Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
LAURUS MASTER FUND, LTD.
AND
ABLE ENERGY, INC.
DATED: JUNE 30, 2006
TABLE OF CONTENTS
PAGE
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1. AGREEMENT TO SELL AND PURCHASE.........................................................................1
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2. FEES AND WARRANT. On the Closing Date:................................................................1
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3. CLOSING, DELIVERY AND PAYMENT..........................................................................2
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3.1 CLOSING.......................................................................................2
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3.2 DELIVERY......................................................................................2
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4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................................2
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4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION.................................................2
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4.2 SUBSIDIARIES..................................................................................3
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4.3 CAPITALIZATION; VOTING RIGHTS.................................................................3
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4.4 AUTHORIZATION; BINDING OBLIGATIONS............................................................4
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4.5 LIABILITIES...................................................................................4
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4.6 AGREEMENTS; ACTION............................................................................5
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4.7 OBLIGATIONS TO RELATED PARTIES................................................................6
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4.8 CHANGES.......................................................................................7
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4.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC....................................................8
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4.10 INTELLECTUAL PROPERTY.........................................................................8
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4.11 COMPLIANCE WITH OTHER INSTRUMENTS.............................................................9
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4.12 LITIGATION....................................................................................9
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4.13 TAX RETURNS AND PAYMENTS......................................................................9
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4.14 EMPLOYEES....................................................................................10
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4.15 REGISTRATION RIGHTS AND VOTING RIGHTS........................................................10
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4.16 COMPLIANCE WITH LAWS; PERMITS................................................................10
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4.17 ENVIRONMENTAL AND SAFETY LAWS................................................................11
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4.18 VALID OFFERING...............................................................................11
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4.19 FULL DISCLOSURE..............................................................................11
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4.20 INSURANCE....................................................................................12
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4.21 SEC REPORTS..................................................................................12
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4.22 LISTING......................................................................................12
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4.23 NO INTEGRATED OFFERING.......................................................................12
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4.24 STOP TRANSFER................................................................................12
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4.25 DILUTION.....................................................................................12
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4.26 PATRIOT ACT..................................................................................13
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4.27 ERISA........................................................................................13
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5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.......................................................14
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5.1 NO SHORTING..................................................................................14
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5.2 REQUISITE POWER AND AUTHORITY................................................................14
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5.3 INVESTMENT REPRESENTATIONS...................................................................14
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5.4 THE PURCHASER BEARS ECONOMIC RISK............................................................14
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5.5 ACQUISITION FOR OWN ACCOUNT..................................................................15
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5.6 THE PURCHASER CAN PROTECT ITS INTEREST.......................................................15
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5.7 ACCREDITED INVESTOR..........................................................................15
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5.8 LEGENDS......................................................................................15
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6. COVENANTS OF THE COMPANY..............................................................................16
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6.1 STOP-ORDERS..................................................................................16
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6.2 LISTING......................................................................................16
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6.3 MARKET REGULATIONS...........................................................................16
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6.4 REPORTING REQUIREMENTS.......................................................................16
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6.5 USE OF FUNDS.................................................................................17
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6.6 ACCESS TO FACILITIES.........................................................................18
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6.7 TAXES........................................................................................18
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6.8 INSURANCE....................................................................................18
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6.9 INTELLECTUAL PROPERTY........................................................................19
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6.10 PROPERTIES...................................................................................19
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6.11 CONFIDENTIALITY..............................................................................20
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6.12 REQUIRED APPROVALS...........................................................................20
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6.13 REISSUANCE OF SECURITIES.....................................................................20
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6.14 OPINION......................................................................................21
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6.15 MARGIN STOCK.................................................................................21
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6.16 FINANCING RIGHT OF FIRST REFUSAL.............................................................18
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6.17 AUTHORIZATION AND RESERVATION OF SHARES......................................................21
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7. COVENANTS OF THE PURCHASER............................................................................22
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7.1 CONFIDENTIALITY..............................................................................22
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7.2 NON-PUBLIC INFORMATION.......................................................................22
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7.3 LIMITATION ON ACQUISITION OF COMMON STOCK OF THE COMPANY.....................................22
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8. COVENANTS OF THE COMPANY AND THE PURCHASER REGARDING INDEMNIFICATION..................................22
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8.1 COMPANY INDEMNIFICATION......................................................................22
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8.2 PURCHASER'S INDEMNIFICATION..................................................................23
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9. CONVERSION OF CONVERTIBLE NOTE........................................................................23
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9.1 MECHANICS OF CONVERSION......................................................................23
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10. REGISTRATION RIGHTS...................................................................................24
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10.1 REGISTRATION RIGHTS GRANTED..................................................................24
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10.2 OFFERING RESTRICTIONS........................................................................24
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11. MISCELLANEOUS.........................................................................................24
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11.1 GOVERNING LAW, JURISDICTION AND WAIVER OF JURY TRIAL.........................................24
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11.2 SEVERABILITY.................................................................................25
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11.3 SURVIVAL.....................................................................................26
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11.4 SUCCESSORS...................................................................................26
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11.5 ENTIRE AGREEMENT; MAXIMUM INTEREST...........................................................26
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11.6 AMENDMENT AND WAIVER.........................................................................26
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11.7 DELAYS OR OMISSIONS..........................................................................26
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11.8 NOTICES......................................................................................27
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11.9 ATTORNEYS' FEES..............................................................................28
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11.10 TITLES AND SUBTITLES.........................................................................28
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11.11 FACSIMILE SIGNATURES; COUNTERPARTS...........................................................28
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11.12 BROKER'S FEES................................................................................28
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11.13 CONSTRUCTION.................................................................................28
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LIST OF EXHIBITS
Form of Convertible Term Note.............................................................................Exhibit A
Form of Warrant...........................................................................................Exhibit B
Form of Opinion...........................................................................................Exhibit C
Form of Escrow Agreement..................................................................................Exhibit D
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of June 30, 2006, by and between Able Energy, Inc., a Delaware
corporation (the "Company"), and LAURUS MASTER FUND, LTD., a Cayman Islands
company (the "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale to the Purchaser of a
Convertible Term Note in the aggregate principal amount of One Million Dollars
($1,000,000) in the form of Exhibit A hereto (as amended, modified and/or
supplemented from time to time, the "Note"), which Note is convertible into
shares of the Company's common stock, $0.01 par value per share (the "Common
Stock") at an initial fixed conversion price of $6.50 per share of Common Stock
("Fixed Conversion Price");
WHEREAS, the Company wishes to issue to the Purchaser a warrant in the
form of Exhibit B hereto (as amended, modified and/or supplemented from time to
time, the "Warrant") to purchase up to 160,000 shares of the Company's Common
Stock (subject to adjustment as set forth therein) in connection with the
Purchaser's purchase of the Note;
WHEREAS, the Purchaser desires to purchase the Note and the Warrant on
the terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and Warrant to
the Purchaser on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties and covenants hereinafter set forth
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE. Pursuant to the terms and conditions
set forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company shall sell to the Purchaser, and the Purchaser shall purchase from the
Company, the Note. The sale of the Note on the Closing Date shall be known as
the "Offering." The Note will mature on the Maturity Date (as defined in the
Note). Collectively, the Note and Warrant and Common Stock issuable upon
conversion of the Note and upon exercise of the Warrant are referred to as the
"Securities."
2. FEES AND WARRANT. On the Closing Date:
(a) The Company will issue and deliver to the Purchaser the
Warrant to purchase up to 160,000 shares of Common Stock (subject to
adjustment as set forth therein) in connection with the Offering,
pursuant to Section 1 hereof. All the representations, covenants,
warranties, undertakings, and indemnification, and other
rights made or granted to or for the benefit of the Purchaser by the
Company are hereby also made and granted for the benefit of the holder
of the Warrant and shares of the Company's Common Stock issuable upon
exercise of the Warrant (the "Warrant Shares").
(b) Subject to the terms of Section 2(d) below, the Company
shall pay to Laurus Capital Management, LLC, the manager of the
Purchaser, a closing payment in an amount equal to three and one half
percent (3.50%) of the aggregate principal amount of the Note. The
foregoing fee is referred to herein as the "Closing Payment."
(c) The Company shall reimburse the Purchaser for its
reasonable expenses (including legal fees and expenses) incurred in
connection with the preparation and negotiation of this Agreement and
the Related Agreements (as hereinafter defined), and expenses incurred
in connection with the Purchaser's due diligence review of the Company
and its Subsidiaries (as defined in Section 4.2) and all related
matters. Amounts required to be paid under this Section 2(c) will be
paid on the Closing Date and shall be $26,000 for such expenses
referred to in this Section 2(c), $12,000 of which has been paid prior
to the Closing Date.
