EXHIBIT 10.1
KFx, Inc.
Addendum
to the
Common Stock and Warrant Purchase Agreement
This Addendum to the Common Stock and Warrant Purchase Agreement (this
"Addendum"), is entered into as of April 30, 2002, by and among KFx, Inc., a
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Delaware corporation (the "Company"), the parties listed on Schedule A attached
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hereto (each, an "Additional Investor" and collectively, the "Additional
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Investors"), and the parties listed on Schedule B attached hereto (the "Existing
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Investors"), with reference to the following facts:
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WHEREAS, the Company and the Existing Investors are parties to that certain
Common Stock and Warrant Purchase Agreement, dated as of March 28, 2002 (the
"Purchase Agreement"; each capitalized term not otherwise defined herein has the
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meaning ascribed to that term in the Purchase Agreement), which provides that
the Existing Investors or their designees may purchase from the Company shares
of Common Stock and Warrants on the same terms and conditions as set forth in
the Purchase Agreement and that such investors will become parties to the
Purchase Agreement, the Investors' Rights Agreement, as amended and restated,
and the Put and Call Option Agreement, as amended and restated;
WHEREAS, the Company, the Existing Investors and the Additional Investors
have agreed to amend and restate the Investors' Rights Agreement and the Put and
Call Option Agreement in connection with the Closing (as defined in section
2.1);
WHEREAS the Company has authorized the sale and issuance of two million
four hundred thousand (2,400,000) shares of its Common Stock (the "Shares")
pursuant to the terms of this Addendum;
WHEREAS the Company has authorized the issuance of warrants, in
substantially the form attached to the Purchase Agreement as its Exhibit A, to
purchase two million seven hundred thousand (2,700,000) shares of Common Stock
(the "Warrants", and together with the Shares, the "Securities") pursuant to the
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terms of this Addendum; and
WHEREAS the Company wishes to sell to the Additional Investors, and the
Additional Investors wish to purchase, the Shares and Warrants on the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing premises and the mutual
covenants and conditions set forth in this Agreement, the parties agree as
follows:
1. Authorization and Sale of the Shares.
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1.1 Authorization. The Company has authorized the issuance and sale
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pursuant to the terms and conditions hereof of two million four hundred thousand
(2,400,000) shares of its Common Stock and Warrants to purchase two million
seven hundred thousand (2,700,000) shares of Common Stock on exercise of such
Warrants.
1
EXHIBIT 10.1
1.2 Issuance and Sale of the Shares and Warrants. On the terms and
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subject to the conditions hereof, each Additional Investor agrees, severally but
not jointly, to purchase, and the Company agrees to issue and sell to each such
Additional Investor, at the Closing: (a) the number of shares of Common Stock
set forth opposite the name of such Additional Investor on Schedule A at a
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purchase price of $2.50 per share, and (b) Warrants to purchase the number of
shares of Common Stock set forth opposite the name of such Additional Investor
on Schedule A at a price of $2.75 per share of Common Stock, as that amount may
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be adjusted pursuant to the Warrants.
1.3 Parties to the Purchase Agreement. The Company and the Existing
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Investors hereby agree that pursuant to this Addendum each Additional Investor
shall hereby become a party to the Purchase Agreement. In connection therewith,
each Additional Investor shall be deemed to (i) be a party to the Purchase
Agreement, (ii) be an "Investor" for all purposes under the Purchase Agreement
and (iii) have all rights and obligations of an Investor thereunder. The Shares
and Warrants acquired by the Additional Investors hereunder shall be considered
"Shares" and "Warrants", respectively, and shall be considered "Securities"
collectively, for all purposes under the Purchase Agreement.
1.4 Defined Terms. For purposes of this Addendum and the
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representations and warranties of the Company in the Purchase Agreement that are
incorporated herein by reference in section 4.2, the term "Related Documents"
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means the Purchase Agreement, the Investors' Rights Agreement (as amended and
restated), the Put and Call Option Agreement (as amended and restated), the
Warrants issued pursuant to the Purchase Agreement, this Addendum and the
Warrants issued pursuant to this Addendum.
2. Closing; Delivery.
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2.1 Closing. Upon satisfaction of the conditions set forth in sections
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6 and 7, the closing of the purchase, sale and issuance of the Shares and
Warrants listed on Schedule A attached hereto shall take place at the offices of
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Shartsis, Xxxxxx & Xxxxxxxx LLP, 18th Floor, One Xxxxxxxx Xxxxx, Xxx Xxxxxxxxx
00000, on April 30,2002 (the "Closing Date"), at 10:00 a.m., or at such other
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time and place as the parties may agree (the "Closing").
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2.2 Delivery at the Closing. Subject to the terms of this Addendum, at
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the Closing the Company will deliver to each Additional Investor listed on
Schedule A attached hereto: (i) a stock certificate representing the number of
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shares of Common Stock set forth opposite the name of such Additional Investor
on Schedule A; and (ii) a Warrant to purchase the number of shares of Common
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Stock set forth opposite the name of such Additional Investor on the Schedule A
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against delivery to the Company by each such Additional Investor at the Closing
of a wire transfer of funds or promissory note for the aggregate purchase price
of the Shares acquired by such Additional Investor.
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EXHIBIT 10.1
3. Amendment and Waiver of Section 1.3(c) of the Purchase Agreement -
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Option to Make Additional Investment
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3.1 Amendment. Section 1.3(c) of the Purchase Agreement is hereby
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amended by deleting the references to "June 30, 2002", and "$10,000,000"
contained therein and substituting "July 31, 2002", and "$15,000,000",
respectively, therefor.
3.2 Waiver. The Company, the Additional Investors and the Existing
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Investors hereby agree to waive the last sentence of section 1.3(c) of the
Purchase Agreement in connection with this Addendum (and this Addendum only). In
connection with such waiver, the Company, the Additional Investors and the
Existing Investors hereby agree that the proceeds from the sale of the Shares
pursuant to this Addendum shall be used as follows: (a) three million eight
hundred fifty thousand dollars ($3,850,000) shall be used to repurchase from the
parties listed on Disclosure Schedule 3 all of the outstanding shares of Series
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C Preferred Stock of Pegasus Technologies Inc., a South Dakota corporation
("Pegasus"), pursuant to the terms and conditions of repurchase agreements
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therefor, (b) four hundred fifty thousand dollars ($450,000) shall be used for
initial expenses related to the construction of a K-Fuel demonstration plant and
(c) the remaining proceeds shall be used for general corporate purposes of the
Company.
4. Representations and Warranties of the Company; Disclosure;
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Covenant. Each Additional Investor hereby acknowledges receipt of the Purchase
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Agreement and the exhibits and schedules thereto.
4.1 The Company represents and warrants to each Additional Investor
that:
(a) The representatives and warranties of the Company set forth
in section 2 of the Purchase Agreement and section 8 of the Put and Call Option
Agreement were true and correct when made.
(b) The representations and warranties referred to above, which
are incorporated by reference herein and made a part hereof, are true and
correct as of the date hereof as if made on the date hereof, except (a) for
changes resulting from the transactions contemplated in the Purchase Agreement,
the Investors' Rights Agreement, the Put and Call Option Agreement and the
Warrants issued pursuant to the Purchase Agreement, and (b) as set forth in
Disclosure Schedule 4.1(b) attached hereto.
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(c) The Company has complied with and is not in violation of any
covenant set forth in section 4 of the Purchase Agreement, section 3 of the
Investors' Rights Agreement or section 7 of the Put and Call Option Agreement.
4.2 On or before May 16, 2002, the Company shall cause Pegasus to
issue to the Company securities of Pegasus in accordance with section 7(f) of
the Put and Call Option Agreement as consideration for the Company's equity
investment in Pegasus that was required by section 2.9 of the Purchase
Agreement. For purposes of such issuance, the Pegasus securities shall be valued
at fair market value as of the time of the Company's equity investment.
5. Representations and Warranties of Additional Investors. Each Additional
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Investor has reviewed the representations and warranties set forth in section 3
of the Purchase
3
EXHIBIT 10.1
Agreement. Each Additional Investor, severally but not jointly, represents and
warrants to the Company that such representations and warranties, which are
incorporated herein by reference and made a part hereof, are true and correct as
of the date hereof with respect to such Additional Investor.
6. Additional Investors' Obligations at Closing. Each Additional Investor's
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obligation to purchase and pay for the Securities is subject to the fulfillment
to such Additional Investor's satisfaction at the Closing of the following
conditions:
6.1 Representations and Warranties Correct; Performance Obligations.
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The representations and warranties of the Company contained in section 4 hereof
shall be true and correct on and as of the date of the Closing with the same
force and effect as if they had been made on and as of such date, subject to
changes contemplated by this Addendum.
6.2 Performance. The Company shall have performed and complied with
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all agreements, obligations and conditions contained in this Addendum that are
required to be performed by it or with which it is required to have complied on
or before the Closing.
6.3 Securities Compliance. The Company shall have taken all action
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necessary to comply with any federal or state securities laws applicable to the
transactions contemplated hereunder.
6.4 Consents, Permits, and Waivers. The Company shall have obtained
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any and all consents, licenses, permits, orders, authorizations, waivers and the
like necessary or appropriate for consummation of the transactions contemplated
by this Addendum and the other Related Documents (except for such as may be
properly obtained subsequent to the Closing).
6.5 Stockholder Approval. The Company shall have satisfied all
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stockholder approval requirements of applicable law, rule or regulation,
including provisions of the American Stock Exchange, or any other exchange or
market on which the Common Stock is then listed or traded.
6.6 Absence of Litigation. No proceeding challenging this Addendum,
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the other Related Documents, the Warrants issued in connection with this
Addendum or the transactions contemplated hereby or thereby, or seeking to
prohibit, alter, prevent or delay the Closing, shall have been instituted before
any court, arbitrator or governmental body, agency or official and shall be
pending.
6.7 Compliance Certificate. The Company shall deliver to each
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Additional Investor at the Closing, relating to such Additional Investor's
purchase of the Common Stock and the issuance of the Warrants, a certificate
signed by the President of the Company stating that the Company has complied
with or satisfied each of the conditions to the Additional Investor's obligation
to consummate the Closing set forth in sections 6.1 through 6.6, unless waived
in writing by the Additional Investor.
6.8 Opinion of Counsel. The Company shall deliver to each Additional
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Investor at the Closing an opinion of counsel for the Company, dated as of the
Closing, in the form attached hereto as Exhibit A.
