Exhibit 10.4
PLACEMENT AGENCY AGREEMENT
This Placement Agency Agreement (this "Agreement") is made and entered into as
of December __, 2004 (the "Effective Date"), by and between Consolidated
Energy, Inc., a Wyoming corporation (the "Company"), and Stonegate Securities,
Inc., a Texas corporation ("Stonegate").
WHEREAS, the Company desires to retain Stonegate as its non-exclusive
placement agent, and Stonegate is willing to act in such capacity, in each
case subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and Stonegate (each a "Party" and collectively,
the "Parties") hereby agree as follows:
1. RETENTION OF STONEGATE; SCOPE OF SERVICES.
(a) Subject to the terms and conditions set forth herein, the Company hereby
retains Stonegate to act as the non-exclusive placement agent to the Company
during the Contract Period (as defined in Section 2 below), and Stonegate
hereby agrees to be so retained.
(b) As the non-exclusive placement agent to the Company, Stonegate will have
the non-exclusive right during the Contract Period to identify for the Company
prospective purchasers (collectively, the "Purchasers" and each individually,
a "Purchaser") in one or more placement (each, a "Placement" and
collectively, the "Placements") of debt and/or equity securities to be issued
by the Company, the type and dollar amount being as mutually agreed to by the
Parties (the "Securities").
(c) Terms of the Placements shall be as set forth in subscription documents,
including any stock purchase or subscription agreement, escrow agreement,
registration rights agreement, warrant agreement and/or other documents to be
executed and delivered in connection with each Placement (collectively, the
"Subscription Documents"). The Placements are intended to be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to Regulation D ("Regulation D") of the rules and
regulations of the Securities and Exchange Commission (the "SEC") promulgated
under the Securities Act.
(d) Stonegate will act on a best efforts basis and will have no obligation to
purchase any of the Securities offered in any Placement. During the Contract
Period, Stonegate shall have the non-exclusive right to arrange for all sales
of Securities in the Placements, including without limitation the exclusive
right to identify potential buyers for the Securities. All sales of
Securities in the Placements shall be subject to the approval of the Company,
which approval may be withheld in the Company's sole discretion.
2. CONTRACT PERIOD AND TERMINATION.
(a) Stonegate shall act as the Company's non-exclusive placement agent under
this Agreement for a period commencing on the Effective Date, and continuing
until terminated by either Party upon 10 days notice to the other Party (the
"Contract Period").
(b) Upon termination, neither party will have any further obligation under
this Agreement, except as provided in Sections 5, 6, 7, 8, 9 and 10 hereof.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The representations and warranties of the Company made to the Purchasers as
set forth in the Subscription Documents are hereby incorporated by reference
as of the date of consummation of the sale of the Securities (the "Closing")
and all such representations and warranties are hereby deemed made by the
Company directly to Stonegate as though set forth in full herein. The company
represents and warrants that it has full power and authority to enter into
this Agreement and to perform its obligations hereunder. This Agreement is
enforceable against the Company in accordance with its terms, subject to
applicable laws governing bankruptcy, insolvency and creditors' rights
generally. The Agreement does not conflict with, violate, cause a default,
right of termination, or acceleration (whether through the passage of time or
otherwise) under any contract, agreement, or understanding binding upon the
Company or any subsidiary of the Company.
4. COVENANTS OF THE COMPANY.
The Company covenants and agrees as follows:
(a) Neither the Company nor any affiliate of the Company (as defined in Rule
501(b) of Regulation D) will sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Securities
Act) of the Company which will be integrated with the sale of the Securities
in a manner which would require the registration under the Securities Act of
the Securities.
(b) Any and all filings and documents required to be filed in connection with
or as a result of the Placements pursuant to federal and state securities laws
are the responsibility of the Company and will be filed by the Company.
(c) Any press release to be issued by the Company announcing or referring to
any Placement shall be subject to the prior review of Stonegate, and each such
press release shall, at the request of Stonegate, identify Stonegate as the
placement agent. Stonegate shall be permitted to publish a tombstone or
similar advertisement upon completion of each Placement identifying itself as
the Company's placement agent with respect thereto. This Agreement shall not
be filed publicly by the Company without the prior written consent of
Stonegate, unless required by applicable law or regulation.
