EXHIBIT 10.10
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PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
by and between
National Coal Corp., as Issuer and Seller
and
CD Investment Partners, Ltd., as Purchaser
with respect to Seller's
Series A Cumulative Convertible Preferred Stock
and Warrant to Purchase Common Stock
August 31, 2004
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TABLE OF EXHIBITS AND SCHEDULES
Exhibit A Form of Articles of Amendment of the Articles of Incorporation
Exhibit B Form of Common Stock Purchase Warrant
Exhibit C Form of Investor Rights Agreement
Exhibit D Form of Opinion of Seller's Counsel
Exhibit E Form of Management Lock-Up Agreement
Exhibit F Form of Subscription Notice
Exhibit G Form of Transfer Notice
Schedule 1 Disclosure Schedules
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PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the "AGREEMENT") dated
as of August 31, 2004, by and between National Coal Corp., a Florida corporation
(the "SELLER"), and CD Investment Partners, Ltd. the "Purchaser".
RECITALS:
WHEREAS, the Purchaser is willing to purchase from the Seller, and the
Seller desires to sell to the Purchaser, 24 shares of its Series A Cumulative
Convertible Preferred Stock, $15,000 liquidation preference per share, par value
$0.0001 per share (the "PREFERRED STOCK") convertible into the Seller's common
stock, $0.0001 par value (the "COMMON STOCK") and a Common Stock Purchase
Warrant (the "WARRANT") entitling the holder thereof to purchase shares of
Common Stock, in each case, as more fully set forth herein.
NOW THEREFORE, in consideration of the mutual promises and
representations, warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I - PURCHASE AND SALE
1.1 PURCHASE AND SALE.
(a) On the terms and subject to the conditions set forth in this
Agreement, at the Closing (as defined in Section 2.2), the Seller will sell, and
Purchaser will purchase, 24 shares of Preferred Stock at a price of $15,000 per
share of Preferred Stock. In addition, the Seller will sell, and the Purchaser
will purchase, at the Closing the Warrant to purchase 48,000 shares of Common
Stock.
(b) The shares of Common Stock issuable upon conversion of the
Preferred Stock are referred to herein as the "CONVERSION SHARES" and the shares
of Common Stock issuable upon exercise of the Warrant are referred to herein as
the "WARRANT SHARES".
1.2 TERMS OF THE PREFERRED STOCK AND WARRANT. The terms and
provisions of the Preferred Stock are set forth in the form of Articles of
Amendment to the Articles of Incorporation providing for the designation,
powers, rights and preferences of Series A Cumulative Convertible Preferred
Stock, attached hereto as EXHIBIT A (the "ARTICLES OF AMENDMENT"). The terms and
provisions of the Warrant are more fully set forth in the form of Common Stock
Purchase Warrant, attached hereto as EXHIBIT B.
1.3 TRANSFERS; LEGENDS.
(a) (i) Except as required by federal securities laws and the
securities law of any state or other jurisdictions, the Preferred Stock,
Conversion Shares, Warrant and Warrant Shares (collectively, the "Securities")
may be transferred, in whole or in part, by the Purchaser at any time. In the
case of Preferred Stock, such transfer may be effected by delivering written
transfer instructions to the Seller, and the Seller shall reflect such transfer
on its books and records and reissue certificates evidencing the Preferred Stock
upon surrender of certificates evidencing the Preferred Stock being transferred.
Any such transfer shall be made by the Purchaser in accordance with applicable
law. Any transferee shall agree to be bound by the terms of the
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Investor Rights Agreement and this Agreement. The Seller shall reissue
certificates evidencing the Securities upon surrender of certificates evidencing
the Securities being transferred in accordance with this Section 1.3(a).
(ii) In connection with any transfer of Securities other
than pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "SECURITIES ACT"), or to the Seller, the Seller may
require the transferor thereof to furnish to the Seller an opinion of counsel
selected by the transferor, such counsel and the form and substance of which
opinion shall be reasonably satisfactory to the Seller and Seller's counsel, to
the effect that such transfer does not require registration under the Securities
Act; PROVIDED, HOWEVER, that in the case of a transfer pursuant to Rule 144
under the Securities Act, no opinion shall be required if the transferor
provides the Seller with a customary seller's representation letter, and if such
sale is not pursuant to subsection (k) of Rule 144, a customary broker's
representation letter and Form 144. Notwithstanding the foregoing, the Seller
hereby consents to and agrees to register on the books of the Seller and with
any transfer agent for the securities of the Seller, without any such legal
opinion, any transfer of Securities by the Purchaser to an Affiliate of the
Purchaser, provided that the transferee certifies to the Seller that it is an
"ACCREDITED INVESTOR" as defined in Rule 501(a) under the Securities Act and
that it is acquiring the Securities solely for investment purposes (subject to
the qualifications hereof) and not with a view to, or for, resale, distribution
or fractionalization thereof in whole or in part in violation of the Securities
Act.
(iii) An "AFFILIATE" means any Person (as such term is
defined below) that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144 under the Securities Act. With
respect to the Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as the Purchaser will be
deemed to be an Affiliate of the Purchaser. A "PERSON" means any individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision of any thereof) or other entity of any kind.
(b) The certificates representing the Preferred Stock shall bear
the following legend:
"THE SHARES REPRESENTED BY, OR ISSUABLE UPON CONVERSION OR EXERCISE OF
SECURITIES EVIDENCED BY, THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT UNLESS, IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, SUCH REGISTRATION IS
NOT REQUIRED."
ARTICLE II - PURCHASE PRICE AND CLOSING
2.1 PURCHASE PRICE. The aggregate purchase price (the "PURCHASE
PRICE") to be paid by the Purchaser to the Seller to acquire the Preferred Stock
and the Warrant at the Closing shall be $360,000. A portion of the Purchase
Price shall be payable by the surrender and cancellation of the promissory note
representing $350,000 of secured debt of the Seller (the "PROMISSORY NOTE").
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2.2 THE CLOSING. The closing of the transactions contemplated
under this Agreement (the "CLOSING") will take place as promptly as practicable,
but no later than five (5) business days following satisfaction or waiver of the
conditions set forth in Article 6.1(a) and (b) and 6.2(a) (other than those
conditions which by their terms are not to be satisfied or waived until the
Closing), at the offices of the Seller, as set forth in Section 9.3. The date on
which the Closing occurs is the "CLOSING DATE."
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser as follows:
3.1 CORPORATE EXISTENCE AND POWER; SUBSIDIARIES. The Seller and
its Subsidiaries are corporations duly incorporated, validly existing and in
good standing under the laws of the state in which they are incorporated, and
have all corporate powers required to carry on their business as now conducted.
The Seller and its Subsidiaries are duly qualified to do business as a foreign
corporation and are in good standing in each jurisdiction where the character of
the property owned or leased by them or the nature of their activities makes
such qualification necessary, except for those jurisdictions where the failure
to be so qualified would not have a Material Adverse Effect on the Seller or any
of its Subsidiaries. For purposes of this Agreement, the term "MATERIAL ADVERSE
EFFECT" means, with respect to any person or entity, a material adverse effect
on its and its Subsidiaries' condition (financial or otherwise), business,
properties, assets, liabilities (including contingent liabilities), results of
operations or current prospects, taken as a whole. True and complete copies of
the Seller's Articles of Incorporation, as amended (the "ARTICLES"), and Bylaws,
as amended (the "BYLAWS"), as currently in effect and as will be in effect on
the Closing Date (collectively, the "ARTICLES AND BYLAWS"), have previously been
provided to the Purchaser. For purposes of this Agreement, the term "SUBSIDIARY"
or "Subsidiaries" means, with respect to any entity, any corporation or other
organization of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are directly or indirectly owned by such entity or
of which such entity is a partner or is, directly or indirectly, the beneficial
owner of 50% or more of any class of equity securities or equivalent profit
participation interests. The Seller has no Subsidiaries other than National Coal
Corporation, a Tennessee corporation which is wholly-owned by the Seller.
3.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by the Seller of this Agreement, the Articles of Amendment, the
Investor Rights Agreement, and each of the other documents executed pursuant to
and in connection with this Agreement (collectively, the "RELATED DOCUMENTS"),
and the consummation of the transactions contemplated hereby and thereby
(including, but not limited to, the sale and delivery of the Preferred Stock and
Warrant, and the subsequent issuance of the Conversion Shares upon conversion of
the Preferred Stock and the Warrant Shares upon exercise of the Warrant) have
been duly authorized, and no additional corporate or stockholder action is
required for the approval thereof. The Conversion Shares and the Warrant Shares
have been duly reserved for issuance by the Seller. This Agreement and the
Related Documents have been or, to the extent contemplated hereby or by the
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Related Documents, will be duly executed and delivered and constitute the legal,
valid and binding agreement of the Seller, enforceable against the Seller in
accordance with their terms, except as may be limited by bankruptcy,
reorganization, insolvency, moratorium and similar laws of general application
relating to or affecting the enforcement of rights of creditors, and except as
enforceability of its obligations hereunder are subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
3.3 CHARTER, BYLAWS AND CORPORATE RECORDS. The minute books of the
Seller and its Subsidiaries contain complete and accurate records of all
meetings and other corporate actions of the board of directors, committees of
the board of directors, incorporators and stockholders of the Seller and its
Subsidiaries to the date hereof. All material corporate decisions and actions
have been validly made or taken. All corporate books, including without
limitation the share transfer register, comply with applicable laws and
regulations and have been regularly updated. Such books fully and correctly
reflect all the decisions of the stockholders.