(d) The Closing Payment and the expenses referred to in the
preceding clause (c) (net of deposits previously paid by the Company)
shall be paid at closing out of funds held pursuant to the Escrow
Agreement (as defined below) and a disbursement letter (the
"Disbursement Letter").
3. CLOSING, DELIVERY AND PAYMENT.
3.1 CLOSING. Subject to the terms and conditions herein, the
closing of the transactions contemplated hereby (the "Closing"), shall
take place on the date hereof, at such time or place as the Company and
the Purchaser may mutually agree (such date is hereinafter referred to
as the "Closing Date").
3.2 DELIVERY. Pursuant to the Escrow Agreement, at the Closing
on the Closing Date, the Company will deliver to the Purchaser, among
other things, the Note and the Warrant and the Purchaser will deliver
to the Company, among other things, the amounts set forth in the
Disbursement Letter by certified funds or wire transfer. The Company
hereby acknowledges and agrees that Purchaser's obligation to purchase
the Note from the Company on the Closing Date shall be contingent upon
the satisfaction (or waiver by the Purchaser in its sole discretion) of
the items and matters set forth in the closing checklist provided by
the Purchaser to the Company on or prior to the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Purchaser as follows
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization. The Company has the
corporate power and authority to own and operate its properties and
assets and, insofar as it is or shall be a party thereto, to (1)
execute and deliver (i) this Agreement, (ii) the Note and the Warrant
to be issued in connection with this
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Agreement, (iii) the Registration Rights Agreement relating to the
Securities dated as of the date hereof between the Company and the
Purchaser (as amended, modified and/or supplemented from time to time,
the "Registration Rights Agreement"), (iv) the Subsidiary Guaranty
dated as of the date hereof made by certain Subsidiaries of the Company
(as amended, modified and/or supplemented from time to time, the
"Subsidiary Guaranty"), (v) the Individual Guaranty dated as of the
date hereof made by Xx Xxxxx Xxxxxx and Xx Xxxxxxx Xxxxx (as amended,
modified and/or supplemented from time to time, the "Individual
Guaranty") (vi) the Funds Escrow Agreement dated as of the date hereof
among the Company, the Purchaser and the escrow agent referred to
therein, substantially in the form of Exhibit D hereto (as amended,
modified and/or supplemented from time to time, the "Escrow Agreement")
and (vii) all other documents, instruments and agreements entered into
in connection with the transactions contemplated hereby and thereby
(the preceding clauses (ii) through (vii), collectively, the "Related
Agreements"); (2) issue and sell the Note and the shares of Common
Stock issuable upon conversion of the Note (the "Note Shares"); (3)
issue and sell the Warrant and the Warrant Shares; and (4) carry out
the provisions of this Agreement and the Related Agreements and to
carry on its business as presently conducted. The Company is duly
qualified and is authorized to do business and is in good standing as a
foreign corporation in all jurisdictions in which the nature or
location of its activities and of its properties (both owned and
leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so has not, or could not
reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the business, assets, liabilities, condition
(financial or otherwise), properties, operations or prospects of the
Company and its Subsidiaries, taken individually and as a whole (a
"Material Adverse Effect").
4.2 SUBSIDIARIES. Each Subsidiary of the Company, the direct
owner of such Subsidiary and its percentage ownership thereof, is set
forth on Schedule 4.2. For the purpose of this Agreement, a
"Subsidiary" of any person or entity means (i) a corporation or other
entity whose shares of stock or other ownership interests having
ordinary voting power (other than stock or other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the directors of such corporation, or other persons
or entities performing similar functions for such person or entity, are
owned, directly or indirectly, by such person or entity or (ii) a
corporation or other entity in which such person or entity owns,
directly or indirectly, more than 50% of the equity interests at such
time.
4.3 CAPITALIZATION; VOTING RIGHTS.
(a) The authorized capital stock of the Company, as of the
date hereof consists of 20,000,000 shares, of which 10,000,000 are
shares of Common Stock, par value $0.001 per share, 3,049,000 shares of
which are issued and outstanding , and 10,000,000 are shares of
preferred stock, par value $0.001 per share of which no shares of
preferred stock are issued and outstanding.
(b) Except as disclosed on Schedule 4.3, other than: (i) the
shares reserved for issuance under the Company's stock option plans;
and (ii) shares which may be granted pursuant to this Agreement and the
Related Agreements, there are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements, or arrangements or
agreements of any kind for the purchase or acquisition from the Company
of any of its securities. Except as
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disclosed on Schedule 4.3, neither the offer, issuance or sale of any
of the Note or the Warrant, or the issuance of any of the Note Shares
or Warrant Shares, nor the consummation of any transaction contemplated
hereby will result in a change in the price or number of any securities
of the Company outstanding, under anti-dilution or other similar
provisions contained in or affecting any such securities.
(c) All issued and outstanding shares of the Company's Common
Stock: (i) have been duly authorized and validly issued and are fully
paid and nonassessable; and (ii) were issued in compliance with all
applicable state and federal laws concerning the issuance of
securities.
(d) The rights, preferences, privileges and restrictions of
the shares of the Common Stock are as stated in the Company's
Certificate of Incorporation (the "Charter"). The Note Shares and
Warrant Shares have been duly and validly reserved for issuance. When
issued in compliance with the provisions of this Agreement and the
Company's Charter, the Securities will be validly issued, fully paid
and nonassessable, and will be free of any liens or encumbrances;
provided, however, that the Securities may be subject to restrictions
on transfer under state and/or federal securities laws as set forth
herein or as otherwise required by such laws at the time a transfer is
proposed.
4.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate,
partnership or limited liability company, as the case may be, action on
the part of the Company (including its officers and directors)
necessary for the authorization of this Agreement and the Related
Agreements, the performance of all obligations of the Company hereunder
and under the other Related Agreements at the Closing and, the
authorization, sale, issuance and delivery of the Note and Warrant has
been taken or will be taken prior to the Closing. This Agreement and
the Related Agreements, when executed and delivered and to the extent
it is a party thereto, will be valid and binding obligations of the
Company s, enforceable against the Company in accordance with their
terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; and
(b) general principles of equity that restrict the
availability of equitable or legal remedies.
The sale of the Note and the subsequent conversion of the Note into Note Shares
are not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with. The issuance of the
Warrant and the subsequent exercise of the Warrant for Warrant Shares are not
and will not be subject to any preemptive rights or rights of first refusal that
have not been properly waived or complied with.
4.5 LIABILITIES. Neither the Company nor any of its Subsidiaries has
any liabilities, except current liabilities incurred in the ordinary course of
business and liabilities disclosed in any of the Company's filings under the
Securities Exchange Act of 1934
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("Exchange Act") made prior to the date of this Agreement (collectively, the
"Exchange Act Filings"), copies of which have been provided to the Purchaser.
4.6 AGREEMENTS; ACTION. Except as set forth on Schedule 4.6 or as
disclosed in any Exchange Act Filings:
(a) there are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees
to which the Company or any of its Subsidiaries is a party or by which
it is bound which may involve: (i) obligations (contingent or
otherwise) of, or payments to, the Company or any of its Subsidiaries
in excess of $ 250,000 (other than obligations of, or payments to, the
Company or any of its Subsidiaries arising from purchase or sale
agreements entered into in the ordinary course of business); or (ii)
the transfer or license of any patent, copyright, trade secret or other
proprietary right to or from the Company or any of its Subsidiaries
(other than licenses arising from the purchase of "off the shelf" or
other standard products); or (iii) provisions restricting the
development, manufacture or distribution of the Company's or any of its
Subsidiaries products or services; or (iv) indemnification by the
Company or any of its Subsidiaries with respect to infringements of
proprietary rights.
(b) Since June 30, 2005 (the "Balance Sheet Date"), the
Company has not: (i) declared or paid any dividends, or authorized or
made any distribution upon or with respect to any class or series of
its capital stock; (ii) incurred any indebtedness for money borrowed or
any other liabilities (other than ordinary course obligations)
individually in excess of $50,000 or, in the case of indebtedness
and/or liabilities individually less than $50,000, in excess of
$100,000 in the aggregate; (iii) made any loans or advances to any
person or entity not in excess, individually or in the aggregate, of
$100,000, other than ordinary course advances for travel expenses; or
(iv) sold, exchanged or otherwise disposed of any of its assets or
rights, other than the sale of its inventory in the ordinary course of
business.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are
affiliated therewith) shall be aggregated for the purpose of meeting
the individual minimum dollar amounts of such subsections.