(a)
5. FURNISHING OF COMPANY INFORMATION; CONFIDENTIALITY.
(a) In connection with Stonegate's activities hereunder on the Company's
behalf, the Company shall furnish Stonegate with all reasonable information
concerning the Company and its operations that Stonegate deems necessary or
appropriate (the "Company Information") and shall provide Stonegate with
reasonable access to the Company's books, records, officers, directors,
employees, accountants and counsel. The Company acknowledges and agrees that,
in rendering its services hereunder, Stonegate will be using and relying upon
the Company Information without independent verification thereof or
independent appraisal of any of the Company's assets and may, in its sole
discretion, use additional information contained in public reports or other
information furnished by the Company or third parties.
(b) Stonegate agrees that the Company Information will be used solely for the
purpose of performing its services hereunder. Subject to the limitations set
forth in subsection (c) below, Stonegate will keep the Company Information
provided hereunder confidential and will not disclose such Company Information
or any portion thereof, except (i) to a third party contacted by Stonegate on
behalf of, and with the prior approval of, the Company pursuant hereto who has
agreed to be bound by a confidentiality agreement satisfactory in form and
substance to the Company, or (ii) to any other person for which the Company's
consent to disclose such Company Information has been obtained.
(c) Stonegate's confidentiality obligations under this Agreement shall not
apply to any portion of the Company Information which (i) at the time of
disclosure to Stonegate or thereafter is generally available to and known by
the public (other than as a result of a disclosure directly or indirectly by
Stonegate in violation of this Agreement); (ii) was available to Stonegate on
a non-confidential basis from a source other than the Company, provided that
such source is not and was not bound by a confidentiality agreement with the
Company; (iii) has been independently acquired or developed by Stonegate
without violating any of its obligations under this Agreement; or (iv) the
disclosure of which is legally compelled (whether by deposition,
interrogatory, request for documents, subpoena, civil or administrative
investigative demand or other similar process). In the event that Stonegate
becomes legally compelled to disclose any of the Company Information,
Stonegate shall provide the Company with prompt prior written notice of such
requirement so that the Company may seek a protective order or other
appropriate remedy and/or waive compliance with the terms of this Agreement.
(d) The obligations of the Parties under this Section 5 shall survive the
termination of this Agreement for 12 months.
6. FEES AND EXPENSES.
(a) As compensation for services rendered by Stonegate in connection with the
Placements, the Company agrees to pay Stonegate a fee (the "Agency Fee") of:
(i) eight percent (8%) of the gross proceeds from the sale of Securities in
the Placements for Five Million Dollars ($5,000,000) or less (on a cumulative
basis); (ii) seven percent (7%) of the gross proceeds from the sale of
Securities for between Five Million Dollars ($5,000,000) and up to and
including Ten Million Dollars ($10,000,000) of Securities sold in the
Placements (on a cumulative basis); and (iii) six percent (6%) of the gross
proceeds from the sale of Securities for any Securities sold in the Placements
in excess of Ten Million Dollars ($10,000,000) (on a cumulative basis). The
Agency Fee shall be paid immediately upon the closing of each sale of
Securities by the Company.
(b) The Company shall also promptly reimburse Stonegate for all reasonable
out-of-pocket expenses incurred by Stonegate and its directors, officers and
employees in connection with the performance of Stonegate's services under
this Agreement. For these purposes, "out-of-pocket expenses" shall include,
but not be limited to, attorneys' fees and costs, long distance telephone,
facsimile, courier, mail, supplies, travel and similar expenses.
(c) Upon closing of the Placement, the Company agrees to issue to Stonegate a
Securities Purchase Warrant (the "Representative's Warrant") entitling the
holder(s) thereof to purchase an amount of Securities equal to ten percent
(10%) of the total number of Securities sold in the Placement for a period of
five (5) years at an exercise price per share equal to the price at which the
Securities are sold to Purchasers. The Representative's Warrant shall
otherwise be substantially in the form of Exhibit A attached hereto.
