EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
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LAURUS MASTER FUND, LTD.
AND
NEW CENTURY ENERGY CORP.
DATED: JUNE 30, 2005
TABLE OF CONTENTS
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PAGE
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1. Agreement to Sell and Purchase, 1
2. Fees, Warrant and Option 2
3. Closing, Delivery and Payment 2
3.1 Closing 2
3.2 Delivery 2
4. Representations and Warranties of the Company 3
4.1 Organization, Good Standing and Qualification 3
4.2 Subsidiaries 3
4.3 Capitalization; Voting Rights 4
4.4 Authorization; Binding Obligations 4
4.5 Liabilities 5
4.6 Agreements; Action 5
4.7 Obligations to Related Parties 7
4.8 Changes 8
4.9 Title to Properties and Assets; Liens, Etc 9
4.10 Intellectual Property 9
4.11 Compliance with Other Instruments 10
4.12 Litigation 10
4.13 Tax Returns and Payments 10
4.14 Employees 11
4.15 Registration Rights and Voting Rights 11
4.16 Compliance with Laws; Permits 12
4.17 Environmental and Safety Laws 12
4.18 Valid Offering 12
4.19 Full Disclosure 12
4.20 Insurance 13
4.21 SEC Reports 13
4.22 Listing 13
4.23 No Integrated Offering 13
4.24 Stop Transfer 14
4.25 Dilution 14
4.26 Patriot Act 14
4.27 ERISA 14
5. Representations and Warranties of the Purchaser 15
5.1 No Shorting 15
5.2 Requisite Power and Authority 15
5.3 Investment Representations 15
5.4 The Purchaser Bears Economic Risk 16
5.5 Acquisition for Own Account 16
5.6 The Purchaser Can Protect Its Interest 16
5.7 Accredited Investor 16
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5.8 Legends 16
6. Covenants of the Company 17
6.1 Stop-Orders 17
6.2 Listing 18
6.3 Market Regulations 18
6.4 Reporting Requirements 18
6.5 Use of Funds 18
6.6 Access to Facilities 18
6.7 Taxes 19
6.8 Insurance 19
6.9 Intellectual Property 20
6.10 Properties 20
6.11 Confidentiality 20
6.12 Required Approvals 21
6.13 Reissuance of Securities 22
6.14 Opinion 22
6.15 Margin Stock 22
6.16 Financing Right of First Refusal 22
6.17 Additional Investment 23
6.18 Authorization and Reservation of Shares 23
7. Covenants of the Purchaser 24
7.1 Confidentiality 24
7.2 Non-Public Information 24
7.3 Limitation on Acquisition of Common Stock of the Company 24
8. Covenants of the Company and the Purchaser Regarding Indemnification 24
8.1 Company Indemnification 24
8.2 Purchaser's Indemnification 25
9. Conversion of Convertible Note 25
9.1 Mechanics of Conversion 25
10. Registration Rights 27
10.1 Registration Rights Granted 27
10.2 Offering Restrictions 27
11. Miscellaneous 27
11.1 Governing Law, Jurisdiction and Waiver of Jury Trial 27
11.2 Severability 28
11.3 Survival 29
11.4 Successors 29
11.5 Entire Agreement; Maximum Interest 29
11.6 Amendment and Waiver 29
11.7 Delays or Omissions 29
11.8 Notices 30
11.9 Attorneys' Fees 31
11.10 Titles and Subtitles 31
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11.11 Facsimile Signatures; Counterparts 31
11.12 Broker's Fees 31
11.13 Construction 31
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LIST OF EXHIBITS
Form of Convertible Term Note Exhibit A
Form of Warrant Exhibit B
Form of Option Exhibit C
Form of Opinion Exhibit D
Form of Escrow Agreement Exhibit E
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of June 30, 2005, by and between NEW CENTURY ENERGY CORP., a Colorado
corporation (the "Company"), and LAURUS MASTER FUND, LTD., a Cayman Islands
company (the "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale to the Purchaser of a Secured
Convertible Term Note in the aggregate principal amount of Fifteen Million
Dollars ($15,000,000) in the form of Exhibit A hereto (as amended, modified or
supplemented from time to time, the "Note"), which Note is convertible into
shares of the Company's common stock, $0.001 par value per share (the "Common
Stock") at an initial fixed conversion price of $0.62 per share of Common Stock
("Fixed Conversion Price");
WHEREAS, the Company wishes to issue to the Purchaser a warrant in the form
of Exhibit B hereto (as amended, modified or supplemented from time to time, the
"Warrant") to purchase up to 7,258,065 shares of the Company's Common Stock
(subject to adjustment as set forth therein) in connection with the Purchaser's
purchase of the Note;
WHEREAS, the Company wishes to issue to the Purchaser an option in the form
of Exhibit C hereto (as amended, modified or supplemented from time to time, the
"Option") to purchase up to 10,222,784 shares of the Company's Common Stock
(subject to adjustment as set forth therein) in connection with the Purchaser's
purchase of the Note;
WHEREAS, the Purchaser desires to purchase the Note, the Warrant and the
Option on the terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note, the Warrant and
the Option to the Purchaser on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Sell and Purchase. Pursuant to the terms and
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conditions set forth in this Agreement, on the Closing Date (as defined in
Section 3), the Company shall sell to the Purchaser, and the Purchaser shall
purchase from the Company, the Note. The sale of the Note on the Closing Date
shall be known as the "Offering." The Note will mature on the Maturity Date (as
defined in the Note). Collectively, the Note, the Common Stock issuable upon
conversion of the Note, the Warrant, the Common Stock issuable upon exercise of
the Warrant, the Option and the Common Stock issuable upon exercise of the
Option are referred to as the "Securities."
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2. Fees, Warrant and Option. On the Closing Date:
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(a) The Company will issue and deliver to the Purchaser the
Warrant to purchase up to 7,258,065 shares of Common Stock (subject to
adjustment as set forth in the Warrant) in connection with the
Offering, pursuant to Section 1 hereof. All the representations,
covenants, warranties, undertakings, and indemnification, and other
rights made or granted to or for the benefit of the Purchaser by the
Company are hereby also made and granted in respect of the Warrant and
shares of the Company's Common Stock issuable upon exercise of the
Warrant (the "Warrant Shares").
(b) The Company will issue and deliver to the Purchaser the
Option to purchase up to 10,222,784 shares of Common Stock (subject to
adjustment as set forth in the Option) in connection with the
Offering, pursuant to Section 1 hereof. All the representations,
covenants, warranties, undertakings, and indemnification, and other
rights made or granted to or for the benefit of the Purchaser by the
Company are hereby also made and granted for the benefit of the holder
of the Option and shares of the Company's Common Stock issuable upon
exercise of the Option (the "Option Shares").
(c) Subject to the terms of Section 2(e) below, the Company shall
pay to Laurus Capital Management, L.L.C., the manager of the
Purchaser, a closing payment in an amount equal to three and one half
percent (3.50%) of the aggregate principal amount of the Note. The
foregoing fee is referred to herein as the "Closing Payment."
(d) The Company shall reimburse the Purchaser for its reasonable
expenses (including legal fees and expenses) incurred in connection
with the preparation and negotiation of this Agreement and the Related
Agreements (as hereinafter defined), and expenses incurred in
connection with the Purchaser's due diligence review of the Company
and its Subsidiaries (as defined in Section 4.2) and all related
matters; provided that the due diligence fees may not exceed $17,500
(exclusive of third party appraisals or extraordinary due diligence).
Amounts required to be paid under this Section 2(d) will be paid on
the Closing Date.
(e) The Closing Payment and the expenses referred to in the
preceding clause (d) (net of deposits previously paid by the Company)
shall be paid at closing out of funds held pursuant to the Escrow
Agreement (as defined below) and a disbursement letter (the
"Disbursement Letter").
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3. Closing, Delivery and Payment.
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3.1 Closing. Subject to the terms and conditions herein, the closing
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of the transactions contemplated hereby (the "Closing"), shall take place
on the date hereof, at such time or place as the Company and the Purchaser
may mutually agree (such date is hereinafter referred to as the "Closing
Date").
3.2 Delivery. Pursuant to the Escrow Agreement, at the Closing on the
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Closing Date, the Company will deliver to the Purchaser, among other
things, the Note, the Warrant and the Option and the Purchaser will deliver
to the Company, among other things, the amounts set forth in the
Disbursement Letter by certified funds or wire transfer.