(d) The Company maintains disclosure controls and procedures
("Disclosure Controls") designed to ensure that information required to
be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized, and
reported, within the time periods specified in the rules and forms of
the Securities and Exchange Commission ("SEC").
(e) The Company makes and keep books, records, and accounts,
that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the Company's assets. The Company
maintains internal control over financial reporting ("Financial
Reporting Controls") designed by, or under the supervision of, the
Company's principal executive and principal financial officers, and
effected by the
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Company's board of directors, management, and other personnel, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles
("GAAP"), including that:
(i) transactions are executed in accordance with
management's general or specific authorization;
(ii) unauthorized acquisition, use, or disposition of
the Company's assets that could have a material effect on the
financial statements are prevented or timely detected;
(iii) transactions are recorded as necessary to
permit preparation of financial statements in accordance with
GAAP, and that the Company's receipts and expenditures are
being made only in accordance with authorizations of the
Company's management and board of directors;
(iv) transactions are recorded as necessary to
maintain accountability for assets; and
(v) the recorded accountability for assets is
compared with the existing assets at reasonable intervals, and
appropriate action is taken with respect to any differences.
(f) There is no weakness in any of the Company's Disclosure
Controls or Financial Reporting Controls that is required to be
disclosed in any of the Exchange Act Filings, except as so disclosed.
4.7 OBLIGATIONS TO RELATED PARTIES. Except as set forth on Schedule
4.7, there are no obligations of the Company to officers, directors,
stockholders or employees of the Company other than:
(a) for payment of salary for services rendered and for bonus
payments;
(b) reimbursement for reasonable expenses incurred on behalf
of the Company ;
(c) for other standard employee benefits made generally
available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of
Directors of the Company , as applicable); and
(d) obligations listed in the Company's financial statements
or disclosed in any of the Company's Exchange Act Filings.
Except as described above or set forth on Schedule 4.7, none of the officers,
directors or, to the best of the Company's knowledge, key employees or
stockholders of the Company or any members of their immediate families, are
indebted to the Company , individually or in the aggregate, in excess of $50,000
or have any direct or indirect ownership interest in any firm
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or corporation with which the Company is affiliated or with which the Company
has a business relationship, or any firm or corporation which competes with the
Company , other than passive investments in publicly traded companies
(representing less than one percent (1%) of such company) which may compete with
the Company . Except as described above, no officer, director or stockholder of
the Company , or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Company and no
agreements, understandings or proposed transactions are contemplated between the
Company and any such person. Except as set forth on Schedule 4.7, the Company is
not a guarantor or indemnitor of any indebtedness of any other person or entity.
4.8 CHANGES. Since the Balance Sheet Date, except as disclosed in any
Exchange Act Filing or in any Schedule to this Agreement or to any of the
Related Agreements, there has not been:
(a) any change in the business, assets, liabilities, condition
(financial or otherwise), properties, operations or prospects of the
Company , which individually or in the aggregate has had, or could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;
(b) any resignation or termination of any officer, key
employee or group of employees of the Company or any of its
Subsidiaries;
(c) any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of
guaranty, endorsement, indemnity, warranty or otherwise;
(d) any damage, destruction or loss, whether or not covered by
insurance, which has had, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(e) any waiver by the Company of a valuable right or of a
material debt owed to it;
(f) any direct or indirect loans made by the Company s to any
stockholder, employee, officer or director of the Company , other than
advances made in the ordinary course of business;
(g) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder of the
Company ;
(h) any declaration or payment of any dividend or other
distribution of the assets of the Company ;
(i) any labor organization activity related to the Company ;
(j) any debt, obligation or liability incurred, assumed or
guaranteed by the Company , except those for immaterial amounts and for
current liabilities incurred in the ordinary course of business;
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(k) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets owned
by the Company;
(l) any change in any material agreement to which the Company
is a party or by which either the Company is bound which either
individually or in the aggregate has had, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect;
(m) any other event or condition of any character that, either
individually or in the aggregate, has had, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect; or
(n) any arrangement or commitment by the Company to do any of
the acts described in subsection (a) through (m) above.
4.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. Except as set forth on
Schedule 4.9, each of the Company has good and marketable title to its
properties and assets, and good title to its leasehold interests, in each case
subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than:
(a) those resulting from taxes which have not yet become
delinquent;
(b) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially
impair the operations of the Company , so long as in each such case,
such liens and encumbrances have no effect on the lien priority of the
Purchaser in such property; and
(c) those that have otherwise arisen in the ordinary course of
business, so long as they have no effect on the lien priority of the
Purchaser therein.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company s are in good operating condition and
repair and are reasonably fit and usable for the purposes for which they are
being used. Except as set forth on Schedule 4.9, the Company is in compliance
with all material terms of each lease to which it is a party or is otherwise
bound.
4.10 INTELLECTUAL PROPERTY.
(a) The Company owns or possesses sufficient legal rights to
all patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information and other proprietary rights and
processes necessary for its business as now conducted and, to the
Company's knowledge, as presently proposed to be conducted (the
"Intellectual Property"), without any known infringement of the rights
of others. There are no outstanding options, licenses or agreements of
any kind relating to the foregoing proprietary rights, the Company is
not bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade
names, copyrights, trade secrets, licenses, information and other
proprietary rights and
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processes of any other person or entity other than such licenses or
agreements arising from the purchase of "off the shelf" or standard
products.
(b) The Company has not received any communications alleging
that the Company has violated any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary
rights of any other person or entity, nor is the Company aware of any
basis therefor.
(c) The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any
of its employees made prior to their employment by the Company es,
except for inventions, trade secrets or proprietary information that
have been rightfully assigned to the Company.
4.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation
or default of (x) any term of its Charter or Bylaws, or (y) any provision of any
indebtedness, mortgage, indenture, contract, agreement or instrument to which it
is party or by which it is bound or of any judgment, decree, order or writ,
which violation or default, in the case of this clause (y), has had, or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. The execution, delivery and performance of and
compliance with this Agreement and the Related Agreements to which it is a
party, and the issuance and sale of the Note by the Company and the other
Securities by the Company each pursuant hereto and thereto, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term or
provision, or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties.
4.12 LITIGATION. Except as set forth on Schedule 4.12 hereto, there is
no action, suit, proceeding or investigation pending or, to the Company's
knowledge, currently threatened against the Company that prevents the Company
from entering into this Agreement or the other Related Agreements, or from
consummating the transactions contemplated hereby or thereby, or which has had,
or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect or any change in the current equity
ownership of the Company , nor is the Company aware that there is any basis to
assert any of the foregoing. The Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or which the Company intends to
initiate.
4.13 TAX RETURNS AND PAYMENTS. The Company has timely filed all tax
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and all other
taxes due and payable by the Company on or before the Closing, have been paid or
will be paid prior to the time they become delinquent. Except as set forth on
Schedule 4.13, the Company has not been advised:
(a) that any of its returns, federal, state or other, have
been or are being audited as of the date hereof; or
9
(b) of any adjustment, deficiency, assessment or court
decision in respect of its federal, state or other taxes.
The Company has no knowledge of any liability for any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.
4.14 EMPLOYEES. Except as set forth on Schedule 4.14, the Company does
not have any collective bargaining agreements with any of its employees. There
is no labor union organizing activity pending or, to the Company's knowledge,
threatened with respect to the Company. Except as disclosed in the Exchange Act
Filings or on Schedule 4.14, the Company is not a party to or bound by any
currently effective employment contract, deferred compensation arrangement,
bonus plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation plan or agreement. To the Company's knowledge, no employee
of the Companys, nor any consultant with whom the Company has contracted, is in
violation of any term of any employment contract, proprietary information
agreement or any other agreement relating to the right of any such individual to
be employed by, or to contract with, the Company because of the nature of the
business to be conducted by the Company ; and to the Company's knowledge the
continued employment by the Company of its present employees, and the
performance of the Company's contracts with its independent contractors, will
not result in any such violation. The Company is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency that would interfere with
their duties to the Company. The Company has not received any notice alleging
that any such violation has occurred. Except for employees who have a current
effective employment agreement with the Company, no employee of the Company has
been granted the right to continued employment by the Company or to any material
compensation following termination of employment with the Company. Except as set
forth on Schedule 4.14, the Company is not aware that any officer, key employee
or group of employees intends to terminate his, her or their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any officer, key employee or group of employees.
