SUBSCRIPTION AGREEMENT
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THIS SUBSCRIPTION AGREEMENT (this "AGREEMENT"), dated as of March ____,
2005, by and among Alternate Energy Corp., a Nevada corporation (the "COMPANY"),
and the subscribers identified on the signature page hereto (each a "SUBSCRIBER"
and collectively "SUBSCRIBERS").
WHEREAS, the Company and the Subscribers are executing and delivering
this Agreement in reliance upon an exemption from securities registration
afforded by the provisions of Section 4(2), Section 4(6) and/or Regulation D
("REGULATION D") as promulgated by the United States Securities and Exchange
Commission (the "COMMISSION") under the Securities Act of 1933, as amended (the
"1933 ACT").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and the Subscribers, in the aggregate, shall
purchase up to One Million Five Hundred Thousand Dollars ($1,500,000) (the
"PURCHASE PRICE") of principal amount of 6% promissory notes of the Company
("NOTE" or "NOTES") convertible into shares of the Company's common stock, $.001
par value (the "COMMON STOCK") at a per share conversion price equal to seventy
percent (70%) of the average closing bid prices of the Common Stock for the five
trading days preceding a Conversion Date (as defined in Section 7.1(b) hereof)
as reported by Bloomberg L.P. for the Principal Market (as defined in Section
9.1(b) hereof) ("CONVERSION PRICE"); and share purchase warrants (the
"WARRANTS"), in the form attached hereto as EXHIBITS A1, A2 AND A3, to purchase
shares of Common Stock (the "WARRANT SHARES"). Subject to the conditions
described in the Note, the Conversion Price will not be more than $0.35 nor less
than $0.15. Five Hundred Thousand Dollars ($500,000) of the Purchase Price shall
be payable on the Initial Closing Date ("INITIAL CLOSING PURCHASE PRICE"). One
Million Dollars ($1,000,000) of the Purchase Price will be payable within five
(5) days after the actual effectiveness ("ACTUAL EFFECTIVE DATE") of the
Registration Statement as defined in Section 11.1(iv) of this Agreement ("SECOND
CLOSING PURCHASE PRICE"). The Notes, shares of Common Stock issuable upon
conversion of the Notes (the "SHARES"), the Warrants and the Warrant Shares are
collectively referred to herein as the "SECURITIES"; and
WHEREAS, the aggregate proceeds of the sale of the Notes and the
Warrants contemplated hereby shall be held in escrow pursuant to the terms of a
Funds Escrow Agreement to be executed by the parties substantially in the form
attached hereto as EXHIBIT B (the "ESCROW AGREEMENT").
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Subscribers hereby
agree as follows:
1. INITIAL CLOSING. Subject to the satisfaction or waiver of
the terms and conditions of this Agreement, on the Initial Closing Date, each
Subscriber shall purchase and the Company shall sell to each Subscriber a Note
in the principal amount designated on the signature page hereto ("INITIAL
CLOSING NOTES"). The aggregate amount of the Notes to be purchased by the
Subscribers on the Initial Closing Date shall, in the aggregate, be equal to the
Initial Closing Purchase Price. The "INITIAL CLOSING DATE" shall be the date
that subscriber funds representing the net amount due the Company from the
Initial Closing Purchase Price of the Offering is transmitted by wire transfer
or otherwise to or for the benefit of the Company. The consummation of the
transactions contemplated herein shall take place at the offices of Grushko &
Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, upon the
satisfaction of all conditions to Closing set forth in this Agreement. Each of
the Initial Closing Date and Second Closing Date is referred to as a "CLOSING
DATE".
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2. SECOND CLOSING.
(a) SECOND CLOSING. The closing date in relation to
the Second Closing Purchase Price shall be the fifth (5th) day after the Actual
Effective Date (the "SECOND CLOSING DATE"). Subject to the satisfaction or
waiver of the terms and conditions of this Agreement on the Second Closing Date,
each Subscriber shall purchase and the Company shall sell to each Subscriber a
Note in the principal amount designated on the signature page hereto ("SECOND
CLOSING NOTES"). The aggregate Purchase Price of the Second Closing Notes for
all Subscribers shall be equal to the Second Closing Purchase Price. The Second
Closing Note shall be identical to the Note issuable on the Initial Closing Date
except that the maturity date of such Notes shall be one (1) year after the
Second Closing Date. The Conversion Price (defined in Section 2.1 (6) of the
Note) shall be equitably adjusted to offset the effect of stock splits, stock
dividends, pro rata distributions of property or equity interests to the
Company's shareholders after the Initial Closing Date.
(b) CONDITIONS TO SECOND CLOSING. The occurrence of
the Second Closing is expressly contingent on (i) the truth and accuracy, on the
Effective Date, Actual Effective Date and the Second Closing Date of the
representations and warranties of the Company and Subscriber contained in this
Agreement, (ii) continued compliance with the covenants of the Company set forth
in this Agreement, (iii) the non-occurrence of any Event of Default (as defined
in the Note) or other default by the Company of its obligations and undertakings
contained in this Agreement, (iv) the delivery on the Second Closing Date of
Second Closing Notes for which the Company Shares issuable upon conversion have
been included in the Registration Statement, which must be effective as of the
Second Closing Date, and (v) the delivery of the Second Closing Warrants for
which the Warrant Shares issuable upon exercise have been included in the
Registration Statement which must be effective as of the Second Closing Date.
The exercise prices of the Warrants issuable on the Second Closing Date shall be
adjusted to offset the effect of stock splits, stock dividends, pro rata
distributions of property or equity interests to the Company's shareholders
after the Initial Closing Date.
(c) SECOND CLOSING DELIVERIES. On the Second Closing
Date, the Company will deliver the Second Closing Notes and Second Closing
Warrants to the Escrow Agent and each Subscriber will deliver his portion of the
respective Purchase Price to the Escrow Agent. On the Second Closing Date, the
Company will deliver a certificate ("SECOND CLOSING CERTIFICATE") signed by its
chief executive officer or chief financial officer (i) representing the truth
and accuracy of all the representations and warranties made by the Company
contained in this Agreement, as of the Initial Closing Date, the Actual
Effective Date, and the Second Closing Date, as if such representations and
warranties were made and given on all such dates, (ii) adopting and renewing the
covenants and conditions set forth in Sections 5, 7, 8, 9, 10, 11, and 12 of
this Agreement in relation to the Second Closing Date, Second Closing Notes and
Second Closing Warrants, (iii) representing the timely compliance by the Company
with the Company's registration requirements set forth in Section 11 of this
Agreement, and (iv) certifying that an Event of Default has not occurred. A
legal opinion nearly identical to the legal opinion referred to in Section 6 of
this Agreement shall be delivered to each Subscriber at the Second Closing in
relation to the Company, Second Closing Notes, and Second Closing Warrants
("SECOND CLOSING LEGAL OPINION"). The Second Closing Legal Opinion must also
state that all of the Registrable Securities have been included for registration
in an effective registration statement effective as of the Actual Effective Date
and Second Closing Date.
3. WARRANTS.
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(a) CLASS A WARRANTS. On each Closing Date, the
Company will issue and deliver Class A Warrants to the Subscribers. One Class A
Warrant will be issued for each Share which would be issued on each such Closing
Date assuming the complete conversion of the Notes issued on each Closing Date
at the Conversion Price in effect on the Initial Closing Date. The per Warrant
Share exercise price to acquire a Warrant Share upon exercise of a Class A
Warrant shall be $0.40. The Class A Warrants shall be exercisable from each
Closing Date until three (3) years after each such Closing Date. The Class A
Warrants will be subject to Call as described in the Class A Warrant.
(b) CLASS B WARRANTS. On the Initial Closing Date,
the Company will issue and deliver Class B Warrants to the Subscribers. The
exercise price to acquire a Warrant Share upon exercise of a Class B Warrant
shall be 70% of the Volume Weighted Average Price of the Common Stock as
reported by Bloomberg LP for the OTC Bulletin Board ("BULLETIN BOARD") for the
five trading days preceding the Closing Date using the AQR function. Each
Subscriber shall receive an amount of Class B Warrants to purchase Warrant
Shares having aggregate exercise prices equal to three times the Purchase Price
paid by such Subscriber on the Initial Closing Date. The Class B Warrants shall
be exercisable until the Registration Statement [as defined in Section 11.1(iv)]
has been effective for the public unrestricted resale of the Shares and Warrant
Shares for 90 days.
(c) CLASS C WARRANTS. On the Initial Closing Date,
the Company will issue and deliver Class C Warrants to the Subscribers. One
Class C Warrant will be issued for each $2.50 of Purchase Price paid on the
Initial Closing Date. The per Warrant Share exercise price to acquire a Warrant
Share upon exercise of a Class C Warrant shall be $1.00. The Class C Warrants
shall be exercisable until three (3) years after the Initial Closing Date.
4. SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES. Each
Subscriber hereby represents and warrants to and agrees with the Company only as
to such Subscriber that:
(a) ORGANIZATION AND STANDING OF THE SUBSCRIBERS. If
the Subscriber is an entity, such Subscriber is a corporation, partnership or
other entity duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(b) AUTHORIZATION AND POWER. Each Subscriber has the
requisite power and authority to enter into and perform this Agreement and to
purchase the Notes and Warrants being sold to it hereunder. The execution,
delivery and performance of this Agreement by such Subscriber and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate or partnership action, and no further
consent or authorization of such Subscriber or its Board of Directors,
stockholders, partners, members, as the case may be, is required. This Agreement
has been duly authorized, executed and delivered by such Subscriber and
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Subscriber enforceable against the Subscriber in
accordance with the terms thereof.
(c) NO CONFLICTS. The execution, delivery and
performance of this Agreement and the consummation by such Subscriber of the
transactions contemplated hereby or relating hereto do not and will not (i)
result in a violation of such Subscriber's charter documents or bylaws or other
organizational documents or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument or obligation to which
such Subscriber is a party or by which its properties or assets are bound, or
result in a violation of any law, rule, or regulation, or any order, judgment or
decree of any court or governmental agency applicable to such Subscriber or its
properties (except for such conflicts, defaults and violations as would not,
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individually or in the aggregate, have a material adverse effect on such
Subscriber). Such Subscriber is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or to purchase the Notes or acquire the
Warrants in accordance with the terms hereof, provided that for purposes of the
representation made in this sentence, such Subscriber is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.
(d) INFORMATION ON COMPANY. The Subscriber has been
furnished with or has had access at the XXXXX Website of the Commission to the
Company's Form 10-KSB for the year ended December 31, 2003 and all subsequent
periodic reports as filed with the Commission (hereinafter referred to as the
"Reports"). In addition, the Subscriber has received in writing from the Company
such other information concerning its operations, financial condition and other
matters as the Subscriber has requested in writing (such other information is
collectively, the "Other Written Information"), and considered all factors the
Subscriber deems material in deciding on the advisability of investing in the
Securities.
(e) INFORMATION ON SUBSCRIBER. The Subscriber is, and
will be at the time of the conversion of the Notes and exercise of the Warrants,
an "accredited investor", as such term is defined in Regulation D promulgated by
the Commission under the 1933 Act, is experienced in investments and business
matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements in
the past and, with its representatives, has such knowledge and experience in
financial, tax and other business matters as to enable the Subscriber to utilize
the information made available by the Company to evaluate the merits and risks
of and to make an informed investment decision with respect to the proposed
purchase, which represents a speculative investment. The Subscriber has the
authority and is duly and legally qualified to purchase and own the Securities.
The Subscriber is able to bear the risk of such investment for an indefinite
period and to afford a complete loss thereof. The information set forth on the
signature page hereto regarding the Subscriber is accurate. The Subscriber is
not required to be registered as a broker-dealer under Section 15 of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and the Subscriber
is not a broker-dealer.
(f) PURCHASE OF NOTES AND WARRANTS. On each Closing
Date, the Subscriber will purchase the Notes and Warrants as principal for its
own account for investment only and not with a view toward, or for resale in
connection with, the public sale or any distribution thereof.
(g) COMPLIANCE WITH SECURITIES ACT. The Subscriber
understands and agrees that the Securities have not been registered under the
1933 Act or any applicable state securities laws, by reason of their issuance in
a transaction that does not require registration under the 1933 Act (based in
part on the accuracy of the representations and warranties of Subscriber
contained herein), and that such Securities must be held indefinitely unless a
subsequent disposition is registered under the 1933 Act or any applicable state
securities laws or is exempt from such registration. In any event, and subject
to compliance with applicable securities laws, the Subscriber may enter into
lawful hedging transactions with third parties, which may in turn engage in
short sales of the Securities in the course of hedging the position they assume
and the Subscriber may also enter into short positions or other derivative
transactions relating to the Securities, or interests in the Securities, and
deliver the Securities, or interests in the Securities, to close out their short
or other positions or otherwise settle short sales or other transactions, or
loan or pledge the Securities, or interests in the Securities, to third parties
that in turn may dispose of these Securities.
(h) SHARES LEGEND. The Shares and the Warrant Shares
shall bear the following or similar legend:
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"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ALTERNATE ENERGY CORP. THAT SUCH REGISTRATION
IS NOT REQUIRED."
(i) WARRANTS LEGEND. The Warrants shall bear the
following
or similar legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON SHARES
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO ALTERNATE ENERGY CORP. THAT
SUCH REGISTRATION IS NOT REQUIRED."
(j) NOTE LEGEND. The Note shall bear the following
legend:
"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE
UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO ALTERNATE ENERGY
CORP. THAT SUCH REGISTRATION IS NOT REQUIRED."
(k) COMMUNICATION OF OFFER. The offer to sell the
Securities was directly communicated to the Subscriber by the Company. At no
time was the Subscriber presented with or solicited by any leaflet, newspaper or
magazine article, radio or television advertisement, or any other form of
general advertising or solicited or invited to attend a promotional meeting
otherwise than in connection and concurrently with such communicated offer.
(l) AUTHORITY; ENFORCEABILITY. This Agreement and
other agreements delivered together with this Agreement or in connection
herewith have been duly authorized, executed and delivered by the Subscriber and
are valid and binding agreements enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity; and Subscriber
has full corporate power and authority necessary to enter into this Agreement
and such other agreements and to perform its obligations hereunder and under all
other agreements entered into by the Subscriber relating hereto.
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(m) RESTRICTED SECURITIES. Subscriber understands
that the Securities have not been registered under the 1933 Act and such
Subscriber will not sell, offer to sell, assign, pledge, hypothecate or
otherwise transfer any of the Securities unless pursuant to an effective
registration statement under the 1933 Act. Notwithstanding anything to the
contrary contained in this Agreement, such Subscriber may transfer (without
restriction and without the need for an opinion of counsel) the Securities to
its Affiliates (as defined below) provided that each such Affiliate is an
"accredited investor" under Regulation D and such Affiliate agrees to be bound
by the terms and conditions of this Agreement. For the purposes of this
Agreement, an "AFFILIATE" of any person or entity means any other person or
entity directly or indirectly controlling, controlled by or under direct or
indirect common control with such person or entity. Affiliate includes each
subsidiary of the Company. For purposes of this definition, "CONTROL" means the
power to direct the management and policies of such person or firm, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.
(n) NO GOVERNMENTAL REVIEW. Each Subscriber
understands that no United States federal or state agency or any other
governmental or state agency has passed on or made recommendations or
endorsement of the Securities or the suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of the
offering of the Securities.
(m) NO MARKET MANIPULATION. No Subscriber has taken,
and will not take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Securities
or affect the price at which the Securities may be issued or resold.
