EXHIBIT 10.53
EXCHANGE RIGHTS AGREEMENT
This Exchange Rights Agreement (the "Agreement") is entered into as of
September 17, 1997 by and between Yellow Stone Fuels Corporation ("YSFC"), an
Ontario, Canada corporation with offices at 000 Xxxxx 0xx Xxxx, Xxxxxxxx,
Xxxxxxx 00000, X.X. Energy Corp. ("USE"), a Wyoming corporation with offices at
000 Xxxxx 0xx Xxxx, Xxxxxxxx, Xxxxxxx 00000, and R A F Financial Corporation
("RAF"), a corporation with offices at 0000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxx,
Xxxxxxxx 00000.
RECITALS
Whereas, USE and its affiliated corporation, Crested Corp. ("Crested"),
own shares of Common Stock of YSFC and have the right to convert indebtedness to
additional shares of Common Stock of YSFC; and
Whereas, USE has taken the initiative in founding and organizing YSFC
and may be deemed to be a founder and promoter of YSFC; and
Whereas, YSFC has or will enter into an Selling Agent Agreement ("Agent
Agreement") with RAF under which RAF has agreed to or will agree to use its best
efforts, as agent for YSFC, to place (sell) shares of Common Stock of YSFC for
YSFC in a private offering (the "Private Offering") for up to US$3 million in
gross proceeds; provided that, YSFC and RAF prior to the end of the Private
Offering may mutually agree to increase the size of the Private Offering up to a
maximum of US$5 million in gross proceeds. Hereafter, the shares of Common Stock
which will be sold in the Private Offering are referred to as the "Private
Offering Shares" and the information about YSFC and the Private Offering to be
delivered to the purchasers ("Investors") in the Private Offering is referred to
as the "Private Placement Memorandum"; and
Whereas, RAF will receive, as a part of its compensation for sale of
the Private Offering Shares, Warrants to Purchase Common Shares of YSFC
("Agent's Warrants", and the future holders of such Agent's Warrants are
referred to as the "Warrantholders"); and
Whereas, the offer and sale of the Private Offering Shares will not be
registered with the Securities and Exchange Commission ("SEC") pursuant to
Section 5 of the Securities Act of 1933 ("1933 Act") or any state securities
laws and, therefore, the Private Offering Shares will constitute "restricted
securities" under SEC Rule 144 and state securities laws; and
Whereas, USE, YSFC and RAF have negotiated the terms and conditions
under which the Investors and their assignees will have the opportunity to
exchange all or a part of their Private Offering Shares for USE Shares if YSFC
is not listed on, and the Common Stock of YSFC is not available for quotation
on, the Nasdaq National Market System ("NNM") by the eighteen month anniversary
of the date of the Private Placement Memorandum (the "Listing Period"); and
Whereas, USE, YSFC and RAF have negotiated the terms and conditions
under which the Warrantholders and the holders of Common Stock of YSFC acquired
upon the exercise of the Agent's Warrants ("Exercise Shares") will have the
opportunity to exchange all or a part of their Agent's Warrants or Exercise
Shares for USE Warrants or for USE Shares, respectively, if YSFC is not listed
on, and the Common Stock of YSFC is not available for quotation on, NNM during
the Listing Period; and
Whereas, the Common Stock of USE is listed on NNM.
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AGREEMENT
Now, therefore, the parties agree as follows:
i. Definitions. In addition to the terms
defined above, the following terms shall have
the following meanings:
"Exchange Date" shall mean the date when the Investor's
Exchange Shares, the Warrantholder's Agent's Warrants or the Exercise
Shares and a duly completed and executed notice of election to exchange
relating thereto are received by USE.
"Exchange Offer Documents" shall mean (i) the prospectus
included in the Registration Statement on Form S-1 or other appropriate
SEC form, which prospectus is to be delivered by USE ("USE Prospectus")
as a part of the Exchange Offer Documents pursuant to paragraph 2 of
this Agreement and which registration statement shall have registered
and/or qualified by the first day of the Exchange Period the offers to
sell (exchange) and the sale (exchange) of the USE Shares and USE
Warrants by USE and the exercise of the USE Warrants to purchase the
USE Shares underlying the USE Warrants with the SEC and the states in
which the Investors, the Investors' assignees, the Warrantholders and
the holders of the Exercise Shares reside and (ii) such accompanying
documents, including the form of notice of election to exchange, as are
necessary to effect the exchange pursuant to this Agreement.
