EXHIBIT 10.14
NOTE INVESTOR RIGHTS AGREEMENT
This Note Investor Rights Agreement (this "AGREEMENT") is made and
entered into as of August 31, 2004 among National Coal Corp., a Florida
corporation (the "COMPANY"), and each of the purchasers executing this Agreement
and listed on SCHEDULE 1 attached hereto (collectively, the "PURCHASERS").
This Agreement is being entered into pursuant to the Note Purchase
Agreement, dated as of the date hereof, by and among the Company and the
Purchasers (the "PURCHASE AGREEMENT").
The Company and the Purchasers hereby agree as follows:
1. DEFINITIONS.
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"ADDITIONAL PURCHASE RIGHT" shall have the meaning set forth in Article
VIII of the Purchase Agreement.
"ADVICE" shall have the meaning set forth in Section 3(m).
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"ARTICLES OF INCORPORATION" means the Articles of Incorporation of the
Company, as amended.
"BLACKOUT PERIOD" shall have the meaning set forth in Section 3(n).
"BOARD" shall have the meaning set forth in Section 3(n).
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
Tennessee generally are authorized or required by law or other government
actions to close.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's Common Stock, par value $0.0001 per
share.
"EFFECTIVE DATE" means the date on which the Registration Statement is
first declared effective with respect to all Registrable Securities.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2.
"EVENT" shall have the meaning set forth in Section 7(e).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FILING DATE" means the 60th day following the Closing Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may be,
from time to time of Registrable Securities, including without limitation the
Purchasers and their assignees.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 5(c).
"LOSSES" shall have the meaning set forth in Section 5(a).
"NOTES" shall mean the 8% Convertible Promissory Notes of the Company
issued or issuable pursuant to the Purchase Agreement.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"PLACEMENT AGENT WARRANTS" means the warrants to purchase shares of
Common Stock issued to Xxxxxxx Xxxx Partners (a division of Pali Capital Inc.)
and/or its designees as compensation for services rendered in connection with
the transactions set forth in the Purchase Agreement.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
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"REGISTRABLE SECURITIES" means (a) the Conversion Shares and the
Warrant Shares (without regard to any limitations on beneficial ownership
contained in the Articles of Incorporation or Warrants) or other securities
issued or issuable to each Purchaser or its transferee or designee (i) upon
conversion of the Notes or the Note Conversion Shares and/or upon exercise of
the Note Conversion Warrants, or (ii) upon any dividend or distribution with
respect to, any exchange for or any replacement of such Notes, Note Conversion
Shares or Note Conversion Warrants (for avoidance of doubt, Registrable
Securities includes shares of Common Stock issued upon conversion of Preferred
Stock and/or upon exercise of the Warrants, in each case, issued pursuant to
Article VIII of the Purchase Agreement) or (iii) upon any conversion, exercise
or exchange of any securities issued in connection with any such distribution,
exchange or replacement; (b) the shares of Common Stock purchased by the
Purchasers from Xxxxxxx Xxxxxx and Xxxxxx Xxxxxx upon exercise of that certain
Stock Option Agreement, dated as of June 30, 2004, by and between Xxxxxxx Xxxxxx
and Xxxxxx Xxxxxx and Xxx Xxx, as indicated therein; (c) securities issued or
issuable upon any stock split, stock dividend, recapitalization or similar event
with respect to any of the foregoing; and (d) any other security issued as a
dividend or other distribution with respect to, in exchange for, in replacement
or redemption of, or in reduction of the liquidation value of, any of the
securities referred to in the preceding clauses; provided, however, that such
securities shall cease to be Registrable Securities when such securities have
been sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction or when such securities may be
sold without any restriction pursuant to Rule 144(k) as determined by the
counsel to the Company pursuant to a written opinion letter, addressed to the
Company's transfer agent to such effect as described in Section 2 of this
Agreement.
"REGISTRATION STATEMENT" means the registration statements and any
additional registration statements contemplated by Section 2, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference in such registration
statement.
"RULE 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"RULE 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
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"SPECIAL COUNSEL" means Xxxxxx and Xxxx LLP.
"WARRANTS" shall have the meaning assigned in the Purchase Agreement
and, for purposes of this Agreement, shall include without limitation the
Placement Agent Warrants.
"WARRANT SHARES" means the shares of Common Stock issuable upon the
exercise of the Note Conversion Warrants and the shares of Common Stock issuable
upon the exercise of the Placement Agent Warrants.