(n) CORRECTNESS OF REPRESENTATIONS. Each Subscriber
represents as to such Subscriber that the foregoing representations and
warranties are true and correct as of the date hereof and, unless a Subscriber
otherwise notifies the Company prior to each Closing Date shall be true and
correct as of each Closing Date.
(o) SURVIVAL. The foregoing representations and
warranties shall survive each Closing Date until the sooner of (i) three years
after the Second Closing Date, or (ii) until all the Shares and Warrant Shares
have been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144 without regard to volume
limitations.
5. COMPANY REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to and agrees with each Subscriber that:
(a) DUE INCORPORATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power to own
its properties and to carry on its business is disclosed in the Reports . The
Company is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. For purpose of this Agreement, a "MATERIAL ADVERSE EFFECT" shall
mean a material adverse effect on the financial condition, results of
operations, properties or business of the Company taken as a whole.
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(b) OUTSTANDING STOCK. All issued and outstanding
shares of capital stock of the Company has been duly authorized and validly
issued and are fully paid and nonassessable.
(c) AUTHORITY; ENFORCEABILITY. This Agreement, the
Note, the Warrants, the Escrow Agreement, Security Agreement and Collateral
Agent Agreement, and any other agreements delivered together with this Agreement
or in connection herewith (collectively "TRANSACTION DOCUMENTS") have been duly
authorized, executed and delivered by the Company and are valid and binding
agreements enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity. The Company has full corporate power and
authority necessary to enter into and deliver the Transaction Documents and to
perform its obligations thereunder.
(d) ADDITIONAL ISSUANCES. There are no outstanding
agreements or preemptive or similar rights affecting the Company's common stock
or equity and no outstanding rights, warrants or options to acquire, or
instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale or issuance of any shares of common
stock or equity of the Company or other equity interest in any of the
Subsidiaries of the Company except as described on SCHEDULE 5(D).
(e) CONSENTS. No consent, approval, authorization or
order of any court, governmental agency or body or arbitrator having
jurisdiction over the Company, or any of its Affiliates, the Bulletin Board nor
the Company's shareholders is required for the execution by the Company of the
Transaction Documents and compliance and performance by the Company of its
obligations under the Transaction Documents, including, without limitation, the
issuance and sale of the Securities.
(f) NO VIOLATION OR CONFLICT. Assuming the
representations and warranties of the Subscribers in Section 4 are true and
correct, neither the issuance and sale of the Securities nor the performance of
the Company's obligations under this Agreement and all other agreements entered
into by the Company relating thereto by the Company will:
(i) violate, conflict with, result in a
breach of, or constitute a default (or an event which with the giving of notice
or the lapse of time or both would be reasonably likely to constitute a default)
under (A) the articles or certificate of incorporation, charter or bylaws of the
Company, (B) to the Company's knowledge, any decree, judgment, order, law,
treaty, rule, regulation or determination applicable to the Company of any
court, governmental agency or body, or arbitrator having jurisdiction over the
Company or over the properties or assets of the Company or any of its
Affiliates, (C) the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company or any
of its Affiliates is a party, by which the Company or any of its Affiliates is
bound, or to which any of the properties of the Company or any of its Affiliates
is subject, or (D) the terms of any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company, or any of its Affiliates
is a party except the violation, conflict, breach, or default of which would not
have a Material Adverse Effect; or
(ii) result in the creation or imposition of
any lien, charge or encumbrance upon the Securities or any of the assets of the
Company or any of its Affiliates; or
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(iii) result in the activation of any
anti-dilution rights or a reset or repricing of any debt or security instrument
of any other creditor or equity holder of the Company, nor result in the
acceleration of the due date of any obligation of the Company; or
(iv) result in the activation of any
piggy-back registration rights of any person or entity holding securities of the
Company or having the right to receive securities of the Company.
(g) THE SECURITIES. The Securities upon issuance:
(i) are, or will be, free and clear of any
security interests, liens, claims or other encumbrances, subject to restrictions
upon transfer under the 1933 Act and any applicable state securities laws;
(ii) have been, or will be, duly and validly
authorized and on the date of issuance of the Shares and upon exercise of the
Warrants, the Shares and Warrant Shares will be duly and validly issued, fully
paid and nonassessable or if registered pursuant to the 1933 Act, and resold
pursuant to an effective registration statement will be free trading and
unrestricted);
(iii) will not have been issued or sold in
violation of any preemptive or other similar rights of the holders of any
securities of the Company;
(iv) will not subject the holders thereof to
personal liability by reason of being such holders; and
(v) will not result in a violation of
Section 5 under the 1933 Act.
(h) LITIGATION. There is no pending or, to the best
knowledge of the Company, threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator having jurisdiction
over the Company, or any of its Affiliates that would affect the execution by
the Company or the performance by the Company of its obligations under the
Transaction Documents. Except as disclosed on the Disclosure Schedule or in the
Reports, there is no pending or, to the best knowledge of the Company, basis for
or threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its Affiliates which litigation if adversely determined would have a
Material Adverse Effect.
(i) REPORTING COMPANY. The Company is a publicly-held
company subject to reporting obligations pursuant to Section 13 of the 1934 Act
and has a class of common shares registered pursuant to Section 12(g) of the
1934 Act. Pursuant to the provisions of the 1934 Act, the Company has timely
filed all reports and other materials required to be filed thereunder with the
Commission during the preceding twelve months.
(j) NO MARKET MANIPULATION. The Company and its
Affiliates have not taken, and will not take, directly or indirectly, any action
designed to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of the Common Stock to facilitate the
sale or resale of the Securities or affect the price at which the Securities may
be issued or resold.
(k) INFORMATION CONCERNING COMPANY. The Reports
contain all material information relating to the Company and its operations and
financial condition as of their respective dates which information is required
to be disclosed therein. Since the date of the financial statements included in
the Reports, and except as modified in the Other Written Information or in the
Schedules hereto, there has been no Material Adverse Event relating to the
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Company's business, financial condition or affairs not disclosed in the Reports.
The Reports do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances when made.
(l) STOP TRANSFER. The Company will not issue any
stop transfer order or other order impeding the sale, resale or delivery of any
of the Securities, except as may be required by any applicable federal or state
securities laws and unless contemporaneous notice of such instruction is given
to the Subscriber.
(m) DEFAULTS. The Company is not in violation of its
articles of incorporation or bylaws. The Company is (i) not in default under or
in violation of any other material agreement or instrument to which it is a
party or by which it or any of its properties are bound or affected, which
default or violation would have a Material Adverse Effect, (ii) not in default
with respect to any order of any court, arbitrator or governmental body or
subject to or party to any order of any court or governmental authority arising
out of any action, suit or proceeding under any statute or other law respecting
antitrust, monopoly, restraint of trade, unfair competition or similar matters,
or (iii) to the Company's knowledge not in violation of any statute, rule or
regulation of any governmental authority which violation would have a Material
Adverse Effect.
(n) NO INTEGRATED OFFERING. Neither the Company, nor
any of its Affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited any
offers to buy any security under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Bulletin Board. Nor will the Company or any of its Affiliates take any
action or steps that would cause the offer or issuance of the Securities to be
integrated with other offerings. The Company will not conduct any offering other
than the transactions contemplated hereby that will be integrated with the offer
or issuance of the Securities.
(o) NO GENERAL SOLICITATION. Neither the Company, nor
any of its Affiliates, nor to its knowledge, any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 0000 Xxx) in connection with the
offer or sale of the Securities.
(p) LISTING. The Company's common stock is quoted on
the Bulletin Board. The Company has not received any oral or written notice that
its common stock is not eligible nor will become ineligible for quotation on the
Bulletin Board nor that its common stock does not meet all requirements for the
continuation of such quotation and the Company satisfies all the requirements
for the continued quotation of its common stock on the Bulletin Board.
(q) NO UNDISCLOSED LIABILITIES. The Company has no
liabilities or obligations which are material, individually or in the aggregate,
which are not disclosed in the Reports and Other Written Information, other than
those incurred in the ordinary course of the Company's businesses since December
31, 2003 and which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect, except as disclosed on SCHEDULE
5(q).
(r) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since
December 31, 2003, no event or circumstance has occurred or exists with respect
to the Company or its businesses, properties, operations or financial condition,
that, under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports. (s) CAPITALIZATION. The
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authorized and outstanding capital stock of the Company as of the date of this
Agreement and the Closing Date (not including the Securities) are set forth on
SCHEDULE 5(D). Except as set forth on SCHEDULE 5(D), there are no options,
warrants, or rights to subscribe to, securities, rights or obligations
convertible into or exchangeable for or giving any right to subscribe for any
shares of capital stock of the Company or any of its Subsidiaries. All of the
outstanding shares of Common Stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable. (t) DILUTION. The
Company's executive officers and directors understand the nature of the
Securities being sold hereby and recognize that the issuance of the Securities
will have a potential dilutive effect on the equity holdings of other holders of
the Company's equity or rights to receive equity of the Company. The board of
directors of the Company has concluded, in its good faith business judgment that
the issuance of the Securities is in the best interests of the Company. The
Company specifically acknowledges that its obligation to issue the Shares upon
conversion of the Notes, and the Warrant Shares upon exercise of the Warrants is
binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company or parties entitled to receive equity of the Company. (u) NO
DISAGREEMENTS WITH ACCOUNTANTS AND LAWYERS. There are no disagreements of any
kind presently existing, or reasonably anticipated by the Company to arise,
between the Company and the accountants and lawyers formerly or presently
employed by the Company, including but not limited to disputes or conflicts over
payment owed to such accountants and lawyers.
(v) DTC STATUS. The Company's transfer agent is a
participant in and the Common Stock is eligible for transfer pursuant to the
Depository Trust Company Automated Securities Transfer Program.
(w) INVESTMENT COMPANY. Neither the Company nor any
Affiliate is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(x) SUBSIDIARY REPRESENTATIONS. The Company makes
each of the representations contained in Sections 5(a), (b), (d), (f), (h), (k),
(m), (q) through (s), (u) and (w) of this Agreement, as same relate to each
Subsidiary of the Company. For purposes of this Agreement, "SUBSIDIARY" means,
with respect to any entity at any date, any corporation, limited or general
partnership, limited liability company, trust, estate, association, joint
venture or other business entity) of which more than 50% of (i) the outstanding
capital stock having (in the absence of contingencies) ordinary voting power to
elect a majority of the board of directors or other managing body of such
entity, (ii) in the case of a partnership or limited liability company, the
interest in the capital or profits of such partnership or limited liability
company or (iii) in the case of a trust, estate, association, joint venture or
other entity, the beneficial interest in such trust, estate, association or
other entity business is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such entity. All
the Company's Subsidiaries as of the Initial Closing Date are set forth on
SCHEDULE 5(x) hereto
(y) COMPANY PREDECESSOR. All representations made by
or relating to the Company of a historical or prospective nature and all
undertaking described in Sections 9.1(g) through 9.1(l) shall relate and refer
to the Company, its predecessors, and the Subsidiaries.
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(z) CORRECTNESS OF REPRESENTATIONS. The Company
represents that the foregoing representations and warranties are true and
correct as of the date hereof in all material respects, and, unless the Company
otherwise notifies the Subscribers prior to each Closing Date, shall be true and
correct in all material respects as of each Closing Date.
(AA) SURVIVAL. The foregoing representations and
warranties shall survive each Closing Date until the sooner of (i) three years
after the Second Closing Date, or (ii) until all the Shares and Warrant Shares
have been resold or transferred by all the Subscribers pursuant to the
Registration Statement or pursuant to Rule 144 without regard to volume
limitations.
6. REGULATION D OFFERING. The offer and issuance of the
Securities to the Subscribers is being made pursuant to the exemption from the
registration provisions of the 1933 Act afforded by Section 4(2) or Section 4(6)
of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder. On the
Closing Date, the Company will provide an opinion reasonably acceptable to
Subscriber from the Company's legal counsel opining on the availability of an
exemption from registration under the 1933 Act as it relates to the offer and
issuance of the Securities and other matters reasonably requested by
Subscribers. A form of the legal opinion is annexed hereto as EXHIBIT C. The
Company will provide, at the Company's expense, such other legal opinions in the
future as are reasonably necessary for the issuance and resale of the Common
Stock issuable upon conversion of the Notes and exercise of the Warrants
pursuant to an effective registration statement.
7.1. CONVERSION OF NOTE.
(a) Upon the conversion of a Note or part thereof,
the Company shall, at its own cost and expense, take all necessary action,
including obtaining and delivering, an opinion of counsel to assure that the
Company's transfer agent shall issue stock certificates in the name of
Subscriber (or its nominee) or such other persons as designated by Subscriber
and in such denominations to be specified at conversion representing the number
of shares of Common Stock issuable upon such conversion. The Company warrants
that no instructions other than these instructions have been or will be given to
the transfer agent of the Company's Common Stock and that, unless waived by the
Subscriber, the Shares will be free-trading, and freely transferable, and will
not contain a legend restricting the resale or transferability of the Shares
provided the Shares are being sold pursuant to an effective registration
statement covering the Shares or are otherwise exempt from registration.
(b) Subscriber will give notice of its decision to
exercise its right to convert the Note, interest, any sum due to the Subscriber
under the Transaction Documents including Liquidated Damages, or part thereof by
telecopying an executed and completed Notice of Conversion (a form of which is
annexed as EXHIBIT A to the Note) to the Company via confirmed telecopier
transmission or otherwise pursuant to Section 14(a) of this Agreement. The
Subscriber will not be required to surrender the Note until the Note has been
fully converted or satisfied. Each date on which a Notice of Conversion is
telecopied to the Company in accordance with the provisions hereof shall be
deemed a CONVERSION DATE. The Company will itself or cause the Company's
transfer agent to transmit the Company's Common Stock certificates representing
the Shares issuable upon conversion of the Note to the Subscriber via express
courier for receipt by such Subscriber within three (3) business days after
receipt by the Company of the Notice of Conversion (such third day being the
"DELIVERY DATE"). In the event the Shares are electronically transferable, then
delivery of the Shares MUST be made by electronic transfer provided request for
11
such electronic transfer has been made by the Subscriber and the Subscriber has
complied with all applicable securities laws in connection with the sale of the
Common Stock, including, without limitation, the prospectus delivery
requirements. A Note representing the balance of the Note not so converted will
be provided by the Company to the Subscriber if requested by Subscriber,
provided the Subscriber delivers the original Note to the Company. In the event
that a Subscriber elects not to surrender a Note for reissuance upon partial
payment or conversion, the Subscriber hereby indemnifies the Company against any
and all loss or damage attributable to a third-party claim in an amount in
excess of the actual amount then due under the Note.
(c) The Company understands that a delay in the
delivery of the Shares in the form required pursuant to Section 7.1 hereof, or
the Mandatory Redemption Amount described in Section 7.2 hereof, respectively
after the Delivery Date or the Mandatory Redemption Payment Date (as hereinafter
defined) could result in economic loss to the Subscriber. As compensation to the
Subscriber for such loss, the Company agrees to pay (as liquidated damages and
not as a penalty) to the Subscriber for late issuance of Shares in the form
required pursuant to Section 7.1 hereof upon Conversion of the Note in the
amount of $50 per business day after the Delivery Date for each $10,000 of Note
principal amount being converted of the corresponding Shares which are not
timely delivered. The Company shall pay any payments incurred under this Section
in immediately available funds upon demand. Furthermore, in addition to any
other remedies which may be available to the Subscriber, in the event that the
Company fails for any reason to effect delivery of the Shares by the Delivery
Date or make payment by the Mandatory Redemption Payment Date, the Subscriber
will be entitled to revoke all or part of the relevant Notice of Conversion or
rescind all or part of the notice of Mandatory Redemption by delivery of a
notice to such effect to the Company whereupon the Company and the Subscriber
shall each be restored to their respective positions immediately prior to the
delivery of such notice, except that the liquidated damages described above
shall be payable through the date notice of revocation or rescission is given to
the Company.
