Exhibit 10.16
NON-REVOLVING CREDIT LINE LOAN AGREEMENT
BY THIS AGREEMENT made and entered into as of the 14th day of March,
2001, AZCO MINING INC., a Delaware corporation, whose address is 0000 Xxxxx Xx
Xxxxxx Xxxx, Xxxxxxxx, Xxxxxxx (hereinafter called "Borrower"), and Xxxxxxxx X.
Xxxxx, whose address is 0000 Xxxxx Xx Xxxxxx Xxxx, Xxxxxxxx, Xxxxxxx
(hereinafter called "Lender"), for and in consideration of the recitals and
mutual promises contained herein, confirm and agree as follows:
SECTION 1. GENERAL LOAN TERMS
1.1 Subject to the conditions herein set forth, Lender agrees to loan
to or for the benefit of Borrower, and Borrower agrees to draw upon and borrow,
in the manner and upon the terms and conditions set forth herein, amounts that
shall not exceed, in the aggregate, $800,000 (the "Loan"). Disbursements under
the Loan are referred to herein individually as an "Advance" and collectively as
"Advances."
1.2 The Loan shall be a non-revolving line of credit, against which
Advances may be made to Borrower, with no right of Borrower to readvance any
repaid sums. Lender shall have no obligation to make any Advance that would
cause the outstanding principal balance of the Loan to exceed the limitations of
Paragraph 1.1 above.
1.3 The Loan shall be evidenced by a Non-Revolving Credit Line Note in
the form attached hereto as Exhibit A (the "Note") of Borrower, executed and
delivered simultaneously with the execution of this Agreement, in the face
amount of $800,000, payable to Lender upon the terms and conditions contained
therein.
1.4 Borrower shall reimburse Lender for the loan fees paid by Lender in
connection with the Senior Loan, are composed of a $1,000 origination fee and a
$250 document preparation fee. Subject to the preceding sentence, Borrower shall
not be obligated to pay any loan fees in connection with the Loan.
1.5 The Loan shall be unsecured.
1.6 In consideration of the Loan, Borrower shall provide to Lender a
warrant for the purchase of 300,000 shares of Borrower's common stock in the
form attached hereto as Exhibit B (the "Warrant"), and Borrower and Lender shall
enter into a Registration Rights Agreement in substantially the form attached
hereto as Exhibit C.
1.7 Lender agrees to subordinate the payment of the Loan to the payment
of an unsecured convertible debenture to be issued to Xxxx Xxxxxxxxxxx in the
principal amount of $450,000, pursuant a subordination agreement reasonably
acceptable to Xx. Xxxxxxxxxxx, provided that such debenture is issued not later
than 90 days after the date hereof.
SECTION 2. CONDITIONS PRECEDENT FOR CLOSING AND ADVANCES
The obligation of Lender to make each and every Advance is subject to
the following express conditions precedent, all of which shall be satisfied as
of the date of the initial Advance (the "Closing Date") and the date of each and
every Advance thereafter:
2.1 Borrower shall have executed and delivered to Lender this
Agreement, the Note, the Warrant and any other documents or items reasonably
required by Lender to effectuate the intent of those agreements (collectively,
the "Documents").
2.2 All representations and warranties by Borrower shall remain true
and correct and all agreements that Borrower is to have performed or complied
with by the date of the requested Advance shall have been performed or complied
with.
2.3 No Event of Default exists, and no event has occurred and no
condition exists that, after notice or lapse of time, or both, would constitute
an Event of Default.
SECTION 3. REPRESENTATIONS AND WARRANTIES
3.1 Borrower represents and warrants to Lender as follows:
(a) The recitals and statements of intent appearing in this
Agreement are true and correct.
(b) Borrower is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is qualified to do
business and is in good standing in the State of Arizona.
(c) Borrower has full power and authority to own its
properties and assets and to carry on its business as now being conducted.
(d) Borrower is fully authorized and permitted to enter into
the Documents, to borrow the amounts contemplated herein upon the terms set
forth herein and to perform the terms of the Documents, none of which conflicts
with any provision of any law, rule or regulation applicable to Borrower. The
Documents are valid and binding legal obligations of Borrower, and each is
enforceable in accordance with its terms.
(e) The execution, delivery and performance by Borrower of the
Documents will not result in any breach of the terms, conditions or provisions
of, or constitute a default under, any agreement or instrument under which
Borrower is a party or is obligated.
(f) No actions, suits or proceedings are pending or threatened
against Borrower that might materially and adversely affect the repayment of the
Loan, the performance by Borrower under the Documents or the financial
condition, business or operations of Borrower.
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(g) Each request by Borrower for an Advance shall constitute
an affirmation on the part of Borrower that the representations and warranties
contained herein are true and correct as of the time of such request and that
the conditions precedent for such Advance, as applicable, have been fully
satisfied.
3.2 All representations and warranties made herein shall survive the
execution of this Agreement, all Advances and the execution and delivery of all
other documents and instruments in connection with the Loan, so long as Lender
has any commitment to lend to Borrower hereunder and until the Loan and all
indebtedness hereunder have been paid in full and all of Borrower's obligations
hereunder have been fully discharged.
SECTION 4. WAIVER
4.1 Borrower waives presentment, demand, protest and notices of
protest, nonpayment, partial payment and all other notices and formalities
except as expressly called for in this Agreement. Borrower consents to and
waives notice of: (i) the granting of indulgences or extensions of time of
payment, (ii) the taking or releasing of security, and (iii) the addition or
release of persons who may be or become primarily or secondarily liable for the
Loan or any other indebtedness arising in connection with the Loan, or any part
thereof, and all in such manner and at such time as Lender may deem advisable.
4.2 No delay or omission by Lender in exercising any right, power or
remedy hereunder, and no indulgence given to Borrower, with respect to any term,
condition or provision set forth herein, shall impair any right, power or remedy
of Lender under this Agreement, or be construed as a waiver by Lender of, or
acquiescence in, any Event of Default. Likewise, no such delay, omission or
indulgence by Lender shall be construed as a variation or waiver of any of the
terms, conditions or provisions of this Agreement. Any actual waiver by Lender
of any Event of Default shall not be a waiver of any other prior or subsequent
Event of Default or of the same Event of Default after notice to Borrower
demanding strict performance.
SECTION 5. DEFAULT
5.1 The occurrence of any of the following events or conditions shall
constitute an "Event of Default" under this Agreement:
(a) Any failure to pay any principal or interest under the
Note when the same shall become due and payable and such failure continues for
10 days after notice thereof to Borrower, or the failure to pay any other sum
due under the Documents when the same shall become due and payable and such
failure continues for 10 days after notice thereof to Borrower. No notice,
however, shall be required after maturity of the Note.
