EXHIBIT 10.25
THIS SECURITIES PURCHASE AGREEMENT, as it may be amended from time to time
(the "Agreement"), dated as of the ___th day of September 1998, is entered into
by and among ENVIRONMENTAL REMEDIATION HOLDING CORPORATION, a Colorado
corporation (the "Company"); and Talisman Capital Opportunity Fund
Ltd.,(hereinafter referred to the "Investor").
WITNESSETH:
WHEREAS, the Company desires to sell to the Investor, and the Investor
desire to purchase from the Company, certain convertible notes and warrants of
the Company, for the respective purchase prices and upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows:
1. AUTHORIZATION OF ISSUE.
The Company has authorized the issuance and sale to the Investor of: (i)
$500,000 principal amount of the Company's 20% convertible notes due October __,
2000 convertible at the lesser of 100% of Market Price as defined in the Note or
$1.00 (the "Note"), which Note shall be substantially in the form of Exhibit A
annexed hereto and made a part hereof and (ii) warrants to purchase 1,500,000
shares of the Company's Common Stock exercisable at $.40 (the "Warrants"), the
form of which Warrants are an exhibit to a certain warrant agreement of even
date (the "Warrant Agreement") as set forth in Exhibit B annexed hereto and made
a part hereof.
2. ISSUANCE OF NOTES AND WARRANTS; REGISTRATION OF CONVERSION
AND EXERCISABLE SHARES.
(a) Issuance of Notes. On the terms and subject to the conditions
hereinafter set forth, on the Closing Date (as hereinafter defined), the Company
will issue and sell to the Investor the Note and the Warrants.
(b) Purchase Price: Payment. The purchase price for each of the Note shall
equal 100% of the aggregate principal amount thereof. Out of the Proceeds, the
Company agrees to pay the Investor's attorneys fee in an amount equal to
$10,000. The purchase price for the Notes shall be paid at the Closing by wire
transfer of immediately available funds or by certified or bank cashier's checks
(at the option of the Investor) payable to the order of the Company, or
otherwise as acceptable to the Company. The purchase price shall be payable by
the Investor against delivery of the Note and Warrants being purchased by it,
both of which shall be registered in the name of the Investor.
(c) Registration of Conversion and Excisable Shares.
(i) As to the Notes, the Company shall file, as soon as practicable, with
the United States Securities and Exchange Commission ("SEC") and use its best
efforts to cause it to be declared effective within one (1) year of the Closing
Date and remain effective until the earlier of the date on which all of the Note
is sold or for the life of the Note, a Form S-1 Registration Statement or other
appropriate form of registration in order to register for resale and
distribution under the Securities Act of 1933, as amended (the "Securities
Act"), all shares of Common Stock of the Company issuable upon voluntary or
mandatory conversion of the Note (the "Conversion Shares"). The obligations of
the Company to so register the Conversion Shares are set forth in the Note.
(ii) As to the Warrants, the Company shall file, as soon as practicable,
with the United States Securities and Exchange Commission ("SEC") and use its
best efforts to cause it to be declared effective within two (2) years of the
Closing Date and remain effective until the earlier of the date on which all of
the Warrants are sold or for the life of the Warrants, a Form S- 1 Registration
Statement or other appropriate form of registration in order to register for
resale and distribution under the Securities Act of 1933, as amended (the
"Securities Act"), all shares of Common Stock of the Company issuable upon
voluntary or mandatory exercise of the Warrants (the "Exercisable Shares"). The
obligations of the Company to so register the Exercisable Shares are set forth
in the Warrant Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
As used in this Agreement, the term "Subsidiary" or "Subsidiaries" shall
mean: (i) the individual or collective reference to the corporations listed on
Schedule 1 annexed hereto and made a part hereof, including, without limitation,
Bass American Petroleum Corp. ("BAPCO"). The Company hereby represents and
warrants to the Investor, as follows:
(a) Organization and Good Standing. The Company and each of its existing
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, with full corporate power
and authority to own its properties and carry on its business as now being
conducted. Each of the Company and such Subsidiaries is qualified as a foreign
corporation and is in good standing in each jurisdiction in which the conduct of
its business or the ownership of its assets requires such qualification.
(b) Capitalization of the Company. The authorized, issued and outstanding
capital stock of the Company is described on the Company's Form S-1, as amended,
submitted to the Securities and Exchange Commission (the "SEC") on July 24,1998
(the "Form S-1"). The Company's Form S-1 and all other documents and reports
filed by the Company and/or its Subsidiaries with the SEC since October 1, 1995
(the "SEC Documents") have been furnished to or otherwise made available to the
Investor or its representatives. The authorized, issued and outstanding shares
of capital stock of each of the Subsidiaries are disclosed on the SEC Documents.