(d) Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest or dividends required to be paid or other charges hereunder exceed the
maximum permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to the Subscriber and thus refunded
to the Company.
7.2. MANDATORY REDEMPTION AT SUBSCRIBER'S ELECTION. In the
event the Company is prohibited from issuing Shares, or fails to timely deliver
Shares on a Delivery Date, or upon the occurrence of any other Event of Default
(as defined in the Note or in this Agreement) that continues for more than ten
days, other than pursuant to the limitations set forth in Section 7.3 hereof,
then at the Subscriber's election, the Company must pay to the Subscriber ten
(10) business days after request by the Subscriber, at the Subscriber's
election, a sum of money determined by (i) multiplying up to the outstanding
principal amount of the Note designated by the Subscriber by 120%, or (ii)
multiplying the number of Shares otherwise deliverable upon conversion of an
amount of Note principal and/or interest designated by the Subscriber (with the
date of giving of such designation being a "DEEMED CONVERSION DATE") at the then
Conversion Price that would be in effect on the Deemed Conversion Date by the
highest closing price of the Common Stock on the principal market for the period
commencing on the Deemed Conversion Date until the day prior to the receipt of
the Mandatory Redemption Payment, whichever is greater, together with accrued
but unpaid interest thereon ("MANDATORY REDEMPTION PAYMENT"). The Mandatory
Redemption Payment must be received by the Subscriber on the same date as the
Company Shares otherwise deliverable or within ten (10) business days after
request, whichever is sooner ("MANDATORY REDEMPTION PAYMENT DATE"). Upon receipt
of the Mandatory Redemption Payment, the corresponding Note principal and
interest will be deemed paid and no longer outstanding. Liquidated damages
calculated pursuant to Section 7.1(c) hereof, that have been paid or accrued for
the twenty day period prior to the actual receipt of the Mandatory Redemption
Payment by the Subscriber shall be credited against the Mandatory Redemption
Payment.
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7.3. MAXIMUM CONVERSION. The Subscriber shall not be entitled
to convert on a Conversion Date that amount of the Note in connection with that
number of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of common stock beneficially owned by the Subscriber and its
Affiliates on a Conversion Date, and (ii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Subscriber and its Affiliates of more than 4.99% of
the outstanding shares of common stock of the Company on such Conversion Date.
For the purposes of the provision to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.
Subject to the foregoing, the Subscriber shall not be limited to aggregate
conversions of only 4.99% and aggregate conversions by the Subscriber may exceed
4.99%. The Subscriber may waive the conversion limitation described in this
Section 7.3, in whole or in part, upon and effective after 61 days prior written
notice to the Company. The Subscriber may allocate which of the equity of the
Company deemed beneficially owned by the Subscriber shall be included in the
4.99% amount described above and which shall be allocated to the excess above
4.99%.
7.4. INJUNCTION POSTING OF BOND. In the event a Subscriber
shall elect to convert a Note or part thereof or exercise the Warrant in whole
or in part, the Company may not refuse conversion or exercise based on any claim
that such Subscriber or any one associated or affiliated with such Subscriber
has been engaged in any violation of law, or for any other reason, unless, an
injunction from a court, on notice, restraining and or enjoining conversion of
all or part of such Note or exercise of all or part of such Warrant shall have
been sought and obtained by the Company and the Company has posted a surety bond
for the benefit of such Subscriber in the amount of 120% of the amount of the
Note, or aggregate purchase price of the Warrant Shares which are sought to be
subject to the injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Subscriber to the extent Subscriber obtains judgment.
7.5. BUY-IN. In addition to any other rights available to the
Subscriber, if the Company fails to deliver to the Subscriber such shares
issuable upon conversion of a Note by the Delivery Date and if after seven (7)
business days after the Delivery Date the Subscriber purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Subscriber of the Common Stock which the
Subscriber was entitled to receive upon such conversion (a "BUY-IN"), then the
Company shall pay in cash to the Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased exceeds (B) the aggregate principal
and/or interest amount of the Note for which such conversion was not timely
honored, together with interest thereon at a rate of 15% per annum, accruing
until such amount and any accrued interest thereon is paid in full (which amount
shall be paid as liquidated damages and not as a penalty). For example, if the
Subscriber purchases shares of Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 of
note principal and/or interest, the Company shall be required to pay the
Subscriber $1,000, plus interest. The Subscriber shall provide the Company
written notice indicating the amounts payable to the Subscriber in respect of
the Buy-In.
7.6 ADJUSTMENTS. The Conversion Price, Warrant exercise price
and amount of Shares issuable upon conversion of the Notes and exercise of the
Warrants shall be adjusted as described in this Agreement, the Notes and
Warrants.
7.7. REDEMPTION. The Note and Warrants shall not be redeemable
or callable except as described in the Note.
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8. BROKER/LEGAL FEES/ESCROW AGENT FEES.
(a) BROKER'S FEE. The Company on the one hand, and
each Subscriber (for himself only) on the other hand, agree to indemnify the
other against and hold the other harmless from any and all liabilities to any
persons claiming brokerage commissions or finder's fees other than Westor
Online, Inc. ("BROKER") on account of services purported to have been rendered
on behalf of the indemnifying party in connection with this Agreement or the
transactions contemplated hereby and arising out of such party's actions. The
Company agrees that it will pay the Broker, in the aggregate, on each Closing
Date a fee of nine percent (9%) of the Purchase Price and a non-accountable due
diligence fee of two percent (2%) of the Purchase Price invested on each Closing
Date (collectively, "BROKER'S FEES"). The Company represents that there are no
other parties entitled to receive fees, commissions, or similar payments in
connection with the Offering except the Broker.
(b) BROKER'S WARRANTS. On each Closing Date, the
Company will issue to the Broker 800,000 Warrants similar to and carrying the
same rights as the A Warrants issuable to the Subscribers except that such
Warrants will not be subject to Call and the purchase price for 400,000 Warrant
Shares shall be $0.40 per Warrant Share, and 400,000 Warrant Shares shall have a
Purchase Price of $1.00 per Warrant Share ("BROKER'S WARRANTS"). All the
representations, covenants, warranties, undertakings, remedies, liquidated
damages, indemnification, and other rights including but not limited to
reservation requirements and registration rights made or granted to or for the
benefit of the Subscribers are hereby also made and granted to the Broker in
respect of the Broker's Warrants.
(c) ESCROW AGENT FEES. The Company will pay Xxxxx &
Associates, LLC the sum of $6,000 on the Initial Closing Date for acting as
Escrow Agent and as payment of legal fees for representing the Broker.
(d) LEGAL FEES. The Company shall pay to Grushko &
Xxxxxxx, P.C., a fee of $15,000 ("LEGAL FEES") (of which $2,480 has been paid)
as reimbursement for services rendered to the Subscribers in connection with
this Agreement and the purchase and sale of the Notes and Warrants (the
"OFFERING"). The Legal Fees will be payable on the Initial Closing Date out of
funds held pursuant to the Escrow Agreement.
(e) REIMBURSEMENT. The Company will reimburse each
Subscriber on each Closing Date a amount equal to two percent of the Purchase
Price paid by such Subscriber on each Closing Date as reimbursement for each
Subscriber's due diligence expenses ("Reimbursement").
9. COVENANTS OF THE COMPANY. The Company covenants and agrees
with the Subscribers as follows:
(a) STOP ORDERS. The Company will advise the
Subscribers, promptly after it receives notice of issuance by the Commission,
any state securities commission or any other regulatory authority of any stop
order or of any order preventing or suspending any offering of any securities of
the Company, or of the suspension of the qualification of the Common Stock of
the Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.
(b) LISTING. The Company shall promptly secure the
listing of the shares of Common Stock and the Warrant Shares upon each national
securities exchange, or electronic or automated quotation system upon which they
are or become eligible for listing and shall maintain such listing so long as
any Notes or Warrants are outstanding. The Company will maintain the listing of
its Common Stock on the American Stock Exchange, Nasdaq SmallCap Market, Nasdaq
National Market System, OTC Bulletin Board ("BULLETIN BOARD"), or New York Stock
14
Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock (the "PRINCIPAL MARKET")), and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide the Subscribers copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common Stock
from any Principal Market. As of the date of this Agreement and the Initial
Closing Date, the Bulletin Board is and will be the Principal Market.
(c) MARKET REGULATIONS. The Company shall notify the
Commission, the Principal Market and applicable state authorities, in accordance
with their requirements, of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Subscribers and promptly provide copies
thereof to Subscriber.
(d) FILING REQUIREMENTS. From the date of this
Agreement and until the sooner of (i) three (3) years after the Second Closing
Date, or (ii) until all the Shares and Warrant Shares have been resold or
transferred by all the Subscribers pursuant to the Registration Statement or
pursuant to Rule 144, without regard to volume limitation, the Company will (A)
cause its Common Stock to continue to be registered under Section 12(b) or 12(g)
of the 1934 Act, (B) comply in all respects with its reporting and filing
obligations under the 1934 Act, (C) comply with all reporting requirements that
are applicable to an issuer with a class of shares registered pursuant to
Section 12(b) or 12(g) of the 1934 Act, as applicable, and (D) comply with all
requirements related to any registration statement filed pursuant to this
Agreement. The Company will use its best efforts not to take any action or file
any document (whether or not permitted by the 1933 Act or the 1934 Act or the
rules thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said acts until three (3)
years after the Second Closing Date. Until the earlier of the resale of the
Common Stock and the Warrant Shares by each Subscriber or three (3) years after
the Warrants have been exercised, the Company will use its best efforts to
continue the listing or quotation of the Common Stock on a Principal Market and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market. The Company
agrees to timely file a Form D with respect to the Securities if required under
Regulation D and to provide a copy thereof to each Subscriber promptly after
such filing.
(e) USE OF PROCEEDS. The proceeds of the Offering
will be employed by the Company for the purposes set forth on SCHEDULE 9(e)
hereto. Except as set forth on SCHEDULE 9(E), the Purchase Price may not and
will not be used for accrued and unpaid officer and director salaries, payment
of financing related debt, redemption of outstanding notes or equity instruments
of the Company nor non-trade obligations outstanding on a Closing Date.
(f) RESERVATION. Prior to each Closing Date, the
Company undertakes to reserve, PRO rata, on behalf of each holder of a Note or
Warrant, from its authorized but unissued common stock, a number of common
shares equal to 200% of the amount of Common Stock necessary to allow each
holder of a Note to be able to convert all such outstanding Notes and interest
and reserve the amount of Warrant Shares issuable upon exercise of the Warrants.
Failure to have sufficient shares reserved pursuant to this Section 9.1(f) for
three (3) consecutive business days or ten (10) days in the aggregate shall be a
material default of the Company's obligations under this Agreement and an Event
of Default under the Note.
15
(g) TAXES. From the date of this Agreement and until
the sooner of (i) three (3) years after the Second Closing Date, or (ii) until
all the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company; provided, however, that any such
tax, assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company shall have set aside on its books adequate reserves with respect
thereto, and provided, further, that the Company will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security therefore.
(h) INSURANCE. From the date of this Agreement and
until the sooner of (i) three (3) years after the Second Closing Date, or (ii)
until all the Shares and Warrant Shares have been resold or transferred by all
the Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company will keep its assets which are
of an insurable character insured by financially sound and reputable insurers
against loss or damage by fire, explosion and other risks customarily insured
against by companies in the Company's line of business, in amounts sufficient to
prevent the Company from becoming a co-insurer and not in any event less than
one hundred percent (100%) of the insurable value of the property insured; and
the Company will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated and to the extent available on commercially reasonable terms.
(i) BOOKS AND RECORDS. From the date of this
Agreement and until the sooner of (i) three (3) years after the Second Closing
Date, or (ii) until all the Shares and Warrant Shares have been resold or
transferred by all the Subscribers pursuant to the Registration Statement or
pursuant to Rule 144, without regard to volume limitations, the Company will
keep true records and books of account in which full, true and correct entries
will be made of all dealings or transactions in relation to its business and
affairs in accordance with generally accepted accounting principles applied on a
consistent basis.
(j) GOVERNMENTAL AUTHORITIES. From the date of this
Agreement and until the sooner of (i) three (3) years after the Second Closing
Date, or (ii) until all the Shares and Warrant Shares have been resold or
transferred by all the Subscribers pursuant to the Registration Statement or
pursuant to Rule 144, without regard to volume limitations, the Company shall
duly observe and conform in all material respects to all valid requirements of
governmental authorities relating to the conduct of its business or to its
properties or assets.
(k) INTELLECTUAL PROPERTY. From the date of this
Agreement and until the sooner of (i) three (3) years after the Second Closing
Date, or (ii) until all the Shares and Warrant Shares have been resold or
transferred by all the Subscribers pursuant to the Registration Statement or
pursuant to Rule 144, without regard to volume limitations, the Company shall
maintain in full force and effect its corporate existence, rights and franchises
and all licenses and other rights to use intellectual property owned or
possessed by it and reasonably deemed to be necessary to the conduct of its
business.
(l) PROPERTIES. From the date of this Agreement and
until the sooner of (i) three (3) years after the Second Closing Date, or (ii)
until all the Shares and Warrant Shares have been resold or transferred by all
the Subscribers pursuant to the Registration Statement (as defined in Section
11.1(iv) hereof) or pursuant to Rule 144, without regard to volume limitations,
the Company will keep its properties in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company will at all times comply with each provision of all
leases to which it is a party or under which it occupies property if the breach
of such provision could reasonably be expected to have a Material Adverse
Effect.
16
(m) CONFIDENTIALITY/PUBLIC ANNOUNCEMENT. From the
date of this Agreement and until the sooner of (i) three (3) years after the
Second Closing Date, or (ii) until all the Shares and Warrant Shares have been
resold or transferred by all the Subscribers pursuant to the Registration
Statement or pursuant to Rule 144, without regard to volume limitations, the
Company agrees that except in connection with a Form 8-K or the Registration
Statement, it will not disclose publicly or privately the identity of the
Subscribers unless expressly agreed to in writing by a Subscriber or only to the
extent required by law and then only upon five days prior notice to Subscriber.
In any event and subject to the foregoing, the Company shall file a Form 8-K or
make a public announcement describing the Offering not later than the first
business day after Closing Date. In the Form 8-K or public announcement, the
Company will specifically disclose the amount of common stock outstanding
immediately after the Closing. A form of the proposed Form 8-K or public
announcement to be employed in connection with the Initial Closing is annexed
hereto as EXHIBIT D.
(n) FURTHER REGISTRATION STATEMENTS. Except for a
registration statement filed on behalf of the Subscribers pursuant to Section 11
of this Agreement the Company will not file any registration statements or amend
any already filed registration statement, including but not limited to Form S-8,
with the Commission or with state regulatory authorities without the consent of
the Subscriber until the sooner of (i) the Registration Statement shall have
been current and available for use in connection with the resale of the
Registrable Securities (as defined in Section 11.1(i) for a period of 90 days,
or (ii) until all the Shares have been resold or transferred by the Subscribers
pursuant to the Registration Statement or Rule 144, without regard to volume
limitations ("EXCLUSION PERIOD"). The Exclusion Period will be tolled during the
pendency of an Event of Default as defined in the Note. The foregoing limitation
shall not apply to a registration statement which will not result in the delay
of the filing or effectiveness of the Registration Statement.
