EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement"), is made and entered
into as of November 23, 2004, by and among Gexa Corp., a Texas corporation (the
"Company"), the undersigned shareholder (the "Selling Shareholder") and the
undersigned prospective investor (the "Investor") who is subscribing for shares
of the Company's Common Stock, par value $0.01 per share (the "Common Stock"),
and warrants to purchase shares of Common Stock. For the purposes of this
Agreement, the term "Sellers" shall mean the Company and the Selling
Shareholder. For the purposes of this Agreement, a "Unit" shall mean (A) ten
shares of Common Stock and (B) three warrants, substantially in the form
attached hereto as Exhibit A, as the same may be amended, modified or
supplemented from time to time in accordance with the terms thereof (the
"Warrant"), each entitling the holder thereof to purchase one share of Common
Stock (subject to adjustment as provided in the Warrant).
ARTICLE I
PURCHASE AND SALE OF UNITS; CLOSING
1.1 Purchase and Sale of the Units.
(a) Subject to the terms and conditions of this Agreement, the Investor
agrees to purchase from the Sellers the number of Units indicated on Schedule A
hereto (the "Subscription Amount") at a purchase price of $43.00 per Unit (the
"Unit Price") for an aggregate purchase price indicated on Schedule A hereto
(the "Aggregate Purchase Price"). The Sellers reserve the right in their sole
discretion to accept or reject the Subscription (as defined below) in whole or
in part or to allot to the Investor less than the Subscription Amount. The
actual Subscription Amount, if any, accepted by the Sellers is referred to in
this Agreement as the "Actual Subscription Amount". Subject to the terms and
conditions of this Agreement, the Sellers shall issue and sell to the Investor
the number of Units equal to the Actual Subscription Amount.
(b) Subject to the terms and conditions of this Agreement on the date of
this Agreement, the Investor shall deliver the Aggregate Purchase Price by wire
transfer to The Bank of New York, as escrow agent (the "Escrow Agent"), in
accordance with the wire transfer instructions attached hereto as Exhibit B.
1.2 Aggregate Number of Units Offered. The Sellers have entered and intend
to enter into this same form of Securities Purchase Agreement (the "Other
Agreements") with certain other investors (the "Other Investors") and desire to
offer and sell (the "Offering") up to 175,000 Units (the "Offering Amount").
Investor hereby acknowledges receipt of a copy of the Confidential Private
Placement Memorandum of the Company dated October 29, 2004, as supplemented on
November 15, 2004 (the "Memorandum"), relating to the Offering. The Investor is
aware that the Sellers are not required to sell a minimum number of Units in the
Offering in order to enter this Agreement and may sell less than the total
number of Units offered in the Offering.
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1.3 Aggregate Purchase Price Escrow Account. All payments for Units made by
the Investor as contemplated by Section 1.1 above will be held by the Escrow
Agent for the Investor's benefit in a non-interest bearing escrow account. The
payment will be returned promptly, without interest or deduction, if the
Investor's Subscription is rejected, the conditions in Section 1.7 are not
satisfied or waived by the Investor or the Offering is terminated by the Sellers
for any reason.
1.4 Binding Effect of this Agreement. The Investor acknowledges and agrees
that this Agreement shall be binding upon the Investor upon the submission to
the Company or Xxxxxxxxxxx & Co. Inc. (the "Placement Agent") of the Investor's
signed counterpart signature page to this Agreement (the "Subscription");
provided that, in the event the Closing Date (as defined below) shall not have
occurred on or prior to December 3, 2004 (the "Termination Date") this Agreement
shall be terminated and be of no force and effect. Until the Termination Date,
the Investor is not entitled to cancel, terminate or revoke this Agreement or
any agreements of the Investor hereunder. The Sellers may terminate the Offering
at any time prior to the Closing Date. The execution of this Agreement by the
Investor or solicitation of the investment contemplated hereby shall create no
obligation on the part of the Sellers or the Placement Agent to accept any
Subscription, in part or in full, or complete the Offering.
1.5 Delivery of Units at Closing.
(a) The completion of the purchase and sale of the Units (the "Closing")
shall occur, subject to the satisfaction or waiver of the conditions set forth
in Section 1.6 and Section 1.7 (other than those intended to be satisfied at
Closing), at 10 a.m. Central Time on the date hereof (the "Closing Date") at the
offices of Xxxxxx & Xxxxxx, 000 Xxxxxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxx 00000, or
such other time, date or place is agreed to by the parties.
(b) At the Closing, (i) the Sellers shall authorize the Company's transfer
agent to issue or transfer, as applicable, and the transfer agent shall issue or
transfer, as applicable, to the Investor one or more stock certificates
registered in the name of the Investor, or in such name of nominee(s) designated
by the Investor in writing, representing that number of shares of Common Stock
as is equal to ten times the Actual Subscription Amount and (ii) the Company
shall issue the number of related Warrants as is equal to three times the Actual
Subscription Amount against payment of the Actual Purchase Price in accordance
with Section 1.1. The "Actual Purchase Price" shall mean an amount equal to the
product of (A) the Actual Subscription Amount multiplied by (B) the Unit Price.
1.6 Conditions to the Sellers' Obligation to Complete Purchase and Sale.
Upon acceptance of the Subscription, the Sellers' obligation to issue and sell
the Units to the Investor at Closing is subject to the satisfaction, on or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Seller's sole benefit and may be waived by the
Sellers at any time in its sole discretion by providing the Investor with prior
written notice thereof:
(a) Payment of Purchase Price. The Investor shall have delivered to the
Escrow Agent the Aggregate Purchase Price; and
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(b) Representations and Warranties; Covenants. The representations and
warranties of the Investor set forth in Article III hereof shall be true and
correct as of the date hereof and as of the Closing Date as though made at that
time (except for representations and warranties that speak as of a specific date
(which shall be true and correct as of such date)), and the Investor shall have
performed, satisfied and complied with in all material respects the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Investor on or prior to the Closing Date.
1.7 Conditions to the Investor's Obligation to Complete Purchase and Sale.
The obligation of the Investor hereunder to purchase the Units from the Sellers
at the Closing is subject to the satisfaction, on or before the Closing Date, of
each of the following conditions, provided that these conditions are for the
Investor's sole benefit and may be waived by the Investor at any time in its
sole discretion by providing the Sellers with prior written notice thereof:
(a) Opinion of Counsel. Receipt by the Investor of an opinion letter of
Xxxxxx & Xxxxxx, counsel to the Company, dated the Closing Date, in
substantially the form attached hereto as Exhibit C;
(b) Representations and Warranties; Covenants. The representations and
warranties of the Company set forth in Article II hereof and of the Selling
Shareholder, to the extent applicable, set forth in Article III hereof, shall be
true and correct in all material respects as of the date hereof and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date which shall be true and correct in
all material respects as of such date), and the Sellers shall have performed,
satisfied and complied with in all material respects the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Sellers on or prior to the Closing Date;
(c) Officer's Certificate. The Company shall have delivered to the Investor
a certificate, dated the Closing Date, duly executed on behalf of the Company by
its Chief Executive Officer to the effect set forth in clauses (b), (e), (f),
(g) and (h) of this Section 1.7;
(d) Secretary's Certificate. The Company shall have delivered to the
Investor a certificate, dated the Closing Date, duly executed by its Secretary
or Assistant Secretary, certifying that the attached copies of the Company's
articles of incorporation, by-laws and the resolutions of the Board of Directors
of the Company approving this Agreement and the transactions contemplated
hereby, are all true, complete and correct and remain unamended and in full
force and effect;
(e) No Litigation. On the Closing Date, no legal action, suit or proceeding
shall be pending or overtly threatened which seeks to restrain or prohibit the
transactions contemplated by this Agreement;
(f) No Suspension, Etc. Trading in the Common Stock shall not have been
suspended by any stock exchange or market on which the Common Stock is then
listed or admitted for trading or quotation, as applicable, or the Securities
and Exchange Commission (the "SEC"), except for any suspension of trading of
limited duration agreed to by the Company, which suspension shall be terminated
prior to the Closing, and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg Financial Markets ("Bloomberg")
shall not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by Bloomberg, or on Nasdaq,
nor shall a banking moratorium have been declared either by the United States or
New York State authorities;
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(g) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement;
(h) Material Adverse Effect. No material adverse effect on the business,
assets, financial condition or results of operations of the Company and its
Subsidiaries (defined below) and no event that would prohibit or otherwise
materially interfere with the ability of the Company to perform any of its
obligations under this Agreement in any material respect shall have occurred at
or before the Closing Date; and
(i) Side Letters. The Company shall enter into side letter agreements with
two of the institutional investors providing certain informational rights to
such investors.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the schedule of exceptions attached hereto as
Schedule B (the "Schedule of Exceptions"), the Company hereby represents and
warrants to the Investor as follows:
2.1 Subsidiaries; Organization. The Company has no subsidiaries as defined
by Rule 405 under the Securities Act of 1933, as amended (the "Securities Act")
except as set forth on the Schedule of Exceptions (the "Subsidiaries"). Each of
the Company and the Subsidiaries is duly organized and validly existing and is
in good standing under the laws of the jurisdiction of its incorporation or
organization. Each of the Company and the Subsidiaries has full corporate power
and authority to own, operate and occupy its properties and to conduct its
business as presently conducted and is registered or qualified to do business
and in good standing in each jurisdiction in which it owns or leases property or
transacts business and where the failure to be so qualified would have a
material adverse effect upon the business, assets, financial condition or
results of operations of the Company and its Subsidiaries, and to the Company's
knowledge, no proceeding has been instituted in any such jurisdiction revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification.
2.2 Due Authorization. The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement.
This Agreement has been duly authorized and validly executed and delivered by
the Company and, assuming due authorization, execution and delivery by the other
parties hereto, constitutes a valid and legally binding obligation of the
Company enforceable against the Company in accordance with its terms, except (i)
to the extent rights to indemnity and contribution may be limited by state or
federal securities laws or the public policy underlying such laws, (ii)
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws affecting
creditors' and contracting parties' rights generally and (iii) enforceability
may be limited by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
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2.3 Non-Contravention. The execution and delivery of this Agreement, the
issuance and sale of the Common Stock and Warrants to be sold by the Company
under this Agreement, the performance by the Company of its obligations under
this Agreement and the consummation of the transactions contemplated hereby will
not (A) conflict with or constitute a violation of, or default (with or without
the giving of notice or the passage of time or both) under, (i) any material
bond, debenture, note or other evidence of indebtedness, or under any material
lease, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which the Company is a party or by which it or
its properties are bound, (ii) the charter, by-laws or other organizational
documents of the Company or any of its Subsidiaries, or (iii) any law,
administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company, any of its
Subsidiaries or their respective properties, or (B) result in the creation or
imposition of any lien, encumbrance, claim, security interest or restriction
whatsoever upon any of the material properties or assets of the Company or any
of its Subsidiaries or an acceleration of indebtedness pursuant to any
obligation, agreement or condition contained in any material bond, debenture,
note or any other evidence of indebtedness or any material indenture, mortgage,
deed of trust or any other agreement or instrument to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound or to which any of the property or assets of the Company
or any of its Subsidiaries is subject. No consent, approval, authorization or
other order of, or registration, qualification or filing with, any regulatory
body, administrative agency, self-regulatory organization, stock exchange or
market, or other governmental body in the United States is required for the
execution and delivery of this Agreement and the valid issuance and sale of the
Units to be sold pursuant to this Agreements, other than such as have been made
or obtained, and except for any securities filings required to be made under
federal or state securities laws.
2.4 Reporting Status. Except as set forth on the Schedule of Exceptions,
the Company has filed in a timely manner all documents that the Company was
required to file under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), during the 12 months preceding the date of this Agreement. The
following documents complied as to form in all material respects with the SEC's
requirements as of their respective filing dates, and the information contained
therein as of the date thereof did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except to the extent that information contained in
any such document has been revised or superseded by a later filed SEC Document
(as defined below):
(a) The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2003 (the "Form 10-K"); and
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(b) The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 2004, June 30, 2004 and September 30, 2004 (the "Form 10-Qs");
and
(c) all other documents, including the exhibits thereto, filed by the
Company with the SEC since September 30, 2004 pursuant to the reporting
requirements of the Exchange Act (together with the Form 10-K and Form 10-Qs,
the "SEC Documents").