(c) Authorization, Execution and Effect of Agreements. The Company has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to issue the Note and Warrants in the
manner and for the purpose contemplated by this Agreement, and to execute,
deliver and perform its obligations under this Agreement, the Note and the
Warrants (collectively, the "Transaction Documents") and all other agreements
and instruments heretofore or hereafter executed and delivered by it pursuant to
or in connection with this Agreement. The execution and delivery of the
Transaction Documents and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action of the
Company. This Agreement and the other Transaction Documents have each been duly
executed and delivered and constitutes, and upon execution and delivery in
accordance herewith each other agreement or instrument executed and delivered by
the Company pursuant hereto, including the Note and Warrants, will constitute,
the legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, subject in each such case, to
applicable bankruptcy, insolvency, reorganization and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(d) Conflicting Agreements and Other Matters. The execution, delivery and
performance by the Company of this Agreement and the other Transaction
Documents, and all other agreements and instruments heretofore or hereafter to
be executed and delivered by the Company in connection with the consummation of
the transactions contemplated by this Agreement and the other Transaction
Documents, and compliance by the Company with the terms and provisions hereof
and thereof applicable to it, including the issuance and sale of the Note and
Warrants, does not and will not (i) violate any provision of any law, rule,
regulation, order, writ, judgment, decree, administrative determination or award
having applicability to the Company or any of the Subsidiaries or (ii) conflict
with or result in a breach of or constitute a default under the Certificate of
Incorporation or By-Laws of the Company or any of the Subsidiaries, or any
indenture or loan or credit agreement, or any other material agreement or
instrument, to which the Company or any of the Subsidiaries is a party or by
which the Company or the Subsidiaries, or any of their respective properties are
bound or affected, and will not result in, or require the creation or imposition
of, any lien upon or with respect to any of the properties now owned by the
Company or any of the Subsidiaries or hereafter acquired by the Company or any
of the Subsidiaries.
(e) Financial Information. The (i) audited consolidated financial
statements of the Company for the fiscal year ended September 30, 1997 as set
forth in the Company's Form 10-K/A filed with the SEC (the "1998 Form 10-K") and
(ii) the unaudited financial statements of the Company for the nine months ended
June 30, 1998 as set forth in the Company's Form 10-Q filed with the SEC, as
amended from time to time (the "1998 Form 10Q/A"), were prepared in accordance
with generally accepted accounting principles ("GAAP") consistently applied, and
fairly present the financial condition and results of operations of the Company
and the Subsidiaries for the periods indicated therein; provided, that the
unaudited financial statements do not contain certain footnote disclosures
required under GAAP for audited financial statements and are subject to year end
audit adjustments, none of which would be material to an Investor's decision to
purchase the Notes.
(f) Litigation, Proceedings: Defaults. Except as disclosed on the SEC
Reports or on Schedule 3(f) hereto, there is no action, suit, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of the Subsidiaries or any of their respective
properties before or by any court, governmental or regulatory authority
(federal, state, local or foreign) which either (i) relates to or challenges the
legality, validity or enforceability of this Agreement or any other document or
agreement to be executed and delivered by the Company pursuant hereto or in
connection herewith, or (ii) if determined adversely (A) would have a material
adverse effect on the condition (financial or otherwise), properties, assets,
business or results of operations of the Company or the Subsidiaries, when taken
as a consolidated whole (a "Material Adverse Effect") after giving effect to the
transaction contemplated by this Agreement,
or (B) could materially impair the ability or obligation of the Company or
the Subsidiaries to perform fully on a timely basis any obligation which it has
or will have under this Agreement or the other Transaction Documents, or any
other agreement or document heretofore or hereafter to be executed by the
Company pursuant hereto or in connection herewith. Neither the Company nor any
of the Subsidiaries is in violation of its Certificate of Incorporation or
By-Laws. Neither the Company nor any of the Subsidiaries is (i) in default under
or in violation of any other material agreement or instrument to which it is a
party or by which it or any of its properties are bound or affected, which
default or violation would have a Material Adverse Effect, (ii) in default with
respect to any order of any court, arbitrator or governmental body or subject to
or party to any order of any court or governmental authority arising out of any
action, suit or proceeding under any statute or other law respecting antitrust,
monopoly, restraint of trade, unfair competition or similar matters, or (iii) in
violation of any statute, rule or regulation of any governmental authority
material to its business.
(g) Governmental Consents, etc. No authorization, consent, approval,
license, qualification or formal exemption from, nor any filing, declaration or
registration with, any court, governmental agency or regulatory authority or any
securities exchange or any other person or entity (collectively "Approvals") is
required in connection with the execution, delivery or performance by the
Company of this Agreement.
(h) Use of Proceeds. To use the proceeds for (1) first to the extent of
$250,000 to cover certain payments necessary for Sao Tome and (2) the balance
for general working capital purposes as the Company so directs.
(i) Accuracy of all SEC Public Filings, All SEC Reports furnished to the
Investor or its representatives and all other documents and reports filed by or
on behalf of the Company with the SEC, when filed, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Company and
each of its Subsidiaries has filed, on a timely basis, all required forms,
reports and documents with the SEC required to be filed by it pursuant to the
Securities Act and the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), all of which complied at the time of filing in all material
respects with all applicable requirements of the Securities Act and the Exchange
Act.
(j) Absence of Certain Changes or Events. Since June 30, 1998, except as
contemplated by this Agreement, disclosed on Schedule 3(j) hereto and made a
part hereof, or disclosed in any Company SEC Report filed since June 30, 1998,
the Company and the Subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, in the
Company's opinion, there has not been (i) any event or events having,
individually or in the aggregate, a Material Adverse Effect, (ii) any change by
the Company in its accounting methods, principles or practices, (iii) any
revaluation by the Company of any material asset (including, without limitation,
any writing down or writing up of the value of oil and gas reserves, writing off
of notes or accounts receivable or reversing of any accruals or reserves), other
than in the ordinary course of business consistent with past practice, (iv) any
entry by the Company or any Subsidiary into any commitment or transaction
material to the Company and the Subsidiaries taken as a whole, except in the
ordinary course of business and consistent in all material respects with past
practice, or (v) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Company or any redemption,
purchase or other acquisition of any of its securities.
