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EXHIBIT 10.4
GENERAL RELEASE AND SETTLEMENT AGREEMENT
THIS GENERAL RELEASE AND SETTLEMENT AGREEMENT (the "Agreement") is made
and entered into as of the 23rd day of January, 2001 by and among FOUR CORNERS
CAPITAL, LLC, a Delaware limited liability company ("Four Corners"), DC
INVESTMENT PARTNERS EXCHANGE FUND, L.P., a Tennessee limited partnership (the
"Exchange Fund" and, together with Four Corners, the "Four Corners Parties") and
ERESOURCE CAPITAL GROUP, INC., a Delaware corporation f/k/a xxxxxxxxxx.xxx (the
"Company").
W I T N E S S E T H:
WHEREAS, the Company has granted options and warrants to Four Corners
to purchase, in the aggregate, 2,000,000 shares of the Company's common stock,
par value $.04 per share (the "Common Stock"), which options represent all of
the outstanding options to purchase the Company's Common Stock held by Four
Corners as of the date hereof (the "Four Corners Options");
WHEREAS, Four Corners/Exchange Fund and the Company entered into that
certain Common Stock Purchase Agreement dated as of January 18, 2000 (the
"Purchase Agreement") and that certain Registration Rights Agreement dated as of
January 18, 2000 (the "Registration Rights Agreement");
WHEREAS, pursuant to the Purchase Agreement, Exchange Fund (as Four
Corner's assignee) purchased, for $1,000,000, 165,070 shares of the Company's
Common Stock (the "Exchange Fund Shares") and warrants to purchase in the
aggregate 2,723,668 shares of the Company's Common Stock (the "Four Corners
Warrants") were issued to Four Corners, of which a warrant to purchase 123,802
shares of the Company's Common Stock was assigned by Four Corners to Exchange
Fund (the "Exchange Fund Warrant" and, together with the Four Corners Warrants,
the "Original Warrants"); and
WHEREAS, the Four Corners Parties and the Company desire to finally,
fully and irrevocably settle all disputes, differences, disagreements,
uncertainties, claims, charges and complaints that the Four Corners Parties and
the Company have or may have between them and give their mutual and general
releases of all of their respective claims in the manner and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by the parties
hereto, it is hereby agreed as follows:
SECTION 1. FOUR CORNERS OPTIONS. In addition to the mutual
covenants, agreements and releases set forth herein, and simultaneously with the
execution and delivery hereof, Four Corners hereby delivers to the Company for
cancellation the Four Corners Options, specifically
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including, but not limited to, the option granted on April 21, 1999 to purchase
200,000 shares of Common Stock at an exercise price of $0.4177 per share; the
option granted on July 7, 1999 to purchase 400,000 shares of Common Stock at an
exercise price of $2.50 per share; the option granted on September 10, 1999 to
purchase 200,000 shares of Common Stock at an exercise price of $1.75 per share;
the option granted on December 2, 1999 to purchase 200,000 shares of Common
Stock at an exercise price of $4.00 per share; and the option granted on
December 2, 1999 to purchase 1,000,000 shares of Common Stock at an exercise
price of $4.00 per share and hereby agrees that each such option agreement and
all options to purchase Common Stock held by Four Corners as of the date hereof
be and hereby are cancelled, provided that, any and all shares issued in
connection with the previous exercise of any such options shall not be cancelled
or affected hereby. Simultaneous with the cancellation of the Four Corners
Options, the Company shall and hereby does deliver to Four Corners an Option
Agreement to purchase 1,000,000 shares of Common Stock in the form attached
hereto as Exhibit A.
SECTION 2. ORIGINAL WARRANTS. In addition to the mutual
covenants, agreements and releases set forth herein, and simultaneously with the
execution and delivery hereof, Four Corners or Exchange Fund, as the case may
be, hereby delivers to the Company for cancellation: (1) that certain "A"
Warrant to purchase 123,802 shares of the Company's Common Stock issued by the
Company to Four Corners as of January 18, 2000 and subsequently transferred,
conveyed and assigned by Four Corners to the Exchange Fund (the "A Warrant");
(2) that certain "B" Warrant to purchase 1,485,638 shares of the Company's
Common Stock issued by the Company to Four Corners as of January 18, 2000 (the
"B Warrant"); and (3) that certain "C" Warrant to purchase 1,114,228 shares of
the Company's Common Stock issued by the Company to Four Corners as of January
18, 2000 (the "C Warrant") and Four Corners or Exchange Fund, as the case may
be, hereby agree that each of the A Warrant, the B Warrant and the C Warrant
(which collectively represent all of the Original Warrants) be and hereby are
cancelled. Simultaneously with the cancellation of the Original Warrants, the
Company shall and hereby does deliver: to Exchange Fund a warrant to purchase
123,802 shares of the Company's Common Stock in the form attached hereto as
Exhibit B (the "Revised Exchange Fund Warrant"), which Revised Exchange Fund
Warrant shall be dated as the date hereof; and to Four Corners a warrant to
purchase 2,599,866 shares of the Company's Common Stock in the form attached
hereto as Exhibit C (the "Revised Four Corners Warrant" and, together with the
Revised Exchange Warrant, the "Revised Warrants") which Revised Four Corners
Warrant shall be dated as the date hereof.