2.5 Capitalization. As of the date hereof, the authorized capital stock of
the Company consists of 77,500,000 shares of capital stock, of which 75,000,000
shares are designated Common Stock and 2,500,000 shares are designated Preferred
Stock. As of October 31, 2004, there were approximately 8,631,223 shares of
Common Stock issued and outstanding, and no shares of Preferred Stock issued and
outstanding. As of October 31, 2004, 2,243,333 shares of Common Stock were
reserved for issuance upon exercise of outstanding stock options issued by the
Company to certain former and current employees, consultants and directors of
the Company. As of October 31, 2004, 447,667 shares of Common Stock were
reserved for issuance upon exercise of warrants issued by the Company. All
outstanding shares of Common Stock are duly authorized, validly issued, fully
paid and nonassessable and were issued in compliance with federal and U.S. state
securities laws. Other than as disclosed in the SEC Documents, and except as set
forth above, there are no outstanding rights, options, warrants, preemptive
rights, rights of first refusal, agreements, commitments or similar rights for
the purchase or acquisition from the Company or any of its Subsidiaries of any
securities of the Company or any of its Subsidiaries. The shares of Common Stock
to be sold pursuant to this Agreement have been duly authorized, and when issued
and paid for in accordance with the terms of this Agreement (the "Common
Shares") will be validly issued, fully paid and nonassessable and free and clear
of all pledges, liens and encumbrances. The Warrants to be issued pursuant to
this Agreement have been duly authorized. The Common Stock issuable upon
exercise of the Warrants (the "Warrant Shares") has been duly authorized and
reserved and, when issued upon exercise of the Warrants in accordance with the
terms of the Warrants, will be validly issued, fully paid and non-assessable and
free and clear of all pledges, liens and encumbrances. The Units, the Common
Shares, the Warrants and the Warrant Shares collectively are referred to herein
as the "Securities". No preemptive right, co-sale right, right of first refusal
or other similar right exists with respect to the Securities or the issuance and
sale thereof. No further approval or authorization of any shareholder or the
Board of Directors of the Company is required for the issuance and sale of the
Securities. Except as set forth in the SEC Documents, no holder of any of the
securities of the Company has any rights ("demand," "piggyback" or otherwise) to
have such securities registered by reason of the intention to file, filing or
effectiveness of a Registration Statement (as defined in Section 6.1 hereof).
2.6 Legal Proceedings. Except as disclosed in the SEC Documents, there is
no action, suit or proceeding before any court, governmental agency or body,
domestic or foreign, now pending or, to the knowledge of the Company or any of
its Subsidiaries, overtly threatened against the Company or its Subsidiaries
wherein an unfavorable decision, ruling or finding would reasonably be expected
to adversely affect the validity or enforceability of, or the authority or
ability of the Company to perform its obligations under this Agreement.
2.7 No Violations. Neither the Company nor any of its Subsidiaries: (i) is
in violation of its charter, bylaws, or other organizational document, or in
violation of any law, administrative regulation, ordinance or order of any court
or governmental agency, arbitration panel or authority applicable to the Company
or any of its Subsidiaries, which violation, individually or in the aggregate,
would be reasonably likely to have a material adverse effect on the business,
assets, financial condition or results of operations of the Company and its
Subsidiaries, (ii) is in default (and there exists no condition which, with or
without the passage of time or giving of notice or both, would constitute a
default) in any material respect in the performance of any bond, debenture, note
or any other evidence of indebtedness in any indenture, mortgage, deed of trust
or any other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound or by which the properties of the Company are bound, which would be
reasonably likely to have a material adverse effect on the business, assets,
financial condition or results of operations of the Company and its Subsidiaries
or would prohibit or otherwise materially interfere with the ability of the
Company to perform any of its obligations under this Agreement in any material
respect.
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2.8 Governmental Permits, Etc. The Company and its Subsidiaries possess all
necessary franchises, licenses, certificates and other authorizations from any
foreign, federal, state or local government or governmental agency, department
or body that are currently necessary for the operation of their respective
businesses as currently conducted, except where such failure to possess could
not reasonably be expected to have a material adverse effect on the business,
assets, financial condition or results of operations of the Company and its
Subsidiaries or would not prohibit or otherwise materially interfere with the
ability of the Company to perform any of its obligations under this Agreement in
any material respect.
2.9 Intellectual Property. The Company and its Subsidiaries, to the
Company's knowledge, own or possess sufficient rights to use all patents, patent
rights, trademarks, copyrights, licenses, inventions, trade secrets, trade names
and know-how that are necessary for the conduct of their respective businesses
as now conducted except where the failure to own or possess would not have a
material adverse effect on the business, assets, financial condition or results
of operations of the Company and its Subsidiaries (the "Company Intellectual
Property"). Except as set forth in the SEC Documents, (i) neither the Company
nor any of its Subsidiaries has received any written notice of, or has any
knowledge of, any infringement by the Company of intellectual property rights of
any third party that, individually or in the aggregate, would have a material
adverse effect on the business, assets, financial condition or results of
operations of the Company and its Subsidiaries and (ii) neither the Company nor
any of its Subsidiaries has received any written notice of any infringement by a
third party of any Company Intellectual Property that, individually or in the
aggregate, would have a material adverse effect on the business, assets,
financial condition or results of operations of the Company and its
Subsidiaries.
2.10 Financial Statements. The consolidated financial statements of the
Company and its Subsidiaries and the related notes thereto included in the SEC
Documents, as the same may be amended, present fairly, in all material respects,
the financial position of the Company as of the dates indicated and the results
of its operations and cash flows for the periods therein specified. Except as
set forth in the SEC Documents, such financial statements (including the related
notes) have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis throughout the periods
therein specified.
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2.11 No Material Adverse Change. Except as publicly disclosed in the SEC
Documents, press releases or in other "public disclosures" as such term is
defined in Section 101(e) of Regulation FD of the Exchange Act, since September
30, 2004, there has not been (i) any material adverse change in the business,
assets, financial condition or results of operations of the Company, (ii) any
obligation, direct or contingent, that is material to the Company, incurred by
the Company, except obligations incurred in the ordinary course of business,
(iii) any dividend or distribution of any kind declared, paid or made on the
capital stock of the Company, or (iv) any loss or damage (whether or not
insured) to the physical property of the Company which has been sustained which
has had a material adverse effect on the business, assets, financial condition
or results of operations of the Company.
2.12 Listing. The Company's Common Stock is registered pursuant to Section
12(g) of the Exchange Act and is listed on the Nasdaq SmallCap Market, and the
Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or the
de-listing of the Common Stock from the Nasdaq SmallCap Market, nor to the
Company's knowledge is The NASDAQ Stock Market, Inc. ("Nasdaq") currently
contemplating terminating such listing. The Company has not received notice
(written or oral) from Nasdaq to the effect that the Company is not in
compliance with the listing or maintenance requirements of the Nasdaq SmallCap
Market.
2.13 No Manipulation of Stock. Neither the Company, nor the Subsidiaries,
nor any of its affiliates has taken or may take directly or indirectly, any
action in violation of applicable law or any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Common
Shares or the Warrant Shares.
2.14 Insurance. The Company and each of its Subsidiaries maintain and will
continue to maintain insurance against loss or damage by fire or other casualty
and such other insurance, including, but not limited to, product liability
insurance, in such amounts and covering such risks as is reasonably adequate
consistent with industry practice for the conduct of their respective businesses
and the value of their respective properties.
2.15 Tax Matters. The Company and each of its Subsidiaries have timely
filed all material federal, state, local and foreign income and franchise and
other tax returns required to be filed by any jurisdiction to which it is
subject and has paid all taxes due in accordance therewith, and no tax
deficiency has been determined adversely to the Company or any of its
Subsidiaries which has had (nor does the Company have any knowledge of any tax
deficiency which, if determined adversely to the Company or any of its
Subsidiaries, would reasonably be expected to have) a material adverse effect on
the business, assets, financial condition or results of operations of the
Company and its Subsidiaries.
2.16 Investment Company. The Company is not an "investment company" within
the meaning of such term under the Investment Company Act of 1940 and the rules
and regulations of the SEC thereunder.
2.17 No Registration. Assuming the accuracy of the representations and
warranties made by, and compliance with the covenants of, the Investors in
Article III hereof, no registration of the Units under the Securities Act is
required in connection with the offer and sale of the Units by the Company to
the Investors as contemplated by this Agreement.
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2.18 Disclosure. To the best of the Company's knowledge, neither this
Agreement or the Schedule of Exceptions hereto nor any other documents,
certificates or instruments furnished to the Investor by or on behalf of the
Company in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made herein or therein, in the light
of the circumstances under which they were made herein or therein, not
misleading
2.19 No Integrated Offering; No General Solicitation. Neither the Company
nor any of its affiliates, nor any person acting on its behalf or their behalf,
directly or indirectly has (i) sold, offered for sale, solicited offers to buy
or otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sale of the Securities
in a manner that would require the registration under the Securities Act of the
sale of the Securities pursuant to this Agreement and the other Agreements; or
(ii) offered, solicited offers to buy or sold Securities by any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Securities Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act. The Company does not have any
registration statement pending before the SEC or currently under the SEC's
review.
2.20 Compliance with Law. The business of the Company and the Subsidiaries
has been and is presently being conducted in accordance with all applicable
federal, state and local governmental laws, rules, regulations and ordinances,
except as set forth in the SEC Documents or such that, individually or in the
aggregate, the noncompliance therewith could not reasonably be expected to have
a material adverse effect on the business, assets, financial condition or
results of operations of the Company and its Subsidiaries or would prohibit or
otherwise materially interfere with the ability of the Company to perform any of
its obligations under this Agreement in any material respect. The Company and
its Subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a material adverse effect on the business,
assets, financial condition or results of operations of the Company and its
Subsidiaries or would prohibit or otherwise materially interfere with the
ability of the Company to perform any of its obligations under this Agreement in
any material respect.
2.21 Xxxxxxxx-Xxxxx Act. The Company is in substantial compliance with the
applicable provisions of the Xxxxxxxx-Xxxxx Act of 2002 (the "Xxxxxxxx-Xxxxx
Act"), and the rules and regulations promulgated thereunder, that are effective
and intends to comply substantially with other applicable provisions of the
Xxxxxxxx-Xxxxx Act, and the rules and regulations promulgated thereunder, upon
the effectiveness of such provisions.
2.22 No Broker. Other than the fee to be paid by the Company to the
Placement Agent, the Company has not incurred any liability for any finder's or
broker's fee, or agent's commission in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
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2.23 Forward-Looking Statements. The information contained in the SEC
Documents regarding the Company's expectations, plans and intentions, and any
other information that constitutes "forward-looking" information within the
meaning of the Securities Act and the Exchange Act were made by the Company on a
reasonable basis and reflected the Company's good faith belief and/or estimate
of the matters described therein, in each case as of the date of the SEC
Document containing such information.
2.24 Use of Proceeds. The proceeds from the sale of the Securities will be
used by the Company for working capital and general corporate purposes.
2.25 Non-Public Information. The Company confirms that neither it nor any
person acting on its behalf has provided Investor with any information that the
Company believes constitutes material non-public information, except with
respect to the existence, terms and conditions of this offering or as otherwise
is disclosed in the Current Report on Form 8-K to be filed by the Company, and
the exhibits thereto, in conjunction with the press release referred to in
Section 5.2 hereto.
2.26 Disclosure. None of the representations and warranties of the Company
appearing in this Agreement or information provided in the Memorandum and any
supplement thereto, when considered together as a whole, contains, or on the
Closing Date will contain, any untrue statement of a material fact or omits, or
on the Closing Date will omit, to state any material fact required to be stated
herein in order for the statements herein, in light of the circumstances under
which they were made, not to be misleading.
2.27 Lock-Up Agreements. All executive officers and directors of the
Company have executed lock up agreements and delivered them to the Placement
Agent in which, without prior approval of the Placement Agent, they have agreed
to not sell shares of Common Stock held by them (including shares which may be
issued to them pursuant to the exercise of outstanding options or warrants)
during the period equal to the later of: 180 days after the closing date of the
offering and 90 days after the effective date of the Registration Statement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDER
The Selling Shareholder represents and warrants to the Investor as follows:
3.1 Due Authorization. This Agreement has been validly executed and
delivered by the Selling Shareholder and, assuming due authorization, execution
and delivery by the other parties hereto, constitutes a valid and legally
binding obligation of the Selling Shareholder enforceable against the Selling
Shareholder in accordance with its terms, except (i) to the extent rights to
indemnity and contribution may be limited by state or federal securities laws or
the public policy underlying such laws, (ii) enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws affecting creditors' and contracting parties' rights
generally and (iii) enforceability may be limited by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
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3.2 Non-Contravention. The execution and delivery of this Agreement, the
transfer and sale of the Common Stock to be sold by the Selling Shareholder
under this Agreement, the performance by the Selling Shareholder of its
obligations under this Agreement and the consummation of the transactions
contemplated hereby will not conflict with or constitute a violation of, or
default (with or without the giving of notice or the passage of time or both)
under, (i) any material bond, debenture, note or other evidence of indebtedness,
or under any material lease, indenture, mortgage, deed of trust, loan agreement,
joint venture or other agreement or instrument to which the Selling Shareholder
is a party or by which it or its properties are bound, (ii) any law,
administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Selling Shareholder or
Selling Shareholder's properties. No consent, approval, authorization or other
order of, or registration, qualification or filing with, any regulatory body,
administrative agency, self-regulatory organization, stock exchange or market,
or other governmental body in the United States is required for the execution
and delivery of this Agreement and the valid issuance and sale of the Common
Stock to be sold pursuant to this Agreements by The Selling Shareholder, other
than such as have been made or obtained, and except for any securities filings
required to be made under federal or state securities laws.