(k) Absence of Litigation. Except as disclosed in the Company SEC Reports
or in Schedule3(k) annexed hereto and made a part hereof, there is no claim,
action, proceeding or investigation pending or, to the Company's knowledge,
threatened against the Company or any Subsidiary, or any property or asset of
the Company or any Subsidiary, before any court, arbitrator or Governmental
Authority, which, individually or when aggregated with other claims, actions,
proceedings or investigations or product liability claims, actions, proceedings
or investigations which are reasonably likely to result from facts and
circumstances that have given rise to such a claim, action, proceeding or
investigation, would have a Material Adverse Effect. As of the date hereof,
neither the Company nor any Subsidiary nor any property or asset of the Company
or any Subsidiary is subject to any order, writ, judgment, injunction, decree,
determination or award having, individually or in the aggregate, a Material
Adverse Effect.
(l) Labor Matters. Except as set forth in Schedule 3(l) annexed hereto and
made a part hereof, with respect to employees of the Company:
(i) to the best of the Company's knowledge, no senior executive or key
employee has any plans to terminate employment with the Company or any of its
Subsidiaries;
(ii) there is no unfair labor practice charge or complaint against the
Company or any of its Subsidiaries pending or, to the best of the Company's
knowledge, threatened before the National Labor Relations Board or any other
comparable authority;
(iii) there is no demand for recognition made by any labor organization or
petition for election filed with the National Labor Relations Board or any other
comparable authority which, individually or in the aggregate, would have a
Material Adverse Effect;
(iv) no grievance or any arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the best of the Company's
knowledge, no claims therefor have been threatened other than grievances or
arbitrations incurred in the ordinary course of business which, individually or
in the aggregate, would not have a Adverse Effect; and
(v) there is no litigation, arbitration proceeding, governmental
investigation, administrative charge, citation or action of any kind pending or,
to the knowledge of the Company or any of its Subsidiaries, proposed or
threatened against the Company relating to employment, employment practices,
terms and conditions of employment or wages and hours which, individually or in
the aggregate, would have a Material Adverse Effect. Except as disclosed in
Schedule 3(l), none of the Company nor any of its Subsidiaries has any
collective bargaining relationship or duty to bargain with any Labor
Organization (as such term is defined in Section 2(5) of the National Labor
Relations Act, as amended), and none of the Company nor any of its Subsidiaries
has recognized any labor organization as the collective bargaining
representative of any of its employees.
(m) Title to and Sufficiency of Assets. As of the date hereof, the Company
and the Subsidiaries own, and as of the Closing Date, the Company and the
Subsidiaries will own, good and marketable title to all of their assets
constituting personal property which is material to their business (excluding,
for purposes of this sentence, assets held under leases), free and clear of any
and all mortgages, liens, encumbrances, charges, claims, restrictions, pledges,
security interests or impositions (collectively, "Liens") except as set forth in
the Company SEC Reports or Schedule 3(m) annexed hereto and made a part hereof.
Such assets, together with all assets held by the Company and the Subsidiaries
under leases, include all tangible and intangible personal property, contracts
and rights necessary or required for the operation of the businesses of the
Company. As of the date hereof, the Company and the Subsidiaries own, and as of
the Closing Date, the Company and the Subsidiaries will own, good and marketable
title to all of their real estate, including oil and gas reserves, which is
material to such persons (excluding, for purposes of this sentence, leases to
real estate and oil and gas reserves), free and clear of any and all Liens,
except as set forth in the Company SEC Reports or in Schedule 3(m) annexed
hereto or such other Liens which would not, individually or in the aggregate,
have a Material Adverse Effect. Such assets, together with real estate and oil
and gas reserve assets held by the Company and the Subsidiaries under leases,
are adequate for the operation of the businesses of the Company, as presently
conducted. The leases to all real estate and oil and gas reserves which are
material to the operations of the businesses of the Company and the Subsidiaries
are in full force and effect and no event has occurred which, with the passage
of time, the giving of notice, or both, would constitute a default or event of
default by the Company or any Subsidiary or, to the knowledge of the Company,
any other person who is a party signatory thereto, other than such defaults or
events of default which, individually or in the aggregate, would not have a
Material Adverse Effect.
(n) Environmental Matters. For purposes of this Agreement, the following
terms shall have the following meanings:
(i) "Hazardous Substances" means
(A) petroleum and petroleum products, by-products or breakdown products,
radioactive materials, asbestos- containing materials and polychlorinated
biphenyls, and
(B) any other chemicals, materials or substances regulated as toxic or
hazardous or as a pollutant, contaminant or waste under any applicable
Environmental Law;
(ii) "Environmental Law" means any law, past, present or future and as
amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment, or common law,
relating to pollution or protection of the environment, health or safety or
natural resources, including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or discharge of
Hazardous Substances; and
(iii) "Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any applicable
Environmental Law.
(A) Except as disclosed on Schedule 3(n-1) annexed hereto and made a part
hereof, the Company and the Subsidiaries are and have been in compliance with
all applicable Environmental Laws, have obtained all Environmental Permits and
are in compliance with their requirements, and have resolved all past
non-compliance with Environmental Laws and Environmental Permits without any
pending, on-going or future obligation, cost or liability, except in each case
for the notices set forth in Schedule 3(n-1) or where such non-compliance would
not, individually or in the aggregate, have a Material Adverse Effect.