4.15 REGISTRATION RIGHTS AND VOTING RIGHTS. Except as set forth on
Schedule 4.15 and except as disclosed in Exchange Act Filings, the Company is
not presently under any obligation, and the Company has not granted any rights,
to register any of the Company's presently outstanding securities or any of its
securities that may hereafter be issued. Except as set forth on Schedule 4.15
and except as disclosed in Exchange Act Filings, to the Company's knowledge, no
stockholder of the Company has entered into any agreement with respect to the
voting of equity securities of the Company.
4.16 COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation of
any provision of the Xxxxxxxx-Xxxxx Act of 2002 or any SEC related regulation or
rule or any rule of the Principal Market (as hereafter defined) promulgated
thereunder or any other applicable statute, rule, regulation, order or
restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of its
properties which has had, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. No governmental
orders, permissions, consents, approvals or authorizations are required to
10
be obtained and no registrations or declarations are required to be filed in
connection with the execution and delivery of this Agreement or any other
Related Agreement and the issuance of any of the Securities, except such as have
been duly and validly obtained or filed, or with respect to any filings that
must be made after the Closing, as will be filed in a timely manner. The Company
has all material franchises, permits, licenses and any similar authority
necessary for the conduct of its business as now being conducted by it, the lack
of which could, either individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
4.17 ENVIRONMENTAL AND SAFETY LAWS. The Company is not in violation of
any applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation. Except as set forth on Schedule 4.17, no Hazardous Materials (as
defined below) are used or have been used, stored, or disposed of by the Company
or, to the Company's knowledge, by any other person or entity on any property
owned, leased or used by the Company. For the purposes of the preceding
sentence, "Hazardous Materials" shall mean:
(a) materials which are listed or otherwise defined as
"hazardous" or "toxic" under any applicable local, state, federal
and/or foreign laws and regulations that govern the existence and/or
remedy of contamination on property, the protection of the environment
from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building
materials; or
(b) any petroleum products or nuclear materials.
4.18 VALID OFFERING. Assuming the accuracy of the representations and
warranties of the Purchaser contained in this Agreement, the offer, sale and
issuance of the Securities will be exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
4.19 FULL DISCLOSURE. The Company has provided the Purchaser with all
information requested by the Purchaser in connection with its decision to
purchase the Note and Warrant, including all information the Company believes is
reasonably necessary to make such investment decision. Neither this Agreement,
the Related Agreements, the exhibits and schedules hereto and thereto nor any
other document delivered by the Company to Purchaser or its attorneys or agents
in connection herewith or therewith or with the transactions contemplated hereby
or thereby, contain any untrue statement of a material fact nor omit to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances in which they are made, not misleading.
Any financial projections and other estimates provided to the Purchaser by the
Company were based on the Company's experience in the industry and on
assumptions of fact and opinion as to future events which the Company, at the
date of the issuance of such projections or estimates, believed to be
reasonable.
11
4.20 INSURANCE. The Company has general commercial, product liability,
fire and casualty insurance policies with coverages which the Company believes
are customary for companies similarly situated to the Company in the same or
similar business.
4.21 SEC REPORTS. Except as set forth on Schedule 4.21, the Company has
filed all proxy statements, reports and other documents required to be filed by
it under the Securities Xxxxxxxx Xxx 0000, as amended (the "Exchange Act"). The
Company has furnished the Purchaser copies of: (i) its Annual Reports on Form
10-K for its fiscal years June 30, 2005; and (ii) its Quarterly Reports on Form
10-QSB for its fiscal quarters ended September 30, 2005, December 30, 2005 and
March 31, 2005, and the Form 8-K filings which it has made during the fiscal
year 2006 to date (collectively, the "SEC Reports"). Except as set forth on
Schedule 4.21, each SEC Report was, at the time of its filing, in substantial
compliance with the requirements of its respective form and none of the SEC
Reports, nor the financial statements (and the notes thereto) included in the
SEC Reports, as of their respective filing dates, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.22 LISTING. The Company's Common Stock is listed or quoted, as
applicable, on a Principal Market (as hereafter defined) and satisfies and at
all times hereafter will satisfy, all requirements for the continuation of such
listing or quotation, as applicable. The Company has not received any notice
that its Common Stock will be delisted from, or no longer quoted on, as
applicable, the Principal Market or that its Common Stock does not meet all
requirements for such listing or quotation, as applicable. For purposes hereof,
the term "Principal Market" means the NASD Over The Counter Bulletin Board,
NASDAQ Capital Market, NASDAQ National Markets System, American Stock Exchange
or New York Stock Exchange (whichever of the foregoing is at the time the
principal trading exchange or market for the Common Stock).
4.23 NO INTEGRATED OFFERING. Neither the Company nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement or any of the Related Agreements to be
integrated with prior offerings by the Company for purposes of the Securities
Act which would prevent the Company from selling the Securities pursuant to Rule
506 under the Securities Act, or any applicable exchange-related stockholder
approval provisions, nor will the Company or any of its affiliates take any
action or steps that would cause the offering of the Securities to be integrated
with other offerings.
4.24 STOP TRANSFER. The Securities are restricted securities as of the
date of this Agreement. The Company will not issue any stop transfer order or
other order impeding the sale and delivery of any of the Securities at such time
as the Securities are registered for public sale or an exemption from
registration is available, except as required by state and federal securities
laws.
4.25 DILUTION. The Company specifically acknowledges that its
obligation to issue the shares of Common Stock upon conversion of the Note and
exercise of the Warrant is
12
binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company.
4.26 PATRIOT ACT. The Company certifies that, to the best of Company's
knowledge, the Company has not been designated, nor is or shall be owned or
controlled, by a "suspected terrorist" as defined in Executive Order 13224. The
Company hereby acknowledges that the Purchaser seeks to comply with all
applicable laws concerning money laundering and related activities. In
furtherance of those efforts, the Company hereby represents, warrants and
covenants that: (i) none of the cash or property that the Company will pay or
will contribute to the Purchaser has been or shall be derived from, or related
to, any activity that is deemed criminal under United States law; and (ii) no
contribution or payment by the Company to the Purchaser, to the extent that they
are within the Company's control shall cause the Purchaser to be in violation of
the United States Bank Secrecy Act, the United States International Money
Laundering Control Act of 1986 or the United States International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001. The Company shall
promptly notify the Purchaser if any of these representations, warranties or
covenants ceases to be true and accurate regarding the Company. The Company
shall provide the Purchaser all additional information regarding the Company
that the Purchaser deems necessary or convenient to ensure compliance with all
applicable laws concerning money laundering and similar activities. The Company
understands and agrees that if at any time it is discovered that any of the
foregoing representations, warranties or covenants are incorrect, or if
otherwise required by applicable law or regulation related to money laundering
or similar activities, the Purchaser may undertake appropriate actions to ensure
compliance with applicable law or regulation, including but not limited to
segregation and/or redemption of the Purchaser's investment in the Company. The
Company further understands that the Purchaser may release confidential
information about the Company and, if applicable, any underlying beneficial
owners, to proper authorities if the Purchaser, in its sole discretion,
determines that it is in the best interests of the Purchaser in light of
relevant rules and regulations under the laws set forth in subsection (ii)
above.
4.27 ERISA. Based upon the Employee Retirement Income Security Act of
1974 ("ERISA"), and the regulations and published interpretations thereunder:
(i) the Company has not engaged in any Prohibited Transactions (as defined in
Section 406 of ERISA and Section 4975 of the Internal Revenue Code of 1986, as
amended (the "CODE")); (ii) the Company has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of its plans; (iii) the
Company does not have any knowledge of any event or occurrence which would cause
the Pension Benefit Guaranty Corporation to institute proceedings under Title IV
of ERISA to terminate any employee benefit plan(s); (iv) the Company does not
have any fiduciary responsibility for investments with respect to any plan
existing for the benefit of persons other than the Company's or such
Subsidiary's employees; and (v) the Company has not withdrawn, completely or
partially, from any multi-employer pension plan so as to incur liability under
the Multiemployer Pension Plan Amendments Act of 1980.
13
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Company as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement):
5.1 NO SHORTING. The Purchaser or any of its affiliates and investment
partners has not, will not and will not cause any person or entity, to directly
engage in "short sales" of the Company's Common Stock as long as the Note shall
be outstanding.
5.2 REQUISITE POWER AND AUTHORITY. The Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and the Related Agreements and to carry out their
provisions. All corporate action on the Purchaser's part required for the lawful
execution and delivery of this Agreement and the Related Agreements have been or
will be effectively taken prior to the Closing. Upon their execution and
delivery, this Agreement and the Related Agreements will be valid and binding
obligations of the Purchaser, enforceable in accordance with their terms,
except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; and
(b) as limited by general principles of equity that restrict
the availability of equitable and legal remedies.
5.3 INVESTMENT REPRESENTATIONS. The Purchaser understands that the
Securities are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon the Purchaser's
representations contained in this Agreement, including, without limitation, that
the Purchaser is an "accredited investor" within the meaning of Regulation D
under the Securities Act of 1933, as amended (the "Securities Act"). The
Purchaser confirms that it has received or has had full access to all the
information it considers necessary or appropriate to make an informed investment
decision with respect to the Note and the Warrant to be purchased by it under
this Agreement and the Note Shares and the Warrant Shares acquired by it upon
the conversion of the Note and the exercise of the Warrant, respectively. The
Purchaser further confirms that it has had an opportunity to ask questions and
receive answers from the Company regarding the Company's and its Subsidiaries'
business, management and financial affairs and the terms and conditions of the
Offering, the Note, the Warrant and the Securities and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify any
information furnished to the Purchaser or to which the Purchaser had access.
5.4 THE PURCHASER BEARS ECONOMIC RISK. The Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. The Purchaser must bear the economic risk
of this investment until the Securities are sold pursuant to: (i) an effective
registration statement under the Securities Act; or (ii) an exemption from
registration is available with respect to such sale.
14
5.5 ACQUISITION FOR OWN ACCOUNT. The Purchaser is acquiring the Note
and Warrant and the Note Shares and the Warrant Shares for the Purchaser's own
account for investment only, and not as a nominee or agent and not with a view
towards or for resale in connection with their distribution.
5.6 THE PURCHASER CAN PROTECT ITS INTEREST. The Purchaser represents
that by reason of its, or of its management's, business and financial
experience, the Purchaser has the capacity to evaluate the merits and risks of
its investment in the Note, the Warrant and the Securities and to protect its
own interests in connection with the transactions contemplated in this Agreement
and the Related Agreements. Further, the Purchaser is aware of no publication of
any advertisement in connection with the transactions contemplated in the
Agreement or the Related Agreements.
5.7 ACCREDITED INVESTOR. The Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
5.8 LEGENDS.
(a) The Note shall bear substantially the following legend:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO ABLE ENERGY, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(b) The Note Shares and the Warrant Shares, if not issued by
DWAC system (as hereinafter defined), shall bear a legend which shall
be in substantially the following form until such shares are covered by
an effective registration statement filed with the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAWS. THESE SHARES MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES
ACT AND APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO ABLE ENERGY, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
15
(c) The Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS WARRANT OR THE UNDERLYING SHARES OF
COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ABLE
ENERGY, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
6. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Purchaser as follows:
6.1 STOP-ORDERS. The Company will advise the Purchaser, promptly after
it receives notice of issuance by the SEC, any state securities commission or
any other regulatory authority of any stop order or of any order preventing or
suspending any offering of any securities of the Company, or of the suspension
of the qualification of the Common Stock of the Company for offering or sale in
any jurisdiction, or the initiation of any proceeding for any such purpose. \\
6.2 LISTING. The Company shall promptly secure the listing or
quotation, as applicable, of the shares of Common Stock issuable upon conversion
of the Note and upon the exercise of the Warrant on the Principal Market upon
which shares of Common Stock are listed or quoted for trading, as applicable
(subject to official notice of issuance) and shall maintain such listing or
quotation, as applicable, so long as any other shares of Common Stock shall be
so listed or quoted, as applicable. The Company will maintain the listing or
quotation, as applicable, of its Common Stock on the Principal Market, and will
comply in all material respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable.
6.3 MARKET REGULATIONS. The Company shall notify the SEC, NASD and
applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Securities to the
Purchaser and promptly provide copies thereof to the Purchaser.
6.4 REPORTING REQUIREMENTS. The Company will deliver, or cause to be
delivered, to the Purchaser each of the following, which shall be in form and
detail acceptable to the Purchaser:
(a) As soon as available, and in any event within ninety (90)
days after the end of each fiscal year of the Company, each of the
Company's and each of its Subsidiaries' audited financial statements
with a report of independent certified public
16
accountants of recognized standing selected by the Company and
acceptable to the Purchaser (the "ACCOUNTANTS"), which annual financial
statements shall be without qualification and shall include each of the
Company's and each of its Subsidiaries' balance sheet as at the end of
such fiscal year and the related statements of each of the Company's
and each of its Subsidiaries' income, retained earnings and cash flows
for the fiscal year then ended, prepared on a consolidating and
consolidated basis to include the Company, each Subsidiary of the
Company and each of their respective affiliates, all in reasonable
detail and prepared in accordance with GAAP, together with (i) if and
when available, copies of any management letters prepared by the
Accountants; and (ii) a certificate of the Company's President, Chief
Executive Officer or Chief Financial Officer stating that such
financial statements have been prepared in accordance with GAAP and
whether or not such officer has knowledge of the occurrence of any
Event of Default (as defined in the Note) and, if so, stating in
reasonable detail the facts with respect thereto;
(b) As soon as available and in any event within forty five
(45) days after the end of each fiscal quarter of the Company, an
unaudited/internal balance sheet and statements of income, retained
earnings and cash flows of the Company and each of its Subsidiaries as
at the end of and for such quarter and for the year to date period then
ended, prepared on a consolidating and consolidated basis to include
all the Company, each Subsidiary of the Company and each of their
respective affiliates, in reasonable detail and stating in comparative
form the figures for the corresponding date and periods in the previous
year, all prepared in accordance with GAAP, subject to year-end
adjustments and accompanied by a certificate of the Company's
President, Chief Executive Officer or Chief Financial Officer, stating
(i) that such financial statements have been prepared in accordance
with GAAP, subject to year-end audit adjustments, and (ii) whether or
not such officer has knowledge of the occurrence of any Event of
Default (as defined in the Note) not theretofore reported and remedied
and, if so, stating in reasonable detail the facts with respect
thereto;
(c) The Company shall timely file with the SEC all reports
required to be filed pursuant to the Exchange Act and refrain from
terminating its status as an issuer required by the Exchange Act to
file reports thereunder even if the Exchange Act or the rules or
regulations thereunder would permit such termination. Promptly after
(i) the filing thereof, copies of the Company's most recent
registration statements and annual, quarterly, monthly or other regular
reports which the Company files with the Securities and Exchange
Commission (the "SEC"), and (ii) the issuance thereof, copies of such
financial statements, reports and proxy statements as the Company shall
send to its stockholders; and
(e) The Company shall deliver, or cause the applicable
Subsidiary of the Company to deliver, such other information as the
Purchaser shall reasonably request.
6.5 USE OF FUNDS. The Company shall use the proceeds of the sale of the
Note and the Warrant (i) to pay to Purchaser, as an advance on behalf All
American Realty and Construction Corp. as manager of the property and business
of CCI Group, Inc. ("CCIG"), the sum of $540,000 representing the pre-payment of
ten (10) months of interest on a promissory
17
note effective December 23, 2005 in the principal amount of $6,127,616
made by CCIG's subsidiary, Beach Properties Barbuda Limited ("BPBL"),
to Purchaser and (ii) for general working capital purposes.
6.6 ACCESS TO FACILITIES. Each of the Company and each of its
subsidiaries will permit any representatives designated by the Purchaser (or any
successor of the Purchaser), upon reasonable notice and during normal business
hours, at such person's expense and accompanied by a representative of the
Company or any Subsidiary following the occurrence and during the continuance of
an Event of Default (as defined in the Note)), to:
(a) visit and inspect any of the properties of the Company or
any of its Subsidiaries;
(b) examine the corporate and financial records of the Company
or any of its Subsidiaries (unless such examination is not permitted by
federal, state or local law or by contract) and make copies thereof or
extracts therefrom; and
(c) discuss the affairs, finances and accounts of the Company
or any of its Subsidiaries with the directors, officers and independent
accountants of the Company or any of its Subsidiaries.
Notwithstanding the foregoing, neither the Company nor any of its Subsidiaries
will provide any material, non-public information to the Purchaser unless the
Purchaser signs a confidentiality agreement and otherwise complies with
Regulation FD, under the federal securities laws.
6.7 TAXES. Each of the Company and each of its Subsidiaries will
promptly pay and discharge, or cause to be paid and discharged, when due and
payable, all taxes, assessments and governmental charges or levies imposed upon
the income, profits, property or business of the Company and its Subsidiaries;
provided, however, that any such tax, assessment, charge or levy need not be
paid currently if (i) the validity thereof shall currently and diligently be
contested in good faith by appropriate proceedings, (ii) such tax, assessment,
charge or levy shall have no effect on the lien priority of the Purchaser in any
property of the Company or any of its Subsidiaries and (iii) if the Company
and/or such Subsidiary shall have set aside on its books adequate reserves with
respect thereto in accordance with GAAP; and provided, further, that the Company
and its Subsidiaries will pay all such taxes, assessments, charges or levies
forthwith upon the commencement of proceedings to foreclose any lien which may
have attached as security therefor.
6.8 INSURANCE. Each of the Company and its Subsidiaries will keep its
assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in similar business similarly situated
as the Company and its Subsidiaries; and the Company and its Subsidiaries will
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons and property to the extent and in the
manner which the Company reasonably believes is customary for companies in
similar business similarly situated as the Company and its Subsidiaries and to
the extent available on commercially reasonable terms. The Company, and each of
its Subsidiaries, will jointly and severally bear the full risk
18
of loss from any loss of any nature whatsoever with respect to the assets
pledged to the Purchaser as security for their respective obligations hereunder
and under the Related Agreements. At the Company's and each of its Subsidiaries'
joint and several cost and expense in amounts and with carriers reasonably
acceptable to the Purchaser, each of the Company and each of its Subsidiaries
shall (i) keep all its insurable properties and properties in which it has an
interest insured against the hazards of fire, flood, sprinkler leakage, those
hazards covered by extended coverage insurance and such other hazards, and for
such amounts, as is customary in the case of companies engaged in businesses
similar to the Company's or the respective Subsidiary's including business
interruption insurance; (ii) maintain a bond in such amounts as is customary in
the case of companies engaged in businesses similar to the Company's or the
respective Subsidiary's insuring against larceny, embezzlement or other criminal
misappropriation of insured's officers and employees who may either singly or
jointly with others at any time have access to the assets or funds of the
Company or any of its Subsidiaries either directly or through governmental
authority to draw upon such funds or to direct generally the disposition of such
assets; (iii) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (iv) maintain all
such worker's compensation or similar insurance as may be required under the
laws of any state or jurisdiction in which the Company or the respective
Subsidiary is engaged in business; and (v) furnish the Purchaser with (x) copies
of all policies and evidence of the maintenance of such policies at least thirty
(30) days before any expiration date, (y) excepting the Company's workers'
compensation policy, endorsements to such policies naming the Purchaser as
"co-insured" or "additional insured" and appropriate loss payable endorsements
in form and substance satisfactory to the Purchaser, naming the Purchaser as
loss payee, and (z) evidence that as to the Purchaser the insurance coverage
shall not be impaired or invalidated by any act or neglect of the Company or any
Subsidiary and the insurer will provide the Purchaser with at least thirty (30)
days notice prior to cancellation. The Company and each Subsidiary shall
instruct the insurance carriers that in the event of any loss thereunder, the
carriers shall make payment for such loss to the Company and/or the Subsidiary
and the Purchaser jointly. In the event that the Purchaser has properly declared
an event of default with respect to this Agreement or any of the Related
Agreements, then all loss recoveries received by the Purchaser upon any such
insurance thereafter may be applied to the obligations of the Company hereunder
and under the Related Agreements, in such order as the Purchaser may determine.
Any surplus (following satisfaction of all Company obligations to the Purchaser)
shall be paid by the Purchaser to the Company or applied as may be otherwise
required by law. Any deficiency thereon shall be paid by the Company or the
Subsidiary, as applicable, to the Purchaser, on demand.
6.9 INTELLECTUAL PROPERTY. Each of the Company and each of its
Subsidiaries shall maintain in full force and effect its existence, rights and
franchises and all licenses and other rights to use Intellectual Property owned
or possessed by it and reasonably deemed to be necessary to the conduct of its
business.
6.10 PROPERTIES. Each of the Company and each of its Subsidiaries will
keep its properties in good repair, working order and condition, reasonable wear
and tear excepted, and from time to time make all needful and proper repairs,
renewals, replacements, additions and improvements thereto; and each of the
Company and each of its Subsidiaries will at all times comply with each
provision of all leases to which it is a party or under which it occupies
19
property if the breach of such provision could, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
6.11 CONFIDENTIALITY. The Company will not, and will not permit any of
its Subsidiaries to, disclose, and will not include in any public announcement,
the name of the Purchaser, unless expressly agreed to by the Purchaser or unless
and until such disclosure is required by law or applicable regulation, and then
only to the extent of such requirement. Notwithstanding the foregoing, the
Company may disclose the Purchaser's identity and the terms of this Agreement to
its current and prospective debt and equity financing sources.
6.12 REQUIRED APPROVALS. For so long as twenty-five percent (25%) of
the principal amount of the Note is outstanding, the Company, without the prior
written consent of the Purchaser, shall not, and shall not permit any of its
Subsidiaries to:
(a) (i) directly or indirectly declare or pay any dividends
(ii) issue any preferred stock that is manditorily redeemable prior to
the one year anniversary of the Maturity Date (as defined in the Note)
or (iii) redeem any of its preferred stock or other equity interests;
(b) liquidate, dissolve or effect a material reorganization
(it being understood that in no event shall the Company or any of its
Subsidiaries dissolve, liquidate or merge with any other person or
entity (unless, in the case of such a merger, the Company or, in the
case of merger not involving the Company, such Subsidiary, as
applicable, is the surviving entity);
(c) become subject to (including, without limitation, by way
of amendment to or modification of) any agreement or instrument which
by its terms would (under any circumstances) restrict the Company's or
any of its Subsidiaries, right to perform the provisions of this
Agreement, any Related Agreement or any of the agreements contemplated
hereby or thereby; or
(d) materially adversely alter or change the scope of the
business of the Company and its Subsidiaries taken as a whole.
6.13 REISSUANCE OF SECURITIES. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Section 5.8 above at such time as:
(a) the holder thereof is permitted to dispose of such
Securities pursuant to Rule 144(k) under the Securities Act; or
(b) upon resale subject to an effective registration statement
after such Securities are registered under the Securities Act.
20
The Company agrees to cooperate with the Purchaser in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the Purchaser and broker, if any.
6.14 OPINION. On the Closing Date, the Company will deliver to the
Purchaser an opinion acceptable to the Purchaser from the Company's external
legal counsel. The Company will provide, at the Company's expense, such other
legal opinions in the future as are deemed reasonably necessary by the Purchaser
(and acceptable to the Purchaser) in connection with the conversion of the Note
and exercise of the Warrant.
6.15 MARGIN STOCK. The Company will not permit any of the proceeds of
the Note or the Warrant to be used directly or indirectly to "purchase" or
"carry" "margin stock" or to repay indebtedness incurred to "purchase" or
"carry" "margin stock" within the respective meanings of each of the quoted
terms under Regulation U of the Board of Governors of the Federal Reserve System
as now and from time to time hereafter in effect.
6.16 AUTHORIZATION AND RESERVATION OF SHARES. The Company shall at all
times have authorized and reserved a sufficient number of shares of Common Stock
to provide for the conversion of the Note and exercise of the Warrants.
6.17 BEACH HOUSE ACCOUNTS PAYABLE. The Company will use its best
efforts to cause CCIG to provide the Purchaser on an ongoing basis with evidence
that any and all obligations in respect of accounts payable of the Beach House
Resort (the "Beach House") operated by CCIG's subsidiary, BPBL, have been met.
6.18 BEACH HOUSE REPORTING. The Company will use its best efforts to
cause CCIG to provide the following in order to evidence that BPBL and the Beach
House are current in all of its ongoing operational needs:
i. As soon as available and in any event within fifteen
(15) days after the end of each calendar month, an
unaudited/internal balance sheet and statements of
income, retained earnings and cash flows of the Beach
House as at the end of and for such month and for the
year to date period then ended, in reasonable detail
and stating in comparative form the figures for the
corresponding date and periods in the previous year,
all prepared in accordance with GAAP, subject to
year-end adjustments and accompanied by a certificate
of the President, Chief Executive Officer or Chief
Financial Officer of the Beach House, stating (i)
that such financial statements have been prepared in
accordance with GAAP, subject to year-end audit
adjustments, and (ii) whether or not such officer has
knowledge of the occurrence of any Event of Default
(as defined in the Note) not theretofore reported and
remedied and, if so, stating in reasonable detail the
facts with respect thereto; and
21
ii. The Company shall use its best efforts to cause CCIG
and BPBL to deliver such other information as the
Purchaser shall, in its sole discretion, reasonably
request from time to time, including, without
limitation, the monthly management reports and other
financial information detailing that the Beach House
is current on all its operational expenses.
7. COVENANTS OF THE PURCHASER. The Purchaser covenants and agrees with
the Company as follows:
7.1 CONFIDENTIALITY. The Purchaser will not disclose, and will not
include in any public announcement, the name of the Company, unless expressly
agreed to by the Company or unless and until such disclosure is required by law
or applicable regulation, and then only to the extent of such requirement.
7.2 NON-PUBLIC INFORMATION. The Purchaser will not effect any sales in
the shares of the Company's Common Stock while in possession of material,
non-public information regarding the Company if such sales would violate
applicable securities law.
7.3 LIMITATION ON ACQUISITION OF COMMON STOCK OF THE COMPANY.
Notwithstanding anything to the contrary contained in this Agreement, any
Related Agreement or any document, instrument or agreement entered into in
connection with any other transactions between the Purchaser and the Company,
the Purchaser may not acquire stock in the Company (including, without
limitation, pursuant to a contract to purchase, by exercising an option or
warrant, by converting any other security or instrument, by acquiring or
exercising any other right to acquire, shares of stock or other security
convertible into shares of stock in the Company, or otherwise, and such
contracts, options, warrants, conversion or other rights shall not be
enforceable or exercisable) to the extent such stock acquisition would cause any
interest (including any original issue discount) payable by the Company to the
Purchaser not to qualify as "portfolio interest" within the meaning of Section
881(c)(2) of the Code, by reason of Section 881(c)(3) of the Code, taking into
account the constructive ownership rules under Section 871(h)(3)(C) of the Code
(the "Stock Acquisition Limitation"). The Stock Acquisition Limitation shall
automatically become null and void without any notice to the Company upon the
earlier to occur of either (a) the Company's delivery to the Purchaser of a
Notice of Redemption (as defined in the Note) or (b) the existence of an Event
of Default (as defined in the Note) at a time when the average closing price of
the Company's common stock as reported by Bloomberg, L.P. on the Principal
Market for the immediately preceding five trading days is greater than or equal
to [150%] of the Fixed Conversion Price (as defined in the Note).
8. COVENANTS OF THE COMPANY AND THE PURCHASER REGARDING
INDEMNIFICATION.
8.1 COMPANY INDEMNIFICATION. The Company agrees to indemnify, hold
harmless, reimburse and defend the Purchaser, each of the Purchaser's officers,
directors, agents, affiliates, control persons, and principal shareholders,
against all claims, costs, expenses, liabilities, obligations, losses or damages
(including reasonable legal fees) of any nature,
22
incurred by or imposed upon the Purchaser which result, arise out of or are
based upon: (i) any misrepresentation by the Company s or breach of any warranty
by the Company in this Agreement, any other Related Agreement or in any exhibits
or schedules attached hereto or thereto; or (ii) any breach or default in
performance by Company or any of its Subsidiaries of any covenant or undertaking
to be performed by Company or any of its Subsidiaries hereunder, under any other
Related Agreement or any other agreement entered into by the Company and the
Purchaser relating hereto or thereto.
8.2 PURCHASER'S INDEMNIFICATION. The Purchaser agrees to indemnify,
hold harmless, reimburse and defend the Company and each of the Company's
officers, directors, agents, affiliates, control persons and principal
shareholders, at all times against any claims, costs, expenses, liabilities,
obligations, losses or damages (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company which result, arise out of or are based
upon: (i) any misrepresentation by the Purchaser or breach of any warranty by
the Purchaser in this Agreement or in any exhibits or schedules attached hereto
or any Related Agreement; or (ii) any breach or default in performance by the
Purchaser of any covenant or undertaking to be performed by the Purchaser
hereunder, or any other agreement entered into by the Company and the Purchaser
relating hereto.
9. CONVERSION OF CONVERTIBLE NOTE.
9.1 MECHANICS OF CONVERSION.
(a) Provided the Purchaser has notified the Company of the
Purchaser's intention to sell the Note Shares and the Note Shares are
included in an effective registration statement or are otherwise exempt
from registration when sold: (i) upon the conversion of the Note or
part thereof, the Company shall, at its own cost and expense, take all
necessary action (including the issuance of an opinion of counsel
reasonably acceptable to the Purchaser following a request by the
Purchaser) to assure that the Company's transfer agent shall issue
shares of the Company's Common Stock in the name of the Purchaser (or
its nominee) or such other persons as designated by the Purchaser in
accordance with Section 9.1(b) hereof and in such denominations to be
specified representing the number of Note Shares issuable upon such
conversion; and (ii) the Company warrants that no instructions other
than these instructions have been or will be given to the transfer
agent of the Company's Common Stock and that after the Effectiveness
Date (as defined in the Registration Rights Agreement) the Note Shares
issued will be freely transferable subject to the prospectus delivery
requirements of the Securities Act and the provisions of this
Agreement, and will not contain a legend restricting the resale or
transferability of the Note Shares.
(b) The Purchaser will give notice of its decision to exercise
its right to convert the Note or part thereof by telecopying or
otherwise delivering an executed and completed notice of the number of
shares to be converted to the Company (the "Notice of Conversion"). The
Purchaser will not be required to surrender the Note until the
Purchaser receives a credit to the account of the Purchaser's prime
broker through the DWAC system (as defined below), representing the
Note Shares or until the Note has been fully satisfied. Each date on
which a Notice of Conversion is telecopied or
23
delivered to the Company in accordance with the provisions hereof shall
be deemed a "Conversion Date." Pursuant to the terms of the Notice of
Conversion, the Company will issue instructions to the transfer agent
accompanied by an opinion of counsel within two (2) business day of the
date of the delivery to the Company of the Notice of Conversion and
shall cause the transfer agent to transmit the certificates
representing the Conversion Shares to the Holder by crediting the
account of the Purchaser's prime broker with the Depository Trust
Company ("DTC") through its Deposit Withdrawal Agent Commission
("DWAC") system within three (3) business days after receipt by the
Company of the Notice of Conversion (the "Delivery Date").
(c) The Company understands that a delay in the delivery of
the Note Shares in the form required pursuant to Section 9 hereof
beyond the Delivery Date could result in economic loss to the
Purchaser. In the event that the Company fails to direct its transfer
agent to deliver the Note Shares to the Purchaser via the DWAC system
within the time frame set forth in Section 9.1(b) above and the Note
Shares are not delivered to the Purchaser by the Delivery Date, as
compensation to the Purchaser for such loss, the Company agrees to pay
late payments to the Purchaser for late issuance of the Note Shares in
the form required pursuant to Section 9 hereof upon conversion of the
Note in the amount equal to the greater of: (i) $500 per business day
after the Delivery Date; or (ii) the Purchaser's actual damages from
such delayed delivery. The Company shall pay any payments incurred
under this Section in immediately available funds upon demand and, in
the case of actual damages, accompanied by reasonable documentation of
the amount of such damages. Such documentation shall show the number of
shares of Common Stock the Purchaser is forced to purchase (in an open
market transaction) which the Purchaser anticipated receiving upon such
conversion, and shall be calculated as the amount by which (A) the
Purchaser's total purchase price (including customary brokerage
commissions, if any) for the shares of Common Stock so purchased
exceeds (B) the aggregate principal and/or interest amount of the Note,
for which such Conversion Notice was not timely honored.
10. REGISTRATION RIGHTS.
10.1 REGISTRATION RIGHTS GRANTED. The Company hereby grants
registration rights to the Purchaser pursuant to the Registration Rights
Agreement.
10.2 Miscellaneous.
10.3 GOVERNING LAW, JURISDICTION AND WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT AND THE OTHER RELATED AGREEMENTS SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
(b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR
FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK
24
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND, AND THE PURCHASER, ON
THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE RELATED
AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR ANY OF THE OTHER RELATED AGREEMENTS; PROVIDED, THAT THE PURCHASER
AND THE COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE
OF NEW YORK; AND FURTHER PROVIDED, THAT, NOTHING IN THIS AGREEMENT
SHALL BE DEEMED OR OPERATE TO PRECLUDE THE PURCHASER FROM BRINGING SUIT
OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE
OBLIGATIONS HEREUNDER OR UNDER THE RELATED AGREEMENTS, OR ANY OTHER
SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE PURCHASER. THE COMPANY EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY
OBJECTION THAT IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS. THE COMPANY HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN
ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS,
COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN SECTION 11.9 AND
THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE
COMPANY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE
U.S. MAILS, PROPER POSTAGE PREPAID.
(c) THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION,
THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN
CONTRACT, TORT, OR OTHERWISE BETWEEN THE PURCHASER AND/OR THE COMPANY
ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED
HERETO OR THERETO.
10.4 SEVERABILITY. Wherever possible each provision of this Agreement
and the Related Agreements shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
or any Related Agreement shall be prohibited by or invalid or illegal under
applicable law such provision shall be ineffective to the extent of such
prohibition or invalidity or illegality, without invalidating the remainder of
such
25
provision or the remaining provisions thereof which shall not in any way be
affected or impaired thereby.
10.5 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby to the extent provided
therein. All statements as to factual matters contained in any certificate or
other instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument. All indemnities set forth herein shall survive
the execution, delivery and termination of this Agreement and the Note and the
making and repayment of the obligations arising hereunder, under the Note and
under the other Related Agreements.
10.6 SUCCESSORS. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be enforceable by each person or entity which shall
be a holder of the Securities from time to time, other than the holders of
Common Stock which has been sold by the Purchaser pursuant to Rule 144 or an
effective registration statement. The Purchaser shall not be permitted to assign
its rights hereunder or under any Related Agreement to a competitor of the
Company unless an Event of Default (as defined in the Note) has occurred and is
continuing.
10.7 ENTIRE AGREEMENT; MAXIMUM INTEREST. This Agreement, the Related
Agreements, the exhibits and schedules hereto and thereto and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and no
party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein. Nothing contained in this Agreement, any Related
Agreement or in any document referred to herein or delivered in connection
herewith shall be deemed to establish or require the payment of a rate of
interest or other charges in excess of the maximum rate permitted by applicable
law. In the event that the rate of interest or dividends required to be paid or
other charges hereunder exceed the maximum rate permitted by such law, any
payments in excess of such maximum shall be credited against amounts owed by the
Company to the Purchaser and thus refunded to the Company.
10.8 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the
Purchaser under this Agreement may be waived only with the written
consent of the Purchaser.
(c) The obligations of the Purchaser and the rights of the
Company under this Agreement may be waived only with the written
consent of the Company.
10.9 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by
26
another party under this Agreement or the Related Agreements, shall impair any
such right, power or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of or in
any similar breach, default or noncompliance thereafter occurring. All remedies,
either under this Agreement or the Related Agreements, by law or otherwise
afforded to any party, shall be cumulative and not alternative.
10.10 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day;
(c) three (3) business days after having been sent by
registered or certified mail, return receipt requested, postage
prepaid; or (
d) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written
verification of receipt.
All communications shall be sent as follows:
IF TO THE COMPANY, TO: ABLE ENERGY, INC.
000 Xxxxx Xxxx Xxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Chief
Executive Officer
Facsimile: 000 000-0000
WITH A COPY TO:
Xxxxxxx X. Xxxxxx
1140 Avenue of the Americas, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention:
Facsimile: 000 000-0000
27
IF TO THE PURCHASER, TO: Laurus Master Fund, Ltd.
c/o M&C Corporate Services Limited
X.X. Xxx 000 XX
Xxxxxx Xxxxx
Xxxxxx Xxxx
South Church Street
Grand Cayman, Cayman Islands
Facsimile: 000-000-0000
WITH A COPY TO:
Xxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxxxx 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: 000-000-0000
or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.
10.11 ATTORNEYS' FEES. In the event that any suit or action is
instituted to enforce any provision in this Agreement or any Related Agreement,
the prevailing party in such dispute shall be entitled to recover from the
losing party all reasonable fees, costs and expenses of enforcing any right of
such prevailing party under or with respect to this Agreement and/or such
Related Agreement, including, without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation,
all fees, costs and expenses of appeals.
10.12 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
10.13 FACSIMILE SIGNATURES; COUNTERPARTS. This Agreement may be
executed by facsimile signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
agreement.
10.14 BROKER'S FEES. Except as set forth on Schedule 11.12 hereof, each
party hereto represents and warrants that no agent, broker, investment banker,
person or firm acting on behalf of or under the authority of such party hereto
is or will be entitled to any broker's or finder's fee or any other commission
directly or indirectly in connection with the transactions contemplated herein.
Each party hereto further agrees to indemnify each other party for any claims,
losses or expenses incurred by such other party as a result of the
representation in this Section 11.12 being untrue.
10.15 CONSTRUCTION. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and the Related Agreements
and, therefore, stipulates that the rule of construction that ambiguities are to
be resolved against the drafting party shall not be applied in the
interpretation of this Agreement or any Related Agreement to favor any party
against the other.
28
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
29
IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES PURCHASE
AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
ABLE ENERGY, INC. LAURUS MASTER FUND, LTD.
By: s/Xxxxxxx X. Xxxxx By: s/Xxxxxx Grin
------------------ -------------
Name: Xxxxxxx X. Xxxxx Name: Xxxxxx Grin
Title: Chief Executive Officer Title: Fund Manager
30
EXHIBIT A
FORM OF CONVERTIBLE NOTE
A-1
EXHIBIT B
FORM OF WARRANT
B-1
EXHIBIT C
FORM OF OPINION
1. The Company and each of its Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its formation and has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
as it is now being conducted.
2. Each of the Company and each of its Subsidiaries has the requisite
corporate power and authority to execute, deliver and perform its obligations
under the Agreement and the Related Agreements. All corporate action on the part
of the Company and each of its Subsidiaries and its officers, directors and
stockholders necessary has been taken for: (i) the authorization of the
Agreement and the Related Agreements and the performance of all obligations of
the Company and each of its Subsidiaries thereunder; and (ii) the authorization,
sale, issuance and delivery of the Securities pursuant to the Agreement and the
Related Agreements. The Note Shares and the Warrant Shares, when issued pursuant
to and in accordance with the terms of the Agreement and the Related Agreements
and upon delivery shall be validly issued and outstanding, fully paid and non
assessable.
3. The execution, delivery and performance by each of the Company and
each of its Subsidiaries of the Agreement and the Related Agreements (to which
it is a party) and the consummation of the transactions on its part contemplated
by any thereof, will not, with or without the giving of notice or the passage of
time or both:
(a) Violate the provisions of their respective Charter or
bylaws; or
(b) Violate any judgment, decree, order or award of any court
binding upon the Company or any of its
Subsidiaries; or
(c) Violate any [insert jurisdictions in which counsel is
qualified] or federal law
4. The Agreement and the Related Agreements will constitute, valid and
legally binding obligations of each of the Company and each of its Subsidiaries
(to the extent such entity is a party thereto), and are enforceable against each
of the Company and each of its Subsidiaries party thereto in accordance with
their respective terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and
(b) general principles of equity that restrict the availability of
equitable or legal remedies.
5. To such counsel's knowledge, the sale of the Note and the subsequent
conversion of the Note into Note Shares are not subject to any preemptive rights
or rights of first refusal that
C-1
have not been properly waived or complied with. To such counsel's knowledge, the
sale of the Warrant and the subsequent exercise of the Warrant for Warrant
Shares are not subject to any preemptive rights or, to such counsel's knowledge,
rights of first refusal that have not been properly waived or complied with.
6. Assuming the accuracy of the representations and warranties of the
Purchaser contained in the Agreement, the offer, sale and issuance of the
Securities on the Closing Date will be exempt from the registration requirements
of the Securities Act. To such counsel's knowledge, neither the Company, nor any
of its affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy and security under circumstances that would cause the offering of the
Securities pursuant to the Agreement or any Related Agreement to be integrated
with prior offerings by the Company for purposes of the Securities Act which
would prevent the Company from selling the Securities pursuant to Rule 506 under
the Securities Act, or any applicable exchange-related stockholder approval
provisions.
7. There is no action, suit, proceeding or investigation pending or, to
such counsel's knowledge, currently threatened against the Company or any of its
Subsidiaries that prevents the right of the Company or any of its Subsidiaries
to enter into this Agreement or any Related Agreement, or to consummate the
transactions contemplated thereby. To such counsel's knowledge, the Company is
not a party or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality; nor is
there any action, suit, proceeding or investigation by the Company currently
pending or which the Company intends to initiate.
X-0
XXXXXXX X
XXXX XX XXXXXX XXXXXXXXX
X-0