3.3 Title. Selling Shareholder holds good and marketable title to all of
the Common Stock to be sold by the Selling Shareholder under this Agreement,
free and clear of any liens, encumbrances, claims, security interests or other
restrictions. Selling Shareholder possesses full authority and legal right to
sell, transfer and assign to Investor the shares of Common Stock to be sold by
Selling Shareholder under this Agreement. At the time of transfer to Investor by
Selling Shareholder of such shares of Common Stock, Investor will own such
shares of Common Stock free and clear of any liens, encumbrances, claims,
security interests or other restrictions. There are no claims pending or, to
Selling Shareholder's knowledge, threatened against the Company or Selling
Shareholder that concern or affect title to any of the shares of Common Stock to
be sold by the Selling Shareholder under this Agreement, or that seek to compel
the transfer or issuance of such Common Stock.
3.4 Legal Proceedings. There is no action, suit or proceeding before any
court, governmental agency or body, domestic or foreign, now pending or, to the
knowledge of the Selling Shareholder, overtly threatened against the Selling
Shareholder wherein an unfavorable decision, ruling or finding would reasonably
be expected to adversely affect the validity or enforceability of, or the
authority or ability of the Selling Shareholder to perform its obligations under
this Agreement
3.5 No Broker. Other than the fee to be paid by the Selling Shareholder to
the Placement Agent, the Selling Shareholder has not incurred any liability for
any finder's or broker's fee, or agent's commission in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
3.6 Lock-Up Agreement. The Selling Shareholder has executed a lock up
agreement and delivered it to the Placement Agent in which, without prior
approval of the Placement Agent, it has agreed to not sell shares of Common
Stock held by it (including shares which may be issued to it pursuant to the
exercise of outstanding options or warrants) during the period equal to the
later of: 180 days after the closing date of the offering and 90 days after the
effective date of the Registration Statement.
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ARTICLE IV
Representations, Warranties and Covenants of THE Investor
The Investor represents, warrants and covenants to the Sellers as follows:
4.1 Securities Law Representations and Warranties.
(a) The Investor is an "accredited investor" as defined in Regulation D
under the Securities Act and the Investor has the knowledge, sophistication and
experience necessary to make, and is qualified to make decisions with respect
to, investments in shares presenting an investment decision like that involved
in the purchase of the Securities, including investments in securities issued by
the Company and investments in comparable companies, can bear the economic risk
of a total loss of its investment in the Securities and has requested, received,
reviewed and considered all information it deemed relevant in making an informed
decision to purchase the Securities. Such Investor is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act and such
Investor is not a broker-dealer;
(b) The Investor (i) is acquiring the Securities for its own account for
investment only and not with a view towards, or for resale in connection with,
the public sale or distribution thereof;
(c) The Investor was not organized for the specific purpose of acquiring
the Securities;
(d) The Investor will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the Securities except in
compliance with the Securities Act, applicable state securities laws and the
respective rules and regulations promulgated thereunder;
(e) The Investor understands that the Securities are being offered and sold
to it in reliance on specific exemptions from the registration requirements of
the United States federal and state securities laws and that the Sellers are
relying upon the truth and accuracy of, and the Investor's compliance with,
representations, warranties, agreements, acknowledgements and understandings of
the Investor set forth herein and in the applicable Warrant in order to
determine the availability of such exemptions and the eligibility of the
Investor to acquire the Securities;
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(f) The Investor understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability
of an investment in the Securities nor have such authorities passed upon or
endorsed the merits of the offering of the Securities; and
(g) The Investor acknowledges that the Sellers have represented that no
action has been or will be taken in any jurisdiction outside the United States
by the Sellers that would permit an offering of the Securities, or possession or
distribution of offering materials in connection with the issue of the
Securities, in any jurisdiction outside the United States where action for that
purpose is required. If the Investor is located or domiciled outside the United
States it agrees to comply with all applicable laws and regulations in each
foreign jurisdiction in which it purchases, offers, sells or delivers Securities
or has in its possession or distributes any offering material, in all cases at
its own expense.
4.2 Legends.
(a) The Investor understands that, until the end of the holding period
under Rule 144(k) of the Securities Act (or any successor provision) the Common
Stock and the Warrants (and all securities issued in exchange therefor or in
substitution thereof, other than the Warrant Shares which shall bear the legend
set forth in Section 4.2(b) of this Agreement, if applicable) shall bear a
legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR AN EXEMPTION THEREFROM.
The legend set forth above shall be removed and the Company shall issue a
new certificate evidencing the Common Stock or a new Warrant of like tenor and
aggregate number of shares and which shall not bear the restrictive legends
required by this Section 4.2(a): (i) with respect to the Common Stock, if the
Common Stock has been resold or transferred pursuant to any registration
statement contemplated by Section 6 and such registration statement was
effective at the time of such transfer, (ii) if, in connection with a sale
transaction, such holder provides the Company with an opinion of counsel
reasonably acceptable to the Company to the effect that a public sale,
assignment or transfer of the Common Stock or Warrant, as appropriate, may be
made without registration under the Securities Act, or (iii) upon expiration of
the two-year holding period under Rule 144(k) of the Securities Act (or any
successor rule); provided that the Investor is not and has not been within 3
months prior to such date, an "affiliate" of the Company (as such term is
defined in Rule 144 of the Securities Act). The Company shall not require such
opinion of counsel for the sale of the Common Stock or Warrants in accordance
with Rule 144 of the Securities Act in the event that the Investor provides such
representations that the Company shall reasonably request confirming compliance
with the requirements of Rule 144.
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(b) Investor understands that, until the end of the applicable holding
period under Rule 144(k) of the Securities Act (or any successor provision) with
respect to the Warrant Shares, any certificate representing the Warrant Shares
shall bear a legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR AN EXEMPTION THEREFROM.
The legend set forth above shall be removed and the Company's transfer
agent shall issue the Warrant Shares, as applicable, without such legend to the
holder of the Warrant Shares upon which it is stamped, as applicable (i) if the
Warrant Shares have been resold or transferred pursuant to a registration
statement contemplated by Section 6 and such registration statement was
effective at the time of such transfer, (ii) if, in connection with a sale
transaction, such holder provides the Company with an opinion of counsel
reasonably acceptable to the Company to the effect that a public sale,
assignment or transfer of the Warrant Shares may be made without registration
under the Securities Act, or (iii) upon expiration of the applicable two-year
holding period under Rule 144(k) of the Securities Act (or any successor rule);
provided that the Investor is not and has not been within 3 months prior to such
date, an "affiliate" of the Company (as such term is defined in Rule 144 of the
Securities Act). The Company shall not require such opinion of counsel for the
sale of the Warrant Shares in accordance with Rule 144 of the Securities Act,
provided that the holder provides such representations that the Company shall
reasonably request confirming compliance with the requirements of Rule 144.
(c) The Investor understands that, in the event Rule 144(k) as promulgated
under the Securities Act (or any successor rule) is amended to change the
two-year period under Rule 144(k) (or the corresponding period under any
successor rule), (i) each reference in Sections 3.2(a) and (b) of this Agreement
to "two (2) years" or the "two-year period" shall be deemed for all purposes of
this Agreement to be references to such changed period, and (ii) all
corresponding references in the Securities shall be deemed for all purposes to
be references to the changed period, provided that such changes shall not become
effective if they are otherwise prohibited by, or would otherwise cause a
violation of, the then-applicable federal securities laws. The Investor
acknowledges that, with respect to the Warrant Shares, the two (2) year holding
period referred to in Section 4.2(b) shall commence on the date the related
Warrant is exercised.
4.3 Authorization; Enforcement; Validity. The Investor has full right,
power, authority and capacity to enter into this Agreement and to consummate the
transactions contemplated hereby and has taken all necessary action to authorize
the execution, delivery and performance of this Agreement. This Agreement
constitutes a valid and binding obligation of the Investor enforceable against
the Investor in accordance with its terms, except (i) to the extent rights to
indemnity and contribution may be limited by state or federal securities laws or
the public policy underlying such laws, (ii) enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws affecting creditors' and contracting parties' rights
generally and (iii) enforceability may be limited by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
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4.4 Certain Trading Limitations. The Investor (i) represents that on and
from the date the Investor first became aware of the Offering until the date
hereof he, she or it has not and (ii) covenants that for the period commencing
on the date hereof and ending on the day the Company publicly announces the
Offering he, she or it will not, engage in any hedging or other transaction
which is designed to or could reasonably be expected to lead to or result in, or
be characterized as, a sale, an offer to sell, a solicitation of offers to buy,
disposition of, loan, pledge or grant of any right with respect to
(collectively, a "Disposition") Common Stock of the Company by the Investor or
any other person or entity in violation of the Securities Act. Such prohibited
hedging or other transactions would include without limitation effecting any
short sale or having in effect any short position (whether or not such sale or
position is against the box and regardless of when such position was entered
into) or any purchase, sale or grant of any right (including without limitation
any put or call option) with respect to the Common Stock of the Company or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from the
Common Stock of the Company.
4.5 No Sale of Securities. The Investor hereby covenants with the Sellers
not to make any sale of the Securities without (i) complying with the provisions
of this Agreement, including Section 6.4 hereof or (ii) without satisfying the
requirements of the Securities Act and the rules and regulations promulgated
thereunder, including, without limitation, causing the prospectus delivery
requirement under the Securities Act to be satisfied, if applicable. The
Investor acknowledges that there may occasionally be times when the Company,
based on the advice of its counsel, determines that, subject to the limitations
of Section 6.4, it must suspend the use of the prospectus forming a part of the
Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the SEC or
until the Company has amended or supplemented such prospectus.
4.6 Registration Questionnaire. The Investor has completed or caused to be
completed the Registration Questionnaire attached hereto as Exhibit D and on the
signature page for use in preparation of the Registration Statement and the
answers to the Questionnaire and on such signature page are true and correct in
all material respects as of the date of this Agreement and will be true and
correct as of the effective date of the Registration Statement; provided that
the Investor shall be entitled to update such information by providing written
notice thereof to the Company prior to the effective date of the Registration
Statement.
4.7 Investor Suitability Questionnaire. The information contained in the
Investor Suitability Questionnaire in the form attached as Exhibit E delivered
by the Investor in connection with this Agreement is complete and accurate in
all respects.
4.8 No Advice. The Investor understands that nothing in this Agreement or
any other materials presented to the Investor in connection with the purchase
and sale of the Units constitutes legal, tax or investment advice. The Investor
has consulted such legal, tax and investment advisors as it, in its sole
discretion, has deemed necessary or appropriate in connection with its purchase
of the Units.
15
4.9 Independent Investment. The Investor has not agreed to act with any
other investor for the purpose of acquiring, holding, voting or disposing of the
Securities purchased hereunder for purposes of Section 13(d) under the Exchange
Act, and the Investor is acting independently with respect to its investment in
the Securities.
ARTICLE V
COVENANTS OF THE COMPANY
5.1 Form D. The Company agrees to file one or more Forms D with respect to
the Securities on a timely basis as required under Regulation D under the
Securities Act to perfect its claim to the exemption provided by Rule 506 of
Regulation D.
5.2 Form 8-K; Press Release. The Company agrees, as soon as practicable
after the Closing Date, but in no event later than one business day after the
Closing Date, to issue a press release and to file with the SEC a Current Report
on Form 8-K disclosing the sale of the Units to the Investor under this
Agreement and the Other Agreements, which press release and Current Report shall
be subject to prior review and comment by the Placement Agent. Upon the issuance
of such press release and filing of such Current Report, to the knowledge of the
Company, the Investor will not be in possession of any material, nonpublic
information regarding the Company or its Common Stock. The Company agrees that,
after the issuance of such press release and filing of such Current Report, none
of the Company's communications to the Investor will include material, nonpublic
information, unless otherwise agreed by the Company and the Investor in
accordance with law.
5.3 Certain Future Financings and Related Actions. Commencing on the
Closing Date and for a period of ninety (90) days following the effective date
of the Registration Statement (as defined in Section 6.1(a) hereof), the Company
shall not, without the prior consent of the Placement Agent, offer, sell,
contract to sell or issue (or engage any person to assist the Company in taking
any such action) any equity securities or securities convertible into,
exchangeable for or otherwise entitling the holder to acquire, any Common Stock;
provided, however, that nothing in this Section 5.3 shall prohibit the Company
from issuing securities (1) to employees, directors, officers, advisors or
consultants of the Company or any of its Subsidiaries; (2) upon exercise of
conversion, exchange, purchase or similar rights issued, granted or given by the
Company and outstanding as of the date of this Agreement; or (3) pursuant to a
strategic partnership or alliance agreement, loan agreement, equipment lease or
similar commercial agreement (including licensing and similar arrangements).