(o) BLACKOUT. The Company undertakes and covenants
that until the first to occur of (i) the end of the Exclusion Period, or (ii)
until all the Shares and Warrant Shares have been resold pursuant to a
registration statement or Rule 144, without regard to volume limitations, the
Company will not enter into any acquisition, merger, exchange or sale or other
transaction that could have the effect of delaying the effectiveness of any
pending registration statement or causing an already effective registration
statement to no longer be effective or current for a period twenty (20) or more
days.
(p) NON-PUBLIC INFORMATION. The Company covenants and
agrees that neither it nor any other person acting on its behalf will provide
any Subscriber or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Subscriber shall have agreed in writing to receive such information. The Company
understands and confirms that each Subscriber shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
10. COVENANTS OF THE COMPANY AND SUBSCRIBER REGARDING
INDEMNIFICATION.
(a) The Company agrees to indemnify, hold harmless,
reimburse and defend the Subscribers, the Subscribers' officers, directors,
agents, Affiliates, control persons, and principal shareholders, against any
claim, cost, expense, liability, obligation, loss or damage (including
reasonable legal fees) of any nature, incurred by or imposed upon the Subscriber
or any such person which results, arises out of or is based upon (i) any
material misrepresentation by Company or breach of any warranty by Company in
this Agreement or in any Exhibits or Schedules attached hereto, or other
17
agreement delivered pursuant hereto; or (ii) after any applicable notice and/or
cure periods, any breach or default in performance by the Company of any
covenant or undertaking to be performed by the Company hereunder, or any other
agreement entered into by the Company and Subscriber relating hereto.
(b) Each Subscriber agrees to indemnify, hold
harmless, reimburse and defend the Company and each of the Company's officers,
directors, agents, Affiliates, control persons against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon the Company or any such person which
results, arises out of or is based upon (i) any material misrepresentation by
such Subscriber in this Agreement or in any Exhibits or Schedules attached
hereto, or other agreement delivered pursuant hereto; or (ii) after any
applicable notice and/or cure periods, any breach or default in performance by
such Subscriber of any covenant or undertaking to be performed by such
Subscriber hereunder, or any other agreement entered into by the Company and
Subscribers, relating hereto.
(c) In no event shall the liability of any Subscriber
or permitted successor hereunder or under any Transaction Document or other
agreement delivered in connection herewith be greater in amount than the dollar
amount of the net proceeds actually received by such Subscriber upon the sale of
Registrable Securities (as defined herein).
(d) The procedures set forth in Section 11.6 shall
apply to the indemnification set forth in Sections 10(a) and 10(b) above.
11.1. REGISTRATION RIGHTS. The Company hereby grants the
following registration rights to holders of the Securities.
(i) On one occasion, for a period commencing ninety
(91) days after the Initial Closing Date, but not later than two (2) years after
the Second Closing Date ("REQUEST DATE"), upon a written request therefor from
any record holder or holders of more than 50% of the Shares issued and issuable
upon conversion of the outstanding Notes and outstanding Warrant Shares, the
Company shall prepare and file with the Commission a registration statement
under the 1933 Act registering the Shares and Warrant Shares issuable upon
exercise of the Warrants and Warrant Shares issuable upon exercise of the
Broker's Warrants (collectively "REGISTRABLE SECURITIES") which are the subject
of such request for unrestricted public resale by the holder thereof. For
purposes of Sections 11.1(i) and 11.1(ii), Registrable Securities shall not
include (A) Securities which are registered for resale in an effective
registration statement, (B) included for registration in a pending registration
statement, or (C) which have been issued without further transfer restrictions
after a sale or transfer pursuant to Rule 144 under the 1933 Act. Upon the
receipt of such request, the Company shall promptly give written notice to all
other record holders of the Registrable Securities that such registration
statement is to be filed and shall include in such registration statement
Registrable Securities for which it has received written requests within ten
(10) days after the Company gives such written notice. Such other requesting
record holders shall be deemed to have exercised their demand registration right
under this Section 11.1(i).
(ii) If the Company at any time proposes to register
any of its securities under the 1933 Act for sale to the public, whether for its
own account or for the account of other security holders or both, except with
respect to registration statements on Forms X-0, X-0 or another form not
available for registering the Registrable Securities for sale to the public,
provided the Registrable Securities are not otherwise registered for resale by
the Subscribers or Holder pursuant to an effective registration statement, each
such time it will give at least fifteen (15) days' prior written notice to the
record holder of the Registrable Securities of its intention so to do. Upon the
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written request of the holder, received by the Company within ten (10) days
after the giving of any such notice by the Company, to register any of the
Registrable Securities not previously registered, the Company will cause such
Registrable Securities as to which registration shall have been so requested to
be included with the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent required to permit the
sale or other disposition of the Registrable Securities so registered by the
holder of such Registrable Securities (the "SELLER" or "SELLERS"). In the event
that any registration pursuant to this Section 11.1(ii) shall be, in whole or in
part, an underwritten public offering of common stock of the Company, the number
of shares of Registrable Securities to be included in such an underwriting may
be reduced by the managing underwriter if and to the extent that the Company and
the underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that the Company shall notify the Seller in writing
of any such reduction. Notwithstanding the foregoing provisions, or Section 11.4
hereof, the Company may withdraw or delay or suffer a delay of any registration
statement referred to in this Section 11.1(ii) without thereby incurring any
liability to the Seller.
(iii) If, at the time any written request for
registration is received by the Company pursuant to Section 11.1(i), the Company
has determined to proceed with the actual preparation and filing of a
registration statement under the 1933 Act in connection with the proposed offer
and sale for cash of any of its securities for the Company's own account and the
Company actually does file such other registration statement, such written
request shall be deemed to have been given pursuant to Section 11.1(ii) rather
than Section 11.1(i), and the rights of the holders of Registrable Securities
covered by such written request shall be governed by Section 11.1(ii).
(iv) The Company shall file with the Commission a
Form SB-2 registration statement (the "REGISTRATION STATEMENT") (or such other
form that it is eligible to use) in order to register the Registrable Securities
for resale and distribution under the 1933 Act not later than thirty (30)
business days after the Initial Closing Date (the "FILING DATE"), and cause to
be declared effective not later than ninety (90) calendar days after the Filing
Date (the "EFFECTIVE DATE"). The Company will register not less than a number of
shares of common stock in the aforedescribed registration statement that is
equal to 200% of the Shares issuable upon conversion of the Notes and all of the
Warrant Shares issuable pursuant to this Agreement upon exercise of the
Warrants. The Registrable Securities shall be reserved and set aside exclusively
for the benefit of each Subscriber and Warrant holder, PRO RATA, and not issued,
employed or reserved for anyone other than each such Subscriber and Warrant
holder. The Registration Statement will immediately be amended or additional
registration statements will be immediately filed by the Company as necessary to
register additional shares of Common Stock to allow the public resale of all
Common Stock included in and issuable by virtue of the Registrable Securities.
Except as disclosed on Schedule 11.1 or with the written consent of the
Subscriber, no securities of the Company other than the Registrable Securities
will be included in the Registration Statement. It shall be deemed a
Non-Registration Event if at any time after the date the Registration Statement
is declared effective by the Commission ("ACTUAL EFFECTIVE DATE") the Company
has registered for unrestricted resale on behalf of the Subscriber fewer than
150% of the amount of Common Shares issuable upon full conversion of all sums
due under the Notes and 100% of the Warrant Shares issuable upon exercise of the
Warrants.
11.2. REGISTRATION PROCEDURES. If and whenever the Company is
required by the provisions of Section 11.1(i), 11.1(ii), or (iv) to effect the
registration of any Registrable Securities under the 1933 Act, the Company will,
as expeditiously as possible:
(a) subject to the timelines provided in this
Agreement, prepare and file with the Commission a registration statement
required by Section 11, with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective for the
period of the distribution contemplated thereby (determined as herein provided),
promptly provide to the holders of the Registrable Securities copies of all
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filings and Commission letters of comment and notify Subscribers (by telecopier
and by e-mail addresses provided by Subscribers) and Grushko & Xxxxxxx, P.C. (by
telecopier and by email to XXXXXXXXX@XXX.XXX) on or before 6:00 PM EST on the
same business day that the Company receives notice that (i) the Commission has
no comments or no further comments on the Registration Statement, and (ii) the
registration statement has been declared effective (failure to timely provide
notice as required by this Section 11.2(a) shall be a material breach of the
Company's obligation and an Event of Default as defined in the Notes and a
Non-Registration Event as defined in Section 10.4 of this Agreement);
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective until such registration statement has been effective for a
period of three (3) years, and comply with the provisions of the 1933 Act with
respect to the disposition of all of the Registrable Securities covered by such
registration statement in accordance with the Sellers' intended method of
disposition set forth in such registration statement for such period;
(c) furnish to the Sellers, at the Company's expense,
such number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or their disposition of the
securities covered by such registration statement;
(d) use its commercially reasonable best efforts to
register or qualify the Registrable Securities covered by such registration
statement under the securities or "blue sky" laws of New York and such
jurisdictions as the Sellers shall request in writing, provided, however, that
the Company shall not for any such purpose be required to qualify generally to
transact business as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to general service of process in any such
jurisdiction;
(e) if applicable, list the Registrable Securities
covered by such registration statement with any securities exchange on which the
Common Stock of the Company is then listed;
(f) immediately notify the Sellers when a prospectus
relating thereto is required to be delivered under the 1933 Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing; and
(g) provided same would not be in violation of the
provision of Regulation FD under the 1934 Act, make available for inspection by
the Sellers, and any attorney, accountant or other agent retained by the Seller
or underwriter, all publicly available, non-confidential financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all publicly
available, non-confidential information reasonably requested by the seller,
attorney, accountant or agent in connection with such registration statement.
11.3. PROVISION OF DOCUMENTS. In connection with each
registration described in this Section 11, each Seller will furnish to the
Company in writing such information and representation letters with respect to
itself and the proposed distribution by it as reasonably shall be necessary in
order to assure compliance with federal and applicable state securities laws.
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11.4. NON-REGISTRATION EVENTS. The Company and the Subscribers
agree that the Sellers will suffer damages if the Registration Statement is not
filed by the Filing Date and not declared effective by the Commission by the
Effective Date, and any registration statement required under Section 11.1(i) or
11.1(ii) is not filed within 60 days after written request and declared
effective by the Commission within 120 days after such request, and maintained
in the manner and within the time periods contemplated by Section 11 hereof, and
it would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (A) the Registration Statement is not filed on or before the
Filing Date, (B) is not declared effective on or before the Effective Date, (C)
the Registration Statement is not declared effective within three (3) business
days after receipt by the Company or its attorneys of a written or oral
communication from the Commission that the Registration Statement will not be
reviewed or that the Commission has no further comments, (D) if the registration
statement described in Sections 11.1(i) or 11.1(ii) is not filed within 60 days
after such written request, or is not declared effective within 120 days after
such written request, or (E) any registration statement described in Sections
11.1(i), 11.1(ii) or 11.1(iv) is filed and declared effective but shall
thereafter cease to be effective (without being succeeded within fifteen (15)
business days by an effective replacement or amended registration statement) for
a period of time which shall exceed 30 days in the aggregate per year (defined
as a period of 365 days commencing on the date the Registration Statement is
declared effective) or more than 20 consecutive days (each such event referred
to in clauses A through E of this Section 11.4 is referred to herein as a
"Non-Registration Event"), then the Company shall deliver to the holder of
Registrable Securities, as Liquidated Damages, an amount equal to two percent
(2%) for each thirty (30) days or part thereof, thereafter of the Purchase Price
of the Notes remaining unconverted and purchase price of Shares issued upon
conversion of the Notes owned of record by such holder which are subject to such
Non-Registration Event. The Company must pay the Liquidated Damages in cash. The
Liquidated Damages must be paid within ten (10) days after the end of each
thirty (30) day period or shorter part thereof for which Liquidated Damages are
payable. In the event a Registration Statement is filed by the Filing Date but
is withdrawn prior to being declared effective by the Commission, then such
Registration Statement will be deemed to have not been filed. All oral or
written comments received from the Commission relating to the Registration
Statement must be satisfactorily responded to within ten (10) business days
after receipt of comments from the Commission. Failure to timely respond to
Commission comments is a Non-Registration Event for which Liquidated Damages
shall accrue and be payable by the Company to the holders of Registrable
Securities at the same rate set forth above. Notwithstanding the foregoing, the
Company shall not be liable to the Subscriber under this Section 11.4 for any
events or delays occurring as a consequence of the acts or omissions of the
Subscribers contrary to the obligations undertaken by Subscribers in this
Agreement. Liquidated Damages will not accrue nor be payable pursuant to this
Section 11.4 nor will a Non-Registration Event be deemed to have occurred for
times during which Registrable Securities are transferable by the holder of
Registrable Securities pursuant to Rule 144(k) under the 1933 Act.
11.5. EXPENSES. All expenses incurred by the Company in
complying with Section 11, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of
insurance and fee of one counsel for all Sellers are called "REGISTRATION
EXPENSES." All underwriting discounts and selling commissions applicable to the
sale of Registrable Securities, including any fees and disbursements of one
counsel to the Seller, are called "SELLING Expenses." The Company will pay all
Registration Expenses in connection with the registration statement under
Section 11. Selling Expenses in connection with each registration statement
under Section 11 shall be borne by the Seller and may be apportioned among the
Sellers in proportion to the number of shares sold by the Seller relative to the
number of shares sold under such registration statement or as all Sellers
thereunder may agree.
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11.6. INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of a registration of any Registrable
Securities under the 1933 Act pursuant to Section 11, the Company will, to the
extent permitted by law, indemnify and hold harmless the Seller, each officer of
the Seller, each director of the Seller, each underwriter of such Registrable
Securities thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities was registered under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances when made, and will subject to the provisions of
Section 11.6(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable to
the Seller to the extent that any such damages arise out of or are based upon an
untrue statement or omission made in any preliminary prospectus if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by the
Company to the Seller with or prior to the delivery of written confirmation of
the sale by the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or (iii) to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller, or
any such controlling person in writing specifically for use in such registration
statement or prospectus.
(b) In the event of a registration of any of the
Registrable Securities under the 1933 Act pursuant to Section 11, each Seller
severally but not jointly will, to the extent permitted by law, indemnify and
hold harmless the Company, and each person, if any, who controls the Company
within the meaning of the 1933 Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the 1933 Act, against
all losses, claims, damages or liabilities, joint or several, to which the
Company or such officer, director, underwriter or controlling person may become
subject under the 1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the registration statement under which such Registrable Securities were
registered under the 1933 Act pursuant to Section 11, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that the Seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of the Seller hereunder shall be limited to
the net proceeds actually received by the Seller from the sale of Registrable
Securities covered by such registration statement.
