the date hereof, the Board is
------------------
comprised of the individuals listed on Schedule 4.6 to the Company Disclosure
------------
Schedule. At any time and from time to time until December 31, 2005, the
Company, at the request of Purchaser, shall take, or cause to be taken, such
action as may be necessary or advisable to ensure that the Board shall consist
of no more than eight individuals, including two individuals designated by
Purchaser; provided, however, that Purchaser shall not be entitled to designate
individuals for election or appointment to the Board during the period beginning
with the filing of the Company's proxy statement for its annual meeting of
stockholders and ending with the day of such annual meeting.
Section 4.7 Right of First Offer
--------------------
(a) No later than forty (40) calendar days prior to the
consummation of any Private Placement, and subject to paragraph (e) below, the
Company will deliver to Purchaser, a written notice (the "Offer Notice")
------------
specifying (i) the aggregate amount of cash consideration (the "Offer Price")
-----------
for which the Company proposes to sell the securities that are the subject of
the Private Placement (the "Offered Securities"), (ii) the identity of the
------------------
purchaser in such Private Placement, and (iii) and all other material terms of
the proposed Private Placement. If the Purchaser delivers to the Company a
written notice (an "ROFO Acceptance Notice") within thirty (30) days following
----------------------
delivery of the Offer Notice (the "ROFO Acceptance Period"), stating that the
----------------------
Purchaser is willing to purchase all or a portion of the Offered Securities on
the terms set forth in the Offer Notice (the "ROFO Accepted Securities"), the
------------------------
Company will sell such ROFO Accepted Securities to the Purchaser, and the
Purchaser will purchase such ROFO Accepted Securities from the Company, on the
proposed terms and subject to the conditions set forth below.
-25-
(b) The consummation of any purchase of the Offered Securities by the
Purchaser pursuant to this Section 4.7 (the "ROFO Closing") will occur on the
------------
fifth Business Day following the delivery of the ROFO Acceptance Notice (such
five (5) Business Day period being referred to herein as the "ROFO Closing
------------
Period") at the principal executive offices of the Company at 10:00 a.m.
------
(Central Time). At the ROFO Closing, the Purchaser will deliver to the Company
by certified or official bank check or wire transfer to an account designated by
the Company an amount in immediately available funds equal to (i) in the event
the ROFO Accepted Securities consist of all the Offered Securities, the Offer
Price, or (ii) in the event the ROFO Accepted Securities consist of less than
all the Offered Securities, an amount equal to the Offer Price multiplied by a
fraction, the numerator of which is the number ROFO Accepted Securities and the
denominator of which is the total number of Offered Securities. Upon receipt or
acknowledgment of payment for the ROFO Accepted Securities, the Company will
deliver one or more certificates evidencing the ROFO Accepted Securities,
together with such other duly executed instruments or documents (executed by the
Company) as may be reasonably requested by the Purchaser to acquire the ROFO
Accepted Securities free and clear of any and all Encumbrances, except for
Encumbrances created by this Agreement, federal or state securities law or the
Purchaser or as specified in the Offer Notice, and the Company will be deemed
to represent and warrant to the Purchaser that, upon the ROFO Closing, the
Company will convey and the Purchaser will acquire the entire record and
beneficial ownership of, and good and valid title to, the ROFO Accepted
Securities, free and clear of any and all Encumbrances, except for Encumbrances
created by this Agreement, federal or state securities laws or the Purchaser or
as described in the Offer Notice.
(c) If (i) the ROFO Accepted Securities consist of less than all of
the Offered Securities, or (ii) no Acceptance Notice is delivered to the Company
prior to the expiration of the ROFO Acceptance Period, then the Company may sell
any portion of the Offered Securities not offered to be purchased by the
Purchaser, at a price equal to or greater than that specified in the Offer
Notice and on payment terms no less favorable to the Company than those
specified in the Offer Notice.
(d) If an Acceptance Notice is delivered to the Company prior to the
expiration of the ROFO Acceptance Period but the ROFO Closing fails to occur
prior to the expiration of the ROFO Closing Period (unless the Purchaser was
ready, willing and able prior to the expiration of the ROFO Closing Period to
consummate the transactions to be consummated by the Purchaser at the ROFO
Closing), the Company may (without affecting its rights, if any, arising out of
such failure) consummate the Private Placement by selling at any time during a
period not to exceed 180 calendar days immediately following the expiration of
the ROFO Acceptance Period, the ROFO Accepted Securities at a price at least
equal to the Per Share Acquisition Price and upon other terms not materially
less favorable to the Company than those set forth in the Offer Notice.