"Exchange Period" shall mean the period of time beginning on
the date when the Exchange Offer Documents are first mailed pursuant to
Paragraph 2 of this Agreement to the Investors, to the Investors'
assignees, to the Warrantholders and to those persons who have Exercise
Shares, and ending on the six-month anniversary of the date of such
mailing, or the next business day if the six-month anniversary falls on
a bank holiday; provided, that the Exchange Offer Documents must be
mailed to the Investors, to the Investors' assignees, to the
Warrantholders and to those persons who have Exercise Shares not later
than the first business day after the expiration of the Listing Period.
"Investor's Exchange Shares" shall mean the Private Offering
Shares owned by an Investor or an Investor's assignee at the beginning
of the Exchange Period; provided, that USE will only recognize and this
Agreement only shall be enforceable with respect to an Investor's
assignee of an Investor's Exchange Shares if (i) the Investor's
Exchange Shares have been assigned or otherwise transferred in
compliance with the 1933 Act and such compliance is established to the
reasonable satisfaction of YSFC before such assignment or transfer is
approved by YSFC; and (ii) the assignee or transferee did not acquire
the Investor's Exchange Shares in a United States or Canadian stock
market or stock exchange transaction.
"Investor's Exchange Value" shall mean the total original cash
cost to the Investor of the Private Offering Shares owned by the
Investor or the Investor's assignee, plus annual interest at the rate
of 10% calculated on a 360 day year basis starting the day after the
Investor's Subscription Agreement was accepted and approved by YSFC for
the Investor's purchase of the Private Offering Shares in the Private
Offering and ending on the Exchange Date.
"USE Shares" shall mean shares of Common Stock of USE, $0.01
par value and any other class of securities ranking on a parity with
such Common Stock.
"USE Share Value" shall mean the average of the closing bid
prices for a share of USE Common Stock on NNM for the five trading days
before the Exchange Date, as reported by NNM. If USE is not listed on,
or the USE Shares are not available for quotation on, NNM on the
Exchange
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Date, the USE Share Value shall be based on the average of the closing
bid prices for such five day period of the USE Shares on a national
securities exchange if the USE Shares are listed on a national
securities exchange or admitted to unlisted trading privileges on such
an exchange, or, if not, based upon the average of the closing bid
prices for such five day period if the USE Shares are listed for
trading on another trading system of the National Association of
Securities Dealers, Inc. If the USE Shares are not so listed on such
exchange or system or admitted to unlisted trading privileges, the USE
Share Value shall be the average of the closing bid prices reported by
the National Quotation Bureau, Inc. for the five trading days before
the Exchange Date. If the USE Shares are not so listed or admitted to
unlisted trading privileges and if bid prices are not so reported, the
current value shall be an amount, not less than book value, determined
in such reasonable manner as may be prescribed by the board of
directors of the Company.
"USE Warrants" shall mean warrants to purchase shares of
Common Stock of USE, with the same terms, including but not limited to
registration rights, as the Agent's Warrants surrendered in exchange
therefor, except that the USE Warrants shall be (i) exercisable only
for the unexpired term of the Agent's Warrants and (ii) exercisable to
purchase that number of USE Shares equal to (a) the product of (x) the
number of shares of Common Stock underlying the Agent's Warrants
multiplied by (z) the price per share of Common Stock of YSFC in the
Private Offering divided by (b) the USE Share Value and except that the
exercise price per share of the USE Warrants shall be equal to the USE
Share Value.
ii. YSFC Notice to USE and RAF of No NNM Listing;
Exchange Offer Documents. At least 30 days before the
expiration of the Listing Period, YSFC shall give
written notice to RAF and USE as to whether or not
YSFC will be listed on, and the Common Stock of YSFC
available for quotation on, NNM at the end of the
Listing Period. If not, not later than the first
business day after the end of the Listing Period, USE
shall mail the Exchange Offer Documents to Investors,
to Investors' assignees, to the Warrantholders and to
those persons who have Exercise Shares.
iii. Exchange Offer Terms.
(1) To Investors. During the Exchange Period,
each Investor and each Investor's assignee
shall have the right to exchange all of part
of the Investor's Exchange Shares for the
number of fully paid and nonassessable USE
Shares which equals the Investor's Exchange
Value divided by the USE Share Value.
(2) To Warrantholders and Holders of Exercise
Shares. During the Exchange Period, each
Warrantholder and each holder of Exercise
Shares shall have the right to exchange (i)
all or part of the Agent's Warrants owned by
the Warrantholder for USE Warrants, and/or
(ii) all or part of the Exercise Shares for
USE Shares on the same basis as the
Investor's Exchange Shares are exchangeable
as provided in paragraph 3.a above.
(3) Receipt During Exchange Period; No
Fractions; Irrevocable Election. No notice
of election to exchange which is given after
the expiration of the Exchange Period will
be accepted by USE. No fractional USE Shares
or USE Warrants shall be issued; any
fractional USE Share or USE Warrant which
would otherwise result shall be rounded up
to the next whole USE Share or USE Warrant.