(b) Any failure or neglect to perform or observe any of the
covenants, conditions or provisions of the Documents (other than a failure or
neglect described in one or more of the other provisions of this Paragraph 5.1)
and such failure or neglect either (i) cannot be remedied, (ii) can be remedied
within 30 days by prompt and diligent action, but it continues unremedied for a
period
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of 30 days after notice thereof to Borrower, or (iii) can be remedied, although
not within 30 days even by prompt and diligent action, but such remedy is not
commenced within 30 days after notice thereof to Borrower or is not diligently
prosecuted to completion within a total of 90 days from the date of such notice.
(c) Any warranty, representation or statement contained in any
of the Documents or made or furnished to Lender by or on behalf of Borrower,
that shall be or shall prove to have been false when made or furnished.
5.2 Upon the occurrence of any Event of Default and at any time while
such Event of Default is continuing, Lender may do one or more of the following:
(a) Cease making Advances and declare the entire Loan and all
other indebtedness of Borrower hereunder immediately due and payable, without
notice or demand;
(b) Proceed to protect and enforce its rights and remedies
under this Agreement, the Note and any other Documents; and
(c) Avail itself of any other relief to which Lender may be
legally or equitably entitled.
5.3 Borrower shall pay all costs and expenses, including without
limitation reasonable attorneys' fees, incurred by Lender in enforcing payment
and performance of the Loan and the other indebtedness and obligations of
Borrower hereunder or in exercising the rights and remedies of Lender hereunder.
SECTION 6. GENERAL
6.1 This Agreement is made for the sole protection and benefit of the
parties hereto and no other person or organization shall have any right of
action hereon.
6.2 This Agreement embodies the entire Agreement of the parties with
regard to the subject matter hereof. There are no representations, promises,
warranties, understandings or agreements expressed or implied, oral or
otherwise, in relation thereto, except those expressly referred to or set forth
herein. Borrower acknowledges that the execution and delivery of this Agreement
is its free and voluntary act and deed, and that said execution and delivery
have not been induced by, nor done in reliance upon, any representations,
promises, warranties, understandings or agreements made by Lender, its agents,
officers, employees or representatives.
6.3 No promise, representation, warranty or agreement made subsequent
to the execution and delivery of this Agreement by either party hereto, and no
revocation, partial or otherwise, or change, amendment or addition to, or
alteration or modification of, this Agreement shall be valid unless the same
shall be in writing signed by all parties hereto.
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6.4 Lender and Borrower each have separate and independent rights and
obligations under this Agreement. Nothing contained herein shall be construed as
creating, forming or constituting any partnership, joint venture, merger or
consolidation of Borrower and Lender for any purpose or in any respect.
6.5 This Agreement shall survive the making of the Loan and shall
continue so long as any part of the Loan, or any extension or renewal thereof,
remains outstanding.
6.6 All rights, powers and remedies granted Lender herein, or otherwise
available to Lender, are for the sole benefit and protection of Lender, and
Lender may exercise any such right, power or remedy at its option and in its
sole and absolute discretion without any obligation to do so. In addition, if,
under the terms hereof, Lender is given two or more alternative courses of
action, Lender may elect any alternative or combination of alternatives, at its
option and in its sole and absolute discretion. All monies advanced by Lender
under the terms hereof and all amounts paid, suffered or incurred by Lender in
exercising any authority granted herein, including reasonable attorneys' fees,
shall bear interest at the highest rate payable on the Loan until paid, and
shall be due and payable by Borrower to Lender immediately without demand.
6.7 Borrower shall indemnify and hold Lender harmless from and against
all claims, costs, expenses, actions, suits, proceedings, losses, damages and
liabilities of any kind whatsoever, including but not limited to attorneys' fees
and expenses, arising out of any matter relating, directly or indirectly, to the
Loan, but excluding any claim or liability which arises from the negligence or
willful misconduct of Lender. This indemnity provision shall continue in full
force and effect and shall survive not only the making of the Loan and all
Advances but shall also survive the repayment of the Loan and the performance of
all of Borrower's other obligations hereunder.
6.8 Time is expressly made of the essence of this Agreement.
6.9 All notices required or permitted to be given hereunder shall be in
writing and may be given in person, by United States mail, by commercial
delivery service, or by electronic transmission with verified receipt. Any
notice directed to a party to this Agreement shall become effective upon the
earliest of the following: (i) actual receipt by that party; (ii) delivery to
the designated address of that party, addressed to that party; or (iii) if given
by certified or registered United States mail, forty-eight (48) hours after
deposit with the United States Postal Service, postage prepaid, addressed to
that party at its designated address. The designated address of a party shall be
the address of that party shown at the beginning of this Agreement or such other
address as that party, from time to time, may specify by notice to the other
parties.
6.10 This Agreement shall be governed by and construed according to the
substantive laws of the State of Arizona, without regard to conflict of law
principles. Exclusive venue for any action shall lie in the state and federal
courts located in Maricopa County, Arizona.
6.11 This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their successors and assigns. Notwithstanding
the previous sentence, Borrower shall not have the right to assign any of its
rights or obligations hereunder without Lender's consent. Lender,
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at any time, shall have the right to sell the Loan or participation interests in
the Loan and in any documents and instruments executed in connection herewith.
Lender is authorized to furnish to any purchaser or participant or prospective
purchaser or participant any information or document that Lender may have or
obtain regarding the Loan or Borrower.
6.12 The headings or captions of sections in this Agreement are for
reference only, do not define or limit the provisions of such sections, and
shall not affect the interpretation of this Agreement.
6.13 The parties shall execute and deliver such additional documents
and do such other acts so either of them may reasonably require to effectuate
the intent of this Agreement as Lender may reasonably require in connection with
this Loan.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
BORROWER
AZCO MINING INC., a Delaware corporation
By: ___________________________________
Its: _____________________________
LENDER
_______________________________________
Xxxxxxxx X. Xxxxx
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EXHIBIT A
NON-REVOLVING CREDIT LINE NOTE
$800,000 Phoenix, Arizona
March 15, 2001
FOR VALUE RECEIVED, the undersigned, AZCO MINING INC., a Delaware
corporation ("Maker"), promises to pay to the order of Xxxxxxxx X. Xxxxx at 0000
Xxxxx Xx Xxxxxx Xxxx, Xxxxxxxx, Xxxxxxx (together with all subsequent holders of
this Note, hereinafter called "Payee"), or at such other place as Payee may from
time to time designate in writing, the principal sum of EIGHT HUNDRED THOUSAND
AND NO/100 DOLLARS ($800,000) plus interest (based on a 360-day year and charged
on the basis of actual days elapsed) from the date hereof on the principal
balance from time to time outstanding as hereinafter provided, principal,
interest and all other sums payable hereunder to be paid in lawful money of the
United States of America as follows:
A. Interest shall accrue at the rate of 1% per annum in excess
of the Prime Rate. The Prime Rate is defined as the interest rate per
annum designated by Imperial Bank as its Prime Rate. The interest rate
on this indebtedness shall change from time to time on the effective
date of, and in conformity with, changes in the Prime Rate.
B. All accrued interest shall be due and payable on the 12th
day of each and every calendar month commencing with the first month
after the date of this Note.