4
EXHIBIT 10.1
6.9 Amended and Restated Investors' Rights Agreement. The Amended and
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Restated Investors' Rights Agreement, in substantially the form attached hereto
as Exhibit B, shall have been executed by all the parties thereto on or prior to
such Closing.
6.10 Amended and Restated Put Agreement. The Amended and Restated Put
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Agreement, in substantially the form attached hereto as Exhibit C, shall have
been executed by all the parties thereto on or prior to such Closing.
6.11 Expenses. At the Closing, the Company shall pay the legal fees
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and expenses of SF&G (legal counsel only for Westcliff) and all due diligence
fees and expenses incurred by Westcliff, incurred in connection with this
Addendum, the other Related Documents and the transactions contemplated hereby
and thereby. For the avoidance of doubt, no fees paid to SF&G pursuant to this
section 6.11 shall be deemed to be payment to counsel for the Investors or the
Additional Investors as required to be made by the Company pursuant to section
2.7 of the Investors' Rights Agreement, as amended and restated.
6.12 Legal Matters. All matters of a legal nature which pertain to
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this Addendum and the transactions contemplated hereby shall have been approved
by each Additional Investor's counsel.
6.13 Proceedings and Documents. All corporate and other proceedings in
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connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Additional Investor, and the Additional Investor shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
7. The Company's Conditions to the Closing. The Company's obligation to
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deliver the Securities at the Closing is subject to the fulfillment to the
Company's satisfaction at such Closing of the following conditions:
7.1 Representations and Warranties. The representations and warranties
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of each Additional Investor contained in section 5 hereof shall be true and
correct on and as of the Closing.
7.2 Performance. The Additional Investors shall have performed and
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complied in all material respects with all agreements, obligations, and
conditions contained in the Addendum that are required to be performed by it or
them or with which it or they are required to have complied on or before the
Closing.
8. Notices. Any notice, consent, authorization or other communication to be
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given hereunder shall be in writing and shall be deemed duly given and received
when delivered personally or transmitted by facsimile transmission with receipt
acknowledged by the addressee, three days after being mailed by first class
mail, or the next business day after being deposited for next-day delivery with
a nationally recognized, receipted, overnight delivery service, charges and
postage prepaid, properly addressed to the party to receive such notice at the
address(es) specified on the signature page of this Addendum for the Company and
on Schedule A attached hereto for each Investor (or at such other address as
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shall be specified by like notice).
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EXHIBIT 10.1
9. Counterparts. This Addendum may be executed in any number of
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counterparts, each of which shall constitute an original, and all of which
together shall be considered one and the same agreement.
10. Governing Law. This Addendum shall be governed by and construed and
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interpreted in accordance with the law of the State of New York, without regard
to that state's conflict of laws principles.
11. Attorneys' Fees. If any action at law or in equity is necessary to
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enforce or interpret the terms of this Addendum, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
12. Representation. Each party hereto acknowledges that (a) Westcliff
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Capital Management, LLC retained SF&G to represent Westcliff in connection with
this Addendum, the other Related Documents and the transactions related hereto
and thereto, (b) the interests of Westcliff may not necessarily coincide with
the interests of other Additional Investors, (c) SF&G does not represent any
Investor or Additional Investor other than Westcliff in connection with the
transaction contemplated hereby and thereby, and (d) each Additional Investor
has consulted with, or has had an opportunity to consult with, its own legal
counsel and has not relied on SF&G for legal counsel in connection with this
Addendum, the other Related Documents and the transactions related hereto and
thereto.
IN WITNESS WHEREOF, this Addendum has been duly executed by or on behalf of
the parties hereto as of the date first above written.
KFx, INC.
By:
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Name:
-----------------------------------
Title:
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Address:
0000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0000 Xxx Xxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
6
THE ADDITIONAL INVESTORS:
WESTCLIFF AGGRESSIVE GROWTH, L.P. WESTCLIFF FOUNDATION
WESTCLIFF LONG/SHORT, L.P. WESTCLIFF MASTER FUND, L.P.
WESTCLIFF PARTNERS, L.P. WESTCLIFF PROFIT SHARING AND MONEY
WESTCLIFF PUBLIC VENTURES FUND, L.P. PURCHASE PENSION PLAN
WESTCLIFF SMALL CAP FUND, L.P. CANCER CENTER OF SANTA XXXXXXX
PALM TRUST
By: Westcliff Capital Management, LLC XXXXXX FOUNDATION
Its: General Partner UNIVERSITY OF SAN FRANCISCO
By: Westcliff Capital Management, LLC
By: Its: Investment Adviser and Attorney-In-Fact
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Xxxxxxx X. Xxxxxxx III, Manager
By:
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Xxxxxxx X. Xxxxxxx III, Manager
RAM TRADING, LTD. NORANDA FINANCE, INC. RETIREMENT
PLAN FOR AFFILIATED COMPANIES
By: Xxxxxxx Capital Management, LLC TRUST
Its: Investment Adviser
By: Mellon Bank, N.A., solely in its capacity as
By: Trustee for the Noranda Finance, Inc. Retirement
--------------------------------------- Plan for Affiliated Companies Trust (as directed
Xxxxx Xxxxxxxx, Chief Financial Officer by Westcliff Capital Management, LLC), and not
in its individual capacity
By:
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Xxxxxxxxxx X. Xxxx
Authorized Signatory
THE EXISTING INVESTORS
WESTCLIFF AGGRESSIVE GROWTH, L.P. WESTCLIFF FOUNDATION
WESTCLIFF ENERGY PARTNERS, L.P. WESTCLIFF MASTER FUND, L.P.
WESTCLIFF LONG/SHORT, L.P. WESTCLIFF PROFIT SHARING AND MONEY
WESTCLIFF PARTNERS, L.P. PURCHASE PENSION PLAN
WESTCLIFF PUBLIC VENTURES FUND, L.P. CANCER CENTER OF SANTA XXXXXXX
WESTCLIFF SMALL CAP FUND, L.P. PALM TRUST
XXXXXX FOUNDATION
By: Westcliff Capital Management, LLC UNIVERSITY OF SAN FRANCISCO
Its: General Partner
By: Westcliff Capital Management, LLC
Its: Investment Adviser and Attorney-In-Fact
By:
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Xxxxxxx X. Xxxxxxx III, Manager
By:
--------------------------------
Xxxxxxx X. Xxxxxxx III, Manager
RAM TRADING, LTD. NORANDA FINANCE, INC. RETIREMENT
PLAN FOR AFFILIATED COMPANIES
TRUST
By: Xxxxxxx Capital Management, LLC
Its: Investment Adviser
By: Mellon Bank, N.A., solely in its capacity as
Trustee for the Noranda Finance, Inc. Retirement
Plan for Affiliated Companies Trust (as directed
by Westcliff Capital Management, LLC), and not
in its individual capacity
By:
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Xxxxx Xxxxxxxx, Chief Financial Officer
By:
--------------------------------
Xxxxxxxxxx X. Xxxx
Authorized Signatory
PENINSULA FUND, L.P. COMMON SENSE PARTNERS, L.P.
By: Peninsula Capital Management, Inc. By: Peninsula Capital Management, Inc.
Its: General Partner Its: Investment Adviser
By: By:
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Xxxxx Xxxxxxx, President Xxxxx Xxxxxxx, President
By: Common Sense Investment Management, LLC
Its: General Partner
By:
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Xxxxx X. Xxxxxxxx
Director and Senior Vice President Finance
EXHIBIT A
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LEGAL OPINION
EXHIBIT B
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AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
KFx, INC.
Amended and Restated Investors' Rights Agreement
Dated as of April 30, 2002
Amended And Restated Investors' Rights Agreement
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (this "Agreement") is made
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as of April 30, 2002, by and among KFx, Inc., a Delaware corporation (the
"Company"), and the Investors listed on Schedule A hereto (each of whom is
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herein called individually, an "Investor" and all of whom are herein called,
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collectively, the "Investors"), with reference to the following facts:
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WHEREAS, certain of the Investors are parties to the Common Stock and Warrant
Purchase Agreement, dated as of March 28, 2002 (the "Original Purchase
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Agreement" and as amended by the Addendum described below, the "Purchase
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Agreement");
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WHEREAS, in connection with the closing of the transactions described in the
Original Purchase Agreement, the Company and certain of the Investors entered
into an Investors' Rights Agreement, dated as of March 28, 2002 (the "Original
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Investors' Rights Agreement");
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WHEREAS, the Company and the Investors amended the Original Investors' Rights
Agreement pursuant to that certain First Amendment to Investors' Rights
Agreement, dated as of April 18, 2002;
WHEREAS, certain of the Investors are parties to that certain Addendum to the
Common Stock and Warrant Purchase Agreement, dated as of April 30, 2002 (the
"Addendum"), which provides that as a condition to the closing of the
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transactions contemplated by the Addendum the Original Investors' Rights
Agreement must be amended and restated in its entirety;
WHEREAS, the Company and the Investors desire to amend and restate in its
entirety the Original Investors' Rights Agreement (as amended by the First
Amendment to Investors' Rights Agreement) pursuant to this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein and for other consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto further agree as follows:
1. Certain Definitions. Capitalized terms not defined herein are defined in
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the Purchase Agreement. The following definitions shall apply for purposes of
this Agreement:
1.1 "Form S-3" means such form under the Securities Act as in effect
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on the date hereof or any registration form under the Securities Act
subsequently adopted by the SEC that permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
1.2 "Holder" means any person owning or having the right to acquire
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Registrable Securities or any assignee thereof in accordance with section 2.10
hereof.
1.3 "Purchase Price" means $2.50 per share of Common Stock or
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Preferred Stock, as the case may be, as that price shall be appropriately
adjusted to reflect any stock dividend, stock split, reverse stock split,
combination of shares, reclassification, recapitalization or other similar event
affecting the number of outstanding shares of Common Stock (or such other stock
or securities).
1.4 "Purchase Price Per Common Share Equivalent" means (a) if Common
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Stock is issued in the Subsequent Dilutive Offering, the price per share of
Common Stock, or (b) if Preferred Stock is issued in the Subsequent Dilutive
Offering, the price at which a share of such Preferred Stock is issued in the
Subsequent Dilutive Offering divided by the number of shares of Common Stock
into which such share of Preferred Stock may be converted.
1.5 "Register", "registered", and "registration" refer to a
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registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document.