3.4 GOVERNMENTAL AUTHORIZATION. Except as otherwise specifically
contemplated in this Agreement and the Related Documents, and except for: (i)
the filings referenced in Section 5.11; (ii) the filing of the Articles of
Amendment; (iii) the filing of a Form D with respect to the Preferred Stock and
the Warrant under Regulation D under the Securities Act; (iv) the filing of the
Registration Statement with the Commission; (v) the application(s) to each
trading market for the listing of the Conversion Shares and the Warrant Shares
for trading thereon; and (vi) any filings required under state securities laws
that are permitted to be made after the date hereof, the execution, delivery and
performance by the Seller of this Agreement and the Related Documents, and the
consummation of the transactions contemplated hereby and thereby (including, but
not limited to, the sale and delivery of the Preferred Stock and Warrant and the
subsequent issuance of the Conversion Shares and Warrant Shares upon conversion
of the Preferred Stock or otherwise or exercise of the Warrant, as applicable)
by the Seller require no action (including, without limitation, stockholder
approval) by or in respect of, or filing with, any governmental or regulatory
body, agency, official or authority (including, without limitation, Nasdaq).
3.5 NON-CONTRAVENTION. The execution, delivery and performance by
the Seller of this Agreement and the Related Documents, and the consummation by
the Seller of the transactions contemplated hereby and thereby (including the
issuance of the Conversion Shares and Warrant Shares) do not and will not (a)
contravene or conflict with the Articles (as amended by the Articles of
Amendment) and Bylaws of the Seller and its Subsidiaries or any material
agreement to which the Seller is a party or by which it is bound; (b) contravene
or conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to
the Seller or its Subsidiaries; (c) constitute a default (or would constitute a
default with notice or lapse of time or both) under or give rise to a right of
termination, cancellation or acceleration or loss of any benefit under any
material agreement, contract or other instrument binding upon the Seller or its
Subsidiaries or under any material license, franchise, permit or other similar
authorization held by the Seller or its Subsidiaries; or (d) result in the
creation or imposition of any Lien (as defined below) on any asset of the Seller
or its Subsidiaries. For purposes of this Agreement, the term "LIEN" means, with
respect to any asset, any mortgage, lien, pledge, charge, security interest,
claim or encumbrance of any kind in respect of such asset.
3.6 SEC DOCUMENTS. The Seller is obligated under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT") to file reports pursuant
to Sections 13 or 15(d) thereof (all such reports filed or required to be filed
by the Seller, including all exhibits thereto or
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incorporated therein by reference, and all documents filed by the Seller under
the Securities Act hereinafter called the "SEC DOCUMENTS"). The Seller has filed
all reports or other documents required to be filed under the Exchange Act. All
SEC Documents filed by the Seller (i) were prepared in all material respects in
accordance with the requirements of the Exchange Act and (ii) did not at the
time they were filed (or, if amended or superseded by a filing prior to the date
hereof, then on the date of such filing) 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 Seller has previously delivered
to the Purchaser a correct and complete copy of each report which the Seller
filed with the Securities and Exchange Commission (the "SEC" or the
"COMMISSION") under the Exchange Act for any period ending on or after December
31, 2003 (the "Recent REPORTS"). None of the information about the Seller or any
of its Subsidiaries which has been disclosed to the Purchaser herein or in the
course of discussions and negotiations with respect hereto which is not
disclosed in the Recent Reports is or was required to be so disclosed, and no
material non-public information has been disclosed to the Purchaser.
3.7 FINANCIAL STATEMENTS. Each of the Seller's (i) audited
consolidated balance sheet as of December 31, 2003, and the related consolidated
statements of operations, cash flows and changes in stockholders' deficiency
(including the related notes) for the period from its inception (January
30,2003) to December 31, 2003 and (ii) the Seller's unaudited consolidated
balance sheet and related consolidated statements of operations and cash flows
as of and for the three months ended March 31, 2004, as contained in the Recent
Reports (both of (i) and (ii), collectively, the "SELLER'S FINANCIAL STATEMENTS"
or the "FINANCIAL STATEMENTS") (x) present fairly in all material respects the
financial position of the Seller and its Subsidiaries on a consolidated basis as
of the dates thereof and the results of operations, cash flows and stockholders'
deficiency as of and for each of the periods then ended, except that the
unaudited financial statements are subject to normal year-end adjustments, and
(y) were prepared in accordance with United States generally accepted accounting
principals ("GAAP") applied on a consistent basis throughout the periods
involved, in each case, except as otherwise indicated in the notes thereto.
3.8 COMPLIANCE WITH LAW. The Seller and its Subsidiaries are in
compliance and have conducted their business so as to comply with all laws,
rules and regulations, judgments, decrees or orders of any court, administrative
agency, commission, regulatory authority or other governmental authority or
instrumentality, domestic or foreign, applicable to their operations, the
violation of which would cause a Material Adverse Affect. There are no judgments
or orders, injunctions, decrees, stipulations or awards (whether rendered by a
court or administrative agency or by arbitration), including any such actions
relating to affirmative action claims or claims of discrimination, against the
Seller or its Subsidiaries or against any of their properties or businesses.
3.9 NO DEFAULTS. The Seller and its Subsidiaries are not, nor have
they received notice that they would be with the passage of time, giving of
notice, or both, (i) in violation of any provision of their Articles and Bylaws
or (ii) in default or violation of any term, condition or provision of (A) any
judgment, decree, order, injunction or stipulation applicable to the Seller or
its Subsidiaries or (B) any material agreement, note, mortgage, indenture,
contract, lease or instrument, permit, concession, franchise or license to which
the Seller or its Subsidiaries are a party or by which the Seller or its
Subsidiaries or their properties or assets may be bound, and no
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circumstances exist which would entitle any party to any material agreement,
note, mortgage, indenture, contract, lease or instrument to which such Seller or
its Subsidiaries are a party, to terminate such as a result of such Seller or
its Subsidiaries, having failed to meet any material provision thereof
including, but not limited to, meeting any applicable milestone under any
material agreement or contract; except in the case of clause (ii) as would not
have a Material Adverse Effect on the Seller or any of its Subsidiaries or any
material adverse effect on the transactions contemplated by this Agreement or by
any of the Related Documents.
3.10 LITIGATION. Except as disclosed in the Recent Reports or on
SCHEDULE 3.10, there is no action, suit, proceeding, judgment, claim or
investigation pending or, to the best knowledge of the Seller, threatened
against the Seller and its Subsidiaries which could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Seller or its Subsidiaries or which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
hereby, and there is no basis for the assertion of any of the foregoing.
3.11 ABSENCE OF CERTAIN CHANGES. Since December 31, 2003, the
Seller has conducted its business only in the ordinary course and there has not
occurred, except as set forth in the Recent Reports or any exhibit thereto or
incorporated by reference therein:
(a) Any event that could reasonably be expected to have a Material
Adverse Effect on the Seller or any of its Subsidiaries;
(b) Any amendments or changes in the Articles or Bylaws of the
Seller and its Subsidiaries, other than on account of the filing of the Articles
of Amendment;
(c) Any damage, destruction or loss, whether or not covered by
insurance, that would, individually or in the aggregate, have or would be
reasonably likely to have, a Material Adverse Effect on the Seller and its
Subsidiaries;
(d) Except as set forth on SCHEDULE 3.11(D), any
(i) incurrence, assumption or guarantee by the Seller or
its Subsidiaries of any debt for borrowed money other than for
equipment leases;
(ii) issuance or sale of any securities convertible into
or exchangeable for securities of the Seller other than to directors,
employees and consultants pursuant to existing equity compensation or
stock purchase plans of the Seller;
(iii) issuance or sale of options or other rights to
acquire from the Seller or its Subsidiaries, directly or indirectly,
securities of the Seller or any securities convertible into or
exchangeable for any such securities, other than options issued to
directors, employees and consultants in the ordinary course of business
in accordance with past practice;
(iv) issuance or sale of any stock, bond or other
corporate security;
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(v) discharge or satisfaction of any material Lien, other
than current liabilities incurred since December 31, 2003 in the
ordinary course of business;
(vi) declaration or making any payment or distribution to
stockholders or purchase or redemption of any share of its capital
stock or other security;
(vii) sale, assignment or transfer of any of its intangible
assets except in the ordinary course of business, or cancellation of
any debt or claim except in the ordinary course of business;
(viii) waiver of any right of substantial value whether or
not in the ordinary course of business;
(ix) material change in officer compensation except in the
ordinary course of business and consistent with past practices; or
(x) other commitment (contingent or otherwise) to do any
of the foregoing.
