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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )*
COTTON VALLEY RESOURCES CORPORATION
- --------------------------------------------------------------------------------
(NAME OF ISSUER)
Common Stock
- --------------------------------------------------------------------------------
(TITLE OF CLASS OF SECURITIES)
221905-10-2
- --------------------------------------------------------------------------------
(CUSIP NUMBER)
John M. Liviakis, 2420 "K" St., Suite 220, Sacramento, CA 95816, (916) 448-6084
- --------------------------------------------------------------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
February 14, 1997
--------------------------------------------------------------
(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ]. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1: and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE> 2
SCHEDULE 13D
CUSIP No. 221905-10-2 PAGE 2 OF __ PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Liviakis Financial Communications, Inc.
68-0311399
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00, AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States (California)
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
1,860,000
NUMBER OF ----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 0
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,860,000
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,860,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.2%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 3
SCHEDULE 13D
CUSIP No. 221905-10-2 PAGE 3 OF __ PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Robert B. Prag
###-##-####
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
125,000
NUMBER OF ----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 0
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 125,000
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
125,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.0%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 4
1. SECURITY AND ISSUER.
The title of the class of equity securities to which this statement
relates is common stock (the "Common Stock") issued by Cotton Valley Resources
Corporation, an Ontario, Canada corporation (the "Corporation"). The principal
offices of the Corporation are located at 8350 North Central Expressway, Suite
M2030, Dallas, Texas 75206.
2. IDENTITY AND BACKGROUND.
This statement is filed by Liviakis Financial Communications, Inc., a
California corporation ("LFC"), and Robert B. Prag ("RBP"). LFC's principal
business is as a consultant in the areas of investor communications, financial
and investor public relations and corporate finance. LFC's principal business
and principal office address is 2420 "K" Street, Suite 220, Sacramento,
California 95816.
LFC's President is John M. Liviakis ("JML"), its Senior Vice President
is RBP, and its Treasurer, Chief Financial Officer and Secretary is Renee A.
Liviakis ("RAL"). JML, RBP and RAL are the only executive officers of LFC.
The activities associated with these positions constitute the principal
occupation and employment of JML, RBP and RAL, respectively. JML, RBP and RAL
are LFC's only directors, and JML and RAL are its sole stockholders. JML, RBP
and RAL are citizens of the United States, and their business address is LFC's
principal business address listed above.
During the last five years, none of LFC, JML, RBP and RAL has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors), and during such period none of them has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction, the
result of which was to subject such person to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
Except (i) as otherwise set forth herein or (ii) for interests
attributable through their ownership of or positions with LFC, none of JML, RBP
and RAL have any interest in the Corporation's Common Stock.
3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to a Consulting Agreement effective as of November 7, 1996 by
and between the Corporation and LFC (the "Consulting Agreement"), the
Corporation agreed to issue to LFC an aggregate of 1,490,000 shares of the
Corporation's Common Stock, of which 1,250,000 have been issued and an
additional 100,000 are issuable within the next sixty days. In addition, the
Consulting Agreement (i) granted LFC the right, which LFC has exercised in
<PAGE> 5
its entirety, to purchase 375,000 units ("Units"), each consisting of one share
of the Corporation's Common Stock and one stock purchase warrant (a "Warrant"),
entitling the holder thereof to acquire one share of the Corporation's Common
Stock at an exercise price of One Dollar and Ten Cents Canadian (CDN$1.10)
during the period commencing on January 2, 1998 and terminating on November 7,
2001, and (ii) granted RBP the right to purchase 125,000 Units, of which he has
purchased 91,000 Units and has the presently exercisable right to purchase an
additional 34,000 Units. LFC has received 275,000 shares of Common Stock in
connection with its purchase of Units and has the right to receive an
additional 100,000 shares of Common Stock within the next sixty days in
connection therewith. RBP has received 91,000 shares of Common Stock in
connection with his purchase of Units. LFC has also purchased 135,000 shares of
Common Stock in the over-the-counter market. Under the Consulting Agreement,
LFC has performed and is to perform certain investor communications, financial
and investor public relations, corporate finance and related services for the
Corporation. A copy of the Consulting Agreement is attached hereto as Exhibit
"1", and a copy of the form of certificate representing Warrants is attached
hereto as Exhibit "2".
This Schedule 13D is being filed to report 1,660,000 shares of the
Corporation's Common Stock owned by LFC, 200,000 shares of the Corporation's
Common Stock which LFC has the right to acquire within the next sixty days,
91,000 shares of the Corporation's Common Stock owned by RBP, and 34,000 shares
of the Corporation's Common Stock which RBP has the right to acquire within the
next sixty days.
In addition, LFC holds 275,000 Warrants and has the right to receive an
additional 100,000 Warrants within the next sixty days. RBP holds 91,000
Warrants and has the right to acquire within the next sixty days an additional
34,000 Warrants.
Of the 1,660,000 shares of Common Stock owned by LFC, 1,250,000 were
received in consideration of services rendered, and 100,000 shares of Common
Stock which LFC has the right to acquire within the next sixty days will be
acquired in consideration of services rendered. LFC has received 275,000 shares
of Common Stock in connection with the purchase of 375,000 Units at a cost of
Two Hundred Eighty-One Thousand Two Hundred Fifty United States Dollars
(US$281,250) and has the right to receive an additional 100,000 shares of Common
Stock. LFC also acquired an aggregate of 135,000 shares of Common Stock through
open market purchases in over-the-counter market, 10,000 of which were purchased
at One Dollar and Sixty-Four Cents (US$1.64) per share and the balance at One
Dollar and Eighty-Nine and One-Half Cents (US$1.895) per share. The source of
funds used in purchasing the Units and making open market purchases was funds
advanced by JML to LFC on an open account basis, payable on demand.
The 91,000 shares of Common Stock owned by RBP were acquired through
the purchase of 91,000 Units at a cost of Sixty-Eight Thousand Two Hundred
Fifty United States Dollars (US$$68,250). The source of funds used in
purchasing the Units was RBP's personal funds. If RBP acquires the 34,000
shares of Common Stock which he is entitled to acquire through the purchase of
Units at a cost of Twenty-Five Thousand Five Hundred United States Dollars
(US$25,500), he intends to utilize personal funds.
4. PURPOSE OF TRANSACTION.
LFC and RBP hold the shares of Common Stock presently owned by them,
respectively, for investment purposes and intend to hold any additional shares
of Common Stock they acquire pursuant to
<PAGE> 6
the Consulting Agreement, including shares of Common Stock acquired through the
exercise of Warrants, for investment purposes. LFC and RBP may also acquire
further shares of Common Stock for investment purposes from time to time,
although they do not have any present plans to do so.