1.6 "Registrable Securities" means (a) the shares of the Company's
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Common Stock issued pursuant to the Purchase Agreement and, if applicable, this
Agreement, (b) shares of the Company's Common Stock previously acquired by the
Investors and listed on Schedule B hereto, (c) shares of the Company's Common
Stock issuable on exercise of the Warrants (as defined in the Purchase
Agreement) issued pursuant to the Purchase Agreement and, if applicable, this
Agreement, and (d) any Common Stock of the Company issued as (or issuable on the
conversion or exercise of any warrant, right or other security that is issued
as) a dividend or other distribution with respect to, or in exchange for, or in
replacement of, the shares referenced in clauses (a), (b) and (c) above;
provided that there shall be excluded any Registrable Securities sold by a
person in a transaction in which that person's rights under section 2 are not
assigned.
1.7 The number of shares of "Registrable Securities" outstanding shall
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be determined by the number of shares of Common Stock outstanding that are, and
the number of shares of Common Stock issuable pursuant to then exercisable or
convertible securities that are, Registrable Securities.
2. Registration Rights. The Company covenants and agrees as follows:
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2.1 Mandatory Registration.
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(a) The Company shall prepare and file with the SEC on or before
May 7, 2002 (the "Filing Deadline") a registration statement on Form S-3 (or, if
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Form S-3 is not then available, on such form of registration statement that is
then available to effect a registration of all Registrable Securities, subject
to consent of the Investors holding at least a majority of the Registrable
Securities) for the purpose of registering under the Securities Act all of the
Registrable Securities for resale by, and for the account of, the Holders as
selling stockholders thereunder (the "Registration Statement"). The Company
----------------------
shall use best efforts to cause the Registration Statement to become effective
as soon as possible after filing. The Company shall keep such registration
statement effective at all times until the earlier of the date on which all the
Registrable Securities (i) are sold and (ii) can be sold by all the Holders (and
any affiliate of the Holder with whom such Holder must aggregate its sales under
Rule 144) in any three-month period without volume limitation and without
registration in compliance with Rule 144 under the Securities Act. The date on
which the Registration Statement is withdrawn pursuant to the preceding sentence
is the "Registration Withdrawal Date".
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(b) If the Company has not filed the Registration Statement with
the SEC on or before May 7, 2002, the Company shall issue to each Holder an
additional warrant (on the same terms and conditions as the Warrants, including
the Exercise Price then in effect (a
2
"Registration Warrant")), to acquire that number of shares of Common Stock equal
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to ten percent (10%) of the number of shares of Common Stock issuable on
exercise of the Warrants issued to that Holder.
(c) At the end of each thirty (30) day period (or a portion
thereof) after May 7, 2002, that the Registration Statement has not been filed
with the SEC, the Company shall issue to each Holder a Registration Warrant to
acquire that number of shares of Common Stock equal to (i) ten percent (10%) of
the number of shares of Common Stock issuable on exercise of the Warrants issued
to that Holder, multiplied by (ii) a fraction, the numerator of which is the
number of days during such thirty-day period before the date on which the
Registration Statement was filed with the SEC and the denominator of which is
thirty.
(d) If the Registration Statement has not been declared effective
by the SEC on or before June 21, 2002, the Company shall issue to each Holder a
Registration Warrant to acquire that number of shares of Common Stock equal to
ten percent (10%) of the number of shares of Common Stock issuable on exercise
of the Warrants issued to that Holder.
(e) At the end of each thirty (30) day period (or a portion
thereof), after June 21, 2002, that the Registration Statement has not been
declared effective by the SEC, the Company shall issue to each Holder a
Registration Warrant to acquire that number of shares of Common Stock equal to
(i) ten percent (10%) of the number of shares of Common Stock issuable on
exercise of the Warrants issued to that Holder, multiplied by (ii) a fraction,
the numerator of which is the number of days during such thirty-day period
before the date on which the Registration Statement is declared effective by the
SEC and the denominator of which is thirty.
2.2 Company Registration.
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(a) If (but without any obligation to do so) the Company proposes
to register any of its stock (including a registration effected by the Company
for stockholders other than the Holders) or other securities under the
Securities Act in connection with the public offering of such securities, the
Company shall, at such time, promptly give each Holder notice of such
registration. On the request of each Holder given within thirty days after such
notice by the Company, the Company shall, subject to the provisions of section
2.2(c), cause to be registered under the Securities Act all of the Registrable
Securities that each such Holder has requested to be registered.
(b) The Company shall have the right to terminate or withdraw any
registration initiated by it under this section 2.2 prior to the effectiveness
of such registration, whether or not any Holder shall have elected to include
securities in such registration. The expenses of such withdrawn registration
shall be borne by the Company in accordance with section 2.7 hereof.
(c) In connection with any offering involving an underwriting of
shares of the Company's capital stock, the Company shall not be required under
this section 2.2 to include any requesting Holder's securities in such
underwriting, unless such Holder accepts the terms of the underwriting as agreed
between the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters) and enters into an underwriting agreement
in customary form with the underwriter or underwriters selected by the Company,
and
3
then only in such quantity as the underwriters advise the Company in writing in
their sole discretion will not jeopardize the success of the offering by the
Company. If the total amount of securities, including Registrable Securities,
requested by the Holders to be included in such offering exceeds the amount of
securities sold other than by the Company that the underwriters advise the
Company in writing in their sole discretion is compatible with the success of
the offering, then the Company shall be required to include in the offering only
that number of such Registrable Securities that the underwriters determine in
their sole discretion will not jeopardize the success of the offering (the
Registrable Securities so included to be apportioned pro rata among the selling
Holders according to the total amount of Registrable Securities entitled to be
included therein owned by each selling Holder or in such other proportions as
shall mutually be agreed to by such selling Holders); provided, that in no event
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shall the amount of Registrable Securities of the selling Holders included in
the offering be reduced below one-third of the total amount of securities
included in such offering. For purposes of such apportionment among Holders, for
any selling stockholder that is a Holder of Registrable Securities and that is a
partnership or corporation, the partners, retired partners and stockholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling Holder", and any pro rata reduction with respect
to such "selling Holder" shall be based on the aggregate amount of Registrable
Securities owned by all such related entities and individuals.
2.3 Form S-3 Registration. If, at any time after the Registration
---------------------
Withdrawal Date, the Company shall receive from one or more Holders a request or
requests that the Company effect a registration on Form S-3 and any related blue
sky or similar qualification or compliance with respect to the Registrable
Securities owned by such Holder or Holders, the Company shall:
(a) Within five days of the receipt thereof, give notice of the
proposed registration, and any related blue sky or similar qualification or
compliance, to all other Holders; and
(b) Cause, as soon as reasonably practicable, such Registrable
Securities to be registered for offering and sale on Form S-3 and cause such
Registrable Securities to be qualified in such jurisdictions as such Holders may
reasonable request, together with all or such portion of the Registrable
Securities of any other Holders joining in such request as are specified in a
request given within twenty days after receipt of such notice from the Company;
provided that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this section 2.3:
(i) If the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $1,000,000;
(ii) If the Company has, within the twelve month period
preceding the date of such request, already effected two registrations for the
Holders pursuant to this section 2.3 or section 2.4;
(iii) If the Company furnishes to the Holders a certificate
signed by the Chief Executive Officer of the Company stating that in the good
faith judgment of the
4
Board of Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such Form S-3 Registration to be effected at
such time, in which event the Company shall have the right to defer the filing
of the Form S-3 registration statement for a period of not more than ninety days
after receipt of the request of the Holder or Holders under this section 2.3;
provided that the Company shall not utilize this right, together with its right
under section 2.4(c), more than once in any twelve month period; provided,
further, that the Company shall not register shares for its own account during
such ninety day period unless the Holder can exercise its right to request the
registration of Registrable Securities under section 2.2; or
(iv) In any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as reasonably practicable after receipt of
the request or requests of the Holders.
2.4 Request for Registration.
------------------------
(a) If, at any time after the Registration Withdrawal Date, the
Company is not eligible to effect a registration on Form S-3 and the Company
shall, during such period that it is not so eligible, receive a written request
from the Holders that the Company file a registration statement under the
Securities Act covering the registration of all or a portion of the Registrable
Securities then outstanding, then the Company shall:
(i) within five days of the receipt thereof, give notice of
the proposed registration, and any related blue sky or similar qualification or
compliance, to all other Holders; and
(ii) cause, as soon as reasonably practicable, such
Registrable Securities to be registered for offering and sale and cause such
Registrable Securities to be qualified in such jurisdictions as such Holders may
reasonable request, together with all or such portion of the Registrable
Securities of any other Holders joining in such request as are specified in a
request given within twenty days after receipt of such notice from the Company;
provided that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this section 2.4:
(A) if the Holders propose to sell Registrable
Securities at an aggregate price to the public of less than $1,000,000;
(B) if the Company has, within the twelve month period
preceding the date of such request, already effected two registrations for the
Holders pursuant to section 2.3 or this section 2.4; and
(C) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
5
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
------------------
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to section 2.4(a) and the Company shall
include such information in the written notice referred to in section 2.4(a).
The underwriter will be selected by a majority in interest (as determined by the
number of Registrable Securities held) of the Initiating Holders and shall be
reasonably acceptable to the Company. In such event, the right of any Holder to
include his, her or its Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in section 2.5(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of this section 2.4, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities that
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities
owned by each Holder; provided, however, that the number of shares of
Registrable Securities to be included in such underwriting shall not be reduced
unless all other securities are first entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this section 2.4, a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors of the Company it would be
seriously detrimental to the Company and its stockholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than ninety days after
receipt of the request of the Initiating Holders; provided that the Company may
not utilize this right, together with its right under section 2.3(b)(iii) more
than once in any twelve month period; provided further, that the Company shall
not register shares for its own account during such ninety day period unless the
Holder can exercise its right to request the registration of Registrable
Securities under section 2.2.