4. Representations and Warranties of the Company. The Company hereby
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represents and warrants to the Purchaser as follows
4.1 Organization, Good Standing and Qualification. Each of the Company
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and each of its Subsidiaries is a corporation, partnership or limited
liability company, as the case may be, duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization. Each
of the Company and each of its Subsidiaries has the corporate, limited
liability company or partnership, as the case may be, power and authority
to own and operate its properties and assets and, insofar as it is or shall
be a party thereto, to (a) execute and deliver (i) this Agreement, (ii) the
Note, the Warrant and the Option to be issued in connection with this
Agreement, (iii) the Master Security Agreement dated as of the date hereof
between the Company, certain Subsidiaries of the Company and the Purchaser
(as amended, modified and/or supplemented from time to time, the "Master
Security Agreement"), (iv) the Registration Rights Agreement relating to
the Securities dated as of the date hereof between the Company and the
Purchaser (as amended, modified and/or supplemented from time to time, the
"Registration Rights Agreement"), (v) the Subsidiary Guaranty dated as of
the date hereof made by certain Subsidiaries of the Company (as amended,
modified and/or supplemented from time to time, the "Subsidiary Guaranty"),
(vi) the Stock Pledge Agreement dated as of the date hereof among the
Company, certain Subsidiaries of the Company and the Purchaser (as amended,
modified and/or supplemented from time to time, the "Stock Pledge
Agreement"), (vii) the Funds Escrow Agreement dated as of the date hereof
among the Company, the Purchaser and the escrow agent referred to therein,
substantially in the form of Exhibit E hereto (as amended, modified and/or
supplemented from time to time, the "Escrow Agreement"), (viii) each
mortgage dated as of the date hereof made by the Company in favor of the
Purchaser and (ix) all other documents, instruments and agreements entered
into in connection with the transactions contemplated hereby and thereby
(the preceding clauses (ii) through (ix), collectively, the "Related
Agreements"); (b) issue and sell the Note and the shares of Common Stock
issuable upon conversion of the Note (the "Note Shares"); (c) issue and
sell the Warrant and the Warrant Shares; (d) issue and sell the Option and
the Option Shares; and (e) carry out the provisions of this Agreement and
the Related Agreements and to carry on its business as presently conducted.
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Each of the Company and each of its Subsidiaries is duly qualified and is
authorized to do business and is in good standing as a foreign corporation,
partnership or limited liability company, as the case may be, in all
jurisdictions in which the nature or location of its activities and of its
properties (both owned and leased) makes such qualification necessary,
except for those jurisdictions in which failure to do so has not, or could
not reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the business, assets, liabilities, condition
(financial or otherwise), properties, operations or prospects of the
Company and its Subsidiaries, taken individually and as a whole (a
"Material Adverse Effect").
4.2 Subsidiaries. Each direct and indirect Subsidiary of the Company,
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the direct owner of such Subsidiary and its percentage ownership thereof,
is set forth on Schedule 4.2. For the purpose of this Agreement, a
"Subsidiary" of any person or entity means (a) a corporation or other
entity whose shares of stock or other ownership interests having ordinary
voting power (other than stock or other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority
of the directors of such corporation, or other persons or entities
performing similar functions for such person or entity, are owned, directly
or indirectly, by such person or entity or (b) a corporation or other
entity in which such person or entity owns, directly or indirectly, more
than 50% of the equity interests at such time.
4.3 Capitalization; Voting Rights.
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(a) The authorized capital stock of the Company, as of the date
hereof consists of 120,000,000 shares, of which 100,000,000 are shares
of Common Stock, par value $0.001 per share, 49,560,600 shares of
which are issued and outstanding as of the date hereof, and 20,000,000
are shares of preferred stock, par value $0.001 per share. The Company
has 5,000 shares of Series A convertible preferred stock designated
and 5,000 shares of Series A convertible preferred stock issued and
outstanding as of the date hereof and 2,000,000 shares of Series B
convertible preferred stock designated and 0 shares of Series B
convertible preferred stock issued and outstanding. The authorized,
issued and outstanding capital stock of each Subsidiary of the Company
is set forth on Schedule 4.3.
(b) Except as disclosed on Schedule 4.3, other than: (i) the
shares reserved for issuance under the Company's stock option plans;
and (ii) shares which may be granted pursuant to this Agreement and
the Related Agreements, there are no outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements, or arrangements or
agreements of any kind for the purchase or acquisition from the
Company of any of its securities. Except as disclosed on Schedule 4.3,
neither the offer, issuance or sale of any of the Note, the Warrant or
the Option, or the issuance of any of the Note Shares, Warrant Shares
or Option Shares, nor the consummation of any transaction contemplated
hereby will result in a change in the price or number of any
securities of the Company outstanding, under anti-dilution or other
similar provisions contained in or affecting any such securities.
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(c) All issued and outstanding shares of the Company's Common
Stock: (i) have been duly authorized and validly issued and are fully
paid and nonassessable; and (ii) were issued in compliance with all
applicable state and federal laws concerning the issuance of
securities.
(d) The rights, preferences, privileges and restrictions of the
shares of the Common Stock are as stated in the Company's Certificate
of Incorporation (the "Charter"). The Note Shares, Warrant Shares and
Option Shares have been duly and validly reserved for issuance. When
issued in compliance with the provisions of this Agreement and the
Company's Charter, the Securities will be validly issued, fully paid
and nonassessable, and will be free of any liens or encumbrances;
provided, however, that the Securities may be subject to restrictions
on transfer under state and/or federal securities laws as set forth
herein or as otherwise required by such laws at the time a transfer is
proposed.
4.4 Authorization; Binding Obligations. All corporate, partnership or
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limited liability company, as the case may be, action on the part of the
Company and each of its Subsidiaries (including their respective officers
and directors) necessary for the authorization of this Agreement and the
Related Agreements, the performance of all obligations of the Company and
its Subsidiaries hereunder and under the other Related Agreements at the
Closing, and the authorization, sale, issuance and delivery of the Note,
the Warrant and the Option has been taken or will be taken prior to the
Closing. This Agreement and the Related Agreements, when executed and
delivered and to the extent it is a party thereto, will be valid and
binding obligations of each of the Company and each of its Subsidiaries,
enforceable against each such entity in accordance with their terms,
except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; and
(b) general principles of equity that restrict the availability
of equitable or legal remedies.
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The sale of the Note and the subsequent conversion of the Note into
Note Shares are not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied
with. The issuance of the Warrant and the subsequent exercise of the
Warrant for Warrant Shares are not and will not be subject to any
preemptive rights or rights of first refusal that have not been properly
waived or complied with. The issuance of the Option and the subsequent
exercise of the Option for Option Shares are not and will not be subject to
any preemptive rights or rights of first refusal that have not been
properly waived or complied with.
4.5 Liabilities. Neither the Company nor any of its Subsidiaries has
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any liabilities, except current liabilities incurred in the ordinary course
of business and liabilities disclosed in any of the Company's filings under
the Securities Exchange Act of 1934 ("Exchange Act") made prior to the date
of this Agreement (collectively, the "Exchange Act Filings"), copies of
which have been provided to the Purchaser.
4.6 Agreements; Action. Except as set forth on Schedule 4.6 or as
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disclosed in any Exchange Act Filings:
(a) there are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees
to which the Company or any of its Subsidiaries is a party or by which
it is bound which may involve: (i) obligations (contingent or
otherwise) of, or payments to, the Company or any of its Subsidiaries
in excess of $50,000 (other than obligations of, or payments to, the
Company or any of its Subsidiaries arising from purchase or sale
agreements entered into in the ordinary course of business); or (ii)
the transfer or license of any patent, copyright, trade secret or
other proprietary right to or from the Company or any of its
Subsidiaries (other than licenses arising from the purchase of "off
the shelf" or other standard products); or (iii) provisions
restricting the development, manufacture or distribution of the
Company's or any of its Subsidiaries' products or services; or (iv)
indemnification by the Company or any of its Subsidiaries with respect
to infringements of proprietary rights.
(b) Since December 31, 2004 (the "Balance Sheet Date"), neither
the Company nor any of its Subsidiaries has: (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect
to any class or series of its capital stock; (ii) incurred any
indebtedness for money borrowed or any other liabilities (other than
ordinary course obligations) individually in excess of $50,000 or, in
the case of indebtedness and/or liabilities individually less than
$50,000, in excess of $100,000 in the aggregate; (iii) made any loans
or advances to any person or entity in excess, individually or in the
aggregate, of $100,000, other than ordinary course advances for travel
expenses; or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary
course of business.
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(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or
entity (including persons or entities the Company or any Subsidiary of
the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar
amounts of such subsections.
(d) The Company maintains disclosure controls and procedures
("Disclosure Controls") designed to ensure that information required
to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized, and
reported, within the time periods specified in the rules and forms of
the Securities and Exchange Commission ("SEC").
(e) The Company makes and keep books, records, and accounts,
that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the Company's assets. The Company
maintains internal control over financial reporting ("Financial
Reporting Controls") designed by, or under the supervision of, the
Company's principal executive and principal financial officers, and
effected by the Company's board of directors, management, and other
personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles ("GAAP"), including that:
(i) transactions are executed in accordance with management's general
or specific authorization;
(ii) unauthorized acquisition, use, or disposition of the Company's
assets that could have a material effect on the financial statements are
prevented or timely detected;
(iii) transactions are recorded as necessary to permit preparation of
financial statements in accordance with GAAP, and that the Company's
receipts and expenditures are being made only in accordance with
authorizations of the Company's management and board of directors;
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(iv) transactions are recorded as necessary to maintain accountability
for assets; and
(v) the recorded accountability for assets is compared with the
existing assets at reasonable intervals, and appropriate action is taken
with respect to any differences.
(f) There is no weakness in any of the Company's Disclosure
Controls or Financial Reporting Controls that is required to be
disclosed in any of the Exchange Act Filings, except as so disclosed.