LFC and RBP have no plans or proposals which relate to or would result
in: any extraordinary corporate transaction, such as a merger, reorganization
or liquidation involving the Corporation or any subsidiary of the Corporation;
the sale or transfer of a material amount of assets of the Corporation or any
of its subsidiaries; any change in the Corporation's present Board of Directors
or management; any material change in the present capitalization or dividend
policy of the Corporation; any material change in the Corporation's business or
corporate structure; any changes in the Corporation's charter, bylaws, or
instruments corresponding thereto or other actions which may impede the
acquisition of control of the Corporation by any person; a class of securities
of the Corporation being delisted from a national securities exchange or
ceasing to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; a class of equity securities of the
Corporation becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Securities Exchange Act of 1934, as amended; or any
similar action.
5. INTEREST IN SECURITIES OF THE ISSUER.
LFC has the sole power to direct the vote or disposition of the
1,660,000 shares of Common Stock of the Corporation owned by LFC and expects to
have the sole power to direct the vote or disposition of the 200,000 shares of
Common Stock of the Corporation which LFC has the right to acquire within the
next sixty days.
RBP has the sole power to direct the vote or disposition of the 91,000
shares of Common Stock of the Corporation owned by RBP and expects to have the
sole power to direct the vote or disposition of the 34,000 shares of Common
Stock of the Corporation which RBP has the right to acquire within the next
sixty days.
The 1,860,000 shares of Common Stock that LFC owns or has the
right to acquire within sixty days of the date hereof, and as to which LFC has
or would have the sole power to direct the vote or disposition, represent
approximately 15.2% of that class of securities. The 125,000 shares of Common
Stock that RBP owns or has the right to acquire within sixty days of the date
hereof, and as to which RBP has or would have the sole power to direct the vote
or disposition, represent approximately 1.0% of that class of securities. The
1,985,000 shares of Common Stock which LFC and RBP in the aggregate presently
own or have the right to acquire within sixty days of the date hereof, and as
to which either LFC or RBP has or would have the sole power to
<PAGE> 7
direct the vote or disposition, represent approximately 16.2% of that class of
securities. In each case, the calculation of the percentage of the class of
Common Stock is based on the advice received by LFC from the Corporation that,
as of December 31, 1996, 10,404,901 shares of Common Stock were issued and
outstanding.
During the past sixty days, LFC and RBP have engaged in the following
transactions in Common Stock:
A. On January 31, 1997, LFC purchased 10,000 shares in
the over-the-counter market at US$1.64 per share.
B. On February 10, 1997, LFC purchased 125,000 shares
in the over-the-counter market at US$1.895 per share.
C. On February 14, 1997, LFC received 1,250,000 shares as
consideration pursuant to the Consulting Agreement.
D. On February 14, 1997, LFC received 275,000 shares
through the purchase of Units from the Corporation at US$0.75 per Unit.
E. On February 14, 1997, RBP received 91,000 shares
through the purchase of Units from the Corporation at US$0.75 per Unit.
6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
The Corporation has issued and will issue shares of Common Stock to
LFC in consideration for consulting services performed and to be performed by
LFC pursuant to the Consulting Agreement. The Corporation has also sold Units
to LFC and RBP and has agreed to sell additional Units to RBP pursuant to the
Consulting Agreement. In the Consulting Agreement and in the certificates
representing the Warrants, the Corporation grants to LFC and RBP certain rights
to have shares of Common Stock registered under the Securities Act of 1933, as
amended.
Except for the Consulting Agreement and the Warrants, there are no
contracts, arrangements, understandings or relationships between any of the
persons named in Item 2 above and any other person with respect to any
securities of the Corporation.
<PAGE> 8
7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 - Consulting Agreement, dated effective as of November 7,
1996, by and between the Corporation and LFC.
Exhibit 2 - Form of Warrant certificate.
Exhibit 3 - Joint Filing Agreement of LFC and RBP pursuant to Rule
13d-1(f)
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: February 21, 1997
LIVIAKIS FINANCIAL COMMUNICATIONS, INC.
By: /s/ John M. Liviakis
----------------------------------
John M. Liviakis, President
/s/ Robert B. Prag
--------------------------------------
Robert B. Prag
<PAGE> 1
EXHIBIT "1"
CONSULTING AGREEMENT
This consulting Agreement (the "Agreement"), dated and effective as of November
7, 1996 is entered into by and between COTTON VALLEY RESOURCES CORPORATION, an
Ontario, Canada corporation (herein referred to as the "Company") and LIVIAKIS
FINANCIAL COMMUNICATIONS, INC., a California corporation (herein referred to as
the "Consultant").
RECITALS
WHEREAS, Company is a publicly held corporation with its common stock
traded through the Canadian Dealing Network; and
WHEREAS, Consultant has experience in the area of corporate finance,
investor communications and financial and investor public relations; and
WHEREAS, Company desires to engage the services of Consultant to
assist and consult with the Company in matters concerning corporate finance and
to represent the company in investors' communications and public relations with
existing shareholders, brokers, dealers and other investment professionals as
to the Company's current and proposed activities;
NOW THEREFORE, in consideration of the promises and the mutual
covenants and agreements hereinafter set forth, the parties hereto covenant and
agree as follows:
1. Term of Consultancy. Company hereby agrees to retain the Consultant
to act in a consulting capacity to the Company, and the Consultant hereby
agrees to provide services to the Company commencing November 7, 1996 and
ending on January 2, 1998.
2. Duties of Consultant. The Consultant agrees that it will generally
provide the following specified consulting services through its officers and
employees during the term specified in Section 1.:
(a) Advise and assist the Company in developing and implementing
appropriate plans and materials for presenting the Company and its business
plans, strategy and personnel to the financial community, establishing an image
for the Company in the financial community, and creating the foundation for
subsequent financial public relations efforts;
(b) Introduce the Company to the financial community;
(c) With the cooperation of the Company, maintain an awareness
during the term of this Agreement of the Company's plans, strategy and
personnel, as they may evolve during such period, and advise and assist the
Company in communicating appropriate
<PAGE> 2
information regarding such plans, strategy and personnel to the financial
community;
(d) Assist and advise the Company with respect to its (i)
stockholder and investor relations, (ii) relations with brokers, dealers,
analysts and other investment professionals, and (iii) financial public
relations generally;
(e) Perform the functions generally assigned to
investor/stockholder relations and public relations departments in major
corporations, including responding to telephone and written inquiries (which
may be referred to the Consultant by the Company); preparing or reviewing press
releases, reports and other communications with or to shareholders, the
investment community and the general public; advising with respect to the
timing, form, distribution and other matters related to such releases, reports
and communications; and consulting with respect to corporate symbols, logos,
names, the presentation of such symbols, logos and names, and other matters
relating to corporate image;
(f) Disseminate information regarding the Company to shareholders,
brokers, dealers, other investment community professionals and the general
investing public;
(g) Conduct meetings, in person or by telephone, with brokers,
dealers, analysts and other investment professionals to advise them of the
Company's plans, goals and activities, and assist the Company in preparing for
press conferences and other forums involving the media, investment community
professionals and the general investment public;
(h) At the Company's request, review business plans, strategies,
mission statements budgets, proposed transactions and other plans for the
purpose of advising the Company of the investment community implications
thereof; and,
(i) Otherwise perform as the Company's financial relations and
public relations consultant.