(d) The obligations of the Parties under this Section 6 shall survive the
termination of this Agreement for any reason.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold Stonegate harmless from and
against any and all losses, claims, damages or liabilities (or actions,
including securityholder actions, in respect thereof) related to or arising
out of Stonegate's engagement hereunder or its role in connection herewith,
and will reimburse Stonegate for all reasonable expenses (including reasonable
costs, expenses, awards and counsel fees and/or judgments) as they are
incurred by Stonegate in connection with investigating, preparing for or
defending any such action or claim, whether or not in connection with pending
or threatened litigation in which Stonegate is a party. The Company will not,
however, be responsible for any claims, liabilities, losses, damages or
expenses which are finally judicially determined to have resulted primarily
from the bad faith, gross negligence or willful misconduct of Stonegate. The
Company also agrees that Stonegate shall not have any liability to the Company
for or in connection with such engagement, except for any such liability for
losses, claims, damages, liabilities or expenses incurred by the Company that
result primarily from the bad faith, gross negligence or willful misconduct of
Stonegate. In the event that the foregoing indemnity is unavailable (except
by reason of the bad faith or gross negligence of Stonegate), then the Company
shall contribute to amounts paid or payable by Stonegate in respect of its
losses, claims, damages and liabilities in such proportion as appropriately
reflects the relative benefits received by, and fault of, the Company and
Stonegate in connection with the matters as to which such losses, claims,
damages or liabilities relate, and other equitable considerations. The
foregoing shall be in addition to any rights that Stonegate may have at common
law or otherwise and shall extend upon the same terms to and inure to the
benefit of any director, officer, employee, agent or controlling person of
Stonegate. The Company hereby consents to personal jurisdiction, service and
venue in any court in which any claim which is subject to this agreement is
brought against Stonegate or any other person entitled to indemnification or
contribution under this subsection (a).
(b) Stonegate agrees to indemnify and hold the Company harmless from and
against any and all losses, claims, damages or liabilities (or actions,
including securityholder actions, in respect thereof) which are finally
judicially determined to have resulted primarily from the bad faith, gross
negligence or willful misconduct of Stonegate, and will reimburse the Company
for all reasonable expenses (including reasonable costs, expenses, awards and
counsel fees and/or judgments) as they are incurred by the Company in
connection with investigating, preparing for or defending any such action or
claim, whether or not in connection with pending or threatened litigation in
which the Company is a party. In the event that the foregoing indemnity is
unavailable, then Stonegate shall contribute to amounts paid or payable by the
Company in respect of its losses, claims, damages and liabilities in such
proportion as appropriately reflects the relative benefits received by, and
fault of, the Company and Stonegate in connection with the matters as to which
such losses, claims, damages or liabilities relate, and other equitable
considerations. The foregoing shall be in addition to any rights that the
Company may have at common law or otherwise and shall extend upon the same
terms to and inure to the benefit of any director, officer, employee, agent or
controlling person of the Company. Stonegate hereby consents to personal
jurisdiction, service and venue in any court in which any claim, which is
subject to this agreement, is brought against the Company or any other person
entitled to indemnification or contribution under this subsection (b).
(c) The obligations of the Parties under this Section 7 shall survive the
termination of this Agreement.
8. NON-CIRCUMVENTION.
The Company hereby agrees that, for a period of one year from the end of the
Contract Period or other termination of this Agreement, the Company will not
enter into any agreement, transaction or arrangement with any of the
institutions (including their agents, principals and affiliates and the
accounts and funds which they manage or advise) which Stonegate has
introduced, directly or indirectly, to the Company pursuant to a meeting,
telephone call, any written communication, or by e mail, as prospective
purchasers of the Securities in the Placements (collectively, the "Stonegate
Contacts"), regardless of whether a transaction is consummated with such
prospective purchasers, unless the Company notifies Stonegate in writing of
the agreement, transaction or arrangement, and pays Stonegate a fee equal to
the Agency Fee for securities of the Company sold to Stonegate Contacts.
9. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAWS
PROVISIONS THEREOF.
10. ARBITRATION.
Stonegate and the Company will attempt to settle any claim or controversy
arising out of this Agreement through consultation and negotiation in good
faith and a spirit of mutual cooperation. Any dispute which the parties
cannot resolve may then be submitted by either party to binding arbitration in
Dallas, Texas under the rules of the American Arbitration Association for
resolution. Nothing in this paragraph will prevent either party from
resorting to judicial proceedings if (a) good faith efforts to resolve the
dispute under these procedures have been unsuccessful or (b) interim relief
from a court is necessary to prevent serious and irreparable injury.
11. NO WAIVER.
The failure or neglect of any party hereto to insist, in any one or more
instances, upon the strict performance of any of the terms or conditions of
this Agreement, or waiver by any party of strict performance of any of the
terms or conditions of this Agreement, shall not be construed as a waiver or
relinquishment in the future of such term or condition, but the same shall
continue in full force and effect.
12. SUCCESSORS AND ASSIGNS.
The benefits of this Agreement shall inure to the benefit of the Parties,
their respective successors, assigns and representatives, and the obligations
and liabilities assumed in this Agreement by the Parties shall be binding upon
their respective successors and assigns. This Agreement may not be assigned
by either Party without the express written consent of the other Party, which
consent shall not be unreasonably withheld.
13. NOTICES.
All notices and other communications required or permitted to be given under
this Agreement shall be in writing and shall be delivered personally or sent
by certified mail, return receipt requested, recognized overnight delivery
service, or facsimile as follows:
If to the Company:
Consolidated Energy, Inc.