4.7 Obligations to Related Parties. Except as set forth on Schedule
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4.7, there are no obligations of the Company or any of its Subsidiaries to
officers, directors, stockholders or employees of the Company or any of its
Subsidiaries other than:
(a) for payment of salary for services rendered and for bonus
payments;
(b) reimbursement for reasonable expenses incurred on behalf of
the Company and its Subsidiaries;
(c) for other standard employee benefits made generally available
to all employees (including stock option agreements outstanding under
any stock option plan approved by the Board of Directors of the
Company and each Subsidiary of the Company, as applicable); and
(d) obligations listed in the Company's and each of its
Subsidiary's financial statements or disclosed in any of the Company's
Exchange Act Filings.
Except as described above or set forth on Schedule 4.7, none of the
officers, directors or, to the best of the Company's knowledge, key
employees or stockholders of the Company or any of its Subsidiaries or any
members of their immediate families, are indebted to the Company or any of
its Subsidiaries, individually or in the aggregate, in excess of $50,000 or
have any direct or indirect ownership interest in any firm or corporation
with which the Company or any of its Subsidiaries is affiliated or with
which the Company or any of its Subsidiaries has a business relationship,
or any firm or corporation which competes with the Company or any of its
Subsidiaries, other than passive investments in publicly traded companies
(representing less than one percent (1%) of such company) which may compete
with the Company or any of its Subsidiaries. Except as described above, no
officer, director, stockholder of the Company or any of its Subsidiaries,
or any member of their immediate families, is, directly or indirectly,
interested in any material contract with the Company or any of its
Subsidiaries and no agreements, understandings or proposed transactions are
contemplated between the Company or any of its Subsidiaries and any such
person. Except as set forth on Schedule 4.7, neither the Company nor any of
its Subsidiaries is a guarantor or indemnitor of any indebtedness of any
other person, firm or entity.
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4.8 Changes. Since the Balance Sheet Date, except as disclosed in any
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Exchange Act Filing or in any Schedule to this Agreement or to any of the
Related Agreements, there has not been:
(a) any change in the business, assets, liabilities, condition
(financial or otherwise), properties, operations or prospects of the
Company or any of its Subsidiaries, which individually or in the
aggregate has had, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(b) any resignation or termination of any officer, key employee
or group of employees of the Company or any of its Subsidiaries;
(c) any material change, except in the ordinary course of
business, in the contingent obligations of the Company or any of its
Subsidiaries by way of guaranty, endorsement, indemnity, warranty or
otherwise;
(d) any damage, destruction or loss, whether or not covered by
insurance, which has had, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(e) any waiver by the Company or any of its Subsidiaries of a
valuable right or of a material debt owed to it;
(f) any direct or indirect loans made by the Company or any of
its Subsidiaries to any stockholder, employee, officer or director of
the Company or any of its Subsidiaries, other than advances made in
the ordinary course of business;
(g) any material change in any compensation arrangement or
agreement with any employee, officer, director, stockholder of the
Company or any of its Subsidiaries;
(h) any declaration or payment of any dividend or other
distribution of the assets of the Company or any of its Subsidiaries;
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(i) any labor organization activity related to the Company or any
of its Subsidiaries;
(j) any debt, obligation or liability incurred, assumed or
guaranteed by the Company or any of its Subsidiaries, except those for
immaterial amounts and for current liabilities incurred in the
ordinary course of business;
(k) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets owned by the
Company or any of its Subsidiaries;
(l) any change in any material agreement to which the Company or
any of its Subsidiaries is a party or by which either the Company or
any of its Subsidiaries is bound which either individually or in the
aggregate has had, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(m) any other event or condition of any character that, either
individually or in the aggregate, has had, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect; or
(n) any arrangement or commitment by the Company or any of its
Subsidiaries to do any of the acts described in subsection (a) through
(m) above.
4.9 Title to Properties and Assets; Liens, Etc. Except as set forth on
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Schedule 4.9, each of the Company and each of its Subsidiaries has good and
marketable title to its properties and assets, and good title to its
leasehold interests, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than:
(a) those resulting from taxes which have not yet become
delinquent;
(b) minor liens and encumbrances which do not materially detract
from the value of the property subject thereto or materially impair
the operations of the Company or any of its Subsidiaries, so long as
in each such case, such liens and encumbrances have no effect on the
lien priority of the Purchaser in such property; and
(c) those that have otherwise arisen in the ordinary course of
business, so long as they have no effect on the lien priority of the
Purchaser in such property.
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All facilities, machinery, equipment, fixtures, vehicles and other
properties owned, leased or used by the Company and its Subsidiaries are in
good operating condition and repair and are reasonably fit and usable for
the purposes for which they are being used. Except as set forth on Schedule
4.9, the Company and its Subsidiaries are in compliance with all material
terms of each lease to which it is a party or is otherwise bound.
4.10 Intellectual Property.
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(a) Each of the Company and each of its Subsidiaries owns or
possesses sufficient legal rights to all patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information
and other proprietary rights and processes necessary for its business
as now conducted and, to the Company's knowledge, as presently
proposed to be conducted (the "Intellectual Property"), without any
known infringement of the rights of others. There are no outstanding
options, licenses or agreements of any kind relating to the foregoing
proprietary rights, nor is the Company or any of its Subsidiaries
bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and other proprietary
rights and processes of any other person or entity other than such
licenses or agreements arising from the purchase of "off the shelf" or
standard products.
(b) Neither the Company nor any of its Subsidiaries has received
any communications alleging that the Company or any of its
Subsidiaries has violated any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary
rights of any other person or entity, nor is the Company or any of its
Subsidiaries aware of any basis therefor.
(c) The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of
any of its employees made prior to their employment by the Company or
any of its Subsidiaries, except for inventions, trade secrets or
proprietary information that have been rightfully assigned to the
Company or any of its Subsidiaries.
4.11 Compliance with Other Instruments. Neither the Company nor any of
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its Subsidiaries is in violation or default of (a) any term of its Charter
or Bylaws, or (b) any provision of any indebtedness, mortgage, indenture,
contract, agreement or instrument to which it is party or by which it is
bound or of any judgment, decree, order or writ, which violation or
default, in the case of this clause (b), has had, or could reasonably be
expected to have, either individually or in the aggregate, a Material
Adverse Effect. Subject to the requirement that the Company obtain any
consents set forth on Schedule 4.11, the Company's or any of its
Subsidiary's execution, delivery and performance of and compliance with
this Agreement and the Related Agreements to which it is a party, and the
issuance and sale of the Note by the Company and the other Securities by
the Company each pursuant hereto and thereto, will not, with or without the
passage of time or giving of notice, result in any such material violation,
or be in conflict with or constitute a default under any such term or
provision, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company
or any of its Subsidiaries or the suspension, revocation, impairment,
forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to the Company, its business or operations or any of its assets
or properties.
11
4.12 Litigation. Except as set forth on Schedule 4.12 hereto, there is
----------
no action, suit, proceeding or investigation pending or, to the Company's
knowledge, currently threatened against the Company or any of its
Subsidiaries that prevents the Company or any of its Subsidiaries from
entering into this Agreement or the other Related Agreements, or from
consummating the transactions contemplated hereby or thereby, or which has
had, or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect or any change in the current equity
ownership of the Company or any of its Subsidiaries, nor is the Company
aware that there is any basis to assert any of the foregoing. Neither the
Company nor any of its Subsidiaries is a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company or any of its Subsidiaries
currently pending or which the Company or any of its Subsidiaries intends
to initiate.
4.13 Tax Returns and Payments. Each of the Company and each of its
---------------------------
Subsidiaries has timely filed all tax returns (federal, state and local)
required to be filed by it. All taxes shown to be due and payable on such
returns, any assessments imposed, and all other taxes due and payable by
the Company or any of its Subsidiaries on or before the Closing, have been
paid or will be paid prior to the time they become delinquent. Except as
set forth on Schedule 4.13, neither the Company nor any of its Subsidiaries
has been advised:
(a) that any of its returns, federal, state or other, have been
or are being audited as of the date hereof; or
(b) of any adjustment, deficiency, assessment or court decision
in respect of its federal, state or other taxes.
The Company has no knowledge of any liability for any tax to be
imposed upon its properties or assets as of the date of this Agreement that
is not adequately provided for.