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(c) Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to such indemnified party other than under this
Section 11.6(c) and shall only relieve it from any liability which it may have
to such indemnified party under this Section 11.6(c), except and only if and to
the extent the indemnifying party is prejudiced by such omission. In case any
such action shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 11.6(c)
for any legal expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of investigation
and of liaison with counsel so selected, provided, however, that, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified parties, as a group, shall have the
right to select one separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the reasonable
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable
contribution in the event of joint liability under the 1933 Act in any case in
which either (i) a Seller, or any controlling person of a Seller, makes a claim
for indemnification pursuant to this Section 11.6 but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 11.6 provides for indemnification in
such case, or (ii) contribution under the 1933 Act may be required on the part
of the Seller or controlling person of the Seller in circumstances for which
indemnification is not provided under this Section 11.6; then, and in each such
case, the Company and the Seller will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that the Seller is responsible only for the
portion represented by the percentage that the public offering price of its
securities offered by the registration statement bears to the public offering
price of all securities offered by such registration statement, provided,
however, that, in any such case, (y) the Seller will not be required to
contribute any amount in excess of the public offering price of all such
securities sold by it pursuant to such registration statement; and (z) no person
or entity guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 0000 Xxx) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
11.7. DELIVERY OF UNLEGENDED SHARES.
(a) Within three (3) business days (such third
business day being the "UNLEGENDED SHARES DELIVERY DATE") after the business day
on which the Company has received (i) a notice that Shares or Warrant Shares or
any other Common Stock held by a Subscriber have been sold pursuant to the
Registration Statement or Rule 144 under the 1933 Act, (ii) a representation
that the prospectus delivery requirements, or the requirements of Rule 144, as
23
applicable and if required, have been satisfied, and (iii) the original share
certificates representing the shares of Common Stock that have been sold, and
(iv) in the case of sales under Rule 144, customary representation letters of
the Subscriber and/or Subscriber's broker regarding compliance with the
requirements of Rule 144, the Company at its expense, (y) shall deliver, and
shall cause legal counsel selected by the Company to deliver to its transfer
agent (with copies to Subscriber) an appropriate instruction and opinion of such
counsel, directing the delivery of shares of Common Stock without any legends
including the legend set forth in Section 4(h) above, reissuable pursuant to any
effective and current Registration Statement described in Section 11 of this
Agreement or pursuant to Rule 144 under the 1933 Act (the "UNLEGENDED SHARES");
and (z) cause the transmission of the certificates representing the Unlegended
Shares together with a legended certificate representing the balance of the
submitted Shares certificate, if any, to the Subscriber at the address specified
in the notice of sale, via express courier, by electronic transfer or otherwise
on or before the Unlegended Shares Delivery Date. Transfer fees shall be the
responsibility of the Seller.
(b) In lieu of delivering physical certificates
representing the Unlegended Shares, if the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of a Subscriber, so long as the certificates
therefor do not bear a legend and the Subscriber is not obligated to return such
certificate for the placement of a legend thereon, the Company shall cause its
transfer agent to electronically transmit the Unlegended Shares by crediting the
account of Subscriber's prime Broker with DTC through its Deposit Withdrawal
Agent Commission system. Such delivery must be made on or before the Unlegended
Shares Delivery Date.
(c) The Company understands that a delay in the
delivery of the Unlegended Shares pursuant to Section 11 hereof later than two
business days after the Unlegended Shares Delivery Date could result in economic
loss to a Subscriber. As compensation to a Subscriber for such loss, the Company
agrees to pay late payment fees (as liquidated damages and not as a penalty) to
the Subscriber for late delivery of Unlegended Shares in the amount of $100 per
business day after the Delivery Date for each $10,000 of purchase price of the
Unlegended Shares subject to the delivery default. If during any 360 day period,
the Company fails to deliver Unlegended Shares as required by this Section 11.7
for an aggregate of thirty (30) days, then each Subscriber or assignee holding
Securities subject to such default may, at its option, require the Company to
redeem all or any portion of the Shares and Warrant Shares subject to such
default at a price per share equal to 120% of the Purchase Price of such Common
Stock and Warrant Shares ("UNLEGENDED REDEMPTION AMOUNT"). The amount of the
aforedescribed liquidated damages that have accrued or been paid for the twenty
day period prior to the receipt by the Subscriber of the Unlegended Redemption
Amount shall be credited against the Unlegended Redemption Amount. The Company
shall pay any payments incurred under this Section in immediately available
funds upon demand.
(d) In addition to any other rights available to a
Subscriber, if the Company fails to deliver to a Subscriber Unlegended Shares as
required pursuant to this Agreement, within seven (7) business days after the
Unlegended Shares Delivery Date and the Subscriber purchases (in an open market
transaction or otherwise) shares of common stock to deliver in satisfaction of a
sale by such Subscriber of the shares of Common Stock which the Subscriber was
entitled to receive from the Company (a "BUY-IN"), then the Company shall pay in
cash to the Subscriber (in addition to any remedies available to or elected by
the Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of common stock so
purchased exceeds (B) the aggregate purchase price of the shares of Common Stock
delivered to the Company for reissuance as Unlegended Shares together with
interest thereon at a rate of 15% per annum, accruing until such amount and any
accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For example, if a Subscriber purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to $10,000 of purchase price of shares of Common Stock
delivered to the Company for reissuance as Unlegended Shares, the Company shall
be required to pay the Subscriber $1,000, plus interest. The Subscriber shall
provide the Company written notice indicating the amounts payable to the
Subscriber in respect of the Buy-In.
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(e) In the event a Subscriber shall request delivery
of Unlegended Shares as described in Section 11.7 and the Company is required to
deliver such Unlegended Shares pursuant to Section 11.7, the Company may not
refuse to deliver Unlegended Shares based on any claim that such Subscriber or
any one associated or affiliated with such Subscriber has been engaged in any
violation of law, or for any other reason, unless, an injunction or temporary
restraining order from a court, on notice, restraining and or enjoining delivery
of such Unlegended Shares or exercise of all or part of said Warrant shall have
been sought and obtained and the Company has posted a surety bond for the
benefit of such Subscriber in the amount of 120% of the amount of the aggregate
purchase price of the Common Stock and Warrant Shares which are subject to the
injunction or temporary restraining order, which bond shall remain in effect
until the completion of arbitration/litigation of the dispute and the proceeds
of which shall be payable to such Subscriber to the extent Subscriber obtains
judgment in Subscriber's favor.
12. (a) RIGHT OF FIRST REFUSAL. Until the later of (i) the
Registration Statement has been effective for the resale of the Registrable
Securities for eighteen months, or (ii) for so long as Notes remain outstanding,
the Subscribers shall be given not less than seven (7) business days prior
written notice of any proposed sale by the Company of its common stock or other
securities or debt obligations, except in connection with (i) full or partial
consideration in connection with a strategic merger, consolidation or purchase
of substantially all of the securities or assets of corporation or other entity,
and (ii) the Company's issuance of securities in connection with strategic
license agreements and other partnering arrangements so long as such issuances
are not for the purpose of raising capital, (iii) the Company's issuance of
Common Stock or the issuance or grants of options to purchase Common Stock
pursuant to the Company's stock option plans and employee stock purchase plans
as they now exist, which copies of such plans have been delivered to the
Subscribers (iv) as a result of the exercise of Warrants or conversion of Notes
which are granted or issued pursuant to this Agreement, (v) the payment of any
interest on the Notes, and (vi) as has been described in the Reports or Other
Written Information filed with the Commission or delivered to the Subscribers
prior to the Closing Date (collectively the foregoing are "EXCEPTED ISSUANCES").
The Subscribers who exercise their rights pursuant to this Section 12(a) shall
have the right during the seven (7) business days following receipt of the
notice to purchase such offered common stock, debt or other securities in
accordance with the terms and conditions set forth in the notice of sale in the
same proportion to each other as their purchase of Notes in the Offering. In the
event such terms and conditions are modified during the notice period, the
Subscribers shall be given prompt notice of such modification and shall have the
right during the seven (7) business days following the notice of modification,
whichever is longer, to exercise such right.
(b) OFFERING RESTRICTIONS. Until the, sooner of (i)
Registration Statement having been effective for the public resale of the
Registrable Securities for ninety (90) days and (ii) the date the Notes are no
longer outstanding, and (iii) during the pendency of an Event of Default, the
Company will not enter into an agreement to nor issue any equity, convertible
debt or other securities convertible into common stock or equity of the Company
nor modify any of the foregoing which may be outstanding at anytime, without the
prior written consent of the Subscriber, which consent may be withheld for any
reason.
(c) FAVORED NATIONS PROVISION. Other than the
Excepted Issuances, if at any time Notes or Warrants are outstanding the Company
shall offer, issue or agree to issue any common stock or securities convertible
into or exercisable for shares of common stock (or modify any of the foregoing
which may be outstanding) to any person or entity at a price per share or
conversion or exercise price per share which shall be less than the Conversion
Price in respect of the Shares, or if less than the Warrant exercise price in
respect of the Warrant Shares, without the consent of each Subscriber holding
Notes, Shares, Warrants, or Warrant Shares, then the Company shall issue, for
25
each such occasion, additional shares of Common Stock to each Subscriber so that
the average per share purchase price of the shares of Common Stock issued to the
Subscriber (of only the Common Stock or Warrant Shares still owned by the
Subscriber) is equal to such other lower price per share and the Conversion
Price and Warrant Exercise Price shall automatically be reduced to such other
lower price per share. The average Purchase Price of the Shares and average
exercise price in relation to the Warrant Shares shall be calculated separately
for the Shares and Warrant Shares. The foregoing calculation and issuance shall
be made separately for Shares received upon conversion and separately for
Warrant Shares. The delivery to the Subscriber of the additional shares of
Common Stock shall be not later than the closing date of the transaction giving
rise to the requirement to issue additional shares of Common Stock. The
Subscriber is granted the registration rights described in Section 11 hereof in
relation to such additional shares of Common Stock except that the Filing Date
and Effective Date vis-a-vis such additional common shares shall be,
respectively, the thirtieth (30th) and sixtieth (60th) date after the closing
date giving rise to the requirement to issue the additional shares of Common
Stock. For purposes of the issuance and adjustment described in this paragraph,
the issuance of any security of the Company carrying the right to convert such
security into shares of Common Stock or of any warrant, right or option to
purchase Common Stock shall result in the issuance of the additional shares of
Common Stock upon the sooner of the agreement to or actual issuance of such
convertible security, warrant, right or option and again at any time upon any
subsequent issuances of shares of Common Stock upon exercise of such conversion
or purchase rights if such issuance is at a price lower than the Conversion
Price or Warrant exercise price in effect upon such issuance. The rights of the
Subscriber set forth in this Section 12 are in addition to any other rights the
Subscriber has pursuant to this Agreement, the Note, any Transaction Document,
and any other agreement referred to or entered into in connection herewith.
(d) MAXIMUM EXERCISE OF RIGHTS. In the event the
exercise of the rights described in Sections 12(a) and 12(c) would result in the
issuance of an amount of common stock of the Company that would exceed the
maximum amount that may be issued to a Subscriber calculated in the manner
described in Section 7.3 of this Agreement, then the issuance of such additional
shares of common stock of the Company to such Subscriber will be deferred in
whole or in part until such time as such Subscriber is able to beneficially own
such common stock without exceeding the maximum amount set forth calculated in
the manner described in Section 7.3 of this Agreement. The determination of when
such common stock may be issued shall be made by each Subscriber as to only such
Subscriber.
13. MISCELLANEOUS.
(a) NOTICES. All notices, demands, requests,
consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i)
personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier
service with charges prepaid, or (iv) 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. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
26
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be: (i) if to the
Company, to: Alternate Energy Corp., 000-0000 Xxxxx Xxxxxxx Xxxx, Xxxxxxxxxx,
Xxxxxxx, Xxxxxx X0X 0X0, Attn: Xxxxxx Xxxxxx, Chairman/CEO, telecopier number:
(000) 000-0000, with a copy by telecopier only to: Xxxxxxxx X. Xxxxxxxx, P.A.,
00000 Xxxxxxxx Xxxx., Xxxxx 000, Xxxxx Xxxxx, XX 00000, telecopier number: (954)
252-4265, (ii) if to the Subscribers, to: the one or more addresses and
telecopier numbers indicated on the signature pages hereto, with an additional
copy by telecopier only to: Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx
0000, Xxx Xxxx, Xxx Xxxx 00000, telecopier number: (000) 000-0000, and (iii) if
to the Broker, to: Westor Online, Inc., 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxx,
Xxx Xxxx 00000, Attn: Xxxxxxx Xxxx, telecopier number: (000) 000-0000, with an
additional copy by telecopier only to: Xxxxx & Associates, LLC, 00 Xxxxxxxx,
Xxxxx 0000, Xxx Xxxx, XX 00000, Attn: Xxxxx Xxxxx, Esq., telecopier number:
(000) 000-0000.
(b) ENTIRE AGREEMENT; ASSIGNMENT. This Agreement and
other documents delivered in connection herewith represent the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by both parties. Neither the Company nor the
Subscribers have relied on any representations not contained or referred to in
this Agreement and the documents delivered herewith. No right or obligation of
the Company shall be assigned without prior notice to and the written consent of
the Subscribers.
(c) COUNTERPARTS/EXECUTION. This Agreement may be
executed in any number of counterparts and by the different signatories hereto
on separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute but one and the same
instrument. This Agreement may be executed by facsimile signature and delivered
by facsimile transmission.
(d) LAW GOVERNING THIS AGREEMENT. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without regard to conflicts of laws principles that would result in the
application of the substantive laws of another jurisdiction. Any action brought
by either party against the other concerning the transactions contemplated by
this Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. THE PARTIES AND THE INDIVIDUALS
EXECUTING THIS AGREEMENT AND OTHER AGREEMENTS REFERRED TO HEREIN OR DELIVERED IN
CONNECTION HEREWITH ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION
OF SUCH COURTS AND WAIVE TRIAL BY JURY. The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees and costs. In the
event that any provision of this Agreement or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.
(e) SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION.
The Company and Subscriber acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to one or more
preliminary and final injunctions to prevent or cure breaches of the provisions
of this Agreement and to enforce specifically the terms and provisions hereof,
this being in addition to any other remedy to which any of them may be entitled
by law or equity. Subject to Section 13(d) hereof, each of the Company,
Subscriber and any signator hereto in his personal capacity hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction in New York of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
27
(f) INDEPENDENT NATURE OF SUBSCRIBERS. The Company
acknowledges that the obligations of each Subscriber under the Transaction
Documents are several and not joint with the obligations of any other
Subscriber, and no Subscriber shall be responsible in any way for the
performance of the obligations of any other Subscriber under the Transaction
Documents. The Company acknowledges that each Subscriber has represented that
the decision of each Subscriber to purchase Securities has been made by such
Subscriber independently of any other Subscriber and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have been made or
given by any other Subscriber or by any agent or employee of any other
Subscriber, and no Subscriber or any of its agents or employees shall have any
liability to any Subscriber (or any other person) relating to or arising from
any such information, materials, statements or opinions. The Company
acknowledges that nothing contained in any Transaction Document, and no action
taken by any Subscriber pursuant hereto or thereto (including, but not limited
to, the (i) inclusion of a Subscriber in the Registration Statement and (ii)
review by, and consent to, such Registration Statement by a Subscriber) shall be
deemed to constitute the Subscribers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the
Subscribers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. The
Company acknowledges that each Subscriber shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising
out of the Transaction Documents, and it shall not be necessary for any other
Subscriber to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that it has elected to provide all Subscribers
with the same terms and Transaction Documents for the convenience of the Company
and not because Company was required or requested to do so by the Subscribers.
The Company acknowledges that such procedure with respect to the Transaction
Documents in no way creates a presumption that the Subscribers are in any way
acting in concert or as a group with respect to the Transaction Documents or the
transactions contemplated thereby.
