EXHIBIT 10.1
SUBSCRIPTION AGREEMENT
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New Frontier Energy, Inc.
XX Xxx 000
Xxxxxxxxx, XX 00000-0000
Ladies and Gentlemen:
The undersigned (the "Investor") is writing to advise you of the following
terms and conditions under which the undersigned hereby offers to subscribe (the
"Offer") for the securities of this private placement (the "Offering") offered
by New Frontier Energy, Inc., a Colorado corporation (the "Company"). The
exclusive placement agent for the Offering is Westminster Securities Corporation
(the "Placement Agent"). The Company is issuing units consisting of (a) $13,000
of 12% Series B Cumulative Convertible Preferred Stock, par value $0.001 (the
"Preferred"), convertible into 20,000 shares (the "Shares") of the Company's
common stock, par value $0.001 ("Common Stock") at the rate of $0.65 per Share
and (b) 20,000 detachable three-year warrants (the "Warrants") to purchase one
share each of common stock at an exercise price of $1.50 per share (the "Warrant
Shares"). The Preferred and the Warrants shall be collectively referred to as
the "Units".
The Company may issue up to $3,003,000 of Units (the "Maximum Offering") in
this offering (the "Offering"). The Company and the Placement Agent, upon mutual
agreement, may also sell up to an additional $598,600 of Units, representing an
over-allotment allowance in the event the Offering is oversubscribed. The
undersigned understands that the Units are being issued pursuant to the
exemption from registration requirements of the Securities Act of 1933, as
amended (the "Securities Act" or the "Act"), provided by Section 4(2) of the
Act. As such, the Units and the underlying Shares and Warrant Shares are
"restricted securities".
The Units are being offered on a "best efforts, all or none" basis by the
Company through the Placement Agent with respect to the initial $754,000 of
Units (the "Minimum Offering"), during an offering period commencing on the date
of the Company's Private Placement Memorandum dated November 8, 2004 (the
"Memorandum") (the "Commencement Date") and continuing until November 30, 2004
(the "Offering Period"). If the Minimum Offering is not reached, the Offering
will terminate on November 30, 2004 (unless extended by mutual agreement of the
Company and the Placement Agent to no later than February 1, 2005) and all funds
will be returned without interest or deduction. In the event the Minimum
Offering is reached, the Offering will continue until the earlier of (i) the
close of business (5:00 p.m. EST) on February 1, 2005, (ii) termination by
mutual agreement of the Company and the Placement Agent, or (iii) completion of
the sale of the Maximum Offering, including any over-allotment sales to which
the Company and Placement Agent may agree ("Final Closing"). Any subscription
documents or funds received after the Final Closing will be returned.
All proceeds received from subscribers for the Units offered hereby will be
deposited by the Placement Agent in a special non-interest bearing escrow
account (the "Escrow Account") with XX Xxxxxx Xxxxx Bank and will be released to
the Company against delivery by the Company to the Placement Agent of
certificates representing the Preferred and the Warrants comprising the Units
(each such date, "Closing Date").
Capitalized terms not otherwise defined herein shall have the meanings set
forth in the Memorandum.
1. Subscription.
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Subject to the terms and conditions hereinafter set forth in this
Subscription Agreement, the undersigned hereby offers to purchase Units as set
forth in the Investor Signature Page attached hereto.
If the Offer is accepted, the Units shall be paid for by the delivery of
such amount by wire transfer or check payable to the order of "JPMorgan Chase as
EA for New Frontier", which is being delivered contemporaneously herewith .
Once a minimum of $754,000 in Units have been sold and proceeds of a
minimum of $754,000 in cleared funds are on deposit in the Escrow Account (the
"Minimum Escrow Date") and such subscriptions are accepted by the Company, an
initial closing will be held as soon as practicable thereafter.
Additional closings will be held, at the discretion of the Company and the
Placement Agent, at reasonable intervals during the Offering Period, but in no
event later than the Final Closing.
2. Conditions to Offer.
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The Offering is made subject to the following conditions: (i) that the
Company shall have the right to accept or reject this Offer, in whole or in
part, for any reason whatsoever; and (ii) that the undersigned agrees to comply
with the terms of this Subscription Agreement.
Acceptance of this Offer shall be deemed given by the countersigning of
this Subscription Agreement on behalf of the Company.