2. REGISTRATION. As soon as possible following the Closing Date
(but not later than the Filing Date), the Company shall prepare and file with
the Commission a "shelf" Registration Statement covering all Registrable
Securities for a secondary or resale offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3 (or if
such form is not available to the Company on Form SB-2 or another form
appropriate for such registration in accordance herewith). The Company shall use
its best efforts to cause the Registration Statement to be declared effective
under the Securities Act not later than one hundred and twenty (120) days after
the Closing Date (including filing with the Commission a request for
acceleration of effectiveness in accordance with Rule 461 promulgated under the
Securities Act within five (5) Business Days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission that a
Registration Statement will not be "reviewed," or not be subject to further
review) and to keep such Registration Statement continuously effective under the
Securities Act until such date as is the earlier of (x) the date when all
Registrable Securities covered by such Registration Statement have been sold or
(y) the date on which the Registrable Securities may be sold without any
restriction pursuant to Rule 144(k) as determined by the counsel to the Company
pursuant to a written opinion letter, addressed to the Company's transfer agent
to such effect (the "EFFECTIVENESS PERIOD"). Upon the initial filing thereof,
the Registration Statement shall cover at least 100% of the shares of Common
Stock for issuance upon the conversion of the Note Conversion Shares (assuming
the Notes are held to maturity and thereupon converted) and Preferred Stock
issuable pursuant to Article VIII of the Purchase Agreement (assuming the
conversion of all of the Notes), 100% of the shares of Common Stock for issuance
upon the exercise of the Note Conversion Warrants and Warrants issuable pursuant
to Article VIII of the Purchase Agreement (assuming the conversion of all of the
Notes) and 100% of the other Registrable Securities. If the Commission informs
the Company that it will not allow the Registration Statement to cover any of
the Registrable Securities, then the Registration Statement shall cover the
highest percentage of such Registrable Securities that the Commission will
allow. Such Registration Statement also shall cover, to the extent allowable
under the Securities Act and the Rules promulgated thereunder (including
Securities Act Rule 416), such indeterminate number of additional shares of
Common Stock resulting from stock splits, stock dividends or similar
transactions with respect to the Registrable Securities.
3. REGISTRATION PROCEDURES.
In connection with the Company's registration obligations hereunder,
the Company shall:
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(a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on Form S-3 (or if such form is not available to
the Company on Form SB-2 or another form appropriate for such registration in
accordance herewith) (which shall include a Plan of Distribution substantially
in the form of EXHIBIT A attached hereto), and cause the Registration Statement
to become effective and remain effective as provided herein; provided, however,
that not less than three (3) Business Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto, the Company shall (i) furnish to the Special Counsel, copies of all
such documents proposed to be filed, which documents (other than those
incorporated by reference) will be subject to the review of such Special
Counsel, and (ii) at the request of any Holder cause its officers and directors,
counsel and independent certified public accountants to respond to such
inquiries as shall be necessary, in the reasonable opinion of counsel to such
Holders, to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement or any
such Prospectus or any amendments or supplements thereto to which the Holders of
a majority of the Registrable Securities or the Special Counsel shall reasonably
object in writing within three (3) Business Days after their receipt thereof.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and to the extent any
Registrable Securities are not included in such Registration Statement for
reasons other than the failure of the Holder to comply with Section 3(m) hereof,
shall prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; (iii) respond as promptly as
possible to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as possible
provide the Holders true and complete copies of all correspondence from and to
the Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
In addition, the Company shall promptly prepare and file such amendments,
including post-effective amendments, to the Registration Statement and the
related prospectus and take all other actions as may be necessary to register
the sale of Registrable Securities by any Holder to whom the rights under this
Agreement have been assigned pursuant to Section 7(j).
(c) Notify the Holders of Registrable Securities to be sold and the
Special Counsel as promptly as possible (A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement or
additional Registration Statement is proposed to be filed (but in no event in
the case of this subparagraph (A), less than three (3) Business Days prior to
date of such filing); (B) when the Commission notifies the Company whether there
will be a "review" of such Registration Statement and whenever the
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Commission comments in writing on such Registration Statement; and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective, and after the effectiveness thereof: (i) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iii) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (iv) if the financial
statements included in the Registration Statement become ineligible for
inclusion therein or of the occurrence of any event that makes any statement
made in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. Without limitation to any remedies to which the
Holders may be entitled under this Agreement, if any of the events described in
Sections 3(c)(C)(i), 3(c)(C)(ii), 3(c)(C)(iii), or 3(c)(C)(iv) occur, the
Company shall use its best efforts to respond to and correct the event.
(d) Use its best efforts to avoid the issuance of, or, if issued, use
best efforts to obtain the withdrawal of, (i) any order suspending the
effectiveness of the Registration Statement or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.
(e) If requested by any Holder of Registrable Securities, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the Company reasonably agrees should
be included therein and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; provided, however, that the
Company shall not be required to take any action pursuant to this Section 3(e)
that would, in the written opinion of counsel for the Company (addressed to the
Special Counsel), violate applicable law.