4.14 Employees. Except as set forth on Schedule 4.14, neither the
Company nor any of its Subsidiaries has any collective bargaining
agreements with any of its employees. There is no labor union organizing
activity pending or, to the Company's knowledge, threatened with respect to
the Company or any of its Subsidiaries. Except as disclosed in the Exchange
Act Filings or on Schedule 4.14, neither the Company nor any of its
Subsidiaries is a party to or bound by any currently effective employment
contract, deferred compensation arrangement, bonus plan, incentive plan,
12
profit sharing plan, retirement agreement or other employee compensation
plan or agreement. To the Company's knowledge, no employee of the Company
or any of its Subsidiaries, nor any consultant with whom the Company or any
of its Subsidiaries has contracted, is in violation of any term of any
employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by,
or to contract with, the Company or any of its Subsidiaries because of the
nature of the business to be conducted by the Company or any of its
Subsidiaries; and to the Company's knowledge the continued employment by
the Company and its Subsidiaries of their present employees, and the
performance of the Company's and its Subsidiaries' contracts with its
independent contractors, will not result in any such violation. Neither the
Company nor any of its Subsidiaries is aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments
of any nature) or other agreement, or subject to any judgment, decree or
order of any court or administrative agency that would interfere with their
duties to the Company or any of its Subsidiaries. Neither the Company nor
any of its Subsidiaries has received any notice alleging that any such
violation has occurred. Except for employees who have a current effective
employment agreement with the Company or any of its Subsidiaries, no
employee of the Company or any of its Subsidiaries has been granted the
right to continued employment by the Company or any of its Subsidiaries or
to any material compensation following termination of employment with the
Company or any of its Subsidiaries. Except as set forth on Schedule 4.14,
the Company is not aware that any officer, key employee or group of
employees intends to terminate his, her or their employment with the
Company or any of its Subsidiaries, nor does the Company or any of its
Subsidiaries have a present intention to terminate the employment of any
officer, key employee or group of employees.
4.15 Registration Rights and Voting Rights. Except as set forth on
----------------------------------------
Schedule 4.15 and except as disclosed in Exchange Act Filings, neither the
Company nor any of its Subsidiaries is presently under any obligation, and
neither the Company nor any of its Subsidiaries has granted any rights, to
register any of the Company's or its Subsidiaries' presently outstanding
securities or any of its securities that may hereafter be issued. Except as
set forth on Schedule 4.15 and except as disclosed in Exchange Act Filings,
to the Company's knowledge, no stockholder of the Company or any of its
Subsidiaries has entered into any agreement with respect to the voting of
equity securities of the Company or any of its Subsidiaries.
4.16 Compliance with Laws; Permits. Neither the Company nor any of its
-----------------------------
Subsidiaries is in violation of any provision of the Xxxxxxxx-Xxxxx Act of
2002 or any SEC regulation or rule or any rule of the Principal Market (as
hereafter defined) promulgated thereunder or any applicable statute, rule,
regulation, order or restriction of any domestic or foreign government or
any instrumentality or agency thereof in respect of the conduct of its
business or the ownership of its properties which has had, or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with
the execution and delivery of this Agreement or any other Related Agreement
and the issuance of any of the Securities, except such as have been duly
and validly obtained or filed, or with respect to any filings that must be
made after the Closing, as will be filed in a timely manner. Each of the
Company and its Subsidiaries has all material franchises, permits, licenses
and any similar authority necessary for the conduct of its business as now
being conducted by it, the lack of which could, either individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
13
4.17 Environmental and Safety Laws. Neither the Company nor any of its
-----------------------------
Subsidiaries is in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to its
knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation. Except as set
forth on Schedule 4.17, no Hazardous Materials (as defined below) are used
or have been used, stored, or disposed of by the Company or any of its
Subsidiaries or, to the Company's knowledge, by any other person or entity
on any property owned, leased or used by the Company or any of its
Subsidiaries. For the purposes of the preceding sentence, "Hazardous
Materials" shall mean:
(a) materials which are listed or otherwise defined as
"hazardous" or "toxic" under any applicable local, state, federal
and/or foreign laws and regulations that govern the existence and/or
remedy of contamination on property, the protection of the environment
from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building
materials; or
(b) any petroleum products or nuclear materials.
4.18 Valid Offering. Assuming the accuracy of the representations and
--------------
warranties of the Purchaser contained in this Agreement, the offer, sale
and issuance of the Securities will be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities
Act"), and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.
4.19 Full Disclosure. Each of the Company and each of its Subsidiaries
---------------
has provided the Purchaser with all information requested by the Purchaser
in connection with its decision to purchase the Note, the Warrant and the
Option, including all information the Company and its Subsidiaries believe
is reasonably necessary to make such investment decision. Neither this
Agreement, the Related Agreements, the exhibits and schedules hereto and
thereto nor any other document delivered by the Company or any of its
Subsidiaries to Purchaser or its attorneys or agents in connection herewith
or therewith or with the transactions contemplated hereby or thereby,
contain any untrue statement of a material fact nor omit to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances in which they are made, not
misleading. Any financial projections and other estimates provided to the
Purchaser by the Company or any of its Subsidiaries were based on the
Company's and its Subsidiaries' experience in the industry and on
assumptions of fact and opinion as to future events which the Company or
any of its Subsidiaries, at the date of the issuance of such projections or
estimates, believed to be reasonable.
14
4.20 Insurance. Each of the Company and each of its Subsidiaries has
---------
general commercial, product liability, and will deliver to the Purchaser,
within thirty (30) days of the Closing Date, evidence of fire and casualty
insurance policies, in each case, with coverages which the Company believes
are customary for companies similarly situated to the Company and its
Subsidiaries in the same or similar business.
4.21 SEC Reports. Except as set forth on Schedule 4.21, the Company
------------
has filed all proxy statements, reports and other documents required to be
filed by it under the Securities Xxxxxxxx Xxx 0000, as amended (the
"Exchange Act"). The Company has furnished the Purchaser copies of: (a) its
Annual Reports on Form 10-KSB for its fiscal years ended December 31, 2004;
and (b) its Quarterly Reports on Form 10-QSB for its fiscal quarter ended
March 31, 2005, and the Form 8-K filings which it has made during the
fiscal year 2005 to date (collectively, the "SEC Reports"). Except as set
forth on Schedule 4.21, each SEC Report was, at the time of its filing, in
substantial compliance with the requirements of its respective form and
none of the SEC Reports, nor the financial statements (and the notes
thereto) included in the SEC Reports, as of their respective filing dates,
contained any 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, in light of the circumstances under which they were
made, not misleading.
4.22 Listing. The Company's Common Stock is listed or quoted, as
-------
applicable, on a Principal Market (as hereafter defined) and satisfies and
at all times hereafter will satisfy, all requirements for the continuation
of such listing or quotation, as applicable. The Company has not received
any notice that its Common Stock will be delisted from, or no longer quoted
on, as applicable, the Principal Market or that its Common Stock does not
meet all requirements for such listing or quotation, as applicable. For
purposes hereof, the term "Principal Market" means the NASD OTC Bulletin
Board, NASDAQ SmallCap Market, NASDAQ National Market System, American
Stock Exchange or New York Stock Exchange (whichever of the foregoing is at
the time the principal trading exchange or market for the Common Stock).
4.23 No Integrated Offering. Neither the Company, nor any of its
------------------------
Subsidiaries or affiliates, nor any person acting on its or their behalf,
has directly or indirectly made any offers or sales of any security or
solicited any offers to buy any security under circumstances that would
cause the offering of the Securities pursuant to this Agreement or any of
the Related Agreements to be integrated with prior offerings by the Company
for purposes of the Securities Act which would prevent the Company from
selling the Securities pursuant to Rule 506 under the Securities Act, or
any applicable exchange-related stockholder approval provisions, nor will
the Company or any of its affiliates or Subsidiaries take any action or
steps that would cause the offering of the Securities to be integrated with
other offerings.
4.24 Stop Transfer. The Securities are restricted securities as of the
-------------
date of this Agreement. Neither the Company nor any of its Subsidiaries
will issue any stop transfer order or other order impeding the sale and
delivery of any of the Securities at such time as the Securities are
registered for public sale or an exemption from registration is available,
except as required by state and federal securities laws.
4.25 Dilution. The Company specifically acknowledges that its
--------
obligation to issue the shares of Common Stock upon conversion of the Note
and exercise of the Warrant or Option is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company.
15
4.26 Patriot Act. The Company certifies that, to the best of Company's
-----------
knowledge, neither the Company nor any of its Subsidiaries has been
designated, nor is or shall be owned or controlled by, a "suspected
terrorist" as defined in Executive Order 13224. The Company hereby
acknowledges that the Purchaser seeks to comply with all applicable laws
concerning money laundering and related activities. In furtherance of those
efforts, the Company hereby represents, warrants and covenants that: (a)
none of the cash or property that the Company or any of its Subsidiaries
will pay or will contribute to the Purchaser has been or shall be derived
from, or related to, any activity that is deemed criminal under United
States law; and (b) no contribution or payment by the Company or any of its
Subsidiaries to the Purchaser, to the extent that they are within the
Company's and/or its Subsidiaries' control shall cause the Purchaser to be
in violation of the United States Bank Secrecy Act, the United States
International Money Laundering Control Act of 1986 or the United States
International Money Laundering Abatement and Anti-Terrorist Financing Act
of 2001. The Company shall promptly notify the Purchaser if any of these
representations, warranties or covenants ceases to be true and accurate
regarding the Company or any of its Subsidiaries. The Company shall provide
the Purchaser any and all additional information regarding the Company or
any of its Subsidiaries that the Purchaser deems necessary or convenient to
ensure compliance with all applicable laws concerning money laundering and
similar activities. The Company understands and agrees that if at any time
it is discovered that any of the foregoing representations, warranties or
covenants are incorrect, or if otherwise required by applicable law or
regulation related to money laundering or similar activities, the Purchaser
may undertake appropriate actions to ensure compliance with applicable law
or regulation, including but not limited to segregation and/or redemption
of the Purchaser's investment in the Company. The Company further
understands that the Purchaser may release confidential information about
the Company and its Subsidiaries and, if applicable, any underlying
beneficial owners, to proper authorities if the Purchaser, in its sole
discretion, determines that it is in the best interests of the Purchaser in
light of relevant rules and regulations under the laws set forth in
subsection (b) above.