SECTION 3. REGISTRATION RIGHTS AGREEMENT. In addition to the
mutual covenants, agreements and releases set forth herein, and simultaneously
with the execution and delivery hereof, the Four Corners Parties and the Company
hereby terminate any and all of the rights and obligations of the Four Corners
Parties and the Company arising out of or relating to the Registration Rights
Agreement and the Registration Rights Agreement is hereby terminated as to the
Four Corners Parties. The Company hereby acknowledges and represents to the Four
Corners Parties that the rights and obligations of the other parties to the
Registration Rights Agreement (including the Acqua Wellington Value Fund, Ltd.)
and the Company arising out of or relating to the Registration Rights Agreement
as to such other parties have also been previously terminated and cancelled.
Simultaneously herewith, the Four Corners Parties and the Company hereby execute
and deliver that certain Registration Rights Agreement in the form
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attached hereto as Exhibit D (the "Revised Registration Rights Agreement"),
which agreement shall be dated as of the date hereof.
SECTION 4. PURCHASE AGREEMENT. In addition to the mutual
covenants, agreements and releases set forth herein, and simultaneously with the
execution and delivery hereof, the Purchase Agreement is hereby terminated and
the parties to the Purchase Agreement shall have no further rights or
obligations with respect thereto.
SECTION 5. SALE OF THE COMPANY'S STOCK. The Four Corners Parties
hereby agree that for a period commencing on the date hereof and ending on the
two year anniversary of the date hereof, (the "Restriction Period"), the number
of shares of the Company's Common Stock sold by or for the account of either
Four Corners or Investment Partners, in the aggregate (whether or not (i) such
shares are now owned by either of the Four Corners Parties or are acquired by
either of them after the date hereof or (ii) such shares are restricted or
unrestricted securities under applicable securities laws) on any day (the "Sales
Date") shall not exceed thirty percent (30%) of the then Average Daily Trading
Volume, as defined below (the "Leak-Out Restriction"). Notwithstanding the
above, if the Company does not file with the Securities and Exchange Commission
(the "SEC") a Registration Statement, as defined in the Revised Registration
Rights Agreement, within 180 days after the date hereof, then the Leak-Out
Restriction shall cease to apply to the Four Corners Shares; provided, however,
that once a Registration Statement is declared effective by the SEC such
Leak-Out Restriction shall once again apply to the Four Corners Shares. For
purposes hereof, the Average Daily Trading Volume shall mean the average daily
reported volume of trading of the Company's Common Stock on all national
securities exchanges and/or reported through the automated evaluation system of
a registered securities association for the five trading days prior to the Sales
Date (where trading day means any day on which the Company's Common Stock is
traded on the American Stock Exchange ("AMEX") or if the Company's Common Stock
is not listed on AMEX, any day on which the Company's Common Stock is traded on
another registered national stock exchange or if the Company's Common Stock is
not so listed, a day on which the Common Stock is quoted in the over-the-counter
market.) Each of the Four Corners Parties further agrees that during the
Restricted Period it will not engage in any Short Sale (as defined in Rule 3b-3
of the General Rules and Regulations under the Securities and Exchange Act of
1934) with respect to the Company's Common Stock; provided, however, that the
Four Corners Parties shall not be restricted from conducting hedging activities
in the ordinary course of their business.
SECTION 6. INVESTMENT BANKING AGREEMENT. In addition to the
mutual covenants, agreements and releases set forth herein, and simultaneously
with the calculation and delivery hereof, Four Corners and the Company hereby
terminate all of the rights and obligations of Four Corners and the Company
arising out of or relating to that certain Investment Banking Agreement dated
December 7, 1999 between the Company and Four Corners (the "Investment Banking
Agreement"), and the Investment Banking Agreement is hereby terminated.