(f) Furnish to each Holder and the Special Counsel, without charge, at
least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, and all exhibits to the
extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(g) Promptly deliver to each Holder and the Special Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the
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Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders and
the Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided, however,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process in any jurisdiction where it is
not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(i) Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold pursuant
to a Registration Statement, which certificates shall be free, to the extent
permitted by applicable law and the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any Holder may request at least two (2) Business
Days prior to any sale of Registrable Securities. In connection therewith, the
Company shall promptly after the effectiveness of the Registration Statement
cause an opinion of counsel to be delivered to and maintained with its transfer
agent, together with any other authorizations, certificates and directions
required by the transfer agent, which authorize and direct the transfer agent to
issue such Registrable Securities without legend upon sale by the Holder of such
shares of Registrable Securities under the Registration Statement.
(j) Upon the occurrence of any event contemplated by Section
3(c)(C)(iv), as promptly as possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an 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, in the light of the circumstances under which they were
made, not misleading.
(k) Cause all Registrable Securities relating to such Registration
Statement to be listed on any United States securities exchange, quotation
system, market or over-the-counter bulletin board, if any, on which similar
securities issued by the Company are then listed.
(l) Comply in all material respects with all applicable rules and
regulations of the
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Commission and make generally available to its security holders earnings
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any 3-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) commencing
on the first day of the first fiscal quarter of the Company after the effective
date of the Registration Statement, which statement shall conform to the
requirements of Rule 158.
(m) Request each selling Holder to furnish to the Company information
regarding such Holder and the distribution of such Registrable Securities as is
required by law or the Commission to be disclosed in the Registration Statement,
and the Company may exclude from such registration the Registrable Securities of
any such Holder who fails to furnish such information within a reasonable time
prior to the filing of each Registration Statement, supplemented Prospectus
and/or amended Registration Statement.
If the Registration Statement refers to any Holder by name or otherwise
as the holder of any securities of the Company, then such Holder shall have the
right to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c)(C)(i), 3(c)(C)(ii), 3(c)(C)(iii),
3(c)(C)(iv) or 3(n), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(j), or until it is advised in writing (the
"ADVICE") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement.
(n) If (i) there is material non-public information regarding the
Company which the Company's Board of Directors (the "BOARD") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose and which the Company would be required to disclose
under the Registration Statement or (iii) with respect to a registration
statement on a form other than Form S-3, if the Company reasonably determines
that, based on the advice of counsel, a post-effective amendment to the
registration statement must be filed with the Commission in order to update the
audited financial statements in the registration statement, or the Company
elects, in its discretion, to file a post-effective amendment to such
registration statement for the purpose of converting it to a Form S-3 after such
form becomes available for use by the Company, and, in either case, such
post-effective amendment is reviewed by the Commission, then (A) in the case of
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an event described in Section 3(n)(i) or 3(n)(ii), the Company may postpone or
suspend filing or effectiveness of a registration statement for a period not to
exceed 30 consecutive days, provided that the Company may not postpone or
suspend its obligation under Section 3(n)(i) or 3(n)(ii) for more than 45 days
in the aggregate during any 12 month period, and (B) in the case of an event
described in Section 3(n)(iii), provided the Company uses best efforts to
promptly cause such post-effective amendment to be declared effective by the
Commission, the Company may suspend effectiveness of a registration statement
for a period not to exceed 75 consecutive days, provided that the Company may
not suspend its obligation under Section 3(n)(iii) for more than 90 days in the
aggregate during any 12 month period (each, a "BLACKOUT PERIOD").
4. REGISTRATION EXPENSES.
All fees and expenses incident to the performance of or compliance with
this Agreement by the Company shall be borne by the Company whether or not the
Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with any
securities exchange, quotation system, market or over-the-counter bulletin board
on which Registrable Securities are required hereunder to be listed, (B) with
respect to filings required to be made with the Commission, and (C) in
compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of Special Counsel in connection with Blue
Sky qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing or photocopying
prospectuses), (iii) messenger, telephone and delivery expenses, (iv) Securities
Act liability insurance, if the Company so desires such insurance, (v) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement, including,
without limitation, the Company's independent public accountants (including, in
the case of an underwritten offering, the expenses of any comfort letters or
costs associated with the delivery by independent public accountants of a
comfort letter or comfort letters) and legal counsel, and (vi) fees and expenses
of the Special Counsel in connection with any Registration Statement hereunder,
not to exceed $7,500. In addition, the Company shall be responsible for all of
its internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
5. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, partners, agents, brokers (including brokers who offer and
sell Registrable
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Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees of each of
them, each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and reasonable attorneys' fees) and expenses (collectively, "LOSSES"), as
incurred, arising out of or relating to any untrue or alleged untrue statement
of a material fact contained or incorporated by reference in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or amendment or supplement thereto, in the
light of the circumstances under which they were made) not misleading, except to
the extent, but only to the extent, that (i) such untrue statements or omissions
are based solely upon information regarding such Holder furnished in writing to
the Company by such Holder expressly for use therein, which information was
reasonably relied on by the Company for use therein or to the extent that such
information relates to (x) such Holder and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of prospectus or in any amendment or supplement thereto
or (y) such Holder's proposed method of distribution of Registrable Securities
as set forth in Exhibit A (or as such Holder otherwise informs the Company in
writing); or (ii) in the case of an occurrence of an event of the type described
in Section 3(c)(C)(ii), 3(c)(C)(iii), 3(c)(C)(iv) or 3(n), the use by a Holder
of an outdated or defective Prospectus after the delivery to the Holder of
written notice from the Company that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 3(m).