28
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)
--------------------------------------------
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
Alternate Energy Corp.
a Nevada corporation
By:_________________________________
Name: Xxxxxx Xxxxxx
Title: CEO
Dated: March _____, 2005
------------------------------------------- -------------------------- ----------------
INITIAL CLOSING PURCHASE SECOND CLOSING
SUBSCRIBER PRICE PURCHASE PRICE
------------------------------------------- -------------------------- ----------------
PLATINUM PARTNERS VALUE ARBITRAGE FUND LP $150,000.00 $300,000.00
Attn: Xxxx Xxxxxxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
_______________________________________
(Signature)
By:
------------------------------------------- -------------------------- ----------------
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)
--------------------------------------------
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
Alternate Energy Corp.
a Nevada corporation
By:_______________________________
Name: Xxxxxx Xxxxxx
Title: CEO
Dated: March _____, 2005
------------------------------------------ -------------------------- -----------------
INITIAL CLOSING PURCHASE SECOND CLOSING
SUBSCRIBER PRICE PURCHASE PRICE
------------------------------------------ -------------------------- -----------------
PROFESSIONAL TRADERS FUND LLC $50,000.00 $100,000
0000 Xxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx
Fax: (000) 000-0000
_______________________________________
(Signature)
By:
------------------------------------------ -------------------------- -----------------
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (C)
--------------------------------------------
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
Alternate Energy Corp.
a Nevada corporation
By:______________________________
Name: Xxxxxx Xxxxxx
Title: CEO
Dated: March _____, 2005
------------------------------------------- -------------------------- -----------------
INITIAL CLOSING PURCHASE SECOND CLOSING
SUBSCRIBER PRICE PURCHASE PRICE
------------------------------------------- -------------------------- -----------------
DESIGN INVESTMENTS LTD. $100,000.00 $200,000.00
0 Xxxxxxx Xxxxxxx
Xxxxxxxxxx Xxxxx, XXX 0000, Xxxxxxxxx
Fax:
_______________________________________
(Signature)
By:
------------------------------------------- -------------------------- -----------------
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (D)
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
Alternate Energy Corp.
a Nevada corporation
By:_____________________________
Name: Xxxxxx Xxxxxx
Title: CEO
Dated: March _____, 2005
---------------------------------------------------------- -------------------------- ------------------
INITIAL CLOSING PURCHASE SECOND CLOSING
SUBSCRIBER PRICE PURCHASE PRICE
---------------------------------------------------------- -------------------------- ------------------
HARBORVIEW MASTER FUND LP $100,000.00 $200,000.00
Harbour House Xxxxxxxxxx Xxxxx
X.X. Xxx 000
Xxxx Xxxx Xxxxxxx, Xxxxxxx Xxxxxx Xxxxxx
Fax: (000) 000-0000
_______________________________________
(Signature)
By:
---------------------------------------------------------- -------------------------- ------------------
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (E)
--------------------------------------------
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
Alternate Energy Corp.
a Nevada corporation
By:_____________________________
Name: Xxxxxx Xxxxxx
Title: CEO
Dated: March _____, 2005
------------------------------------------- -------------------------- ------------------
INITIAL CLOSING PURCHASE SECOND CLOSING
SUBSCRIBER PRICE PURCHASE PRICE
------------------------------------------- -------------------------- ------------------
DOUBLE U MASTER FUND LP $100,000.00 $200,000.00
X/x Xxxxxxxxx Xxxxxxxxxx Xxx.
Xxxxxx Xxxxx, Xxxxxxxxxx Drive
P.O. Box 972
Road Town, Tortola
British Virgin Islands
Attn: Xxxxxx Xxxx Fax:
(000) 000-0000
_______________________________________
(Signature)
By:
------------------------------------------- -------------------------- ------------------
LIST OF EXHIBITS AND SCHEDULES
------------------------------
Exhibit A1 Form of Class A Warrant
Exhibit A2 Form of Class B Warrant
Exhibit A3 Form of Class C Warrant
Exhibit B Escrow Agreement
Exhibit C Form of Legal Opinion
Exhibit D Form of Public Announcement or Form 8-K
Schedule 5(d) Additional Issuances / Capitalization
Schedule 5(q) Undisclosed Liabilities
Schedule 5(x) Subsidiaries
Schedule 9(e) Use of Proceeds
Schedule 11.1 Other Securities to be Registered
Exhibit A-1
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ALTERNATE ENERGY CORP. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase _________ shares of Common
Stock of Alternate Energy Corp. (subject to
adjustment as provided herein)
CLASS A COMMON STOCK PURCHASE WARRANT
No. 2005-A-001 Issue Date: March ____, 2005
ALTERNATE ENERGY CORP., a corporation organized under the laws of the
State of Nevada (the "Company"), hereby certifies that, for value received,
PLATINUM PARTNERS VALUE ARBITRAGE FUND LP, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Fax: (000) 000-0000, or its assigns (the "Holder"), is entitled,
subject to the terms set forth below, to purchase from the Company at any time
after the Issue Date until 5:00 p.m., E.S.T on the third (3rd) anniversary of
the Issue Date (the "Expiration Date"), up to ________ fully paid and
nonassessable shares of Common Stock at a per share purchase price of $0.40. The
aforedescribed purchase price per share, as adjusted from time to time as herein
provided, is referred to herein as the "Purchase Price." The number and
character of such shares of Common Stock and the Purchase Price are subject to
adjustment as provided herein. The Company may reduce the Purchase Price without
the consent of the Holder. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Subscription Agreement
(the "SUBSCRIPTION AGREEMENT"), dated March ___, 2005, entered into by the
Company and Holder's of the Class A Warrants.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Alternate Energy Corp. and any
corporation which shall succeed or assume the obligations of Alternate Energy
Corp. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.001 par value per share, as authorized on the date of the Subscription
Agreement, and (b) any other securities into which or for which any of the
securities described in (a) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 5 or otherwise.
(d) The term "Warrant Shares" shall mean the Common Stock issuable upon
exercise of this Warrant.
1. EXERCISE OF WARRANT.
1.1. NUMBER OF SHARES ISSUABLE UPON EXERCISE. From and after
the Issue Date through and including the Expiration Date, the Holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of subsection 1.2 or upon exercise of this Warrant in
part in accordance with subsection 1.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.
1.2. FULL EXERCISE. This Warrant may be exercised in full by
the Holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such Holder and surrender of the original Warrant within four (4)
days of exercise, to the Company at its principal office or at the office of its
Warrant Agent (as provided hereinafter), accompanied by payment, in cash, wire
transfer or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price then in
effect.
1.3. PARTIAL EXERCISE. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the manner and
at the place provided in subsection 1.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of whole shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, the whole number of shares of Common
Stock for which such Warrant may still be exercised.
1.4. FAIR MARKET VALUE. Fair Market Value of a share of Common
Stock as of a particular date (the "Determination Date") shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ"), National Market System, the NASDAQ SmallCap
Market or the American Stock Exchange, LLC, then the closing or last sale price,
respectively, reported for the last business day immediately preceding the
Determination Date;
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System, the NASDAQ SmallCap Market or
the American Stock Exchange, Inc., but is traded in the over-the-counter market,
then the average of the closing bid and ask prices reported for the last
business day immediately preceding the Determination Date;
(c) Except as provided in clause (d) below, if the
Company's Common Stock is not publicly traded, then as the Holder and the
Company agree, or in the absence of such an agreement, by arbitration in
accordance with the rules then standing of the American Arbitration Association,
before a single arbitrator to be chosen from a panel of persons qualified by
education and training to pass on the matter to be decided; or
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all amounts to
be payable per share to holders of the Common Stock pursuant to the charter in
the event of such liquidation, dissolution or winding up, plus all other amounts
to be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.
2
1.5. COMPANY ACKNOWLEDGMENT. The Company will, at the time of
the exercise of the Warrant, upon the request of the Holder hereof acknowledge
in writing its continuing obligation to afford to such Holder any rights to
which such Holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the Holder shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such Holder any such rights.
1.6. TRUSTEE FOR WARRANT HOLDERS. In the event that a bank or
trust company shall have been appointed as trustee for the Holder of the
Warrants pursuant to Subsection 3.2, such bank or trust company shall have all
the powers and duties of a warrant agent (as hereinafter described) and shall
accept, in its own name for the account of the Company or such successor person
as may be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.
1.7 DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. The
Company agrees that the shares of Common Stock purchased upon exercise of this
Warrant shall be deemed to be issued to the Holder hereof as the record owner of
such shares as of the close of business on the date on which this Warrant shall
have been surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within four (4) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder hereof, or as such Holder
(upon payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share of Common Stock, together with any other stock or
other securities and property (including cash, where applicable) to which such
Holder is entitled upon such exercise pursuant to Section 1 or otherwise.
2. CASHLESS EXERCISE.
(a) If a Registration Statement (as defined in the
Subscription Agreement) ("Registration Statement") is effective and the Holder
may sell its shares of Common Stock upon exercise hereof pursuant to the
Registration Statement, this Warrant may be exercisable in whole or in part for
cash only as set forth in Section 1 above. If no such Registration Statement is
available during the time that such Registration Statement is required to be
effective pursuant to the terms of the Subscription Agreement, then payment upon
exercise may be made at the option of the Holder either in (i) cash, wire
transfer or by certified or official bank check payable to the order of the
Company equal to the applicable aggregate Purchase Price, (ii) by delivery of
Common Stock issuable upon exercise of the Warrants in accordance with Section
(b) below or (iii) by a combination of any of the foregoing methods, for the
number of Common Stock specified in such form (as such exercise number shall be
adjusted to reflect any adjustment in the total number of shares of Common Stock
issuable to the holder per the terms of this Warrant) and the holder shall
thereupon be entitled to receive the number of duly authorized, validly issued,
fully-paid and non-assessable shares of Common Stock (or Other Securities)
determined as provided herein.
(b) If the Fair Market Value of one share of Common Stock is
greater than the Purchase Price (at the date of calculation as set forth below),
in lieu of exercising this Warrant for cash, the holder may elect to receive
shares equal to the value (as determined below) of this Warrant (or the portion
thereof being cancelled) by surrender of this Warrant at the principal office of
the Company together with the properly endorsed Subscription Form in which event
the Company shall issue to the holder a number of shares of Common Stock
computed using the following formula:
3
X=Y (A-B)
-----
A
Where X= the number of shares of Common Stock to be issued to the holder
Y= the number of shares of Common Stock purchasable under the Warrant or,
if only a portion of the Warrant is being exercised, the portion of the
Warrant being exercised (at the date of such calculation)
A= the Fair Market Value of one share of the Company's Common Stock (at
the date of such calculation)
B= Purchase Price (as adjusted to the date of such calculation)
(c) The Holder may employ the cashless exercise feature described in Section (b)
above only during the pendency of a Non-Registration Event as described in
Section 11 of the Subscription Agreement.
For purposes of Rule 144 promulgated under the 1933 Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
commenced, on the date this Warrant was originally issued pursuant to the
Subscription Agreement.
3. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
3.1. REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at
any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.
3.2. DISSOLUTION. In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver or
cause to be delivered the stock and other securities and property (including
cash, where applicable) receivable by the Holder of the Warrants after the
effective date of such dissolution pursuant to this Section 3 to a bank or trust
company (a "Trustee") having its principal office in New York, NY, as trustee
for the Holder of the Warrants.
3.3. CONTINUATION OF TERMS. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the Other Securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any Other Securities, including, in the case of any
4
such transfer, the person acquiring all or substantially all of the properties
or assets of the Company, whether or not such person shall have expressly
assumed the terms of this Warrant as provided in Section 4. In the event this
Warrant does not continue in full force and effect after the consummation of the
transaction described in this Section 3, then only in such event will the
Company's securities and property (including cash, where applicable) receivable
by the Holder of the Warrants be delivered to the Trustee as contemplated by
Section 3.2.
3.4 SHARE ISSUANCE. Until the Expiration Date, if the Company
shall issue any Common Stock except for the Excepted Issuances (as defined in
the Subscription Agreement), prior to the complete exercise of this Warrant for
a consideration less than the Purchase Price that would be in effect at the time
of such issue, then, and thereafter successively upon each such issue, the
Purchase Price shall be reduced to such other lower issue price. For purposes of
this adjustment, the issuance of any security or debt instrument of the Company
carrying the right to convert such security or debt instrument into Common Stock
or of any warrant, right or option to purchase Common Stock shall result in an
adjustment to the Purchase Price upon the issuance of the above-described
security, debt instrument, warrant, right, or option and again at any time upon
any subsequent issuances of shares of Common Stock upon exercise of such
conversion or purchase rights if such issuance is at a price lower than the
Purchase Price in effect upon such issuance. The reduction of the Purchase Price
described in this Section 3.4 is in addition to the other rights of the Holder
described in the Subscription Agreement.
4. EXTRAORDINARY EVENTS REGARDING COMMON STOCK. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be adjusted to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Purchase Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Purchase Price in effect
on the date of such exercise.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the Holder of the Warrant and any
Warrant Agent of the Company (appointed pursuant to Section 11 hereof).
5
6. RESERVATION OF STOCK, ETC. ISSUABLE ON EXERCISE OF WARRANT;
FINANCIAL STATEMENTS. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrants, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
7. ASSIGNMENT; EXCHANGE OF WARRANT. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "Transferor"). On the
surrender for exchange of this Warrant, with the Transferor's endorsement in the
form of Exhibit B attached hereto (the "Transferor Endorsement Form") and
together with an opinion of counsel reasonably satisfactory to the Company that
the transfer of this Warrant will be in compliance with applicable securities
laws, the Company at its expense, twice, only, but with payment by the
Transferor of any applicable transfer taxes, will issue and deliver to or on the
order of the Transferor thereof a new Warrant or Warrants of like tenor, in the
name of the Transferor and/or the transferee(s) specified in such Transferor
Endorsement Form (each a "Transferee"), calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant so surrendered by the Transferor. No such transfers shall
result in a public distribution of the Warrant.
8. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense, twice only, will execute and deliver, in lieu thereof, a new Warrant of
like tenor.
9. REGISTRATION RIGHTS. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in the Subscription Agreement. The terms of the Subscription Agreement are
incorporated herein by this reference.
10. MAXIMUM EXERCISE. The Holder shall not be entitled to exercise this
Warrant on an exercise date nor may the Company exercise its right to give a
Call Notice (as defined in Section 11) in connection with that number of Common
Stock which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates on an exercise date or
Call Date, and (ii) the number of Common Stock issuable upon the exercise of
this Warrant with respect to which the determination of this limitation is being
made on an exercise date or Call Date, which would result in beneficial
ownership by the Holder and its affiliates of more than 4.99% of the outstanding
Common Stock on such date. For the purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. Subject to the foregoing, the Holder shall not be limited to
aggregate exercises which would result in the issuance of more than 4.99%. The
restriction described in this paragraph may be revoked upon sixty-one (61) days
prior notice from the Holder to the Company. The Holder may allocate which of
the equity of the Company deemed beneficially owned by the Subscriber shall be
included in the 4.99% amount described above and which shall be allocated to the
excess above 4.99%.
11. CALL. The Company shall have the option to "call" the exercise of
shares issuable upon exercise of this Warrant (the "Warrant Call") in accordance
with and governed by the following:
(a) The Company shall exercise the Warrant Call by giving to
the Warrant Holder a written notice of call (the "Call Notice") during the
period in which the Warrant Call may be exercised. The effective date of each
Call Notice (the "Call Date") is the date on which notice is effective under the
notice provision of Section 14 of this Warrant.