Each Investor, each Investor's assignee,
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each Warrantholder and each holder of
Exercise Shares shall have the right, one
time only, to exchange some or all of the
Investor's Exchange Shares, the
Warrantholder's Agent's Warrants or the
Exercise Shares for USE Shares or USE
Warrants, as applicable. On the Exchange
Date, the notices of election to exchange
shall be irrevocable and shall not be
changed to increase or decrease the number
of Investor's Exchange Shares, Agent's
Warrants or Exercise Shares to be exchanged.
(4) Certificates for USE Shares and USE
Warrants. From time to time during the
Exchange Period (i) certificates for the USE
Shares shall be issued by USE to the persons
exercising their right of exchange for USE
Shares, and (ii) USE Warrants shall be
issued by USE to the persons who have
exchanged Agent's Warrants for USE Warrants.
iv. Current Registration Statement; Expenses of
Registration and Qualification. USE shall keep the
registration statement current until the day after
the last day of the Exchange Period. USE shall pay
for all expenses incurred in connection with such
registration statement and, in addition, for all
expenses incurred in connection with registering
or qualifying the offer and sale of the USE Shares,
USE Warrants and underlying USE Shares under the
securities laws of the states wherein the Investors,
Investors' assignees, Warrantholders and each holder
of Exercise Shares reside. USE shall not pay any
commissions or other compensation to any person in
connection with such offers and sales.
v. Adjustments for Recapitalizations; No
Termination. In the event that between the date of
the Private Placement Memorandum and the day after
the last day of the Exchange Period, YSFC or USE
declares any stock dividend or effectuates any stock
split or undergoes a capital reorganization or other
transaction which changes the kind or number of
shares of Common Stock of YSFC or USE, then full and
equitable adjustment in the number of USE Shares and
USE Warrants shall be made with the objective of
maintaining after the transaction the relative values
of the Investor's Exchange Value and the USE Share
Value before such stock dividend or other capital
reorganization or other transaction as if such
transaction had not occurred, taking into account
changes in USE Share Value which have resulted
otherwise than from such stock dividend or stock
split, etc.
USE and YSFC agree that from the date of this Agreement until the day
after the last day of the Exchange, neither USE nor YSFC will take or permit any
action, including, but not limited to, a merger, reorganization or sale of
assets, which would terminate or diminish the rights of the Investors,
Investors' assignees, Warrantholders or holders of Exercise Shares under this
Agreement.
vi. Injunctive Relief. USE irrevocably grants RAF and its
assignees, in addition to other legal remedies
available, the right to apply for an injunction,
without bond exceeding $500, to enforce USE's
covenants herein and USE's sole remedy in the event
of the entry of such injunctive relief shall be the
dissolution of such injunctive relief, if warranted,
upon hearing duly held (all claims for damages by
reason of the wrongful issuance of such injunction
being expressly waived hereby).
vii. Complete Agreement; Governing Law and Expenses
of Resolution; Notice. This Agreement represents the
complete agreement among the parties with
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respect to the subject matter hereof, except for the
Agent Agreement and the Agent's Warrants the terms of
which shall control in the event of any conflict with
this Agreement. This Agreement shall be construed and
interpreted under the laws of the State of Colorado;
this Agreement is entered into in Denver, Colorado.
In the event of litigation to enforce the rights of
the parties hereto, the party which prevails shall be
entitled to recover from the other parties the costs
and expenses (including reasonable attorney's fees)
of such litigation. Notice to the parties hereto
shall be given by first class mail to the address of
the party stated in this Agreement; notice to the
Investors, Investor assignees, Warrantholders and
holders of Exercise Shares shall be by first class
mail to the addresses of such persons as reflected in
the records of the Company. Unless otherwise stated
in this Agreement, all notices under this Agreement
shall be given when postmarked after having been
deposited in the U.S.
Mail, postage prepaid.
viii. Binding Nature. This Agreement shall be binding upon
the parties hereto, and inure to the benefit of the
parties, their respective heirs, administrators,
executors, successors and assigns. Further, RAF shall
have the right, in its sole discretion, to enforce
this Agreement on behalf of the Investors, Investor
assignees, Warrantholders and holders of Exercise
Shares or to assign the rights to enforcement hereof
to one or more of the Investors, Investor assignees,
Warrantholders and holders of Exercise Shares.
This Agreement is effective as of the date first stated above.
YELLOW STONE FUELS CORP. U.S. ENERGY CORP.
By: /s/ Xxxx X. Xxxxxx By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, President Xxxx X. Xxxxxx, Chairman
RAF FINANCIAL CORPORATION
/s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx,
Senior Vice President, Corporate Finance
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