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of an
Indemnified Party (as defined in Section 5(c) to this Agreement) and shall
survive the transfer of the Registrable Securities by the Holders.
(b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents and employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising solely
out of or based solely upon any omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that (i) such untrue statement or omission is contained in
or omitted from any information so furnished in writing by such Holder to the
Company specifically for inclusion in the Registration Statement or such
Prospectus and that
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such information was reasonably relied upon by the Company for use in the
Registration Statement, such Prospectus, or in any amendment or supplement
thereto, or to the extent that such information relates to (x) such Holder and
was reviewed and expressly approved in writing by such Holder expressly for use
in the Registration Statement, such Prospectus, or such form of prospectus or in
any amendment or supplement thereto or (y) such Holder's proposed method of
distribution of Registrable Securities as set forth in Exhibit A (or as such
Holder otherwise informs the Company in writing) or (ii) in the case of an
occurrence of an event of the type described in Section 3(c)(C)(ii),
3(c)(C)(iii), 3(c)(C)(iv) or 3(n), the use by a Holder of an outdated or
defective Prospectus after the delivery to the Holder of written notice from the
Company that the Prospectus is outdated or defective and prior to the receipt by
such Holder of the Advice contemplated in Section 3(m); provided, however, that
the indemnity agreement contained in this Section 5(b) shall not apply to
amounts paid in settlement of any Losses if such settlement is effected without
the prior written consent of the Holder, which consent shall not be unreasonably
withheld. Notwithstanding anything to the contrary contained herein, the Holder
shall be liable under this Section 5(b) for only that amount as does not exceed
the net proceeds to such Holder as a result of the sale of Registrable
Securities pursuant to such Registration Statement.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"INDEMNIFIED PARTY"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
reasonable fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel in writing (with a copy to the Indemnifying
Party) that a conflict of interest is likely to exist if the same counsel were
to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the reasonable expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect
11
any settlement of any pending Proceeding in respect of which any Indemnified
Party is a party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability on claims that are the subject matter
of such Proceeding and does not impose any monetary or other obligation or
restriction on the Indemnified Party.
All reasonable fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party, which notice shall be delivered no more frequently than on a
monthly basis (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) CONTRIBUTION. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying, Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
Notwithstanding anything to the contrary contained herein, the Holder shall be
required to contribute under this Section 5(d) for only that amount as does not
exceed the net proceeds to such Holder as a result of the sale of Registrable
Securities pursuant to such Registration Statement.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are
in addition
12
to any liability that the Indemnifying Parties may have to the Indemnified
Parties. The indemnity and contribution agreements herein are in addition to and
not in diminution or limitation of any indemnification provisions under the
Purchase Agreement.
6. RULE 144.
As long as any Holder owns Notes, Note Conversion Shares, Note
Conversion Warrants or Registrable Securities, the Company covenants to timely
file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. As long as any
Holder owns Notes, Note Conversion Shares, Note Conversion Warrants or
Registrable Securities, if the Company is not required to file reports pursuant
to Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to
the Holders and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly financial statements,
together with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act, as
well as any other information required thereby, in the time period that such
filings would have been required to have been made under the Exchange Act. The
Company further covenants that it will take such further action as any Holder
may reasonably request, all to the extent required from time to time to enable
such Person to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including compliance with the provisions
of the Purchase Agreement relating to the transfer of the Registrable
Securities. Upon the request of any Holder, the Company shall deliver to such
Holder a written certification of a duly authorized officer as to whether it has
complied with such requirements. The definition of "Registrable Securities" for
purposes of this Section 6 shall be interpreted as if it did not include the
proviso at the end of such definition.
7. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by the Company or by a Holder,
of any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Except as otherwise disclosed in the
Purchase Agreement, neither the Company nor any of its subsidiaries is a party
to an agreement currently in effect, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Without limiting the generality of the foregoing, without the written
13
consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict with the
provisions of this Agreement.
(c) NOTICE OF EFFECTIVENESS. Within two (2) Business Days after any
Registration Statement which includes the Registrable Securities is ordered
effective by the Commission, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Holders whose Registrable Securities are included
in such Registration Statement) confirmation that the Registration Statement has
been declared effective by the Commission in the form attached hereto as EXHIBIT
B.