It is understood that until January 2, 1997, the Consultant will only
be responsible to advise the Company on matters concerning corporate finance
and to assist the Company in creation of its investor relations infrastructure.
The Consultant will not be expected to perform any proactive investor relations
or financial public relations activities until January 2, 1997.
3. Allocation of Time and Energies. The Consultant hereby
promises to perform and discharge well and faithfully the responsibilities
which may be assigned to the Consultant from time to time by the officers and
duly authorized representatives of the Company in connection with the conduct
of its financial and investor public relations and communications activities,
so long as such activities are in compliance with applicable securities laws
and regulations. Consultant shall diligently and thoroughly provide the
consulting services required hereunder. Although no specific hours-per-day
requirement will be required, Consultant and the Company agree that Consultant
will perform the duties set forth hereinabove in a diligent and professional
manner. The parties
2.
<PAGE> 3
acknowledge and agree that a disproportionately large amount of the effort to
be expended and the costs to be incurred by the Consultant and the benefits to
be received by the Company are expected to occur upon and shortly after, and in
any event, within one month of the effectiveness of this Agreement. It is
explicitly understood that Consultant's performance of its duties hereunder
will in no way be measured by the price of the Company's common stock, nor the
trading volume of the Company's common stock, both of which cannot be
guaranteed by the Consultant. It is also understood that the Company is
entering into this Agreement with Liviakis Financial Communications, Inc.
("LFC"), a corporation and not any individual member of LFC, and with such,
Consultant will not be deemed to have breached this Agreement if any member,
officer or director of LFC leaves the firm or dies or becomes physically unable
to perform any meaningful activities during the term of the Agreement, provided
the Consultant otherwise performs its obligations under this Agreement.
4. Remuneration. As full and complete compensation for services
described in this Agreement, the Company shall compensate Consultant as
follows:
4.1 In connection with Consultant undertaking this engagement, the
Company agrees to sell, and Consultant and Robert B. Prag ("RBP"), an
affiliate of consultant, severally agree to buy, for One Canadian
Dollar (C$1.00) per unit five hundred thousand (500,000) units (the
"Units"), each consisting of one share of the Company's common stock
("Common Stock") and one stock purchase warrant (a "Warrant") entitling
the holder thereof to purchase a share of Common Stock at an exercise
price of One Dollar and Ten Cents Canadian (C$1.10) through November 7,
2001. The Warrants shall be evidenced by the form of warrant
certificate attached hereto as Exhibit A. It is understood that the
Units, the shares of Common Stock and Warrants constituting the Units,
and the shares of Common Stock issuable upon exercise of the Warrants
have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), and consequently such securities constitute
"restricted securities" as defined in Rule 144 promulgated under the
Securities Act, unless registered under the Securities Act.
Consultant shall purchase three hundred seventy-five thousand (375,000)
Units, for which he shall deliver to the Company his promissory note in
the amount of Two Hundred Eighty-One Thousand Two Hundred Fifty United
States Dollars (US$281,250), payable in four monthly installments on
the fifteenth (15th) day of December 1996 and January, February and
March 1997 of US$56,250, US$75,000, US$75,000 and US$75,000,
respectively. RBP shall purchase one hundred twenty-five thousand
(125,000) Units, for which he shall deliver to the Company his
promissory note in the amount of Ninety-Three Thousand Seven
3.
<PAGE> 4
Hundred Fifty United States Dollars (US$93,750), payable in four
monthly installments on the fifteenth (15th) day of December 1996 and
January, February and March 1997 of US$18,750, US$25,000, US$25,000,
and US$25,000, respectively. Certificates representing the shares of
Common Stock and Warrants constituting the Units shall be issued in the
names of Consultant and RBP and delivered in trust to Weir & Foulds,
counsel to the Company, pursuant to irrevocable instructions under
which Weir & Foulds is to deliver the certificates representing such
securities to Consultant and RBP, respectively, pro rata as such
promissory notes are paid.
In addition, as consideration for Consultant undertaking this
engagement, the Company shall issue and deliver to Consultant an
aggregate of one million four hundred ninety thousand (1,490,000)
shares (the "Consideration Shares") of Common Stock. The
Consideration Shares shall be issued by the Company and delivered to
Consultant in accordance with the following schedule:
<TABLE>
<CAPTION>
Number of Shares Date
---------------- ----
<S> <C>
400,000 Upon execution of this Agreement
800,000 January 2, 1997
50,000 January 31, 1997
50,000 February 28, 1997
50,000 March 31, 1997
50,000 April 31, 1997
50,000 May 31, 1997
40,000 June 30, 1997
-------
1,490,000
</TABLE>
It is understood that the Consideration Shares have not been
registered under the Securities Act and consequently such securities
constitute and will constitute "restricted securities" as defined in
Rule 144 promulgated under the Securities Act, unless registered under
the Securities Act.
The Company agrees that, when issued and delivered to Consultant and
RBP, the Consideration Shares, the shares of Common Stock constituting
part of the Units and the shares of Common Stock issuable upon
exercise of the Warrants shall be duly authorized, validly
outstanding, fully paid and non-assessable. The Company also
understands and agrees that Consultant has foregone significant
opportunities to accept this engagement and that the Company derives
substantial benefit from the execution of this Agreement and the
ability to announce its relationship with Consultant. The
Consideration Shares, therefore, constitute payment for Consultant's
agreement to represent the Company and are a nonrefundable,
non-apportionable and non-ratable retainer. If the Company elects to
terminate this Agreement prior to January 2, 1998 for any reason
whatsoever, it is agreed and
4.
<PAGE> 5
understood that Consultant will not be and may not be required or
requested by the company to return any of the Consideration Shares or
any securities constituting the Units or issued upon exercise of the
Warrants.
The Consideration Shares and the shares of Common Stock constituting
the Units shall have the benefit of the same registration rights as
the shares as the shares of Common Stock issuable upon exercise of the
Warrants receive pursuant to the terms of the warrant certificates
representing the Warrants. The Company agrees to file by November 30,
1997 and thereafter to prosecute diligently to effectiveness a
registration statement under the Securities Act covering, among other
securities, such Consideration Shares, shares of common Stock
constituting part of the Units, and shares of Common Stock issuable
upon exercise of the Warrants as Consultant and RBP may request.
