EXHIBIT 10.12
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "AGREEMENT") is made and entered
into as of August 31, 2004 between National Coal Corp., a Florida corporation
(the "COMPANY"), and CD Investment Partners, Ltd. (the "PURCHASER").
This Agreement is being entered into pursuant to the Preferred Stock
and Warrant Purchase Agreement, dated as of the date hereof, by and between the
Company and the Purchaser (the "PURCHASE AGREEMENT").
The Company and the Purchaser hereby agree as follows:
1. DEFINITIONS.
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"ADVICE" shall have the meaning set forth in Section 3(m).
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"ARTICLES OF INCORPORATION" means the Articles of Incorporation of the
Company, as amended.
"BLACKOUT PERIOD" shall have the meaning set forth in Section 3(n).
"BOARD" shall have the meaning set forth in Section 3(n).
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
Tennessee generally are authorized or required by law or other government
actions to close.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's Common Stock, par value $0.0001 per
share.
"EFFECTIVE DATE" means the date on which the Registration Statement is
first declared effective with respect to all Registrable Securities.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2.
"EVENT" shall have the meaning set forth in Section 7(e).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FILING DATE" means the 60th day following the Closing Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may be,
from time to time of Registrable Securities, including without limitation the
Purchaser and its assignees.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 5(c).
"LOSSES" shall have the meaning set forth in Section 5(a).
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" means (a) the Conversion Shares and the
Warrant Shares (without regard to any limitations on beneficial ownership
contained in the Articles of Incorporation or Warrants) or other securities
issued or issuable to the Purchaser or its transferee or designee (i) upon
conversion of the Preferred Stock and/or upon exercise of the Warrants, or (ii)
upon any dividend or distribution with respect to, any exchange for or any
replacement of such Preferred Stock or Warrants or (iii) upon any conversion,
exercise or exchange of any securities issued in connection with any such
distribution, exchange or replacement; (b) the shares of Common Stock purchased
by the Purchaser from Xxxxxxx Xxxxxx and Xxxxxx Xxxxxx upon exercise of that
certain Stock Option Agreement, dated as of June 30, 2004, by and between
Xxxxxxx Xxxxxx and Xxxxxx Xxxxxx and Xxx Xxx; (c) securities issued or issuable
upon any stock split, stock dividend, recapitalization or similar event with
respect to any of the foregoing; and (d) any other security issued as a dividend
or other distribution with respect to, in exchange for, in replacement or
redemption of, or in reduction of the liquidation value of, any of the
securities referred to in the preceding clauses; provided, however, that such
securities shall cease to be Registrable Securities when such securities have
been sold to or through a broker or dealer or underwriter in a public
2
distribution or a public securities transaction or when such securities may be
sold without any restriction pursuant to Rule 144(k) as determined by the
counsel to the Company pursuant to a written opinion letter, addressed to the
Company's transfer agent to such effect as described in Section 2 of this
Agreement. The parties acknowledge that the Company may choose to include the
Registrable Securities hereunder on a registration statement with other similar
securities, but only if to do so would not materially adversely affect the
Holder.
"REGISTRATION STATEMENT" means the registration statements and any
additional registration statements contemplated by Section 2, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference in any such registration
statements.
"RULE 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"RULE 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPECIAL COUNSEL" means Xxxxxxxxx Traurig, LLP, special counsel to the
Holders.
"WARRANTS" shall have the meaning assigned in the Purchase Agreement.
"WARRANT SHARES" means the shares of Common Stock issuable upon the
exercise of the warrants issued or to be issued to the Purchaser or its
assignees or designees in connection with the offering consummated under the
Purchase Agreement (including Warrants issued pursuant to Article VIII of the
Purchase Agreement).