C. If not earlier due and payable, the unpaid principal
balance, all accrued and unpaid interest and all other amounts payable
hereunder shall be due and payable in full on March 12, 2002.
Maker agrees to make all payments of principal and interest hereunder
by wire transfer for intra-bank account transfer) to an account at Imperial Bank
specified in writing by Payee.
Maker agrees to an effective rate of interest that is the rate stated
above plus any additional rate of interest resulting from any other charges in
the nature of interest paid or to be paid by or on behalf of Maker, or any
benefit received or to be received by Payee, in connection with this Note.
The principal balance of this Note represents advances on a
non-revolving line of credit all or any part of which may be advanced to Maker
from time to time, subject to the other terms hereof and the terms contained in
that Non-Revolving Credit Line Loan Agreement of even date herewith, between
Maker, as borrower, and Payee, as lender (the "Loan Agreement"). The principal
balance outstanding at any one time shall not exceed the face amount hereof.
If any payment required under this Note is not paid within 10 days
after the date it is due, then Maker shall pay a "late charge" equal to 5% of
the amount of that payment to compensate Payee for administrative expenses and
other costs of delinquent payments. This late charge may be assessed without
notice, shall be immediately due and payable and shall be in addition to all
other rights and remedies available to Payee.
All payments on this Note shall be applied first to the payment of any
costs, fees or other charges incurred in connection with the indebtedness
evidenced hereby, next to the payment of accrued interest and then to the
reduction of the principal balance, or in such other order as Payee may elect.
Maker shall have the option to prepay this Note, in full or in part, at
any time, without penalty.
Time is of the essence of this Note. At the option of Payee, the entire
unpaid principal balance, all accrued and unpaid interest and all other amounts
payable hereunder shall become immediately due and payable upon the failure by
Maker to pay any sum due and owing hereunder, or upon the occurrence of any
Event of Default, as defined in the Loan Agreement.
After maturity, including maturity upon acceleration, the unpaid
principal balance, all accrued and unpaid interest and all other amounts payable
hereunder shall bear interest at a per annum rate equal to the Prime Rate plus
500 basis points. Maker shall pay all costs and expenses, including reasonable
attorneys' fees and court costs, incurred in the collection or enforcement of
all or any part of this Note.
Failure of Payee to exercise any option hereunder shall not constitute
a waiver of the right to exercise the same in the event of any subsequent
default or in the event of continuance of any existing default after demand for
strict performance hereof.
Maker, sureties, guarantors and endorsers hereof: (a) agree to be
jointly and severally bound, (b) severally waive any homestead or exemption
right against said debt, (c) severally waive demand, diligence, presentment for
payment, protest and demand, and notice of extension, dishonor, protest, demand
and nonpayment of this Note, and (d) consent that Payee may extend the time of
payment or otherwise modify the terms of payment of any part or the whole of the
debt evidenced by this Note, at the request of any other person primarily liable
hereon, and such consent shall not alter nor diminish the liability of any
person.
This Note shall be binding upon Maker and its successors and assigns
and shall inure to the benefit of Payee and their successors and assigns.
All notices required or permitted in connection with this Note shall be
given at the place and in the manner provided in the Loan Agreement for the
giving of notices.
This Note shall be governed by and construed according to the laws of
the State of Arizona.
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IN WITNESS WHEREOF, these presents are executed as of the date first
written above.
AZCO MINING INC., a Delaware corporation
By: ___________________________________
Its: _____________________________
Maker
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EXHIBIT B
THIS WARRANT AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT
TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT AND SUCH STATE LAWS. THIS WARRANT MAY NOT BE EXERCISED UNLESS AT
THE TIME OF SUCH EXERCISE, THE ISSUER DELIVERS A PROSPECTUS MEETING THE
REQUIREMENTS OF SECTION 10 OF THE ACT, FORMING A PART OF A REGISTRATION
STATEMENT OR POST-EFFECTIVE AMENDMENT THERETO, WHICH IS EFFECTIVE UNDER
THE ACT, UNLESS IN THE OPINION OF COUNSEL TO THE CORPORATION, SUCH
OFFER AND SALE IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT.
AZCO MINING INC.
COMMON STOCK PURCHASE WARRANT
Azco Mining Inc. ("Company"), a Delaware corporation, hereby certifies
that, for value received, Xxxxxxxx X. Xxxxx ("Holder"), whose address is 0000
Xxxxx Xx Xxxxxx Xxxx, Xxxxxxxx, Xxxxxxx is entitled, subject to the terms set
forth below at any time or from time to time after the date hereof and before
the Expiration Date (as defined below), to purchase from the Company 300,000
shares ("Shares") of Common Stock, par value $.002 per share, at a price of
$0.70 per Share (the purchase price per Share, as adjusted from time to time
pursuant to the provisions hereunder set forth, is referred to in this Warrant
as the "Purchase Price").
1. TERM OF THE WARRANT.
1.1 Time of Exercise. Subject to the provisions of Sections 1.5,
"Transfer and Assignment," and 3.1, "Registration and Legends," this Warrant may
be exercised at any time and from time to time after 9:00 a.m., Arizona time, on
September 15, 2001 ("Exercise Commencement Date"), but no later than 5:00 p.m.,
Arizona time, on March 15, 2006 ("Expiration Date"), at which point it shall
become void and all rights under this Warrant shall cease.
1.2 Manner of Exercise.
1.2.1 The Holder may exercise this Warrant, in whole or in
part, upon surrender of this Warrant with the form of subscription attached
hereto duly executed to the Company at its corporate office in Glendale, Arizona
together with the full Purchase Price for each Share to be purchased in lawful
money of the United States, or by certified check, bank draft or postal or
express money order payable in United States dollars to the order of the
Company, and upon compliance with and subject to the conditions set forth in
this Warrant.
1.2.2 Upon receipt of this Warrant with the form of
subscription duly executed and accompanied by payment of the aggregate Purchase
Price for the Shares for which this Warrant is then being exercised, the Company
shall cause to be issued certificates or other
evidence of ownership, for the total number of whole Shares for which this
Warrant is being exercised in such denominations as are required for delivery to
the Holder, and the Company shall thereupon deliver such documents to the Holder
or its nominee.
1.2.3 If the Holder exercises this Warrant with respect to
fewer than all of the Shares that may be purchased under this Warrant, the
Company shall execute a new Warrant for the balance of the Shares that may be
purchased upon exercise of this Warrant and deliver such new Warrant to the
Holder.
1.2.4 The Company covenants and agrees that it will pay when
due and payable any and all taxes which may be payable in respect of the issue
of this Warrant, or the issue of any Shares upon the exercise of this Warrant.
The Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issuance or delivery of this Warrant
or of the Shares in a name other than that of the Holder at the time of
surrender, and until the payment of such tax, the Company shall not be required
to issue such Shares.