2.5 Obligations of the Company. Whenever required under this section 2
--------------------------
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Except as otherwise provided in section 2.1, prepare and file
with the SEC a registration statement with respect to such Registrable
Securities and use best efforts to cause such registration statement to become
effective, and, on the request of the Holders of a majority of the Registrable
Securities registered thereunder, keep such registration statement effective for
a period of up to 180 days or, if earlier, until the distribution contemplated
in the Registration Statement has been completed; provided that (i) such 180-day
period shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other
6
securities) of the Company; and (ii) in the case of any registration of
Registrable Securities on Form S-3 (or any other Form, to the extent permitted
by law) that are intended to be offered on a continuous or delayed basis, such
180-day period shall be extended, if necessary, to keep the Registration
Statement effective until all such Registrable Securities are sold, except to
the extent that the Holders (and any affiliate of the Holder with whom such
Holder must aggregate its sales under Rule 144) of such Registrable Securities
may sell those Registrable Securities in any three-month period without regard
to the volume limitation and without registration in compliance with Rule 144
under the Securities Act;
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the Securities Act
with respect to the disposition of all securities covered by such registration
statement during the period of time such registration statement remains
effective;
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request to facilitate the disposition of Registrable Securities owned
by them;
(d) Use best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions;
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering;
(f) During the period of time such registration statement remains
effective, notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act or the happening of any event
as a result of which the prospectus included 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 the light of the circumstances then
existing; and, thereafter, the Company will promptly prepare (and, when
completed, deliver to each selling Holder) a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain 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 the light of the
circumstances then existing;
(g) Cause all such Registrable Securities registered hereunder to
be listed on each securities exchange on which securities of the same class
issued by the Company are then listed;
7
(h) Provide a transfer agent and registrar for all Registrable
Securities registered hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration;
and
(i) Furnish, at the request of any Holder requesting registration
of Registrable Securities pursuant to this section 2, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this section 2 if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities, and (ii) a "comfort" letter signed by
the independent public accountants who have certified the Company's financial
statements included in the registration statement, covering substantially the
same matters with respect to the registration statement (and the prospectus
included therein) and with respect to events subsequent to the date of the
financial statements, as are customarily covered in accountants' letters
delivered to the underwriters in underwritten public offerings of securities
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities.
2.6 Information from Holder. It shall be a condition precedent to the
-----------------------
obligations of the Company to take any action pursuant to this section 2 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding such Holder, the
Registrable Securities held by such Holder, and the intended method of
disposition of such securities as shall be required to effect the registration
of such Registrable Securities.
2.7 Expenses of Registration. All expenses incurred in connection with
------------------------
registrations, filings or qualifications pursuant to sections 2.1, 2.2, 2.3 and
2.4, including (without limitation) all registration, filing and qualification
fees, printing fees and expenses, accounting fees and expenses, fees and
disbursements of counsel for the Company and the fees and disbursements of
counsel for the selling Holders selected by the Holders, shall be borne by the
Company. Notwithstanding the foregoing, the Company shall not be required to pay
for any expenses of any registration proceeding begun pursuant to section 2.1 or
2.3 if the registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered (in which
case all participating Holders shall bear such expenses pro rata based on the
number of Registrable Securities that were requested to be included in the
withdrawn registration); provided that, if at the time of such withdrawal, the
Holders shall have learned of a material adverse change in the condition
(financial or otherwise), business, or prospects of the Company from that known
to the Holders at the time of their request and shall have withdrawn the request
with reasonable promptness following disclosure by the Company of such material
adverse change, then the Holders shall not be required to pay any of such
expenses and shall retain their rights pursuant to section 2.1 or 2.3. Anything
herein to the contrary notwithstanding, all underwriting discounts, commissions
and transfer taxes incurred in connection with a sale of Registrable Securities
shall be borne and paid by the Holder thereof, and the Company shall have no
responsibility therefor.
8
2.8 Indemnification. If any Registrable Securities are included in a
---------------
registration statement under this section 2:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers, directors, stockholders,
members and managers of such Holder, legal counsel and accountants for such
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages
or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or any other federal or state securities law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based on any of the following statements, omissions
or violations (collectively a "Violation"): (i) any untrue statement or alleged
---------
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) 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, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law; and the Company will reimburse
such Holder, underwriter or controlling person for any legal or other expenses
incurred, as incurred, in connection with investigating or defending any such
loss, claim, damage, liability or action; provided that the indemnity agreement
in this section 2.8(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld or
delayed), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based on a Violation that occurs in reliance on and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who shall have signed the registration statement, each person, if any,
who controls the Company within the meaning of the Securities Act, legal counsel
and accountants for the Company, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages or liabilities
to which any of the foregoing persons may become subject, under the Securities
Act, the Exchange Act or any other federal or state securities law, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based on any Violation, in each case to the extent (and only
to the extent) that such Violation occurs in reliance on and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will reimburse any person intended
to be indemnified pursuant to this section 2.8(b), for any legal or other
expenses reasonably incurred, as incurred, by such person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided that the indemnity agreement in this section 2.8(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder (which consent
shall not be unreasonably withheld or delayed); and provided further that in no
event shall any indemnity by such Holder under this section 2.8(b), when
aggregated
9
with amounts contributed, if any, pursuant to section 2.8(d), exceed the net
proceeds from the sale of Registrable Securities hereunder received by such
Holder.
(c) Promptly after receipt by an indemnified party under this
section 2.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this section 2.8, deliver to
the indemnifying party notice of the commencement thereof and the indemnifying
party shall have the right to participate in, and, to the extent that the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided that an indemnified party (together with
all other indemnified parties that may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to notify the indemnifying party within a reasonable
time of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this section 2.8, but the omission so to notify the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this section 2.8.
(d) If the indemnification provided in this section 2.8 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that shall have resulted in such
loss, liability, claim, damage or expense, as well as any other relevant
equitable considerations; provided that in no event shall any contribution by a
Holder under this section 2.8(d), when aggregate with amounts paid, if any,
pursuant to section 2.8(b), exceed the net proceeds from the sale of Registrable
Securities hereunder received by such Holder. The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this section
2.8 shall survive the completion of any offering of Registrable Securities in a
registration statement under this section 2, and otherwise.
10
2.9 Reports under Exchange Act. With a view to making available to the
--------------------------
Holders the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration or pursuant to a
registration on Form S-3, the Company agrees to:
(a) Make and keep public information available, as those terms
are used in SEC Rule 144, at all times;
(b) Take such action as is necessary to enable the Holders to
utilize Form S-3 for the sale of their Registrable Securities;
(c) File with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
(d) Furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith on request, (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144,
the Securities Act and the Exchange Act, or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested in availing any Holder of any rule or regulation of the SEC
that permits the selling of any such securities without registration or pursuant
to such form; and
(e) Undertake any additional actions reasonably necessary to
maintain the availability of the Registration Statement or the use of Rule 144.
2.10 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this section 2 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such Registrable Securities that (a) is a subsidiary, parent,
current or former partner, current or former limited partner, current or former
member, current or former manager or stockholder of a Holder, (b) is an entity
controlling, controlled by or under common control, or under common investment
management, with a Holder, including without limitation a corporation,
partnership or limited liability company that is a direct or indirect parent or
subsidiary of the Holder, or (c) is a transferee or assignee of at least 10,000
(as adjusted for stock split, combinations, dividends and the like) shares of
such Registrable Securities; provided that: (i) the Company is, within a
reasonable time after such transfer, notified of the name and address of such
transferee or assignee and the Registrable Securities with respect to which such
registration rights are being assigned; (ii) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement; and (iii) such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act.
2.11 Limitations on Subsequent Registration Rights. From and after the
---------------------------------------------
date of this Agreement, the Company shall not, without the prior consent of the
Holders of at least two-thirds of the Registrable Securities then outstanding,
enter into any agreement with any holder or prospective holder of any securities
of the Company that would allow such holder or prospective holder to include
such securities in any registration filed under sections 2.1 and 2.3 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include
11
such securities in any such registration only to the extent that the inclusion
of such securities will not reduce the amount of the Registrable Securities of
the Holders that are included; provided, however, that this section shall not
apply to the transaction described on Schedule 2.14 of the Purchase Agreement.
3. Covenants.
---------
3.1 Reserve for Exercise Shares. The Company shall at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock such number of shares of Common Stock (the "Exercise Shares") as shall be
---------------
sufficient to enable it to comply with its exercise obligations under the
Warrants and Registration Warrants. If at any time the number of Exercise Shares
shall not be sufficient to effect the exercise of the Warrants and Registration
Warrants, the Company will forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number as will be sufficient for such purposes. The Company will obtain
authorization, consent, approval or other action by, or make any filing with,
any administrative body that may be required under applicable state securities
laws in connection with the issuance of Exercise Shares.
3.2 [INTENTIONALLY OMITTED]
---------------------
3.3 Preferred Stock. Except for the transaction described in item 2 of
---------------
Schedule 2.14 of the Purchase Agreement, the Company shall not issue any
preferred stock of the Company (or other securities of any nature convertible
into preferred stock of the Company) without the consent of Holders holding at
least two-thirds of the then outstanding Registrable Securities.
3.4 Termination of Covenants. The covenants set forth in sections 3.1
------------------------
and 3.3 shall terminate as to each Holder and be of no further force and effect
at the time the Holders no longer hold any Registrable Securities.
4. Subsequent Dilutive Offerings. If during the period beginning on March
-----------------------------
28, 2002 and ending on April 30, 2003, the Company issues shares of Common Stock
or Preferred Stock at a Purchase Price Per Common Share Equivalent less than the
Purchase Price (a "Subsequent Dilutive Offering"), then the Company shall,
----------------------------
within ten (10) days of the closing of the Subsequent Dilutive Offering, issue
to each Holder:
(a) A number of shares of Common Stock equal to (i)(A) the number
of shares of Common Stock purchased by such Holder pursuant to Purchase
Agreement multiplied by (B) the remainder of the Purchase Price minus the
Purchase Price Per Common Share Equivalent (as of the date of sale) issued in
the Subsequent Dilutive Offering, divided by (ii) the Purchase Price per Common
Share Equivalent (as of the date of sale) issued in the Subsequent Dilutive
Offering; and
(b) a Warrant (which has the same terms and conditions as the
Warrants, including the Warrant Price (as defined in the Warrants) then in
effect) to purchase a number of shares of Common Stock equal to 112.5% of the
number of shares of Common Stock issued to that Investor pursuant to section
4(a) above.
5. Right of First Offer.
--------------------
12
5.1 Holders' Rights. So long as a person is a Holder, the Company
---------------
hereby grants to each such Holder the first right to purchase the Equity
Securities (as defined in Section 5.5) that the Company may from time to time
desire to issue during the period beginning on the Closing Date and ending on
and including the second anniversary of the Closing Date. A Holder that chooses
to exercise the right of first offer may designate as purchasers under such
right himself, herself or itself, a current or former constituent partner,
affiliate or current or former member of itself or an entity controlling,
controlled by or under common control with itself, including without limitation
a corporation or limited liability company that is a parent or subsidiary, in
such proportions as it deems appropriate.