3. Representations and Warranties of the Undersigned.
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The undersigned, in order to induce the Company to accept this Offer,
hereby warrants and represents as follows:
(A) The undersigned, if not an individual, is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite power and authority to
enter into and to consummate the transactions contemplated by this
Agreement and otherwise to carry out its obligations hereunder. The
purchase by Investor of the Units hereunder has been duly authorized by all
necessary action on the part of Investor. This Agreement has been duly
executed by Investor, and when delivered by Investor in accordance with the
terms hereof, will constitute the valid and legally binding obligation of
Investor, enforceable against it in accordance with its terms.
(B) The undersigned has sufficient liquid assets to sustain a loss of
the undersigned's entire investment.
(C) The undersigned is not purchasing the Units as a result of any
advertisement, article, notice or other communication regarding the Units
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.
(D) The undersigned represents that he (she or it) is an Accredited
Investor as that term is defined in Regulation D promulgated under the
Securities Act. In general, an "Accredited Investor" is deemed to be an
institution with assets in excess of $5,000,000 or individuals with net
worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse.
(E) Subject to meeting the Minimum Offering, Investor agrees that the
Investor's subscription shall be irrevocable by Investor, and that, except
as required by applicable law, Investor shall not be otherwise entitled to
cancel, terminate or revoke this Agreement or any of Investor's obligations
hereunder.
(F) The Company has not made any other representations or warranties
to the undersigned with respect to the Company except as contained herein
or in the Memorandum. The Company has not rendered any investment advice to
the undersigned with respect to the Company.
(G) The undersigned has not authorized any person or institution to
act as his Purchaser Representative (as that term is defined in Regulation
D of the General Rules and Regulations under the Act) in connection with
this transaction. The undersigned has such knowledge and experience in
financial, investment and business matters that he is capable of evaluating
the merits and risks of the prospective investment in the Units. The
undersigned has consulted with such independent legal counsel or other
advisers as he has deemed appropriate to assist the undersigned in
evaluating his proposed investment in the Units.
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(H) The undersigned represents that he (i) has adequate means of
providing for his current financial needs and possible personal
contingencies, and has no need for liquidity of investment in the Units;
(ii) can afford to (a) hold unregistered securities for an indefinite
period of time as required and (b) sustain a complete loss of the entire
amount of the subscription; and (iii) has not made an overall commitment to
investments which are not readily marketable which is disproportionate so
as to cause such overall commitment to become excessive.
(I) The undersigned has reviewed the Memorandum. The undersigned has
also been afforded the opportunity to ask questions of, and receive answers
from, the officers and/or directors of the Company concerning the terms and
conditions of the Offering and to obtain any additional information, to the
extent that the Company possesses such information or can acquire it
without unreasonable effort or expense, necessary to verify the accuracy of
the information furnished; and has availed himself of such opportunity to
the extent he considers appropriate in order to permit him to evaluate the
merits and risks of an investment in the Units. It is understood that all
documents, records and books pertaining to this investment have been made
available for inspection, and that the books and records of the Company
will be available upon reasonable notice for inspection by investors during
reasonable business hours at its principal place of business.
(J) The undersigned acknowledges that none of the Units, Shares or
Warrant Shares have been registered under the Securities Act in reliance on
an exemption for transactions by an issuer not involving a public offering,
and further understands that the undersigned is purchasing the Units
without being furnished any prospectus setting forth all of the information
that would be required to be furnished under the Act.
(K) The undersigned further acknowledges that this Offering has not
been passed upon or the merits thereof endorsed or approved by any state or
federal authorities.
(L) The Units being subscribed for are being acquired solely for the
account of the undersigned and not with a view to, or for resale in
connection with, any distribution in any jurisdiction where such sale or
distribution would be precluded. By such representation, the undersigned
means that no other person has a beneficial interest in the Units (or
underlying Shares or Warrant Shares) subscribed for hereunder, and that no
other person has furnished or will furnish directly or indirectly, any part
of or guarantee the payment of any part of the consideration to be paid to
the Company in connection therewith. The undersigned does not intend to
dispose of all or any part of the Units (or underlying Shares or Warrant
Shares) except in compliance with the provisions of the Act and applicable
state securities laws and understands that the Units are being offered
pursuant to a specific exemption under the provisions of the Act, which
exemption(s) depends, among other things, upon compliance with the
provisions of the Act.
(M) Unless the Shares or the Warrant Shares are subject to an
effective registration statement, the undersigned further represents and
agrees that the undersigned will not sell, transfer or otherwise dispose of
or encumber the Units (or underlying Shares or Warrant Shares) unless prior
to any such sale, transfer, disposition or encumbrance, the undersigned
will, if requested, furnish the Company and its transfer agent with an
opinion of counsel satisfactory to the Company in form and substance that
registration under the Act or applicable state securities laws is not
required. Notwithstanding the foregoing, no consent of the Company shall be
required for the undersigned to pledge the Units or underlying securities
with a registered broker-dealer in a margin account.