(d) PIGGY-BACK REGISTRATIONS. If at any time when there is not an
effective Registration Statement covering all of the Registrable Securities, the
Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or its then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each Holder of Registrable Securities written notice of such
determination and, if within seven (7) Business Days after receipt of such
notice, any such Holder shall so request in writing (which request shall specify
the Registrable Securities intended to be disposed of by the Holder), the
Company will cause the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the Holder, to
the extent required to permit the disposition of the Registrable Securities so
to be registered, provided that if at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to such Holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay expenses in accordance with Section 4 hereof), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities being registered pursuant to this Section 7(d) for the
same period as the delay in registering such other securities. The Company shall
include in such registration statement all or any part of such Registrable
Securities such Holder requests to be registered; provided, however, that the
Company shall not be required to register any Registrable Securities pursuant to
this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the
Securities Act. In the case of an underwritten public offering, if the managing
underwriter(s) or underwriter(s) should reasonably object to the inclusion of
the Registrable Securities in such registration statement, then if the Company
after consultation with the managing underwriter should reasonably determine
that the inclusion of such Registrable Securities, would materially adversely
affect the offering contemplated in such registration statement, and based on
such determination recommends
14
inclusion in such registration statement of fewer or none of the Registrable
Securities of the Holders, then (x) the number of Registrable Securities of the
Holders included in such registration statement shall be reduced pro-rata among
such Holders (based upon the number of Registrable Securities requested to be
included in the registration), if the Company after consultation with the
underwriter(s) recommends the inclusion of fewer Registrable Securities, or (y)
none of the Registrable Securities of the Holders shall be included in such
registration statement, if the Company after consultation with the
underwriter(s) recommends the inclusion of none of such Registrable Securities;
provided, however, that if securities are being offered for the account of other
persons or entities as well as the Company, such reduction shall not represent a
greater fraction of the number of Registrable Securities intended to be offered
by the Holders than the fraction of similar reductions imposed on such other
persons or entities (other than the Company).
(e) FAILURE TO FILE REGISTRATION STATEMENT AND OTHER EVENTS. The
Company and the Holders agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the sixtieth (60th) day
following the Closing Date and maintained in the manner contemplated herein
during the Effectiveness Period. The Company and the Holders further agree that
it would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement is not filed on or prior to the
sixtieth (60th) day following the Closing Date, or (ii) the Company fails to
file with the Commission a request for acceleration in accordance with Rule 461
promulgated under the Securities Act within five (5) Business Days of the date
that the Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or not subject
to further review, or (iii) the Registration Statement is filed with and
declared effective by the Commission but thereafter ceases to be effective as to
all Registrable Securities at any time prior to the expiration of the
Effectiveness Period, without being succeeded immediately by a subsequent
Registration Statement filed with the Commission, except as otherwise permitted
by this Agreement, including pursuant to Section 3(n), or (iv) trading in the
Common Stock shall be suspended (other than a suspension affecting trading in
securities generally) or if the Common Stock is delisted from any securities
exchange, quotation system, market or over-the-counter bulletin board on which
Registrable Securities are required hereunder to be listed (each an "EXCHANGE"),
without immediately being listed on any other Exchange, for any reason for more
than three (3) Business Days, other than pursuant to Section 3(n), or (v) the
conversion rights of the Holders are suspended for any reason without the
consent of the particular Holder other than as set forth in Article III.A.5 of
the Articles of Incorporation, or (vi) the Company has breached Section 3(n) of
this Agreement (any such failure or breach being referred to as an "EVENT"), the
Company shall pay in cash as liquidated damages for such failure and not as a
penalty to each Holder an amount equal to two percent (2%) of such Holder's pro
rata share of the purchase price paid by all Holders for Notes and other
Registrable Securities purchased and then outstanding pursuant to the Purchase
Agreement for the initial thirty (30) day period until the applicable Event has
been cured, which shall be pro rated for such periods less than thirty (30) days
and one and one-half percent (1.5%) of such Holder's pro rata share of the
purchase price paid by all Holders for Notes and other Registrable Securities
purchased and then outstanding pursuant to the Purchase Agreement for each
subsequent thirty (30) day period until the applicable Event has been cured
which shall be pro rated for such periods less than thirty days (the "PERIODIC
AMOUNT"). Payments to be
15
made pursuant to this Section 7(e) shall be due and payable immediately upon
demand in immediately available cash funds. The parties agree that the Periodic
Amount represents a reasonable estimate on the part of the parties, as of the
date of this Agreement, of the amount of damages that may be incurred by the
Holders if the Registration Statement is not filed on or prior to the sixtieth
(60th) day following the Closing Date and maintained in the manner contemplated
herein during the Effectiveness Period or if any other Event as described herein
has occurred. Notwithstanding the foregoing, the Company shall remain obligated
to cure the breach or correct the condition that caused the Event, and the
Holder shall have the right to take any action necessary or desirable to enforce
such obligation.