0000 Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxx, President
If to Stonegate:
Stonegate Securities, Inc.
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxxx, President
Either Party may change its address or facsimile number set forth above by
giving the other Party notice of such change in accordance with the provisions
of this Section 13. A notice shall be deemed given (a) if by personal
delivery, on the date of such delivery, (b) if by certified mail, on the date
shown on the applicable return receipt, (c) if by overnight delivery service,
on the day after the date delivered to the service, or (d) if by facsimile, on
the date of transmission.
14. NATURE OF RELATIONSHIP.
The Parties intend that Stonegate's relationship to the Company and the
relationship of each director, officer, employee or agent of Stonegate to the
Company shall be that of an independent contractor and not as an employee of
the Company or an affiliate thereof. Nothing contained in this Agreement
shall constitute or be construed to be or create a partnership or joint
venture between Stonegate and the Company or their respective successors or
assigns. Neither Stonegate nor any director, officer, employee or agent of
Stonegate shall be considered to be an employee of the Company by virtue of
the services provided hereunder.
15. MISCELLANEOUS
Stonegate's obligations under this Agreement are subject to the following
general conditions:
(a) All relevant terms, conditions, and circumstances relating to the
Placements will be reasonably satisfactory to Stonegate and its counsel.
(b) Stonegate reserves the right to solicit the assistance of outside dealers
("Dealers") to assist in the offer and sale of the Placements; provided,
however, that any such Dealers agree in writing to be bound by the terms of
the applicable Placement. It is understood that Stonegate, in its sole
discretion, shall be entitled to pay over to any such Dealers any portion of
the compensation received by Stonegate hereunder. The Company shall have no
financial liability for any fees or expenses of any such Dealers.
16. CAPTIONS.
The Section titles herein are for reference purposes only and do not control
or affect the meaning or interpretation of any term or provision hereof.
17. AMENDMENTS.
No alteration, amendment, change or addition hereto shall be binding or
effective unless the same is set forth in a writing signed by a duly
authorized representative of each Party.
18. PARTIAL INVALIDITY.
If it is finally determined that any term or provision hereof is invalid or
unenforceable, (a) the remaining terms and provisions hereof shall be
unimpaired, and (b) the invalid or unenforceable term or provision shall be
replaced by a term or provision that is valid and enforceable and that comes
as close as possible to expressing the intention of the invalid or
unenforceable term or provision.
19. ENTIRE AGREEMENT.
This Agreement embodies the entire agreement and understanding of the Parties
and supersedes any and all prior agreements, arrangements and understandings
relating to the matters provided for herein.
20. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be an original, but all of which together shall be considered one and
the same agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
written above by duly authorized representatives of the Company and Stonegate.
CONSOLIDATED ENERGY, INC.
By:
Title:
STONEGATE SECURITIES, INC.
By:
Title:
EXHIBIT A
Form of Representative's Warrant
THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
SECURITIES LAWS, HAVE BEEN TAKEN FOR INVESTMENT, AND MAY NOT BE SOLD OR
TRANSFERRED OR OFFERED FOR SALE OR TRANSFER UNLESS A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS WITH RESPECT TO
SUCH SECURITIES IS THEN IN EFFECT, OR IN THE OPINION OF COUNSEL (WHICH OPINION
IS REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES), SUCH
REGISTRATION UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS IS
NOT REQUIRED.
Date: 1/12/05
Warrant to Purchase
25,735
Shares
CONSOLIDATED ENERGY, INC.
(Incorporated under the laws of the State of Wyoming)
REPRESENTATIVE'S WARRANT FOR THE PURCHASE OF SHARES OF
COMMON STOCK
Warrant Price: [price for the Securities sold in the placement]
$ 1.70 per share, subject to adjustment as provided below.
THIS IS TO CERTIFY that, for value received, Stonegate Securities, Inc.
("Stonegate") and its assigns (collectively, the "Holder", ____________),
is entitled to purchase, subject to the terms and conditions hereinafter set
forth, up to 25,735 shares of the common stock, par value $0.001 per share
("Common Stock"), of Consolidated Energy, Inc., a Wyoming corporation (the
"Company"), and to receive certificate(s) for the Common Stock so purchased.
1. Exercise Period and Vesting. The exercise period is the period beginning
on the date of this Warrant (the "Issuance Date") and ending at 5:00 p.m.,
Dallas, Texas time, five years from the Issuance Date (the "Exercise Period").