1.2.5 The Company shall, at the time of any exercise of all or
part of this Warrant, upon the request of the Holder hereof, acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holders shall continue to be entitled after such exercise in accordance
with the provisions of this Warrant, provided that if the Holder of this Warrant
shall fail to make any such request, such failure shall not affect the
continuing obligations of the Company to afford to such Holder any such rights.
1.3 Exchange of Warrant. This Warrant may be split-up, combined or
exchanged for another Warrant or Warrants of like tenor to purchase a like
aggregate number of Shares. If the Holder desires to split-up, combine or
exchange this Warrant, it shall make such request in writing delivered to the
Company at its corporate office and shall surrender this Warrant and any other
Warrants to be so split-up, combined or exchanged, the Company shall execute and
deliver to the person entitled thereto a Warrant or Warrants, as the case may
be, as so requested. The Company shall not be required to effect any split-up,
combination or exchange which will result in the issuance of a Warrant entitling
the Holder to purchase upon exercise a fraction of a Share. The Company may
require the Holder to pay a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any split-up, combination or
exchange of Warrants. The term "Warrant" as used herein includes any Warrants
issued in substitution for or replacement of this Warrant, or into which this
Warrant may be divided or exchanged.
1.4 Holder as Owner. Prior to due presentment for registration of
transfer of this Warrant, the Company may deem and treat the Holder as the
absolute owner of this Warrant (notwithstanding any notation of ownership or
other writing hereon) for the purpose of any exercise hereof and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Irrespective of the date of issue and delivery of certificates for any Shares
issuable upon the exercise of the Warrant, each person in whose name any such
certificate is issued shall be deemed to have become the holder of record of the
Shares represented thereby on the date on which all or a portion of the Warrant
surrendered in connection with the subscription therefor was surrendered and
payment of the purchase price was tendered. No surrender of all or a portion of
the Warrant on any date when the stock transfer books of the Company are closed,
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however, shall be effective to constitute the person or persons entitled to
receive Shares upon such surrender as the record holder of such Shares on such
date, but such person or persons shall be constituted the record holder or
holders of such Shares at the close of business on the next succeeding date on
which the stock transfer books are opened. Each person holding any Shares
received upon exercise of the Warrant shall be entitled to receive only
dividends or distributions payable to holders of record on or after the date on
which such person shall be deemed to have become the holder of record of such
Shares.
1.5 Transfer and Assignment. This Warrant may not be sold,
hypothecated, exercised, assigned or transferred except in accordance with and
subject to the provisions of the Securities Act of 1933, as amended ("Act").
1.6 Method for Assignment. Any assignment permitted under this Warrant
shall be made by surrender of this Warrant to the Company at its principal
office with the form of assignment attached hereto duly executed and funds
sufficient to pay any transfer tax. In such event, the Company shall, without
charge, execute and deliver a new Warrant in the name of the assignee designated
in such instrument of assignment and this Warrant shall promptly be canceled.
This Warrant may be divided or combined with other Warrants which carry the same
rights upon presentation thereof at the corporate office of the Company together
with a written notice signed by the Holder, specifying the names and
denominations in which such new Warrants are to be issued.
1.7 Rights of Holder. Nothing contained in this Warrant shall be
construed as conferring upon the Holder the right to vote or consent or receive
notice as a stockholder in respect of any meetings of stockholders for the
election of directors or any other matter, or as having any rights whatsoever as
a stockholder of the Company. If, however, at any time prior to the expiration
of this Warrant and prior to its exercise, any of the following shall occur:
1.7.1 The Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
1.7.2 The Company shall offer to the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
1.7.3 There shall be proposed any capital reorganization or
reclassification of the Common Stock, or a sale of all or substantially all of
the assets of the Company, or a consolidation or merger of the Company with
another entity; or
1.7.4 There shall be proposed a voluntary or involuntary
dissolution, liquidation or winding up of the Company; then, in any one or more
of said cases, the Company shall cause to be mailed to the Holder, at the
earliest practicable time (and, in any event, not less than thirty
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(30) days before any record date or other date set for definitive action),
written notice of the date on which the books of the Company shall close or a
record shall be taken to determine the stockholders entitled to such dividend,
distribution, convertible or exchangeable securities or subscription rights, or
entitled to vote on such reorganization, reclassification, sale, consolidation,
merger, dissolution, liquidation or winding up, as the case may be. Such notice
shall also set forth such facts as shall indicate the effect of such action (to
the extent such effect may be known at the date of such notice) on the Purchase
Price and the kind and amount of the Common Stock and other securities and
property deliverable upon exercise of this Warrant. Such notice shall also
specify the date as of which the holders of the Common Stock of record shall
participate in said distribution or subscription rights or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be (on which date, in the event of
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the right to exercise this Warrant shall terminate). Without limiting the
obligation of the Company to provide notice to the holder of actions hereunder,
it is agreed that failure of the Company to give notice shall not invalidate
such action of the Company.
1.8 Lost Warrant Certificate(s). Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and, in the case of loss, theft or destruction of reasonably
satisfactory indemnification, including a surety bond if required by the
Company, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will cause to be executed and delivered a new Warrant of like tenor and
date. Any such new Warrant executed and delivered shall constitute an additional
contractual obligation on the part of the Company, whether or not this Warrant
so lost, stolen, destroyed, or mutilated shall be at any time enforceable by
anyone.
1.9 Covenants of the Company. The Company covenants and agrees as
follows:
1.9.1 At all times it shall reserve and keep available for the
exercise of this Warrant into Common Stock such number of authorized shares of
Common Stock as are sufficient to permit the exercise in full of this Warrant
into Common Stock; and
1.9.2 All Shares issued upon exercise of the Warrant shall be
duly authorized, validly issued and outstanding, fully-paid and non-assessable.
2. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES PURCHASABLE UPON
EXERCISE.
2.1 Recapitalization. The number of Shares purchasable on exercise of
this Warrant and the purchase price therefor shall be subject to adjustment from
time to time in the event that the Company shall: (i) pay a dividend in, or make
a distribution of, shares of Common Stock, (ii) subdivide its outstanding shares
of Common Stock into a greater number of shares, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares, or (iv) spin-off a
subsidiary by distributing, as a dividend or otherwise, shares of the subsidiary
to its stockholders. In any such case, the total number of shares purchasable on
exercise of this Warrant immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive, at the same aggregate purchase price, the
number of shares of Common Stock that the
4
Holder would have owned or would have been entitled to receive immediately
following the occurrence of any of the events described above had this Warrant
been exercised in full immediately prior to the occurrence (or applicable record
date) of such event. An adjustment made pursuant to this Paragraph 2 shall, in
the case of a stock dividend or distribution, be made as of the record date and,
in the case of a subdivision or combination, be made as of the effective date
thereof. If, as a result of any adjustment pursuant to this Paragraph 2, the
Holder shall become entitled to receive shares of two or more classes of series
of securities of the Company, the Board of Directors of the Company shall
equitably determine the allocation of the adjusted purchase price between or
among shares or other units of such classes or series and shall notify the
Holder of such allocation.