(e) Except as set forth on Schedule 3.11(e), any creation,
sufferance or assumption by the Seller or any of its Subsidiaries of any Lien on
any asset (other than Liens in connection with equipment leases) or any making
of any loan, advance or capital contribution to or investment in any Person in
an aggregate amount which exceeds $25,000 outstanding at any time;
(f) Any entry into, amendment of, relinquishment, termination or
non-renewal by the Seller or its Subsidiaries of any material contract, license,
lease, transaction, commitment or other right or obligation, other than in the
ordinary course of business; or
(g) Any transfer or grant of a right with respect to the
trademarks, trade names, service marks, trade secrets, copyrights or other
intellectual property rights owned or licensed by the Seller or its
Subsidiaries, except as among the Seller and its Subsidiaries.
3.12 NO UNDISCLOSED LIABILITIES. Except as set forth in the Recent
Reports, and except for liabilities and obligations incurred in the ordinary
course of business since December 31, 2003, as of the date hereof, (i) the
Seller and its Subsidiaries do not have any material liabilities or obligations
(absolute, accrued, contingent or otherwise) which, and (ii) there has not been
any aspect of the prior or current conduct of the business of the Seller or its
Subsidiaries which may form the basis for any material claim by any third party
which if asserted could result in any such material liabilities or obligations
which, are not fully reflected, reserved against or disclosed in the balance
sheet of the Seller as at December 31, 2003.
3.13 TAXES. All tax returns and tax reports required to be filed
with respect to the income, operations, business or assets of the Seller and its
Subsidiaries have been timely filed (or appropriate extensions have been
obtained) with the appropriate governmental agencies in all jurisdictions in
which such returns and reports are required to be filed, and all of the
foregoing as filed are correct and complete and, in all material respects,
reflect accurately all liability for taxes of the Seller and its Subsidiaries
for the periods to which such returns relate, and all amounts shown as owing
thereon have been paid. All income, profits, franchise, sales, use, value added,
occupancy, property, excise, payroll, withholding, FICA, FUTA and other taxes
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(including interest and penalties), if any, collectible or payable by the Seller
and its Subsidiaries or relating to or chargeable against any of its material
assets, revenues or income or relating to any employee, independent contractor,
creditor, stockholder or other third party through the Closing Date, were fully
collected and paid by such date if due by such date or provided for by adequate
reserves in the Financial Statements as of and for the periods ended December
31, 2003 (other than taxes accruing after such date) and all similar items due
through the Closing Date will have been fully paid by that date or provided for
by adequate reserves, whether or not any such taxes were reported or reflected
in any tax returns or filings. No taxation authority has sought to audit the
records of the Seller or any of its Subsidiaries for the purpose of verifying or
disputing any tax returns, reports or related information and disclosures
provided to such taxation authority, or for the Seller's or any of its
Subsidiaries' alleged failure to provide any such tax returns, reports or
related information and disclosure. No material claims or deficiencies have been
asserted against or inquiries raised with the Seller or any of its Subsidiaries
with respect to any taxes or other governmental charges or levies which have not
been paid or otherwise satisfied, including claims that, or inquiries whether,
the Seller or any of its Subsidiaries has not filed a tax return that it was
required to file, and, to the best of the Seller's knowledge, there exists no
reasonable basis for the making of any such claims or inquiries. Neither the
Seller nor any of its Subsidiaries has waived any restrictions on assessment or
collection of taxes or consented to the extension of any statute of limitations
relating to taxation.
3.14 INTERESTS OF OFFICERS, DIRECTORS AND OTHER AFFILIATES. The
description of any interest held, directly or indirectly, by any officer,
director or other Affiliate of the Seller or its Subsidiaries (other than the
interests of the Seller and its Subsidiaries in such assets) in any property,
real or personal, tangible or intangible, used in or pertaining to Seller's
business, including any interest in the Intellectual Property (as defined in
Section 3.15 hereof), as set forth in the Recent Reports, is true and complete,
and no officer, director or other Affiliate of the Seller or its Subsidiaries
has any interest in any property, real or personal, tangible or intangible, used
in or pertaining to the Seller's business, including the Seller's Intellectual
Property, other than as set forth in the Recent Reports.
3.15 INTELLECTUAL PROPERTY. Other than as set forth in the Recent
Reports:
(a) the Seller or a Subsidiary thereof has the right to use or is
the sole and exclusive owner of all right, title and interest in and to all
foreign and domestic patents, patent rights, trademarks, service marks, trade
names, brands and copyrights (whether or not registered and, if applicable,
including pending applications for registration) owned, used or controlled by
the Seller and its Subsidiaries (collectively, the "RIGHTS") and in and to each
material invention, software, trade secret, technology, product, composition,
formula, method of process used by the Seller or its Subsidiaries (the Rights
and such other items, the "INTELLECTUAL PROPERTY"), and, to the Seller's
knowledge, has the right to use the same, free and clear of any claim or
conflict with the rights of others;
(b) no royalties or fees (license or otherwise) are payable by the
Seller or its Subsidiaries to any Person by reason of the ownership or use of
any of the Intellectual Property except as set forth on SCHEDULE 3.15;
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(c) there have been no claims made against the Seller or its
Subsidiaries asserting the invalidity, abuse, misuse, or unenforceability of any
of the Intellectual Property, and, to its knowledge, there are no reasonable
grounds for any such claims;
(d) neither the Seller nor its Subsidiaries have made any claim of
any violation or infringement by others of its rights in the Intellectual
Property, and to the best of the Seller's knowledge, no reasonable grounds for
such claims exist; and
(e) neither the Seller nor its Subsidiaries have received notice
that it is in conflict with or infringing upon the asserted rights of others in
connection with the Intellectual Property.
3.16 RESTRICTIONS ON BUSINESS ACTIVITIES. Other than as set forth
in the Recent Reports, there is no agreement, judgment, injunction, order or
decree binding upon the Seller or its Subsidiaries which has or could reasonably
be expected to have the effect of prohibiting or materially impairing any
business practice of the Seller or its Subsidiaries, any acquisition of property
by the Seller or its Subsidiaries or the conduct of business by the Seller or
its Subsidiaries as currently conducted or as currently proposed to be conducted
by the Seller.
3.17 PREEMPTIVE RIGHTS. Except as set forth in SCHEDULE 3.17, none
of the stockholders of the Seller possess any preemptive rights in respect of
the Preferred Stock or the Conversion Shares or Warrant Shares to be issued to
the Purchaser upon conversion of the Preferred Stock or exercise of the Warrant,
as applicable.
3.18 INSURANCE. The insurance policies providing insurance coverage
to the Seller or its Subsidiaries are adequate for the business conducted by the
Seller and its Subsidiaries and are sufficient for compliance by the Seller and
its Subsidiaries with all requirements of law and all material agreements to
which the Seller or its Subsidiaries are a party or by which any of their assets
are bound. All of such policies are in full force and effect and are valid and
enforceable in accordance with their terms, and the Seller and its Subsidiaries
have complied with all material terms and conditions of such policies, including
premium payments. None of the insurance carriers has indicated to the Seller or
its Subsidiaries an intention to cancel any such policy.
3.19 SUBSIDIARIES AND INVESTMENTS. Except as set forth in the
Recent Reports or on SCHEDULE 3.19, the Seller has no Subsidiaries or
Investments. For purposes of this Agreement, the term "INVESTMENTS" shall mean,
with respect to any Person, all advances, loans or extensions of credit to any
other Person, all purchases or commitments to purchase any stock, bonds, notes,
debentures or other securities of any other Person, and any other investment in
any other Person, including partnerships or joint ventures (whether by capital
contribution or otherwise) or other similar arrangement (whether written or
oral) with any Person, including but not limited to arrangements in which (i)
the Person shares profits and losses, (ii) any such other Person has the right
to obligate or bind the Person to any third party, or (iii) the Person may be
wholly or partially liable for the debts or obligations of such partnership,
joint venture or other arrangement.
3.20 CAPITALIZATION. (a) The authorized capital stock of the Seller
consists of 80,000,000 shares of common stock, $0.0001 par value per share, of
which 44,290,216 shares are issued and outstanding as of the date hereof, and
10,000,000 shares of preferred stock,
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$0.0001 par value per share, issuable in one or more classes or series, with
such relative rights and preferences as the Board of Directors may determine,
none of which has been authorized for issuance other than 1,611 shares that have
been designated Series A Cumulative Convertible Preferred Stock, of which no
shares are outstanding immediately prior to the execution of this Agreement.