4.27 ERISA. Based upon the Employee Retirement Income Security Act of
-----
1974 ("ERISA"), and the regulations and published interpretations
thereunder: (a) neither the Company nor any of its Subsidiaries has engaged
in any Prohibited Transactions (as defined in Section 406 of ERISA and
Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code")); (b) each of the Company and each of its Subsidiaries has met all
applicable minimum funding requirements under Section 302 of ERISA in
respect of its plans; (c) neither the Company nor any of its Subsidiaries
has any knowledge of any event or occurrence which would cause the Pension
Benefit Guaranty Corporation to institute proceedings under Title IV of
ERISA to terminate any employee benefit plan(s); (d) neither the Company
nor any of its Subsidiaries has any fiduciary responsibility for
investments with respect to any plan existing for the benefit of persons
other than the Company's or such Subsidiary's employees; and (e) neither
the Company nor any of its Subsidiaries has withdrawn, completely or
partially, from any multi-employer pension plan so as to incur liability
under the Multiemployer Pension Plan Amendments Act of 1980.
16
5. Representations and Warranties of the Purchaser. The Purchaser hereby
-------------------------------------------------
represents and warrants to the Company as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement):
5.1 No Shorting. The Purchaser or any of its affiliates and investment
-----------
partners has not, will not and will not cause any person or entity, to
directly or indirectly engage in "short sales" of the Company's Common
Stock as long as the Note shall be outstanding.
5.2 Requisite Power and Authority. The Purchaser has all necessary
--------------------------------
power and authority under all applicable provisions of law to execute and
deliver this Agreement and the Related Agreements and to carry out their
provisions. All corporate action on the Purchaser's part required for the
lawful execution and delivery of this Agreement and the Related Agreements
have been or will be effectively taken prior to the Closing. Upon their
execution and delivery, this Agreement and the Related Agreements will be
valid and binding obligations of the Purchaser, enforceable in accordance
with their terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; and
(b) as limited by general principles of equity that restrict the
availability of equitable and legal remedies.
5.3 Investment Representations. The Purchaser understands that the
---------------------------
Securities are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon the
Purchaser's representations contained in this Agreement, including, without
limitation, that the Purchaser is an "accredited investor" within the
meaning of Regulation D under the Securities Act of 1933, as amended (the
"Securities Act"). The Purchaser confirms that it has received or has had
full access to all the information it considers necessary or appropriate to
make an informed investment decision with respect to the Note, the Warrant
and the Option to be purchased by it under this Agreement and the Note
Shares, the Warrant Shares and the Option Shares acquired by it upon the
conversion of the Note, the exercise of the Warrant and the exercise of the
Option, respectively. The Purchaser further confirms that it has had an
opportunity to ask questions and receive answers from the Company regarding
the Company's and its Subsidiaries' business, management and financial
affairs and the terms and conditions of the Offering, the Note, the
Warrant, the Option and the Securities and to obtain additional information
(to the extent the Company possessed such information or could acquire it
without unreasonable effort or expense) necessary to verify any information
furnished to the Purchaser or to which the Purchaser had access.
5.4 The Purchaser Bears Economic Risk. The Purchaser has substantial
----------------------------------
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has
the capacity to protect its own interests. The Purchaser must bear the
economic risk of this investment until the Securities are sold pursuant to:
(a) an effective registration statement under the Securities Act; or (b) an
exemption from registration is available with respect to such sale.
17
5.5 Acquisition for Own Account. The Purchaser is acquiring the Note,
---------------------------
the Warrant, the Option, the Note Shares, the Warrant Shares and the Option
Shares for the Purchaser's own account for investment only, and not as a
nominee or agent and not with a view towards or for resale in connection
with their distribution.
5.6 The Purchaser Can Protect Its Interest. The Purchaser represents
---------------------------------------
that by reason of its, or of its management's, business and financial
experience, the Purchaser has the capacity to evaluate the merits and risks
of its investment in the Note, the Warrant, the Option and the Securities
and to protect its own interests in connection with the transactions
contemplated in this Agreement and the Related Agreements. Further, the
Purchaser is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement or the Related
Agreements.
5.7 Accredited Investor. The Purchaser represents that it is an
--------------------
accredited investor within the meaning of Regulation D under the Securities
Act.
5.8 Legends.
-------
(a) The Note shall bear substantially the following legend:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE AND THE
COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER
SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO NEW CENTURY ENERGY CORP. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(b) The Note Shares, the Warrant Shares and the Option Shares, if
not issued by the Deposit Withdrawal Agent Commission ("DWAC") system,
shall bear a legend which shall be in substantially the following form
until such shares are covered by an effective registration statement
filed with the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO NEW CENTURY ENERGY CORP. THAT SUCH REGISTRATION IS NOT REQUIRED."
18
(c) The Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR
THE UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO NEW CENTURY ENERGY CORP. THAT SUCH REGISTRATION IS NOT REQUIRED."
(d) The Option shall bear substantially the following legend:
"THIS OPTION AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THE OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS OPTION AND
THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS OPTION MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS OPTION UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO NEW CENTURY ENERGY CORP. THAT SUCH
REGISTRATION IS NOT REQUIRED."
6. Covenants of the Company. The Company covenants and agrees with the
---------------------------
Purchaser as follows:
6.1 Stop-Orders. The Company will advise the Purchaser, promptly after
-----------
it receives notice of issuance by the SEC, any state securities commission
or any other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the Company, or
of the suspension of the qualification of the Common Stock of the Company
for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.
6.2 Listing. The Company shall promptly secure the listing or
-------
quotation, as applicable, of the shares of Common Stock issuable upon
conversion of the Note, upon the exercise of the Warrant and upon the
19
exercise of the Option on the Principal Market upon which shares of Common
Stock are listed or quoted for trading, as applicable (subject to official
notice of issuance) and shall maintain such listing or quotation, as
applicable, so long as any other shares of Common Stock shall be so listed
or quoted, as applicable. The Company will maintain the listing or
quotation, as applicable, of its Common Stock on the Principal Market, and
will comply in all material respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the National Association
of Securities Dealers ("NASD") and such exchanges, as applicable.
6.3 Market Regulations. The Company shall notify the SEC, NASD and
-------------------
applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other
necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of
the Securities to the Purchaser and promptly provide copies thereof to the
Purchaser.
6.4 Reporting Requirements. The Company shall timely file with the SEC
----------------------
all reports required to be filed pursuant to the Exchange Act and refrain
from terminating its status as an issuer required by the Exchange Act to
file reports thereunder even if the Exchange Act or the rules or
regulations thereunder would permit such termination.
6.5 Use of Funds. The Company shall use the proceeds of the sale of
--------------
the Note, the Warrant and the Option as set forth on Schedule 6.5.
6.6 Access to Facilities. Each of the Company and each of its
----------------------
Subsidiaries will permit any representatives designated by the Purchaser
(or any successor of the Purchaser), upon reasonable notice and during
normal business hours, at such person's expense and accompanied by a
representative of the Company or any Subsidiary (provided that no such
prior notice shall be required to be given and no such representative of
the Company or any Subsidiary shall be required to accompany the Purchaser
in the event the Purchaser believes such access is necessary to preserve or
protect the Collateral (as defined in the Master Security Agreement) or
following the occurrence and during the continuance of an Event of Default
(as defined in the Note)), to:
(a) visit and inspect any of the properties of the Company or any
of its Subsidiaries;
(b) examine the corporate and financial records of the Company or
any of its Subsidiaries (unless such examination is not permitted by
federal, state or local law or by contract) and make copies thereof or
extracts therefrom; and
(c) discuss the affairs, finances and accounts of the Company or
any of its Subsidiaries with the directors, officers and independent
accountants of the Company or any of its Subsidiaries.
20
Notwithstanding the foregoing, neither the Company nor any of its
Subsidiaries will provide any material, non-public information to the
Purchaser unless the Purchaser signs a confidentiality agreement and
otherwise complies with Regulation FD, under the federal securities laws.
6.7 Taxes. Each of the Company and each of its Subsidiaries will
-----
promptly pay and discharge, or cause to be paid and discharged, when due
and payable, all taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Company and
its Subsidiaries; provided, however, that any such tax, assessment, charge
or levy need not be paid currently if (a) the validity thereof shall
currently and diligently be contested in good faith by appropriate
proceedings, (b) such tax, assessment, charge or levy shall have no effect
on the lien priority of the Purchaser in any property of the Company or any
of its Subsidiaries and (c) if the Company and/or such Subsidiary shall
have set aside on its books adequate reserves with respect thereto in
accordance with GAAP; and provided, further, that the Company and its
Subsidiaries will pay all such taxes, assessments, charges or levies
forthwith upon the commencement of proceedings to foreclose any lien which
may have attached as security therefor.