2.2 Merger or Consolidation. In the event of any reorganization or
recapitalization of the Company or in the event the Company consolidates with or
merges into another entity or transfers all or substantially all of its assets
to another entity, then and in each such event, the Holder, on exercise of this
Warrant as provided herein, at any time after the consummation of such
reorganization, recapitalization, consolidation, merger or transfer, shall be
entitled, and the documents executed to effectuate such event shall so provide,
to receive the stock or other securities or property to which the Holder would
have been entitled upon such consummation if the Holder had exercised this
Warrant immediately prior thereto. In such case, the terms of this Warrant shall
survive the consummation of any such reorganization, recapitalization,
consolidation, merger or transfer and shall be applicable to the shares of stock
or other securities or property receivable on the exercise of this Warrant after
such consummation. and as an exchange for a larger or smaller number of shares,
as the case may be.
2.3 Notice of Dissolution or Liquidation. Except as otherwise provided
in Section 2.2, "Merger or Consolidation," in the case of any sale or conveyance
of all or substantially all of the assets of the Company in connection with a
plan of complete liquidation of the Company, or in the case of the dissolution,
liquidation or winding-up of the Company, all rights under this Warrant shall
terminate on a date fixed by the Company, such date so fixed to be not earlier
than the date of the commencement of the proceedings for such dissolution,
liquidation or winding-up and not later than thirty (30) days after such
commencement date. Notice of such termination of purchase rights shall be given
to the Holder at least thirty (30) days prior to such termination date.
2.4 Statement of Adjustment. Any adjustment pursuant to the provisions
of this Section 2 shall be made on the basis of the number of Shares which the
Holder would have been entitled to acquire by exercise of this Warrant
immediately prior to the event giving rise to such adjustment and, as to the
Purchase Price in effect immediately prior to the rise to such adjustment.
Whenever any such adjustment is required to be made, the Company shall forthwith
determine the new number of Shares which the Holder hereof shall be entitled to
purchase hereunder and/or such new Purchase Price and shall prepare, retain on
file and transmit to the Holder within ten (10) days after such preparation a
statement describing in reasonable detail the method used in calculating such
adjustment.
2.5 No Fractional Shares. The Company shall not issue any fraction of a
Share in connection with the exercise of this Warrant, and in any case where the
Holder would, except for
5
the provisions of this Section 2.5, be entitled under the terms of this Warrant
to receive a fraction of a Share upon such exercise, the Company shall upon the
exercise and receipt of the Purchase Price, issue the largest number of whole
Shares purchasable upon exercise of this Warrant. The Company shall not be
required to make any cash or other adjustment in respect of such fraction of a
Share to which the Holder would otherwise be entitled. The Holder, by the
acceptance of this Warrant, expressly waives his right to receive a certificate
for any fraction of a Share upon exercise hereof.
2.6 No Change in Form Required. The form of Warrant need not be changed
because of any change pursuant to this Section 2 in the Purchase Price or in the
number of Shares purchasable upon the exercise of a Warrant, may state the same
Purchase Price and the same number of shares of Common Stock as are stated in
the Warrants initially issued pursuant to the Agreement.
3. REGISTRATION UNDER THE SECURITIES ACT OF 1933.
3.1 Registration and Legends. The Holder understands that (i) the
Company has not registered the Warrant or the Shares under the Act, or the
applicable securities laws of any state in reliance on exemptions from
registration and (ii) such exemptions depend upon the Holder's investment intent
at the time the Holder acquires the Warrant or the Shares. The Holder therefore
represents and warrants that it is acquiring the Warrant, and will acquire the
Shares, for the Holder's own account for investment and not with a view to
distribution, assignment, resale or other transfer of the Warrant or the Shares.
Because the Warrant and the Shares are not registered, the Holder is aware that
the Holder must hold them indefinitely unless they are registered under the Act
and any applicable securities laws or the Holder must obtain exemptions from
such registration. Upon exercise, in part or in whole, of this Warrant, the
Shares shall bear the following legend:
The shares of Common Stock represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act") or any
applicable state securities laws, and they may not be offered for sale, sold,
transferred, pledged or hypothecated without an effective registration statement
under the Securities Act and under any applicable state securities laws, or an
opinion of counsel, satisfactory to the company, that an exemption from such
registration is available.
3.2 No-Action Letter. The Company agrees that it will be satisfied that
no post-effective amendment or new registration is required for the public sale
of the Shares if it shall be presented with a letter from the Staff of the
Securities and Exchange Commission ("Commission"), stating in effect that, based
upon stated facts which the Company shall have no reason to believe are not true
in any material respect, the Staff will not recommend any action to the
Commission if such Shares are offered and sold without delivery of a prospectus,
and that, therefore, no Registration Statement under which such shares are to be
registered is required to be filed.
6
3.3 Agreements. The agreements in this Section shall continue in effect
regardless of the exercise and surrender of this Warrant.
4. RESERVATION OF SHARES. The Company shall at all times reserve, for the
purpose of issuance on exercise of this Warrant such number of shares of Common
Stock or such class or classes of capital stock or other securities as shall
from time to time be sufficient to comply with this Warrant and the Company
shall take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized and unissued Common Stock or such other
class or classes of capital stock or other securities to such number as shall be
sufficient for that purpose.
5. SURVIVAL. All agreements, covenants, representations and warranties herein
shall survive the execution and delivery of this Warrant and any investigation
at any time made by or on behalf of any parties hereto and the exercise, sale
and purchase of this Warrant (and any other securities or property) issuable on
exercise hereof.
6. REMEDIES. The Company agrees that the remedies at law of the Holder, in the
event of any default or threatened default by the Company in the performance or
compliance with any of the terms of this Warrant, may not be adequate and such
terms may, in addition to and not in lieu of any other remedy, be specifically
enforced by a decree of specific performance of any agreement contained herein
or by an injunction against a violation of any of the terms hereof or otherwise.
7. OTHER MATTERS.
7.1 Binding Effect. All the covenants and provisions of this Warrant by
or for the benefit of the Company shall bind and inure to the benefit of its
successors and assigns hereunder.
7.2 Notices. Notices or demands pursuant to this Warrant to be given or
made by the Holder to or on the Company shall be sufficiently given or made if
sent by certified or registered mail, return receipt requested, postage prepaid,
and addressed, until another address is designated in writing by the Company, as
follows:
Azco Mining Inc.
0000 Xxxxx Xx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Attn: Vice President - Finance
Notices to the Holder provided for in this Warrant shall be deemed given or made
by the Company if sent by certified or registered mail, return receipt
requested, postage prepaid, and addressed to the Holder at the Holder's last
known address as it shall appear on the books of the Company.
7.3 Governing Law. The validity, interpretation and performance of this
Warrant shall be governed by the laws of the State of Arizona.