Consultant and RBP agree that they, respectively, will not sell shares
of Common Stock received hereunder prior to January 2, 1998.
4.2 Consultant and Prag (hereinafter referred to as "Consultants")
acknowledge that the shares of Common Stock, the Options and the
shares issuable upon the exercise of the Options to be issued pursuant
to this Agreement (collectively, the "Shares") have not been
registered under the Securities Act of 1933, and accordingly are
"restricted securities" within the meaning of Rule 144 of the Act. As
such, the Options and the Shares may not be resold or transferred
unless the Company has received an opinion of counsel reasonably
satisfactory to the Company that such resale or transfer is exempt
from the registration requirements of that Act.
4.3 In connection with the acquisition of Shares hereunder, the
Consultants represent and warrant to the Company as follows:
(a) Consultants acknowledge that the Consultants have been
afforded the opportunity to ask questions of and receive answers from
duly authorized officers or other representatives of the Company
concerning an investment in the Shares, and any additional information
which the Consultants have requested.
(b) Consultants' investments in restricted securities is
reasonable in relation to the Consultants' net worth, which is in
excess of ten (10) times the Consultants' cost basis in the Shares.
Consultants have had experience in investments in restricted and
publicly traded securities, and Consultants have had experience in
investments in speculative securities and other investments which
involve the risk of loss of investment. Consultants acknowledges that
an investment in the Shares is speculative and involves the risk of
loss. Consultants have the requisite knowledge to assess the relative
merits and risks of this investment without the
5.
<PAGE> 6
necessity of relying upon other advisors, and Consultants can afford
the risk of loss of his entire investment in the Shares. Consultants
are (i) accredited investors, as that term is defined in Regulation D
promulgated under the Securities Act of 1933, and (ii) a purchaser
described in Section 25102(f)(2) of the California Corporate
Securities Law of 1968, as amended.
(c) Consultants are requiring the Shares for the Consultants' own
account for long-term investment and not with a view toward resale of
distribution thereof except in accordance with applicable securities
laws.
(d) In any vote of shareholders for the election of directors or
any related matter (such as increasing or decreasing the authorized
number of directors or creating a classified board of directors) held
prior to January 1, 2001, Consultants shall vote any shares of Common
Stock received by Consultants pursuant to this Agreement, either
directly or through the exercise of warrants, and then held by
Consultants (i) in connection with the election of directors for such
nominees as may be designated by Eugene A. Soltero and James E. Houge
and (ii) with respect to related matters in such manner as Messrs.
Soltero and Houge may designate. Any designation regarding voting by
Messrs. Soltero and Houge shall be made in a written notice executed
by Messrs. Soltero and Houge and delivered to Consultants. It is
understood that any shares of Common Stock transferred by Consultants
to person or entities not subject to the control of Consultants shall
be transferred free of any obligation with respect to voting arising
under this subparagraph.
5. Financing "Finder's Fee". It is understood that in the event
Consultant introduces Company, or its nominees, to a lender or equity
purchaser, not already having a preexisting relationship with the Company, who
Company, or its nominees, ultimately finances or causes the completion of such
financing, Company agrees to compensate Consultant for such services with a
"finder's fee" in the amount of 2.5% of total gross financing provided by
Company payable in cash. This will be in addition to any fees payable by
Company to any other intermediary, if any, which shall be per separate
agreements negotiated between Company and such other intermediary.
5.1 It is further understood that Company, and not Consultant, is
responsible to perform any and all due diligence on such lender or
equity purchaser introduced to it by Consultant under this Agreement,
prior to Company receiving funds. However, Consultant will not
introduce any parties to Company about which Consultant has any prior
knowledge of questionable, unethical or illicit activities.
6.
<PAGE> 7
5.2 Company agrees that said compensation to Consultant shall be paid in
full at the time said financing is closed. Moreover, said
compensation, will be a condition precedent to the closing of such
funding or financing and Company shall execute any and all documents
necessary to effect said compensation.
5.3 As further consideration to Consultant, Company, or its nominees,
agrees not to obtain any other financing from any lender or equity
purchaser supplied or referred to Company by Consultant for a period
of five years from the date of this Agreement, either directly or
indirectly through third parties or nominees. In the event of
circumvention by Company, or its nominees, Consultant shall receive a
fee equal to that outlined in Section "5" herein.
5.4 Consultant will notify Company of introductions it makes for
potential sources of financing in a timely manner (approximately 3
days within introduction) via facsimile memo. If Company has a
preexisting relationship with such nominee and believes such party
should be excluded from this Agreement, then Company will notify
Consultant immediately of such circumstance via facsimile memo.
6. Expenses. Consultant agrees to pay for all its expenses (phone,
mailing labor, etc.), other than extraordinary items (travel required by/or
specifically requested by the Company, luncheons or dinners to large groups of
investment professionals, mass faxing to a sizable percentage of the Company's
constituents, investor conference calls, print advertisements in publications,
etc.) approved by the Company prior to its incurring an obligation for
reimbursement.
7. Indemnification. The Company warrants and represents that all oral
communications, written documents or materials, other than those designated by
the Company to the Consultant as "confidential" or "Company private", furnished
to Consultant by the Company with respect to financial affairs, operations,
profitability and strategic planning of the Company are accurate and Consultant
may rely upon the accuracy thereof without independent investigation. The
Company will protect, indemnify and hold harmless Consultant against any claims
or litigation including any damages, liability, cost and reasonable attorney's
fees with respect thereto resulting from Consultant's communication or
dissemination of any said information, documents or materials not designated by
the Company to the Consultant as "confidential" or "Company private", excluding
any such claims or litigation resulting from Consultant's communication or
dissemination of information not provided or authorized by the Company. To the
extent feasible, the Company agrees to make Consultant an additional insured on
any and all commercial liability and directors and officers liability insurance
7.
<PAGE> 8
policies and to provide Consultant with current Certificates of Insurance
reflecting the same.
8. Representations. Consultant represents that it is not required to
maintain any licenses and registrations under federal or any state regulations
necessary to perform the services set forth herein. Consultant acknowledges
that, to the best of its knowledge, the performance of the services set forth
under this Agreement will not violate any rule or provision of any regulatory
agency having jurisdiction over Consultant. Consultant acknowledges that, to
the best of its knowledge, Consultant and its officers and directors are not
the subject of any investigation, claim, decree or judgment involving any
violation of the SEC or securities laws. Consultant further acknowledges that
it is not a securities Broker Dealer or a registered investment advisor.