(b) All shares of the Seller's issued and outstanding capital
stock have been duly authorized, are validly issued and outstanding, and are
fully paid and nonassessable. No securities issued by the Seller from the date
of its incorporation to the date hereof were issued in violation of any
statutory or common law preemptive rights. There are no dividends which have
accrued or been declared but are unpaid on the capital stock of the Seller. All
taxes required to be paid by Seller in connection with the issuance and any
transfers of the Seller's capital stock have been paid. All permits or
authorizations required to be obtained from or registrations required to be
effected with any Person in connection with any and all issuances of securities
of the Seller from the date of the Seller's incorporation to the date hereof
have been obtained or effected, and all securities of the Seller have been
issued and are held in accordance with the provisions of all applicable
securities or other laws.
3.21 OPTIONS, WARRANTS, RIGHTS. Except as set forth on SCHEDULE
3.21, there are no outstanding (a) securities, notes or instruments convertible
into or exercisable for any of the capital stock or other equity interests of
the Seller or its Subsidiaries; (b) options, warrants, subscriptions or other
rights to acquire capital stock or other equity interests of the Seller or its
Subsidiaries; or (c) commitments, agreements or understandings of any kind,
including employee benefit arrangements, relating to the issuance or repurchase
by the Seller or its Subsidiaries of any capital stock or other equity interests
of the Seller or its Subsidiaries, any such securities or instruments
convertible or exercisable for securities or any such options, warrants or
rights. Other than the rights of the Purchaser under the Preferred Stock and the
Warrant, and except as set forth on SCHEDULE 3.21, neither the Seller nor the
Subsidiaries have granted anti-dilution rights to any person or entity in
connection with any outstanding option, warrant, subscription or any other
instrument convertible or exercisable for the securities of the Seller or any of
its Subsidiaries. Other than the rights granted to the Purchaser under the
Investor Rights Agreement, there are no outstanding rights which permit the
holder thereof to cause the Seller or the Subsidiaries to file a registration
statement under the Securities Act or which permit the holder thereof to include
securities of the Seller or any of its Subsidiaries in a registration statement
filed by the Seller or any of its Subsidiaries under the Securities Act, and
there are no outstanding agreements or other commitments which otherwise relate
to the registration of any securities of the Seller or any of its Subsidiaries
for sale or distribution in any jurisdiction, except as set forth on SCHEDULE
3.21.
3.22 EMPLOYEES, EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFIT PLANS.
Except as set forth in the Recent Reports or on SCHEDULE 3.22, there are no
employment, consulting, severance or indemnification arrangements, agreements,
or understandings between the Seller and any officer, director, consultant or
employee of the Seller or its Subsidiaries (the "EMPLOYMENT AGREEMENTS"). No
Employment Agreement provides for the acceleration or change in the award,
grant, vesting or determination of options, warrants, rights, severance
payments, or other contingent obligations of any nature whatsoever of the Seller
or its Subsidiaries in favor of any such parties in connection with the
transactions contemplated by this Agreement. Except as
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disclosed in the Recent Reports or on SCHEDULE 3.22, the terms of employment or
engagement of all directors, officers, employees, agents, consultants and
professional advisors of the Seller and its Subsidiaries are such that their
employment or engagement may be terminated upon not more than two weeks' notice
given at any time without liability for payment of compensation or damages and
the Seller and its Subsidiaries have not entered into any agreement or
arrangement for the management of their business or any part thereof other than
with their directors or employees.
3.23 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Seller, nor
any Affiliate of the Seller, nor to the knowledge of the Seller, any agent or
employee of the Seller, any other Person acting on behalf of or associated with
the Seller, or any individual related to any of the foregoing Persons, acting
alone or together, has: (a) received, directly or indirectly, any rebates,
payments, commissions, promotional allowances or any other economic benefits,
regardless of their nature or type, from any customer, supplier, trading
company, shipping company, governmental employee or other Person with whom the
Seller has done business directly or indirectly; or (b) directly or indirectly,
given or agreed to give any gift or similar benefit to any customer, supplier,
trading company, shipping company, governmental employee or other Person who is
or may be in a position to help or hinder the business of the Seller (or assist
the Seller in connection with any actual or proposed transaction) which (i) may
subject the Seller to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (ii) if not given in the past, may have
had an adverse effect on the Seller or (iii) if not continued in the future, may
adversely affect the assets, business, operations or prospects of the Seller or
subject the Seller to suit or penalty in any private or governmental litigation
or proceeding.
3.24 ENVIRONMENTAL MATTERS. Except as described in the Recent
Reports or on Schedule 3.24, none of the premises or any properties owned,
occupied or leased by the Seller or its Subsidiaries (the "PREMISES") has been
used by the Seller or the Subsidiaries or, to the Seller's knowledge, by any
other Person, to manufacture, treat, store, or dispose of any substance that has
been designated to be a "HAZARDOUS SUBSTANCE" under applicable Environmental
Laws (hereinafter defined) ("HAZARDOUS SUBSTANCES") in violation of any
applicable Environmental Laws. To its knowledge, the Seller and its Subsidiaries
have not disposed of, discharged, emitted or released any Hazardous Substances
which would require, under applicable Environmental Laws, remediation,
investigation or similar response activity. No Hazardous Substances are present
as a result of the actions of the Seller or its Subsidiaries or, to the Seller's
knowledge, any other Person, in, on or under the Premises which would give rise
to any liability or clean-up obligations of the Seller or its Subsidiaries under
applicable Environmental Laws. The Seller and, to the Seller's knowledge, any
other Person for whose conduct it may be responsible pursuant to an agreement or
by operation of law, are in compliance with all laws, regulations and other
federal, state or local governmental requirements, and all applicable judgments,
orders, writs, notices, decrees, permits, licenses, approvals, consents or
injunctions in effect on the date of this Agreement relating to the generation,
management, handling, transportation, treatment, disposal, storage, delivery,
discharge, release or emission of any Hazardous Substance (the "ENVIRONMENTAL
LAWS"). Neither the Seller nor, to the Seller's knowledge, any other Person for
whose conduct it may be responsible pursuant to an agreement or by operation of
law has received any written complaint, notice, order, or citation of any
actual, threatened or alleged noncompliance with any of the Environmental Laws,
and there is no proceeding, suit or investigation pending or, to the Seller's
knowledge, threatened against the Seller or, to the
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Seller's knowledge, any such Person with respect to any violation or alleged
violation of the Environmental Laws, and, to the knowledge of the Seller, there
is no basis for the institution of any such proceeding, suit or investigation.
3.25 LICENSES; COMPLIANCE WITH REGULATORY REQUIREMENTS. Except as
disclosed in the Recent Reports, the Seller holds all material authorizations,
consents, approvals, franchises, licenses and permits required under applicable
law or regulation for the operation of the business of the Seller and its
Subsidiaries as presently operated (the "GOVERNMENTAL AUTHORIZATIONS"). All the
Governmental Authorizations have been duly issued or obtained and are in full
force and effect, and the Seller and its Subsidiaries are in material compliance
with the terms of all the Governmental Authorizations. The Seller and its
Subsidiaries have not engaged in any activity that, to their knowledge, would
cause revocation or suspension of any such Governmental Authorizations. The
Seller has no knowledge of any facts which would cause the Seller to believe
that the Governmental Authorizations will not be renewed by the appropriate
governmental authorities in the ordinary course. Neither the execution, delivery
nor performance of this Agreement shall adversely affect the status of any of
the Governmental Authorizations.
3.26 BROKERS. Except as set forth on SCHEDULE 3.26, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this
Agreement, based upon any arrangement made by or on behalf of the Seller, which
would make any Purchaser liable for any fees or commissions.
3.27 SECURITIES LAWS. Neither the Seller nor its Subsidiaries nor
any agent acting on behalf of the Seller or its Subsidiaries has taken or will
take any action which might cause this Agreement or the Preferred Stock to
violate the Securities Act or the Exchange Act or any rules or regulations
promulgated thereunder, as in effect on the Closing Date. Assuming that all of
the representations and warranties of the Purchaser set forth in Article IV are
true, all offers and sales of capital stock, securities and notes of the Seller
were conducted and completed in compliance with the Securities Act. All shares
of capital stock and other securities issued by the Seller and its Subsidiaries
prior to the date hereof have been issued in transactions that were either
registered offerings or were exempt from the registration requirements under the
Securities Act and all applicable state securities or "BLUE SKY" laws and in
compliance with all applicable corporate laws.
3.28 DISCLOSURE. No representation or warranty made by the Seller
in this Agreement, nor in any document, written information, financial
statement, certificate, schedule or exhibit prepared and furnished by the Seller
or the representatives of the Seller pursuant hereto or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact, or omits to state a material fact necessary to make the
statements or facts contained herein or therein not misleading in light of the
circumstances under which they were furnished.
3.29 POISON PILL. The Seller and its Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Seller's
Articles of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchaser as a
result of the Purchaser
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and the Seller fulfilling their obligations or exercising their rights under
this Agreement and the Related Documents, including without limitation the
Seller's issuance of the Securities and the Purchaser's ownership of the
Securities.