(f) FAILURE OF REGISTRATION STATEMENT TO BECOME EFFECTIVE. The Company
and the Holders agree that the Holders will suffer damages if the Registration
Statement is not declared effective on or prior to the one hundred and twentieth
(120th) day following the Closing Date. The Company and the Holders further
agree that it would not be feasible to ascertain the extent of such damages with
precision. Accordingly, if the Registration Statement is not declared effective
within one-hundred and fifty (150) days after the Closing Date, the Company
shall pay in cash as liquidated damages for such failure and not as a penalty to
each Holder an amount equal to (i) two percent (2%) of such Holder's pro rata
share of the purchase price paid by all Holders for Notes and other Registrable
Securities purchased and then outstanding pursuant to the Purchase Agreement and
(ii) one and one-half percent (1.5%) of such Holder's pro rata share of the
purchase price paid by all Holders for Notes and other Registrable Securities
purchased and then outstanding pursuant to the Purchase Agreement for each
subsequent thirty (30) day period (which shall be pro rated for such periods
less than thirty (30) days) until the Registration Statement is declared
effective. Payments to be made pursuant to this Section 7(f) shall be due and
payable immediately upon demand in immediately available cash funds. The parties
agree that the amounts set forth in this Section 7(f) represent a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of damages that may be incurred by the Holders if the Registration
Statement is not declared effective on or prior to the one hundred and twentieth
(120th) day following the Closing Date. Notwithstanding the foregoing, the
Company shall remain obligated to cause the Registration Statement to become
effective, and the Holder shall have the right to take any action necessary or
desirable to enforce such obligation.
(g) SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION.
(i) The Company and the Holders 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 an injunction or 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.
(ii) Each of the Company and the Holders (i) hereby
irrevocably submits to the exclusive jurisdiction of the state and
federal courts located in New York City, New York for the purposes of
any suit, action or proceeding arising out of or relating to this
Agreement and (ii) hereby waives, and agrees not to assert in any such
suit,
16
action or proceeding, any claim that it is not personally subject to
the jurisdiction 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. Each of the Company and the Holders consents
to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof.
Nothing in this Section 7(g) shall affect or limit any right to serve
process in any other manner permitted by law.
(h) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and the
Holders of at least a majority of the Registrable Securities. Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders and that
does not directly or indirectly affect the rights of other Holders may be given
by Holders of the Registrable Securities to which such waiver or consent
relates; provided, however, that the provisions of this sentence may not be
amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(i) NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., New York City time, on
a Business Day, (ii) the next Business Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Business Day or later than 5:00
p.m., New York City time, on any date and earlier than 11:59 p.m., New York City
time, on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service such as Federal Express
or (iv) actual receipt by the party to whom such notice is required to be given.
The addresses for such communications shall be with respect to each Holder at
its address set forth under its name on SCHEDULE 1 attached hereto, or with
respect to the Company, addressed to:
National Coal Corp.
000 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile No.: (000) 000-0000
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Company shall be sent to Xxxxxx
Xxxxxxxx & Markiles, LLP, 00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx
00000, Facsimile No. (000) 000-0000. Copies of notices to any Holder shall be
sent to the addresses, if any, listed on SCHEDULE 1 attached hereto.
17
(j) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns
and shall inure to the benefit of each Holder and its successors and assigns;
provided, that the Company may not assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of each Holder; and
provided, further, that each Holder may assign its rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.
(k) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the Notes, Note Conversion Shares, Note Conversion Warrants,
Additional Purchase Rights or the Registrable Securities if: (i) the Holder
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment the further disposition of such securities
by the transferee or assignees is restricted under the Securities Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section 7(k),
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions of this Agreement, and (v) such transfer shall have been made
in accordance with the applicable requirements of the Purchase Agreement. The
rights to assignment shall apply to the Holders (and to subsequent) successors
and assigns.