2. REGISTRATION. As soon as possible following the Closing Date
(but not later than the Filing Date), the Company shall prepare and file with
the Commission a "shelf" Registration Statement covering all Registrable
Securities for a secondary or resale offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3 (or if
such form is not available to the Company on Form SB-2 or another form
appropriate for such registration in accordance herewith). The Company shall use
its best efforts to cause the Registration Statement to be declared effective
under the Securities Act not later than one hundred and twenty (120) days after
the Closing Date (including filing with the Commission a request for
acceleration of effectiveness in accordance with Rule 461
3
promulgated under the Securities Act within five (5) Business Days of the date
that the Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or not be
subject to further review) and to keep such Registration Statement continuously
effective under the Securities Act until the earlier of (x) the date when all
Registrable Securities covered by such Registration Statement have been sold or
(y) the date on which the Registrable Securities may be sold without any
restriction pursuant to Rule 144(k) as determined by the counsel to the Company
pursuant to a written opinion letter, addressed to the Company's transfer agent
to such effect (the "EFFECTIVENESS PERIOD"). Upon the initial filing thereof,
the Registration Statement shall cover at least 100% of the shares of Common
Stock for issuance upon the conversion of the Preferred Stock, 100% of the
shares of Common Stock for issuance upon the exercise of the Warrants and 100%
of the other Registrable Securities. If the Commission informs the Company that
it will not allow the Registration Statement to cover any of the Registrable
Securities, then the Registration Statement shall cover the highest percentage
of such Registrable Securities that the Commission will allow. Such Registration
Statement also shall cover, to the extent allowable under the Securities Act and
the Rules promulgated thereunder (including Securities Act Rule 416), such
indeterminate number of additional shares of Common Stock resulting from stock
splits, stock dividends or similar transactions with respect to the Registrable
Securities.
3. REGISTRATION PROCEDURES.
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on Form S-3 (or if such form is not available to
the Company on Form SB-2 or another form appropriate for such registration in
accordance herewith) (which shall include a Plan of Distribution substantially
in the form of EXHIBIT A attached hereto), and cause the Registration Statement
to become effective and remain effective as provided herein; provided, however,
that not less than three (3) Business Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto, the Company shall (i) furnish to the Special Counsel, copies of all
such documents proposed to be filed, which documents (other than those
incorporated by reference) will be subject to the review of such Special
Counsel, and (ii) at the request of any Holder cause its officers and directors,
counsel and independent certified public accountants to respond to such
inquiries as shall be necessary, in the reasonable opinion of counsel to such
Holders, to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement or any
such Prospectus or any amendments or supplements thereto to which the Holders of
the Registrable Securities or the Special Counsel shall reasonably object in
writing within three (3) Business Days after their receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
Registrable Securities for the Effectiveness Period and to the extent any
Registrable Securities are not included in such
4
Registration Statement for reasons other than the failure of the Holder to
comply with Section 3(m) hereof, shall prepare and file with the Commission such
additional Registration Statements in order to register for resale under the
Securities Act all Registrable Securities; (ii) cause the related Prospectus to
be amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424 (or any similar
provisions then in force) promulgated under the Securities Act; (iii) respond as
promptly as possible to any comments received from the Commission with respect
to the Registration Statement or any amendment thereto and as promptly as
possible provide the Holders true and complete copies of all correspondence from
and to the Commission relating to the Registration Statement; and (iv) comply in
all material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
In addition, the Company shall promptly prepare and file such amendments,
including post-effective amendments, to the Registration Statement and the
related Prospectus and take all other actions as may be necessary to register
the sale of Registrable Securities by any Holder to whom the rights under this
Agreement have been assigned pursuant to Section 7(j).
(c) Notify the Holders of Registrable Securities to be sold and
the Special Counsel as promptly as possible (A) when a Prospectus or any
Prospectus supplement or post-effective amendment to the Registration Statement
or additional Registration Statement is proposed to be filed (but in no event in
the case of this subparagraph (A), less than three (3) Business Days prior to
date of such filing); (B) when the Commission notifies the Company whether there
will be a "review" of such Registration Statement and whenever the Commission
comments in writing on such Registration Statement; and (C) with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective, and after the effectiveness thereof: (i) of any request by the
Commission or any other Federal or state governmental authority for amendments
or supplements to the Registration Statement or Prospectus or for additional
information; (ii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that purpose;
(iii) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (iv) if the financial
statements included in the Registration Statement become ineligible for
inclusion therein or of the occurrence of any event that makes any statement
made in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. Without limitation to any remedies to which the
Holders may be entitled under this Agreement, if any of the events described in
Sections 3(c)(C)(i), 3(c)(C)(ii), 3(c)(C)(iii), or 3(c)(C)(iv) occur, the
Company shall use its best efforts to respond to and correct the event.
5
(d) Use its best efforts to avoid the issuance of, or, if issued,
use best efforts to obtain the withdrawal of, (i) any order suspending the
effectiveness of the Registration Statement or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.
(e) If requested by any Holder of Registrable Securities, (i)
promptly incorporate in a Prospectus supplement or post-effective amendment to
the Registration Statement such information as the Company reasonably agrees
should be included therein and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; provided, however, that the
Company shall not be required to take any action pursuant to this Section 3(e)
that would, in the written opinion of counsel for the Company (addressed to the
Special Counsel), violate applicable law.