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ARTICLE VI
Registration of Shares; Compliance with the Securities Act
6.1 Registration Procedures and Expenses. The Company shall:
(a) Subject to receipt of the Registration Statement Questionnaire from the
Investor, use commercially reasonable best efforts to prepare and file with the
SEC, within 30 days after the Closing Date, a registration statement (the
"Registration Statement") to enable the resale of the Registrable Shares by the
Investor. "Registrable Shares" means (a) each Common Share; and (b) each Warrant
Share until the earlier of: (1) the date on which such share has been resold or
otherwise transferred pursuant to the Registration Statement; (2) the date on
which such share is transferred in compliance with Rule 144 under the Securities
Act or may be sold or transferred by a person who is not an affiliate of the
Company pursuant to Rule 144 under the Securities Act (or any other similar
provisions then in force) without any volume or manner of sale restrictions
thereunder; and (3) the date on which such share ceases to be outstanding
(whether as a result of redemption, repurchase and cancellation or otherwise).
(b) use commercially reasonable best efforts, subject to receipt of
necessary information from the Investor, including the Registration Statement
Questionnaire, to cause the Registration Statement to become effective within
120 days of the Closing Date;
(c) use commercially reasonable best efforts to prepare and file with the
SEC such amendments and supplements to the Registration Statement and the
Prospectus (as defined in Section 6.5 below) used in connection therewith and
take all such other actions as may be necessary to keep the Registration
Statement current and effective for a period (the "Registration Period") not
exceeding, with respect to the Investor's Registrable Shares, the earliest of
(i) the second anniversary of the Closing Date (provided, however, that with
respect to Registrable Shares that are Warrant Shares, the foregoing date shall
be the second anniversary of the date the related Warrant was exercised), (ii)
the date on which all Registrable Shares then held by the Investor may be sold
or transferred in compliance with Rule 144 under the Securities or may be sold
or transferred by a person who is not an affiliate of the Company pursuant to
Rule 144 of the Securities Act (or any other similar provisions then in force)
without any volume or manner of sale restrictions thereunder, and (iii) such
time as all Registrable Shares held by the Investor have been sold (A) pursuant
to a registration statement, (B) to or through a broker or dealer or underwriter
in a public distribution or a public securities transaction, or (C) in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all transfer restrictions
and restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale;
(d) promptly furnish to the Investor with respect to the Registrable Shares
registered under the Registration Statement such reasonable number of copies of
the Registration Statement and Prospectus, including any supplements to or
amendments of the Prospectus or Registration Statement, in order to facilitate
the public sale or other disposition of all or any of the Registrable Shares by
the Investor;
17
(e) promptly take such action as may be necessary to qualify, or obtain, an
exemption for the Registrable Shares under such of the state securities laws of
United States jurisdictions as shall be necessary to qualify, or obtain an
exemption for, the sale of the Registrable Shares in states specified in writing
by the Investor; provided, however, that the Company shall not be required to
qualify to do business or consent to service of process in any jurisdiction in
which it is not now so qualified or has not so consented;
(f) bear all expenses in connection with the procedures in paragraph (a)
through (e) of this Section 6.1 and the registration of the Registrable Shares
pursuant to the Registration Statement, regardless of whether a Registration
Statement becomes effective, including without limitation: (i) all registration
and filing fees and expenses (including filings made with Nasdaq or any other
applicable stock exchange); (ii) fees and expenses of compliance with federal
securities and state "blue sky" or securities laws; (iii) expenses of printing
(including printing certificates for the Registrable Shares and Prospectuses);
(iv) all application and filing fees in connection with listing the Registrable
Shares on the Nasdaq SmallCap Market; and (v) all fees and disbursements of
counsel of the Company and independent certified public accountants of the
Company; provided, however, that the Investor shall be responsible for paying
the underwriting commissions or brokerage fees, and taxes of any kind
(including, without limitation, transfer taxes) applicable to any disposition,
sale or transfer of the Investor's Registrable Shares. The Company shall, in any
event, bear its internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties); and
(g) advise the Investors, within two business days by e-mail, fax or other
type of communication, and, if requested by such person, confirm such advice in
writing: (i) after it shall receive notice or obtain knowledge of the issuance
of any stop order by the SEC delaying or suspending the effectiveness of the
Registration Statement or of the initiation or threat of any proceeding for that
purpose, or any other order issued by any state securities commission or other
regulatory authority suspending the qualification or exemption from
qualification of such Registrable Shares under state securities or "blue sky"
laws; and it will promptly use its commercially reasonable best efforts to
prevent the issuance of any stop order or other order or to obtain its
withdrawal at the earliest possible moment if such stop order or other order
should be issued; and (ii) when the Prospectus or any supplements to or
amendments of the Prospectus have been filed, and, with respect to the
Registration Statement or any post-effective amendment thereto, when the same
has become effective.
6.2 Delay in Effectiveness of Registration Statement. The Company further
agrees that, (i) in the event the Registration Statement has not been filed with
the SEC within 30 days after the Closing Date, and (ii) unless the failure to
become effective is due to the fault of the Investor or one or more of the
institutional investors who are Other Investors, in the event the Registration
Statement has not been declared effective by the SEC within 120 days after the
Closing Date, the Company shall pay to the Investor liquidated damages in the
amount of 1.0% of the total purchase price of the Units purchased by the
Investor pursuant to this Agreement and an additional liquidated damages payment
of 1.0% of the total purchase price of the Units purchased by the Investor
pursuant to this Agreement for each 30-day period thereafter until the
Registration Statement has been filed or declared effective, as applicable;
provided, that, in no event shall the aggregate penalty under this Section 6.2
in any 30-day period exceed 1.0% of the total purchase price of the Units
purchased by the Investor. The Company shall deliver the cash payments described
in clauses (i) and (ii) to the Investor by the fifth business day after the
occurrence of the event described in (i) or (ii), as applicable. Notwithstanding
anything to the contrary in Section 6.2 or any other provision of this
Agreement, payment of cash as provided in this Section 6.2 shall be the
Investor's sole and exclusive remedy in the event of the occurrence of an event
described in (i) or (ii).
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6.3 Piggyback Registrations. If the Company at any time proposes to file a
registration statement (other than a registration on Form X-0, Xxxx X-0 or Form
S-3 (solely with respect to dividend reinvestment plans and similar plans) or
any successor forms thereto) (a "Company Registration Statement") with respect
to securities, whether for its own account or for the account of other holders
of the Company's securities ("Other Holders") that have requested such
registration (a "Requesting Holder"), the Company shall, in each case, give
written notice of such proposed filing to the Investor at least twenty (20) days
before the anticipated filing date of the Company Registration Statement, and
such notice shall offer to the Investor the opportunity to have any or all of
the Registrable Shares held by the Investor included in the Company Registration
Statement. If the Investor desires to have its Registrable Shares registered
under this Section 6.3, it shall so advise the Company in writing within ten
(10) days after the date of receipt of such notice (which request shall set
forth the amount of Registrable Shares for which registration is requested), and
the Company shall use its commercially reasonable efforts to include in the
Company Registration Statement all such Registrable Shares so requested to be
included therein. Notwithstanding the foregoing, if such proposed offering is an
underwritten offering and the managing underwriter or underwriters of the
offering advises the Company that the total amount of Registrable Shares which
the Investor, the Company and any Other Holders intended to be included in such
proposed public offering is sufficiently large to adversely affect the success
of such proposed public offering, then the amount of securities to be offered
for the account of the Investor and the Other Holders shall be reduced pro rata,
based upon the aggregate number of securities to be offered for the accounts of
the Investor and all Other Holders (except the Company) intended to be included
in such offering, to the extent necessary to reduce the total amount of
securities to be included in such proposed public offering to the amount
recommended by such managing underwriter or underwriters before the securities
offered by the Company are so reduced. Anything to the contrary in this
Agreement notwithstanding, the Company may withdraw or postpone any Company
Registration Statement referred to in this Section 6.3 at any time before it
becomes effective or withdraw, postpone or terminate the offering after it
becomes effective without any liability or obligation to the Investor. The
obligations of the Company under this Section 6.3 shall terminate with respect
to the Investor: (1) on the date that a Registration Statement filed by the
Company in accordance with Section 6.1 is declared effective or (2) on the date
on which the Investor can sell all of its remaining Registrable Shares in any
three (3) month period pursuant to Rule 144 as promulgated under the Securities
Act without the need for any registration or qualification.
6.4 Transfer of Shares; Suspension.
(a) The Investor agrees that it will not effect any Disposition of the
Securities or its right to purchase the Registrable Shares that would constitute
a sale within the meaning of the Securities Act, except as contemplated in the
Registration Statement referred to in Section 6.1, any Company Registration
Statement referred to in 6.3 or in accordance with the Securities Act, and that
it will promptly notify the Company of any changes in the information set forth
in such registration statement regarding the Investor or its plan of
distribution.
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(b) Except in the event that paragraph (c) below applies, the Company
shall, at all times during the Registration Period, promptly (i) prepare and
file from time to time with the SEC a post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or a supplement
or amendment to any document incorporated therein by reference or file any other
required document so that such Registration Statement will not contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein not misleading, and so that, as thereafter delivered to
purchasers of the Registrable Securities being sold thereunder, such Prospectus
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; (ii) provide the Investor copies of any documents filed pursuant to
Section 6.3(b)(i); and (iii) inform the Investor that the Company has complied
with its obligations in Section 6.3(b)(i) (or that, if the Company has filed a
post-effective amendment to the Registration Statement which has not yet been
declared effective, the Company will notify the Investor to that effect, will
use its commercially reasonable efforts to secure the effectiveness of such
post-effective amendment as promptly as possible and will promptly notify the
Investor pursuant to Section 6.3(b)(iii) hereof when the amendment has become
effective).
(c) Subject to paragraph (d) below, in the event of (i) any request by the
SEC or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to a
Registration Statement or related Prospectus or for additional information; (ii)
the issuance by the SEC or any other federal or state governmental authority of
any stop order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose; (iii) the receipt by the Company
of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; or (iv) any event or circumstance which necessitates the making of any
changes in the Registration Statement or Prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and that in the case
of the Prospectus, it will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, then
the Company shall deliver a notice in writing to the Investor (the "Suspension
Notice") to the effect of the foregoing and, upon receipt of such Suspension
Notice, the Investor will refrain from selling any Registrable Shares pursuant
to the Registration Statement (a "Suspension") until the Investor's receipt of
copies of a supplemented or amended Prospectus prepared and filed by the
Company, or until it is advised in writing by the Company that the current
Prospectus may be used. In the event of any Suspension, the Company will use its
commercially reasonable efforts, consistent with the best interests of the
Company and its shareholders, to cause the use of the Prospectus so suspended to
be resumed as soon as reasonably practicable after the delivery of a Suspension
Notice to the Investor.
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(d) Notwithstanding the foregoing paragraphs of this Section 6.4, the
Investor shall not be prohibited from selling Registrable Shares under the
Registration Statement as a result of Suspensions on more than two occasions of
not more than 45 days each in any twelve-month period.
(e) In the event of a sale of Registrable Shares by the Investor under the
Registration Statement, the Investor must also deliver to the Company's transfer
agent, with a copy to the Company, a Certificate of Subsequent Sale
substantially in the form attached hereto as Exhibit F, so that the Registrable
Shares may be properly transferred.
6.5 Indemnification. For the purpose of this Section 6.5, the term
"Registration Statement" shall include any preliminary or final prospectus,
exhibit, supplement or amendment included in or relating to the Registration
Statement referred to in Section 6.1 or any Company Registration Statement
referred to in Section 6.3 and the term "Rules and Regulations" means the rules
and regulations promulgated under the Securities Act.
(a) Indemnification by the Company. The Company agrees to indemnify and
hold harmless the Investor and each person, if any, who controls the Investor
within the meaning of the Securities Act, against any losses, claims, damages,
liabilities or expenses to which the Investor or such controlling person may
become subject, under the Securities Act, the Exchange Act, or any other federal
or state statutory law or regulation insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement,
including the Prospectus, financial statements and schedules, and all other
documents filed as a part thereof, as amended at the time of effectiveness of
the Registration Statement, including any information deemed to be a part
thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A,
or pursuant to Rule 434 of the Rules and Regulations, or the Prospectus, in the
form first filed with the SEC pursuant to Rule 424(b) of the Regulations, or
filed as part of the Registration Statement at the time of effectiveness if no
Rule 424(b) filing is required (the "Prospectus"), or any amendment or
supplement thereto (ii) the omission or alleged omission to state in any of them
a material fact required to be stated therein or necessary to make the
statements in any of them, in light of the circumstances under which they were
made, not misleading, or (iii) any inaccuracy in the representations and
warranties of the Company contained in this Agreement, or any failure of the
Company to perform its obligations under this Agreement, and will reimburse the
Investor and each such controlling person for any legal and other expenses as
such expenses are reasonably incurred by the Investor or such controlling person
in connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense arises out of or is based upon (i) an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, the Prospectus or any amendment or
supplement of the Registration Statement or Prospectus in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Investor expressly for use in the Registration Statement or the Prospectus,
or (ii) the failure of the Investor to comply with the covenants and agreements
contained in Sections 4.5 or 6.4 of this Agreement respecting resale of
Securities, or (iii) the inaccuracy of any representations made by the Investor
in this Agreement or (iv) any untrue statement or omission of a material fact in
any Prospectus that is corrected in any subsequent Prospectus that was delivered
to the Investor before the pertinent sale or sales by the Investor.