6
(b) The Company's right to exercise the Warrant Call shall
commence thirty trading days after the actual effective date of a Registration
Statement described in Section 11.1(iv) of the Subscription Agreement and end
thirty trading days prior to the Expiration Date.
(c) The number of shares of Common Stock to be issued upon
exercise of the Warrant which are subject to a Call Notice must be registered in
a Registration Statement effective from twenty (20) trading days prior to the
Call Date and through the date such Common Stock is actually delivered to the
Warrant Holder ("Delivery Date").
(d) A Call Notice may be given not sooner than fifteen trading
days after the prior Call Date.
(e) A Call Notice may be given by the Company in connection
with shares of Common Stock issuable upon exercise of the Warrant only within
ten days after the Common Stock has had a closing price as reported for the
Principal Market (as defined in the Subscription Agreement) of two hundred and
fifty percent (250%) of the Purchase Price for ten (10) consecutive trading days
("Lookback Period").
(f) The Common Stock must be listed on the Principal Market
for the Lookback Period and through the Delivery Date.
(g) The Company shall not have received a notice from the
Principal Market during the ninety calendar days prior to the Call Date that the
Company or its Common Stock does not meet the requirements for continued
quotation, listing or trading on the Principal Market.
(h) The Company and the Common Stock shall meet the
requirements for continued quotation, listing or trading on the Principal Market
for the Lookback Period and through the Delivery Date.
(i) Unless otherwise agreed to by the Holder of this Warrant,
a Call Notice must be given to all Warrant Holders who receive Warrants similar
to this Warrant (in terms of exercise price and other principal terms) issued on
or about the same Issue Date as this Warrant, in proportion to the amounts of
Common Stock which may be purchased by the respective Warrant Holders in
accordance with the respective Warrants held by each.
(j) The Warrant Holder shall exercise his Warrant rights and
purchase the Called Warrant Shares and pay for same within fourteen trading days
after the Call Date. If the Warrant Holder fails to timely pay the amount
required by the Warrant Call, the Company's sole remedy shall be to cancel a
corresponding amount of this Warrant.
(k) The Company may not exercise the right to Call this
Warrant after the occurrence of a default by the Company of a material term of
this Warrant or the Subscription Agreement.
12. WARRANT AGENT. The Company may, by written notice to the Holder of
the Warrant, appoint an agent (a "Warrant Agent") for the purpose of issuing
Common Stock (or Other Securities) on the exercise of this Warrant pursuant to
Section 1, exchanging this Warrant pursuant to Section 7, and replacing this
Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such Warrant Agent.
13. TRANSFER ON THE COMPANY'S BOOKS. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
7
14. NOTICES. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) 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. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company to: Alternate Energy Corp.,
000-0000 Xxxxx Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0, Attn: Xxxxxx
Xxxxxx, Chairman/CEO, telecopier number: (000) 000-0000.
15. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York County in the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
8
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above.
ALTERNATE ENERGY CORP.
By:
---------------------------------
Name: Xxxxxx Xxxxxx
Title: CEO
Witness:
_______________________________
9
EXHIBIT A
FORM OF SUBSCRIPTION
(to be signed only on exercise of Warrant)
TO: ALTERNATE ENERGY CORP.
The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):
___ ________ shares of the Common Stock covered by such Warrant; or
___ the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
___ $__________ in lawful money of the United States; and/or
___ the cancellation of such portion of the attached Warrant as is exercisable
for a total of _______ shares of Common Stock (using a Fair Market Value of
$_______ per share for purposes of this calculation); and/or
___ the cancellation of such number of shares of Common Stock as is necessary,
in accordance with the formula set forth in Section 2, to exercise this Warrant
with respect to the maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to ______________________________________________________
whose address is _______________________________________________________________
________________________________________________________________________________
Number of Shares of Common Stock Beneficially Owned on the date of exercise:
Less than five percent (5%) of the outstanding Common Stock of Alternate Energy
Corp.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act"), or pursuant to an exemption from
registration under the Securities Act.
Dated:___________________
_________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
_________________________________________
_________________________________________
(Address)
10
EXHIBIT B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Alternate Energy Corp. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Alternate Energy Corp. with full power of substitution in the premises.
------------------------ ----------------------------- -------------------------
TRANSFEREES PERCENTAGE TRANSFERRED NUMBER TRANSFERRED
------------------------ ----------------------------- -------------------------
------------------------ ----------------------------- -------------------------
------------------------ ----------------------------- -------------------------
------------------------ ----------------------------- -------------------------
Dated: ______________, ___________
_________________________________________
(Signature must conform to name of holder
as specified on the face of the warrant)
Signed in the presence of:
__________________________ _________________________________________
(Name) _________________________________________
(address)
ACCEPTED AND AGREED:
[TRANSFEREE] _________________________________________
_________________________________________
(address)
__________________________
(Name)
Exhibit B-1
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ALTERNATE ENERGY CORP. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase __________ shares of
Common Stock of Alternate Energy Corp.
(subject to adjustment as provided herein)
CLASS B COMMON STOCK PURCHASE WARRANT
No. 2005-B-001 Issue Date: March ____, 2005
ALTERNATE ENERGY CORP., a corporation organized under the laws of the
State of Nevada (the "Company"), hereby certifies that, for value received,
PLATINUM PARTNERS VALUE ARBITRAGE FUND LP, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Fax: (000) 000-0000, or its assigns (the "Holder"), is entitled,
subject to the terms set forth below, to purchase from the Company at any time
after the Issue Date until 5:00 p.m., E.S.T on the ninetieth day that the
Registration Statement (as defined in the Subscription Agreement) has been
effective for the public resale of the Warrant Shares (the "Expiration Date"),
up to _________ fully paid and nonassessable shares of Common Stock at a per
share purchase price of $_____. The aforedescribed purchase price per share, as
adjusted from time to time as herein provided, is referred to herein as the
"Purchase Price." The number and character of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided herein. The Company may
reduce the Purchase Price without the consent of the Holder. Capitalized terms
used and not otherwise defined herein shall have the meanings set forth in that
certain Subscription Agreement (the "SUBSCRIPTION AGREEMENT"), dated March ___,
2005, entered into by the Company and Holder's of the Class B Warrants.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Alternate Energy Corp. and any
corporation which shall succeed or assume the obligations of Alternate Energy
Corp. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.001 par value per share, as authorized on the date of the Subscription
Agreement, and (b) any other securities into which or for which any of the
securities described in (a) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 5 or otherwise.
(d) The term "Warrant Shares" shall mean the Common Stock issuable upon
exercise of this Warrant.
1
1. EXERCISE OF WARRANT.
1.1. NUMBER OF SHARES ISSUABLE UPON EXERCISE. From and after
the Issue Date through and including the Expiration Date, the Holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of subsection 1.2 or upon exercise of this Warrant in
part in accordance with subsection 1.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.
1.2. FULL EXERCISE. This Warrant may be exercised in full by
the Holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such Holder and surrender of the original Warrant within four (4)
days of exercise, to the Company at its principal office or at the office of its
Warrant Agent (as provided hereinafter), accompanied by payment, in cash, wire
transfer or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price then in
effect.
1.3. PARTIAL EXERCISE. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the manner and
at the place provided in subsection 1.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of whole shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, the whole number of shares of Common
Stock for which such Warrant may still be exercised.
1.4. FAIR MARKET VALUE. Fair Market Value of a share of Common
Stock as of a particular date (the "Determination Date") shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ"), National Market System, the NASDAQ SmallCap
Market or the American Stock Exchange, LLC, then the closing or last sale price,
respectively, reported for the last business day immediately preceding the
Determination Date;
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System, the NASDAQ SmallCap Market or
the American Stock Exchange, Inc., but is traded in the over-the-counter market,
then the average of the closing bid and ask prices reported for the last
business day immediately preceding the Determination Date;
(c) Except as provided in clause (d) below, if the
Company's Common Stock is not publicly traded, then as the Holder and the
Company agree, or in the absence of such an agreement, by arbitration in
accordance with the rules then standing of the American Arbitration Association,
before a single arbitrator to be chosen from a panel of persons qualified by
education and training to pass on the matter to be decided; or
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all amounts to
be payable per share to holders of the Common Stock pursuant to the charter in
the event of such liquidation, dissolution or winding up, plus all other amounts
to be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.
2
1.5. COMPANY ACKNOWLEDGMENT. The Company will, at the time of
the exercise of the Warrant, upon the request of the Holder hereof acknowledge
in writing its continuing obligation to afford to such Holder any rights to
which such Holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the Holder shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such Holder any such rights.
1.6. TRUSTEE FOR WARRANT HOLDERS. In the event that a bank or
trust company shall have been appointed as trustee for the Holder of the
Warrants pursuant to Subsection 3.2, such bank or trust company shall have all
the powers and duties of a warrant agent (as hereinafter described) and shall
accept, in its own name for the account of the Company or such successor person
as may be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.
1.7 DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. The
Company agrees that the shares of Common Stock purchased upon exercise of this
Warrant shall be deemed to be issued to the Holder hereof as the record owner of
such shares as of the close of business on the date on which this Warrant shall
have been surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within four (4) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder hereof, or as such Holder
(upon payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share of Common Stock, together with any other stock or
other securities and property (including cash, where applicable) to which such
Holder is entitled upon such exercise pursuant to Section 1 or otherwise.
2. CASHLESS EXERCISE.
(a) If a Registration Statement (as defined in the
Subscription Agreement) ("Registration Statement") is effective and the Holder
may sell its shares of Common Stock upon exercise hereof pursuant to the
Registration Statement, this Warrant may be exercisable in whole or in part for
cash only as set forth in Section 1 above. If no such Registration Statement is
available during the time that such Registration Statement is required to be
effective pursuant to the terms of the Subscription Agreement, then payment upon
exercise may be made at the option of the Holder either in (i) cash, wire
transfer or by certified or official bank check payable to the order of the
Company equal to the applicable aggregate Purchase Price, (ii) by delivery of
Common Stock issuable upon exercise of the Warrants in accordance with Section
(b) below or (iii) by a combination of any of the foregoing methods, for the
number of Common Stock specified in such form (as such exercise number shall be
adjusted to reflect any adjustment in the total number of shares of Common Stock
issuable to the holder per the terms of this Warrant) and the holder shall
thereupon be entitled to receive the number of duly authorized, validly issued,
fully-paid and non-assessable shares of Common Stock (or Other Securities)
determined as provided herein.
(b) If the Fair Market Value of one share of Common Stock is
greater than the Purchase Price (at the date of calculation as set forth below),
in lieu of exercising this Warrant for cash, the holder may elect to receive
shares equal to the value (as determined below) of this Warrant (or the portion
thereof being cancelled) by surrender of this Warrant at the principal office of
the Company together with the properly endorsed Subscription Form in which event
the Company shall issue to the holder a number of shares of Common Stock
computed using the following formula:
3
X=Y (A-B)
-----
A
Where X= the number of shares of Common Stock to be issued to the
holder
Y= the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being exercised (at the
date of such calculation)
A= the Fair Market Value of one share of the Company's Common
Stock (at the date of such calculation)
B= Purchase Price (as adjusted to the date of such calculation)
(c) The Holder may employ the cashless exercise feature described in Section (b)
above only during the pendency of a Non-Registration Event as described in
Section 11 of the Subscription Agreement.
For purposes of Rule 144 promulgated under the 1933 Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
commenced, on the date this Warrant was originally issued pursuant to the
Subscription Agreement.
3. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
3.1. REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at
any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.
3.2. DISSOLUTION. In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver or
cause to be delivered the stock and other securities and property (including
cash, where applicable) receivable by the Holder of the Warrants after the
effective date of such dissolution pursuant to this Section 3 to a bank or trust
company (a "Trustee") having its principal office in New York, NY, as trustee
for the Holder of the Warrants.
3.3. CONTINUATION OF TERMS. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the Other Securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any Other Securities, including, in the case of any
such transfer, the person acquiring all or substantially all of the properties
or assets of the Company, whether or not such person shall have expressly
4
assumed the terms of this Warrant as provided in Section 4. In the event this
Warrant does not continue in full force and effect after the consummation of the
transaction described in this Section 3, then only in such event will the
Company's securities and property (including cash, where applicable) receivable
by the Holder of the Warrants be delivered to the Trustee as contemplated by
Section 3.2.
3.4 SHARE ISSUANCE. Until the Expiration Date, if the Company
shall issue any Common Stock except for the Excepted Issuances (as defined in
the Subscription Agreement), prior to the complete exercise of this Warrant for
a consideration less than the Purchase Price that would be in effect at the time
of such issue, then, and thereafter successively upon each such issue, the
Purchase Price shall be reduced to such other lower issue price. For purposes of
this adjustment, the issuance of any security or debt instrument of the Company
carrying the right to convert such security or debt instrument into Common Stock
or of any warrant, right or option to purchase Common Stock shall result in an
adjustment to the Purchase Price upon the issuance of the above-described
security, debt instrument, warrant, right, or option and again at any time upon
any subsequent issuances of shares of Common Stock upon exercise of such
conversion or purchase rights if such issuance is at a price lower than the
Purchase Price in effect upon such issuance. The reduction of the Purchase Price
described in this Section 3.4 is in addition to the other rights of the Holder
described in the Subscription Agreement.
4. EXTRAORDINARY EVENTS REGARDING COMMON STOCK. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be adjusted to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Purchase Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Purchase Price in effect
on the date of such exercise.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the Holder of the Warrant and any
Warrant Agent of the Company (appointed pursuant to Section 11 hereof).
5
6. RESERVATION OF STOCK, ETC. ISSUABLE ON EXERCISE OF WARRANT;
FINANCIAL STATEMENTS. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrants, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
7. ASSIGNMENT; EXCHANGE OF WARRANT. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "Transferor"). On the
surrender for exchange of this Warrant, with the Transferor's endorsement in the
form of Exhibit B attached hereto (the "Transferor Endorsement Form") and
together with an opinion of counsel reasonably satisfactory to the Company that
the transfer of this Warrant will be in compliance with applicable securities
laws, the Company at its expense, twice, only, but with payment by the
Transferor of any applicable transfer taxes, will issue and deliver to or on the
order of the Transferor thereof a new Warrant or Warrants of like tenor, in the
name of the Transferor and/or the transferee(s) specified in such Transferor
Endorsement Form (each a "Transferee"), calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant so surrendered by the Transferor. No such transfers shall
result in a public distribution of the Warrant.
8. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense, twice only, will execute and deliver, in lieu thereof, a new Warrant of
like tenor.
9. REGISTRATION RIGHTS. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in the Subscription Agreement. The terms of the Subscription Agreement are
incorporated herein by this reference.
10. MAXIMUM EXERCISE. The Holder shall not be entitled to exercise this
Warrant on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates on an exercise date,
and (ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this limitation is being made
on an exercise date, which would result in beneficial ownership by the Holder
and its affiliates of more than 4.99% of the outstanding shares of Common Stock
on such date. For the purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to
the foregoing, the Holder shall not be limited to aggregate exercises which
would result in the issuance of more than 4.99%. The restriction described in
this paragraph may be waive, in whole or in part, revoked upon sixty-one (61)
days prior notice from the Holder to the Company. The Holder may allocate which
of the equity of the Company deemed beneficially owned by the Subscriber shall
be included in the 4.99% amount described above and which shall be allocated to
the excess above 4.99%.