7
7.4 Parties Bound and Benefited. Nothing in this Warrant expressed and
nothing that may be implied from any of the provisions hereof is intended, or
shall be construed, to confer upon, or give to, any person or corporation other
than the Company and the Holder any right, remedy or claim under promise or
agreement hereof, and all covenants, conditions, stipulations, promises and
agreements contained in this Warrant shall be for the sole and exclusive benefit
of the Company and its successors and of the Holder, its successors and, if
permitted, its assignees.
7.5 Headings. The Article headings herein are for convenience only and
are not part of this Warrant and shall not affect the interpretation thereof.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
under its corporate seal as of the 15th day of March, 2001.
Azco Mining Inc.
By: ____________________________________
Vice President - Finance
AZCO MINING INC.
ASSIGNMENT
FOR VALUE RECEIVED, ____________________________________ hereby sells,
assigns and transfers unto __________________________ _____________________ the
within Warrant and the rights represented thereby, and does hereby irrevocably
constitute and appoint __________________________________________ Attorney, to
transfer said Warrant on the books of the Company, with full power of
substitution.
Dated: _____________________________
Signed: ________________________________
Print Name: ____________________________
8
SUBSCRIPTION FORM
AZCO MINING INC.
0000 XXXXX XX XXXXXX XXXX
XXXXXXXX, XXXXXXX 00000
Re: Warrant to Purchase 300,000 shares of common stock, par value $.002 per
share ("Common Stock") of Azco Mining Inc., a Delaware corporation (the
"Company"), dated March __, 2001 (the "Warrant").
The undersigned hereby irrevocably subscribes for the purchase of _____
shares of Common Stock (the "Shares"), pursuant to and in accordance with the
terms and conditions of the Warrant, and herewith makes payment, covering the
purchase of the Shares, which should be delivered to the undersigned at the
address stated below, and, if such number of Shares shall not be all of the
Shares purchasable hereunder, then a new Warrant of like tenor for the balance
of the remaining Shares purchasable under this Warrant be delivered to the
undersigned at the address stated below.
The undersigned agrees that: (1) the undersigned will not offer, sell,
transfer or otherwise dispose of any such Shares, unless either (a) a
registration statement, or post-effective amendment thereto, covering such
Shares have been filed with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended ("Act"), and such sale, transfer or other
disposition is accompanied by a prospectus meeting the requirements of Section
10 of the Act forming a part of such registration statement, or post-effective
amendment thereto, which is in effect under the Act covering the Shares to be so
sold, transferred or otherwise disposed of, or (b) counsel to the Company
satisfactory to the undersigned has rendered an opinion in writing and addressed
to the Company that such proposed offer, sale, transfer or other disposition of
the Shares is exempt from the provisions of Section 5 of the Act in view of the
circumstances of such proposed offer, sale, transfer or other disposition; (2)
the Company may notify the transfer agent for its Common Stock that the
certificates for the Common Stock acquired by the undersigned are not to be
transferred unless the transfer agent receives advice from the Company that one
or both of the conditions referred to in (1)(a) and (1)(b) above have been
satisfied; and (3) the Company may affix the legend set forth in Section 3.1 of
this Warrant to the certificates for Shares hereby subscribed for, if such
legend is applicable.
Dated: _________________________ Signed: ________________________________
Address: _______________________________
9
EXHIBIT C
AZCO MINING INC.
REGISTRATION RIGHTS AGREEMENT
March 15, 2001
Xxxxxxxx X. Xxxxx
as Investor
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TABLE OF CONTENTS
PAGE
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1. Certain Definitions............................................. 1
2. Registration Requirements....................................... 2
3. Registration Procedures......................................... 3
4. Suspensions of Effectiveness.................................... 4
5. Indemnification................................................. 5
6. Contribution.................................................... 7
7. Survival........................................................ 8
8. Transfer or Assignment of Rights................................ 8
9. Miscellaneous................................................... 8
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Rights Agreement"), entered
into as of March 15, 2001, between Xxxxxxxx X. Xxxxx (the "Investor") and Azco
Mining Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company and the Investor have entered into a Non-Revolving
Credit Line Agreement pursuant to which the Investor has loaned $800,000 to the
Company (the "Agreement"); and
WHEREAS, pursuant to the Agreement, the Company issued to the Investor
a Warrant (the "Warrant") to purchase 300,000 shares of the Company's common
stock, par value $.002 per share ("Common Stock"), at a purchase price of $0.70
per share (the common stock to be purchased thereunder, the "Warrant Stock");
and
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investor's commitment to enter into the Agreement, the Company has agreed to
provide the Investor with certain registration rights with respect to the
Warrant Stock as set forth in this Rights Agreement.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the Agreement
and this Rights Agreement and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, intended to be legally
bound hereby, the Company and the Investor agree as follows:
1. Certain Definitions. The following terms shall have the following
respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Principal Market" shall mean the American Stock Exchange, the Nasdaq
National Market, Nasdaq SmallCap Market, Nasdaq OTC Bulletin Board or any
similar organization or agency succeeding such market or exchange's functions of
reporting prices, whichever is at the time the principal U.S. trading exchange
or market for the Common Stock.
"Register," "Registered" and "Registration" shall refer to a
registration effected by preparing and filing an appropriate registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
"Securities Act" shall mean the U.S. Securities Act of 1933, as
amended.
Registration Requirements.
(a) Subject to the terms and conditions of this Rights
Agreement, and unless earlier registered pursuant to Section 2(b) hereof, the
Company shall file with the Commission no later than 45 days after the date
Investor shall have purchased, in the aggregate, 50% of all the shares of
Warrant Stock purchasable under the Warrant, an appropriate registration
statement on Form S-3 (or any successor or other appropriate form) under the
Securities Act for the registration of the Warrant Stock (the "Registration
Statement"). Furthermore, at the time of filing of the Registration Statement,
the Company shall file (A) such blue sky filings as shall have been requested by
the Investor; and (B) any required filings with the National Association of
Securities Dealers, Inc. or exchange or market where the Warrant Stock is
traded. The Company shall use its reasonable best efforts to have all filings
declared effective as promptly as practicable.
(b) (i) If the Company proposes to register any Common Stock
under the Securities Act (other than (1) a registration relating solely to the
sale of securities to participants in a Company stock plan, (2) a registration
relating solely to a transaction described in Rule 145 under the Securities Act,
(3) a registration on any form that may not be used for the Warrant Stock, (4) a
registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities which are also being registered or
(5) a registration pursuant to Section 2(a)), whether for its own account or for
the account of any stockholder, the Company shall promptly, but not later than
30 days prior to the initial filing of such registration statement, give the
Investor written notice of such registration setting forth the intended method
of disposition, the maximum proposed offering price, commissions and discounts
in connection therewith and other relevant information. Upon the written request
of the Investor given within 20 days after the giving of such notice by the
Company, the Company shall, subject to the provisions of this Section 2(b),
cause to be registered under the Securities Act all of the Warrant Stock which
the Investor requests to be registered by inclusion of such Warrant Stock in the
registration statement which covers the securities which the Company proposes to
register; provided, that if, at any time after giving written notice of its
intention to register any Common Stock and prior to the effective date of the
registration statement filed in connection therewith, the Company shall
determine for any reason either not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to the Investor and, thereupon, (1) in the case of a determination
not to register, shall be relieved of its obligation to register any Warrant
Stock in connection with such registration, and (2) in the case of a
determination to delay registering, shall be permitted to delay registering any
Warrant Stock for the same period as the delay in registering such other
securities.