This Warrant is vested in full as of the Issuance Date and is immediately
exercisable by Holder. This Warrant will terminate automatically and
immediately upon the expiration of the Exercise Period.
2. Exercise of Warrant; Cashless Exercise. This Warrant may be exercised, in
whole or in part, at any time and from time to time during the Exercise
Period. Such exercise shall be accomplished by tender to the Company of the
purchase price set forth above as the warrant price (the "Warrant Price"),
either (a) in cash, by wire transfer or by certified check or bank cashier's
check, payable to the order of the Company, or (b) by surrendering such number
of shares of Common Stock received upon exercise of this Warrant with a
current market price equal to the Warrant Price (a "Cashless Exercise"),
together with presentation and surrender to the Company of this Warrant with
an executed subscription in substantially the form attached hereto as Exhibit
A (the "Subscription"). Upon receipt of the foregoing, the Company will
deliver to the Holder, as promptly as possible, a certificate or certificates
representing the shares of Common Stock so purchased, registered in the name
of the Holder or its transferee (as permitted under Section 3 below). With
respect to any exercise of this Warrant, the Holder will for all purposes be
deemed to have become the holder of record of the number of shares of Common
Stock purchased hereunder on the date this Warrant, a properly executed
Subscription and payment of the Warrant Price is received by the Company (the
"Exercise Date"), irrespective of the date of delivery of the certificate
evidencing such shares, except that, if the date of such receipt is a date on
which the stock transfer books of the Company are closed, such person will be
deemed to have become the holder of such shares at the close of business on
the next succeeding date on which the stock transfer books are open.
Fractional shares of Common Stock will not be issued upon the exercise of this
Warrant. In lieu of any fractional shares that would have been issued but for
the immediately preceding sentence, the Holder will be entitled to receive
cash equal to the current market price of such fraction of a share of Common
Stock on the trading day immediately preceding the Exercise Date. In the
event this Warrant is exercised in part, the Company shall issue a new Warrant
to the Holder covering the aggregate number of shares of Common Stock as to
which this Warrant remains exercisable for.
If the Holder elects to conduct a Cashless Exercise, the Company shall cause
to be delivered to the Holder a certificate or certificates representing the
number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
Where:
X = the number of shares of Common Stock to be issued to Holder;
Y = the portion of the Warrant (in number of shares of Common
Stock) being exercised by Holder (at the date of such
calculation);
A = the fair market value of one share of Common Stock on the
Exercise Date (as calculated below); and
B = Warrant Price (as adjusted to the date of such calculation).
For purposes of the foregoing calculation, "fair market value of one share of
Common Stock on the Exercise Date" shall mean: (i) if the principal trading
market for such securities is a national or regional securities exchange, the
closing price on such exchange for day immediately prior to such Exercise
Date; (ii) if sales prices for shares of Common Stock are reported by the
Nasdaq National Market System or Nasdaq Small Cap Market (or a similar system
then in use), the last reported sales price for the day immediately prior to
such Exercise Date; or (iii) if neither (i) nor (ii) above are applicable, and
if bid and ask prices for shares of Common Stock are reported in the
over-the-counter market by Nasdaq (or, if not so reported, by the National
Quotation Bureau), the average of the high bid and low ask prices so reported
for the ten (10) trading days immediately prior to such Exercise Date.
Notwithstanding the foregoing, if there is no reported closing price, last
reported sales price, or bid and ask prices, as the case may be, for the
period in question, then the current market price shall be determined as of
the latest ten (10) day period prior to such day for which such closing price,
last reported sales price, or bid and ask prices, as the case may be, are
available, unless such securities have not been traded on an exchange or in
the over-the-counter market for 30 or more days immediately prior to the day
in question, in which case the current market price shall be determined in
good faith by, and reflected in a formal resolution of, the Board of Directors
of the Company. The Company acknowledges and agrees that this Warrant was
issued on the Issuance Date.
3. Transferability and Exchange.
(a) This Warrant, and the Common Stock issuable upon the exercise hereof, may
not be sold, transferred, pledged or hypothecated unless the Company shall
have been provided with an opinion of counsel, or other evidence reasonably
satisfactory to it, that such transfer is not in violation of the Securities
Act, and any applicable state securities laws. Subject to the satisfaction of
the aforesaid condition, this Warrant and the underlying shares of Common
Stock shall be transferable from time to time by the Holder upon written
notice to the Company. If this Warrant is transferred, in whole or in part,
the Company shall, upon surrender of this Warrant to the Company, deliver to
each transferee a Warrant evidencing the rights of such transferee to purchase
the number of shares of Common Stock that such transferee is entitled to
purchase pursuant to such transfer. The Company may place a legend similar to
the legend at the top of this Warrant on any replacement Warrant and on each
certificate representing shares issuable upon exercise of this Warrant or any
replacement Warrants. Only a registered Holder may enforce the provisions of
this Warrant against the Company. A transferee of the original registered
Holder becomes a registered Holder only upon delivery to the Company of the
original Warrant and an original Assignment, substantially in the form set
forth in Exhibit B attached hereto.