6.8 Insurance. Each of the Company and its Subsidiaries will keep its
---------
assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion and other
risks customarily insured against by companies in similar business
similarly situated as the Company and its Subsidiaries; and the Company and
its Subsidiaries will maintain, and in the case of casualty insurance,
within thirty (30) days of the Closing Date, will procure and thereafter
maintain, in each case, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and
property to the extent and in the manner which the Company reasonably
believes is customary for companies in similar business similarly situated
as the Company and its Subsidiaries and to the extent available on
commercially reasonable terms. The Company, and each of its Subsidiaries,
will jointly and severally bear the full risk of loss from any loss of any
nature whatsoever with respect to the assets pledged to the Purchaser as
security for their respective obligations hereunder and under the Related
Agreements. At the Company's and each of its Subsidiaries' joint and
several cost and expense in amounts and with carriers reasonably acceptable
to the Purchaser, each of the Company and each of its Subsidiaries shall
(a) keep all its insurable properties and properties in which it has an
interest insured against the hazards of fire, flood, sprinkler leakage,
those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies
engaged in businesses similar to the Company's or the respective
Subsidiary's including business interruption insurance; (b) maintain a
bond, in such amounts as is customary in the case of companies engaged in
businesses similar to the Company's or the respective Subsidiary's,
insuring against larceny, embezzlement or other criminal misappropriation
of insured's officers and employees who may either singly or jointly with
others at any time have access to the assets or funds of the Company or any
of its Subsidiaries either directly or through governmental authority to
draw upon such funds or to direct generally the disposition of such assets;
(c) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (d) maintain
all such worker's compensation or similar insurance as may be required
under the laws of any state or jurisdiction in which the Company or the
respective Subsidiary is engaged in business; and (e) furnish the Purchaser
with (i) copies of all policies and evidence of the maintenance of such
policies at least thirty (30) days before any expiration date, (ii)
21
excepting the Company's workers' compensation policy, endorsements to such
policies naming the Purchaser as "co-insured" or "additional insured" and
appropriate loss payable endorsements in form and substance satisfactory to
the Purchaser, naming the Purchaser as loss payee, and (iii) evidence that
as to the Purchaser the insurance coverage shall not be impaired or
invalidated by any act or neglect of the Company or any Subsidiary and the
insurer will provide the Purchaser with at least thirty (30) days notice
prior to cancellation. The Company and each Subsidiary shall instruct the
insurance carriers that in the event of any loss thereunder, the carriers
shall make payment for such loss to the Company and/or the Subsidiary and
the Purchaser jointly. In the event that as of the date of receipt of each
loss recovery upon any such insurance, the Purchaser has not declared an
event of default with respect to this Agreement or any of the Related
Agreements, then the Company and/or such Subsidiary shall be permitted to
direct the application of such loss recovery proceeds toward investment in
property, plant and equipment that would comprise "Collateral" secured by
the Purchaser's security interest pursuant to the Master Security
Agreement, any Related Agreement and/or such other security agreement as
shall be required by the Purchaser, with any surplus funds to be applied
toward payment of the obligations of the Company to the Purchaser. In the
event that the Purchaser has properly declared an event of default with
respect to this Agreement or any of the Related Agreements, then all loss
recoveries received by the Purchaser upon any such insurance thereafter may
be applied to the obligations of the Company hereunder and under the
Related Agreements, in such order as the Purchaser may determine. Any
surplus (following satisfaction of all Company obligations to the
Purchaser) shall be paid by the Purchaser to the Company or applied as may
be otherwise required by law. Any deficiency thereon shall be paid by the
Company or the Subsidiary, as applicable, to the Purchaser, on demand.
6.9 Intellectual Property. Each of the Company and each of its
----------------------
Subsidiaries shall maintain in full force and effect its existence, rights
and franchises and all licenses and other rights to use Intellectual
Property owned or possessed by it and reasonably deemed to be necessary to
the conduct of its business.
6.10 Properties. Each of the Company and each of its Subsidiaries will
----------
keep its properties in good repair, working order and condition, reasonable
wear and tear excepted, and from time to time make all needful and proper
repairs, renewals, replacements, additions and improvements thereto; and
each of the Company and each of its Subsidiaries will at all times comply
with each provision of all leases to which it is a party or under which it
occupies property if the breach of such provision could, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.11 Confidentiality. The Company will not, and will not permit any of
---------------
its Subsidiaries to, disclose, and will not include in any public
announcement, the name of the Purchaser, unless expressly agreed to by the
Purchaser or unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement.
Notwithstanding the foregoing, the Company may disclose the Purchaser's
identity and the terms of this Agreement to its current and prospective
debt and equity financing sources.
22
6.12 Required Approvals. For so long as twenty-five percent (25%) of
-------------------
the principal amount of the Note is outstanding, the Company, without the
prior written consent of the Purchaser, shall not, and shall not permit any
of its Subsidiaries to:
(a) (i) directly or indirectly declare or pay any dividends,
other than dividends paid to the parent of the Company, the Company or
any of its wholly-owned Subsidiaries, (ii) issue any preferred stock
that is mandatorily redeemable prior to the one year anniversary of
Maturity Date (as defined in the Note) or (iii) redeem any of its
preferred stock or other equity interests;
(b) liquidate, dissolve or effect a material reorganization (it
being understood that in no event shall the Company or any of its
Subsidiaries dissolve, liquidate or merge with any other person or
entity (unless, in the case of such a merger, the Company or, in the
case of merger not involving the Company, such Subsidiary, as
applicable, is the surviving entity);
(c) become subject to (including, without limitation, by way of
amendment to or modification of) any agreement or instrument which by
its terms would (under any circumstances) restrict the Company's or
any of its Subsidiaries' right to perform the provisions of this
Agreement, any Related Agreement or any of the agreements contemplated
hereby or thereby;
(d) materially alter or change the scope of the business of the
Company and its Subsidiaries taken as a whole;
(e) (i) create, incur, assume or suffer to exist any indebtedness
(exclusive of trade debt and debt incurred to finance the purchase of
equipment (not in excess of five percent (5%) of the fair market value
of the Company's and its Subsidiaries' assets)) whether secured or
unsecured other than (x) the Company's obligations owed to the
Purchaser, (y) indebtedness set forth on Schedule 6.12(e) attached
hereto and made a part hereof and any refinancings or replacements
thereof on terms no less favorable to the Purchaser than the
indebtedness being refinanced or replaced, and (z) any indebtedness
incurred in connection with the purchase of assets (other than
equipment) in the ordinary course of business, or any refinancings or
replacements thereof on terms no less favorable to the Purchaser than
the indebtedness being refinanced or replaced, so long as any lien
23
relating thereto shall only encumber the fixed assets so purchased and
no other assets of the Company or any of its Subsidiaries; (ii) cancel
any indebtedness owing to it in excess of $50,000 in the aggregate
during any 12 month period; (iii) assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with
any obligations of any other person or entity, except the endorsement
of negotiable instruments by the Company or any Subsidiary thereof for
deposit or collection or similar transactions in the ordinary course
of business or guarantees of indebtedness otherwise permitted to be
outstanding pursuant to this clause (e);
(f) create or acquire any Subsidiary after the date hereof unless
(i) such Subsidiary is a wholly-owned Subsidiary of the Company and
(ii) such Subsidiary becomes a party to the Master Security Agreement,
the Stock Pledge Agreement and the Subsidiary Guaranty (either by
executing a counterpart thereof or an assumption or joinder agreement
in respect thereof) and, to the extent required by the Purchaser,
satisfies each condition of this Agreement and the Related Agreements
as if such Subsidiary were a Subsidiary on the Closing Date; and
(g) transfer or assign in any manner whatsoever any of its assets
to any person or entity, including without limitation any subsidiary
created after the date hereof.
6.13 Reissuance of Securities. The Company agrees to reissue
--------------------------
certificates representing the Securities without the legends set forth in
Section 5.8 above at such time as:
(a) the holder thereof is permitted to dispose of such Securities
pursuant to Rule 144(k) under the Securities Act; or
(b) upon resale subject to an effective registration statement
after such Securities are registered under the Securities Act.
The Company agrees to cooperate with the Purchaser in connection with
all resales pursuant to Rule 144(d) and Rule 144(k) and provide legal
opinions necessary to allow such resales provided the Company and its
counsel receive reasonably requested representations from the Purchaser and
broker, if any.
6.14 Opinion. On the Closing Date, the Company will deliver to the
-------
Purchaser an opinion acceptable to the Purchaser from the Company's
external legal counsel. The Company will provide, at the Company's expense,
such other legal opinions in the future as are deemed reasonably necessary
by the Purchaser (and acceptable to the Purchaser) in connection with the
conversion of the Note and exercise of the Warrant or Option.
24
6.15 Margin Stock. The Company will not permit any of the proceeds of
------------
the Note or the Warrant or the Option to be used directly or indirectly to
"purchase" or "carry" "margin stock" or to repay indebtedness incurred to
"purchase" or "carry" "margin stock" within the respective meanings of each
of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect.