(e) Anything in this Section 4.7 to the contrary notwithstanding, the
Company shall be under no obligation to provide an Offer Notice if the Per Share
Acquisition Price is equal to or greater than (i) $3.00, for a Private Placement
prior to the first anniversary of the approval
-26-
of the Share Issuance by the requisite vote of the Company's stockholders (the
"Stockholder Approval"), (ii) $3.50, for a Private Placement on or before the
--------------------
second anniversary of the Stockholder Approval, or (iii) $4.00, for a Private
Placement occurring prior to the termination of this Agreement.
Section 4.8 Concurrent Deliveries.
---------------------
(a) Concurrently herewith Purchaser is delivering to the Company
the Purchase Price for the Securities in accordance with Article II hereof;
(b) Concurrently herewith the Company is delivering to Purchaser
the following:
(i) Securities. The Convertible Note and the Warrants;
----------
(ii) Consents Under Agreements. The original of each
-------------------------
consent or Approval, if any, pursuant to Section 4.4; and
(iii) Legal Opinion. The opinion of Xxxxxx & Xxxxxx L.L.P.,
-------------
corporate counsel to the Company, an opinion dated the date hereof, in
substantially the form attached as Exhibit A hereto.
---------
ARTICLE V
INDEMNIFICATION
---------------
Section 5.1 Indemnification of Purchaser. Subject to the provisions of
----------------------------
this Article V, the Company agrees to indemnify and hold harmless the Purchaser
Indemnified Parties from and against any and all Purchaser Indemnified Costs.
Section 5.2 Indemnification of Company. Subject to the provisions of
--------------------------
this Article V, Purchaser agrees to indemnify and hold harmless the Company from
and against any and all Company Indemnified Costs.
Section 5.3 Defense of Third-Party Claims. An Indemnified Party shall
-----------------------------
give prompt written notice to any person who is obligated to provide
indemnification hereunder (an "Indemnifying Party") of the commencement or
assertion of any action, proceeding, demand, or claim by a third party
(collectively, a "third-party action") in respect of which such Indemnified
Party shall seek indemnification hereunder. Any failure to so notify an
Indemnifying Party shall not relieve such Indemnifying Party from any liability
that it, he, or she may have to such Indemnified Party under this Section 5.3
unless the failure to give such notice materially and adversely prejudices such
Indemnifying Party. The Indemnifying Party shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
-27-
(a) The Indemnified Party shall be entitled, at its own expense, to
participate in the defense of such third-party action (provided, however, that
the Indemnifying Party shall pay the attorneys' fees of one counsel (provided
that if any such third-party action is brought in a jurisdiction other than the
State of Delaware, the Indemnifying Party shall also pay the attorney's fees of
one local counsel) to the Indemnified Party if (i) the employment of separate
counsel shall have been authorized in writing by any such Indemnifying Party in
connection with the defense of such third-party action, (ii the Indemnifying
Parties shall not have employed counsel reasonably satisfactory to the
Indemnified Party to have charge of such third-party action, (ii counsel to the
Indemnified Party shall have reasonably concluded that there may be defenses
available to the Indemnified Party that are different from or additional to
those available to the Indemnifying Party, (iv counsel to the Indemnified Party
and the Indemnifying Party shall have advised their respective clients in
writing, with a copy delivered to the other party, that there is a conflict of
interest that could make it inappropriate under applicable standards of
professional conduct to have common counsel), or (v) the third-party action is a
proceeding brought by a stockholder of the Company (in such stockholder's name
or derivatively on behalf of the Company) in respect of the transactions
contemplated by this Agreement;
(b) The Indemnifying Party shall obtain the prior written approval of
the Indemnified Party before entering into or making any settlement, compromise,
admission, or acknowledgment of the validity of such third-party action or any
liability in respect thereof if, pursuant to or as a result of such settlement,
compromise, admission, or acknowledgment, injunctive or other equitable relief
would be imposed against the Indemnified Party or if, in the opinion of the
Indemnified Party, such settlement, compromise, admission, or acknowledgment
could have a material adverse effect on its business;
(c) No Indemnifying Party shall consent to the entry of any judgment
or enter into any settlement that does not include as an unconditional term
thereof the giving by each claimant or plaintiff to each Indemnified Party of a
release from all liability in respect of such third-party action; and
(d) The Indemnifying Party shall not be entitled to control (but shall
be entitled to participate at its own expense in the defense of), and the
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any third-party action
(i) as to which the Indemnifying Party fails to assume the defense within a
reasonable length of time; or (ii to the extent the third-party action seeks an
order, injunction, or other equitable relief against the Indemnified Party
which, if successful, would materially adversely affect the business,
operations, assets, or financial condition of the Indemnified Party; provided,
however, that the Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment that would give rise to liability on the part of
any Indemnifying Party without the prior written consent of such Indemnifying
Party.