(ii) Underwriting; Limitation due to Marketing Factors. If a
registered offering under this Section 2(b) involves an underwriting (whether
firm commitment, best efforts or otherwise, including any transaction pursuant
to which a selling shareholder is deemed to be an underwriter under the
Securities Act), the Company shall not be required to include any Warrant Stock
in such registration unless the Investor accepts the terms of the underwriting
as agreed upon between the Company or the persons entitled to select the
underwriters, as the case may be, and the underwriters thereof. Notwithstanding
any other provision of this Section 2(b), if the total amount of securities,
including Warrant Stock, requested by shareholders to be included in any
offering registered pursuant to this Section 2(b) exceeds the amount of
securities sold other than
-2-
by the Company, or if such registration is initiated by shareholders of the
Company, by such initiating shareholders, that the underwriters determine in
their reasonable discretion is compatible with the success of the offering, then
the Company shall be required to include in the offering only that number of
such securities, including the Warrant Stock, which the underwriters determine
in their reasonable discretion will not jeopardize the success of the offering.
The securities in excess of the securities to be sold by the Company or the
initiating shareholders, as the case may be, shall be apportioned first, to all
requesting shareholders in proportion (as nearly as practicable) to the amount
of securities requested to be included by shareholders, and second, to the
Company, if such registration is initiated by shareholders of the Company.
(c) Notwithstanding anything to the contrary herein, the Company
shall not be required to register any shares of Common Stock which may be sold
under paragraph (k) of Rule 144 promulgated under the Securities Act.
3. Registration Procedures. At its expense, the Company will use its
reasonable best efforts to:
(a) Keep such registration effective for a period of
twenty-four (24) months, as extended pursuant to Section 4 hereof.
(b) Furnish such number of prospectuses and amendments and
supplements thereto, and other documents incident thereto as the Investor from
time to time may reasonably request;
(c) Prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep such Registration Statement effective for the applicable period; cause the
related prospectus to be supplemented by any required prospectus supplement, and
as so supplemented to be filed pursuant to Rule 424 under the Securities Act;
and comply with the provisions of the Securities Act applicable to it with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended methods
of disposition by the sellers thereof set forth in such Registration Statement
or supplement to such prospectus;
(d) Notify the Investor and its counsel (as designated in
writing by the Investor) promptly, and confirm such notice (a "Notice") in
writing, (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and, with respect to the Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the Commission for amendments or supplements to the Registration
Statement or related prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose,
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification of any of the Warrant Stock for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, (v) of the happening of any event as a result of which the prospectus
included in the Registration Statement (as then in effect) contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein (in the case
-3-
of the prospectus or any preliminary prospectus, in light of the circumstances
under which they were made) not misleading, and (vi) of the Company's reasonable
determination that a post-effective amendment to the Registration Statement
would be appropriate or that there exist circumstances not yet disclosed to the
public which make further sales under such Registration Statement inadvisable
pending such disclosure and post-effective amendment;
(e) Upon the occurrence of any event contemplated by Section
3(d)(ii)-(vi) (unless a Blocking Notice shall be in effect) and immediately upon
the expiration of any Blocking Notice (as defined in Section 4), prepare, if the
occurrence of such event or period requires such preparation, a supplement or
post-effective amendment to the Registration Statement or related prospectus or
any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Warrant Stock
being sold thereunder, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements, in light of the circumstances under which they were made, not
misleading;
(f) Obtain the withdrawal of any order suspending the
effectiveness of the Registration Statement, or the lifting of any suspension of
the qualification of any of the Warrant Stock for sale in any jurisdiction, as
promptly as practicable;
(g) Cause all Warrant Stock subject to the Registration
Statement at all times to be registered or qualified for offer and sale under
the securities or blue sky laws of such jurisdictions as the Investor reasonably
requests in writing; use its best efforts to keep each such registration or
qualification effective, including through new filings or amendments or
renewals, during the period the Registration Statement is required to be kept
effective and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Warrant Stock covered by the
Registration Statement; provided, however, that the Company will not be required
to qualify to do business or take any action that would subject it to taxation
or general service of process in any jurisdiction where it is not then so
qualified or subject; and
(h) Cause all Warrant Stock included in such Registration
Statement to be listed, by the date of first sale of Warrant Stock pursuant to
such Registration Statement, on the Principal Market.
4. Suspensions of Effectiveness. The Company may suspend dispositions
under the Registration Statement and notify the Investor that it may not sell
the Warrant Stock pursuant to any Registration Statement or prospectus (a
"Blocking Notice") if the Company's management determines in its good faith
judgment that the Company's obligation to ensure that such Registration
Statement and prospectus are current and complete would require the Company to
take actions that might reasonably be expected to have a materially adverse
effect on the Company and its shareholders. The Investor agrees by acquisition
of the Warrant Stock that, upon receipt of a Blocking Notice or "Prospectus
Inadequacy Notice" from the Company of the existence of any fact of the kind
described in the following sentence, the Investor shall not dispose of, sell or
offer for sale the Warrant Stock pursuant to the Registration Statement until
such Investor receives (i) copies of the supplemented or amended prospectus, or
until counsel for the Company shall have determined that such disclosure is not
required due to subsequent events, (ii) notice in writing (the "Advice") from
the Company that the use of the prospectus may
-4-
be resumed and (iii) copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus. Pursuant to the immediately
preceding sentence, the Company may provide such Prospectus Inadequacy Notice to
the Investor upon the determination by the Company of the existence of any fact
or the happening or any event that makes any statement of a material fact made
in the Registration Statement, the prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein untrue in any
material respect, or that requires the making of any additions to or changes in
the Registration Statement or the prospectus, in order to make the statements
therein not misleading in any material respect. If so directed by the Company in
connection with any such notice, each Investor will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
Investor's possession, of the prospectus covering such Warrant Stock that was
current immediately prior to the time of receipt of such notice. Delivery of a
Blocking Notice or Prospectus Inadequacy Notice and the related suspension of
any Registration Statement shall not constitute a default under this Rights
Agreement.
5. Indemnification.
(a) Company Indemnity. The Company will indemnify the
Investor, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus (including any
related registration statement, notification or the like or any amendment
thereto) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any state
securities law or in either case, any rule or regulation thereunder applicable
to the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse the Investor, each of its officers, directors and partners, and each
person controlling the Investor, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission (or alleged untrue
statement or omission) that is made in reliance upon and in conformity with
written information furnished to the Company by the Investor and stated to be
specifically for use therein. In addition to any other information furnished in
writing to the Company by the Investor, the information in the Registration
Statement concerning the Investor under the caption "Plan of Distribution" (or
any similarly captioned Section containing information required pursuant to Item
508 of Regulation S-K) shall be deemed information furnished in writing to the
Company by the Investor to the extent it conforms to information actually
supplied in writing by the Investor. The indemnity agreement contained in this
Section 5(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent will not be unreasonably withheld).