6.16 Financing Right of First Refusal.
--------------------------------
(a) The Company hereby grants to the Purchaser a right of first
refusal to provide any Additional Financing (as defined below) to be
issued by the Company and/or any of its Subsidiaries, subject to the
following terms and conditions. From and after the date hereof, prior
to the incurrence of any additional indebtedness and/or the sale or
issuance of any equity interests of the Company or any of its
Subsidiaries (an "Additional Financing"), the Company and/or any
Subsidiary of the Company, as the case may be, shall notify the
Purchaser of its intention to enter into such Additional Financing. In
connection therewith, the Company and/or the applicable Subsidiary
thereof shall submit a fully executed term sheet (a "Proposed Term
Sheet") to the Purchaser setting forth the terms, conditions and
pricing of any such Additional Financing (such financing to be
negotiated on "arm's length" terms and the terms thereof to be
negotiated in good faith) proposed to be entered into by the Company
and/or such Subsidiary. The Purchaser shall have the right, but not
the obligation, to deliver its own proposed term sheet (the "Purchaser
Term Sheet") setting forth the terms and conditions upon which the
Purchaser would be willing to provide such Additional Financing to the
Company and/or such Subsidiary. The Purchaser Term Sheet shall contain
terms no less favorable to the Company and/or such Subsidiary than
those outlined in Proposed Term Sheet. The Purchaser shall deliver
such Purchaser Term Sheet within ten business days of receipt of each
such Proposed Term Sheet. If the provisions of the Purchaser Term
Sheet are at least as favorable to the Company and/or such Subsidiary,
as the case may be, as the provisions of the Proposed Term Sheet, the
Company and/or such Subsidiary shall enter into and consummate the
Additional Financing transaction outlined in the Purchaser Term Sheet.
25
(b) The Company will not, and will not permit its Subsidiaries
to, agree, directly or indirectly, to any restriction with any person
or entity which limits the ability of the Purchaser to consummate an
Additional Financing with the Company or any of its Subsidiaries.
6.17 Additional Investment. The Company agrees and acknowledges that
----------------------
the Purchaser shall have the right (at its sole option), on or prior to the
date which is 270 days following the Closing Date, to issue an additional
note to the Company in an aggregate principal amount of up to $15,000,000
but not less than $1,000,000 on the same terms and conditions (including,
without limitation, the same interest rate, the Fixed Conversion Price (as
defined in the Note) then in effect, proportionate warrant coverage (at the
same exercise prices), a proportionate amortization schedule, etc.) set
forth in, and pursuant to substantially similar documentation as, this
Agreement and the Related Agreements. The Purchaser agrees and acknowledges
that no new warrants or options must be granted by the Company to the
Purchaser in connection with such additional investment.
6.18 Authorization and Reservation of Shares. The Company shall at all
---------------------------------------
times have authorized and reserved a sufficient number of shares of Common
Stock to provide for the conversion of the Note, the exercise of the
Warrant and the exercise of the Option.
6.19 DWAC System. At all times following the date that is forty-five
------------
days after the Closing Date, the Company shall not utilize any system other
than the DWAC system for the transfer of Securities to Laurus.
7. Covenants of the Purchaser. The Purchaser covenants and agrees with the
Company as follows:
7.1 Confidentiality. The Purchaser will not disclose, and will not
---------------
include in any public announcement, the name of the Company, unless
expressly agreed to by the Company or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of
such requirement.
7.2 Non-Public Information. The Purchaser will not effect any sales in
----------------------
the shares of the Company's Common Stock while in possession of material,
non-public information regarding the Company if such sales would violate
applicable securities law.
7.3 Limitation on Acquisition of Common Stock of the Company.
----------------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, any
Related Agreement or any document, instrument or agreement entered into in
connection with any other transactions between the Purchaser and the
Company, the Purchaser may not acquire stock in the Company (including,
without limitation, pursuant to a contract to purchase, by exercising an
option or warrant, by converting any other security or instrument, by
acquiring or exercising any other right to acquire, shares of stock or
other security convertible into shares of stock in the Company, or
otherwise, and such contracts, options, warrants, conversion or other
rights shall not be enforceable or exercisable) to the extent such stock
acquisition would cause any interest (including any original issue
discount) payable by the Company to the Purchaser not to qualify as
26
"portfolio interest" within the meaning of Section 881(c)(2) of the Code,
by reason of Section 881(c)(3) of the Code, taking into account the
constructive ownership rules under Section 871(h)(3)(C) of the Code (the
"Stock Acquisition Limitation"). The Stock Acquisition Limitation shall
automatically become null and void without any notice to the Company upon
the earlier to occur of either (a) the Company's delivery to the Purchaser
of a Notice of Redemption (as defined in the Note) or (b) the existence of
an Event of Default (as defined in the Note) at a time when the average
closing price of the Company's common stock as reported by Bloomberg, L.P.
on the Principal Market for the immediately preceding five trading days is
greater than or equal to 150% of the Fixed Conversion Price (as defined in
the Note).
8. Covenants of the Company and the Purchaser Regarding Indemnification.
--------------------------------------------------------------------
8.1 Company Indemnification. The Company agrees to indemnify, hold
------------------------
harmless, reimburse and defend the Purchaser, each of the Purchaser's
officers, directors, agents, affiliates, control persons, and principal
shareholders, against any and all claims, costs, expenses, liabilities,
obligations, losses or damages (including reasonable legal fees) of any
nature, incurred by or imposed upon the Purchaser which result, arise out
of or are based upon: (a) any misrepresentation by the Company or any of
its Subsidiaries or breach of any warranty by the Company or any of its
Subsidiaries in this Agreement, any other Related Agreement or in any
exhibits or schedules attached hereto or thereto; (b) any breach or default
HLHannah Loev1184293445Will failure to become effective with registration
statement by certain time constitute material default?in performance by the
Company or any of its Subsidiaries of any covenant or undertaking to be
performed by the Company or any of its Subsidiaries hereunder, under any
other Related Agreement or any other agreement entered into by the Company
and/or any of its Subsidiaries and the Purchaser relating hereto or thereto
or (c) (i) the violation of any local, state or federal law, rule or
regulation pertaining to environmental regulation, contamination or cleanup
(collectively, "Environmental Laws"), including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 (42 U.S.C. 9601 et seq. and 40 CFR 302.1 et seq.), the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. 6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. 1251 et seq., and 40 CFR 116.1 et
seq.), the Hazardous Materials Transportation Act (49 U.S.C. 1801 et seq.)
and the regulations promulgated pursuant to said laws, all as amended and
relating to or affecting the Company and/or any Subsidiary and the
Company's and/or any Subsidiary's properties, whether or not caused by or
within the control of the Purchaser and/or (ii) the presence, release or
threat of release of any hazardous, toxic or harmful substances, wastes,
materials, pollutants or contaminants (including, without limitation,
asbestos, polychlorinated biphenyls, petroleum products, flammable
explosives, radioactive materials, infectious substances or raw materials
which include hazardous constituents) or any other substances or raw
materials which are included under or regulated by Environmental Laws on,
in, under or affecting all or any portion of any property of the Company
and/or any Subsidiary or any surrounding areas, regardless of whether or
not caused by or within the control of the Purchaser.
8.2 Purchaser's Indemnification. The Purchaser agrees to indemnify,
----------------------------
hold harmless, reimburse and defend the Company and each of the Company's
officers, directors, agents, affiliates, control persons and principal
shareholders, at all times against any claims, costs, expenses,
liabilities, obligations, losses or damages (including reasonable legal
fees) of any nature, incurred by or imposed upon the Company which result,
arise out of or are based upon: (a) any misrepresentation by the Purchaser
or breach of any warranty by the Purchaser in this Agreement or in any
exhibits or schedules attached hereto or any Related Agreement; or (b) any
breach or default in performance by the Purchaser of any covenant or
undertaking to be performed by the Purchaser hereunder, or any other
agreement entered into by the Company and the Purchaser relating hereto.
27
9. Conversion of Convertible Note.
------------------------------
9.1 Mechanics of Conversion.
-----------------------
(a) Provided the Purchaser has notified the Company of the
Purchaser's intention to sell the Note Shares and the Note Shares are
included in an effective registration statement or are otherwise
exempt from registration when sold: (i) upon the conversion of the
Note or part thereof, the Company shall, at its own cost and expense,
take all necessary action (including the issuance of an opinion of
counsel reasonably acceptable to the Purchaser following a request by
the Purchaser) to assure that the Company's transfer agent shall issue
shares of the Company's Common Stock in the name of the Purchaser (or
its nominee) or such other persons as designated by the Purchaser in
accordance with Section 9.1(b) hereof and in such denominations to be
specified representing the number of Note Shares issuable upon such
conversion; and (ii) the Company warrants that no instructions other
than these instructions have been or will be given to the transfer
agent of the Company's Common Stock and that after the Effectiveness
Date (as defined in the Registration Rights Agreement) the Note Shares
issued will be freely transferable subject to the prospectus delivery
requirements of the Securities Act and the provisions of this
Agreement, and will not contain a legend restricting the resale or
transferability of the Note Shares.
(b) The Purchaser will give notice of its decision to exercise
its right to convert the Note or part thereof by telecopying or
otherwise delivering an executed and completed notice of the number of
shares to be converted to the Company (the "Notice of Conversion").