The parties hereto shall extend reasonable cooperation in connection with the
defense of any third-party action pursuant to this Article V and, in connection
therewith, shall furnish such
-28-
records, information, and testimony and attend such conferences, discovery
proceedings, hearings, trials, and appeals as may be reasonably requested.
Section 5.4 Direct Claims. In any case in which an Indemnified Party
-------------
seeks indemnification hereunder which is not subject to Section 5.3 because no
third-party action is involved, the Indemnified Party shall notify the
Indemnifying Party in writing of any Indemnified Costs which such Indemnified
Party claims are subject to indemnification under the terms hereof. The failure
of the Indemnified Party to exercise promptness in such notification shall not
amount to a waiver of such claim unless the resulting delay materially
prejudices the position of the Indemnifying Party with respect to such claim.
Section 5.5 Limitations. The provisions of this Section 5.5 shall be
-----------
applicable to all claims for indemnification:
(a) Minimum Loss. No Indemnifying Party shall be required to
------------
indemnify an Indemnified Party for Indemnified Costs unless and until the
aggregate amount of such Indemnified Costs for which the Indemnified Party is
otherwise entitled to indemnification pursuant to this Article V exceeds
$100,000 (the "Minimum Loss"). After the Minimum Loss is exceeded, the
Indemnified Party shall be entitled to be paid the entire amount of its
Indemnified Representation Costs in excess of (but not including) the Minimum
Loss, subject to the limitations on recovery and recourse set forth in this
Section 5.5.
(b) Limitation as to Time. No Indemnifying Party shall be liable
---------------------
for any Indemnified Costs pursuant to this Article V unless a written claim for
indemnification in accordance with Section 5.3 or 5.4 is given by the
Indemnified Party to the Indemnifying Party with respect thereto on or before
the later to occur of (i) two years from the conversion of the Conversion Note,
or (ii) provided the Conversion Note has not previously been converted for
Conversion Shares, six months after maturity of the Conversion Note.
ARTICLE VI
MISCELLANEOUS
-------------
Section 6.1 Survival of Provisions. Subject to the provision of Section
----------------------
5.5, the representations, warranties and covenants (including the
indemnification obligations) of the Company and Purchaser made herein or in any
other Transaction Document shall remain operative and in full force and effect
pursuant to their terms regardless of any investigation made by or on behalf of
Purchaser or the Company, as the case may be.
Section 6.2 No Waiver; Modification in Writing. No failure or delay on
----------------------------------
the part of the Company or Purchaser in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
-29-
The remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the Company or Purchaser at law or in equity.
The provisions of this Agreement, including the provisions of this sentence, may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given without the written consent of the
Company, on the one hand, and Purchaser or its Permitted Assignees, on the other
hand, provided that notice of any such waiver shall be given to each party
hereto as set forth below. Any amendment, supplement or modification of or to
any provision of this Agreement, or any waiver of any provision of this
Agreement, shall be effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically required by
this Agreement, no notice to or demand on any party hereto in any case shall
entitle the other party to any other or further notice or demand in similar or
other circumstances.
Section 6.3 Specific Performance. The parties recognize that in the
--------------------
event the Company should refuse to perform under the provisions of this
Agreement or any other Transaction Document, monetary damages alone will not be
adequate. Purchaser shall therefore be entitled, in addition to any other
remedies which may be available, including money damages, to obtain specific
performance of the terms of this Agreement and of the obligations undertaken by
the Company or its stockholders in any of the other Transaction Documents,
including, but not limited to, the Voting Agreement. In the event of any action
to enforce this Agreement or any other Transaction Document specifically, the
Company hereby waives the defense that there is an adequate remedy at law.
Section 6.4 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal, or incapable of being enforced by any rule of
applicable law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated herein are not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal, or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated herein are consummated as originally contemplated to the fullest
extent possible.
