-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IbVuLaC2aCbLuDpSGR9rwqRnwk6xJQu+KaRWkzmEQwTdWDQsbPsgHPEjYzpiXRvc AH66n2mM6xdVx556u0eimw== 0000950148-97-000455.txt : 19970225 0000950148-97-000455.hdr.sgml : 19970225 ACCESSION NUMBER: 0000950148-97-000455 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19970224 SROS: NONE GROUP MEMBERS: LIVIAKIS FINANCIAL COMMUNICATIONS INC GROUP MEMBERS: LIVIAKIS FINANCIAL COMMUNICATIONS, INC. GROUP MEMBERS: ROBERT B. PRAG SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: COTTON VALLEY RESOURCES CORP CENTRAL INDEX KEY: 0001023947 STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382] IRS NUMBER: 980164357 STATE OF INCORPORATION: A6 FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-50439 FILM NUMBER: 97541471 BUSINESS ADDRESS: STREET 1: 8350 N CENTRAL EXPRESSWAY STREET 2: STE M2030 CITY: DALLAS STATE: TX ZIP: 75206 BUSINESS PHONE: 2143631968 MAIL ADDRESS: STREET 1: 8350 NORTH CENTRAL EXPRESSWAY STREET 2: M2030 CITY: DALLAS STATE: TX ZIP: 75206 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LIVIAKIS FINANCIAL COMMUNICATIONS INC CENTRAL INDEX KEY: 0000930254 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 68031139 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 2118 P STREET SUITE C CITY: SACRAMENTO STATE: CA ZIP: 95816 BUSINESS PHONE: 9164486084 MAIL ADDRESS: STREET 1: 2118 P STREET SUITE C CITY: SACRAMENTO STATE: CA ZIP: 95816 SC 13D 1 SCHEDULE 13D 1 OMB APPROVAL OMB Number: 3235-0145 Expires: October 31, 1994 Estimated average burden hours per form........ 14.90 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). 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. 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. 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 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 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 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. 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 EX-1 2 EXHIBIT 1 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 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. 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. 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:
Number of Shares Date ---------------- ---- 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
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. 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. 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. 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. 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. 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. 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. EX-2 3 EXHIBIT 2 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: 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 - 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 - 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 - 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 - 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 - 6 - 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 - 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, - 8 - 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_______________________________ - 9 - 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. - 10 - 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 - 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 - EX-3 4 EXHIBIT 3 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 -----END PRIVACY-ENHANCED MESSAGE-----