The Purchaser will not be required to surrender the Note until the
Purchaser receives a credit to the account of the Purchaser's prime
broker through the DWAC system, representing the Note Shares or until
the Note has been fully satisfied. Each date on which a Notice of
Conversion is telecopied or delivered to the Company in accordance
with the provisions hereof shall be deemed a "Conversion Date."
Pursuant to the terms of the Notice of Conversion, the Company will
issue instructions to the transfer agent accompanied by an opinion of
28
counsel within three (3) business days of the date of the delivery to
the Company of the Notice of Conversion and shall cause the transfer
agent to transmit the certificates representing the Conversion Shares
to the Holder by crediting the account of the Purchaser's prime broker
with the Depository Trust Company ("DTC") through its DWAC system
within three (3) business days after receipt by the Company of the
Notice of Conversion (the "Delivery Date").
(c) The Company understands that a delay in the delivery of the
Note Shares in the form required pursuant to Section 9 hereof beyond
the Delivery Date could result in economic loss to the Purchaser. In
the event that the Company fails to direct its transfer agent to
deliver the Note Shares to the Purchaser via the DWAC system within
the time frame set forth in Section 9.1(b) above and the Note Shares
are not delivered to the Purchaser by the Delivery Date, as
compensation to the Purchaser for such loss, the Company agrees to pay
late payments to the Purchaser for late issuance of the Note Shares in
the form required pursuant to Section 9 hereof upon conversion of the
Note in the amount equal to $200 per business day after the Delivery
Date. The Company shall pay any payments incurred under this Section
in immediately available funds upon demand and, in the case of actual
damages, accompanied by reasonable documentation of the amount of such
damages. Such documentation shall show the number of shares of Common
Stock the Purchaser is forced to purchase (in an open market
transaction) which the Purchaser anticipated receiving upon such
conversion, and shall be calculated as the amount by which (A) the
Purchaser's total purchase price (including customary brokerage
commissions, if any) for the shares of Common Stock so purchased
exceeds (B) the aggregate principal and/or interest amount of the
Note, for which such Conversion Notice was not timely honored.
10. Registration Rights.
-------------------
10.1 Registration Rights Granted. The Company hereby grants
-----------------------------
registration rights to the Purchaser pursuant to the Registration Rights
Agreement.
10.2 Offering Restrictions. Except as previously disclosed in the SEC
---------------------
Reports or in the Exchange Act Filings, or stock or stock options granted
to employees or directors of the Company (these exceptions hereinafter
referred to as the "Excepted Issuances"), neither the Company nor any of
its Subsidiaries will, prior to the full repayment or conversion of the
Note (together with all accrued and unpaid interest and fees related
thereto), (a) enter into any equity line of credit agreement or similar
agreement or (b) issue, or enter into any agreement to issue, any
securities with a variable/floating conversion and/or pricing feature which
are or could be (by conversion or registration) free-trading securities
(i.e. common stock subject to a registration statement).
29
11. Miscellaneous.
-------------
11.1 Governing Law, Jurisdiction and Waiver of Jury Trial.
----------------------------------------------------
(a) THIS AGREEMENT AND THE OTHER RELATED AGREEMENTS SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
(b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR
FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND, AND THE PURCHASER, ON
THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE RELATED
AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR ANY OF THE OTHER RELATED AGREEMENTS; PROVIDED, THAT THE
PURCHASER AND THE COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE
COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY
OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN
THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE PURCHASER
FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL
(AS DEFINED IN THE MASTER SECURITY AGREEMENT) OR ANY OTHER SECURITY
FOR THE OBLIGATIONS (AS DEFINED IN THE MASTER SECURITY AGREEMENT), OR
TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE PURCHASER.
30
THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS.
THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT
AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS
SET FORTH IN SECTION 11.9 AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF THE COMPANY'S ACTUAL RECEIPT THEREOF OR
THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID.
(c) THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION,
THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN
CONTRACT, TORT, OR OTHERWISE BETWEEN THE PURCHASER AND/OR THE COMPANY
ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED
HERETO OR THERETO.
11.2 Severability. Wherever possible each provision of this Agreement
------------
and the Related Agreements shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Agreement or any Related Agreement shall be prohibited by or invalid or
illegal under applicable law such provision shall be ineffective to the
extent of such prohibition or invalidity or illegality, without
invalidating the remainder of such provision or the remaining provisions
thereof which shall not in any way be affected or impaired thereby.
11.3 Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by the
Purchaser and the closing of the transactions contemplated hereby to the
extent provided therein. All statements as to factual matters contained in
any certificate or other instrument delivered by or on behalf of the
Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument. All
indemnities set forth herein shall survive the execution, delivery and
termination of this Agreement and the Note and the making and repayment of
the obligations arising hereunder, under the Note and under the other
Related Agreements.
31
11.4 Successors. Except as otherwise expressly provided herein, the
----------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, heirs, executors and administrators of the parties hereto and
shall inure to the benefit of and be enforceable by each person or entity
which shall be a holder of the Securities from time to time, other than the
holders of Common Stock which has been sold by the Purchaser pursuant to
Rule 144 or an effective registration statement. The Purchaser may not
assign its rights hereunder or under any Related Agreement to a competitor
of the Company unless an Event of Default (as defined in the Note) has
occurred and is continuing.
11.5 Entire Agreement; Maximum Interest. This Agreement, the Related
-----------------------------------
Agreements, the exhibits and schedules hereto and thereto and the other
documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by
any representations, warranties, covenants and agreements except as
specifically set forth herein and therein. Nothing contained in this
Agreement, any Related Agreement or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or require
the payment of a rate of interest or other charges in excess of the maximum
rate permitted by applicable law. In the event that the rate of interest or
dividends required to be paid or other charges hereunder exceed the maximum
rate permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to the Purchaser and thus
refunded to the Company.
11.6 Amendment and Waiver.
--------------------
(a) This Agreement may be amended or modified only upon the
written consent of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the
Purchaser under this Agreement may be waived only with the written
consent of the Purchaser.
(c) The obligations of the Purchaser and the rights of the
Company under this Agreement may be waived only with the written
consent of the Company.
11.7 Delays or Omissions. It is agreed that no delay or omission to
---------------------
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the
Related Agreements, shall impair any such right, power or remedy, nor shall
it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. All remedies, either under
this Agreement or the Related Agreements, by law or otherwise afforded to
any party, shall be cumulative and not alternative.
32
11.8 Notices. All notices required or permitted hereunder shall be in
--------
writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business
day;
(c) three (3) business days after having been sent by registered
or certified mail, return receipt requested, postage prepaid; or
(d) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written
verification of receipt.
All communications shall be sent as follows:
If to the Company, to: New Century Energy Corp.
0000 Xxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: 000-000-0000
with a copy to:
Xxxxx X. Xxxx, Esq.
0000 Xxxxx Xxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
If to the Purchaser, to: Laurus Master Fund, Ltd.
c/o M&C Corporate Services Limited
X.X. Xxx 000 XX
Xxxxxx Xxxxx
Xxxxxx Xxxx
South Church Street
Grand Cayman, Cayman Islands
Facsimile: 000-000-0000
33
with a copy to:
Xxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxxxx 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: 000-000-0000
with a copy to:
Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Facsimile: 000-000-0000
or at such other address as the Company or the Purchaser may designate
by written notice to the other parties hereto given in accordance herewith.
11.9 Attorneys' Fees. In the event that any suit or action is
----------------
instituted to enforce any provision in this Agreement or any Related
Agreement, the prevailing party in such dispute shall be entitled to
recover from the losing party all fees, costs and expenses of enforcing any
right of such prevailing party under or with respect to this Agreement
and/or such Related Agreement, including, without limitation, such
reasonable fees and expenses of attorneys and accountants, which shall
include, without limitation, all fees, costs and expenses of appeals.
11.10 Titles and Subtitles. The titles of the sections and subsections
--------------------
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
11.11 Facsimile Signatures; Counterparts. This Agreement may be
------------------------------------
executed by facsimile signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
agreement.
11.12 Broker's Fees. Except as set forth on Schedule 11.12 hereof,
--------------
each party hereto represents and warrants that no agent, broker, investment
banker, person or firm acting on behalf of or under the authority of such
party hereto is or will be entitled to any broker's or finder's fee or any
other commission directly or indirectly in connection with the transactions
contemplated herein. Each party hereto further agrees to indemnify each
other party for any claims, losses or expenses incurred by such other party
as a result of the representation in this Section 11.13 being untrue.
11.13 Construction. Each party acknowledges that its legal counsel
------------
participated in the preparation of this Agreement and the Related
Agreements and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be
applied in the interpretation of this Agreement or any Related Agreement to
favor any party against the other.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
NEW CENTURY ENERGY CORP. LAURUS MASTER FUND, LTD.
By: /s/ Xxxxxx X. XxXxxxxxx By: /s/ Xxxxxx Grin
----------------------- ------------------------
Name: Xxxxxx X. XxXxxxxxx Name: Xxxxxx Grin
----------------------- ------------------------
Title: President Title: Director
----------------------- ------------------------
35