5.2 Notice.
------
(a) Prior to any sale or issuance by the Company of any Equity
Securities, the Company shall notify each Holder in writing (the "Notice") of
its bona fide intention to sell and issue such securities, setting forth the
number of shares of Equity Securities it proposes to sell and the price and
other terms upon which it proposes to make such sale. Within 30 days after
receipt of the Notice, each Holder shall notify the Company whether it elects to
exercise its right to purchase all (or any part thereof) of the Equity
Securities so offered and specify the number of shares of Equity Securities the
Holder elects to acquire. If the participating Holders elect, in aggregate, to
acquire less than all of the Equity Securities the Company proposes to sell,
then each Holder shall be entitled to purchase the number of Equity Securities
each such Holder specified in its election to participate. If the participating
Holders elect, in aggregate, to acquire more than all of the Equity Securities
the Company proposes to sell, then (i) each Holder shall be entitled to purchase
its pro rata share (or any portion thereof if such Holder elects to purchase
less than its pro rata share) of all of the Equity Securities the Company
proposes to sell, and (ii) if, after the allocation in clause (i) (and, if
necessary, in this clause (ii)), any shares of Equity Securities have not been
allocated, each Holder that shall have subscribed for more shares of Equity
Securities than shall have been allocated under clause (i) (and, if necessary,
under this clause (ii)) shall be entitled to purchase a fraction of such
remaining Equity Securities, the numerator of which is the number of shares of
Registrable Securities purchased pursuant to the Purchase Agreement by such
Holder and the denominator of which is the number of shares of Registrable
Securities purchased pursuant to the Purchase Agreement by all Holders
exercising the right of purchase of such remaining Equity Securities. If, after
the allocation in clauses (i) and (ii), any shares of Equity Securities shall
not have been allocated, the procedure set forth in clause (ii) shall be
repeated until all of the Equity Securities shall have been allocated or until
each Holder shall have been allocated the maximum number of shares specified in
its notice. A Holder's pro rata share of the Equity Securities shall be equal to
a fraction of such Equity Securities, the numerator of which is the number of
shares of Registrable Securities purchased pursuant to the Purchase Agreement by
such Holder (or its assignor) and the denominator of which is the number of
shares of Registrable Securities purchased pursuant to the Purchase Agreement by
all Holders (or their assignors) who are exercising the right of purchase of
such Equity Securities pursuant to this section 5.2(a). If a Holder has been
assigned only a portion of the Registrable Securities purchased pursuant to the
Purchase Agreement by an assignor thereof, that Holder's pro rata share of the
Equity Securities shall be equal to a fraction of such Equity Securities, the
numerator of which is the portion of the shares purchased pursuant to the
Purchase Agreement by the assigning Holder and assigned to the Holder and the
denominator of which is the number of shares of Registrable Securities purchased
pursuant to the
13
Purchase Agreement by all Holders (or their assignors) who are exercising the
right of purchase of such Equity Securities pursuant to this section 5.2(a).
(b) Subject to section 5.2(c), the Holders hereby waive their
rights under section 5.2(a) with respect to the transaction described on
Schedule 5.14 of the Purchase Agreement.
(c) Notwithstanding anything contained in section 5.2(a), prior
to any sale or issuance by the Company or by its subsidiaries of any
Investment-Related Securities in connection with a commercial investment in the
Company or any of its subsidiaries (a "Commercial Investment") by any person or
---------------------
entity (including pursuant to the transaction described on Schedule 2.14 of the
Purchase Agreement), the Company shall notify each Holder in writing (the
"Commercial Investment Notice") of its bona fide intention to enter into an
----------------------------
agreement regarding the proposed Commercial Investment. Within 30 days after
receipt of such Commercial Investment Notice, each Holder shall have the right
to offer to the Company or its subsidiaries within 30 days of the Notice a
substantially similar Commercial Investment. The Company or its subsidiaries
shall be required to accept any such offer by the Holders, unless after the
allocations of such Commercial Investment pursuant to this section 5.2(c), the
Holders electing to participate in such Commercial Investment have not elected
to participate in the entire amount of such Commercial Investment. If the
participating Holders elect, in aggregate, to make Commercial Investment that is
more than the Company requires, then (i) each Holder shall be entitled to
participate in the Commercial Investment based on its pro rata share, as
described in section 5.2(a) above (or any portion thereof if such Holder elects
to purchase less than its pro rata share) of the Commercial Investment, and (ii)
if, after the allocation in clause (i) (and, if necessary, in this clause (ii)),
any participation in the Commercial Investment has not been allocated, each
Holder that shall have subscribed for a greater participation in the Commercial
Investment than shall have been allocated under clause (i) (and, if necessary,
under this clause (ii)) shall be entitled to participate in a fraction of such
remaining Commercial Investment, the numerator of which is the number of shares
of Registrable Securities purchased pursuant to the Purchase Agreement by such
Holder and the denominator of which is the number of shares of Registrable
Securities purchased pursuant to the Purchase Agreement by all Holders who are
exercising their right to participate in the Commercial Investment. If, after
the allocation in clauses (i) and (ii), any participation in the Commercial
Investment shall not have been allocated, the procedure set forth in clause (ii)
shall be repeated until all of the participation in the Commercial Investment
has been allocated. For purposes of this section 5.2(c), the term
"Investment-Related Securities" shall mean (a) common stock of the Company or
any subsidiary; (b) rights, options or warrants to purchase common stock of the
Company or any subsidiary; (c) any security of the Company or any subsidiary
other than common stock having voting rights in the election of the Board of
Directors, not contingent upon a failure to pay dividends; (d) any equity- or
debt-related security of the Company or any subsidiary convertible into or
exchangeable for any of the foregoing; and (e) any agreement or commitment to
issue any of the foregoing.
5.3 Failure to Notify. After expiration of all notice periods
-----------------
specified in Section 5.2 above, the Company may, during a period of 90 days
following the expiration of such notice periods, sell and issue to other persons
such Equity Securities as to which the Holders do not indicate a desire to
purchase or enter into the Commercial Investment transaction as to which the
Holders do not elect to participate or if the Holders do not participate for the
14
entire amount of the Commercial Investment, at a price not less and upon terms
and conditions not more favorable to the offeree than those set forth in the
Notice or Commercial Notice, as the case may be. In the event the Company does
not sell such Equity Securities within said 90 day period, the Holders shall no
longer be obligated to purchase the Equity Securities pursuant to their
elections to purchase such Equity Securities under Section 5.2(a), and the
Company shall not thereafter issue or sell any Equity Securities without first
offering such securities to the Holders in the manner provided herein. In the
event the Company does not enter into the proposed Commercial Investment
transaction within said 90 day period, the Company shall not thereafter enter
into a Commercial Investment transaction without first offering such Commercial
Investment to the Holders in the manner provided herein.
5.4 Payment. If a Holder gives the Company notice that such Holder
-------
desires to purchase any of the Equity Securities offered by the Company or
participate in any Commercial Investment in the Company, payment for the Equity
Securities or Commercial Investment shall be by check or wire transfer against
delivery of the Equity Securities at the executive offices of the Company within
10 days after giving the Company such notice, or, if later, the closing date for
the sale of such Equity Securities or Commercial Investment proposed by the
Company in the Notice. The Company and any affected Holder shall take all such
action as may be required by any regulatory authority in connection with the
exercise by a Holder of the right to purchase Equity Securities or make such a
Commercial Investment as set forth in this Section 5.
5.5 Equity Securities. The term "Equity Securities" shall mean (a)
----------------- -----------------
Common Stock; (b) rights, options or warrants to purchase Common Stock; (c) any
security other than Common Stock having voting rights in the election of the
Board of Directors, not contingent upon a failure to pay dividends; (d) any
equity- or debt-related security convertible into or exchangeable for any of the
foregoing; and (e) any agreement or commitment to issue any of the foregoing.
6. Miscellaneous.
-------------
6.1 Amendments and Waivers. Any term of this Agreement may be amended
----------------------
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Investors holding more than
two-thirds of the Registrable Securities then outstanding. Any amendment or
waiver effective in accordance with this Section 6.1 shall be binding upon each
Investor, his, her or its heirs, representatives or permitted assigns, and the
Company and its heirs, representatives and permitted assigns.
6.2 Notices. Any notice, consent, authorization or other communication
-------
to be given hereunder shall be in writing and shall be deemed duly given and
received when delivered personally or transmitted by facsimile transmission with
receipt acknowledged by the addressee, three days after being mailed by first
class mail, or the next business day after being deposited for next-day delivery
with a nationally recognized, receipted, overnight delivery service, charges and
postage prepaid, properly addressed to the party to receive such notice at the
address(es) specified on the signature page of this Agreement for the Company
and on Schedule A for each Investor (or at such other address as shall be
specified by like notice).
15
6.3 Entire Agreement. This Agreement (including the Schedules hereto),
----------------
the Purchase Agreement and the Warrants contain the entire agreement of the
parties and supersede all prior negotiations, correspondence, term sheets,
agreements and understandings, written and oral, between or among the parties
regarding the subject matter hereof.
6.4 Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the respective heirs, representatives, successors and
permitted assigns of the parties (including transferees of any shares of
Registrable Securities). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective heirs, representatives, successors and permitted assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
6.5 Severability. If any provision of this Agreement is held by a
------------
court of competent jurisdiction to be unenforceable under applicable law, such
provision shall be replaced with a provision that accomplishes, to the extent
possible, the original business purpose of such provision in a valid and
enforceable manner, and the balance of the Agreement shall be interpreted as if
such provision were so modified and shall be enforceable in accordance with its
terms.
6.6 Governing Law. This Agreement shall be governed by and construed
-------------
and interpreted in accordance with the law of the State of New York, without
regard to that state's conflict of laws principles.
6.7 Further Assurances. Each party shall execute such other and
------------------
further certificates, instruments and other documents as may be reasonably
necessary and proper to implement, complete and perfect the transactions
contemplated by this Agreement..
6.8 Aggregation of Stock. All shares of Registrable Securities held or
--------------------
acquired by affiliated entities or persons, or entities or persons under common
investment management, shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
[remainder of page intentionally left blank; signature page follows]
16
IN WITNESS WHEREOF, this Investors' Rights Agreement has been duly executed by
or on behalf of the parties hereto as of the date first above written.
KFx, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Address:
0000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0000 Xxx Xxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
THE INVESTORS:
WESTCLIFF AGGRESSIVE GROWTH, L.P. WESTCLIFF FOUNDATION
WESTCLIFF ENERGY PARTNERS, L.P. WESTCLIFF MASTER FUND, L.P.