Company acknowledges that, to the best of its knowledge, it has not violated
any rule or provision of any regulatory agency having jurisdiction over the
Company. Company acknowledges that, to the best of its knowledge, Company is
not the subject of any investigation, claim, decree or judgment involving any
violation of the SEC or securities laws.
9. Legal Representation. The Company acknowledges that it has been
represented by independent legal counsel in the preparation of this Agreement.
Consultant represents that they have consulted with independent legal counsel
and/or tax, financial and business advisors, to the extent the Consultant
deemed necessary.
10. Status as Independent Contractor. Consultant's engagement pursuant
to this Agreement shall be as independent Contractor, and not as an employee,
officer or other agent of the Company. Neither party to this Agreement shall
represent or hold itself out to be the employer or employee of the other.
Consultant further acknowledges the consideration provided hereinabove is a
gross amount of consideration and that the Company will not withhold from such
consideration any amounts as to income taxes, social security payments or any
other payroll taxes. All such income taxes and other such payment shall be
made or provided for by Consultant and the Company shall have no responsibility
or duties regarding such matters. Neither the Company or the Consultant
possess the authority to bind each other in any agreements without the express
written consent of the entity to be bound.
11. Attorney's Fee. If any legal action or any arbitration or other
proceeding is brought for the enforcement or interpretation of this Agreement,
or because of an alleged dispute, breach, default or misrepresentation in
connection with or related to this Agreement, the successful or prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs
in connection with that action or proceeding, in addition to any other relief
to which it or they may be entitled.
8.
<PAGE> 9
12. Waiver. The waiver by either party of a breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any subsequent breach by such other party.
13. Notices. All notices, requests, and other communications hereunder
shall be deemed to be duly given if sent by U.S. mail, postage prepaid,
addressed to the other party at the address as set forth herein below:
To the Company: Mr. James E. Hogue, President
Cotton Valley Resources Corporation
8350 N. Central Expressway
Suite M2030
Dallas, TX 75206
To the Consultant: Liviakis Financial Communications, Inc.
John M. Liviakis, President
2420 "K" Street, Suite 220;
Sacramento, CA 95816.
It is understood that either party may change the address to which
notices for it shall be addressed by providing notice of such change to the
other party in the manner set forth in this paragraph.
14. Choice of Law, Jurisdiction and Venue. This Agreement shall be
governed by, construed and enforced in accordance with the laws of the State of
California. The parties agree that Sacramento County, CA will be the venue of
any dispute and will have jurisdiction over all parties.
15. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the alleged breach thereof, or relating to Consultant's
activities or remuneration under this Agreement, shall be settled by binding
arbitration in California, in accordance with the applicable rules of the
American Arbitration Association, and judgment on the award rendered by the
arbitrator(s) shall be binding on the parties and may be entered in any court
having jurisdiction thereof. The provisions of Title 9 of Part 3 of the
California Code of Civil Procedure, including section 1283.05, and successor
statutes, permitting expanded discovery proceedings shall be applicable to all
disputes that are arbitrated under this paragraph.
16. Complete Agreement. This Agreement instrument contains the entire
agreement of the parties relating to the subject matter hereof. This Agreement
and its terms may not be changed orally but only by an agreement in writing
signed by the party against whom
9.
<PAGE> 10
enforcement of any waiver, change, modification, extension or discharge is
sought.
AGREED TO:
"Company" COTTON VALLEY RESOURCES CORPORATION
Date: 12/13/96 By:/s/ James E. Hogue
----------------- ------------------------------------------
James E. Hogue/President
& Its Duly Authorized Officer
"Consultant" LIVIAKIS FINANCIAL COMMUNICATIONS, INC.
Date: 11/7/96 By:/s/John M. Liviakis /s/Robert B. Prag
----------------- ------------------- ---------------------
John M. Liviakis Robert B. Prag
President Sr. Vice President
10.
<PAGE> 1
EXHIBIT "2"
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THE WARRANTS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY
BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO RELEVANT
PROVISIONS OF FEDERAL AND STATE SECURITIES OR BLUE SKY LAWS OR IF AN EXEMPTION
FROM SUCH REGISTRATION OR QUALIFICATION IS APPLICABLE.
COTTON VALLEY RESOURCES CORPORATION
Incorporated Under the Laws of the Province of Ontario
No. 96-A____ ________Common Stock
Purchase Warrants
CERTIFICATE FOR COMMON STOCK
PURCHASE WARRANTS
1. Warrant. This Warrant Certificate certifies that
_________________________, or registered assigns (the "Registered Holder"), is
the registered owner of the above indicated number of Warrants expiring on the
Expiration Date, as hereinafter defined. One (1) Warrant entitles the
Registered Holder to purchase one (1) share of the common stock (a "Share") of
Cotton Valley Resources Corporation, an Ontario corporation (the "Company"),
from the Company at a purchase price of One Dollar and Ten Cents Canadian
(C$1.10) (the "Exercise Price") at any time during the Exercise Period, as
hereinafter defined, upon surrender at the principal office of the Company of
this Warrant Certificate with the exercise form appended hereto duly completed
and executed and accompanied by payment of the Exercise Price.
Upon due presentment for transfer or exchange of this Warrant
Certificate at the principal office of the Company, a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued in exchange for this Warrant Certificate,
subject to the limitations provided herein, upon payment of any tax or
governmental charge imposed in connection with such transfer. Subject to the
terms hereof, the Company shall deliver Warrant Certificates in required whole
number denominations to Registered Holders in connection with any transfer or
exchange permitted hereunder.
2. Restrictive Legend. Each Warrant Certificate and each
certificate representing Shares issued upon exercise of a Warrant, unless such
Shares are then registered under the Securities Act of 1933, as amended (the
"Act"), shall bear a legend in substantially the following form:
<PAGE> 2
"THE [SECURITIES] REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY BE OFFERED AND SOLD
ONLY IF REGISTERED AND QUALIFIED PURSUANT TO RELEVANT PROVISIONS OF
FEDERAL AND STATE SECURITIES OR BLUE SKY LAWS OR IF AN EXEMPTION FROM
SUCH REGISTRATION OR QUALIFICATION IS APPLICABLE."
3. Exercise. Subject to the terms hereof, the Warrants evidenced
by this Warrant Certificate may be exercised at the Exercise Price in whole or
in part at any time during the period (the "Exercise Period") commencing on
January 2, 1998 and terminating at 5:00 p.m., Central standard time, on
November 7, 2001 (the "Expiration Date"). The Exercise Period may be extended
by the Company's Board of Directors.
A Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date (the "Exercise Date") of the surrender to the
Company at its principal offices of this Warrant Certificate with the exercise
form attached hereto completed and executed by the Registered Holder and
accompanied by payment to the Company, in cash or by check (which shall be
accepted subject to collection), of an amount equal to the aggregate Exercise
Price for the Warrants being exercised, in lawful money of Canada.