3.30 INDEPENDENT NATURE OF THE PURCHASER. The Seller acknowledges
that the obligations of the Purchaser under this Agreement and the Related
Documents are several and not joint with the obligations of any other third
party purchasers of the Seller's securities, and the Purchaser shall not be
responsible in any way for the performance of the obligations of any other third
party purchasers of the Seller's securities. Each of the Purchaser and the
Seller agree and acknowledge that (i) the decision of the Purchaser to purchaser
the Preferred Stock and the Warrant pursuant to this Agreement has been made
(and the decision of the Purchaser to purchase the Warrant Shares pursuant to
the terms of the Warrant will be made) by the Purchaser independently of any
third party purchasers of the Seller's securities and (ii) no other third party
purchasers of the Seller's securities have acted as agent for the Purchaser in
connection with the Purchaser making its investment hereunder and that no such
other third party purchasers will be acting as agent of the Purchaser in
connection with monitoring its investment hereunder. Nothing contained herein or
in any other Related Document or any agreement of any such third party
purchaser, and no action taken by the Purchaser pursuant hereto or any third
party purchaser pursuant thereto, shall be deemed to constitute the Purchaser or
any such third party purchasers as a partnership, association, joint venture or
any other kind of entity, or create a presumption that the Purchaser or any such
third party purchasers are in any way acting in concert or as a group with
respect to any matters. The Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation, the rights arising out of
this Agreement or out of any of the other Related Documents, and its shall not
be necessary for any such third party purchasers to be joined as an additional
party in any proceeding for such purpose. To the extent that any such third
party purchasers purchase the same or similar securities as the Purchaser
hereunder or on the same or similar terms and conditions or pursuant to the same
or similar documents, all such matters are solely in the control of the Seller,
not the action or decision of the Purchaser and are not done with the knowledge
of the Purchaser hereunder, and would be solely for the convenience of the
Seller and not because it was required or requested by the Purchaser or any such
other third party purchaser.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller as follows:
4.1 EXISTENCE AND POWER. The Purchaser is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization. The Purchaser has all powers required to bind it to the
representations, warranties and covenants set forth herein.
4.2 AUTHORIZATION. The execution, delivery and performance by the
Purchaser of this Agreement, the Related Documents to which it is a party, and
the consummation by the Purchaser of the transactions contemplated hereby and
thereby have been duly authorized, and no additional action is required for the
approval of this Agreement or the Related Documents. This Agreement and the
Related Documents to which the Purchaser is a party have been or, to the extent
contemplated hereby, will be duly executed and delivered and constitute valid
and binding agreements of the Purchaser, enforceable against it in accordance
with their terms,
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except as may be limited by bankruptcy, reorganization, insolvency, moratorium
and similar laws of general application relating to or affecting the enforcement
of rights of creditors and except that enforceability of their obligations
thereunder are subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
4.3 INVESTMENT. The Purchaser is acquiring the securities
described herein for its own account and not with a view to, or for sale in
connection with, any distribution thereof, nor with the intention of
distributing or reselling the same, provided, however, that by making the
representation herein, the Purchaser does not agree to hold any of the
securities for any minimum or other specific term and reserves the right to
dispose of the securities at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act. The Purchaser
is aware that none of the securities has been registered under the Securities
Act or under applicable state securities or blue sky laws. The Purchaser is an
"ACCREDITED INVESTOR" as such term is defined in Rule 501 of Regulation D, as
promulgated under the Securities Act. The Purchaser is not, and is not required
to be, registered as a broker-dealer under Section 15 of the Exchange Act.
4.4 RELIANCE ON EXEMPTIONS. The Purchaser understands that the
Preferred Stock and the Warrant are being offered and sold to it in reliance
upon specific exemptions from the registration requirements of United States
federal and state securities laws and that the Seller is relying upon the truth
and accuracy of, and its compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set forth herein
in order to determine the availability of such exemptions and the eligibility of
the Purchaser to acquire the securities.
4.5 EXPERIENCE OF THE PURCHASER. The Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. The Purchaser is able to bear
the economic risk of an investment in the securities and, at the present time,
is able to afford a complete loss of such investment.
4.6 GENERAL SOLICITATION. The Purchaser is not purchasing the
securities as a result of any advertisement, article, notice or other
communication regarding the securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
4.7 INDEPENDENT INVESTMENT. The Purchaser has acted alone in
acquiring the Securities purchased hereunder for purposes of Section 13(d) under
the Exchange Act, and the Purchaser is acting independently with respect to its
investment of the Securities.
ARTICLE V - COVENANTS OF THE SELLER AND PURCHASER
5.1 INSURANCE. The Seller and its Subsidiaries shall, from time to time
upon the written request of the Purchaser, promptly furnish or cause to be
furnished to the Purchaser evidence, in form and substance reasonably
satisfactory to the Purchaser, of the maintenance of
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all insurance maintained by
it for loss or damage by fire and other hazards, damage or injury to persons and
property and under workmen's compensation laws.
5.2 REPORTING OBLIGATIONS. So long as any of the Preferred Stock
is outstanding, and so long as the Warrant has not been exercised and has not
expired by its terms, the Seller shall furnish to the Purchaser, or any other
persons who hold any of the Preferred Stock or the Warrant (provided that such
subsequent holders give notice to the Seller that they hold Preferred Stock or
the Warrant and furnish their addresses) promptly upon their becoming available
one copy of (A) each report, notice or proxy statement sent by the Seller to its
stockholders generally, and of each regular or periodic report (pursuant to the
Exchange Act) and (B) any registration statement, prospectus or written
communication pursuant to the Securities Act relating to the issuance or
registration of Conversion Shares and the Warrant Shares and filed by the Seller
with the Commission or any securities market or exchange on which shares of
Common Stock are listed; provided, however, that the Seller shall have no
obligation to deliver periodic reports (pursuant to the Exchange Act) under this
Section 5.2 to the extent such reports are publicly available.
The Purchaser is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business, operations or
financial condition of the Seller which may have been furnished to the Purchaser
hereunder, to any regulatory body or agency having jurisdiction over the
Purchaser or to any Person which shall, or shall have right or obligation to
succeed to all or any part of the Purchaser's interest in the Seller or this
Agreement.
5.3 INVESTIGATION. The representations, warranties, covenants and
agreements set forth in this Agreement shall not be affected or diminished in
any way by any investigation (or failure to investigate) at any time by or on
behalf of the party for whose benefit such representations, warranties,
covenants and agreements were made. Without limiting the generality of the
foregoing, the inability or failure of the Purchaser to discover any breach,
default or misrepresentation by the Seller under this Agreement or the Related
Documents (including under any certificate furnished pursuant to this
Agreement), notwithstanding the exercise by the Purchaser or other holders of
the Preferred Stock issued pursuant to this Agreement or the Related Documents
of their rights hereunder to conduct an investigation shall not in any way
diminish any liability hereunder.
5.4 FURTHER ASSURANCES. (a) The Seller shall, at its cost and
expense, upon written request of the Purchaser, duly execute and deliver, or
cause to be duly executed and delivered, to the Purchaser such further
instruments and do and cause to be done such further acts as may be necessary,
advisable or proper, in the absolute discretion of the Purchaser, to carry out
more effectually the provisions and purposes of this Agreement. The parties
shall use their best efforts to timely satisfy each of the conditions described
in Article VI of this Agreement.
(b) The Purchaser hereby covenants to deliver the Promissory Note
to Seller as soon as practicable following the Closing Date.
5.5 USE OF PROCEEDS. The Seller covenants and agrees that the
proceeds of the Purchase Price shall be used by the Seller for working capital
and general corporate purposes.
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5.6 CORPORATE EXISTENCE. So long as the Purchaser owns Preferred
Stock, the Warrant, Conversion Shares or Warrant Shares, the Seller shall
preserve and maintain and cause its Subsidiaries to preserve and maintain their
corporate existence and good standing in the jurisdiction of their incorporation
and the rights, privileges and franchises of the Seller and its Subsidiaries
(except, in each case, in the event of a merger or consolidation in which the
Seller or its Subsidiaries, as applicable, is not the surviving entity) in each
case where failure to so preserve or maintain could have a Material Adverse
Effect on the financial condition, business or operations of the Seller and its
Subsidiaries taken as a whole.
5.7 LICENSES. So long as the Purchaser owns Preferred Stock, the
Warrant, Conversion Shares or Warrant Shares, the Seller shall, and shall cause
its Subsidiaries to, maintain at all times all material licenses or permits
necessary to the conduct of its business and as required by any governmental
agency or instrumentality thereof.
5.8 TAXES AND CLAIMS. The Seller and its Subsidiaries shall duly
pay and discharge (a) all material taxes, assessments and governmental charges
upon or against the Seller or its properties or assets prior to the date on
which penalties attach thereto, unless and to the extent that such taxes are
being diligently contested in good faith and by appropriate proceedings, and
appropriate reserves therefor have been established, and (b) all material lawful
claims, whether for labor, materials, supplies, services or anything else which
might or could, if unpaid, become a lien or charge upon the properties or assets
of the Seller or its Subsidiaries unless and to the extent only that the same
are being diligently contested in good faith and by appropriate proceedings and
appropriate reserves therefor have been established.