WESTCLIFF LONG/SHORT, L.P. WESTCLIFF PROFIT SHARING AND MONEY
WESTCLIFF PARTNERS, L.P. PURCHASE PENSION PLAN
WESTCLIFF PUBLIC VENTURES FUND, L.P. CANCER CENTER OF SANTA XXXXXXX
WESTCLIFF SMALL CAP FUND, L.P. PALM TRUST
XXXXXX FOUNDATION
By: Westcliff Capital Management, LLC UNIVERSITY OF SAN FRANCISCO
Its: General Partner
By: Westcliff Capital Management, LLC
Its: Investment Adviser and Attorney-In-Fact
By:
-------------------------------
Xxxxxxx X. Xxxxxxx III, Manager
By:
-----------------------------------------
Xxxxxxx X. Xxxxxxx III, Manager
17
RAM TRADING, LTD. NORANDA FINANCE, INC. RETIREMENT
PLAN FOR AFFILIATED COMPANIES
TRUST
By: Mellon Bank, N.A., solely in its capacity as
Trustee for the Noranda Finance, Inc. Retirement
Plan for Affiliated Companies Trust (as directed
by Westcliff Capital Management, LLC), and not
in its individual capacity
By:
-------------------------------------------------
Xxxxxxxxxx X. Xxxx
Authorized Signatory
PENINSULA FUND, L.P. COMMON SENSE PARTNERS, L.P.
By: Peninsula Capital Management, Inc. By: Peninsula Capital Management, Inc.
Its: General Partner Its: Investment Adviser
By: By:
----------------------------------- -------------------------------------------------
Xxxxx Xxxxxxx, President Xxxxx Xxxxxxx, President
By: Common Sense Investment Management, LLC
Its:General Partner
By:
-------------------------------------------------
Xxxxx X. Xxxxxxxx
Director and Senior Vice President Finance
18
SCHEDULE A
----------
SCHEDULE OF INVESTORS
Name of Investor, Address and Facsimile Number
----------------------------------------------
----------------------------------------------
Westcliff Aggressive Growth, L.P.
Westcliff Energy Partners, L.P.
Westcliff Foundation
Westcliff Long/Short, L.P.
Westcliff Master Fund, L.P.
Westcliff Partners, L.P.
Westcliff Profit Sharing and Money
Purchase Pension Plan
Westcliff Public Ventures Fund, L.P.
Westcliff Small Cap Fund, L.P.
Cancer Center of Santa Xxxxxxx
Palm Trust
Xxxxxx Foundation
University of San Francisco
c/o Westcliff Capital Management, LLC
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
----------------------------------------------
----------------------------------------------
Noranda Finance, Inc. Retirement Plan for
Affiliated Companies Trust
c/o Mellon Bank, N.A.
Xxx Xxxxxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxxxxx X. Xxxx
----------------------------------------------
----------------------------------------------
Peninsula Fund, L.P.
c/o Xxxxx Xxxxxxx
Peninsula Capital Management, Inc.
Xxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
----------------------------------------------
Common Sense Partners, L.P.
c/o Xxxxx Xxxxxxx
Peninsula Capital Management, Inc.
Xxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
----------------------------------------------
Ram Trading, Ltd.
c/o Xxxxx Xxxxxxxx
Xxxxxxx Capital Management, LLC
000 Xxxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000
----------------------------------------------
----------------------------------------------
For any notice to a Westcliff-related entity, send a copy to:
Xxxx X. Xxxxxx, Esq.
Xxxxxxxx, Xxxxxx & Xxxxxxxx LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
SCHEDULE B
----------
INVESTORS' COMMON STOCK
Investor Name Number of Shares of Common Stock
------------- --------------------------------
Westcliff Energy Partners, L.P. 67,500
Westcliff Public Ventures Fund, L.P. 41,200
EXHIBIT C
---------
AMENDED AND RESTATED
--------------------
PUT AGREEMENT
-------------
(formerly titled Put and Call Option Agreement)
This Amended and Restated Put Agreement, is made as of April 30, 2002,
by and among KFx, Inc., a Delaware corporation (the "Company"), and the parties
-------
listed on the Schedule of Grantees attached hereto as Exhibit A (each, a
"Grantee" and collectively, the "Grantees"), with reference to the following
------- --------
facts:
WHEREAS, the Grantees are parties to the Common Stock and Warrant Purchase
Agreement, dated as of March 28, 2002 (the "Original Purchase Agreement" and as
---------------------------
amended by the Addendum described below, the "Purchase Agreement");
------------------
WHEREAS, in connection with the closing of the transactions described in the
Original Purchase Agreement, the Company and Grantees entered into a Put and
Call Option Agreement, dated as of March 28, 2002 (the "Original Put
------------
Agreement");
---------
WHEREAS, the Grantees are parties to that certain Addendum to the Common Stock
and Warrant Purchase Agreement, dated as of April 30, 2002 (the "Addendum"),
--------
which provides that as a condition to the closing of the transactions
contemplated by the Addendum the Original Put Agreement must be amended and
restated in its entirety;
WHEREAS, the Company has agreed to grant the Grantees the right to cause the
shares of Common Stock (the "Shares") acquired pursuant to the Purchase
------
Agreement and the Addendum to be purchased by the Company under the terms and
conditions provided in this Agreement. For purposes of this Agreement, "Shares"
includes all shares of Common Stock issued in connection with any and all
Subsequent Dilutive Offerings (as defined in the Amended and Restated Investors'
Rights Agreement);
WHEREAS, in connection with the closing of the transactions described in the
Addendum, the Company's Call Option shall expire and terminate pursuant to
section 6(b)(ii) of the Original Put Agreement; and
WHEREAS, the Company and the Grantees desire to amend and restate in its
entirety the Original Put Agreement pursuant to this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein, the parties agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined in this
-----------
Agreement have the meanings respectively ascribed to them in the Purchase
Agreement. In addition, the following terms when capitalized have the following
meanings in this Agreement:
(a) "Put Exercise Notice" means a written notice, in substantially the
-------------------
form of Exhibit B attached hereto, from a Grantee to the Company exercising such
Grantee's Put Option and specifying the number of Shares with respect to which
such Put Option is being exercised.
(b) "Put Option" means each Grantee's right and option to require the
----------
Company, on the terms and conditions set forth herein, to purchase all or any
portion of the
Shares acquired by such Grantee pursuant to the Purchase Agreement. Anything
herein to the contrary notwithstanding, the Put Options granted hereunder shall
become effective on the earlier of (i) July 31, 2002 or (ii) the redemption or
conversion of all outstanding bonds issued under that certain Indenture, dated
as of July 25, 1997, between the Company and First Bank National Association,
doing business as Colorado National Bank, as trustee.
2. Grant of Put Option. Subject to the terms and conditions set forth
-------------------
herein, the Company irrevocably grants and issues to each Grantee a Put Option
to require the Company to purchase the Shares at a purchase price (the "Put
---
Payment Price") per Share of (i) $2.50 or, if the Company has effected one or
-------------
more Subsequent Dilutive Offerings prior to the exercise of the Put Option, at
the lowest Purchase Price Per Common Share Equivalent (as defined in the Amended
and Restated Investors' Rights Agreement) prior to the exercise of the Put
Option, as equitably adjusted from time to time for combinations of shares,
stock splits, stock dividends, recapitalizations and the like (the "Share
-----
Purchase Price"), plus (ii) interest on the Share Purchase Price at the rate of
--------------
nine percent (9%) simple interest per annum from the Closing Date to the date on
which the Put Payment Price is paid in full.
3. Expiration Date of the Put Option. Each Put Option shall expire and be
---------------------------------
of no further force or effect at the earlier of the time when it shall have been
exercised with respect to all Shares that the Grantee holds or 11:59 p.m.,
California time, on December 23, 2002 (the "Expiration Date").
---------------
4. Exercise of the Put Option.
---------------------------
(a) If at any time prior to the Expiration Date, a Grantee wishes to
exercise its Put Option, such Grantee shall deliver a Put Exercise Notice to the
Company. Such Put Exercise Notice shall be effective if and only if it is
received by the Company on or prior to the Expiration Date.
(b) Within ten (10) days of delivery of the Put Exercise Notice, the
Company shall notify the Grantees in writing (the "Company Notice") of how the
--------------
Company intends to pay the Put Payment Price. The Company shall pay to each such
Grantee the full amount of the Put Payment Price for each of the Shares that the
Grantee has elected to have purchased by the Company as soon as possible after
the delivery of the Put Exercise Notice; provided that, subject to section 4(c),
such payment must be made not later than one hundred (100) days after delivery
of the Put Exercise Notice (the "Payment Period"). If the Company indicates in
--------------
the Company Notice that it will pay the Put Payment Price with cash that the
Company has on hand, then the Company must indicate how those funds were raised
and when it will pay the Put Payment Price. If the Company indicates in the
Company Notice that intends to raise the assets to pay the Put Payment Price by
selling the Pegasus Securities (as defined below) or the assets of Pegasus, then
the Company must (i) commence marketing Pegasus (as defined below) as soon as
possible, (ii) use commercially reasonable efforts to sell the Pegasus
Securities or the assets of Pegasus in a reasonable and orderly manner and (iii)
provide periodic updates to, and respond to inquiries from, the Grantees
regarding the progress of such sale.
(c) If the Company does not pay the full amount of the Put Payment
Price for all of the Shares to be purchased by the Company during the Payment
Period, then the Company
shall effect such purchase of the Shares by transferring to the Grantees all of
the Company's right, title and interest in and to all the shares (the "Pegasus
-------
Securities") of common stock and preferred stock of Pegasus Technologies, Inc.,
----------
a South Dakota corporation ("Pegasus"), that the Company owns, with the
Company's endorsement when necessary or appropriate or with stock powers duly
executed in blank with the Company's signature; provided that the Company is
required to effect the purchase described in this section 4(c) only if the
Grantees holding at least two-thirds of the Shares then outstanding exercise the
Put Option, in which case all Shares then outstanding shall become subject to
and bound by such put transaction. If the Company is required to effect the
purchase described in this section 4(c), then each Grantee shall be entitled to
receive as consideration for its Shares a fraction of the Pegasus Securities,
the numerator of which is the number of shares of Shares then held by each such
Grantee and the denominator of which is the number of Shares then held by all of
the Grantees participating in such put. For purposes of this Agreement, "Pegasus
Securities" includes (i) any sums paid as liquidating dividends or as a return
of capital with respect to the Pegasus Securities, (ii) any stock certificates
(including, without limitation, any certificates representing a stock dividend,
stock split or a distribution in connection with any reclassification, increase
or reduction of capital), options or rights, whether in respect of, as an
addition to, in substitution for or in exchange for all or any portion of the
Pegasus Securities, or otherwise, or (iii) any property distributed on or with
respect to Pegasus Securities pursuant to a recapitalization or reclassification
of capital or pursuant to a reorganization of Pegasus.