The person entitled to receive the Shares issuable upon exercise of a
Warrant or Warrants ("Warrant Shares") shall be treated for all purposes as the
holder of such Warrant Shares as of the close of business on the Exercise Date.
The Company shall not be obligated to issue any fractional share interests in
Warrant Shares issuable or deliverable on the exercise of any Warrant or scrip
or cash with respect thereto, and such right to a fractional share shall be of
no value whatsoever. If more than one Warrant shall be exercised at one time
by the same Registered Holder, the number of full Shares which shall be
issuable on exercise thereof shall be computed on the basis of the aggregate
number of full shares issuable on such exercise.
Promptly, and in any event within ten business days after the Exercise
Date, the Company shall cause to be issued and delivered to the person or
persons entitled to receive the same, a certificate or certificates for the
number of Warrant Shares deliverable on such exercise.
The Company may deem and treat the Registered Holder of the Warrants
at any time as the absolute owner thereof for all purposes, and the Company
shall not be affected by any notice to the contrary. The Warrants shall not
entitle the Registered Holder thereof to any of the rights of shareholders or
to any dividend declared on the Shares unless the Registered Holder shall have
exercised the Warrants and thereby purchased the Warrant Shares
- 2 -
<PAGE> 3
prior to the record date for the determination of holders of Shares entitled to
such dividend or other right.
4. Reservation of Shares and Payment of Taxes. The Company
covenants that it will at all times reserve and have available from its
authorized Common Stock such number of Shares as shall then be issuable on the
exercise of outstanding Warrants. The Company covenants that all Warrant
Shares which shall be so issuable shall be duly and validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof.
The Registered Holder shall pay all documentary, stamp or similar
taxes and other government charges that may be imposed with respect to the
issuance, transfer or delivery of any Warrant Shares on exercise of the
Warrants. In the event the Warrant Shares are to be delivered in a name other
than the name of the Registered Holder of the Warrant Certificate, no such
delivery shall be made unless the person requesting the same has paid the
amount of any such taxes or charges incident thereto.
5. Registration of Transfer. The Warrant Certificates may be
transferred in whole or in part, provided any such transfer complies with all
applicable securities laws. Warrant Certificates to be transferred shall be
surrendered to the Company at its principal office. The Company shall execute,
issue and deliver in exchange therefor the Warrant Certificate or Certificates
which the Registered Holder making the transfer shall be entitled to receive.
The Company shall keep transfer books at its principal office which
shall register Warrant Certificates and the transfer thereof. On due
presentment of any Warrant Certificate for registration of transfer at such
office, the Company shall execute, issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants. All Warrant Certificates presented for
registration of transfer or exercise shall be duly endorsed or be accompanied
by a written instrument or instruments of transfer in form satisfactory to the
Company. The Company may require payment of a sum sufficient to cover any tax
or other government charge that may be imposed in connection therewith.
All Warrant Certificates so surrendered, or surrendered for exercise,
or for exchange in case of mutilated Warrant Certificates, shall be promptly
canceled by the Company and thereafter retained by the Company until the
Expiration Date. Prior to due presentment for registration of transfer
thereof, the Company may treat the Registered Holder of any Warrant Certificate
as the absolute owner thereof (notwithstanding any notations of ownership or
writing thereon made by anyone other than the Company), and the Company shall
not be affected by any notice to the contrary.
- 3 -
<PAGE> 4
6. Loss or Mutilation. On receipt by the Company of evidence
satisfactory as to the ownership of and the loss, theft, destruction or
mutilation of this Warrant Certificate, the Company shall execute and deliver,
in lieu thereof, a new Warrant Certificate representing an equal aggregate
number of Warrants. In the case of loss, theft or destruction of any Warrant
Certificate, the individual requesting issuance of a new Warrant Certificate
shall be required to indemnify the Company in a form and amount satisfactory to
the Company. In the event a Warrant Certificate is mutilated, such Certificate
shall be surrendered and canceled by the Company prior to delivery of a new
Warrant Certificate. Applicants for a new Warrant Certificate shall also
comply with such other regulations and pay such other reasonable charges as the
Company may prescribe.
7. Adjustment of Shares. The number and kind of securities
issuable upon exercise of a Warrant shall be subject to adjustment from time to
time upon the happening of certain events, as follows:
(a) Stock Splits, Stock Combinations and Certain Stock
Dividends. If the Company shall at any time subdivide or combine its
outstanding Shares, or declare a dividend in Shares or other
securities of the Company convertible into or exchangeable for Shares,
a Warrant for the same Exercise Price shall, after such subdivision or
combination or after the record date for such dividend, be exercisable
for that number of Shares and other securities of the Company that the
Registered Holder would have owned immediately after such event with
respect to the Shares and other securities for which a Warrant may
have been exercised immediately before such event had the Warrant been
exercised immediately before such event. Any adjustment under this
Section 7(a) shall become effective at the close of business on the
date the subdivision, combination or dividend becomes effective.
(b) Adjustment for Reorganization, Consolidation, Merger.
In case of any reorganization of the Company (or any other corporation
the stock or other securities of which are at the time receivable upon
exercise of a Warrant) or in case the Company (or any such other
corporation) shall merge into or with or consolidate with another
corporation or convey all or substantially all of its assets to
another corporation or enter into a business combination of any form
as a result of which the Shares or other securities receivable upon
exercise of a Warrant are converted into other stock or securities of
the same or another corporation, then and in each such case, the
Registered Holder of a Warrant, upon exercise of the purchase right at
any time after the consummation of such reorganization, consolidation,
merger, conveyance or combination, shall for the same Exercise Price
be entitled to receive, in lieu of the Shares or other securities to
which such Registered Holder would have been entitled had he
- 4 -
<PAGE> 5
exercised the purchase right immediately prior thereto, such stock and
securities which such Registered Holder would have owned immediately
after such event with respect to the Shares and other securities for
which a Warrant may have been exercised immediately before such event
had the Warrant been exercised immediately prior to such event.
In each case of an adjustment in the Shares or other securities
receivable upon the exercise of a Warrant, the Company shall promptly notify
the Registered Holder of such adjustment. Such notice shall set forth in
reasonable detail the facts upon which such adjustment is based.
8. Reduction in Exercise Price at Company's Option. The
Company's Board of Directors may, at its sole discretion, reduce the Exercise
Price of the Warrants in effect at any time either for the remaining life of
the Warrants or any shorter period of time determined by the Company's Board of
Directors. The Company shall promptly notify the Registered Holders of any
such reduction in the Exercise Price.
9. Registration Rights.
(a) If, at any time during the Exercise Period and the three (3)
years following any exercise hereunder, the Company proposes to file a
registration statement with respect to any class of securities (other than
pursuant to a registration statement on Forms S-4 or S-8 or any successor form)
under the Securities Act, the Company shall notify the Registered Holder at
least twenty (20) days prior to the filing of such registration statement and
will offer to include in such registration statement all or any portion of the
Warrant Shares. In a written notice to be delivered to the Company within
twenty (20) days after receipt of any such notice from the Company, the
Registered Holder shall state the number of Warrant Shares that it wishes to
register for resale and distribution publicly under the proposed registration
statement. The Company will use its best efforts, through its officers,
directors, auditors and counsel in all matters necessary or advisable, to file
at least one (1) such registration statement by November 30, 1997. The Company
will also use its best efforts, through its officers, directors, auditors and
counsel in all matters necessary or advisable, to include within the coverage
of each such registration statement (except as hereinafter provided) the
Warrant Shares that Registered Holder has advised the Company that Registered
Holder wishes to register pursuant to such registration statement for resale
and distribution, to prosecute each such registration statement diligently to
effectiveness, to cause such registration statement to become effective as
promptly as practicable, and to register or qualify the securities so being
registered under such state and provincial securities or "blue sky" laws as the
Registered Holder may reasonably request. In that
- 5 -
<PAGE> 6
regard, the Company makes no representations or warranties as to its ability to
have any registration statement declared effective.
All registrations requested pursuant to this Section 9(a) are referred
to herein as "Piggyback Registrations." In the event the Company is advised by
the staff of the Securities and Exchange Commission, Nasdaq Stock Market or any
self-regulatory or state securities agency that the inclusion of the Warrant
Shares will prevent, preclude or materially delay the effectiveness of a
registration statement filed, the Company, in good faith, may amend such
registration statement to exclude the Warrant Shares without otherwise
affecting the Registered Holder's rights to any other registration statement
herein.
(i) Primary Registrations. If a Piggyback Registration
is an underwritten primary registration on behalf of the Company, and
if the underwriter thereof advises the Company in writing that in its
opinion the number of Warrant Shares requested to be included in such
registration statement exceeds the number that can be sold in such
offering without materially adversely affecting the distribution of
such securities by the Company, then the Company will include in such
registration statement first, the securities that the Company proposes
to sell and second, the securities requested to be included in such
registration statement by selling securityholders, such rights to
inclusion being apportioned pro rata among the Registered Holder and
the other holders of any other securities requesting registration
according to the market value of Warrant Shares and other securities
requested to be registered.
Notwithstanding the above, if any such underwriter shall
advise the Company in writing that the distribution of the Warrant
Shares being included in the registration statement concurrently with
the securities being registered by the Company would materially
adversely affect the distribution of such securities by the Company,
then the Registered Holder shall delay its offering and sale for such
period ending on the earliest of (a) 180 days following the effective
date of the Company's registration statement, (b) the earliest date
that, in the opinion of such underwriter, such adverse effect would no
longer be caused, or (c) such date as the Company, managing
underwriter and Registered Holder shall otherwise agree. In the event
of such delay, the Company shall file such supplements and
post-effective amendments and take any such other actions as may be
necessary or appropriate to permit such Registered Holder to make its
proposed offering and sale for a period of at least ninety (90) days
commencing immediately following the end of such period of delay. If
any party disapproves of the
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<PAGE> 7
terms of any such underwriting, it may elect to withdraw therefrom by
written notice to the Company, the underwriter and the Registered
Holder. Notwithstanding the foregoing, the Company shall not be
required to include Warrant Shares within the coverage of a
registration statement being filed pursuant to this Section 9(a)(i)
if, in the opinion of counsel for both the Company and Registered
Holder, all of the Warrant Shares proposed to be registered may be
immediately transferred pursuant to the provisions of Rule 144 under
the Securities Act.
(ii) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of
holders of securities of the Company, and the underwriter thereof
advises the Company in writing that in its opinion the number of
Warrant Shares requested to be included in such registration statement
exceeds the number which can be sold in such offering without
materially adversely affecting the distribution of such securities,
then the Company will include in such registration statement the
securities requested to be included in such registration statement by
selling securityholders on a pro rata basis, with such rights to
inclusion being apportioned among the Registered Holder and the other
holders of any other securities requesting registration according to
the market value of Warrant Shares and other securities requested by
them, respectively, to be registered. Notwithstanding the foregoing,
the Company shall not be required to include Warrant Shares within the
coverage of a registration statement being filed pursuant to this
Section 9(a)(ii) if, in the opinion of counsel for both the Company
and Registered Holder, all of the Warrant Shares proposed to be
registered may be immediately transferred pursuant to the provisions
of Rule 144 under the Securities Act.
(b) If at any time after January 1, 1998 and prior to the third (3rd)
anniversary of the earlier of the Expiration Date and the exercise of the final
Warrant represented hereby and the Warrant Shares issued or issuable upon
exercise of the Warrants represented hereby are not then registered under one
or more Piggyback Registrations and then covered by a prospectus complying with
the requirements of the Securities Act, the Registered Holder may by written
notice to the Company require the Company to file a registration statement
under the Securities Act covering such Warrant Shares as the Registered Holder
may specify in such notice. A Registered Holder shall be entitled so to
require the Company to file a registration statement pursuant to this Section
9(b) on only one (1) occasion. The Company will file such a registration
statement within ninety (90) days of receipt of such notice; and
- 7 -
<PAGE> 8
thereafter will prosecute such registration statement diligently to
effectiveness; will cause such registration statement to become effective as
promptly as practicable; will promptly file all such supplements and
post-effective amendments to such registration statement and take any such
other actions as may be necessary or appropriate to make available to
Registered Holder on as continuous a basis as is practicable a prospectus
meeting the requirements of the Securities Act through the earliest of (a) the
date on which the final Warrant Shares have been sold and distributed by
Registered Holder, (b) the date on which, in the opinion of counsel for both
the Company and Registered Holder, all of the Warrant Shares which Registered
Holder then holds may be immediately transferred pursuant to the provisions of
Rule 144 under the Securities Act, and (c) November 7, 2004; and will register
or qualify the securities so being registered under such state and provincial
securities or "blue sky" laws as the Registered Holder may reasonably request.
In that regard, the Company makes no representations or warranties as to its
ability to have any registration statement or post-effective amendment thereto
declared effective.
(c) In the event of any registration of a security pursuant to
this Section 9, the Company shall indemnify the Registered Holder and its
officers, directors and other controlling persons against all losses, claims,
damages and liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus (and as amended or supplemented) relating to such registration, or
caused by any omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading
in light of the circumstances under which they are made unless such statement
or omission was made in reliance upon and in conformity with information
furnished to the Company by the Registered Holder expressly for use therein.
The Registered Holder shall also indemnify the Company, its officers and
directors and each underwriter of the Warrant Shares so registered with respect
to losses, claims damages and liabilities caused by any untrue statement or
omission made in reliance upon and in conformity with information furnished by
the Registered Holder to the Company in writing expressly for use in such
registration statement or prospectus.
(d) All expenses of any registration referred to in this Section
9, except the fees and disbursements of counsel to the Registered Holder,
underwriting commissions or discounts and any transfer or other taxes
applicable to the transfer of Warrant Shares by the Registered Holder, shall be
borne by the Company.
(e) Following the exercise of Warrants hereunder and the disposition
of Warrant Shares, the Registered Holder shall promptly advise the Company when
Registered Holder no longer holds any Warrant Shares acquired through the
exercise of Warrants hereunder,
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<PAGE> 9
and upon the request of the Company, the Registered Holder shall advise the
Company from time to time of the number of Warrant Shares then held by
Registered Holder.
(f) The registration rights granted hereunder to the Registered
Holder with respect to Warrant Shares shall also apply to any other shares of
the Company's Common Stock or other securities issued by the Company other than
Warrants which are then held by the Registered Holder and constitute
"restricted securities" as that term is defined in Rule 144 promulgated under
the Securities Act, on the same basis as if such securities were Warrant
Shares.
10. Notices. All notices, demands, elections, or requests
(however characterized or described) required or authorized hereunder shall be
deemed given sufficiently if in writing and sent by registered or certified
mail, return receipt requested and postage prepaid, or by facsimile or telegram
to the Company, at its principal executive office, and to the Registered
Holder, at the address of such holder as set forth on the books maintained by
the Company.
11. General Provisions. This Warrant Certificate shall be
construed and enforced in accordance with, and governed by, the laws of the
State of Texas. Except as otherwise expressly stated herein, time is of the
essence in performing hereunder. The headings of this Warrant Certificate are
for convenience in reference only and shall not limit or otherwise affect the
meaning hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of the __ day of _______, 1996.
Cotton Valley Resources Corporation
By__________________________________
Title_______________________________
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<PAGE> 10
COTTON VALLEY RESOURCES CORPORATION
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
TEN ENT - as tenants by the entireties Custodian
JR TEN - as joint tenants with right (Cust) (Minor)
of survivorship and not as under Uniform Gifts
tenants in common to Minors Act _______
(State)
Additional abbreviations may also be used though not in the above list.
FORM OF ASSIGNMENT
(To be Executed by the Registered Holder if He
Desires to Assign Warrants Evidenced by the
Within Warrant Certificate)
FOR VALUE RECEIVED ____________________________ hereby sells, assigns
and transfers unto _____________________________________________ (_______)
Warrants, evidenced by the within Warrant Certificate, and does hereby
irrevocably constitute and appoint _________________________________ Attorney to
transfer the said Warrants evidenced by the within Warrant Certificates on the
books of the Company, with full power of substitution.
Dated:____________________ _____________________________
Signature
Notice: The above signature must correspond with the name as written upon the
face of the Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.
Signature Guaranteed: ________________________________________________________
SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM OF ONE OF THE
FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC COAST STOCK
EXCHANGE, AMERICAN STOCK EXCHANGE, OR MIDWEST STOCK EXCHANGE.
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<PAGE> 11
FORM OF ELECTION TO PURCHASE
(To be Executed by the Holder if he Desires to Exercise
Warrants Evidenced by the Warrant Certificate)
To Cotton Valley Resources Corporation:
The undersigned hereby irrevocably elects to exercise _______
_______________________ (_______)Warrants, evidenced by the within Warrant
Certificate for, and to purchase thereunder, _____________ ___________________
(______) full shares of Common Stock issuable upon exercise of said Warrants and
delivery of C$_________ and any applicable taxes.
The undersigned requests that certificates for such shares be issued
in the name of:
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
________________________________
(Please print name and address ________________________________
_______________________________________________________________________________
_______________________________________________________________________________
If said number of Warrants shall not be all the Warrants evidenced by
the within Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so exercised by issued in the name of
and delivered to:
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
_______________________________________________________________________________
(SIGNATURES CONTINUED ON FOLLOWING PAGE)
- 11 -
<PAGE> 12
Dated: ____________________________ Signature:__________________________
NOTICE: The above signature must correspond with the name as written upon the
face of the within Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever. If signed by any
other person, the Form of Assignment hereon must be duly executed by
the registered holder in favor of the person so signing, and if the
certificate representing the shares or any Warrant Certificate
representing Warrants not exercised is to be registered in a name
other than that in which the within Warrant Certificate is registered,
the signature of the holder hereof must be guaranteed.
Signature Guaranteed: ________________________________________________________
ANY SIGNATURE GUARANTY REQUIRED MUST BE PROVIDED BY A COMMERCIAL BANK OR MEMBER
FIRM OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC
COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, OR MIDWEST STOCK EXCHANGE.
- 12 -
<PAGE> 1
EXHIBIT "3"
JOINT FILING AGREEMENT
Liviakis Financial Communications, Inc. and Robert B. Prag
(collectively the "Parties" and individually a "Party") hereby agree that they
shall file a single statement on Schedule 13D (as amended from time to time,
the "Statement") with respect to their beneficial ownership of shares of Common
Stock (the "Securities") of Cotton Valley Resources Corporation, an Ontario,
Canada corporation, on behalf of and in satisfaction of the obligations of all
of the Parties and that they shall amend the Statement from time to time as
required by rules promulgated under the Securities Exchange Act of 1934, as
amended.
Each of the Parties represents and warrants that such Party is
eligible to use Schedule 13D with respect to information regarding the
Securities and agrees to assume responsibility for the timely filing of the
Statement and any amendments thereto. Each of the Parties hereby assumes
responsibility for the completeness and accuracy of the information concerning
such Party contained in the Statement. No Party shall be responsible for the
completeness and accuracy of the information contained in the Statement
concerning the other Parties, unless such Party knows or has reason to believe
that such information is incomplete or inaccurate. The execution of the
Statement, including any amendment thereto, by one of the Parties shall
constitute a representation by such Party that the information concerning such
Party contained therein is complete and accurate and that such Party neither
knows nor has any reason to believe that the information concerning the other
Parties contained therein is either incomplete or inaccurate.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but which together shall constitute one and
the same instrument.
In Witness Whereof, the Parties have executed this Joint Filing
Agreement this 21st day of February, 1997.
LIVIAKIS FINANCIAL COMMUNICATIONS, INC.
By: /s/ John M. Liviakis
------------------------------------
/s/ Robert B. Prag
---------------------------------------
Robert B. Prag