21
(b) Indemnification by the Investor. The Investor will indemnify and hold
harmless the Company, each of its directors, each of its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Securities Act, against any losses, claims, damages,
liabilities or expenses to which the Company, each of its directors, each of its
officers who sign the Registration Statement or controlling person may become
subject, under the Securities Act, the Exchange Act, or any other federal or
state statutory law or regulation insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon (i) any failure on the part of the Investor to
comply with the covenants and agreements contained in Sections 4.5 or 6.4 of
this Agreement respecting the sale of the Registrable Shares or (ii) the
inaccuracy of any representation or warranty made by the Investor in this
Agreement or (iii) any untrue or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any amendment or
supplement to the Registration Statement or Prospectus, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of the Investor expressly for use therein; provided, however, that the
Investor shall not be liable for any such untrue or alleged untrue statement or
omission or alleged omission of which the Investor has delivered to the Company
in writing a correction at least five business days before the occurrence of the
transaction from which such loss was incurred, and the Investor will reimburse
the Company, each of its directors, each of its officers who signed the
Registration Statement or controlling person for any legal and other expense
reasonably incurred by the Company, each of its directors, each of its officers
who signed the Registration Statement or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action for which such person is entitled to be
indemnified in accordance with this Section 6.5(b). Notwithstanding anything to
the contrary contained herein, the Investors shall be liable under this Section
6.5(b) for only that amount as does not exceed the net proceeds to such Investor
as a result of the sale of Registrable Shares pursuant to the Registration
Statement.
(c) Indemnification Procedure.
(i) Promptly after receipt by an indemnified party under this Section 6.5
of notice of the threat or commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under this Section 6.5, promptly notify the indemnifying party in writing of the
claim; but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party for contribution
or otherwise under the indemnity agreement contained in this Section 6.5 or to
the extent it is not prejudiced as a result of such failure.
(ii) In case any such action is brought against any indemnified party and
such indemnified party seeks or intends to seek indemnity from an indemnifying
party, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with all other indemnifying parties similarly
notified, to assume the defense thereof; provided, however, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be a
conflict between the positions of the indemnifying party and the indemnified
party in conducting the defense of any such action or that there may be legal
defenses available to it or other indemnified parties that are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to assume the defense of such
action, the indemnifying party will not be liable to such indemnified party
under this Section 6.5 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless:
(1) the indemnified party shall have employed such counsel in connection
with the assumption of legal defenses in accordance with the proviso to the
preceding sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel, approved
by such indemnifying party representing all of the indemnified parties who are
parties to such action), or
(2) the indemnifying party shall not have counsel reasonably satisfactory
to the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of action, in each of which cases the
reasonable fees and expenses of counsel shall be at the expense of the
indemnifying party. Notwithstanding the provisions of this Section 6.5, the
Investor shall not be liable for any indemnification obligation under this
Agreement in excess of the amount of net proceeds received by the Investor from
the sale of the Registrable Shares, unless such obligation has resulted from the
gross negligence or willful misconduct of the Investor.
(d) Contribution. If a claim for indemnification under this Section 6.5 is
unavailable to an indemnified party (by reason of public policy or otherwise),
then each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of any losses, claims, damages, liabilities or expenses referred to in
this Agreement, in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified party in connection with the
actions, statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any losses, claims, damages, liabilities or
expenses shall be deemed to include, subject to the limitations set forth in
this Section 6.5, any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
22
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.5 were determined by pro rata allocation
or by any other method of allocation that does not take into account the
equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.5, no Investor shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds from the sale of Registrable Shares by the Investor
exceeds the amount of any damages that the Investor has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No party to this Agreement guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any other party to this Agreement who was
not guilty of such fraudulent misrepresentation.
6.6 Termination of Conditions and Obligations. The restrictions imposed by
Article 4 or Article 6 upon the transferability of the Registrable Shares shall
cease and terminate as to any particular number of the Registrable Shares upon
the passage of two years from the Closing Date or at such time as an opinion of
counsel satisfactory in form and substance to the Company shall have been
rendered to the effect that such conditions are not necessary in order to comply
with the Securities Act.
6.7 Rule 144. For a period of two years following the Closing Date
(provided, however, that with respect to Registrable Shares that are Warrant
Shares, the foregoing period shall be two years following the date the related
Warrant was exercised), the Company agrees with each holder of Registrable
Shares to:
(a) comply with the requirements of Rule 144(c) under the Securities Act
with respect to current public information about the Company; and
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act (at any
time it is subject to such reporting requirements).
6.8 Grant of Subsequent Registration Rights. From and after the Closing
Date, the Company shall not, without the prior written consent of the holders of
a majority of the Registrable Shares held by the Investor and all Other
Investors, enter into any agreement with any holder or prospective holder of any
securities of the Company giving such holder or prospective holder the right to
include any securities of the Company held by such holder under the Registration
Statement required under Section 6.1; provided that, the Company may grant
registration rights to include in the Registration Statement the shares of
Common Stock underlying the warrants to be issued to the Placement Agent in
connection with the Offering.
ARTICLE VII
7.1 Notices. Except as specifically permitted by Section 6.1(g), all
notices, requests, consents and other communications hereunder shall be in
writing, shall be mailed (A) if within United States by first-class registered
or certified airmail, or nationally recognized overnight express courier,
postage prepaid, or by facsimile, or (B) if delivered from outside the United
States, by International Federal Express or facsimile, and shall be deemed given
(i) if delivered by first-class registered or certified mail domestic, three
business days after so mailed, (ii) if delivered by nationally recognized
overnight carrier, one business day after so mailed, (iii) if delivered by
International Federal Express, two business days after so mailed, and (iv) if
delivered by facsimile, upon electric confirmation of receipt, and shall be
delivered as addressed as follows:
23
if to the Company or the Selling Shareholder, to:
Xx. Xxxx X. Xxxxxxx
Chairman, CEO and President
Gexa Corp.
00 Xxxxxxxx Xxxxx Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
with a copy to:
Xx. Xxxxxx X. Xxxxx
Xxxxxx & Xxxxxx, L.L.P.
000 Xxxxxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
if to an Investor, at its address on the signature page hereto, or at such
other address or addresses as may have been furnished to the other parties
hereto in writing.
7.2 Changes. This Agreement may not be modified or amended except pursuant
to an instrument in writing signed by the Sellers and the Investor.
7.3 Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
7.4 Severability. In case any provision contained in this Agreement should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
7.5 Survival of Representations, Warranties and Agreements. Notwithstanding
any investigation made by any party to this Agreement, all covenants,
agreements, representations and warranties made by the Company, the Selling
Shareholder and the Investor herein shall survive the execution of this
Agreement, the delivery to the Investor of the Units being purchased and the
payment therefor.
24
7.6 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Texas, without giving effect
to any of the conflicts of law principles which would result in the application
of the substantive law of another jurisdiction.
7.7 Entire Agreement. This Agreement and the Warrant and the documents
referenced herein and therein constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement and the Warrants supersede all
prior agreements and understandings.
7.8 Finders Fees. Neither the Sellers nor the Investor nor any affiliate
thereof has incurred any obligation which will result in the obligation of the
other party to pay any finder's fee or commission in connection with this
transaction, except for fees payable by the Sellers to the Placement Agent.
7.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other party.
7.10 Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors, heirs, executors and administrators and
permitted assigns of the parties hereto. With respect to transfers that are not
made pursuant to the Registration Statement, but are otherwise made in
accordance with all applicable laws and the terms of this Agreement, the rights
and obligations of the Investor under this Agreement shall be automatically
assigned by the Investor to any transferee of all or any portion of the
Investor's Securities who is a Permitted Transferee (as defined below);
provided, however, that within two business days prior to the transfer, (i) the
Company is provided written notice of the transfer including the name and
address of the transferee and the number of Securities transferred; and (ii)
that such transferee agrees in writing to be bound by the terms of this
Agreement as if such transferee was the Investor. For purposes of this
Agreement, a "Permitted Transferee" shall mean any Person who (a) is an
"accredited investor," as that term is defined in Rule 501(a) of Regulation D
under the Securities Act and (b) is a transferee of at least 50,000 Common
Shares, Warrants and/or Warrant Shares. Upon any transfer permitted by this
Section 7.10, the Company shall be obligated to such transferee to perform all
of its covenants under this Agreement as if such transferee was the Investor.
7.11 Expenses. Each party hereto shall bear its own expenses in connection
with the preparation and negotiation of the Agreement.
7.12 Exculpation. Each party to this Agreement acknowledges that Jenkens &
Xxxxxxxxx, P.C. represented Xxxxxxxxxxx & Co. Inc. in the Offering contemplated
by this Agreement and has not represented either the Sellers or the Investor or
any other investor who purchases Units in the Offering pursuant to a Securities
Purchase Agreement in substantially the form hereof.
25
IN WITNESS WHEREOF, the parties have caused this Securities Purchase
Agreement to be duly executed as of the date first written above.
GEXA CORP.
By:______________________________
Xxxx X. Xxxxxxx
Chairman, CEO and President
SELLING SHAREHOLDER
________________________________
Xxxx X. Xxxxxxx
[Signatures of Investors on Following Page]
26
"INVESTOR"
_______________________________________________
(print full legal name of Investor)
By: ______________________________________________
(signature of authorized representative)
Name:______________________________________________
Its:_______________________________________________
Address:___________________________________________
Telephone:_________________________________________
Fax:_______________________________________________
Email:_____________________________________________
Tax I.D. or SSN:___________________________________
Address where Units should be sent (if different
from above)
___________________________________________________
___________________________________________________
___________________________________________________
[signature page to Securities Purchase Agreement]
27
Schedule A
Units Purchased
TOTAL NUMBER OF UNITS: ____________
Seller Shares of Common Stock Common Stock Warrants
Gexa Corp. _________ _________
Xxxx X. Xxxxxxx _________ None
Aggregate Purchase Price: $____________
Schedule B
Company Disclosure Schedule
Section 2.1 Subsidiaries; Organization
The Company has the following subsidiaries:
Gexa Energy, LLC, a Texas limited liability company
Gexa Energy, LLC, a New Jersey limited liability company
Gexa-Cirro, LLC
Section 2.4 Reporting Status
The Form 10-K, as filed on May 18, 2004, and the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 2004, as filed on May 21,
2004 were not filed by the Company in the time periods required by the Exchange
Act.
Section 2.5 Capitalization
The Company has negotiated an agreement in principle to settle a lawsuit
with Capello Capital Corp ("Capello"). Among other things, the settlement
requires the Company to issue to Capello warrants to purchase 400,000 shares of
Common Stock at an exercise price of $4.50. As of the date hereof, no formal
settlement has been signed and the Company has not yet issued the warrant to
Capello.
At the Closing, the Company is entering into side letter agreements with
two of the institutional investors providing such investors access to certain
on-going daily and monthly reporting currently provided by the Company to its
senior lender, as well as certain other information (subject to confidentiality
and trading restrictions applicable to such institutional investors).
Exhibit A
FORM OF WARRANT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR AN APPLICABLE EXEMPTION THEREFROM.
GEXA CORP.
WARRANT TO PURCHASE 105,000 SHARES OF COMMON STOCK
Warrant No.:__________
Date of Issuance: November 23, 2004
Gexa Corp., a Texas corporation (the "Company"), hereby certifies that, for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, ZLP Master Opportunity Fund, Ltd., the registered holder hereof or
its permitted assigns, is entitled, subject to the terms and conditions of this
Warrant and of that certain Securities Purchase Agreement, dated November 23,
2004 by and between the Company, the Selling Shareholder (as defined therein)
and the holder (as such agreement may be amended, supplemented and modified from
time to time, the "Purchase Agreement"), to purchase from the Company, upon
surrender of this Warrant (as defined below) at its principal office at 00
Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000 (or such other location as the
Company may advise the holder hereof in writing), at any time or times not
before 9:00 a.m., Central Standard Time, on the Commencement Date (as defined
below) and not after 5:00 p.m., Central Standard Time, on the Expiration Date
(as defined below) (the "Exercise Period"), 105,000 fully paid nonassessable
shares of Common Stock (as defined below) of the Company at the Exercise Price
per share provided in Section 1(d) of this Warrant, such Exercise Price and such
number of shares of Common Stock to be delivered upon exercise of this Warrant
being subject to adjustment as provided in Section 8 of this Warrant.
Capitalized terms used herein but not defined shall have the same meanings
assigned to them in the Purchase Agreement.
Section 1. Definitions. The following terms as used in this Warrant shall
have the following meanings:
"Business Day" means any day other than Saturday, Sunday or other day on
which commercial banks in the City of Houston, Texas are required by law to
remain closed.