(d) Each Share that is not purchased as described herein shall remain
outstanding and the Grantee holding such Share shall be entitled to all the
rights of a stockholder of the Company until such Share is purchased as
described herein.
(e) At the closing of the put transaction at which the Company
purchases the Shares, each participating Grantee shall deliver to the Company a
certificate or certificates representing all the Shares being put, which shall
be free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever.
5. Call Option. Pursuant to the terms of this Agreement, the Company's Call
-----------
Option, as described in the Original Put Agreement is hereby terminated and
cancelled, and, accordingly, the Company no longer has any rights to exercise
all or any portion of the Call Option.
6. [INTENTIONALLY OMITTED]
----------------------
7. Covenants of the Company. The Company covenants that:
------------------------
(a) The Company will not, by amendment of its charter documents or
through any reorganization, recapitalization, transfer of assets, consolidation,
merger, dissolution, issuance or sale of securities or any other voluntary
action, avoid or seek to avoid the performance of any of the terms of this
Agreement, but will at all times in good faith take all necessary action to
carry out all such terms.
(b) As long as any Put Option remains effective and unexercised, as a
whole or in part, the Company will not (i) sell, assign (by operation of law or
otherwise), transfer,
convey, or otherwise dispose of, or grant any option with respect to, any of the
Pegasus Securities or the assets of Pegasus or (ii) create, incur or permit to
exist any pledge, mortgage, lien, charge, encumbrance or security interest with
respect to any of the Pegasus Securities or the assets of Pegasus or the
proceeds thereof other than that created hereby.
(c) Without the written consent of Grantees holding at least
two-thirds of Shares then outstanding, the Company will not, prior to the
Expiration Date, permit, authorize or cause (i) the sale, transfer or other
disposition of the Pegasus Securities owned by the Company, (ii) the sale,
transfer or other disposition of any material asset of, or the sale, transfer or
other disposition of all or substantially all of the assets of, Pegasus to any
other person(s) or entity(ies) (including, but not limited to, any license of
Pegasus' intellectual property rights), (iii) the consolidation with or merger
into any other person or entity or permit any such person or entity to
consolidate with or merge into Pegasus, (iv) Pegasus to incur indebtedness of
any nature, or (v) except as set forth in section 7(f) below, Pegasus to issue
any additional shares of capital stock or sell or otherwise dispose of any
shares of capital stock held in treasury to any person or entity.
Notwithstanding the foregoing, however, Pegasus may sub-license its intellectual
property rights in the ordinary course of business and consistent with the
five-year business plan that has been provided to the Grantees.
(d) The Company shall promptly (i) notify the Grantees of any event of
which the Company becomes aware causing material loss or depreciation in the
value of the Pegasus Securities or assets of Pegasus, (ii) deliver to the
Grantees all written notices received by the Company with respect to the Pegasus
Securities and (iii) pay promptly when due all taxes, assessments, and
governmental charges or levies on the Pegasus Securities and assets of Pegasus.
(e) At all times prior to the Expiration Date, the Company shall cause
Pegasus to continue to operate under its five-year business plan and such
business plan shall not be materially modified without the prior written consent
of Grantees holding at least two-thirds of Shares then outstanding.
(f) If Pegasus (i) has any capital requirements at any time prior to
the Expiration Date, (ii) intends to repurchase or otherwise acquire the shares
or other beneficial ownership interest of its minority stockholders or (iii)
repay any of its outstanding indebtedness, the Company shall fund such capital
requirements, stock repurchase program or debt repayment program by making
equity investments or contributions to Pegasus in exchange for securities of
Pegasus and all such securities issued by Pegasus shall be deemed to be "Pegasus
Securities", and the Company shall not permit or cause Pegasus to satisfy such
capital requirements by any other means without the prior written consent of
Grantees holding at least two-thirds of Shares then outstanding. Anything herein
to the contrary notwithstanding, none of such investments or contributions by
the Company shall be in the form of a loan or other form of indebtedness.
8. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents, warrants and agrees as follows:
(a) Subject only to this Agreement, the Company owns all right, title
and interest, of record and beneficial, in and to all of the Pegasus Securities
as of the date hereof. The shares of Pegasus Securities set forth on Exhibit C
hereto constitute all of the issued and
outstanding shares of capital stock of Pegasus of any class held by the Company.
The Pegasus Securities that are now outstanding have been duly and validly
issued, fully paid and nonassessable. Except for issuances of up to $500,000 of
securities of Pegasus to Kennecott Energy Company, a Delaware corporation, there
are no outstanding options, warrants or rights to acquire any capital stock of
any class of Pegasus, and there has not been approved by Pegasus and there is
not now pending any issuance or sale by Pegasus of capital stock of any class.
(b) The Pegasus Shares are owned by the Company free and clear of any
pledge, mortgage, hypothecation, lien, charge or encumbrance, or any security
interest therein or in the proceeds thereof, except as provided by this
Agreement for the benefit of the Grantees.
(c) The Company warrants and will defend the Grantees' right, title
and interest in and to the Pegasus Securities and the proceeds thereof against
the claims of any persons or entities.
9. Remedies Cumulative. The Company agrees that the rights, powers and
-------------------
remedies given to Grantees by this Agreement, the Purchase Agreement and its
Addendum, and the Amended and Restated Investors' Rights Agreement are
cumulative and concurrent and not exclusive of any thereof or of any other
powers, rights or remedies available to the Grantees, whether existing at law or
in equity or by statute or otherwise and shall be in addition to every other
right, power or remedy provided in this Agreement or such other agreements or
now or hereafter existing or in equity or by statute or otherwise, and the
exercise or beginning of the exercise by the Grantees of any one or more of such
rights, powers and remedies shall not preclude the simultaneous or later
exercise by the Grantees of any or all such other rights, powers and remedies.
No failure on the part of the Grantees to exercise any right, power or remedy
shall operate as a waiver thereof.
10. Miscellaneous.
-------------
(a) Indemnification. The Company agrees to indemnify and hold harmless
---------------
each Grantee and its respective members, managers, partners, officers,
directors, employees and agents from and against all losses, claims, expenses,
judgments, damages and liabilities, including attorney fees and expert fees,
which arise in connection with or arise out of the breach of any
representations, warranties, agreements and/or covenants of the Company
contained in this Agreement.
(b) Amendments and Waivers. Any term of this Agreement may be amended
----------------------
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Grantees holding more than
two-thirds of the then outstanding Shares. Any amendment or waiver effective in
accordance with this section 10(b) shall be binding upon each Grantee, his, her
or its heirs, representatives or permitted assigns, and the Company and its
heirs, representatives and permitted assigns.
(c) Notices. Any notice, consent, authorization or other communication
-------
to be given hereunder shall be in writing and shall be deemed duly given and
received when delivered personally or transmitted by facsimile transmission with
receipt acknowledged by the addressee,
three days after being mailed by first class mail, or the next business day
after being deposited for next-day delivery with a nationally recognized,
receipted, overnight delivery service, charges and postage prepaid, properly
addressed to the party to receive such notice at the address(es) specified on
the signature page of this Agreement for the Company and on Exhibit A for each
Grantee (or at such other address as shall be specified by like notice).
(d) Entire Agreement. This Agreement and the other Related Documents
----------------
contain the entire agreement of the parties and supersede all prior
negotiations, correspondence, term sheets, agreements and understandings,
written and oral, between or among the parties regarding the subject matter
hereof.
(e) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the respective heirs, representatives, successors and
permitted assigns of the parties. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective heirs, representatives, successors and permitted assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
(f) Severability. If any provision of this Agreement is held by a
------------
court of competent jurisdiction to be unenforceable under applicable law, such
provision shall be replaced with a provision that accomplishes, to the extent
possible, the original business purpose of such provision in a valid and
enforceable manner, and the balance of the Agreement shall be interpreted as if
such provision were so modified and shall be enforceable in accordance with its
terms.
(g) Governing Law. This Agreement shall be governed by and construed
-------------
and interpreted in accordance with the law of the State of New York, without
regard to that state's conflict of laws principles.
(h) Attorneys' Fees. If any action at law or in equity is necessary to
---------------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
(i) Interpretation. This Agreement shall be construed according to its
--------------
fair language. The rule of construction to the effect that any ambiguities are
to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement.
(j) Further Assurances. The Company agrees that at any time and from
------------------
time to time, on written request of a Grantee, the Company will execute and
deliver such further documents and do such further acts and things as the
Grantees reasonably requests to effect the purposes of this Agreement.
(k) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall constitute an original, and all of which
together shall be considered one and the same agreement.
(l) Assignment. The Company shall not assign this Agreement or any
----------
rights hereunder or delegate any duties hereunder. Any attempted or purported
assignment or delegation in violation of the preceding sentence shall be void.
(m) Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
[Signatures appear on the following page.]
IN WITNESS WHEREOF, this Amended and Restated Put Agreement has been duly
executed by or on behalf of the parties as of the date first above written.
THE COMPANY
Kfx, Inc.
By:
--------------------------------------------
Print Name:
------------------------------------
Title:
-----------------------------------------
Address: 0000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0000 Xxx Xxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
THE GRANTEES:
WESTCLIFF AGGRESSIVE GROWTH, L.P. WESTCLIFF FOUNDATION
WESTCLIFF ENERGY PARTNERS, L.P. WESTCLIFF MASTER FUND, L.P.