(N) The undersigned hereby agrees that the Company may insert the
following or similar legend on the face of the certificates evidencing the
Units and the Shares and Warrants Shares, if required in compliance with
federal and state securities laws:
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"These securities have not been registered under the Securities
Act of 1933, as amended (the "Securities Act") or under the
securities laws of any state. They may not be sold, offered for
sale or hypothecated in the absence of a registration statement
in effect with respect to the securities under such act or an
opinion of counsel reasonably satisfactory to the company that
such registration is not required pursuant to a valid exemption
therefrom under the Securities Act.
(O) The undersigned hereby acknowledges that the Placement Agent, its
affiliates and/or its beneficial owners may subscribe for Units.
The undersigned certifies that each of the foregoing representations and
warranties set forth in subsection (A) through (O) inclusive of this Section 3
are true as of the date hereof and shall survive such date.
4. Representations and Warranties of the Company.
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The Company hereby makes the following representations and warranties to
the Investors:
(A) Subsidiaries. The Company has one wholly owned subsidiary, Skyline
Resources, Inc. ("Subsidiary"). All of the issued and outstanding shares of
capital stock of the Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights, and the Company
owns all of the issued and outstanding shares of capital stock of the
Subsidiary.
(B) Organization and Qualification. Each of the Company and its
Subsidiary is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. Neither the Company nor the Subsidiary is
in violation of any of the provisions of its articles of incorporation,
bylaws or other organizational or charter documents.
(C) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the Offering.
The execution and delivery of this Subscription Agreement by the Company
and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary action on the part of the Company and
its shareholders and no further consent or action is required by the
Company, other than the Required Approvals. This Subscription Agreement,
when executed and delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and
general principles of equity.
(D) No Conflicts. The execution, delivery and performance of this
Subscription Agreement by the Company and the consummation by the Company
of the Offering do not and will not: (i) conflict with or violate any
provision of the Company's or the Subsidiary's articles of incorporation,
bylaws or other organizational or charter documents, or (ii) subject to
obtaining the Required Approvals (as defined below), conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of
time or both) of any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or Subsidiary is a party or by which any
property or asset of the Company or Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental
authority as currently in effect to which the Company or Subsidiary is
subject (including federal and state securities laws and regulations), or
by which any property or asset of the Company or Subsidiary is bound or
affected; except in the case of each of clauses (ii) and (iii), such as
could not, individually or in the aggregate (a) adversely affect the
legality, validity or enforceability of the Offering, (b) have or result in
or be reasonably likely to have or result in a material adverse effect on
the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiary, taken as a
whole, or (c) adversely impair the Company's ability to perform fully on a
timely basis its obligations under this Subscription Agreement (any of (a),
(b) or (c), a "Material Adverse Effect").
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(E) Filings, Consents and Approvals. Neither the Company nor the
Subsidiary is required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any
court or other federal, state, local or other governmental authority or
other person in connection with the execution, delivery and performance by
the Company of this Subscription Agreement, other than (i) the filing with
the Commission of the Registration Statement, (ii) the filing with the
Commission of a Form D pursuant to Commission Regulation D, (iii)
applicable Blue Sky filings and (iv) the filing of the Certificate of
Designations with the Colorado Secretary of State (collectively, the
"Required Approvals").
(F) Issuance of the Securities. The Units, and each component or
underlying security, are duly authorized and, when issued and paid for in
accordance with this Subscription Agreement, will be duly and validly
issued, fully paid and nonassessable, free and clear of all liens, and not
subject to any preemptive rights. The Company has reserved from its duly
authorized capital stock a number of shares of Common Stock required for
issuance of the Shares and the Warrant Shares.
(G) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company is as set forth in the
Memorandum. No person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the
Offering. Except as set forth in the Memorandum or SEC Reports (defined
below), and for options and shares of capital stock issued or issuable
under the Company's stock option plan, there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any person any right to
subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or
Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares of
Common Stock.
(H) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the
two years preceding the date hereof (or such shorter period as the Company
was required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC Reports") in accordance with
the time requirements of the Securities Act and the Exchange Act. As of
their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the
rules and regulations of the Commission promulgated thereunder, and none of
the SEC Reports, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company has
advised Investor(s) that a correct and complete copy of each of the SEC
Reports (together with all exhibits and schedules thereto and as amended to
date) is available at xxxx://xxx.xxx.xxx, a website maintained by the
Commission where Investor(s) may view the SEC Reports. The financial
statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time
of filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise specified
in such financial statements or the notes thereto, and fairly present in
all material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results
of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit
adjustments.