5.9 PERFORM COVENANTS. The Seller shall (a) make full and timely
payment of any and all payments on the Preferred Stock, and all other
obligations of the Seller to the Purchaser in connection therewith, whether now
existing or hereafter arising, and (b) duly comply with all the terms and
covenants contained herein and in each of the instruments and documents given to
the Purchaser in connection with or pursuant to this Agreement, all at the times
and places and in the manner set forth herein or therein.
5.10 ADDITIONAL COVENANTS.
(a) Except for transactions approved by a majority of the
disinterested directors of the Board of Directors, neither the Seller nor any of
its Subsidiaries shall enter into any transaction with any director, officer,
employee or holder of more than 5% of the outstanding capital stock of any class
or series of capital stock of the Seller or any of its Subsidiaries, member of
the family of any such person, or any corporation, partnership, trust or other
entity in which any such person, or member of the family of any such person, is
a director, officer, trustee, partner or holder of more than 5% of the
outstanding capital stock thereof, with the exception of transactions which are
consummated upon terms that are no less favorable than would be available if
such transaction had been effected at arms-length, in the reasonable judgment of
the Board of Directors.
(b) The Seller shall timely prepare and file with the Securities
and Exchange Commission the form of notice of the sale of securities pursuant to
the requirements of Regulation D regarding the sale of the Preferred Stock and
the Warrant under this Agreement.
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(c) The Seller shall timely prepare and file such applications,
consents to service of process (but not including a general consent to service
of process) and similar documents and take such other steps and perform such
further acts as shall be required by the state securities law requirements of
the jurisdiction where the Purchaser resides with respect to the sale of the
Preferred Stock and the Warrant under this Agreement.
(d) State Securities Law Compliance --Resale. Beginning no later
than 60 days following the date of this Agreement and continuing until either
(i) the Purchaser has sold all of its Registrable Securities under a
registration statement pursuant to the Investor Rights Agreement or (ii) the
Common Stock becomes a "covered security" under Section 18(b)(1)(A) of the
Securities Act, the Seller shall maintain within either Xxxxx'x Industrial
Manual or Standard and Poor's Standard Corporation Descriptions (or any
successors to these manuals which are similarly qualified as "recognized
securities manuals" under state Blue Sky laws) an updated listing containing (i)
the names of the officers and directors of the Seller, (ii) a balance sheet of
the Seller as of a date that is at no time older than eighteen months and (iii)
a profit and loss statement of the Seller for either the preceding fiscal year
or the most recent year of operations.
5.11 SECURITIES LAWS DISCLOSURE; PUBLICITY. The Seller shall (i) on
or promptly after the Closing Date, issue a press release disclosing the
transactions contemplated hereby, and (ii) after the Closing Date, file with the
Commission a Report on Form 8-K disclosing the transactions contemplated hereby.
Except as provided in the preceding sentence, the Purchaser shall not make any
press release or other publicity about the terms of this Agreement or the
transactions contemplated hereby without the prior approval of the other unless
otherwise required by law or the rules of the Commission or Nasdaq.
5.12 CORPORATE GOVERNANCE. No later than the 90th day following the
Closing Date, the Seller shall be in full compliance with the corporate
governance requirements applicable to companies listed on either the Nasdaq
Small Cap Market, the Nasdaq National Market or the American Stock Exchange
(each, a "QUALIFIED Exchange"), including, without limitation, the requirements
that the Board of Directors have at least three independent members (the
"INDEPENDENT DIRECTORS"), a compliant audit committee and a compliant
compensation committee.
5.13 LISTING OF COMMON STOCK. The Seller shall use its best efforts
to list its Common Stock on a Qualified Exchange within one year of the Closing
Date.
5.14 REPAYMENT OF BRIDGE DEBT. Immediately following the Closing,
the Seller shall pay $2,775,000 principal amount and accrued interest on its
outstanding senior secured promissory notes due in April 2005 and May 2005 and
shall as soon as practicable thereafter deliver to the Purchaser written
confirmation from the lenders that such principal and interest has been repaid.
5.15 OPTION EXERCISE. In connection with (a) the exercise by the
Purchaser of the Options (as defined below) and (b) the transfer pursuant to the
Options of Common Stock to the Purchaser and issuance of certificates
representing such shares to the Purchaser, and to the extent required by the
Seller's transfer agent for the Common Stock (the "TRANSFER AGENT"), the Seller
shall use its best efforts, at the Seller's cost and expense, to cause a written
opinion of counsel to
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be delivered to the Transfer Agent, which opinion of counsel shall be reasonably
acceptable to the Transfer Agent to the effect that such transfer may be made
without registration under the Securities Act and covering such other matters as
the Transfer Agent may require. In addition, the Seller shall, at the Seller's
cost and expense, upon written request of the Purchaser, duly execute and
deliver, or cause to be duly executed and delivered, to the Purchaser or the
Transfer Agent such further instruments and do and cause to be done such further
acts as may be necessary, advisable or proper, in the sole discretion of the
Purchaser, to effect the transfer of the shares of Common Stock to the Purchaser
upon exercise of the Options and to ensure that such transfer complies with all
applicable state and federal securities laws.
ARTICLE VI - CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATIONS OF THE PURCHASER TO EFFECT THE
CLOSING. The obligations of the Purchaser to effect the Closing and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing, of each of the following conditions, any of which
may be waived, in writing, by the Purchaser:
(a) The Seller shall deliver the following:
1. (i) One or more certificates evidencing 24 shares of
the Preferred Stock, duly authorized, issued, fully paid and
non-assessable, to be purchased at the Closing by the
Purchaser, registered in the name of the Purchaser; and
(ii) One or more certificates evidencing the Warrant,
registered in the name of the Purchaser, pursuant to which the
Purchaser shall be initially entitled to purchase 48,000
shares of Common Stock.
2. The Investor Rights Agreement, in the form attached
hereto as EXHIBIT C (the "INVESTOR RIGHTS AGREEMENT"), duly executed by
the Seller.
3. A legal opinion of Xxxxxx Xxxxxxxx & Markiles, LLP
("SELLER'S COUNSEL"), counsel to the Seller, in the form attached
hereto as EXHIBIT D.
4. A certificate of the Secretary of the Seller (the
"SECRETARY'S CERTIFICATE"), in form and substance satisfactory to the
Purchaser, certifying as follows:
(i) that the Articles of Amendment authorizing
the Preferred Stock has been duly filed in the office of the
Secretary of State of the State of Florida, and that attached
to the Secretary's Certificate is true and complete copy of
the Articles of Incorporation of the Seller, as amended, and
the Articles of Amendment;
(ii) that a true copy of the Bylaws of the
Seller, as amended to the Closing Date, is attached to the
Secretary's Certificate;
(iii) that attached thereto are true and complete
copies of the resolutions of the Board of Directors of the
Seller authorizing the execution, delivery and performance of
this Agreement and the Related Documents, instruments and
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certificates required to be executed by it in connection
herewith and approving the consummation of the transactions in
the manner contemplated hereby including, but not limited to,
the authorization and issuance of the Preferred Stock and the
Warrant;
(iv) the names and true signatures of the
officers of the Seller signing this Agreement and all other
documents to be delivered in connection with this Agreement;
(v) such other matters as required by this
Agreement; and
(vi) such other matters as the Purchaser may
reasonably request.
5. Proof of due filing with the Secretary of State of
the State of Florida of the Articles of Amendment authorizing the
Preferred Stock.
6. Such other documents as the Purchaser shall
reasonably request.
(b) Xxx Xxx and Xxxxxx Xxxxxx shall have each entered into a nine
month Management Lock-Up Agreement in the form attached hereto as EXHIBIT E, and
copies thereof shall have been delivered to the Purchaser at the Closing.
(c) Seller shall have applied to each U.S. securities exchange,
interdealer quotation system and other trading market where its Common Stock is
currently listed or qualified for trading or quotation for the listing or
qualification of the Conversion Shares and the Warrant Shares for trding or
quotation thereon in the time and manner required thereby.
(d) The Purchaser shall have been assigned, pursuant to an
assignment dated as of the Closing Date (the "ASSIGNMENT"), the right to
purchase, at a purchase price of $0.65 per share (the "OPTIONS"), 114,092 shares
of restricted Common Stock pursuant to that certain Stock Option Agreement,
dated as of June 30, 2004, by and between Xxxxxxx Xxxxxx and Xxxxxx Xxxxxx, as
optionors, and Xxx Xxx, as optionee, as amended, (the "STOCK OPTION AGREEMENT").