The Company may require, as a condition of allowing such assignment in
connection with a transfer of Notes, Note Conversion Shares, Note Conversion
Warrants, Additional Purchase Rights or Registrable Securities (i) that the
Holder or transferee of all or a portion of the Notes, the Note Conversion
Shares, the Note Conversion Warrants, the Additional Purchase Rights or the
Registrable Securities as the case may be, furnish to the Company a written
opinion of counsel that is reasonably acceptable to the Company to the effect
that such transfer may be made without registration under the Securities Act,
(ii) that the Holder or transferee execute and deliver to the Company an
investment letter in form and substance acceptable to the Company (iii) that the
transferee be an "accredited investor" as defined in Rule 501(a) promulgated
under the Securities Act and (iv) that the transfer of such Notes, Note
Conversion Shares, Note Conversion Warrants, Additional Purchase Rights and/or
Registrable Securities be (A) a transfer of an amount of such Notes, Note
Conversion Shares, Note Conversion Warrants and/or Registrable Securities equal
to, convertible into and/or exercisable for (and in the case of the Notes,
convertible into Note Conversion Shares convertible into) not less than 5% of
the total number of Conversion Shares that would have been issuable upon the
full conversion of all Note Conversion Shares on the Closing Date (as defined in
the Purchase Agreement, and as if all Notes had been converted as of the Closing
Date), (B) a transfer of Additional Purchase Rights pursuant to the terms of
Article VIII of the Purchase Agreement or (C) a transfer of all of the Notes,
Note Conversion Shares, Note Conversion Warrants, Additional Purchase Rights and
Registrable Securities then owned by the Holder.
18
(l) COUNTERPARTS; FACSIMILE. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by electronic image or
facsimile transmission, such signature shall create a valid binding obligation
of the party executing (or on whose behalf such signature is executed) the same
with the same force and effect as if such electronic image or facsimile
signature were the original thereof.
(m) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law thereof.
(n) CUMULATIVE REMEDIES. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(o) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable in any respect, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(p) HEADINGS; INTERPRETATION. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof. Any form of the word "include" as
used in this Agreement shall be deemed to be followed by the phrase "without
limitation".
(q) REGISTRABLE SECURITIES HELD BY THE COMPANY AND ITS AFFILIATES.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by the
Company or its Affiliates (other than any Holder or transferees or successors or
assigns thereof if such Holder is deemed to be an Affiliate solely by reason of
its holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(r) OBLIGATIONS OF PURCHASERS. The Company acknowledges that the
obligations of each Purchaser under this Agreement, are several and not joint
with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under this Agreement. The decision of each Purchaser to enter into to
this Agreement has been made by such Purchaser independently of any other
Purchaser. The Company further acknowledges that nothing contained in this
Agreement, and no action taken by any Purchaser pursuant hereto, shall be deemed
to constitute the Purchasers as a partnership, an association, a joint venture
or any other kind of entity, or
19
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated
hereby. Each Purchaser shall be entitled to independently protect and enforce
its rights, including without limitation, the rights arising out of this
Agreement, and it shall not be necessary for any other Purchaser to be joined as
an additional party in any proceeding for such purpose.
Each Purchaser acknowledges and agrees that it has been represented by
its own separate legal counsel in their review and negotiation of this Agreement
and with respect to the transactions contemplated hereby. For reasons of
administrative convenience only, this Agreement has been prepared by Special
Counsel (counsel for SDS Capital Partners SPC, Ltd. ("SDS")) and the Special
Counsel will perform certain duties under this Agreement. Such counsel does not
represent all of the Purchasers but only SDS. The Company has elected to provide
all Purchasers with the same terms and Agreement for the convenience of the
Company and not because it was required or requested to do so by the Purchasers.
The Company acknowledges that such procedure with respect to this Agreement in
no way creates a presumption that the Purchasers are in any way acting in
concert or as a group with respect to this Agreement or the transactions
contemplated hereby or thereby.
[signature page follows]
20
IN WITNESS WHEREOF, the parties hereto have caused this Note Investor
Rights Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
COMPANY:
NATIONAL COAL CORP.
By: /S/ XXX X. XXX
-----------------------------------------
Name: Xxx X. Xxx
Title: Chief Executive Officer
21
PURCHASERS:
Print Exact Name: CRESTVIEW CAPITAL MASTER, LLC
By: /S/ XXXXXXX X. XXXXX
---------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Manager
[Omnibus Note Investor Rights Agreement Signature Page]
22
PURCHASERS:
Print Exact Name: SDS CAPITAL GROUP SPC, LTD.
By: /S/ XXXXX X. XXXXX
---------------------------------
Name: Xxxxx X. Xxxxx
Title: General Counsel
[Omnibus Note Investor Rights Agreement Signature Page]
23
SCHEDULE 1
PURCHASERS
---------------------------------------------------------
NAME AND ADDRESS
---------------------------------------------------------
Crestview Capital Master LLC*
Attn: Xxxxxxx Xxxxx
00 Xxxxxx Xxxxx, Xxxxx X
Xxxxxxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
xxxxxxx@xxxxxxxxx.xxx
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SDS Capital Group SPC, Ltd.
Attn: Xxxxx Xxxxx
00 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
xxxxx@xxxxxxxxxx.xxx
xxxxx@xxxxxxxxxx.xxx
with a copy to:
Xxxxxx and Xxxx LLP
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxxxxxx Xxxxxxx, Esq.
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* This investor is a "Crestview Investor."