(f) Furnish to each Holder and the Special Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, and all
exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.
(g) Promptly deliver to each Holder and the Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling Holders
and the Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided, however,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process in any jurisdiction where it is
not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
(i) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
6
be sold pursuant to a Registration Statement, which certificates shall be free,
to the extent permitted by applicable law and the Purchase Agreement, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any Holder may request at least
two (2) Business Days prior to any sale of Registrable Securities. In connection
therewith, the Company shall promptly after the Effective Date cause an opinion
of counsel to be delivered to and maintained with its transfer agent, together
with any other authorizations, certificates and directions required by the
transfer agent, which authorize and direct the transfer agent to issue such
Registrable Securities without legend upon sale by the Holder of such shares of
Registrable Securities under the Registration Statement.
(j) Upon the occurrence of any event contemplated by Section
3(c)(C)(iv), as promptly as possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(k) Cause all Registrable Securities relating to such Registration
Statement to be listed on any United States securities exchange, quotation
system, market or over-the-counter bulletin board, if any, on which similar
securities issued by the Company are then listed.
(l) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its security
holders earnings statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 3-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the Effective Date, which statement shall conform to the
requirements of Rule 158.
(m) Request each selling Holder to furnish to the Company
information regarding such Holder and the distribution of such Registrable
Securities as is required by law or the Commission to be disclosed in the
Registration Statement, and the Company may exclude from such registration the
Registrable Securities of any such Holder who fails to furnish such information
within a reasonable time prior to the filing of each Registration Statement,
supplemented Prospectus and/or amended Registration Statement.
If the Registration Statement refers to any Holder by name or otherwise
as the holder of any securities of the Company, then such Holder shall have the
right to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c)(C)(i), 3(c)(C)(ii), 3(c)(C)(iii),
3(c)(C)(iv) or 3(n), such Holder will forthwith
7
discontinue disposition of such Registrable Securities under the Registration
Statement until such Holder's receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement contemplated by Section 3(j),
or until it is advised in writing (the "ADVICE") by the Company that the use of
the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration Statement.
(n) If (i) there is material non-public information regarding the
Company which the Company's Board of Directors (the "BOARD") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose and which the Company would be required to disclose
under the Registration Statement or (iii) with respect to a registration
statement on a form other than Form S-3, if the Company reasonably determines
that, based on the advice of counsel, a post-effective amendment to the
registration statement must be filed with the Commission in order to update the
audited financial statements in such registration statement, or the Company
elects, in its discretion, to file a post-effective amendment to such
registration statement for the purpose of converting it to a Form S-3 after such
form becomes available for use by the Company, and, in either case, such
post-effective amendment is reviewed by the Commission, then (A) in the case of
an event described in Section 3(n)(i) or 3(n)(ii), the Company may postpone or
suspend filing or effectiveness of a registration statement for a period not to
exceed 30 consecutive days, provided that the Company may not postpone or
suspend its obligation under Section 3(n)(i) or 3(n)(ii) for more than 45 days
in the aggregate during any 12 month period, and (B) in the case of an event
described in Section 3(n)(iii), provided the Company uses its best efforts to
promptly cause such post-effective amendment to be declared effective by the
Commission, the Company may suspend effectiveness of a registration statement
for a period not to exceed 75 consecutive days, provided that the Company may
not suspend its obligation under Section 3(n)(iii) for more than 90 days in the
aggregate during any 12 month period (each, a "BLACKOUT PERIOD").
4. REGISTRATION EXPENSES.
All fees and expenses incident to the performance of or compliance with
this Agreement by the Company shall be borne by the Company whether or not the
Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with any
securities exchange, quotation system, market or over-the-counter bulletin board
on which Registrable Securities are required hereunder to be listed, (B) with
respect to filings required to be made with the Commission, and (C) in
compliance with state securities or blue sky laws (including, without
limitation, fees and disbursements of Special Counsel in connection with blue
sky qualifications of the Registrable Securities and determination of
8
the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as the Holders of Registrable Securities may designate)),
(ii) printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing or photocopying
prospectuses), (iii) messenger, telephone and delivery expenses, (iv) Securities
Act liability insurance, if the Company so desires such insurance, and (v) fees
and expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement, including,
without limitation, the Company's independent public accountants (including, in
the case of an underwritten offering, the expenses of any comfort letters or
costs associated with the delivery by independent public accountants of a
comfort letter or comfort letters) and legal counsel. In addition, the Company
shall be responsible for all of its internal expenses incurred in connection
with the consummation of the transactions contemplated by this Agreement
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange as required hereunder.
5. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, partners, members, managers, stockholders,
agents, brokers (including brokers who offer and sell Registrable Securities as
principal as a result of a pledge or any failure to perform under a margin call
of Common Stock), investment advisors and employees of each of them, each Person
who controls any such Holder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, members,
managers, stockholders, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and reasonable attorneys' fees) and expenses (collectively,
"LOSSES"), as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained or incorporated by reference in
the Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of prospectus or amendment or supplement thereto, in the
light of the circumstances under which they were made) not misleading, except to
the extent, but only to the extent, that (i) such untrue statements or omissions
are based solely upon information regarding such Holder furnished in writing to
the Company by such Holder expressly for use therein, which information was
reasonably relied on by the Company for use therein or to the extent that such
information relates to (x) such Holder and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of prospectus or in any amendment or supplement thereto
or (y) such Holder's proposed method of distribution of Registrable Securities
as set forth in Exhibit A (or as such Holder otherwise informs the Company in
writing); or (ii) in the case of an occurrence of an event of the type described
in Section 3(c)(C)(ii), 3(c)(C)(iii), 3(c)(C)(iv) or 3(n), the use by a Holder
of an outdated or defective Prospectus after the delivery to the Holder of
9
written notice from the Company that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 3(m).
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of an
Indemnified Party (as defined in Section 5(c) to this Agreement) and shall
survive the transfer of the Registrable Securities by the Holders.
(b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents and employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising solely
out of or based solely upon any omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that (i) such untrue statement is contained in any
information so furnished in writing (or such omission was omitted from
information required to be provided in writing) by such Holder to the Company
specifically for inclusion in the Registration Statement or such Prospectus and
that such information was reasonably relied upon by the Company for use in the
Registration Statement, such Prospectus, or in any amendment or supplement
thereto, or to the extent that such information relates to (x) such Holder and
was reviewed and expressly approved in writing by such Holder expressly for use
in the Registration Statement, such Prospectus, or such form of prospectus or in
any amendment or supplement thereto or (y) such Holder's proposed method of
distribution of Registrable Securities as set forth in Exhibit A (or as such
Holder otherwise informs the Company in writing) or (ii) in the case of an
occurrence of an event of the type described in Section 3(c)(C)(ii),
3(c)(C)(iii), 3(c)(C)(iv) or 3(n), the use by a Holder of an outdated or
defective Prospectus after the delivery to the Holder of written notice from the
Company that the Prospectus is outdated or defective and prior to the receipt by
such Holder of the Advice contemplated in Section 3(m); provided, however, that
the indemnity agreement contained in this Section 5(b) shall not apply to
amounts paid in settlement of any Losses if such settlement is effected without
the prior written consent of the Holder, which consent shall not be unreasonably
withheld. Notwithstanding anything to the contrary contained herein, a Holder
shall be liable under this Section 5(b) for only that amount as does not exceed
the net proceeds to such Holder as a result of the sale of Registrable
Securities pursuant to such Registration Statement.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "INDEMNIFIED PARTY"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all reasonable fees and expenses incurred in connection with
10
defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.
An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel in writing (with a copy to the Indemnifying
Party) that a conflict of interest is likely to exist if the same counsel were
to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the reasonable expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding and does not impose any monetary
or other obligation or restriction on or attributes any fault or liability to
any Indemnified Party.
All reasonable fees and expenses of an Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to such Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party, which notice shall be delivered no more frequently than on a
monthly basis (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) CONTRIBUTION. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and such Indemnified Party in connection with
the actions,
11
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and such Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or such Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms. Notwithstanding anything to the contrary contained
herein, a Holder shall be required to contribute under this Section 5(d) for
only that amount as does not exceed the net proceeds to such Holder as a result
of the sale of Registrable Securities pursuant to such Registration Statement.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties. The indemnity and contribution agreements herein are in
addition to and not in diminution or limitation of any indemnification
provisions under the Purchase Agreement.