WESTCLIFF LONG/SHORT, L.P. WESTCLIFF PROFIT SHARING AND MONEY
WESTCLIFF PARTNERS, L.P. PURCHASE PENSION PLAN
WESTCLIFF PUBLIC VENTURES FUND, L.P. CANCER CENTER OF SANTA XXXXXXX
WESTCLIFF SMALL CAP FUND, L.P. PALM TRUST
XXXXXX FOUNDATION
UNIVERSITY OF SAN FRANCISCO
By: Westcliff Capital Management, LLC
Its:General Partner By: Westcliff Capital Management,LLC
Its:Investment Adviser and
Attorney-In-Fact
By:
--------------------------------
Xxxxxxx X. Xxxxxxx III, Manager
By:
---------------------------------
Xxxxxxx X. Xxxxxxx III, Manager
Xxxxxxx X. Xxxxxxx III, Manager
11
RAM TRADING, LTD. NORANDA FINANCE, INC. RETIREMENT
PLAN FOR AFFILIATED COMPANIES
By: Xxxxxxx Capital Management, LLC TRUST
Its: Investment Adviser By:Mellon Bank, N.A., solely in its capacity as
Trustee for the Noranda Finance, Inc.
Retirement Plan for Affiliated Companies Trust
By: (as directed by Westcliff Capital Management, LLC),
----------------------------------------- and not in its individual capacity
Xxxxx Xxxxxxxx, Chief Financial Officer
By:
---------------------------------------------
Xxxxxxxxxx X. Xxxx
Authorized Signatory
PENINSULA FUND, L.P. COMMON SENSE PARTNERS, L.P.
By: Peninsula Capital Management, Inc. By: Peninsula Capital Management, Inc.
Its: General Partner Its: Investment Adviser
By: By:
---------------------------------------- ---------------------------------------------
Xxxxx Xxxxxxx, President Xxxxx Xxxxxxx, President
By: Common Sense Investment Management, LLC
Its: General Partner
By:
---------------------------------------------
Xxxxx X. Xxxxxxxx
Director and Senior Vice President Finance
EXHIBIT A
---------
SCHEDULE OF GRANTEES
Name of Grantee, Address and Facsimile Number
---------------------------------------------
---------------------------------------------
Westcliff Aggressive Growth, L.P.
Westcliff Energy Partners, L.P.
Westcliff Long/Short, L.P.
Westcliff Partners, L.P.
Westcliff Public Ventures Fund, L.P.
Westcliff Small Cap Fund, L.P.
Westcliff Foundation
Westcliff Master Fund, L.P.
Westcliff Profit Sharing And Money Purchase
Pension Plan
Cancer Center Of Santa Xxxxxxx
Palm Trust
Xxxxxx Foundation
University Of San Francisco
c/o Westcliff Capital Management, LLC
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
---------------------------------------------
Noranda Finance, Inc. Retirement Plan for
Affiliated Companies Trust
c/o Mellon Bank, N.A.
Xxx Xxxxxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxxxxx X. Xxxx
---------------------------------------------
Peninsula Fund, L.P.
c/o Xxxxx Xxxxxxx
Peninsula Capital Management, Inc.
Xxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
---------------------------------------------
Common Sense Partners, L.P.
c/o Xxxxx Xxxxxxx
Peninsula Capital Management, Inc.
Xxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
---------------------------------------------
13
---------------------------------------------
Ram Trading, Ltd.
c/o Xxxxx Xxxxxxxx
Xxxxxxx Capital Management, LLC
000 Xxxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000
---------------------------------------------
For any notice to a Westcliff-related entity, send a copy to:
Xxxx X. Xxxxxx, Esq.
Xxxxxxxx, Xxxxxx & Xxxxxxxx LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
EXHIBIT B
---------
PUT EXERCISE NOTICE
BY GRANTEE OF
PUT OPTION GRANTED BY
KFx, INC.
KFx, Inc.
0000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Ladies and Gentlemen:
Pursuant to the Amended and Restated Put Agreement, dated as of April 30, 2002,
among KFx Inc., a Delaware corporation (the "Company"), the undersigned and
other purchasers of Common Stock of the Company (the "Stock"), granting to me a
put option (the "Put Option") to require the Company to purchase up to an
aggregate of shares of my Stock on the terms and conditions and at
----------
the times set forth therein and at the Put Payment Price (as defined in the Put
Agreement), I hereby exercise the Put Option with respect to shares of
---------
my Stock.
Very truly yours,
---------------------------------
Signature
Dated: , 200 ---------------------------------
-------------------- - Typed or Printed Name
---------------------------------
Social Security Number
EXHIBIT C
----------
PEGASUS SECURITIES
Exhibit C - Shares of Pegasus Technologies, Inc. owned by KFx Inc.
1. Common Stock: 11,173,537 shares
2. Preferred Shares, Class C, convertible into Common Stock: 2,798,161
shares of preferred, convertible into 3,295,715 shares of common (Sold
to third parties, being repurchased from proceeds today)
3. Warrants to Purchase Common Stock: 1,805,000 shares
The above does not include notes and advances payable to KFx Inc. by Pegasus
Technologies, Inc. that may, in the future, be converted to Common Stock of
Pegasus and Warrants.
SCHEDULE A
----------
ADDITIONAL INVESTORS
------------------------------------------------------------------------------------------
Shares of
Common Stock
Issuable On Aggregate
Additional Investor Shares of Exercise of Investment
Name and Address Common Stock the Warrant Amount
----------------------------------------------------------------------------------------
Westcliff Aggressive Growth, L.P. 26,698 30,035 $ 66,745.00
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
----------------------------------------------------------------------------------------
Westcliff Partners, L.P. 63,596 71,545 $158,990.00
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
----------------------------------------------------------------------------------------
Westcliff Long/Short, L.P. 18,174 20,446 $ 45,435.00
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
----------------------------------------------------------------------------------------
Westcliff Public Ventures Fund, L.P. 117,783 132,506 $294,457.50
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
----------------------------------------------------------------------------------------
Westcliff Small Cap Fund, L.P. 22,221 24,999 $ 55,552.50
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
----------------------------------------------------------------------------------------
Cancer Center of Santa Xxxxxxx 16,215 18,242 $ 40,537.50
x/x Xxxxxxxxx Xxxxxxx Xxxxxxxxxx, LLC
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
----------------------------------------------------------------------------------------
Westcliff Master Fund, L.P. 146,592 164,916 $366,480.00
c/o Westcliff Capital Management, LLC
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
----------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Xxxxxx Foundation 31,820 35,797 $ 79,550.00
x/x Xxxxxxxxx Xxxxxxx Xxxxxxxxxx, LLC
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
------------------------------------------------------------------------------------------
Palm Trust 28,086 31,597 $ 70,215.00
x/x Xxxxxxxxx Xxxxxxx Xxxxxxxxxx, LLC
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
------------------------------------------------------------------------------------------
University of San Francisco 32,093 36,105 $ 80,232.50
x/x Xxxxxxxxx Xxxxxxx Xxxxxxxxxx, LLC
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
------------------------------------------------------------------------------------------
Westcliff Foundation 23,558 26,502 $ 58,895.00
x/x Xxxxxxxxx Xxxxxxx Xxxxxxxxxx, LLC
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
------------------------------------------------------------------------------------------
Westcliff Profit Sharing and Money Purchase 4,382 4,930 $ 10,955.00
Pension Plan
c/o Westcliff Capital Management, LLC
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Fax: (000) 000-0000
------------------------------------------------------------------------------------------
Noranda Finance, Inc. Retirement Plan for 268,782 302,380 $ 671,955.00
Affiliated Companies Trust
c/o Mellon Bank, N.A.
Xxx Xxxxxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxxxxx X. Xxxx
------------------------------------------------------------------------------------------
Ram Trading, Ltd. 1,600,000 1,800,000 $4,000,000.00
c/o Xxxxx Xxxxxxxx
Xxxxxxx Capital Management, LLC
000 Xxxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000
==========================================================================================
TOTAL 2,400,000 2,700,000 $6,000,000.00
------------------------------------------------------------------------------------------
SCHEDULE B
----------
EXISTING INVESTORS
Westcliff Aggressive Growth, L.P.
Westcliff Energy Partners, L.P.
Westcliff Long/Short, L.P.
Westcliff Partners, L.P.
Westcliff Public Ventures Fund, L.P.
Westcliff Small Cap Fund, L.P.
Westcliff Foundation
Westcliff Master Fund, L.P.
Westcliff Profit Sharing and Money Purchase Pension Plan
Cancer Center of Santa Xxxxxxx
Palm Trust
Xxxxxx Foundation
University of San Francisco
Ram Trading, Ltd.
Peninsula Fund, L.P.
Common Sense Partners, L.P.
Disclosure Schedule 3
KFx Inc. - Addendum to the Common Stock & Warrant Purchase Agreement
April 30, 2002
List of Parties from whom KFx Inc. will repurchase Pegasus Series C Preferred
-----------------------------------------------------------------------------
Stock
-----
Evergreen Resources, Inc. $2,148,333.33
Dr. Xxxxx Xxxxxxxxxxx 273,422.56
Xxxx X. Xxxxxx 141,389.60
Xxxx Xxxxxxx 136,710.77
Xxxxxxxx Xxxxxxx 143,221.86
Xxxxxxx Xxxx 137,664.59
U. S. Global, LLC 372,306.74
Xxxxxxx X. Xxxxxx 494,765.97
TOTAL $3,847,815.42
KFx Inc.
Addendum to Common Stock and Warrant Purchase Agreement
Dated as of April 30, 2002
Disclosure Schedule 4.1(b) - Intellectual Property
Licenses Granted
----------------
1. License to Heartland Fuels Development Corporation dated May 10, 1991
covering the Series A and B Technology. Heartland Fuels granted an
exclusive worldwide license with right to sublicense to K-Fuel, LLC on
April 22, 1996 (the "Series A and B License Agreement"). The Series A
and B License Agreement was amended and restated on June 29, 1999.
2. License to K-Fuel, LLC covering the Series C Technology dated April
22, 1996 (the "Series C License Agreement"). The Series C License
Agreement was amended and restated on June 29, 1999. K-Fuel, LLC holds
exclusive world wide rights with rights to sublicense to the Series C
Technology.
3. Amended and Restated Patent and Technology License from KFx Inc. to
Landrica Development Company for the Series C Technology granting a
non-exclusive right to the technology for a single fuel plant having a
design capacity of five hundred sixty thousand (560,000) tons of
upgraded coal.
License Fee and Royalty Payment Obligations
-------------------------------------------
1. Gross Royalty Share Agreement between KFx Inc. and Fort Union, Ltd.,
dated August 17, 1995.
2. Royalty Agreement Dated December 29, 1992 and Amendment to Royalty
Agreement dated August 6, 1997, between KFx Inc. and Xxxxxx Xxxxxxxxx,
et al.
3. Royalty Agreement dated August 17, 1995 between Ohio Valley Electric
Corporation and KFx Inc.