(b) Investor Indemnity. The Investor will indemnify the
Company, each of its directors, officers, partners, and each underwriter, if
any, of the Company's securities covered by the Registration Statement, each
person who controls the Company or such underwriter within
-5-
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act and the rules and regulations thereunder, and each of their officers,
directors and partners, and each person controlling such other Investor (if
any), and each of their officers, directors, and partners, and each person
controlling such other Investor against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
the Registration Statement (or any amendment thereto) or prospectus or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statement therein not misleading, and
will reimburse the Company and its directors, officers and partners, or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating and defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement or prospectus in reliance upon and in
conformity with written information furnished to the Company by the Investor and
stated to be specifically for use therein, and provided that the Investor shall
not be liable under this indemnity for an amount in excess of the proceeds
received by the Investor from the sale of the Warrant Stock pursuant to such
Registration Statement. In addition to any other information furnished in
writing to the Company by the Investor, the information in the Registration
Statement concerning the Investor under the caption "Plan of Distribution" (or
any similarly captioned Section containing information required pursuant to Item
508 of Regulation S-K) shall be deemed information furnished in writing to the
Company by the Investor to the extent it conforms to information actually
supplied in writing by the Investor. The indemnity agreement contained in this
Section 5(b) shall not apply to amounts paid in settlement of any such claims,
losses, damages or liabilities if such settlement is effected without the
written consent of the Investor (which consent shall not be unreasonably
withheld).
(c) Procedure. Each party entitled to indemnification under
this Section 5 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
except to the extent that the Indemnifying Party is materially and adversely
affected by such failure to provide notice. The Indemnifying Party shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for such Indemnified Party, provided, however,
that if separate firm(s) of attorneys are required due to a conflict of
interest, then the indemnifying party shall be liable for the reasonable fees
and expenses of one additional firm. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a
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release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with the defense of such claim and
litigation resulting therefrom.
6. Contribution. If the indemnification provided for in Section 5
hereof is unavailable to the Indemnified Party in respect of any losses, claims,
damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (i) as between the Company and the Investor on the one hand and the
underwriters on the other, in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Investor on the one hand or
underwriters, as the case may be, on the other from the offering of the Warrant
Stock, or if such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and of the Investor on the
other, in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations and (ii) as between the Company on the one hand and the Investor
on the other, in such proportion as is appropriate to reflect the relative fault
of the Company and of the Investor in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Investor on the other shall be deemed to be in the same proportion as the
proceeds from the offering of Warrant Stock by the Company to the Investor
pursuant to this Rights Agreement bear to the proceeds received by the Investor
from the sale of Warrant Stock pursuant to the Registration Statement. The
relative fault of the Company on the one hand and of the Investor on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or by the
Investor.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 6 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 5(a) or Section 5(b) hereof had been
available under the circumstances.
The Company and the Investor agree that it would not be just and
equitable if contribution pursuant to this Section 6 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraphs shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, the Investor shall not be
required to contribute any amount in excess of the amount by which the total
price at which the shares of Warrant Stock offered by the Investor and
distributed to the public, or offered to the public, exceeds the amount of any
damages that the Investor has
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otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
7. Survival. The indemnity and contribution agreements contained in
Section 5 and Section 6 shall remain operative and in full force and effect
regardless of (i) any termination of the Agreement or any underwriting
agreement, (ii) any investigation made by or on behalf of any Indemnified Party
or by or on behalf of the Company and (iii) the consummation of the sale or
successive resales of the Registrable Securities.
8. Transfer or Assignment of Rights. Neither this Rights Agreement nor
any rights of the Investor or the Company hereunder may be assigned by either
party to any other person.
9. Miscellaneous.
(a) Entire Agreement. This Rights Agreement, together with the
Agreement, contains the entire understanding and agreement of the parties
relating to the registration of Registrable Securities, and may not be modified
or terminated except by a written agreement signed by both parties.
(b) Notices. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder or
which are given with respect to this Rights Agreement shall be in writing and
shall be personally served or deposited in the mail, registered or certified,
return receipt requested, postage prepaid, or delivered by reputable air courier
service with charges prepaid, or transmitted by hand delivery, telegram or
facsimile, addressed as set forth below, or to such other address as such party
shall have specified most recently by written notice: If to the Company, to:
Azco Mining Inc.
0000 Xxxxx Xx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Attn: Vice President - Finance
Tel: 000-000-0000
Fax: 000-000-0000
With a copy (which shall not constitute notice) to:
Xxxxxxx & Xxxxx Xxxxxxx Xxxx LLP
Renaissance Xxx
Xxx Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
-8-
If to the Investor, to
Xxxxxxxx X. Xxxxx
0000 Xxxxx Xx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Tel: 000-000-0000
Fax: 000-000-0000
With a copy (which shall not constitute notice) to:
[Xxxxx counsel]
Notice shall be deemed given on the date of service or transmission if
personally served or transmitted by telegram, telex or facsimile during normal
business hours of the recipient. Notice otherwise sent as provided herein shall
be deemed given on the third business day following the date mailed or on the
second business day following delivery of such notice by a reputable air courier
service.
(c) Registration Expenses. The Company shall be responsible
for the expenses to be incurred by the Company in connection with Investor's
exercise of its registration rights under this Rights Agreement, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and expenses, and
the expense of any special audits that may be required in connection herewith.
(d) Gender of Terms. All terms used herein shall be deemed to
include the feminine and the neuter, and the singular and the plural, as the
context requires.
(e) GOVERNING LAW. THIS RIGHTS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ARIZONA, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES.
(f) Titles. The titles used in this Rights Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Rights Agreement.
(g) Counterparts. This Rights Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(h) "Market Stand-off" Agreement. The Investor hereby agrees
that he shall not, to the extent requested by the Company or an underwriter of
Common Stock (or other securities) of the Company, sell or otherwise transfer or
dispose of any Common Stock, including Warrant Shares, in a market transaction
during the seven days prior to and 180 days following the effective date of a
registration statement of the Company filed under the Securities Act, but only
if:
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(i) the Investor is entitled under Section 2 to participate in
such registration (provided that such agreement shall not apply to any
shares which are included in any such registration); and
(ii) all officers and directors of the Company and
shareholders who beneficially own more than 5% of the Company's outstanding
Common Stock (determined on a fully diluted basis) and all other persons with
registration rights enter into similar agreements.
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IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed as of the date first above written.
AZCO MINING INC.
By: ______________________________ By: ________________________________
Name: ________________________ Xxxxxxxx X. Xxxxx
Title: _______________________
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