"Commencement Date" means May 24, 2005 or, if such date does not fall on a
Business Day, then the next Business Day.
"Common Stock" means (i) the common stock, par value $0.01 per share, of
the Company, and (ii) any capital stock into which such Common Stock shall have
been changed or any capital stock resulting from a reclassification of such
Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended and
the rules and regulations promulgated thereunder.
"Exercise Delivery Documents" shall have the meaning specified in Section
2(e) hereof.
"Exercise Price" shall be equal to $5.59, subject to further adjustment as
hereinafter provided.
"Expiration Date" means November 23, 2009 or, if such date does not fall on
a Business Day, then the next Business Day.
"Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization or
association and a government or any department or agency thereof.
"Principal Market" means the Nasdaq National Market, the Nasdaq SmallCap
Market or the American Stock Exchange, or if the Common Stock is not traded on
the Nasdaq National Market, the Nasdaq SmallCap Market or the American Stock
Exchange, then the principal securities exchange or trading market for the
Common Stock.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Trading Day" shall mean (x) a day on which the Principal Market is open
for business or (y) if the applicable security is not so listed on a Principal
Market or admitted for trading or quotation, a Business Day.
"Trading Price" of a security on any date of determination means:
(1) the closing sales price as reported by the Principal Market on such
date;
(2) if such security is not listed for trading on the Principal Market on
any such date, the closing sales price as reported in the composite transactions
for the principal U.S. securities exchange on which such security is so listed;
(3) if such security is not listed on a U.S. national or regional
securities exchange, the last price quoted by Interactive Data Corporation for
such security on such date or, if Interactive Data Corporation is not quoting
such price, a similar quotation service selected by the Company;
(4) if such security is not so quoted, the average of the mid-point of the
last bid and ask prices for such security on such date from at least two dealers
recognized as market-makers for such security selected by the Company for this
purpose; or
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(5) if such security is not so quoted, the average of that last bid and ask
prices for such security on such date from a dealer engaged in the trading of
securities selected by the Company for this purpose.
"Transfer Agent" has the meaning specified in Section 2(a) hereof.
"Warrant" means this Warrant and the other warrants to purchase shares of
Common Stock issued pursuant to the Purchase Agreement and all warrants issued
in exchange, transfer or replacement thereof.
"Warrant Date" has the meaning specified in Section 3 hereof.
"Warrant Delivery Date" has the meaning specified in Section 2(b) hereof.
"Warrant Share Delivery Date" has the meaning specified in Section 2(a)
hereof.
"Warrant Shares" means all shares of Common Stock issuable upon exercise of
this Warrant.
The definition of certain other terms are specified in Section 8 hereof.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, including, without
limitation, Section 2(c), this Warrant may be exercised by the holder hereof
then registered as such on the books of the Company, in whole or in part, at any
time on any Business Day during the Exercise Period by: (i) delivery of a
written notice, in the form of the subscription notice attached as Exhibit A
hereto or a reasonable facsimile thereof (the "Exercise Notice"), to the Company
and the Company's designated transfer agent (the "Transfer Agent"), of such
holder's election to exercise all or a portion of this Warrant; (ii) the
surrender of this Warrant to the Company; and (iii) the payment of the aggregate
Exercise Price to the Company by wire transfer or by certified bank check
payable to the order of the Company in United States dollars (the items to be
delivered pursuant to clauses (i), (ii) and (iii) above collectively are
referred to herein as the "Exercise Delivery Documents"); provided, however,
that if such Warrant Shares are to be issued in any name other than that of the
registered holder of this Warrant, such issuance shall be deemed a transfer and
the provisions of Section 7 of this Warrant shall be applicable. In the event of
any exercise of the rights represented by this Warrant in compliance with this
Section 2(a) and Section 2(c), the Company shall, within 3 Business Days after
receipt of the Exercise Delivery Documents, issue and deliver to the address
specified in the Exercise Notice, a certificate or certificates in such
denominations as may be requested by the holder in the Exercise Notice,
registered in the name of the holder or its designee, for the number of shares
of Common Stock to which the holder shall be entitled upon such exercise. Upon
delivery of the Exercise Delivery Documents, the holder of this Warrant shall be
deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date of delivery the certificates evidencing such Warrant
Shares.
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(b) Unless the rights represented by this Warrant shall not have taken
effect, shall have expired or shall have been fully exercised, the Company
shall, within 5 Business Days after receipt of the Exercise Delivery Documents,
and at its own expense, issue a new Warrant identical in all respects to this
Warrant exercised except it shall represent rights to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant is
exercised.
(c) Notwithstanding anything contained in this Warrant to the contrary,
this Warrant cannot be exercised, either in whole or in part, except by a holder
who, at the time of exercise, is an "accredited investor," as such term is
defined in Rule 501(a) of Regulation D under the Securities Act.
(d) Notwithstanding anything contained in this Warrant to the contrary, the
Company shall not be required to issue fractions of shares of Common Stock upon
exercise of this Warrant or to distribute certificates evidencing such
fractional shares. If more than one Warrant shall be presented for exercise in
full at the same time by the same holder, the number of full shares of Common
Stock shall be issuable upon the exercise thereof shall be computed on the basis
of the aggregate number of shares of Common Stock purchasable on exercise of all
Warrants so presented. In lieu of any fractional shares, there shall be paid to
the holder an amount of cash equal to the same fraction of the current market
value of a share of Common Stock. For purposes of this Section 2(d), the current
market value of a share of Common Stock shall be the Trading Price of a share of
Common Stock for the Trading Day immediately prior to the date of such exercise.
Section 3. Date; Duration. The issue date of this Warrant is November 23,
2004 (the "Warrant Date"). This Warrant, in all events, shall be wholly void and
of no effect at 5:00 pm Central Standard Time on the Expiration Date.
Section 4. Taxes.
(a) The Company shall pay any and all documentary, stamp, transfer and
other similar taxes that may be payable with respect to the issuance and
delivery of Warrant Shares upon exercise of this Warrant.
(b) Notwithstanding any other provision of this Warrant, for income tax
purposes, the holder or any assignee or transferee shall agree that the Company
and the Transfer Agent shall be permitted to withhold from any amounts payable
to such assignee or transferee any taxes required by law to be withheld from
such amounts. Unless exempt from the obligation to do so, each assignee or
transferee shall execute and deliver to the Company or the Transfer Agent, as
applicable, a properly completed Form W-8 or W-9, indicating that such assignee
or transferee is not subject to back-up withholding for United States federal
income tax purposes. Each assignee or transferee that does not deliver such a
form pursuant to the preceding sentence shall have the burden of proving to the
Company's reasonable satisfaction that it is exempt from such requirement.
(c) The issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant for any issue tax in respect thereof; provided, however, that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of the holder hereof, and the Company shall not be required to
issue or deliver such certificates or other securities unless and until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
4
Section 5. Warrant Holder Not Deemed a Shareholder. Except as otherwise
specifically provided herein, prior to the exercise of this Warrant represented
hereby, the holder of this Warrant shall not be entitled, as such, to any rights
of a shareholder of the Company, including, without limitation, the right to
vote or to consent to any action of the shareholders of the Company, to receive
dividends or other distributions, to exercise any preemptive right or to receive
any notice of meetings of shareholders of the Company, and shall not be entitled
to receive any notice of any proceedings of the Company. In addition, nothing
contained in this Warrant shall be construed as imposing any liabilities on such
holder to purchase any securities (upon exercise of this Warrant or otherwise)
or as a shareholder of the Company, whether such liabilities are asserted by the
Company or by creditors of the Company.
Section 6. Compliance with Securities Laws.
(a) The holder of this Warrant, by the acceptance hereof, represents and
warrants that it is acquiring this Warrant and the Warrant Shares issuable upon
exercise of this Warrant for its own account for investment only and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the Securities
Act; provided, however, that by making the representations herein, the holder
does not agree to hold this Warrant or any of the Warrant Shares for any minimum
or other specific term and reserves the right to dispose of this Warrant and
Warrant Shares at any time in accordance with or pursuant to a registration
statement or an exemption under the Securities Act. The holder of this Warrant
further represents, by acceptance hereof, that, as of this date, such holder is
an "accredited investor" as such term is defined in Rule 501(a) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
and was not organized for the specific purpose of acquiring this Warrant or the
Warrant Shares.
(b) The holder of this Warrant understands that, until the end of the
holding period under Rule 144(k) of the Securities Act (or any successor
provision) this Warrant (and all securities issued in exchange therefor or in
substitution thereof, other than Warrant Shares, which shall bear the legend set
forth in Section 6(c) of this Warrant, if applicable) shall bear a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR AN EXEMPTION THEREFROM.
5
The legend set forth above shall be removed and the Company shall issue a
new certificate evidencing a new Warrant of like tenor and aggregate number of
shares and which shall not bear the restrictive legends required by this Section
6(b): (i) if, in connection with a sale transaction, such holder provides the
Company with an opinion of counsel reasonably acceptable to the Company to the
effect that a public sale, assignment, pledge or transfer of this Warrant, as
appropriate, may be made without registration under the Securities Act, or (ii)
upon expiration of the two?year holding period under Rule 144(k) of the
Securities Act (or any successor rule); provided that the Investor is not and
has not been within three (3) months prior to such date, an "affiliate" of the
Company (as such term is defined in Rule 144 of the Securities Act). The Company
shall not require such opinion of counsel for the sale of this Warrant in
accordance with Rule 144 of the Securities Act in the event that the holder
provides such representations that the Company shall reasonably request
confirming compliance with the requirements of Rule 144.
(c) The holder of this Warrant understands that, until the end of the
applicable holding period under Rule 144(k) of the Securities Act (or any
successor provision) with respect to the Warrant Shares, any certificate
representing the Warrant Shares shall bear a legend in substantially the
following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR AN EXEMPTION THEREFROM.
The legend set forth above shall be removed and the Company shall issue the
Warrant Shares without such legend to the holder of the Warrant Shares upon
which it is stamped, (i) if the Warrant Shares have been resold or transferred
pursuant to a registration statement that was effective at the time of such
transfer, (ii) if, in connection with a sale transaction, such holder provides
the Company with an opinion of counsel reasonably acceptable to the Company to
the effect that a public sale, assignment, pledge or transfer of the Warrant
Shares may be made without registration under the Securities Act, or (iii) upon
expiration of the applicable two?year holding period under Rule 144(k) of the
Securities Act (or any successor rule); provided that the holder of the Warrant
Shares is not and has not been within three (3) months prior to such date, an
"affiliate" of the Company (as such term is defined in Rule 144 of the
Securities Act). The Company shall not require such opinion of counsel for the
sale of the Warrant Shares in accordance with Rule 144 of the Securities Act,
provided that the holder provides such representations that the Company shall
reasonably request confirming compliance with the requirements of Rule 144.
Whenever a certificate representing the Warrant Shares is required to be issued
to a the holder without a legend, in lieu of delivering physical certificates
representing the Warrant Shares, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, the Company shall use its reasonable best efforts to cause its
transfer agent to electronically transmit the Warrant Shares to the holder by
crediting the account of the holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission system (to the extent not inconsistent with any
provisions of this Warrant or the Purchase Agreement).
6
Section 7. Ownership and Transfer.
(a) The Company shall maintain at its principal executive offices or such
other office or agency of the Company as it may designate by notice to the
holder hereof (a "Designated Office"), a register for this Warrant (the "Warrant
Register"), in which the Company shall record the name and address of the person
in whose name this Warrant has been issued. Upon the transfer of this Warrant in
accordance with the provisions of clause (b) below, the Company shall record the
name and address of such new holder(s) as well as the name and address of each
transferee. The Company may treat the person in whose name this Warrant is
registered on the Warrant Register as the owner and holder thereof for all
purposes, notwithstanding any notice to the contrary, but in all events
recognizing any transfers made in accordance with the terms of this Warrant.
(b) The holder of the Warrants agrees that it will not (i) transfer the
Warrant prior to delivery to the Company of the opinion of counsel referred to
in, and to the effect described in, Section 7(c) hereof, or until registration
hereof under the Securities Act and any applicable state securities or blue sky
laws has become effective, or (ii) transfer the Warrant Shares prior to delivery
to the Company of the opinion of counsel referred to in, and to the effect
described in, Section 7(c) hereof, or until registration of such Warrant Shares
under the Securities Act and any applicable state securities or blue sky laws
has become effective.
(c) Except as otherwise expressly provided herein, by its acceptance hereof
the holder of the Warrant agrees that, prior to any transfer of the Warrant or
any transfer of the Warrant Shares, such holder will deliver to the Company a
statement setting forth the intention of such holder's prospective transferee
with respect to its retention or disposition of the Warrant or of such Warrant
Shares (whichever is involved in such transfer), in either such case together
with a signed copy of the opinion of such holder's counsel, concurred in by
counsel to the Company, to the effect that the proposed transfer of the Warrant
or the proposed transfer of the Warrant Shares may be effected without
registration under the Securities Act and any applicable state securities or
blue sky laws. The holder of the Warrant shall then be entitled to transfer the
Warrant or to transfer such Warrant Shares in accordance with the statement of
intention delivered by such holder to the Company.