6. RULE 144.
As long as any Holder owns Preferred Stock, Warrants or Registrable
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as any Holder owns Preferred Stock,
Warrants or Registrable Securities, if the Company is not required to file
reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare
and furnish to the Holders and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in form and substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of the
Exchange Act, as well as any other information required thereby, in the time
period that such filings would have been required to have been made under the
Exchange Act. The Company further covenants that it will take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such Person to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including
12
compliance with the provisions of the Purchase Agreement relating to the
transfer of the Registrable Securities. Upon the request of any Holder, the
Company shall deliver to such Holder a written certification of a duly
authorized officer as to whether it has complied with such requirements. The
definition of "Registrable Securities" for purposes of this Section 6 shall be
interpreted as if it did not include the proviso at the end of such definition.
7. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Except as otherwise disclosed in
the Purchase Agreement, neither the Company nor any of its subsidiaries is a
party to an agreement currently in effect, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Without limiting the generality of the foregoing, without the written consent of
the Holders of the then outstanding Registrable Securities, the Company shall
not grant to any Person the right to request the Company to register any
securities of the Company under the Securities Act unless the rights so granted
are subject in all respects to the prior rights in full of the Holders set forth
herein, and are not otherwise in conflict with the provisions of this Agreement.
(c) NOTICE OF EFFECTIVENESS. Within two (2) Business Days after
any Registration Statement which includes the Registrable Securities is ordered
effective by the Commission, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Holders whose Registrable Securities are included
in such Registration Statement) confirmation that the Registration Statement has
been declared effective by the Commission in the form attached hereto as EXHIBIT
B.
(d) PIGGY-BACK REGISTRATIONS. If at any time when there is not an
effective Registration Statement covering all of the Registrable Securities the
Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or its then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Holder of Registrable Securities written notice of such
determination and, if within
13
seven (7) Business Days after receipt of such notice, any such Holder shall so
request in writing (which request shall specify the Registrable Securities
intended to be disposed of by the Holder), the Company will cause the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Holder, to the extent required
to permit the disposition of the Registrable Securities so to be registered,
provided that if at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to such Holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay expenses in accordance with Section 4 hereof), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities being registered pursuant to this Section 7(d) for the
same period as the delay in registering such other securities. The Company shall
include in such registration statement all or any part of such Registrable
Securities such Holder requests to be registered; provided, however, that the
Company shall not be required to register any Registrable Securities pursuant to
this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the
Securities Act. In the case of an underwritten public offering, if the managing
underwriter(s) or underwriter(s) should reasonably object to the inclusion of
the Registrable Securities in such registration statement, then if the Company
after consultation with the managing underwriter should reasonably determine
that the inclusion of such Registrable Securities, would materially adversely
affect the offering contemplated in such registration statement, and based on
such determination recommends inclusion in such registration statement of fewer
or none of the Registrable Securities of the Holders, then (x) the number of
Registrable Securities of the Holders included in such registration statement
shall be reduced pro-rata among such Holders (based upon the number of
Registrable Securities requested to be included in the registration), if the
Company after consultation with the underwriter(s) recommends the inclusion of
fewer Registrable Securities, or (y) none of the Registrable Securities of the
Holders shall be included in such registration statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities; provided, however, that if securities are being offered
for the account of other persons or entities as well as the Company, such
reduction shall not represent a greater fraction of the number of Registrable
Securities intended to be offered by the Holders than the fraction of similar
reductions imposed on such other persons or entities (other than the Company).
(e) FAILURE TO FILE REGISTRATION STATEMENT AND OTHER EVENTS. The
Company and the Holders agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and
maintained in the manner contemplated herein during the Effectiveness Period.
The Company and the Holders further agree that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, if (i) the
Registration Statement is not filed on or prior to the Filing Date, or (ii) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act within five (5)
Business Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not
be "reviewed," or not subject to further review, or (iii) the
14
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective as to all Registrable Securities at any
time prior to the expiration of the Effectiveness Period, without being
succeeded immediately by a subsequent Registration Statement filed with the
Commission, except as otherwise permitted by this Agreement, including pursuant
to Section 3(n), or (iv) trading in the Common Stock shall be suspended (other
than a suspension affecting trading in securities generally) or if the Common
Stock is delisted from any securities exchange, quotation system, market or
over-the-counter bulletin board on which Registrable Securities are required
hereunder to be listed (each an "EXCHANGE"), without immediately being listed on
any other Exchange, for any reason for more than three (3) Business Days, other
than pursuant to Section 3(n), or (v) the conversion rights of the Holders are
suspended for any reason without the consent of the particular Holder other than
as set forth in Article III.A.5 of the Articles of Incorporation, or (vi) the
Company has breached Section 3(n) of this Agreement (any such failure or breach
being referred to as an "EVENT"), the Company shall pay in cash as liquidated
damages for such failure and not as a penalty to each Holder an amount equal to
two percent (2%) of such Holder's pro rata share of the purchase price paid by
all Holders for Preferred Stock and other Registrable Securities purchased and
then outstanding pursuant to the Purchase Agreement for the initial thirty (30)
day period until the applicable Event has been cured, which shall be pro rated
for such periods less than thirty (30) days and one and one-half percent (1.5%)
of such Holder's pro rata share of the purchase price paid by all Holders for
Preferred Stock and other Registrable Securities purchased and then outstanding
pursuant to the Purchase Agreement for each subsequent thirty (30) day period
until the applicable Event has been cured which shall be pro rated for such
periods less than thirty days (the "PERIODIC AMOUNT"). Payments to be made
pursuant to this Section 7(e) shall be due and payable immediately upon demand
in immediately available cash funds. The parties agree that the Periodic Amount
represents a reasonable estimate on the part of the parties, as of the date of
this Agreement, of the amount of damages that may be incurred by the Holders if
the Registration Statement is not filed on or prior to the Filing Date and
maintained in the manner contemplated herein during the Effectiveness Period or
if any other Event as described herein has occurred. Notwithstanding the
foregoing, the Company shall remain obligated to cure the breach or correct the
condition that caused the Event, and the Holder shall have the right to take any
action necessary or desirable to enforce such obligation.
(f) FAILURE OF REGISTRATION STATEMENT TO BECOME EFFECTIVE. The
Company and the Holders agree that the Holders will suffer damages if the
Registration Statement is not declared effective on or prior to the one hundred
and twentieth (120th) day following the Closing Date. The Company and the
Holders further agree that it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, if the Registration Statement is not
declared effective within one-hundred and fifty (150) days after the Closing
Date, the Company shall pay in cash as liquidated damages for such failure and
not as a penalty to each Holder an amount equal to (i) two percent (2%) of such
Holder's pro rata share of the purchase price paid by all Holders for Preferred
Stock and other Registrable Securities purchased and then outstanding pursuant
to the Purchase Agreement and (ii) one and one-half percent (1.5%) of such
Holder's pro rata share of the purchase price paid by all Holders for Preferred
Stock and other Registrable Securities purchased and then outstanding pursuant
to the Purchase Agreement for each subsequent thirty (30) day period (which
shall be pro rated for such periods less than thirty (30) days) until the
Registration Statement is
15
declared effective. Payments to be made pursuant to this Section 7(f) shall be
due and payable immediately upon demand in immediately available cash funds. The
parties agree that the amounts set forth in this Section 7(f) represent a
reasonable estimate on the part of the parties, as of the date of this
Agreement, of the amount of damages that may be incurred by the Holders if the
Registration Statement is not declared effective on or prior to the one hundred
and twentieth (120th) day following the Closing Date. Notwithstanding the
foregoing, the Company shall remain obligated to cause the Registration
Statement to become effective, and the Holder shall have the right to take any
action necessary or desirable to enforce such obligation.
(g) SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION.
(i) The Company and the Holders acknowledge and agree
that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof,
this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(ii) Each of the Company and the Holders (i) hereby
irrevocably submits to the exclusive jurisdiction of the state and
federal courts located in New York City, New York for the purposes of
any suit, action or proceeding arising out of or relating to this
Agreement and (ii) hereby waives, and agrees not to assert in any such
suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such court, that the suit, action or proceeding
is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Each of the Company and the Holders
consents to process being served in any such suit, action or proceeding
by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof.
Nothing in this Section 7(g) shall affect or limit any right to serve
process in any other manner permitted by law.
(h) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of the Registrable Securities. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of the
Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(i) NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is
16
delivered via facsimile at the facsimile telephone number specified for notice
prior to 5:00 p.m., New York City time, on a Business Day, (ii) the next
Business Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number specified in this Section on a
day that is not a Business Day or later than 5:00 p.m., New York City time, on
any date and earlier than 11:59 p.m., New York City time, on such date, (iii)
the Business Day following the date of mailing, if sent by nationally recognized
overnight courier service such as Federal Express or (iv) actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be with respect to each Holder at its address set forth on
the signature page hereto, or with respect to the Company, addressed to:
National Coal Corp.
000 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile No.: (000) 000-0000
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Company shall be sent to Xxxxxx
Xxxxxxxx & Markiles, LLP, 00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx
00000, Facsimile No. (000) 000-0000. Copies of notices to any Holder shall be
sent to the addresses, if any, listed on the signature page hereto.
(j) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns and shall inure to the benefit of each Holder and its successors and
assigns; provided, that the Company may not assign this Agreement or any of its
rights or obligations hereunder without the prior written consent of each
Holder; and provided, further, that each Holder may assign its rights hereunder
in the manner and to the Persons as permitted under the Purchase Agreement.
(k) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the Preferred Stock, Warrants or the Registrable Securities if:
(i) the Holder agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment the further disposition of such
securities by the transferee or assignees is restricted under the Securities Act
and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section 7(k),
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions of this Agreement, and (v) such transfer shall have been made
in accordance with the applicable requirements of the Purchase Agreement. The
rights to assignment shall apply to the Holders (and to subsequent) successors
and assigns.
17
The Company may require, as a condition of allowing such assignment in
connection with a transfer of Preferred Stock, Warrants or Registrable
Securities (i) that the Holder or transferee of all or a portion of the
Preferred Stock, the Warrants or the Registrable Securities as the case may be,
furnish to the Company a written opinion of counsel that is reasonably
acceptable to the Company to the effect that such transfer may be made without
registration under the Securities Act, (ii) that the Holder or transferee
execute and deliver to the Company an investment letter in form and substance
acceptable to the Company (iii) that the transferee be an "accredited investor"
as defined in Rule 501(a) promulgated under the Securities Act and (iv) that the
transfer of such Preferred Stock, Warrants and/or Registrable Securities be (A)
a transfer of an amount of such Preferred Stock, Warrants and/or Registrable
Securities equal to, convertible into and/or exercisable for not less than 5% of
the total number of Conversion Shares that would have been issuable upon the
full conversion of all Preferred Stock on the Closing Date (as defined in the
Purchase Agreement) or (B) a transfer of all of the Preferred Stock, Warrants
and Registrable Securities then owned by the Holder.
(l) COUNTERPARTS; FACSIMILE. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by electronic image or
facsimile transmission, such signature shall create a valid binding obligation
of the party executing (or on whose behalf such signature is executed) the same
with the same force and effect as if such electronic image or facsimile
signature were the original thereof.
(m) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law thereof.
(n) CUMULATIVE REMEDIES. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(o) SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable in any respect, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(p) HEADINGS; INTERPRETATION. The headings herein are for
convenience only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof. Any form of the word
"include" as used in this Agreement shall be deemed to be followed by the phrase
"without limitation".
18
(q) [Intentionally Omitted]
(r) OBLIGATIONS OF PURCHASERS. The Company acknowledges that the
obligations of each Holder under this Agreement are several and not joint with
the obligations of any other Holder, and no Holder shall be responsible in any
way for the performance of the obligations of any other Holder under this
Agreement. The decision of each Holder to enter into to this Agreement has been
made by such Holder independently of any other Holder. The Company further
acknowledges that nothing contained in this Agreement, and no action taken by
any Holder pursuant hereto, shall be deemed to constitute the Holders as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Holders are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated hereby.
Each Holder shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement, and it
shall not be necessary for any other Holder to be joined as an additional party
in any proceeding for such purpose. The Purchaser represents that it has been
represented by legal counsel in its review and negotiation of this Agreement.
[signature page follows]
19
IN WITNESS WHEREOF, the parties hereto have caused this Investor Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
COMPANY:
NATIONAL COAL CORP.
By: /S/ XXX X. XXX
--------------------------------
Name: Xxx X. Xxx
Title: Chief Executive Officer
PURCHASER:
CD INVESTMENT PARTNERS, LTD.
By: CD Capital Management LLC
Its: Investment Manager
By: /S/ XXXX XXXXXXXXX
--------------------------------
Name: Xxxx Xxxxxxxxx
Title: President
Address for all Notices:
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
with a copy to (which shall not constitute notice):
Xxxxxxxxx Xxxxxxx, LLP
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxx, Esq. and Xxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
20
EXHIBIT A
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the selling
security holders. Sales of shares may be made by selling security holders,
including their respective donees, transferees, pledgees or other
successors-in-interest directly to purchasers or to or through underwriters,
broker-dealers or through agents. Sales may be made from time to time on the OTC
Bulletin Board or any exchange upon which our shares may trade in the future, in
the over-the-counter market or otherwise, at market prices prevailing at the
time of sale, at prices related to market prices, or at negotiated or fixed
prices. The shares may be sold by one or more of, or a combination of, the
following:
- a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction (including crosses in
which the same broker acts as agent for both sides of the transaction);
- purchases by a broker-dealer as principal and resale by such
broker-dealer, including resales for its account, pursuant to this
prospectus;
- ordinary brokerage transactions and transactions in which the broker
solicits purchases;
- through options, swaps or derivatives;
- in privately negotiated transactions;
- in making short sales or in transactions to cover short sales;
- put or call option transactions relating to the shares; or
- any other method permitted by applicable law.
The selling security holders may effect these transactions by selling
shares directly to purchasers or to or through broker-dealers, which may act as
agents or principals. These broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the selling security holders
and/or the purchasers of shares for whom such broker-dealers may act as agents
or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions). Each of
the selling security holders has advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities.
Each selling security holder will act independently of us in making
decisions regarding the time, manner and size of each sale of shares of common
stock covered by this registration statement.
The selling security holders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with those
transactions, the broker-dealers or other financial institutions may engage in
short sales of the shares or of securities convertible into or exchangeable for
the shares in the course of hedging positions they assume with the selling
security holders. Each of the selling security holders may also enter into
options or other transactions with broker-dealers or other financial
institutions which require the delivery of shares offered by this prospectus to
those broker-dealers or other financial institutions. The broker-dealer or other
financial institution may then resell the shares pursuant to this prospectus (as
amended or supplemented, if required by applicable law, to reflect those
transactions).
Each of the selling security holders and any broker-dealers that act in
connection with the sale of shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933, as amended (the
"Securities Act"), and any commissions received by broker-dealers or any profit
on the resale of the shares sold by them while acting as principals may be
deemed to be underwriting discounts or commissions under the Securities Act.
Each of the selling security holders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the shares
against liabilities, including liabilities arising under the Securities Act. We
have agreed to indemnify each of the selling security holders and each selling
security holder has agreed, severally and not jointly, to indemnify us against
some liabilities in connection with the offering of the shares, including
liabilities arising under the Securities Act.
The selling security holders will be subject to the prospectus delivery
requirements of the Securities Act. We have informed the selling security
holders that the anti-manipulative provisions of Regulation M promulgated under
the Securities Exchange Act of 1934, as amended, may apply to their sales in the
market.
Selling security holders also may resell all or a portion of the shares
in open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of Rule 144.
Upon being notified by a selling security holder that a material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, we will file a supplement to
this prospectus, if required pursuant to Rule 424(b) under the Securities Act,
disclosing:
- the name of each such selling security holder and of the participating
broker-dealer(s);
- the number of shares involved;
- the initial price at which the shares were sold;
- the commissions paid or discounts or concessions allowed to the
broker-dealer(s), where applicable;
2
- that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this
prospectus; and
- other facts material to the transactions.
In addition, if required under applicable law or the rules or
regulations of the Commission, we will file a supplement to this prospectus when
a selling security holder notifies us that a donee or pledgee intends to sell
more than 500 shares of common stock.
We are paying all expenses and fees in connection with the registration
of the shares. Each of the selling security holders will bear all brokerage or
underwriting discounts or commissions paid to broker-dealers in connection with
the sale of the shares.
3
EXHIBIT B
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Name and Address of Transfer Agent]
Re: National Coal Corp.
Dear [______]:
We are counsel to National Coal Corp., a Florida corporation (the
"Company"), and have represented the Company in connection with that certain
Preferred Stock and Warrant Purchase Agreement (the "Purchase Agreement") dated
as of __________________, 2004 by and among the Company and the buyers named
therein (collectively, the "Holders") pursuant to which the Company issued to
the Holders its Series A Cumulative Convertible Preferred Stock, par value
$0.0001 per share, (the "Preferred Stock") convertible into shares of the
Company's common stock, par value $0.0001 per share (the "Common Stock") and
warrants to purchase shares of the Common Stock (the "Warrants"). Pursuant to
the Purchase Agreement, the Company has also entered into an Investor Rights
Agreement with the Holders (the "Investor Rights Agreement") pursuant to which
the Company agreed, among other things, to register the shares of Common Stock
issuable upon conversion of the Preferred Stock and exercise of the Warrants and
certain other shares of Common Stock, under the Securities Act of 1933, as
amended (the "1933 Act"). In connection with the Company's obligations under the
Investor Rights Agreement, on ____________ ___, 2004, the Company filed a
Registration Statement on Form SB-2 (File No. 333-_____________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Holders as
a selling securityholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
By:__________________________________
cc: [LIST NAMES OF HOLDERS]