EXHIBIT A
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the selling
security holders. Sales of shares may be made by selling security holders,
including their respective donees, transferees, pledgees or other
successors-in-interest directly to purchasers or to or through underwriters,
broker-dealers or through agents. Sales may be made from time to time on the OTC
Bulletin Board or any exchange upon which our shares may trade in the future, in
the over-the-counter market or otherwise, at market prices prevailing at the
time of sale, at prices related to market prices, or at negotiated or fixed
prices. The shares may be sold by one or more of, or a combination of, the
following:
- a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction (including crosses in
which the same broker acts as agent for both sides of the transaction);
- purchases by a broker-dealer as principal and resale by such
broker-dealer, including resales for its account, pursuant to this
prospectus;
- ordinary brokerage transactions and transactions in which the broker
solicits purchases;
- through options, swaps or derivatives;
- in privately negotiated transactions;
- in making short sales or in transactions to cover short sales; and
- put or call option transactions relating to the shares.
The selling security holders may effect these transactions by selling
shares directly to purchasers or to or through broker-dealers, which may act as
agents or principals. These broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the selling security holders
and/or the purchasers of shares for whom such broker-dealers may act as agents
or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions). The
selling security holders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities.
The selling security holders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with those
transactions, the broker-dealers or other financial institutions may engage in
short sales of the shares or of securities convertible into or exchangeable for
the shares in the course of hedging positions they assume with the selling
security holders. The selling security holders may also enter into options or
other
transactions with broker-dealers or other financial institutions which require
the delivery of shares offered by this prospectus to those broker-dealers or
other financial institutions. The broker-dealer or other financial institution
may then resell the shares pursuant to this prospectus (as amended or
supplemented, if required by applicable law, to reflect those transactions).
The selling security holders and any broker-dealers that act in
connection with the sale of shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933, and any commissions
received by broker-dealers or any profit on the resale of the shares sold by
them while acting as principals may be deemed to be underwriting discounts or
commissions under the Securities Act. The selling security holders may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the shares against liabilities, including liabilities arising
under the Securities Act. We have agreed to indemnify each of the selling
security holders and each selling security holder has agreed, severally and not
jointly, to indemnify us against some liabilities in connection with the
offering of the shares, including liabilities arising under the Securities Act.
The selling security holders will be subject to the prospectus delivery
requirements of the Securities Act. We have informed the selling security
holders that the anti-manipulative provisions of Regulation M promulgated under
the Securities Exchange Act of 1934 may apply to their sales in the market.
Selling security holders also may resell all or a portion of the shares
in open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of Rule 144.
Upon being notified by a selling security holder that a material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, we will file a supplement to
this prospectus, if required pursuant to Rule 424(b) under the Securities Act,
disclosing:
- the name of each such selling security holder and of the participating
broker-dealer(s);
- the number of shares involved;
- the initial price at which the shares were sold;
- the commissions paid or discounts or concessions allowed to the
broker-dealer(s), where applicable;
- that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this
prospectus; and
- other facts material to the transactions.
In addition, if required under applicable law or the rules or
regulations of the Commission, we will file a supplement to this prospectus when
a selling security holder notifies us that a donee or pledgee intends to sell
more than 500 shares of common stock.
We are paying all expenses and fees in connection with the registration
of the shares. The selling security holders will bear all brokerage or
underwriting discounts or commissions paid to broker-dealers in connection with
the sale of the shares.
EXHIBIT B
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Name and Address of Transfer Agent]
Re: National Coal Corp.
Dear [______]:
We are counsel to National Coal Corp., a Florida corporation (the
"Company"), and have represented the Company in connection with that certain
Note Purchase Agreement (the "Purchase Agreement") dated as of August 31, 2004
by and among the Company and the buyers named therein (collectively, the
"Holders") pursuant to which the Company issued to the Holders 8% Convertible
Promissory Notes (the "Notes") convertible into (a) its Series A Cumulative
Convertible Preferred Stock, par value $0.0001 per share, (the "Preferred
Stock") convertible into shares of the Company's common stock, par value $0.0001
per share (the "Common Stock") and (b) warrants to purchase shares of the Common
Stock (the "Warrants"). Pursuant to the Purchase Agreement, the Company has also
entered into a Note Investor Rights Agreement with the Holders (the "Note
Investor Rights Agreement") pursuant to which the Company agreed, among other
things, to register the shares of Common Stock issuable upon conversion of the
Preferred Stock and exercise of the Warrants and certain other shares of Common
Stock, under the Securities Act of 1933, as amended (the "1933 Act"). In
connection with the Company's obligations under the Note Investor Rights
Agreement, on ____________ ___, 2004, the Company filed a Registration Statement
on Form SB-2 (File No. 333-_____________) (the "Registration Statement") with
the Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities which names each of the Holders as a selling securityholder
thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
By:__________________________________
cc: [LIST NAMES OF HOLDERS]