Section 6.5 Parties in Interest. This Agreement shall be binding upon
-------------------
and, except as provided below, inure solely to the benefit of each party hereto
and their successors and assigns, and nothing in this Agreement, except as set
forth in Article V which is intended for the benefit of all Indemnified Parties,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 6.6 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery by
a standard overnight carrier or when delivered by hand or (c) the expiration of
two business days after the day when mailed by certified or registered
-30-
mail, postage prepaid, addressed at the following addresses (or at such other
address for a party as shall be specified by like notice):
(d) If to Purchaser, to:
Guardian Energy Management Corp.
0000 Xxxxxx Xxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000-0000
Attention: Vice President - Operations
Facsimile: (000) 000-0000
with a copy to:
Guardian Energy Management Corp.
0000 Xxxxxx Xxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000-0000
Attention: Secretary
Facsimile: (000) 000-0000
(e) If to the Company, to:
Xxxxxx Exploration Company
0000 Xxxxx Xxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxx L.L.P.
0000 Xxxxxxxx Xxxx Xxxxxx
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxx Early
Facsimile: (000) 000-0000
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, on the date of receipt, if by facsimile transmission, three
Business Days after the date of mailing, if mailed by registered or certified
mail, return receipt requested, and one Business Day after the date of sending,
if sent by Federal Express or other recognized overnight courier.
-31-
Section 6.7 Counterparts. This Agreement may be executed and delivered
------------
(including by facsimile transmission) in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
Section 6.8 Shared Expenses. All expenses associated with the
---------------
preparation of this and the other Transaction Documents, up to a maximum of
$30,000, shall be shared equally by the Company and Purchaser.
Section 6.9 Entire Agreement. This Agreement (which term shall be
----------------
deemed to include the Exhibits and Schedules hereto and the other certificates,
documents and instruments delivered hereunder) constitutes the entire agreement
of the parties hereto and supersedes all prior agreements, letters of intent and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. There are no representations or warranties, agreements,
or covenants other than those expressly set forth in this Agreement.
Section 6.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO ANY CONFLICTS OF LAW PROVISIONS.
Section 6.11 Public Announcements. The Company, on the one hand, and
--------------------
Purchaser, on the other, shall consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
or the transactions contemplated hereby, except for statements required by Law
or by any listing agreements with any national securities exchange or the
National Association of Securities Dealers, Inc., or made in disclosures filed
pursuant to the Securities Act or the Securities Exchange Act of 1934.
Section 6.12 Assignment. Neither this Agreement nor any of the rights,
----------
interests, or obligations hereunder shall be assigned by any of the parties
hereto, whether by operation of Law or otherwise; provided, however, that upon
notice to the Company assignments may be made to any of the following Persons,
and Persons controlled thereby (each a "Permitted Assignee"), (a) Purchaser may
assign or delegate any or all of its rights or obligations under this Agreement
to any Affiliate thereof and to any of Jordan Exploration Company LLC, Xxxxxx X.
Xxxxxx, Xxxxxx X. Xxxxx, Xxxxx Xxxxxxxxxx or Xxxxx Xxxxxx, and (b) nothing in
this Agreement shall limit Purchaser's ability to make a collateral assignment
of its rights under this Agreement to any institutional lender that provides
funds to Purchaser without the consent of the Company. The Company shall
execute an acknowledgment of such collateral assignments in such forms as
Purchaser's lenders may from time to time reasonably request; provided, however,
that unless w xxxxxx notice is given to the Company that any such collateral
assignment has been foreclosed upon, the Company shall be entitled to deal
exclusively with Purchaser as to any matters arising under this Agreement or any
of the other agreements delivered pursuant hereto. In the event of such an
assignment, the provisions of this Agreement shall inure to the benefit of and
be binding
-32-
on Purchaser's assigns. Any attempted assignment in violation of this Section
shall be null and void.
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-33-
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its duly authorized officer as of the date first written above.
XXXXXX EXPLORATION COMPANY
By: /s/ Xxxxx X. Xxxxxx
------------------------------
Name: Xxxxx X. Xxxxxx
----------------------------
Title: President
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GUARDIAN ENERGY MANAGEMENT CORP.
By: /s/ Xxxx X. Xxxxxxx
------------------------------
Name: Xxxx X. Xxxxxxx
----------------------------
Title: Vice President - Operations
---------------------------