(I) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports: (i) there has been no event, occurrence or
development that has had a Material Adverse Effect, (ii) the Company has
not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or
required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting or the identity of its
auditors (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders except in the
ordinary course of business consistent with prior practice, or purchased,
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redeemed or made any agreements to purchase or redeem any shares of its
capital stock except consistent with prior practice or pursuant to existing
Company stock option or similar plans, and (v) the Company has not issued
any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option or similar plans.
(J) Litigation. Except as set forth in the SEC Reports, there is no
action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or
affecting the Company, the Subsidiary or any of its properties before or by
any court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an
"Action") which: (i) adversely affects or challenges the legality, validity
or enforceability of this Subscription Agreement or the Units or (ii)
would, if there were an unfavorable decision, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor the Subsidiary is or has been the subject
of any Action involving a claim of violation of or liability under federal
or state securities laws. The Company does not have pending before the
Commission any request for confidential treatment of information. There has
not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company.
The Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
(K) Compliance. Except as described in the Memorandum, each of the
Company and the Subsidiary: (i) is not in default under or in violation of
(and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice of
a claim that it is in default under or that it is in violation of, any
material indenture, loan or credit agreement or any other material
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been
waived), which default or violation would have or result in a Material
Adverse Effect, (ii) is not in violation of any order of any court,
arbitrator or governmental body, or (iii) is not and has not been in
violation of any statute, rule or regulation of any governmental authority,
except in each case as would not, individually or in the aggregate, have or
result in a Material Adverse Effect.
(L) Regulatory Permits. The Company possesses all certificates,
authorizations and permits issued by the appropriate federal, state, local
or foreign regulatory authorities necessary to conduct its business as
described in the SEC Reports, except where the failure to possess such
permits would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect ("Material Permits"), and
the Company has not received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(M) Listing and Maintenance Requirements. The Company's Common Stock
currently trades on the Nasdaq Over-the Counter Bulletin Board (OTCBB). The
Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with the periodic SEC
reporting requirements necessary to maintain trading on the OTCBB.
(N) Internal Accounting Controls. Each of the Company and the
Subsidiary is in material compliance with all provisions of the Sarbanes
Oxley Act of 2002 which are presently applicable to it. Each of the Company
and the Subsidiary maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences. The Company has
established disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the Company and designed such disclosures
controls and procedures to ensure that material information relating to the
Company, including its Subsidiary, is made known to the certifying officers
by others within those entities. The Company's certifying officers have
evaluated the effectiveness of the Company's controls and procedures as of
August 31, 2004 (such date, the "Evaluation Date"). The Company presented
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in the Form 10-QSB for the quarter ended August 31, 2004 the conclusions of
the certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date. Since
the Evaluation Date, there have been no significant changes in the
Company's internal controls (as such term is defined in Item 307(b) of
Regulation S-B under the Exchange Act).
(O) Disclosure. The disclosure provided to the Investor regarding the
Company, its business and the transactions contemplated hereby, furnished
by or on behalf of the Company, including all of the SEC Reports, does not
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. The
Company acknowledges and agrees that the Investor makes or has made no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Subscription
Agreement.
5. Covenants of the Company.
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(A) Board Approval. The Company has held a meeting of its board of
directors ("Board") which authorized the issuance of the Units in this Offering.
(B) Registration Rights. The Company grants registration rights to the
Investor(s) under the following terms and conditions:
(1) The Company will prepare and file, at its own expense, within thirty
(30) days of the Final Closing, a registration statement under the Securities
Act (the "Registration Statement") with the Commission sufficient to permit the
non-underwritten public offering and resale of the Shares (subject to adjustment
as set forth in Section 5(C) below) and Warrant Shares (subject to adjustment as
set forth in the Warrant form) (the "Registrable Securities") through the
facilities of all appropriate securities exchanges, if any, on which the
Company's Common Stock is being sold or on the over-the-counter market if the
Company's Common Stock is traded thereon.
(2) The Company will use its reasonable best efforts to cause such
Registration Statement to become effective within one hundred and twenty (120)
days from the Final Closing or, if earlier, within five (5) days of Commission
clearance to request acceleration of effectiveness. The number of shares
designated in the Registration Statement to be registered shall include all of
the Registrable Securities and shall include appropriate language regarding
reliance upon Rule 416 to the extent permitted by the Commission. The Company
will notify the Investors of the effectiveness of the Registration Statement
within three business days of such event. In the event that the number of shares
so registered shall prove to be insufficient to register the resale of all of
the Registrable Securities, then the Company shall be obligated to file, within
thirty (30) days of notice from any Investor, a further Registration Statement
registering such remaining shares and shall use its reasonable best efforts to
prosecute such additional Registration Statement to effectiveness within ninety
(90) days of the date of such notice.
(3) The Company will maintain the Registration Statement or post-effective
amendment filed under the terms of the subscription agreement effective under
the Securities Act until the earlier of (i) the date that all of the Registrable
Securities have been sold pursuant to such Registration Statement, (ii) all
Registrable Securities have been otherwise transferred to persons who may trade
such shares without restriction under the Securities Act, and the Company has
delivered a new certificate or other evidence of ownership for such securities
not bearing a restrictive legend, or (iii) all Registrable Securities may be
sold at any time, without volume or manner of sale limitations pursuant to Rule
144(k) or any similar provision then in effect under the Securities Act in the
opinion of counsel to the Company, which counsel shall be reasonably acceptable
to the Investor (the "Effectiveness Period").
(4) If, at any time during which the Registration Statement required by
Section 5(B)(1) and 5(B)(2) above is not effective, the Company shall determine
to proceed with the preparation and filing of a separate registration statement
pursuant to the Securities Act in connection with the proposed offer and sale of
any of its securities by it or any of its security holders (other than a
registration statement on Form X-0, X-0, or other limited purpose form), the
Company will give written notice of its determination to all the Investors. Upon
receipt of a written request from any Investor, within thirty (30) days after
receipt of any such notice from the Company, the Company will cause all such
Registrable Securities requested by the Investor to be included in such
registration statement, all to the extent required to permit the sale or other
disposition by such Investors, of such shares. The obligation of the Company
under this Section 5(B)(4) shall be unlimited as to the number of registration
statements to which it applies, unless the Effectiveness Period has ended.
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(5) All fees, disbursements and out-of-pocket expenses and costs incurred
by the Company in connection with the preparation and filing of the Registration
Statement and in complying with applicable federal securities and Blue Sky laws
(including, without limitation, all attorneys' fees of the Company) shall be
borne by the Company. The Investors shall bear the cost of underwriting and/or
brokerage discounts, fees and commissions, if any, applicable to the Registrable
Securities being registered and the fees and expenses of their counsel. The
Company shall use its reasonable best efforts to qualify any of the Securities
for sale in such states as any Investor reasonably designates and shall furnish
indemnification. However, the Company shall not be required to qualify in any
state which will require an escrow or other restriction relating to the Company
and/or the sellers, or which will require the Company to qualify to do business
in such state or require the Company to file therein any general consent to
service of process. The Company at its expense will supply the Investors with
copies of the applicable Registration Statement and any prospectus included
therein and other related documents in such quantities as may be reasonably
requested by the Investors.
(6) In the event that (i) the Registration Statement is not filed with the
Commission within thirty (30) days of the Final Closing, (ii) such Registration
Statement is not declared effective by the Commission within the earlier of one
hundred and twenty (120) days from the Final Closing Date or five (5) days of
clearance by the Commission to request effectiveness, (iii) such Registration
Statement is not maintained as effective by the Company for the Effectiveness
Period or as allowed by 5(B)(9)(ii) below or (iv) the additional Registration
Statement referred to in Section 5(B)(2) is not filed within thirty (30) days or
declared effective within ninety (90) days as set forth therein (each a
"Registration Default") then the Company will pay Investor (pro rated on a daily
basis), as partial compensation for such failure and not as a penalty two
percent (2.0%) of the purchase price of the Registrable Securities purchased
from the Company and held by the Investor for each month (or portion thereof)
until such Registration Statement has been filed (in the case of clause (i) and
clause (iv)), and in the event of late effectiveness (in case of clause (ii)
above) or lapsed effectiveness (in the case of clause (iii) above), two percent
(2.0%) of the purchase price of the Registrable Securities purchased from the
Company and held by the Investor each month (or portion thereof) (regardless of
whether one or more such Registration Defaults are then in existence, but
without duplication of such partial compensatory payments) until such
Registration Statement has been declared effective. Such compensatory payments
shall be made to the Investors in cash or in stock, at the Company's option, no
later than the fifth business day following the month in which such Registration
Default(s) occurred, provided, however, that the payment of such amounts shall
not relieve the Company from its obligations to register the Securities pursuant
to this Section. If the compensatory payments are made in stock, such stock
shall be included in an amendment to the Registration Statement, when effective,
and shall have unlimited piggyback rights pursuant to Section 5(B)(4) above.
(7) If the Company does not remit the payment to the Investors as set forth
in Section 5(B)(6) above, the Company will pay the Investors interest at the
rate of 12% per annum, or the highest rate permitted by law, if less, until such
sums have been paid in full, and reasonable costs of collection, including
attorneys' fees, in addition to the liquidated damages. The registration of the
Registrable Securities pursuant to this provision or payment of such
compensatory amounts shall not affect or limit the Investors' other rights or
remedies as set forth in this Agreement or at law.
(8) In the event a Registration Statement is not effective at any time
after one year following the Final Closing date (other than an Allowed Delay, as
defined in Section 5(B)(9)(ii) below), compensatory payments as defined in
Section 5(B)(6) above shall cease, and the Warrants shall become exercisable
pursuant to a cashless exercise feature. At such time, the Company shall cause
its counsel to issue such legal opinions as may be reasonably requested by the
Investors in connection with any sales of the Shares or the Warrant Shares in
accordance with Rule 144 under the Securities Act, within 5 business days of
request therefor, without charge to the Investors. In addition, the Investors
shall be entitled to unlimited piggyback registration rights under Section
5(B)(4) above.
(9) In the case of each registration effected by the Company pursuant to
any section herein, the Company will keep each Investor advised in writing as to
the initiation of each registration and as to the completion thereof. At its
expense, the Company will:
8
(i) Prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the Securities Act with respect to a disposition of all securities covered
by such registration statement;
(ii) Notify the Investors at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in
light of the circumstances then existing, and at the request of the
shareholders, prepare and furnish to them a reasonable number of copies of
a supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the Investors, such prospectus shall not
include 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 not misleading or incomplete in light of the circumstances then
existing; provided that, for not more than five (5) consecutive business
days (or a total of not more than thirty (30) calendar days in any twelve
(12) month period), the Company may delay the disclosure of material
non-public information concerning the Company the public disclosure of
which at the time is not, in the good faith opinion of the Company in the
best interests of the Company and which may, based on the written advice of
outside counsel, be delayed under applicable law or regulation (an "Allowed
Delay"); provided, further, that the Company shall promptly (i) notify each
Investor in writing of the existence of (but in no event, without the prior
written consent of such Investors, shall the Company disclose to such
Investor any of the facts or circumstances regarding) material non-public
information giving rise to an Allowed Delay and (ii) advise each Investors
in writing to cease all sales under such registration statement until the
termination of the Allowed Delay;
(iii) Use its commercially reasonable best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a registration
statement, and, if such an order is issued, to obtain the withdrawal of
such order at the earliest possible moment and to notify Investor (and, in
the event of an underwritten offering, the managing underwriter) of the
issuance of such order and the resolution thereof;
(iv) Cause all shares of Common Stock which are registered in accordance
with the provisions herein, to be listed or included for quotation on each
exchange or marketplace on which the Company's shares of Common Stock are
then listed or included for quotation;
(v) Provide a transfer agent and registrar for all such shares and CUSIP
number for all such shares of Common Stock in each case not later than the
effective date of such registration statement; and
(vi) Otherwise use its commercially reasonable best efforts to comply with
all applicable rules and regulations of the Commission.
(vii) In the event of a transfer of the Shares and the Warrant Shares
utilizing the prospectus included within any of the registration statements
covered by this Section 5(B), the Company shall cause its counsel to issue
a legal opinion permitting such transfer and cause its transfer agent to
reissue a new certificate representing such Shares and the Warrant Shares
without a restrictive legend within three business days, time being of the
essence, in each case without charge to the Investor other than customary
transfer fees which may be charged by the transfer agent or broker-dealer.
Without limiting the Investor's other legal remedies, the Company shall
immediately upon demand reimburse the Investor for the cost and losses
occasioned by any buy-in resulting from the Company's failure to timely
deliver unlegended share certificates.
(10) To the extent Investor includes any Shares or Warrant Shares in a
registration statement pursuant to the terms hereof, the Company will indemnify
and hold harmless Investor, its directors and officers, and each person, if any,
who controls Investor within the meaning of the Securities Act, from and
against, and will reimburse Investor, its directors and officers and each
controlling person with respect to, any and all loss, damage, liability, cost
and expense to which Investor or such controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained
9
therein or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by Investor or any such
controlling person in writing specifically for use in the preparation thereof.
(11) To the extent Investor includes any Shares or Warrant Shares in a
registration statement pursuant to the terms hereof, Investor will indemnify and
hold harmless the Company, its directors and officers and any controlling person
from and against, and will reimburse the Company, its directors and officers and
any controlling person with respect to, any and all loss, damage, liability,
cost or expense to which the Company, its directors and officers or such
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are caused by
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, 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 so made in reliance upon and in
conformity with written information furnished by or on behalf of the Investor
specifically for use in the preparation thereof and provided further, that the
maximum amount that may be recovered from Investor shall be limited to the
amount of proceeds received by Investor from the sale of such shares of Common
Stock
(12) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
hereunder to the extent permitted by law, provided that (i) no contribution
shall be made under circumstances where the indemnifying party would not have
been liable for indemnification pursuant to the provisions hereof, (ii) no
seller of securities guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any seller of securities who was not guilty of such fraudulent
misrepresentation, and (iii) the amount of the contribution together with any
other payments made in respect of such loss, damage, liability or expense, by
any seller of securities shall be limited to the net amount of proceeds received
by such seller from the sale of such securities.
(13) The Investor will cooperate with the Company in connection with this
Subscription Agreement, including timely supplying all information and executing
and returning all documents requested by the Company which are required to
enable the Company to perform its obligations to register the Shares and the
Warrant Shares (which shall include all information regarding the Investor and
proposed manner of sale of securities required to be disclosed in any
registration statement filed in accordance with this Section 5).
(C) Certain Adjustments. The Preferred, Shares, Warrants and Warrant Shares
shall receive customary adjustment in connection with forward or reverse stock
splits, stock dividends, recapitalizations, reclassification, mergers or
consolidations and the like. In addition, the Preferred will have certain
weighted-average anti-dilution rights for issuances below $0.65 per share as
described in the Certificate of Designations for the Preferred, and the Warrants
will have certain weighted-average anti-dilution rights for issuances below
$1.50 per share as described in the form of Warrant. Specifically excluded from
this anti-dilution adjustment provision are shares issued pursuant to options
and warrants outstanding as of the date of the Memorandum, options exercised
pursuant to grants under the 2003 New Frontier Energy, Inc. Stock Option and
Stock Grant Plan, and certain shares or options issued in connection with
strategic mergers or acquisitions consummated by the Company.
6. Specific State Legends.
-----------------------
FOR NEW HAMPSHIRE RESIDENTS ONLY: NEITHER THE FACT THAT A REGISTRATION
STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED WITH THE STATE OF NEW
HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS
LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF
STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B OF THE NEW HAMPSHIRE UNIFORM
SECURITIES ACT IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR
10
THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A
TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE
MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,
SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH
THE PROVISIONS OF THIS PARAGRAPH.
FOR FLORIDA RESIDENTS ONLY: EACH FLORIDA RESIDENT WHO SUBSCRIBES FOR THE
PURCHASE OF SECURITIES HEREIN HAS THE RIGHT, PURSUANT TO SECTION
517.061(11)(A)(5) OF THE FLORIDA SECURITIES ACT, TO WITHDRAW HIS SUBSCRIPTION
FOR THE PURCHASE AND RECEIVE A FULL REFUND OF ALL MONIES PAID WITHIN THREE
BUSINESS DAYS AFTER THE EXECUTION OF THIS SUBSCRIPTION AGREEMENT OR PAYMENT FOR
THE PURCHASE HAS BEEN MADE, WHICHEVER IS LATER. WITHDRAWAL WILL BE WITHOUT ANY
FURTHER LIABILITY TO ANY PERSON. TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER
NEED ONLY SEND A LETTER OR TELEGRAM TO THE COMPANY AT THE ADDRESS SET FORTH IN
THIS SUBSCRIPTION AGREEMENT INDICATING HIS INTENTION TO WITHDRAW.
SUCH LETTER OR TELEGRAM SHOULD BE SENT AND POSTMARKED PRIOR TO THE END OF
THE AFOREMENTIONED THIRD BUSINESS DAY. IT IS ADVISABLE TO SEND SUCH LETTER BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS RECEIVED AND ALSO
TO EVIDENCE THE TIME IT WAS MAILED. IF THE REQUEST IS MADE ORALLY, IN PERSON OR
BY TELEPHONE TO AN OFFICER OF THE COMPANY, A WRITTEN CONFIRMATION THAT THE
REQUEST HAS BEEN RECEIVED SHOULD BE REQUESTED.
FOR GEORGIA RESIDENTS ONLY THE SECURITIES OFFERED HEREBY ARE BEING ISSUED
OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE GEORGIA
SECURITIES ACT OF 1973, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT
FOR RESIDENTS OF ALL STATES: THE SECURITIES OFFERED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE
AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO
BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
7. No Waiver.
----------
Notwithstanding any of the representations, warranties, acknowledgments or
agreements made herein by the undersigned, the undersigned does not thereby or
in any manner waive any rights granted to the undersigned under federal or state
securities laws.
8. Revocation.
-----------
The undersigned agrees that he shall not cancel, terminate or revoke this
Subscription Agreement or any agreement of the undersigned made hereunder other
than as set forth herein, and that this Subscription Agreement shall survive the
death or disability of the undersigned.
11
9. Termination of Subscription Agreement.
--------------------------------------
If the Company elects to cancel this Subscription Agreement, provided that
it returns to the undersigned, without interest and without deduction, all sums
paid by the undersigned, this Offer shall be null and void and of no further
force and effect, and no party shall have any rights against any other party
hereunder.
10. Miscellaneous.
--------------
(A) All notices or other communications given or made hereunder shall be in
writing and shall be mailed by registered or certified mail, return receipt
requested, postage prepaid, or by overnight courier service to the undersigned
at his address set forth on the Investor Signature Page, and to the Company and
the Placement Agent at the addresses set forth in the Memorandum.
(B) This Subscription Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and may be amended only
by a writing executed by all parties.
(C) The provisions of this Subscription Agreement shall survive the
execution thereof.
(D) This Subscription Agreement shall be governed by the laws of the State
of New York as an agreement between residents of New York.
11. Certification.
--------------
The undersigned certifies that he has read this entire Subscription
Agreement and that every statement on his part made and set forth herein is true
and complete.
12
INVESTOR SIGNATURE PAGE FOR NEW FRONTIER ENERGY, INC. SUBSCRIPTION AGREEMENT
Please print or type, Use ink only. (All Parties Must Sign)
The undersigned investor hereby certifies that he (i) has received and relied
solely upon the Confidential Private Placement Memorandum, this Subscription
Agreement and their respective exhibits and schedules, (ii) agrees to all the
terms and conditions of this Subscription Agreement, (iii) meets the suitability
standards set forth herein and (iv) is a resident of the state or foreign
jurisdiction indicated below.
Dollar Amount of Units Subscribed for: $_________________________ ($13,000 Units
for 20,000 Shares and 20,000 Warrants)
___________________________________ If other than individual check one and
Name of Investor (Print) indicate capacity of signatory under
the signature:
[ ] Trust
______________________________________ [ ] Estate
Name of Joint Investor (if any) (Print) [ ] Uniform Gifts to Minors Act,
State of __________
[ ] Attorney-in-fact
[ ] Corporation
______________________________________ [ ] Other
Signature of Investor
If Joint Ownership, Check one:
[ ] Joint Tenants with Right of
[ ] Survivorship
______________________________________ [ ] Tenants in Common
Signature of Joint Investor (if any) [ ] Tenants by the Entirety
[ ] Community by Property
______________________________________
Capacity of Signatory (if applicable) Backup Withholding Statement:
[ ] Please check this box only if the
investor is subject to backup
withholding
______________________________________
Social Security or Taxpayer
Identification Number
Foreign Person:
Investor Address: [ ] Please check this box only if the
investor is a nonresident alien,
foreign corporation, foreign
____________________________________ partnership, foreign trust or
Street Address foreign estate
Country ___________ Passport # _______
____________________________________
City State Zip Code ID #______________ ID Type __________
Telephone: ( ) Fax: ( )
Email:_____________________________________________
Address for Delivery of Securities (if different from above):
_________________________________________________
_________________________________________________
City State Zip Code
Broker:
Westminster Registered Rep.________________ Other Investor Representative:
_____________________________
The investor agrees to the terms of this Agreement and, as required by the
Regulations pursuant to the Internal Revenue Code, certifies under penalty of
perjury that (1) the Social Security Number or Taxpayer Identification Number
and address provided above is correct, (2) the investor is not subject to backup
withholding (unless the Backup Withholding Statement box is checked) either
because he has not been notified that he is subject to backup withholding as a
result of a failure to report all interest or dividends or because the Internal
Revenue Service has notified him that he is no longer subject to backup
withholding and (3) the investor (unless, the Foreign Person box above is
checked) is not a nonresident alien, foreign partnership, foreign trust or
foreign estate.
THE SUBSCRIPTION FOR UNITS OF NEW FRONTIER ENERGY, INC. BY THE ABOVE NAMED
INVESTOR(S) IS ACCEPTED THIS ________ DAY OF ______________________, 2004.
NEW FRONTIER ENERGY, INC.
By:___________________________
Name: Xxxx X. Xxxxx
Title: President
13