11. WARRANT AGENT. The Company may, by written notice to the Holder of
the Warrant, appoint an agent (a "Warrant Agent") for the purpose of issuing
Common Stock (or Other Securities) on the exercise of this Warrant pursuant to
Section 1, exchanging this Warrant pursuant to Section 7, and replacing this
Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such Warrant Agent.
6
12. TRANSFER ON THE COMPANY'S BOOKS. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
13. NOTICES. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) 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. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company to: Alternate Energy Corp.,
000-0000 Xxxxx Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0, Attn: Xxxxxx
Xxxxxx, Chairman/CEO, telecopier number: (000) 000-0000.
14. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York County in the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
7
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above.
ALTERNATE ENERGY CORP.
By:
-----------------------------------
Name: Xxxxxx Xxxxxx
Title: CEO
Witness:
_______________________
8
EXHIBIT A
FORM OF SUBSCRIPTION
(to be signed only on exercise of Warrant)
TO: ALTERNATE ENERGY CORP.
The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):
___ ________ shares of the Common Stock covered by such Warrant; or
___ the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
___ $__________ in lawful money of the United States; and/or
___ the cancellation of such portion of the attached Warrant as is exercisable
for a total of _______ shares of Common Stock (using a Fair Market Value of
$_______ per share for purposes of this calculation); and/or
___ the cancellation of such number of shares of Common Stock as is necessary,
in accordance with the formula set forth in Section 2, to exercise this Warrant
with respect to the maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to ______________________________________________________
whose address is _______________________________________________________________
________________________________________________________________________________
Number of Shares of Common Stock Beneficially Owned on the date of exercise:
Less than five percent (5%) of the outstanding Common Stock of Alternate Energy
Corp.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act"), or pursuant to an exemption from
registration under the Securities Act.
Dated:___________________
_________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
_________________________________________
_________________________________________
(Address)
EXHIBIT B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Alternate Energy Corp. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Alternate Energy Corp. with full power of substitution in the premises.
------------------------ ----------------------------- -------------------------
TRANSFEREES PERCENTAGE TRANSFERRED NUMBER TRANSFERRED
------------------------ ----------------------------- -------------------------
------------------------ ----------------------------- -------------------------
------------------------ ----------------------------- -------------------------
------------------------ ----------------------------- -------------------------
Dated: ______________, ___________
_________________________________________
(Signature must conform to name of holder
as specified on the face of the warrant)
Signed in the presence of:
__________________________ _________________________________________
(Name) _________________________________________
(address)
ACCEPTED AND AGREED:
[TRANSFEREE] _________________________________________
_________________________________________
(address)
__________________________
(Name)
Exhibit C-1
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ALTERNATE ENERGY CORP. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase ___________ shares of
Common Stock of Alternate Energy Corp.
(subject to adjustment as provided herein)
CLASS C COMMON STOCK PURCHASE WARRANT
No. 2005-C-001 Issue Date: March ____, 2005
ALTERNATE ENERGY CORP., a corporation organized under the laws of the
State of Nevada (the "Company"), hereby certifies that, for value received,
___________________________, __________________________________________________,
or its assigns (the "Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company at any time after the Issue Date until 5:00
p.m., E.S.T on the third (3rd) anniversary of the Issue Date (the "Expiration
Date"), up to 1,000,000 fully paid and nonassessable shares of Common Stock at a
per share purchase price of $1.00. The aforedescribed purchase price per share,
as adjusted from time to time as herein provided, is referred to herein as the
"Purchase Price." The number and character of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided herein. The Company may
reduce the Purchase Price without the consent of the Holder. Capitalized terms
used and not otherwise defined herein shall have the meanings set forth in that
certain Subscription Agreement (the "SUBSCRIPTION AGREEMENT"), dated March ___,
2005, entered into by the Company and Holder's of the Company's Class C
Warrants.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Alternate Energy Corp. and any
corporation which shall succeed or assume the obligations of Alternate Energy
Corp. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.001 par value per share, as authorized on the date of the Subscription
Agreement, and (b) any other securities into which or for which any of the
securities described in (a) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 5 or otherwise.
(d) The term "Warrant Shares" shall mean the Common Stock issuable upon
exercise of this Warrant.
1
1. EXERCISE OF WARRANT.
1.1. NUMBER OF SHARES ISSUABLE UPON EXERCISE. From and after
the Issue Date through and including the Expiration Date, the Holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of subsection 1.2 or upon exercise of this Warrant in
part in accordance with subsection 1.3, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.
1.2. FULL EXERCISE. This Warrant may be exercised in full by
the Holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such Holder and surrender of the original Warrant within four (4)
days of exercise, to the Company at its principal office or at the office of its
Warrant Agent (as provided hereinafter), accompanied by payment, in cash, wire
transfer or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price then in
effect.
1.3. PARTIAL EXERCISE. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the manner and
at the place provided in subsection 1.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of whole shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, the whole number of shares of Common
Stock for which such Warrant may still be exercised.
1.4. FAIR MARKET VALUE. Fair Market Value of a share of Common
Stock as of a particular date (the "Determination Date") shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ"), National Market System, the NASDAQ SmallCap
Market or the American Stock Exchange, LLC, then the closing or last sale price,
respectively, reported for the last business day immediately preceding the
Determination Date;
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System, the NASDAQ SmallCap Market or
the American Stock Exchange, Inc., but is traded in the over-the-counter market,
then the average of the closing bid and ask prices reported for the last
business day immediately preceding the Determination Date;
(c) Except as provided in clause (d) below, if the
Company's Common Stock is not publicly traded, then as the Holder and the
Company agree, or in the absence of such an agreement, by arbitration in
accordance with the rules then standing of the American Arbitration Association,
before a single arbitrator to be chosen from a panel of persons qualified by
education and training to pass on the matter to be decided; or
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all amounts to
be payable per share to holders of the Common Stock pursuant to the charter in
the event of such liquidation, dissolution or winding up, plus all other amounts
to be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.
2
1.5. COMPANY ACKNOWLEDGMENT. The Company will, at the time of
the exercise of the Warrant, upon the request of the Holder hereof acknowledge
in writing its continuing obligation to afford to such Holder any rights to
which such Holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the Holder shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such Holder any such rights.
1.6. TRUSTEE FOR WARRANT HOLDERS. In the event that a bank or
trust company shall have been appointed as trustee for the Holder of the
Warrants pursuant to Subsection 3.2, such bank or trust company shall have all
the powers and duties of a warrant agent (as hereinafter described) and shall
accept, in its own name for the account of the Company or such successor person
as may be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.
1.7 DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. The
Company agrees that the shares of Common Stock purchased upon exercise of this
Warrant shall be deemed to be issued to the Holder hereof as the record owner of
such shares as of the close of business on the date on which this Warrant shall
have been surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within four (4) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder hereof, or as such Holder
(upon payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share of Common Stock, together with any other stock or
other securities and property (including cash, where applicable) to which such
Holder is entitled upon such exercise pursuant to Section 1 or otherwise.
2. CASHLESS EXERCISE.
(a) If a Registration Statement (as defined in the
Subscription Agreement) ("Registration Statement") is effective and the Holder
may sell its shares of Common Stock upon exercise hereof pursuant to the
Registration Statement, this Warrant may be exercisable in whole or in part for
cash only as set forth in Section 1 above. If no such Registration Statement is
available during the time that such Registration Statement is required to be
effective pursuant to the terms of the Subscription Agreement, then payment upon
exercise may be made at the option of the Holder either in (i) cash, wire
transfer or by certified or official bank check payable to the order of the
Company equal to the applicable aggregate Purchase Price, (ii) by delivery of
Common Stock issuable upon exercise of the Warrants in accordance with Section
(b) below or (iii) by a combination of any of the foregoing methods, for the
number of Common Stock specified in such form (as such exercise number shall be
adjusted to reflect any adjustment in the total number of shares of Common Stock
issuable to the holder per the terms of this Warrant) and the holder shall
thereupon be entitled to receive the number of duly authorized, validly issued,
fully-paid and non-assessable shares of Common Stock (or Other Securities)
determined as provided herein.
(b) If the Fair Market Value of one share of Common Stock is
greater than the Purchase Price (at the date of calculation as set forth below),
in lieu of exercising this Warrant for cash, the holder may elect to receive
shares equal to the value (as determined below) of this Warrant (or the portion
thereof being cancelled) by surrender of this Warrant at the principal office of
the Company together with the properly endorsed Subscription Form in which event
the Company shall issue to the holder a number of shares of Common Stock
computed using the following formula:
3
X=Y (A-B)
-----
A
Where X= the number of shares of Common Stock to be issued to the
holder
Y= the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being exercised (at the
date of such calculation)
A= the Fair Market Value of one share of the Company's Common
Stock (at the date of such calculation)
B= Purchase Price (as adjusted to the date of such calculation)
(c) The Holder may employ the cashless exercise feature described in Section (b)
above only during the pendency of a Non-Registration Event as described in
Section 11 of the Subscription Agreement.
For purposes of Rule 144 promulgated under the 1933 Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
commenced, on the date this Warrant was originally issued pursuant to the
Subscription Agreement.
3. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
3.1. REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at
any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.
3.2. DISSOLUTION. In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver or
cause to be delivered the stock and other securities and property (including
cash, where applicable) receivable by the Holder of the Warrants after the
effective date of such dissolution pursuant to this Section 3 to a bank or trust
company (a "Trustee") having its principal office in New York, NY, as trustee
for the Holder of the Warrants.
3.3. CONTINUATION OF TERMS. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the Other Securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any Other Securities, including, in the case of any
4
such transfer, the person acquiring all or substantially all of the properties
or assets of the Company, whether or not such person shall have expressly
assumed the terms of this Warrant as provided in Section 4. In the event this
Warrant does not continue in full force and effect after the consummation of the
transaction described in this Section 3, then only in such event will the
Company's securities and property (including cash, where applicable) receivable
by the Holder of the Warrants be delivered to the Trustee as contemplated by
Section 3.2.
3.4 SHARE ISSUANCE. Until the Expiration Date, if the Company
shall issue any Common Stock except for the Excepted Issuances (as defined in
the Subscription Agreement), prior to the complete exercise of this Warrant for
a consideration less than the Purchase Price that would be in effect at the time
of such issue, then, and thereafter successively upon each such issue, the
Purchase Price shall be reduced to such other lower issue price. For purposes of
this adjustment, the issuance of any security or debt instrument of the Company
carrying the right to convert such security or debt instrument into Common Stock
or of any warrant, right or option to purchase Common Stock shall result in an
adjustment to the Purchase Price upon the issuance of the above-described
security, debt instrument, warrant, right, or option and again at any time upon
any subsequent issuances of shares of Common Stock upon exercise of such
conversion or purchase rights if such issuance is at a price lower than the
Purchase Price in effect upon such issuance. The reduction of the Purchase Price
described in this Section 3.4 is in addition to the other rights of the Holder
described in the Subscription Agreement.
4. EXTRAORDINARY EVENTS REGARDING COMMON STOCK. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be adjusted to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Purchase Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Purchase Price in effect
on the date of such exercise.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the Holder of the Warrant and any
Warrant Agent of the Company (appointed pursuant to Section 11 hereof).
5
6. RESERVATION OF STOCK, ETC. ISSUABLE ON EXERCISE OF WARRANT;
FINANCIAL STATEMENTS. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrants, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
7. ASSIGNMENT; EXCHANGE OF WARRANT. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "Transferor"). On the
surrender for exchange of this Warrant, with the Transferor's endorsement in the
form of Exhibit B attached hereto (the "Transferor Endorsement Form") and
together with an opinion of counsel reasonably satisfactory to the Company that
the transfer of this Warrant will be in compliance with applicable securities
laws, the Company at its expense, twice, only, but with payment by the
Transferor of any applicable transfer taxes, will issue and deliver to or on the
order of the Transferor thereof a new Warrant or Warrants of like tenor, in the
name of the Transferor and/or the transferee(s) specified in such Transferor
Endorsement Form (each a "Transferee"), calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant so surrendered by the Transferor. No such transfers shall
result in a public distribution of the Warrant.
8. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense, twice only, will execute and deliver, in lieu thereof, a new Warrant of
like tenor.
9. REGISTRATION RIGHTS. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in the Subscription Agreement. The terms of the Subscription Agreement are
incorporated herein by this reference.
10. MAXIMUM EXERCISE. The Holder shall not be entitled to exercise this
Warrant on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates on an exercise date,
and (ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this limitation is being made
on an exercise date, which would result in beneficial ownership by the Holder
and its affiliates of more than 4.99% of the outstanding shares of Common Stock
on such date. For the purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to
the foregoing, the Holder shall not be limited to aggregate exercises which
would result in the issuance of more than 4.99%. The restriction described in
this paragraph may be waive, in whole or in part, revoked upon sixty-one (61)
days prior notice from the Holder to the Company. The Holder may allocate which
of the equity of the Company deemed beneficially owned by the Subscriber shall
be included in the 4.99% amount described above and which shall be allocated to
the excess above 4.99%.
11. WARRANT AGENT. The Company may, by written notice to the Holder of
the Warrant, appoint an agent (a "Warrant Agent") for the purpose of issuing
Common Stock (or Other Securities) on the exercise of this Warrant pursuant to
Section 1, exchanging this Warrant pursuant to Section 7, and replacing this
Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such Warrant Agent.
12. TRANSFER ON THE COMPANY'S BOOKS. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
6
13. NOTICES. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) 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. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company to: Alternate Energy Corp.,
000-0000 Xxxxx Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0, Attn: Xxxxxx
Xxxxxx, Chairman/CEO, telecopier number: (000) 000-0000.
14. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York County in the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
7
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above.
ALTERNATE ENERGY CORP.
By:
---------------------------------
Name: Xxxxxx Xxxxxx
Title: CEO
Witness:
_______________________________
8
EXHIBIT A
FORM OF SUBSCRIPTION
(to be signed only on exercise of Warrant)
TO: ALTERNATE ENERGY CORP.
The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):
___ ________ shares of the Common Stock covered by such Warrant; or
___ the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
___ $__________ in lawful money of the United States; and/or
___ the cancellation of such portion of the attached Warrant as is exercisable
for a total of _______ shares of Common Stock (using a Fair Market Value of
$_______ per share for purposes of this calculation); and/or
___ the cancellation of such number of shares of Common Stock as is necessary,
in accordance with the formula set forth in Section 2, to exercise this Warrant
with respect to the maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to ______________________________________________________
whose address is _______________________________________________________________
________________________________________________________________________________
Number of Shares of Common Stock Beneficially Owned on the date of exercise:
Less than five percent (5%) of the outstanding Common Stock of Alternate Energy
Corp.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act"), or pursuant to an exemption from
registration under the Securities Act.
Dated:___________________
_________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
_________________________________________
_________________________________________
(Address)
9
EXHIBIT B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Alternate Energy Corp. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Alternate Energy Corp. with full power of substitution in the premises.
------------------------ ----------------------------- -------------------------
TRANSFEREES PERCENTAGE TRANSFERRED NUMBER TRANSFERRED
------------------------ ----------------------------- -------------------------
------------------------ ----------------------------- -------------------------
------------------------ ----------------------------- -------------------------
------------------------ ----------------------------- -------------------------
Dated: ______________, ___________
_________________________________________
(Signature must conform to name of holder
as specified on the face of the warrant)
Signed in the presence of:
__________________________ _________________________________________
(Name) _________________________________________
(address)
ACCEPTED AND AGREED:
[TRANSFEREE] _________________________________________
_________________________________________
(address)
__________________________
(Name)