(b) This Warrant is exchangeable upon its surrender by the Holder to the
Company for new Warrants of like tenor and date representing in the aggregate
the right to purchase the number of shares purchasable hereunder, each of such
new Warrants to represent the right to purchase such number of shares as may
be designated by the Holder at the time of such surrender.
4. Adjustments to Warrant Price and Number of Shares Subject to Warrant. The
Warrant Price and the number of shares of Common Stock purchasable upon the
exercise of this Warrant are subject to adjustment from time to time upon the
occurrence of any of the events specified in this Section 4. For the purpose
of this Section 4, "Common Stock" means shares now or hereafter authorized of
any class of common stock of the Company and any other stock of the Company,
however designated, that has the right to participate in any distribution of
the assets or earnings of the Company without limit as to per share amount
(excluding, and subject to any prior rights of, any class or series of
preferred stock).
(a) In case the Company shall (i) pay a dividend or make a distribution in
shares of Common Stock or other securities, (ii) subdivide its outstanding
shares of Common Stock into a greater number of shares, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issue by reclassification of its shares of Common Stock other securities of
the Company, then the Warrant Price in effect at the time of the record date
for such dividend or on the effective date of such subdivision, combination or
reclassification, and/or the number and kind of securities issuable on such
date, shall be proportionately adjusted so that the Holder of any Warrant
thereafter exercised shall be entitled to receive the aggregate number and
kind of shares of Common Stock (or such other securities other than Common
Stock) of the Company, at the same aggregate Warrant Price, that, if such
Warrant had been exercised immediately prior to such date, the Holder would
have owned upon such exercise and been entitled to receive by virtue of such
dividend, distribution, subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
surviving corporation) of cash, evidences of indebtedness or assets, or
subscription rights or warrants, the Warrant Price to be in effect after such
record date shall be determined by multiplying the Warrant Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the current market price per share of Common Stock on such record
date, less the amount of cash so to be distributed (or the fair market value
(as determined in good faith by, and reflected in a formal resolution of, the
Board of Directors of the Company) of the portion of the assets or evidences
of indebtedness so to be distributed, or of such subscription rights or
warrants, applicable to one share of Common Stock, and the denominator of
which shall be such current market price per share of Common Stock. Such
adjustment shall be made successively whenever such a record date is fixed;
and in the event that such distribution is not so made, the Warrant Price
shall again be adjusted to be the Warrant Price which would then be in effect
if such record date had not been fixed.
(c) For the purpose of any computation under any subsection of this Section 4,
the "current market price" per share of Common Stock on any date shall be the
per share price of the Common Stock on the trading day immediately prior to
the event requiring an adjustment hereunder and shall be: (i) if the
principal trading market for such securities is a national or regional
securities exchange, the closing price on such exchange on such day; or (ii)
if sales prices for shares of Common Stock are reported by the Nasdaq National
Market System or Small Cap Market System (or a similar system then in use),
the last reported sales price so reported on such day; or (iii) if neither (i)
nor (ii) above are applicable, and if bid and ask prices for shares of Common
Stock are reported in the over-the-counter market by Nasdaq (or, if not so
reported, by the National Quotation Bureau), the average of the high bid and
low ask prices so reported on such day. Notwithstanding the foregoing, if
there is no reported closing price, last reported sales price, or bid and ask
prices, as the case may be, for the day in question, then the current market
price shall be determined as of the latest date prior to such day for which
such closing price, last reported sales price, or bid and ask prices, as the
case may be, are available, unless such securities have not been traded on an
exchange or in the over-the-counter market for 30 or more days immediately
prior to the day in question, in which case the current market price shall be
determined in good faith by, and reflected in a formal resolution of, the
Board of Directors of the Company.
(d) Notwithstanding any provision herein to the contrary, no adjustment in the
Warrant Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Warrant Price; provided, however,
that any adjustments which by reason of this subsection (d) are not required
to be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 4 shall be made to the
nearest cent or the nearest one-hundredth of a share, as the case may be.