(d) Notwithstanding any provisions contained in this Warrant to the
contrary, this Warrant may be transferred, in whole or in part, by the holder
hereof without regard to the requirements and conditions set forth in Sections
7(b) and 7(c) above if any such transfer is made to any entity that is
wholly-owned by such holder.
Section 8. Adjustment of Exercise Price and Number of Shares Issuable Upon
Exercise Upon Certain Corporate Events.
The Exercise Price and the number of Warrant Shares issuable upon the
exercise of this Warrant are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 8.
(a) In case the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of Common
Stock, the Exercise Price in effect at the opening of business on the date
following the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Exercise Price by a fraction of which (i) the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the record date
of this Warrant fixed for such determination and (ii) the denominator shall be
the sum of such number of shares of Common Stock referred to in (i) above plus
the total number of shares constituting such dividend or other distribution.
Such reduction in the Exercise Price shall become effective immediately after
the opening of business on the day following the record date. If any dividend or
distribution of the type described in this Section 8(a) of this Warrant is
declared but not so paid or made, the Exercise Price shall again be adjusted to
the Exercise Price that otherwise then be in effect if such dividend or
distribution had not been declared.
7
(b) In case the outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the Exercise Price in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Exercise Price in effect at the opening of business
on the day following the day upon which such combination becomes effective shall
be proportionately increased, such reduction or increase, as applicable, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(c) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock shares of any class of capital stock of the Company
or evidences of its indebtedness or other property (including cash or assets or
securities, but excluding (i) dividends or distributions to which Section 8(a)
applies, (ii) any dividend or distribution paid exclusively in cash, or (iii)
any consideration distributed in connection with reclassification, change,
merger, consolidation, statutory share exchange, combination, sale or conveyance
to which Section 9 of this Warrant applies (the foregoing hereinafter in this
Section 8(c) called the "Distributed Assets")), the Exercise Price shall be
reduced so that the same shall be equal to the price determined by multiplying
the Exercise Price in effect immediately prior to the close of business on the
Record Date with respect to such distribution by a fraction of which (i) the
numerator shall be the Current Market Price (as defined in Section 8(d) of this
Warrant) on such date less the fair market value (as determined in good faith by
the Company's Board of Directors, whose determination shall be conclusive and
set forth in a board resolution) on such date of the portion of the Distributed
Assets so distributed applicable to one share of Common Stock (determined on the
basis of the number of shares of Common Stock outstanding on the Record Date (as
defined in Section 8(d) of this Warrant)), and (ii) the denominator shall be
such Current Market Price, such reduction to become effective immediately prior
to the opening of business on the day following the Record Date.
Such reduction in the Exercise Price shall become effective immediately
prior to the opening of business on the day following the Record Date. However,
in the event the then fair market value (as so determined) of the portion of the
Distributed Assets so distributed applicable to one share of Common Stock is
equal to or greater than the Current Market Price on the Record Date, in lieu of
the foregoing adjustment, adequate provision shall be made so that the holder of
this Warrant shall have the right to receive upon exercise of this Warrant (or
any portion thereof) the amount of Distributed Assets such holder would have
received had such holder converted this Warrant (or portion thereof) immediately
prior to such Record Date. In the event that such dividend or distribution is
not so paid or made, the Exercise Price shall again be adjusted to be the
Exercise Price which would then be in effect if such dividend or distribution
had not been declared.
8
If the Company's Board of Directors determines the fair market value of any
distribution for purposes of this Section 8(c) by reference to the actual
trading market for any securities comprising all or part of such distribution,
it must in doing so consider the prices in such market over the same period (the
"Reference Period") used in computing the Current Market Price pursuant to
Section 8(d) of this Warrant to the extent possible, unless a majority of the
independent members of the Company's Board of Directors determines in good faith
that determining the fair market value during the Reference Period would not be
in the best interest of the holders.
With respect to any rights that may be issued or distributed pursuant to
any rights plan that the Company implements after the earliest date of issuance
of this Warrant or any predecessor Warrant (a "Rights Plan"), upon exercise of
this Warrant into Common Stock, to the extent such Rights Plan is in effect upon
such exercise, the holder of this Warrant will receive, in addition to the
Common Stock, the rights described therein (whether or not the rights have
separated from the Common Stock prior to the time of exercise), subject to the
limitations set forth in any such Rights Plan. In the event the holder receives
such rights, there will be no adjustment to the Exercise Price or the number of
shares issuable upon exercise of this Warrant pursuant to this Section 8(c). In
the event the holder does not receive such rights upon exercise of this Warrant
for any reason, then an adjustment shall be made to the Exercise Price to the
extent provided for in the other provisions of this Section 8(c).
For purposes of this Section 8(c) and Section 8(a) of this Warrant, any
dividend or distribution to which this Section 8(c) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock to which Section 8(a) of this Warrant apply (or
both), shall be deemed instead to be (1) a dividend or distribution of the
evidences of indebtedness, assets, shares of capital stock, rights or warrants
immediately followed by (2) a dividend or distribution of such shares of Common
Stock or such rights or warrants (and any further Exercise Price reduction
required by Section 8(a) of this Warrant with respect to such dividend or
distribution shall then be made, except (A) the Record Date of such dividend or
distribution shall be substituted as "the date fixed for the determination of
shareholders entitled to receive such dividend or other distribution," "Record
Date fixed for such determination" and "Record Date" within the meaning of
Section 8(a) of this Warrant, and (B) any shares of Common Stock included in
such dividend or distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the meaning of Section
8(a) of this Warrant and any reduction or increase in the number of shares of
Common Stock resulting from such subdivision or combination shall be disregarded
in connection with such dividend or distribution.
(d) For purposes of this Section 8, the following terms shall have the
meaning indicated:
9
(1) "Current Market Price" shall mean the closing price per share of Common
Stock on the date immediately prior to the date in question.
(2) "Record Date" shall mean, with respect to any dividend, distribution or
other transaction or event in which the holders of Common Stock have the right
to receive any cash, securities or other property or in which the Common Stock
(or other applicable security) is exchanged for or converted into any
combination of cash, securities or other property, the date fixed for
determination of shareholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
(e) The Company may make such reductions in the Exercise Price, in addition
to those required by Sections 8(a) or (b) of this Warrant, as the Board of
Directors considers to be advisable to avoid or diminish any income tax to
holders of Common Stock or rights to purchase Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes.
(f) No adjustment in the Exercise Price shall be required under this
Section 8 unless such adjustment would require an increase or decrease of at
least 1% in the Exercise Price; provided, however, that any adjustments which by
reason of this Section 8(f) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 8 shall be made by the Company and shall be made to the nearest cent or
to the nearest one hundredth of a share, as the case may be. No adjustment need
be made for a change in the no par value of the Common Stock.
(g) Notice to Holders of Warrants Prior to Certain Actions. In case:
(1) the Company shall declare a dividend (or any other distribution) on its
Common Stock that would require an adjustment in the Exercise Price pursuant to
this Section 8;
(2) of any reclassification of the Common Stock of the Company (other than
a subdivision or combination of its outstanding Common Stock, a change in par
value, a change from par value to no par value or a change from no par value to
par value), or any merger, consolidation, statutory share exchange or
combination to which the Company is a party and for which approval of any
shareholders of the Company is required, or the sale, transfer or conveyance of
all or substantially all of the assets of the Company; or
(3) of the voluntary or involuntary dissolution, liquidation or winding-up
of the Company,
10
the Company shall cause to be provided to the holder of this Warrant at
such address appearing in the Warrant Register at least ten (10) days prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the date
as of which the holders of shares of Common Stock of record to be entitled to
such dividend, distribution, rights or warrants are to be determined, or (y) the
date on which such reclassification, merger, consolidation, statutory share
exchange, combination, sale, transfer, conveyance, dissolution, liquidation or
winding-up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, merger, consolidation, statutory share exchange,
combination, sale, transfer, dissolution, liquidation or winding-up. Failure to
give such notice, or any defect therein, shall not affect the legality or
validity of the proceedings or actions described in clauses (1) through (3) of
this Section 8(g). In addition, whenever the Exercise Price is adjusted as
provided in this Section 8, the Company shall prepare a notice of such
adjustment of the Exercise Price setting forth the adjusted Exercise Price and
the date on which each adjustment becomes effective and shall mail such notice
of such adjustment of the Exercise Price to the holder of this Warrant at his
last address in the Warrant Register within twenty (20) days of the effective
date of such adjustment. Failure to deliver such notice nor any defect therein
shall not effect the legality or validity of any such adjustment.
(h) In any case in which this Section 8 provides that an adjustment shall
become effective immediately after a record date for an event, the Company may
defer until the occurrence of such event (i) issuing to the holder of this
Warrant exercised after such record date and before the occurrence of such event
the additional shares of Common Stock issuable upon such exercise by reason of
the adjustment required by such event over and above the Common Stock issuable
upon such exercise before giving effect to such adjustment and (ii) paying to
such holder any amount in cash in lieu of any fraction pursuant to Section 2(d)
of this Warrant.
(i) Upon each adjustment of the Exercise Price pursuant to this Section 8,
this Warrant shall thereupon evidence the right to purchase that number of
Warrant Shares (calculated to the nearest hundredth of a share) obtained by
multiplying the number of Warrant Shares purchasable immediately prior to such
adjustment upon exercise of this Warrant by the Exercise Price in effect
immediately prior to such adjustment and dividing the product so obtained by the
Exercise Price in effect immediately after such adjustment. The adjustment
pursuant to this Section 8(i) to the number of Warrant Shares purchasable upon
exercise of this Warrant shall be made each time an adjustment of the Exercise
Price is made pursuant to this Section 8 (or would be made but for Section 8 of
this Warrant).
Section 9. Effect of Reclassification, Consolidation, Merger or Sale. If
any of the following events occur, namely (i) any reclassification or change of
the outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), as a result of which holders of Common
Stock shall be entitled to receive capital stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
(ii) any consolidation, merger, statutory share exchange or combination of the
Company with another Person as a result of which holders of Common Stock shall
be entitled to receive stock, securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock (other than as a
result of a change in name, a change in par value or a change in the
jurisdiction of incorporation), (iii) any sale or conveyance of the properties
and assets of the Company as, or substantially as, an entirety to any other
Person as a result of which holders of Common Stock shall be entitled to receive
stock, securities or other property or assets (including cash) with respect to
or in exchange for such Common Stock, then the Company or the successor or
purchasing person, as the case may be, shall issue a replacement Warrant
providing that this Warrant shall be exercisable for the kind and amount of
shares of stock and other securities or property or assets (including cash)
receivable upon such reclassification, change, consolidation, merger,
combination, statutory share exchange, sale or conveyance by a holder of a
number of shares of Common Stock issuable upon exercise of such Warrants
(assuming, for such purposes, a sufficient number of authorized shares of Common
Stock available for issuance upon exercise of all such Warrants) immediately
prior to such reclassification, change, consolidation, merger, combination,
statutory share exchange, sale or conveyance assuming such holder of Common
Stock did not exercise his rights of election, if any, that holders of Common
Stock who were entitled to vote or consent to such transaction had as to the
kind or amount of securities, cash or other property receivable upon such
consolidation, merger, combination, statutory share exchange, sale or conveyance
(provided that, if the kind or amount of securities, cash or other property
receivable upon such consolidation, merger, combination, statutory share
exchange, sale or conveyance is not the same for each share of Common Stock in
respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purposes of this Section 9 the kind and
amount of securities, cash or other property receivable upon such consolidation,
merger, combination, statutory share exchange, sale or conveyance for each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). Such replacement Warrant shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in Section 8 of this Warrant. If, in
the case of any such reclassification, change, consolidation, merger,
combination, statutory share exchange, sale or conveyance, the stock or other
securities and assets receivable thereupon by a holder of shares of Common Stock
shall include shares of stock or other securities and assets of a corporation
other than the successor or purchasing person, as the case may be, in such
reclassification, change, consolidate, merger, combination, statutory share
exchange, sale or conveyance, then such replacement Warrant shall also be
executed by such other person and shall contain such additional provisions to
protect the interests of the holder of the Warrants as the Company's Board of
Directors shall reasonably consider necessary by reason of the foregoing. The
Exercise Price for the stock and other securities, property and assets
(including cash) so receivable upon such event shall be an amount equal to the
Exercise Price immediately prior to such event.
11
The Company shall mail such replacement Warrant to the holder of this
Warrant, at such holder's address appearing in the Warrant Register within
twenty (20) days after execution thereof. Failure to deliver such notice shall
not affect the legality or validity of such replacement Warrant.
The above provisions of this Section 9 shall similarly apply to successive
or series of related reclassifications, changes, consolidations, mergers,
statutory shares exchanges, combinations, sales and conveyances.