(B) Except as disclosed in Schedule 3(n-2) annexed hereto and made a part
hereof, neither the Company nor any of the Subsidiaries has (I) placed, held,
located, released, transported or disposed of any Hazardous Substances on,
under, from or at any of the Company's or any of the Subsidiaries' properties or
any other properties, other than in a manner that would not, in all such cases
taken individually or in the aggregate, result in a Company Material Adverse
Effect, (II) any knowledge of the presence of any Hazardous Substances on,
under, emanating from, or at any of the Company's or any of the Subsidiaries'
properties or any other property but arising from the Company's or any of the
Subsidiaries' current or former properties or operations, other than in a manner
that would not result in a Material Adverse Effect, or (III) any knowledge of
nor has it received any written notice (x) of any violation of or liability
under any Environmental Laws, (y) of the institution or pendency of any suit,
action, claim, proceeding or investigation by any Governmental Entity or any
third party in connection with any such violation or liability, (z) requiring
the response to or remediation of Hazardous Substances at or arising from any of
the Company's or any of the Subsidiaries' current or former properties or
operations or any other properties, (aa) alleging noncompliance by the Company
or any of the Subsidiaries with the terms of any Environmental Permit requiring
material expenditures or resulting in material liability or (bb) demanding
payment for response to or remediation of Hazardous Substances at or arising
from any of the Company's or any of the Subsidiaries' current or former
properties or operations or any other properties, except in each case for the
notices set forth in Schedule 3(n-2) annexed hereto.
(o) Brokers. No broker, finder or investment banker, is entitled to any
brokerage, finder's or other fee or commission in connection with the this
Agreement and the transactions contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
The Investor hereby separately represents and warrants to the Company as
follows:
(a) Investigation; Investment Representation. The Investor (i) possesses
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of its investment hereunder; (ii) has
been afforded the opportunity to ask questions of, and receive answers from, the
Company concerning the terms and conditions of its investment, the transactions
contemplated hereby and the business and affairs of the Company; (iii) has
examined, to the extent it deems appropriate, all of the agreements and
documents referred to herein or in the schedules hereto and such other documents
that it has requested; and (iv) understands that the Notes are not being
registered under the Securities Act of 1933, as amended, on the ground that the
issuance thereof is exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended, as a transaction by an issuer not involving
a public offering, and the Company's reliance on this exemption is predicated in
part on the Investor' representations and warranties contained in this Section
4(a). The Investor is acquiring the Note and Warrants for its own account, for
investment purposes only and not with a view to the sale or distribution
thereof.
(b) Execution and Effect of Agreement. The Investor has all necessary power
and authority to enter into this Agreement and consummate the transactions
contemplated hereby. This Agreement constitutes the legal, valid and binding
obligation of the Investor, enforceable against the Investor in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity).
5. COVENANTS.
As long as the Note is outstanding, the Company agrees that, unless it
first procures the written consent to act otherwise of the holders of record of
66-2/3% of the outstanding principal amount of the Note of record then
outstanding, it will use its best efforts to cause each of its Subsidiaries to:
(a) Promptly pay all taxes (exclusive of income taxes imposed on the
Investor), fees and charges payable, or ruled to be payable, by any federal,
state or local authority, in respect of this Agreement or the execution,
delivery or issuance of the Note or Warrants by reason of any now existing or
hereafter enacted federal, state or local statute or ordinance, and indemnify
and hold the Investor harmless from and against all liabilities with respect to
or in connection with any such taxes, fees or charges.
(b) Maintain their corporate existence and right to carry on business, duly
procure all necessary renewals and extensions thereof, and use their best
efforts to maintain, preserve and renew all necessary or desirable rights,
powers, privileges and franchises owned by them.
(c) Promptly notify the Investor of any material adverse change in the
condition (financial or otherwise), properties, assets, business or results of
operations of the Company or any of the Subsidiaries.
(d) Not cause, suffer or permit any liquidation, winding up or dissolution
of the Company or the Subsidiaries.
(e) Maintain and cause the Subsidiaries to maintain a system of accounting
established and administered in accordance with generally accepted accounting
principles.
(f) Comply with all of the covenants and agreements on the part of the
Company to be performed under the terms of the Note, the Warrants and the other
Transaction Documents.
(g) Except as provided in the Use of Proceeds set forth in Section 3(h),
the Company shall not transfer, sell, convey or use as collateral or otherwise
dispose of any the proceeds of this transaction to any Subsidiary or affiliate
except for cash or cash equivalent consideration and for a proper business
purpose, while the Note is outstanding, without the prior written consent from
the Investor.
(h) Except as provided in the Use of Proceeds set forth in Section 3(h),
the Company shall not and shall not permit any of its Subsidiaries to, directly
or indirectly, create or otherwise cause or permit to exist or become effective
any encumbrances or restriction on the ability of any Subsidiary to (i) pay a
dividend or make any other distribution on or in respect to its Capital Stock;
or (ii) make loans or advances or to pay any indebtedness or other obligation
owed to the Company or any Subsidiary.
6. FINANCIAL STATEMENTS; INSPECTION; NON-PUBLIC INFORMATION.
(a) The Company will furnish to the Investor (and its permitted
transferees, successors and assigns), as long as such Investor owns any of the
Note, copies of all Form 10-K Annual Report and Form 10-Q Quarterly Financial
Reports filed by the Company, with the SEC.
(b) The Company will, subject to execution of appropriate confidentiality
and non- disclosure agreements, permit the Investor, as long as its owns the
Note, the Conversion Shares, the Warrants or the Exercisable Shares, or any
authorized representative designated by the Investor, to visit and inspect at
the Investor's expense any of the properties of the Company and the
Subsidiaries, and to discuss its affairs, finances and accounts with officers of
the Company, all at such reasonable times and as often as the Investor may
reasonably request.