(e) In the event that at any time, as a result of an adjustment made pursuant
to subsection (a) above, the Holder of any Warrant thereafter exercised shall
become entitled to receive any shares of capital stock of the Company other
than shares of Common Stock, thereafter the number of such other shares so
receivable upon exercise of any Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the shares of Common Stock contained in this
Section 4, and the other provisions of this Warrant shall apply on like terms
to any such other shares.
(f) If the Company merges or consolidates into or with another corporation or
entity, or if another corporation or entity merges into or with the Company
(excluding such a merger in which the Company is the surviving or continuing
corporation and which does not result in any reclassification, conversion,
exchange, or cancellation of the outstanding shares of Common Stock), or if
all or substantially all of the assets or business of the Company are sold or
transferred to another corporation, entity, or person, then, as a condition to
such consolidation, merger, or sale (a "Transaction"), lawful and adequate
provision shall be made whereby the Holder shall have the right from and after
the Transaction to receive, upon exercise of this Warrant and upon the terms
and conditions specified herein and in lieu of the shares of the Common Stock
that would have been issuable if this Warrant had been exercised immediately
before the Transaction, such shares of stock, securities, or assets as the
Holder would have owned immediately after the Transaction if the Holder had
exercised this Warrant immediately before the effective date of the
Transaction.
5. Registration Rights. The Company hereby grants to Holder, with respect to
the shares of Common Stock underlying this Warrant, registration rights
identical to those that are granted to Purchasers in the Placement (as such
terms are defined in that certain Placement Agency Agreement, dated as of
December 13, 2004, by and between the Company and Stonegate); it being
specifically agreed and understood that the shares of Common Stock underlying
this Warrant will be included in any registration statement filed by the
Company which includes shares of Common Stock, or shares of Common Stock
underlying any securities, issued to Purchasers in the Placement.
6. Reservation of Shares. The Company agrees at all times to reserve and hold
available out of its authorized but unissued shares of Common Stock the number
of shares of Common Stock issuable upon the full exercise of this Warrant.
The Company further covenants and agrees that all shares of Common Stock that
may be delivered upon the exercise of this Warrant will, upon delivery, be
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the purchase thereof hereunder.
7. Notices to Holder. Upon any adjustment of the Warrant Price (or number of
shares of Common Stock purchasable upon the exercise of this Warrant) pursuant
to Section 4, the Company shall promptly thereafter cause to be given to the
Holder written notice of such adjustment. Such notice shall include the
Warrant Price (and/or the number of shares of Common Stock purchasable upon
the exercise of this Warrant) after such adjustment, and shall set forth in
reasonable detail the Company's method of calculation and the facts upon which
such calculations were based. Where appropriate, such notice shall be given
in advance and included as a part of any notice required to be given under the
other provisions of this Section 7.
In the event of (a) any fixing by the Company of a record date with respect to
the holders of any class of securities of the Company for the purpose of
determining which of such holders are entitled to dividends or other
distributions, or any rights to subscribe for, purchase or otherwise acquire
any shares of capital stock of any class or any other securities or property,
or to receive any other right, (b) any capital reorganization of the Company,
or reclassification or recapitalization of the capital stock of the Company or
any transfer of all or substantially all of the assets or business of the
Company to, or consolidation or merger of the Company with or into, any other
entity or person, or (c) any voluntary or involuntary dissolution or winding
up of the Company, then and in each such event the Company will give the
Holder a written notice specifying, as the case may be (i) the record date for
the purpose of such dividend, distribution, or right, and stating the amount
and character of such dividend, distribution, or right; or (ii) the date on
which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, conveyance, dissolution, liquidation, or winding up is
to take place and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or such capital stock or securities receivable upon
the exercise of this Warrant) shall be entitled to exchange their shares of
Common Stock (or such other stock securities) for securities or other property
deliverable upon such event. Any such notice shall be given at least 10 days
prior to the earliest date therein specified.
8. No Rights as a Stockholder. This Warrant does not entitle the Holder to
any voting rights or other rights as a stockholder of the Company, nor to any
other rights whatsoever except the rights herein set forth.
9. Additional Covenants of the Company. For so long as the Common Stock is
listed for trading on any regional or national securities exchange or Nasdaq
(National Market or Small Cap System), the Company shall, upon issuance of any
shares for which this Warrant is exercisable, at its expense, promptly obtain
and maintain the listing of such shares. The Company shall also comply with
the reporting requirements of Sections 13 and 15(d) of the Exchange Act for so
long as and to the extent that such requirements apply to the Company.