(e) Simultaneously with or prior to the Closing, the Seller shall
have sold (the "CONTEMPORANEOUS OFFERING") securities to third party purchasers,
who are not acting in concert with the Purchaser, for an aggregate of a minimum
of fifteen million six hundred seventy thousand dollars ($15,670,000) or a
maximum of nineteen million four hundred and thirty four thousand five hundred
and fifty dollars ($19,434,550). The securities sold to any such third party
purchasers shall be on, and have such terms and conditions as the Seller shall
determine in its sole discretion.
(f) Seller shall have delivered to Purchaser by wire transfer of
immediately available funds to an account specified in writing by Purchaser an
amount equal to $17,260.27, which represents the accrued interest due to
Purchaser on the Promissory Note as of the date hereof.
6.2 CONDITIONS TO OBLIGATIONS OF THE SELLER TO EFFECT THE CLOSING.
The obligations of the Seller to effect the Closing and the transactions
contemplated by this Agreement shall be
21
subject to the satisfaction at or prior to the Closing of each of the following
conditions, any of which may be waived, in writing, by the Seller:
(a) The Purchaser shall deliver (i) payment of $10,000 in cash by
wire transfer and $350,000 by the cancellation of the Promissory Note, pursuant
to Section 2.1 hereof (as evidenced by the execution of this Agreement by the
Purchaser); (ii) an executed copy of this Agreement; (iii) an executed copy of
the Investor Rights Agreement; and (iv) such other documents as the Seller shall
reasonably request. The Purchaser shall deliver the original Promissory Note to
be cancelled to the Seller following the Closing pursuant to Section 5.4(b).
(b) Simultaneously with or prior to the Closing, the Seller shall
have consummated the Contemporaneous Offering. The securities sold to any such
third party purchasers pursuant to the Contemporaneous Offering shall be on, and
have such terms and conditions as the Seller shall determine in its sole
discretion.
ARTICLE VII - INDEMNIFICATION, TERMINATION AND DAMAGES
7.1 SURVIVAL OF REPRESENTATIONS. Except as otherwise provided
herein, the representations and warranties of the Seller and the Purchaser
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing Date and shall continue in full force
and effect for a period of three (3) years from the Closing Date; provided,
however, that the Seller's warranties and representations under Sections 3.13
(Taxes), 3.19 (Subsidiaries and Investments), 3.20 (Capitalization), and 3.21
(Options, Warrants, Rights), shall survive the Closing Date and continue in full
force and effect until the expiration of all applicable statutes of limitation;
and further provided that the Seller's warranties and representations under
Section 3.24 (Environmental Matters) shall survive the Closing Date and continue
in full force and effect for a period of six (6) years from the Closing Date.
The Seller's and the Purchaser's warranties and representations shall in no way
be affected or diminished in any way by any investigation of the subject matter
thereof made by or on behalf of the Seller or the Purchaser.
7.2 INDEMNIFICATION.
(a) The Seller agrees to indemnify and hold harmless the
Purchaser, its Affiliates, each of their officers, directors, partners,
employees and agents and their respective successors and assigns, from and
against any losses, damages, or expenses which are caused by or arise out of (i)
any breach or default in the performance by the Seller of any covenant or
agreement made by the Seller in this Agreement or in any of the Related
Documents; (ii) any breach of warranty or representation made by the Seller in
this Agreement or in any of the Related Documents; or (iii) any and all third
party actions, suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal fees and expenses) incident to any of the
foregoing.
(b) The Purchaser agrees to indemnify and hold harmless the
Seller, its Affiliates, each of their officers, directors, partners, employees
and agents and their respective successors and assigns, from and against any
losses, damages, or expenses which are caused by or arise out of (i) any breach
or default in the performance by the Purchaser of any covenant or agreement made
by the Purchaser in this Agreement or in any of the Related Documents; (ii) any
breach of
22
warranty or representation made by the Purchaser in this Agreement or in any of
the Related Documents; and (iii) any and all third party actions, suits,
proceedings, claims, demands, judgments, costs and expenses (including
reasonable legal fees and expenses) incident to any of the foregoing; provided,
however, that the Purchaser's liability under this Section 7.2(b) shall not
exceed the Purchase Price.
7.3 INDEMNITY PROCEDURE. A party or parties hereto agreeing to be
responsible for or to indemnify against any matter pursuant to this Agreement is
referred to herein as the "INDEMNIFYING PARTY" and the other party or parties
claiming indemnity is referred to as the "INDEMNIFIED PARTY." An Indemnified
Party under this Agreement shall, with respect to claims asserted against such
party by any third party, give written notice to the Indemnifying Party of any
liability which might give rise to a claim for indemnity under this Agreement
within sixty (60) business days of the receipt of any written claim from any
such third party, but not later than twenty (20) days prior to the date any
answer or responsive pleading is due, and with respect to other matters for
which the Indemnified Party may seek indemnification, give prompt written notice
to the Indemnifying Party of any liability which might give rise to a claim for
indemnity; provided, however, that any failure to give such notice will not
waive any rights of the Indemnified Party except to the extent the rights of the
Indemnifying Party are materially prejudiced.
The Indemnifying Party shall have the right, at its election, to take
over the defense or settlement of such claim by giving written notice to the
Indemnified Party at least fifteen (15) days prior to the time when an answer or
other responsive pleading or notice with respect thereto is required. If the
Indemnifying Party makes such election, it may conduct the defense of such claim
through counsel of its choosing (subject to the Indemnified Party's approval of
such counsel, which approval shall not be unreasonably withheld), shall be
solely responsible for the expenses of such defense and shall be bound by the
results of its defense or settlement of the claim. The Indemnifying Party shall
not settle any such claim without prior notice to and consultation with the
Indemnified Party, and no such settlement involving any equitable relief or
which might have an adverse effect on the Indemnified Party may be agreed to
without the written consent of the Indemnified Party (which consent shall not be
unreasonably withheld). So long as the Indemnifying Party is diligently
contesting any such claim in good faith, the Indemnified Party may pay or settle
such claim only at its own expense and the Indemnifying Party will not be
responsible for the fees of separate legal counsel to the Indemnified Party,
unless the named parties to any proceeding include both parties or
representation of both parties by the same counsel would be inappropriate due to
conflicts of interest or otherwise. If the Indemnifying Party does not make such
election, or having made such election does not, in the reasonable opinion of
the Indemnified Party proceed diligently to defend such claim, then the
Indemnified Party may (after written notice to the Indemnifying Party), at the
expense of the Indemnifying Party, elect to take over the defense of and proceed
to handle such claim in its discretion and the Indemnifying Party shall be bound
by any defense or settlement that the Indemnified Party may make in good faith
with respect to such claim. In connection therewith, the Indemnifying Party will
fully cooperate with the Indemnified Party should the Indemnified Party elect to
take over the defense of any such claim. The parties agree to cooperate in
defending such third party claims and the Indemnified Party shall provide such
cooperation and such access to its books, records and properties as the
Indemnifying Party shall reasonably request with respect to any matter for which
indemnification is sought hereunder; and the parties hereto agree to cooperate
with each other in order to ensure the proper and adequate defense thereof.
23
With regard to claims of third parties for which indemnification is
payable hereunder, such indemnification shall be paid by the Indemnifying Party
upon the earlier to occur of: (i) the entry of a judgment against the
Indemnified Party and the expiration of any applicable appeal period, or if
earlier, five (5) days prior to the date that the judgment creditor has the
right to execute the judgment; (ii) the entry of an unappealable judgment or
final appellate decision against the Indemnified Party; or (iii) a settlement of
the claim. Notwithstanding the foregoing, the reasonable expenses of counsel to
the Indemnified Party shall be reimbursed on a current basis by the Indemnifying
Party. With regard to other claims for which indemnification is payable
hereunder, such indemnification shall be paid promptly by the Indemnifying Party
upon demand by the Indemnified Party.
ARTICLE VIII - MISCELLANEOUS
8.1 FURTHER ASSURANCES. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement, and further agrees to take promptly, or cause to
be taken, all actions, and to do promptly, or cause to be done, all things
necessary, proper or advisable under applicable law to consummate and make
effective the transactions contemplated hereby, to obtain all necessary waivers,
consents and approvals, to effect all necessary registrations and filings, and
to remove any injunctions or other impediments or delays, legal or otherwise, in
order to consummate and make effective the transactions contemplated by this
Agreement for the purpose of securing to the parties hereto the benefits
contemplated by this Agreement.
8.2 FEES AND EXPENSES. Each party shall pay the fees and expenses
of its advisor, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, deliver and performance of this Agreement.
8.3 NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 5:00 p.m. (New York City
time) on a business day, (b) the next business day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a business day
or later than 5:00 p.m. (New York City time) on any business day, or (c) the
business day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service such as Federal Express. The address for
such notices and communications shall be as follows:
24
If to the Purchaser, addressed to:
CD Investment Partners, Ltd.
c/o CD Capital Management LLC
Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxxx
Facsimile No.: (000) 000-0000
If to the Seller, addressed to:
National Coal Corp.