(c) The Company in no event shall disclose non-public information to the
Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company marks such information as 'Non-Public
Information - Confidential" and provides the Investor, such advisors and
representatives with a reasonable opportunity to accept or refuse to accept such
non-public information for review. Nothing herein shall require the Company to
disclose non-public information to the Investor or its respective advisors or
representatives, and the Company represents that it does not disseminate
non-public information to the Investor who purchases stock in the Company in a
public offering, to money managers or to securities analysts; provided, however,
that notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, notify immediately the advisors and representatives of the
Investor and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed in
the Prospectus included in the Registration Statement, would cause such
Prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, not misleading. Nothing herein
shall be construed to mean that such persons or entities other than the Investor
(without the written consent of the Investor prior to disclosure of such
information) may not obtain non-public information in the course of conducting
due diligence in accordance with the terms of this Agreement and nothing herein
shall prevent any such persons or entities from notifying the Company of their
opinion that based on such due diligence by such persons or entities, that the
Registration Statement contains an untrue statement of a material fact or omits
a material fact required to be stated in the Registration Statement or necessary
to make the statements contained therein, in light of the circumstances in which
they were made, not misleading.
7. TRANSFER OF NOTES.
(a) Permissible Transfers. The Investor acknowledges that the Company's
securities being issued and sold to them hereunder are being so issued and sold
in transactions which are exempt from the registration requirements of the
Securities Act of 1933, as amended. Neither the Note, the Conversion Shares
issuable upon conversion of the Note, the Warrants or the Exercisable Shares
issuable upon exercise of the Warrants, may be distributed, transferred, or
otherwise disposed of by the Investor except pursuant to an effective
Registration Statement under such Act which is current with respect to the
securities offered thereby, or pursuant to an applicable exemption therefrom,
and pursuant to applicable "Blue Sky" or state securities laws or an applicable
exemption therefrom.
In the event the Investor seeks to distribute, transfer or otherwise dispose of
the Note, the Conversion Shares, the Warrants or the Exercisable Shares prior to
registrations, the Investor shall provide the Company, at the Investor's sole
expense, an opinion of counsel reasonably satisfactory to the Company which
states that the anticipated distribution, transfer or other disposition of the
Note, the Conversion Shares, the Warrants or the Exercisable Shares is exempt
under the applicable federal securities laws and the "Blue Sky" or state
securities laws of the applicable resident state of the intended transferee and
references the applicable statutes and case law to support such opinion.
(b) Legend.
(i) As to the Notes, unless the Conversion Shares have been registered
pursuant to an effective Registration Statement filed under the Securities Act
or held for the requisite period to be freely transferable pursuant to Rule 144
promulgated under the Securities Act and otherwise comply with Rule 144(k) (in
either such case the certificates shall bear no legend), the Company shall cause
to be set forth on the certificates representing any Conversion Shares a legend
substantially in the following form: "This Note, and the securities issuable
upon the conversion of this Note, have not been registered under the Securities
Act of 1933, as amended (the "Act") or applicable state law and may not be sold,
transferred or otherwise disposed of unless registered under the Act and any
applicable state act or unless the Company receives an opinion from counsel to
the holder and is satisfied that this Note and the underlying securities may be
transferred without registration under the Act."
(ii) As to the Warrants, unless the Exercisable Shares have been registered
pursuant to an effective Registration Statement filed under the Securities Act
or held for the requisite period to be freely transferable pursuant to Rule 144
promulgated under the Securities Act and otherwise comply with Rule 144(k) (in
either such case the certificates shall bear no legend), the Company shall cause
to be set forth on the certificates representing any Exercisable Shares a legend
substantially in the following form: "This Warrant, and the securities issuable
upon the exercise of this Warrant, have not been registered under the Securities
Act of 1933, as amended (the "Act") or applicable state law and may not be sold,
transferred or otherwise disposed of unless registered under the Act and any
applicable state act or unless the Company receives an opinion of counsel for
the holder and is satisfied that this Warrant and the underling securities may
be transferred without registration under the Act."
(c) Registration of Conversion Shares and Exercisable Shares, Other
Exemption. The Company shall use its best efforts to cause the Conversion Shares
and Exercisable Shares to be registered for resale or distribution under the
Securities Act, all in accordance with the terms set forth in the Note and
Warrants respectively.
8. CONDITIONS PRECEDENT TO CLOSING.
(a) Conditions Precedent to Obligations of the Investor. The obligation of
the Investor to purchase the Note and the Warrants by it at the Closing
hereunder is subject to the fulfillment on or prior to the Closing Date of the
following conditions:
(i) Such Investor shall have received an opinion, addressed to it and dated
the Closing Date, of counsel to the Company acceptable to Investor, in the form
of Exhibit C hereto and made a part hereof.
(ii) The representations and warranties made by the Company herein shall be
true and correct in all material respects on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of the Closing Date, and the Company shall have complied in all material
respects with all covenants hereunder required to be performed by it at or prior
to the Closing Date.
(iii) There shall not have occurred and be continuing any Material Adverse
Effect.
(iv) The purchase of the Note and the Warrants agreed to be purchased by
the Investor hereunder shall not be prohibited or enjoined (temporarily or
permanently) under the laws of any jurisdiction to which such Investor is
subject.
(v) All legal matters incident to the transactions contemplated by this
Agreement shall have been reasonably approved by counsel to the Investor.
(vi) Not less than $500,000 of the Note offered hereby shall have been
subscribed for by Investor as of the Closing Date.
(b) Conditions Precedent to Obligations to the Company. The obligation of
the Company to issue and sell the Note and the Warrants is subject to the
fulfillment on or prior to the Closing Date of the following conditions:
(i) The representations and warranties made by the Investor herein shall be
true and correct in all material respects on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of the Closing Date.
(ii) The sale of the Note and the Warrants by the Company shall not be
prohibited or enjoined (temporarily or permanently) as of the Closing Date.
(iii) The purchase of the Note and Warrants agreed to be purchased by the
Investor hereunder shall not be prohibited or enjoined (temporarily or
permanently) under the laws of any jurisdiction to which such Investor is
subject.
(iv) All legal matters incident to the transactions contemplated by this
Agreement shall have been reasonably approved by counsel to the Company.
(v) Not less than $500,000 of the Notes offered hereby shall have been
subscribed for by Investor as of the Closing Date.
9. CLOSING.
The closing hereunder (the "Closing") shall take place at 10:00 A.M. at the
offices of Mintmire & Associates, 000 Xxxxxxx Xxxxxx, Xxxx Xxxxx, Xxxxxxx 00000
on or before October __, 1998, or at such other location as may be mutually
agreed upon. The date of such Closing is referred to in this Agreement as the
"Closing Date".
(a) At the Closing, in addition to true copies of the other Transaction
Documents duly executed by the Company, the Company shall deliver to the
Investor (a) a duly executed Note in the form of Exhibit A hereto, and (b) duly
executed Warrants in the form attached to Exhibit B, all against payment of the
purchase price therefor by wire transfer of immediately available funds or by
certified or bank cashier's check payable to the order of the Company.
(b) At the Closing, the Investor shall wire transfer the purchase price for
the Note and Warrants subscribed to by the Investor to following attorneys'
escrow account established by Mintmire & Associates, as counsel to the Company,
or such other location and counsel as may be mutually agreed upon. All of such
funds shall be held in escrow by such counsel until the Note and Warrants shall
have duly executed by the Company and delivered by the Company or such escrow
agent to the the Investor or its representative.
Wire Instructions:
Palm Beach National Bank & Trust Company
North Palm Beach, Florida
ABA #000000000
Attn: Xx. Xxxxxx Xxxxxx
For credit to: Xxxxxx X. Xxxxxxxx, P.A. Trust Account
Account No.: 110010359
Reference: Environmental Remediation Holding Corporation
10. ADJUSTMENT TO TERMS OF NOTE AND Warrants.
The conversion or excise price of the Note and Warrants may be adjusted
from time to time as set forth in the respective instruments.
11. REPLACEMENT OF NOTE OR Warrants.
Upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of the Note or Warrants and, in the case
of any such loss, theft or destruction, upon delivery of an indemnity bond by
the holder in such reasonable amount as the Company may determine, or, in the
case of any such mutilation, upon surrender and cancellation of the Note or
Warrants, the Company at its expense will execute and deliver, in lieu thereof,
a new Note or Warrant of like tenor and, in the case of a new Note, dated the
date to which interest on such lost, stolen, destroyed or mutilated Note has
been paid.
12. BROKERS.
(a) The Investor represent and warrant to the Company that it has not
engaged or authorized any broker, finder, investment banker or other third party
to act on its behalf, directly or indirectly, as a broker, finder, investment
banker or in any other like capacity in connection with the transactions
contemplated by this Agreement nor has it consented to or acquiesced in anyone
so acting, and it knows of no claim by any person for compensation from it for
so acting or of any basis for such a claim.
(b) The Company represents and warrants to the Investor that neither the Company
nor any of its officers, directors or agents has engaged or authorized any
broker, finder, investment banker or other third party to act on its behalf,
directly or indirectly, as a broker, finder, investment banker or in any other
like capacity in connection with the transactions contemplated by this Agreement
nor has it consented to or acquiesced in anyone so acting, and it knows of no
claim by any person for compensation from it for so acting or of any basis for
such a claim.
(13) RIGHT OF FIRST OFFER.
The Company agrees that, during the period beginning on the date hereof and
terminating on the second anniversary of the Closing Date, the Company will not,
without the prior written consent of the Investor as set forth in this paragraph
13, which consent shall not be unreasonably withheld, offer to sell or sell, or
agree to offer to sell or sell any equity or debt securities of the Company or
any of its subsidiaries (or any security convertible into or exercisable or
exchangeable, directly or indirectly, for equity or debt securities of the
Company or any of its subsidiaries) ("Future Offerings") unless the Company
shall have first delivered to the Investor at least five (5) trading days prior
to the closing of such Future Offering, written notice describing the proposed
Future Offering, including the terms and conditions thereof, and providing the
Investor and its affiliates an option during the five (5) trading day period
following delivery of such notice to purchase up to the full amount of the
securities being offered in the Future Offering on the same terms as
contemplated by such Future Offering. The Investor shall notify the Company, in
writing, prior to the end of such five (5) trading day period if it desires to
participate in the Future Offering and to complete the purchase on the later of
(if a closing date is set forth in the Future Offering, in accordance with such
Future Offering by 5PM Eastern Standard Time by the closing date set forth in
such Future Offering; or (ii) if no closing date is set forth in the Future
Offering, within five (5) days of the date the Investor notifies the Company
that it desires to participate in the Future Offering.
14. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the Investor, each
person who controls the Investor and the Investor's employees, accountants,
attorneys and Investors (the "Investor's Indemnitees") against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act or any other statute or at common law
for any legal or other expenses (including the costs of any investigation and
preparation) incurred by them in connection with any litigation, whether or not
resulting in any liability, but only insofar as such losses, claims, damages,
liabilities and litigation arise out of or are based upon any untrue statement
of material fact contained in this Agreement and all documents related thereto
or any amendment or supplement thereto or any application or other document
filed in any state or jurisdiction, or the omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
under the circumstances under which they were made, not misleading, all as of
the date of this Agreement or of such amendment as the case may be; provided,
however, that the indemnity agreement contained in this Section 14(a) shall not
apply to amount paid in settlement of any such litigation, if such settlements
are made without the consent of the Company, nor shall it apply to the
Investor's Indemnitees in respect to any such losses, claims, damages or
liabilities arising out of or based upon any such untrue statement or alleged
untrue statement or any such omission or alleged omission, if such statement or
omission was made in reliance upon information furnished in writing to the
Company by the Investor specifically for use in connection with the preparation
of this Agreement and the documents related thereto or any such amendment or
supplement thereto or any application or other document filed in any state or
jurisdiction. This indemnity agreement is in addition to any other liability
which the Company may otherwise have to the Investor's Indemnitees. The
Investor's Indemnitees agree, within ten (10) days after the receipt by them of
written notice of the commencement of any action against them in respect to
which indemnity may be sought from the Company under this Section 14(a), to
notify the Company in writing of the commencement of such action; provided,
however, that the failure of the Investor's Indemnitees to notify the Company of
any such action shall not relieve the Company from any liability which it may
have to the Investor's Indemnitees on account of the indemnity agreement
contained in this Section 14(a), and further shall not relieve the Company from
any other liability which it may have to the Investor's Indemnitees, and if the
Investor's Indemnitees shall notify the Company of the commencement thereof, the
Company shall be entitled to participate in (and, to the extent that the Company
shall wish, to direct) the defense thereof at its own expense, but such defense
shall be conducted by counsel of recognized standing and reasonably satisfactory
to the Investor's Indemnitees, defendant or defendants, in such litigation. The
Company agrees to notify the Investor's Indemnitees promptly of the commencement
of any litigation or proceedings against the Company or any of the Company's
officers or directors of which the Company may be advised in connection with the
issue and sale of any of the Securities and to furnish to the Investor's
Indemnitees, at their request, to provide copies of all pleadings therein and to
permit the Company's Indemnitees to be observers therein and apprise the
Investor's Indemnitees of all developments therein, all at the Company's
expense.
(b) The Investor agrees, in the same manner and to the same extent as set
forth in Section 14(a) above, to indemnify and hold harmless the Company, and
the Company's and Company's employees, accountants, attorneys and Investors (the
"Company's Indemnitees") with respect to (i) any statement in or omission from
this Agreement and the documents related thereto or any amendment or supplement
thereto or any application or other document filed in any state or jurisdiction,
or any information furnished pursuant to this Agreement, if such statement or
omission was made in reliance upon information furnished in writing to the
Company by the Investor on its behalf specifically for use in connection with
the preparation thereof or supplement thereto,
or (ii) any untrue statement of a material fact made by the Investor or its
Investors not based on statements in this Agreement or the documents related
thereto or authorized in writing by the Company, or with respect to any
misleading statement made by the Investor or its Investors resulting from the
omission of material facts which misleading statement is not based upon this
Agreement or the documents related thereto, or information furnished in writing
by the Company or, (iii) any breach of any representation, warranty or covenant
made by the Investor in this Agreement. The Investor shall not be liable for
amounts paid in settlement of any such litigation if such settlement was
effected without its consent. In case of the commencement of any action in
respect of which indemnity may be sought from the Investor, the Company's
Indemnitees shall have the same obligation to give notice as set forth in
Section 14(a) above, subject to the same loss of indemnity in the event such
notice is not given, and the Investor shall have the same right to participate
in (and, to the extent that it shall wish, to direct) the defense of such action
at its own expense, but such defense shall be conducted by counsel of recognized
standing reasonably satisfactory to the Company. The Investor agrees to notify
the Company's Indemnitees and, at their request, to provide copies of all
pleadings therein and to permit the Company's Indemnitees to be observers
therein and apprise them of all the developments therein, all at the Investor's
expense.
15. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
All representations, warranties and agreements of the Company or of the
Investor contained in this Agreement or in any certificate, document, schedule
or instrument delivered pursuant hereto shall survive for a period of two (2)
years the Closing hereunder and the delivery of any and all documents and
instruments hereunder, regardless of any investigation made by or on behalf of
the Investor or the Company, respectively. All statements contained in any
certificate, schedule or other document delivered by the Company pursuant hereto
in connection with the transactions contemplated hereby shall be deemed
representations and warranties of the Company.
16. NOTICES.
Any notices or other communications required or permitted hereunder shall
be in writing and personally delivered or sent by telecopier or by registered or
certified mail, return receipt requested, postage prepaid, addressed or
telecopied as follows or to such other address or telecopier number of which
notice has been given pursuant hereto:
If to the Company: Environmental Remediation Holding Corp.
0000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx, President
Tel: (000) 000-0000
Fax: (000) 000-0000
-and-
Environmental Remediation Holding Corp.
Attn: Xxxxxx Xxxxxx, Vice President and
Chief Financial Officer
Fax: (000) 000-0000
With a copy to: Mintmire & Associates
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Investor:
Talisman Capital Opportunity Fund Ltd.
00000 XxXxxxxx Xxxxx
Xxxxx 000
Xxxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
17. ENTIRE AGREEMENT: AMENDMENT ETC.
This Agreement and the Exhibits hereto represents the entire understanding
and agreement among the parties hereto with respect to the subject matter
hereof. With the written consent of the holders of 66-2/3% of the outstanding
principal amount of the Note and the Warrants, the obligations of the Company
and the rights of the holders of the Note and Warrants may be waived or modified
(either generally or in a particular instance, either retroactively or
prospectively and either for a specified period of time or indefinitely), and
with the same consent the Company, when authorized by resolution of its Board of
Directors ("Approved Company Resolutions"), may enter into a supplementary
agreement for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement. Neither this Agreement
nor any provision hereof may be changed, waived, discharged or terminated
orally, except by a statement in writing authorized as aforesaid and signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought.
18. SUCCESSORS.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
19. SECTION READINGS.
The section headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
20. APPLICABLE LAW.
This Agreement shall be governed by, construed and enforced in accordance
with the laws of the State of New York, United States of America, without
reference to or application of principles of conflicts of laws.
21. SEVERABILITY.
If at any time subsequent to the date hereof, any provision of this
Agreement shall be held by any court of competent jurisdiction to be illegal,
void or unenforceable, such provision shall be of no force and effect, but the
illegality or unenforceability of such provision shall have no effect upon and
shall not impair the enforceability of any other provision of this Agreement.
22. NO WAIVER.
The failure of any party at any time or times to require performance of any
provision hereof shall in no manner affect the right at a later time to enforce
the same. No waiver by any party of any condition, or of the breach of any
provision, term, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances shall
be deemed to be construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
23. RESOLUTION OF DISPUTES.
Any dispute regarding the interpretation or application of this Agreement,
the Note, the Warrants or any of the other Transaction Documents which cannot be
settled among the parties shall be resolved in New York, New York, by final and
binding arbitration in accordance with the then obtaining rules of the American
Arbitration Association. There shall be appointed three arbitrators, one of whom
shall be selected by the Company, the second by the Investor(s) and the third by
mutual agreement of the parties or by the American Arbitration Association. The
decision of the arbitrators shall be final and upon the Investor and the Company
and may be enforced by the prevailing party or parties in any court of competent
jurisdiction. Each party shall bear their own costs of the arbitration and shall
share equally the costs of the arbitrators.
(24) ATTORNEY FEES.
The Investor shall be entitled to recover from the Company the reasonable
attorneys' fees and expenses (and the reasonable costs of investigation)
incurred by such Holder in connection with enforcement by such Holder of any
obligation of the Company hereunder.
25. FEES AND EXPENSES.
The Company agrees to pay the fees and expenses of Investor's counsel in
connection with the preparation, negotiation and coordination of this Agreement
in an amount equal to $10,000.
26. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of
the date first written.
ENVIRONMENTAL REMEDIATION HOLDING
CORPORATION
By: _________________________________
Xxxxx Xxxxxxxxx, President
TALISMAN CAPITAL OPPORTUNITY FUND LTD.
By:__________________________________
SCHEDULE 1
Subsidiaries
There are no subsidiaries other than BAPCO.
SCHEDULE 3(f)
Litigation, Proceedings: Defaults
There is no litigation, nor are there any proceedings or defaults that have
not been disclosed in SEC Reports except as follows:
o A requirement of the funding provided to the Company on November 15, 1997
from Avalon was that the Company would file its registration statement within
forty-five (45) days of the funding. The Form S-1 was filed on January 8, 1998,
however, this eight (8) day lateness was waived by the Avalon investors. In
addition, the Company had agreed to use its best effort to have its registration
declared effective within one hundred twenty (120) days of the November 15, 1997
closing. The Company believes that it has used its best efforts to have its
registration declared effective. The Avalon agreements required that in the
event that the registration statement was not effective within one hundred
twenty (120) days, that the Company would pay as liquidated damages an amount
equal to three percent (3%) of the aggregate amount of the notes per month. The
initial comments and the comments to the Amended Form S-1 have delayed
registration. While most of the comments received on the Amended Form S-1 are
purely accounting matters which the Company believes have now been resolved, as
a result of the delay in registration, pursuant to the Avalon agreements, the
Avalon investors may be due the liquidated damages and since they have not been
paid, may be in default of the agreement.
o In the Kingsbridge agreements, the Company had agreed to use its best
effort to have its registration declared effective within ninety (90) days of
the March 23, 1998 closing. The Company believes that it has used its best
efforts to have its registration declared effective. The Kingsbridge agreements
required that in the event that the registration statement was not effective
within such ninety (90) period, that the Company would be required to make a
lump sum payment in the amount of $10,000 within three (3) trading days of the
date by which such registration statement was required to have been declared
effective. Such ninety (90) period ended on June 21, 1998. To the extent such
sums may not have been paid, the Company may be in default of that agreement.
SCHEDULE 3(j)
Absence of Certain Changes or Events
There were no changes or events which have not been disclosed in SEC Reports
SCHEDULE 3(k)
Absence of Litigation
There is no claim, action proceeding or litigation pending or threatened
which has not been disclosed in an SEC Report
SCHEDULE 3(l)
Labor Matters
None
SCHEDULE 3(m)
Title to and Sufficiency of Assets
There are no Liens which have not been disclosed in an SEC Report
SCHEDULE 3(n-1)
Environmental Matters - Notice
None
SCHEDULE 3(n-2)
Environmental Compliance - Hazardous Waste
None
EXHIBITS
EXHIBIT A - Form of 20% Convertible Note due September __, 2000
EXHIBIT B - Form of Warrant Agreement
EXHIBIT C - Opinion of Company Counsel