The Company shall not, by amendment of its Articles of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant. Without limiting the generality of the foregoing, the Company (a)
will at all times reserve and keep available, solely for issuance and delivery
upon exercise of this Warrant, shares of Common Stock issuable from time to
time upon exercise of this Warrant, (b) will not increase the par value of any
shares of capital stock receivable upon exercise of this Warrant above the
amount payable therefor upon such exercise, and (c) will take all such actions
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable stock.
10. Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the Company, the Holder and their respective successors and
permitted assigns.
11. Notices. The Company agrees to maintain a ledger of the ownership of this
Warrant (the "Ledger"). Any notice hereunder shall be given by registered or
certified mail if to the Company, at its principal executive office and, if to
the Holder, to its address shown in the Ledger of the Company; provided,
however, that the Holder may at any time on three (3) days written notice to
the Company designate or substitute another address where notice is to be
given. Notice shall be deemed given and received after a certified or
registered letter, properly addressed with postage prepaid, is deposited in
the U.S. mail.
12. Severability. Every provision of this Warrant is intended to be
severable. If any term or provision hereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the
remainder of this Warrant.
13. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Texas without giving effect to the
principles of choice of laws thereof.
14. Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Warrant, the prevailing party shall be entitled to recover
reasonable attorneys' fees in addition to its costs and expenses and any other
available remedy.
15. Entire Agreement. This Warrant (including the Exhibits attached hereto)
constitutes the entire understanding between the Company and the Holder with
respect to the subject matter hereof, and supersedes all prior negotiations,
discussions, agreements and understandings relating to such subject matter.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
duly authorized officer as of the date first set forth above.
CONSOLIDATED ENERGY, INC.
By:
Title:
Exhibit A
SUBSCRIPTION FORM
(To be Executed by the Holder to Exercise the Rights To Purchase Common Stock
Evidenced by the Within Warrant)
The undersigned hereby irrevocably subscribes for _______ shares (the "Stock")
of the Common Stock of Consolidated Energy, Inc. (the "Company") pursuant to
and in accordance with the terms and conditions of the attached Warrant (the
"Warrant"), and hereby makes payment of $_______ therefor by [tendering cash,
wire transferring or delivering a certified check or bank cashier's check,
payable to the order of the Company] [surrendering _______ shares of Common
Stock received upon exercise of the Warrant, which shares have a current
market price equal to such payment as required in Section 2 of the Warrant].
The undersigned requests that a certificate for the Stock be issued in the
name of the undersigned and be delivered to the undersigned at the address
stated below. If the Stock is not all of the shares purchasable pursuant to
the Warrant, the undersigned requests that a new Warrant of like tenor for the
balance of the remaining shares purchasable thereunder be delivered to the
undersigned at the address stated below.
In connection with the issuance of the Stock, I hereby represent to the
Company that I am acquiring the Stock for my own account for investment and
not with a view to, or for resale in connection with, a distribution of the
shares within the meaning of the Securities Act of 1933, as amended (the
"Securities Act").
I understand that because the Stock has not been registered under the
Securities Act, I must hold such Stock indefinitely unless the Stock is
subsequently registered and qualified under the Securities Act or is exempt
from such registration and qualification. I shall make no transfer or
disposition of the Stock unless (a) such transfer or disposition can be made
without registration under the Securities Act by reason of a specific
exemption from such registration and such qualification, or (b) a registration
statement has been filed pursuant to the Securities Act and has been declared
effective with respect to such disposition. I agree that each certificate
representing the Stock delivered to me shall bear substantially the same as
set forth on the front page of the Warrant.
I agree that each certificate representing the Stock delivered to me shall
bear substantially the same legend as set forth on the front page of the
Warrant.
I further agree that the Company may place stop orders on the certificates
evidencing the Stock with the transfer agent, if any, to the same effect as
the above legend. The legend and stop transfer notice referred to above shall
be removed only upon my furnishing to the Company of an opinion of counsel
(reasonably satisfactory to the Company) to the effect that such legend may be
removed.
Date:
Signed:
Address:
Exhibit B
ASSIGNMENT
(To be Executed by the Holder to Effect Transfer of the Attached Warrant)
For Value Received __________________________ hereby sells, assigns and
transfers to _________________________ the Warrant attached hereto and the
rights represented thereby to purchase _________ shares of Common Stock in
accordance with the terms and conditions hereof, and does hereby irrevocably
constitute and appoint _________________________ as attorney to transfer such
Warrant on the books of the Company with full power of substitution.
Dated:________________________ Signed: _____________________________
Please print or typewrite name and address of assignee:
Please insert Social Security or other Tax Identification Number of Assignee:
