Exhibit 99.7
SECURITIES PURCHASE AGREEMENT
THIS IS A SECURITIES PURCHASE AGREEMENT (this "Agreement") by and
between the undersigned ("Purchasers"), and AER Energy Resources, Inc., a
Georgia corporation ("AER"), dated as of September 27, 2000, and by which
Purchasers and AER, in consideration of the agreements set forth below (the
mutuality, adequacy and sufficiency of which are hereby acknowledged),
hereby agree as follows:
1. Agreement to Purchase and Sell. Upon the terms set forth in this
Agreement, each Purchaser hereby agrees to purchase from AER and AER agrees
to sell to each Purchaser (i) (A) 200,000 shares of AER's no par value
Series A Convertible Preferred Stock (the "Preferred Stock") and (B) 2,250
shares of Preferred Stock (representing 50% of a transaction fee to be paid
by AER to each Purchaser) (collectively, the shares to be issued by AER
pursuant to clauses (A) and (B) above shall be referred to as the "Shares")
and (ii) a warrant to purchase 470,035 shares of AER's no par value Common
Stock (collectively, the "Warrants") in the form attached hereto as Exhibit
A. The aggregate purchase price for each Purchaser for its Shares and
Warrants shall be $2,000,000.
2. The Closing. The closing shall occur at 10:00 a.m. on September
27, 2000 (the "Closing") at the offices of Xxxxxxxxxx Xxxxxx & Xxxxxxx LLP,
000 Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx, Xxxxxxx 00000-0000, or as the parties
shall otherwise agree. At the Closing, the following shall occur:
(a) AER shall deliver to each Purchaser (i) a duly completed and
executed share certificate in the name of each Purchaser representing its
Shares, (ii) a duly completed and executed Warrant, and (iii) if such
Purchaser converts in part its $1,000,000 AER convertible promissory note
dated March 31, 2000 (a "Note") to Preferred Stock, a new AER promissory
note for the remaining principal balance, with otherwise identical terms.
(b) Each Purchaser shall deliver to AER by wire transfer in
immediately available federal funds the aggregate purchase price of its
Shares and its Warrant (less $22,500, representing 50% of the transaction
fee to be paid by AER in cash to each Purchaser), or at its option, it may
pay a portion of the purchase price by converting its Note at a conversion
price of $10.00 of principal per Share, in which case the Note will be
surrendered for cancellation in whole or in part, as appropriate.
3. Representations and Warranties.
(a) By AER. AER hereby represents and warrants to each Purchaser
that:
(i) AER is a duly incorporated and organized Georgia
corporation validly existing and in good standing under Georgia law;
(ii) AER has the power and authority to issue the Shares and
the Warrant to Purchaser pursuant to this Agreement and to execute, deliver
and otherwise perform this Agreement, and without limiting the foregoing,
the Board of Directors of AER has authorized and approved the execution,
delivery and performance of this Agreement;
(iii) the Shares, the AER Common Stock ("Common Stock")
issuable upon exercise of the Warrants (the "Warrant Shares") and the Common
Stock issuable upon conversion of the Shares (the "Conversion Shares") when
issued will be validly issued, fully paid and non-assessable shares of
capital stock of AER free and clear of any liens, encumbrances, adverse
rights or claims of any kind whatsoever, and AER will at all times maintain
a number of authorized but unissued shares of Common Stock for issuance of
the Warrant Shares and the Conversion Shares;
(iv) this Agreement and the Warrants each has been duly
executed and delivered by AER, and constitutes the legal, valid and binding
obligation of AER, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency and other
laws and equitable principles affecting creditors' rights generally and the
discretion of the courts in granting equitable remedies;
(v) the execution, delivery and performance of this Agreement
and the Warrants each is in compliance with, and is not and will not be,
after the giving of notice or the passage of time or both, in violation of
(A) the articles of incorporation or bylaws of AER as amended or restated,
(B) any applicable law, regulation or order to which AER or its assets is
subject or bound, or (C) any agreement to which AER or its assets is subject
or bound (and without limiting the foregoing, will not result in any
preemptive rights or otherwise require the issuance of stock or other
securities to satisfy antidilution or other similar requirements);
(vi) all of the documents (the "SEC Documents") filed by AER
within the last thirty-six months prior to the date of this Agreement with
the Securities and Exchange Commission (the "Commission") in accordance with
the requirements of the Securities Act of 1933, as amended (the "Securities
Act"), and the Securities Exchange Act of 1934, as amended (collectively the
"Securities Acts"), conformed in all material respects to the requirements
of the Securities Acts and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
(vii) the authorized capital stock of AER consists of
100,000,000 shares of common stock, no par value ("Common Stock") and
10,000,000 shares of preferred stock, no par value. As of September 21,
2000, AER had 24,850,263 shares of Common Stock outstanding, and no shares
of preferred stock outstanding. Other than warrants previously issued to
each Purchaser, the Warrant issued to Xxxxxx Investments, Inc. ("Xxxxxx") in
1995, and stock options granted to employees and restricted stock issued to
directors, both as described in the SEC Documents, AER has no outstanding
securities convertible into (or exercisable or exchangeable for) or
evidencing the right to purchase or subscribe for, shares of its capital
stock or authorized subscriptions, options, warrants, calls, rights,
commitments or any other agreements or arrangements, obligating it to issue
any shares of its capital stock or securities convertible into capital
stock;
(viii) the financial statements (including any related notes)
included in the SEC Documents (the "Financial Statements"), have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as may be noted
therein) and fairly present the financial condition, results of operations
and cash flows of AER as of the dates thereof and for the periods ended on
such dates (in each case subject, as to interim statements, to changes
resulting from year-end adjustments (none of which were or could be expected
to be material in amount or effect)); and
(ix) except as set forth in the Financial Statements, since
December 31, 1999, AER has conducted its business only in the ordinary
course in substantially the same manner as theretofore conducted, and AER
has not undergone or suffered any material adverse change in its condition,
financial or otherwise, business, operations, affairs, properties, assets or
prospects.
(b) By Purchasers. Each Purchaser hereby represents and warrants
to AER:
(i) this Agreement has been duly executed and delivered by
Purchaser, and constitutes the legal, valid and binding obligation of
Purchaser, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency and other
laws and equitable principles affecting creditors' rights generally and the
discretion of the courts in granting equitable remedies;
(ii) Purchaser will acquire the Shares, the Conversion
Shares, the Warrant and the Warrant Shares (collectively the "Securities")
for its own account, to hold for investment, and with no present intention
of dividing its participation with others or reselling or otherwise
participating, directly or indirectly, in a distribution of the Securities,
and it will not make any sale, transfer, or other disposition of the
Securities in violation of the Securities Act or any applicable state
securities laws (the "State Acts"). There will be placed on the Warrant and
any certificates for the Shares, the Conversion Shares and the Warrant
Shares, a legend stating in substance:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS IN RELIANCE ON ONE OR MORE
EXEMPTIONS THEREUNDER AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN TRANSACTIONS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT THEREUNDER. THE
SECURITIES EVIDENCED HEREBY ARE SUBJECT TO
RESTRICTIONS ON TRANSFER CONTAINED IN A SECURITIES
PURCHASE AGREEMENT TO WHICH THE CORPORATION IS A
PARTY. ANY TRANSFER OF THE SECURITIES REPRESENTED
HEREBY IN VIOLATION OF SAID AGREEMENT SHALL BE
VOID. THE CORPORATION WILL MAIL TO THE HOLDER OF
THESE SECURITIES A COPY OF SUCH RESTRICTIONS
WITHOUT CHARGE WITHIN FIVE (5) DAYS AFTER RECEIPT
OF WRITTEN REQUEST THEREFOR ADDRESSED TO THE
CORPORATION.
(iii) Purchaser, in offering to subscribe for the Securities
hereunder, has been given access to all material and relevant information
concerning AER, thereby enabling Purchaser to make an informed investment
decision concerning the Securities. Purchaser has relied solely upon an
independent investigation made by it and its representatives, if any, and
has, prior to the date hereof, been given access to and the opportunity to
examine data and information relating to AER. In making its investment
decision to purchase the Securities, Purchaser is not relying on any oral or
written representations or assurances from AER or any other person or any
representation of AER or any other person other than as set forth in this
Agreement. Without limiting the foregoing, Purchaser has reviewed AER's
Annual Report on Form 10-K for the year ended December 31, 1999 and AER's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.
Purchaser is an "accredited investor" as defined in Rule 501 of Regulation D
under the Securities Act.
(iv) Purchaser understands and acknowledges that an
investment in the Securities involves a high degree of risk. Purchaser
represents that Purchaser is able to bear the economic risk of an investment
in the Securities, which Purchaser acknowledges are currently illiquid and
may remain illiquid indefinitely, including a possible total loss of its
investment. In making this statement Purchaser hereby represents and
warrants to AER that Purchaser has adequate means of providing for
Purchaser's current needs and contingencies; Purchaser is able to afford to
hold the Securities for an indefinite period and Purchaser further
represents that Purchaser has such knowledge and experience in financial and
business matters that Purchaser is capable of evaluating the merits and
risks of the investment in the Securities. Further, Purchaser represents
that Purchaser has no present need for liquidity in the Securities and
Purchaser is willing to accept such investment risks.
(v) Purchaser understands that no United States federal or
state agency, or similar agency of any other country, has reviewed,
approved, passed upon or made any recommendation or endorsement of AER or
the Securities.
(vi) This Agreement is made by AER with Purchaser in reliance
upon Purchaser's representations and covenants made in this Section 3(b),
which reliance by its execution of this Agreement Purchaser hereby confirms.
(vii) Purchaser understands that the Securities have not been
registered under the Securities Act or any State Acts and are being offered
and sold pursuant to exemptions therefrom based in part upon the
representations of Purchaser contained herein.
(viii) Purchaser knows of no public solicitation or
advertisement of an offer in connection with the proposed issuance and sale
of the Securities.
(ix) Purchaser has reviewed with its tax advisors the U.S.
federal, state, local and foreign tax consequences of an investment in the
Securities and the transactions contemplated by this Agreement. Purchaser
is relying solely on such advisors and not on any statements or
representations of AER or any of its agents and understands that Purchaser
(and not AER) shall be responsible for Purchaser's own tax liability that
may arise as a result of this investment or the transactions contemplated by
this Agreement.
(x) Purchaser's acquisition of the Securities is not a
transaction (or any element of a series of transactions) that is a part of a
plan or scheme to evade the registration provisions of the Securities Act.
4. Registration of Shares.
(a) Demand Registration. If at any time prior to eight (8) years
from the date of the Closing, AER shall receive a written request from a
Purchaser or Purchasers holding Shares, Conversion Shares, Warrants and
Warrant Shares representing at least 25% of the Common Stock issuable upon
conversion of the Shares and exercise of the Warrants that AER file a
registration statement under the Securities Act, covering the registration
of at least $2,000,000 of the Warrant Shares, the Conversion Shares, other
shares of Common Stock owned by each Purchaser, and shares of Common Stock
owned by Keystone, Inc., Xxxxx X. Xxxxx, Xxxx X. Xxxxxxx or "affiliates" or
"associates" thereof, as such terms are defined in the Securities Act
(collectively the "Third Party Shareholders") to the extent such shares of
Common Stock are not then freely tradable under the Securities Act, AER
shall first notify in writing any Purchaser who has not joined in such
request of such request. Each such Purchaser and any Third Party
Shareholder shall have ten (10) days in which to notify AER of its intention
to join in the request to register its shares. Not later than ninety (90)
days after receipt by AER of a written request for a demand registration
pursuant to this Section 4(a), AER shall file a registration statement with
the Commission relating to the shares as to which such request for a demand
registration relates (the "Requested Shares") and AER shall use its best
efforts to cause the registration statement (which may cover, without
limitation, an offering on a delayed or continuous basis open for up to one
hundred eighty (180) days pursuant to Commission Rule 415) for the Requested
Shares to become effective under the Securities Act. AER shall be obligated
to effect only three (3) registrations pursuant to this Section 4(a) for all
Purchasers and Third Party Shareholders together, and only if the proposed
aggregate selling price in any such offering is at least $2,000,000. Any
such request shall be subject to the rights of the purchasers of AER
Debentures (the "Debenture Subscribers") and Xxxxxx pursuant to the
Registration Rights Agreement dated as of November 22, 1995 among AER, the
Debenture Subscribers and Xxxxxx.
(b) Delay of Registration. Notwithstanding anything to the
contrary in Section 4(a), AER shall have the right (i) to defer the initial
filing or request for acceleration of effectiveness of any registration
pursuant to Section 4(a) or (ii) after effectiveness, to suspend
effectiveness of any such registration statement or to require holders to
suspend further sales pending amendment (collectively a "Delay"), if, in the
good faith judgment of the Board of Directors of AER and upon the advice of
counsel to AER, such delay in filing or requesting acceleration of
effectiveness or such suspension of effectiveness or suspension of sales is
necessary in light of the existence of material non-public information
(financial or otherwise) concerning AER disclosure of which at the time is
not, in the opinion of the Board of Directors of AER and upon the advice of
counsel, (A) otherwise required and (B) in the best interests of AER;
provided, however that AER will not invoke a Delay for more than three (3)
months, unless the reason for the Delay is that AER is then engaged in an
acquisition, in which case it will use its best efforts to end the Delay as
soon as possible and provided, further that AER will not invoke Delays for
more than an aggregate of six (6) months in any calendar year. The one
hundred eighty (180) day period referred to herein during which the
registration statement may be kept current after its effective date shall be
extended for an additional number of business days equal to the number of
business days during which the right to sell shares was suspended pursuant
to the preceding sentence, and, if and to the extent necessary to effect
such extension, the eight (8)-year period referred to above shall also be
extended. In addition, the eight (8)-year period will also be extended if
any registration has been delayed pursuant to the foregoing and cannot be
completed within such period.
(c) "Piggyback" Registration. If at any time prior to eight (8)
years from the date of the Closing, AER shall determine to proceed with the
preparation and filing of a registration statement under the Securities Act
in connection with the proposed offer and sale for money of any of its
equity securities by it or any of its security holders (other than on Form
S-4 or Form S-8 promulgated under the Securities Act or any successor or
similar form), AER will give written notice of its determination to each
Purchaser. Upon the written request of a Purchaser or any Third Party
Shareholder given to AER within ten (10) days after Purchaser's receipt of
any such notice by AER, AER will cause all the Conversion Shares and Warrant
Shares and other shares of Common Stock which Purchasers and any of the
Third Party Shareholders have requested to have registered (the "Piggyback
Shares") to be included in such registration statement; provided, however,
that such request shall be subject to the rights of the Debenture
Subscribers and Xxxxxx pursuant to the Registration Rights Agreement dated
as of November 22, 1995 among AER, the Debenture Subscribers and Xxxxxx, and
provided, further that, if the managing underwriter, in the case of an
underwritten public offering, determines and advises in writing that the
inclusion in the registration statement of all the Piggyback Shares proposed
to be included by Purchasers or the Third Party Shareholders would interfere
with the successful marketing of the securities proposed to be registered by
AER, then the number of such Piggyback Shares to be included in the
registration statement shall be reduced in accordance with the
recommendations of the managing underwriter, except that if the managing
underwriter determines and advises that the inclusion in such registration
statement of any Piggyback Shares would so interfere, then no Piggyback
Shares shall be included in such registration statement; provided that any
such reduction shall be made pro rata with respect to all Purchasers and
Third Party Shareholders requesting such registration.
(d) Expenses. With respect to each inclusion of shares in a
registration statement pursuant to Section 4(a) or 4(b), AER shall bear the
following fees, costs and expenses: all registration, filing and NASD fees,
printing expenses, fees and disbursements of counsel and accountants for AER
and all legal fees and disbursements and other expenses of complying with
state securities or blue sky laws of any jurisdictions in which the
securities to be offered are to be registered or qualified. Fees and
disbursements not expressly included above shall be borne pro rata by the
Purchasers and the Third Party Shareholders whose shares are included in
such registration statement.
(e) Indemnification, Etc. In the event that shares are
registered pursuant to Section 4(a) or 4(b), AER, Purchasers and the Third
Party Shareholders shall execute reasonable and customary underwriting,
indemnification and lock-up agreements relating to such registration and
shall undertake reasonable and customary registration procedures.
(f) Termination of Rights. Notwithstanding anything to the
contrary in this Section 4, all registration rights set forth in this
Section 4 shall terminate with respect to each Purchaser and Third Party
Shareholder at such time as it or he is able to sell all of its or his
Common Stock subject to such registration rights pursuant to Rule 144 under
the Securities Act within a single three (3)-month period.
