Convertible Preferred Stock Purchase Agreement

CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT


BETWEEN


ASSURE ENERGY, INC.


AND


THE PURCHASER LISTED ON
SCHEDULE 1 HERETO


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AUGUST 27, 2002
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TABLE OF CONTENTS


ARTICLE I CERTAIN DEFINITIONS.......................................... 1
1.1 Certain Definitions........................................ 1


ARTICLE II PURCHASE AND SALE OF CONVERTIBLE PREFERRED SHARES............ 2
2.1 Purchase and Sale; Terms of Convertible Preferred Shares... 2


ARTICLE III REPRESENTATIONS AND WARRANTIES............................. 3
3.1 Representations, Warranties and Agreements of the Company.. 3
3.2 Representations and Warranties of the Purchaser............ 5


ARTICLE IV OTHER AGREEMENTS OF THE PARTIES.............................. 7
4.1 Manner of Offering......................................... 7
4.2 Listing of Common Stock.................................... 7
4.3 Conversion and Exercise Procedures......................... 7
4.4 Indemnification............................................ 7
4.5 Merger or Consolidation.................................... 8
4.6 Piggyback Registration Rights.............................. 8


ARTICLE V MISCELLANEOUS................................................ 8
5.1 Fees and Expenses.......................................... 8
5.2 Entire Agreement; Amendments............................... 8
5.3 Notices.................................................... 8
5.4 Amendments; Waivers........................................ 9
5.5 Headings................................................... 9
5.6 Successors and Assigns..................................... 9
5.7 No Third Party Beneficiaries............................... 9
5.8 Governing Law; Venue; Service of Process................... 10
5.9 Survival................................................... 10
5.10 Counterpart Signatures..................................... 10
5.11 Severability............................................... 10
5.12 Limitation of Remedies..................................... 10
5.13 Omnibus Provision.......................................... 10


LIST OF SCHEDULES:


Schedule 1 Purchaser Schedule 3.1(c) Capitalization


LIST OF EXHIBITS:


Exhibit A Form of Certificate of Designation Exhibit B Conversion And Exercise Procedure


i
THIS PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), is made and entered into as of the 27th day of August, 2002, between Assure Energy, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Company"), and the purchaser listed on SCHEDULE 1 hereto (the "Purchaser").


WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to the Purchaser and the Purchaser desires to acquire from the Company, shares of the Company's Series B Convertible Preferred Stock, par value $.0001 per share (the "Series B Preferred Stock"), with an aggregate stated value of Five Hundred Twenty-Five Thousand Dollars ($525,000).


IN CONSIDERATION of the mutual covenants contained in this Agreement, the Company and the Purchaser agree as follows:


ARTICLE I


CERTAIN DEFINITIONS


1.1 Certain Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:


"Agreement" shall have the meaning set forth in the introductory paragraph of this Agreement.


"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 the State of New York are authorized or required by law or other government actions to close.


"Certificate of Designation" means the Certificate of Designation of the Series B Convertible Preferred Stock, in the form of EXHIBIT A annexed hereto.


"Commission" means the Securities and Exchange Commission.


"Common Stock" means shares of the Company's common stock, par value $.001 per share.


"Company" shall have the meaning set forth in the introductory paragraph.


"Conversion Date" shall have the meaning set forth in the Certificate of Designation.


"Conversion Price" shall have the meaning set forth in the Certificate of Designation.


"Exchange Act" means the Securities Exchange Act of 1934, as amended.


"Losses" shall have the meaning set forth in Section 4.4(a) hereof.
"Material" shall mean having a financial consequence in excess of $100,000.


"Material Adverse Effect" shall have the meaning set forth in Section 3.1(a).


"NASD" means the National Association of Securities Dealers, Inc.


"Notice of Conversion" shall have the meaning set forth in EXHIBIT B annexed hereto.


"Notice of Exercise" shall have the meaning set forth in EXHIBIT B annexed hereto.


"OTCBB" shall mean the NASD over-the counter Bulletin Board(R).


"Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.


"Purchase Price" shall have the meaning set forth in Section 2.1(b).


"Purchaser" shall have the meaning set forth in the introductory paragraph.


"Securities Act" means the Securities Act of 1933, as amended.


"Series B Preferred Stock" shall have the meaning set forth in the recital.


"Shares" shall have the meaning set forth in Section 2.1(a).


"Subsidiaries" shall have the meaning set forth in Section 3.1(a).


ARTICLE II


PURCHASE AND SALE OF CONVERTIBLE PREFERRED SHARES


2.1 Purchase and Sale; Terms of Convertible Preferred Shares.


(a) Subject to the terms and conditions set forth herein, the Company shall issue and sell and the Purchaser shall purchase an aggregate of Five Hundred Twenty-Five Thousand Dollars ($525,000) of Series B Preferred Stock (the "Shares"). The Shares shall have the respective rights, preferences and privileges as set forth in the Certificate of Designation to be filed by the Company with the Secretary of State of Delaware as soon as practicable following the execution of this Agreement, in the form annexed hereto as Exhibit A. These rights, preferences, and privileges include (i) the right to receive a 5% cumulative dividend, payable annually, in cash or common stock of the Company, at the Company's option; (ii) the right of the Company to redeem the Shares, at any time after the date of issuance, upon twenty one (21) days prior written notice of redemption to the holder, at a price of $105 per Share plus all accrued but unpaid dividends; (iii) automatic redemption by the Company on the fifth anniversary of the date


2 of issuance at a price of $105 per Share plus all accrued but unpaid dividends; (iv) the right of the holder to convert Share principal into units of the Company, at the conversion price then in effect, at any time within 15 days of the holder's receipt of a notice of redemption from the Company or at any time commencing on the second anniversary of the date of issuance, each unit consisting of one share of the Company's common stock (the "Unit Shares") and one common stock purchase warrant exercisable to purchase one share of the Company's common stock (the "Warrant Shares") at a price of $2.00 per share at any time during the four (4) year period commencing one year from the date of issuance of the units. The initial conversion price is $1.75 of Share principal for each unit.


(b) The purchase price for each Share shall be $100 (the "Per Share Consideration"). The Per Share Consideration multiplied by the number of Shares to be purchased by the Purchaser as set forth in SCHEDULE 1 is referred to as the "Purchase Price".


ARTICLE III


REPRESENTATIONS AND WARRANTIES


3.1 Representations, Warranties and Agreements of the Company. The Company hereby makes the following representations and warranties to the Purchaser, all of which shall survive the Closing:


(a) Organization and Qualification. The Company is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company has no subsidiaries other than Assure Oil & Gas Corp., Inventoy.com International, Inc. and Westerra 2000 Inc. (collectively, the "Subsidiaries"). Each of the Subsidiaries is a corporation, duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with the full corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, have a material adverse effect on the results of operations, assets, prospects, or financial condition of the Company and the Subsidiaries, taken as a whole (a "Material Adverse Effect").


(b) Authorization, Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated hereby and to otherwise carry out its obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby has been duly authorized by all necessary action on the part of the Company. This Agreement when delivered in accordance with the terms hereof will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,


3 liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application.


(c) Capitalization. The authorized, issued and outstanding capital stock of the Company is set forth on SCHEDULE 3.1(C). No shares of the Series B Preferred Stock have been issued as of the date hereof. No shares of Common Stock are entitled to preemptive or similar rights, nor is any holder of the Common Stock entitled to preemptive or similar rights arising out of any agreement or understanding with the Company by virtue of this Agreement. Except as disclosed in SCHEDULE 3.1(C), there are no authorized or outstanding options, warrants, script, rights to subscribe to, registration rights, calls or commitments of any character whatsoever relating to, ...