If this Section 9 applies to any event or occurrence, Section 8 of this
Warrant shall not apply, provided that such other provisions shall continue to
apply to all other issuances.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrants. If this Warrant
is lost, stolen, mutilated or destroyed, the Company shall promptly, on receipt
of an indemnification undertaking or other form of security reasonably
acceptable to the Company (or in the case of a mutilated Warrant, the Warrant),
issue a new Warrant of like denomination and tenor as this Warrant so lost,
stolen, mutilated or destroyed.
12
Section 11. Notice. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed (A) if within
United States by first-class registered or certified airmail, or nationally
recognized overnight express courier, postage prepaid, or by facsimile, or (B)
if delivered from outside the United States, by International Federal Express or
facsimile, and shall be deemed given (i) if delivered by first-class registered
or certified mail domestic, three business days after so mailed, (ii) if
delivered by nationally recognized overnight carrier, one business day after so
mailed, (iii) if delivered by International Federal Express, two business days
after so mailed, and (iv) if delivered by facsimile, upon electric confirmation
of receipt, and shall be delivered as addressed as follows:
If to the Company:
Xx. Xxxx Xxxxxxx
Chairman, CEO and President
Gexa Corp.
00 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxx
Xxxxxx & Xxxxxx, L.L.P.
000 Xxxxxxxxx, 00xx Xxx.
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
If to the Transfer Agent:
Corporate Stock Transfer, Inc.
0000 Xxxxxx Xxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
If to a holder of this Warrant, to it at the address and facsimile number
set forth on the signature page to the Purchase Agreement or at such other
address and facsimile as shall be delivered to the Company upon the issuance or
transfer of this Warrant.
Section 12. Amendments. This Warrant and any term hereof may be amended,
changed, waived, discharged, or terminated only by an instrument in writing
signed by the Company and the holders of this Warrant. Such amendment, change,
waiver, discharge or termination shall be binding on the Company and all of the
Warrant holder's assignees and transferees. No waivers of any term, condition or
provision of this Warrant in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such term, condition or
provision.
13
Section 13. Obligations Binding on Successors. This Warrant will be binding
upon any entity succeeding to the Company in one or a series of transactions by
merger, consolidation or acquisition of all or substantially all of the
Company's assets or other similar transactions.
Section 14. Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of Texas.
Section 15. Descriptive Headings. The headings of this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
as of day and year first above written.
GEXA CORP.
14
Exhibit B
ESCROW AGENT WIRE TRANSFER INSTRUCTIONS
Exhibit C
FORM OF OPINION OF COUNSEL TO THE COMPANY
Capitalized terms not defined herein shall have the meaning given them in
the Agreement.
1. The Company is duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization and has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted.
2. The Company has all requisite power and authority to execute, deliver, and
perform its obligations under the Agreement. The execution and delivery of
the Agreement by the Company and the performance of each of its obligations
thereunder have been duly and validly authorized by all necessary corporate
action and no further consent or authorization of the Company, its Board of
Directors or its shareholders is required.
3. Neither the execution, delivery or performance of the Agreement by the
Company nor the consummation of the transactions contemplated thereby will
(i) conflict with or violate the Company's Articles of Incorporation or
Bylaws, (ii) conflict with or violate any law applicable to the Company, or
by which any property or asset of any of the Company is bound or affected
or (iii) result in a default under the terms of any agreement to which the
Company is a party and which the Company has attached as an exhibit to its
reports filed with the SEC under the Exchange Act.
4. No approvals or authorizations by, or filings or qualifications with, any
governmental authority or body are required in connection with the
execution and delivery of the Agreement or any other agreements or
documents executed and delivered pursuant thereto by the Company, except
such as have been duly obtained or made.
5. The shares of Common Stock issued by the Company under the Agreement and
the shares of Common Stock to be issued upon exercise of the Warrants
issued under the Agreement shall, when issued pursuant to the terms and
conditions specified in the Agreement, be duly authorized, validly issued,
fully paid and non-assessable shares of Common Stock. The Warrants shall,
when issued pursuant to the terms and conditions specified in the
Agreement, be duly authorized, validly issued and non-assessable Warrants
of the Company and the Common Stock to be issued upon exercise of the
Warrants has been duly reserved for issuance by the Company.
6. The Agreement and the Warrant have been duly executed and delivered by the
Company and each constitutes a legal, valid and binding agreement of the
Company enforceable against the Company in accordance with their respective
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, or other similar laws affecting the
enforcement of creditors' rights generally and other general principles of
equity and subject to other standard exceptions and qualifications. The
shares of Common Stock issued by the Company under the Agreement and the
shares of Common Stock to be issued upon exercise of the Warrants issued
under the Agreement are not subject to any preemptive rights under the
Company's Articles of Incorporation or Bylaws.
7. To our knowledge, there is no action, suit, claim, investigation or
proceeding pending or threatened against the Company which questions the
validity of the Agreement or the transactions contemplated thereby or any
action taken or to be taken pursuant thereto.
8. Subject to the accuracy of the representations and warranties of the
parties to this Agreement and each of the Other Investors in the Offering
and assuming that there has been no general solicitation or advertising of
the shares of Common Stock or Warrants to be sold under the Agreement, the
offer and sale of the shares of Common Stock and the Warrants in conformity
with the terms of the Agreement are exempt from the registration
requirements of Section 5 of the Securities Act.
2
Exhibit D
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please
provide us with the following information:
1. For use in the "Selling Shareholder" section of the Registration Statement,
please state your or your organization's name exactly as it should appear
in the Registration Statement (the "Holder"):
________________________________________________________________________
2. Please provide the type and amount of securities of the Company that the
Holder will own immediately after Closing, including those securities
purchased by the Holder pursuant to the Securities Purchase Agreement and
those Securities purchased by the Holder through other transactions:
Securities purchased pursuant to the Securities Purchase Agreement: _______
______________________________________________________________________
Other securities beneficially owned through other transactions:________
_______________________________________________________________________
3. Has the Holder had any position, office or other material relationship
within the past three years with the Company or its affiliates?
_____ Yes _____ No
If yes, please indicate the nature of any such relationships below:
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
4. If the Holder is an entity, identify the individual or individuals who have
sole or shared voting or investment power over the Company's securities
owned by such entity:
_________________________________________________________
5. Is the Holder a broker-dealer? (indicate "Yes" or "No") ____________
Is the Holder an affiliate of a broker-dealer? (indicate "Yes" or "No")
____________
If the answer is yes, except as set forth below, the Holder purchased the
shares in the ordinary course of business, and at the time of the purchase of
the securities to be resold, the seller had no agreements or understandings,
directly or indirectly, with any person to distribute them.
State any exceptions here:
_______________________________________________________________________
_______________________________________________________________________
The undersigned has reviewed the answers to the above questions and affirms
that the same are true, complete and accurate. The undersigned agrees to notify
the Company of any changes in the foregoing information.
Dated: ______________, 2004 _________________________________
_________________________________
_________________________________
(Please sign your name in exactly the same
manner as the certificate(s) for the shares
being registered)
2
Exhibit E
INVESTOR SUITABILITY QUESTIONNAIRE
Before any sale of Common Stock or Warrants by Gexa Corp. can be made to
you, this Questionnaire must be completed and returned to Xxxxxxxxxxx & Co. Inc.
Attn: Investment Banking Department, 000 Xxxxx Xxxxxx, 00xx Xxxxx., Xxx Xxxx, XX
00000.
1. IF YOU ARE AN INDIVIDUAL PLEASE FILL IN THE IDENTIFICATION QUESTIONS IN (A)
IF YOU ARE AN ENTITY PLEASE FILL IN THE IDENTIFICATION QUESTIONS IN (B)
A. INDIVIDUAL INDENTIFICATION QUESTIONS
Name_____________________________________________
(Exact name as it should appear on stock certificate)
Residence Address_________________________________
Home Telephone Number_____________________________
Fax Number________________________________________
Date of Birth______________________________________
Social Security Number_____________________________
B. INDENTIFICATION QUESTIONS FOR ENTITIES
Name ____________________________________________________
(Exact name as it will appear on stock certificate)
Address of Principal
Place of Business________________________________________
State (or Country) of Formation
or Incorporation_________________________________________
Contact Person_____________________________________________
Telephone Number ( )_____________________________________
Type of Entity
(corporation, partnership,
trust, etc.)_______________________________________________
Was entity formed for the purpose of this investment?
Yes____ No ______
2. DESCRIPTION OF INVESTOR
The following information is required to ascertain whether you would be
deemed an "accredited investor" as defined in Rule 501 of Regulation D under the
Securities Act. Please check whether you are any of the following:
[] a corporation or partnership with total assets in excess of $5,000,000, not
organized for the purpose of this particular investment
[] private business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940 [a U.S. venture capital fund which
invests primarily through private placements in non-publicly traded
securities and makes available (either directly or through co-investors) to
the portfolio companies significant guidance concerning management,
operations or business objectives
[] a Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment
Act of 1958
[] an investment company registered under the Investment Company Act of 1940
or a business development company as defined in Section 2(a)(48) of that
Act
[] a trust not organized to make this particular investment, with total assets
in excess of $5,000,000 whose purchase is directed by a sophisticated
person as described in Rule 506(b)(2)(ii) of the Securities Act of 1933 and
who completed item 4 below of this questionnaire
[] a bank as defined in Section 3(a)(2) or a savings and loan association or
other institution defined in Section 3(a)(5)(A) of the Securities Act of
1933 acting in either an individual or fiduciary capacity
[] an insurance company as defined in Section 2(13) of the Securities Act of
1933
[] an employee benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974 (i) whose investment decision is
made by a fiduciary which is either a bank, savings and loan association,
insurance company, or registered investment advisor, or (ii) whose total
assets exceed $5,000,000, or (iii) if a self-directed plan, whose
investment decisions are made solely by a person who is an accredited
investor and who completed Part I of this questionnaire;
[] a charitable, religious, educational or other organization described in
Section 501(c)(3) of the Internal Revenue Code, not formed for the purpose
of this investment, with total assets in excess of $5,000,000
[] an entity not located in the U.S. none of whose equity owners are U.S.
citizens or U.S. residents
[] a broker or dealer registered under Section 15 of the Securities Exchange
Act of 1934
[] a plan having assets exceeding $5,000,000 established and maintained by a
government agency for its employees
[] an individual who had individual income from all sources during each of the
last two years in excess of $200,000 or the joint income of you and your
spouse (if married) from all sources during each of such years in excess of
$300,000
[] an individual who reasonably expects that either your own income from all
sources during the current year to exceed $200,000 or the joint income of
you and your spouse (if married) from all sources during the current year
to exceed $300,000
[] an individual whose net worth as of the date you purchase the securities
offered, together with the net worth of your spouse, be in excess of
$1,000,000
[] an entity in which all of the equity owners are accredited investors
3. BUSINESS, INVESTMENT AND EDUCATIONAL EXPERIENCE
Occupation_________________________
Number of Years_____________________
Present Employer____________________
Position/Title______________________
Educational Background________________
Frequency of prior investment (check one in each column):
Stocks & Bonds Venture Capital Investments
Frequently
Occasionally
Never
4. SIGNATURE
The above information is true and correct. The undersigned recognizes that
the Company and its counsel are relying on the truth and accuracy of such
information in reliance on the exemption contained in Subsection 4(2) of the
Securities Act of 1933, as amended, and Regulation D promulgated thereunder. The
undersigned agrees to notify the Company promptly of any changes in the
foregoing information which may occur prior to the investment.
Executed at ___________________, on [_________ ___], 2004
____________________________
(Signature)
____________________________
(Title if for Entity)
3
Exhibit F
CERTIFICATE OF SUBSEQUENT SALE
[Continental Stock Transfer]
[address and contact]
RE: Sale of Shares of Common Stock of Gexa Corp. (the "Company") pursuant to
the Company's Prospectus dated _____________ (the "Prospectus")
Ladies and Gentlemen:
The undersigned hereby certifies, in connection with the sale of shares of
Common Stock of the Company included in the table of Selling Shareholders in the
Prospectus, that the undersigned has sold the shares pursuant to the Prospectus
and in a manner described under the caption "Plan of Distribution" in the
Prospectus and that such sale complies with all applicable securities laws,
including, without limitation, the Prospectus delivery requirements of the
Securities Act of 1933, as amended.
Selling Shareholder (the beneficial owner):_______________________
Record Holder (e.g., if held in name of nominee):_________________
Restricted Stock Certificate No.(s):______________________________
Number of Shares Sold:____________________________________________
Date of Sale:_____________________________________________________
In the event that you receive a stock certificate(s) representing more
shares of Common Stock than have been sold by the undersigned, then you should
return to the undersigned a newly issued certificate for such excess shares in
the name of the Record Holder and BEARING A RESTRICTIVE LEGEND. Further, you
should place a stop transfer on your records with regard to such certificate.
Very truly yours,
Dated:________________
By:_________________________________
Print Name:_________________________
Title:______________________________