5. Survival; Indemnification. The representations, warranties and
agreements made in this Agreement shall survive the Closing. Each party,
acknowledging that each of the others is entitled to rely on its
representations, warranties and agreements in this Agreement in order to
preserve the benefit of the bargain otherwise represented by this Agreement,
agrees that neither the survival of such representations, warranties and
agreements, nor their enforceability nor any remedies for breaches of them
shall be affected by any knowledge of a party regardless of when or how such
party acquired such knowledge.
6. Miscellaneous.
(a) Good Faith Efforts; Further Assurances; Cooperation. The
parties shall in good faith undertake to perform their obligations in this
Agreement, to satisfy all conditions and to cause the transactions contem-
plated in this Agreement to be carried out promptly in accordance with the
terms of this Agreement. Upon the execution of this Agreement and
thereafter, each party shall do such things as may be reasonably requested
by the others in order more effectively to consummate or document the
transactions contemplated by this Agreement. The parties shall cooperate
with each other and their respective counsel, accountants or representatives
in connection with any actions required to be taken as part of their
respective rights and obligations under this Agreement.
(b) Notices. Each notice, communication and delivery under this
Agreement (i) shall be made in writing signed by the party making the same,
(ii) shall specify the section of this Agreement pursuant to which it is
given, (iii) shall be given either in person or by a nationally recognized
next business day delivery service or by telecopier, and (iv) if not given
in person, shall be given to a party at the address set forth below such
party's signature (or at such other address as a party may furnish to the
other parties to this Agreement pursuant to this Section 6(b)). If notice
is given pursuant to this Section 6(b) of a permitted successor or assign of
a party, then notice shall also thereafter be given as set forth above to
such successor or assign of such party.
(c) Assignment. No assignment or transfer by a Purchaser or any
Third Party Shareholder of their respective rights and obligations under
this Agreement shall be made by merger or other operation of law or
otherwise except with the prior written consent of AER. This Agreement is
binding upon the parties and their successors and assigns and inures to the
benefit of the parties and their permitted successors and assigns and, when
appropriate to effect the binding nature of this Agreement for the benefit
of the other parties, of any other successor or assign.
(d) Severability. Any determination by any court of competent
jurisdiction of the invalidity of any provision of this Agreement that is
not essential for accomplishing its purposes shall not affect the validity
of any other provision of this Agreement, which shall remain in full force
and effect and which shall be construed as to be valid under applicable law.
(e) Controlling Law; Integration; Amendment; Waiver. This
Agreement is governed by, and shall be construed and enforced in accordance
with, the laws of the State of Georgia (except the laws of that state that
would render such choice of laws ineffective). This Agreement supersedes
all prior negotiations, agreements and understandings between the parties as
to its subject matter, constitutes the entire agreement between the parties
as to its subject matter and may not be altered or amended except in writing
signed by the parties. The failure of any party at any time or times to
require performance of any provision of this Agreement shall in no manner
affect the right to enforce the same; and no waiver by any party of any
provision or of a breach of any provision of this Agreement, whether by
conduct or otherwise, in any one of more instances shall be deemed or
construed either as a further or continuing waiver of any such provision or
breach or as a waiver of any other provision or of a breach of any other
provision of this Agreement.
(f) Copies. This Agreement may be executed in two or more
copies, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or its terms to produce or
account for more than one of such copies.
DULY EXECUTED and delivered by Purchasers and AER, on September 27,
2000.
PURCHASERS: FW AER II, L.P.
By:
Name
Title:
Address:
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Phone: (000) 000-0000
Fax Number: (000) 000-0000
ELMWOOD PARTNERS II
By:
Name:
Title:
Address:
00000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Phone: (000) 000-0000
Fax Number: (000) 000-0000
AER: AER ENERGY RESOURCES, INC.
By:
X.X. Xxxxx
Vice President and Chief Financial Officer
Address:
0000 Xxxxxxxxx Xxxxxxx, Xxxxx X
Xxxxxx, Xxxxxxx 00000
Phone: (000) 000-0000
Fax Number: (000) 000-0000
* * * * *
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