000 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile No.: (000) 000-0000
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Seller shall be sent to Xxxxxx Xxxxxxxx
& Markiles, LLP, 00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000,
Facsimile No. (000) 000-0000. Copies of notices to any Purchaser shall be sent
to Xxxxxxxxx Xxxxxxx, LLP, 00 X. Xxxxxx Xx., Xxxxx 0000, Xxxxxxx, Xxxxxxxx
00000, Attention: Xxxxx X. Xxxxxxxxx, Esq. and Xxxx X. Xxxxx, Esq., Facsimile
No. (000) 000-0000.
Unless otherwise stated above, such communications shall be effective
when they are received by the addressee thereof in conformity with this Section.
Any party may change its address for such communications by giving notice
thereof to the other parties in conformity with this Section.
8.4 GOVERNING LAW. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and enforced in accordance with the laws of the State of New York without
reference to the conflicts of laws principles thereof.
8.5 JURISDICTION AND VENUE. This Agreement shall be subject to the
exclusive jurisdiction of the Xxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx Xxxxxxxx of New
York and if such court does not have proper jurisdiction, the State Courts of
New York County, New York. The parties to this Agreement agree that any breach
of any term or condition of this Agreement shall be deemed to be a breach
occurring in the State of New York by virtue of a failure to perform an act
required to be performed in the State of New York and irrevocably and expressly
agree to submit to the jurisdiction of the Xxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx
Xxxxxxxx of New York and if such court does not have proper jurisdiction, the
State Courts of New York County, New York for the purpose of resolving any
disputes among the parties relating to this Agreement or the transactions
contemplated hereby. The parties irrevocably waive, to the fullest extent
permitted by law, any objection which they may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement, or any judgment entered by any court in respect hereof brought
in New York County, New York, and further irrevocably waive any claim that any
suit, action or proceeding brought in Xxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx Xxxxxxxx
of New York and if such court does not have proper jurisdiction, the State
Courts of New York County, New York has been brought in an inconvenient forum.
Each of the parties hereto consents to process being served in any such suit,
action or proceeding, by mailing a copy
25
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 9.5 shall affect
or limit any right to serve process in any other manner permitted by law.
8.6 SUCCESSORS AND ASSIGNS. This Agreement is personal to each of
the parties and may not be assigned without the written consent of the other
parties; provided, however, that the Purchaser shall be permitted to assign this
Agreement to any Person to whom it assigns or transfers securities or rights
issued or issuable pursuant to this Agreement. Any assignee must be an
"ACCREDITED INVESTOR" as defined in Rule 501(a) promulgated under the Securities
Act.
8.7 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason or to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall continue in full force and effect and in
no way be affected, impaired or invalidated.
8.8 ENTIRE AGREEMENT. This Agreement and the other agreements and
instruments referenced herein constitute the entire understanding and agreement
of the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings.
8.9 OTHER REMEDIES. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party shall be deemed cumulative
with and not exclusive of any other remedy conferred hereby or by law, or in
equity on such party, and the exercise of any one remedy shall not preclude the
exercise of any other.
8.10 AMENDMENT AND WAIVERS. Any term or provision of this Agreement
may be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the Seller and the Purchaser, and
such waiver or amendment, as the case may be, shall be binding upon the
Purchaser. The waiver by a party of any breach hereof or default in the
performance hereof shall not be deemed to constitute a waiver of any other
default or any succeeding breach or default. This Agreement may not be amended
or supplemented by any party hereto except pursuant to a written amendment
executed by the Seller and the Purchaser.
8.11 NO WAIVER. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
8.12 CONSTRUCTION OF AGREEMENT; KNOWLEDGE. For purposes of this
Agreement, the term "KNOWLEDGE," when used in reference to a corporation means
the knowledge of the directors and executive officers of such corporation
(including, if applicable, any person designated as a chief scientific, medical
or technical officer) assuming such persons shall have made inquiry that is
customary and appropriate under the circumstances to which reference is made,
and when used in reference to an individual means the knowledge of such
individual assuming the individual shall have made inquiry that is customary and
appropriate under the circumstances to which reference is made.
8.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against the party whose
signature appears thereon and all of
26
which together shall constitute one and the same instrument. This Agreement
shall become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of both parties. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile
signature page were an original thereof.
8.14 NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon or give any
person other than the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and permitted assigns, any
rights or remedies under or by reason of this Agreement.
8.15 WAIVER OF TRIAL BY JURY. THE PARTIES HERETO IRREVOCABLY WAIVE
TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
8.16 INDEPENDENT NATURE OF PURCHASER'S OBLIGATIONS AND RIGHTS. The
obligations of the Purchaser under this Agreement or any Related Documents are
several and not joint with the obligations of any third party purchaser of the
Seller's securities, and the Purchaser shall not be responsible in any way for
the performance of the obligations of any third party purchaser. Each of the
Purchaser and the Seller agrees and acknowledges that (1) the decision of the
Purchaser to purchase the Preferred Stock and the Warrant pursuant to this
Agreement has been made (and the decision of the Purchaser to purchase the
Warrant Shares pursuant to the terms of the Warrant will be made) by the
Purchaser independently of any other third party purchasers of the Seller's
securities and (ii) no other third party purchasers of the Seller's securities
have acted as agent for the Purchaser in connection with the Purchaser making
its investment hereunder and that no such other third party purchasers will be
acting as agent of the Purchaser in connection with monitoring its investment
hereunder. Nothing contained herein or in any Related Documents or any other
agreements with any third party purchaser, and no action taken by the Purchaser
pursuant hereto or any third party purchaser pursuant thereto, shall be deemed
to constitute the Purchaser or any third party purchaser as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchaser and any third party purchasers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by such agreement. The Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation, the
rights arising out of this Agreement or out of the other Related Documents, and
it shall not be necessary for any third party purchaser to be joined as an
additional party in any proceeding for such purpose. To the extent that any such
third party purchasers purchase the same or similar securities as the Purchaser
hereunder or on the same or similar terms and conditions or pursuant to the same
or similar documents, all such matters are solely in the control of the Seller,
not the action or decision of the Purchaser and are not done with the knowledge
of the Purchaser hereunder, and would be solely for the convenience of the
Seller and not because it was required or requested to do so by the Purchaser or
any such other third party purchaser. The Purchaser represents that it has been
represented by legal counsel in its review and negotiation of this Agreement and
the Related Documents.
[Signature Page Follows]
28
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SELLER:
NATIONAL COAL CORP.
By: /S/ XXX X. XXX
-----------------------------
Name: Xxx X. Xxx
Title: Chief Executive Officer
PURCHASER:
CD INVESTMENT PARTNERS, LTD.
By: CD Capital Management LLC
Its: Investment Manager
By: /S/ XXXX XXXXXXXXX
--------------------------------
Name: Xxxx Xxxxxxxxx
Title: President
29
EXHIBIT G
SUBSCRIPTION FORM
[To be executed only upon exercise Additional Purchase Right]
1. The undersigned hereby elects to purchase shares of the Series
A Cumulative Convertible Preferred Stock of National Coal Corp. (the "Company")
along with the appropriate number of Warrants, in each case, pursuant to the
terms of the Preferred Stock and Warrant Purchase Agreement, dated as of August
___, 2004 among the Company and CD Investment Partners, Ltd. (the "Purchase
Agreement"), and tenders herewith payment of the purchase price of such shares
in full.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name as is specified
below. The undersigned hereby makes for the benefit of the Company, as of the
date hereof and with respect to the shares of Series A Cumulative Convertible
Stock being acquired hereunder, the representations and warranties set forth in
Section 4.3 through 4.6 of the Purchase Agreement.
---------------------------------
(Name)
---------------------------------
---------------------------------
---------------------------------
(Address)
-------------------------------------
(Name of Purchaser)
-------------------------------------
(Signature of Purchaser)
-------------------------------------
(Street Address)
-------------------------------------
(State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name
Purchaser in the Purchase Agreement in every particular, without alteration or
enlargement or any change whatsoever.
EXHIBIT H
ASSIGNMENT FORM
FOR ADDITIONAL PURCHASE RIGHT
FOR VALUE RECEIVED the undersigned Purchaser pursuant to the Preferred Stock and
Warrant Purchase Agreement, dated as of August ___, 2004 among the Company and
CD Investments Partners, Ltd. (the "Purchase Agreement") hereby sells, assigns
and transfers unto the Assignee named below all of the rights of the undersigned
under Article VIII of the Purchase Agreement, with respect to the number of
shares of Preferred Stock and Warrant Shares set forth below:
---------------------------------------
---------------------------------------
---------------------------------------
(Name and Address of Assignee)
---------------------------------------
(Number of Shares of Preferred Stock)
---------------------------------------
(Number of Warrant Shares)
Dated:---------------------------------
---------------------------------------
(Print Name and Title)
---------------------------------------
(Signature)
---------------------------------------
(Witness)
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the Warrant in every particular, without alteration or
enlargement or any change whatsoever.