Simultaneously herewith, and in return for the cancellation and termination of
the Investment Banking Agreement and in full satisfaction of all and any
obligation the Company may have for fees and to reimburse Four Corners for
expenses incurred pursuant to the Investment Banking Agreement, the Company
shall issue to Four Corners 200,000 shares of its Common Stock, which shall be
duly authorized, validly issued, fully paid and nonassessable and free and clear
of
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all liens, claims and encumbrances, which stock certificate representing said
shares shall be delivered to Four Corners within 5 business days of the date
hereof.
SECTION 7. RELEASE OF CLAIMS BY THE FOUR CORNERS PARTIES. As a
material inducement for the Company to enter into this Agreement, each of the
Four Corners Parties, for itself and on behalf of its members and managers,
successors and assigns, as the case may be, hereby releases, waives, acquits,
withdraws, retracts and forever discharges, except as otherwise provided herein,
any and all claims, causes of action, whether at law or in equity, known or
unknown, fixed or contingent, which they now have or may have hereafter,
directly or indirectly, (collectively, "Claims"), against the Company, its
successors or assigns, or any and all of the Company's past or present
subsidiaries, agents, directors and officers (including, but not limited to, C.
Xxxxxxx Xxxxx, Xxxx Xxxxxxxx, Xxxxxx X. Xxxxx, Xxxxx X. Xxxxxxxxx, Xxxxxxx
Xxxxxx, Xxxxxx xx Xxxx, Xxxxxxx Xxxxxx Xxxxxx, Xxxxxxx X. Xxxxxx and C. Xxxx
Xxxxxxxx), by reason of any act, omission, matter, cause or thing whatsoever,
from the beginning of time to, and including, the date of the execution of this
Agreement including, without limitation, all claims, arising out of or relating
to or any of the transactions contemplated by the Investment Banking Agreement,
the Purchase Agreement, the Registration Rights Agreement, the Original Warrants
or the Four Corners Options; provided, however, that the foregoing shall in no
way affect the rights of the parties arising under this Agreement, the Revised
Warrants, the new Option Agreement or the Revised Registration Rights Agreement.
SECTION 8. RELEASE OF CLAIMS BY THE COMPANY. As a material
inducement for the Four Corners Parties to enter into this Agreement, the
Company, for itself and on behalf of its directors, officers, subsidiaries,
successors and assigns, as the case may be, hereby releases, waives, acquits,
withdraws, retracts and forever discharges any and all claims or causes of
action, whether at law or in equity, known or unknown, fixed or contingent,
which the Company has now against the Four Corners Parties or any and all of
their officers, directors, agents, subsidiaries, successors and assigns, by
reason of any act, omission, matter, cause or thing whatsoever, from the
beginning of time to, and including, the date of the execution of this Agreement
including, without limitation, all Claims arising out of or relating to or any
of transactions contemplated by the Investment Banking Agreement, the Purchase
Agreement, the Registration Rights Agreement, the Original Warrants or the Four
Corners Options; provided, however, that the foregoing shall in no way affect
the rights of the parties arising under this Agreement, the Revised Warrants,
the new Option Agreement or the Revised Registration Rights Agreement.
SECTION 9. NON-ASSIGNMENT OF CLAIMS. Each of the parties hereto
represents and warrants to the other parties hereto that such party has not made
any assignment or other transfer of any interest in or right to any Claim
released by such party under the terms of this Agreement. Four Corners
represents that it has not assigned or transferred any of the Four Corners
Warrants or the Four Corners Options to any other person or entity, except for
the transfer of the A Warrant to Exchange Fund described elsewhere herein.
SECTION 10. PRIORITY; NO FURTHER OBLIGATIONS. To the extent the
terms and conditions of this Agreement alter or vary the terms and conditions of
any agreement between any of the parties hereto, the parties hereto agree that
the terms and conditions of this Agreement
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shall be deemed to have modified, amended and superseded the terms and
conditions of such agreement, notwithstanding any terms or conditions therein to
the contrary.
SECTION 11. NOTICES. All notices or other communications which
are required or permitted hereunder shall be in writing and sufficient if
delivered by hand, by facsimile transmission, by registered or certified mail,
postage pre-paid, or by courier or overnight carrier to the persons at the
addresses set forth below (or at such other address as may be provided
hereunder), and shall have been deemed to have been delivered as of the date so
delivered:
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If to Company:
eResource Capital Group, Inc.
0000 Xxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx Xxxxxx
Telephone: (000) 000-0000 x00
Facsimile: (000) 000-0000
If to Four Corners:
Four Corners Capital, LLC
Xxx Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to Exchange Fund:
DC Investment Partners Exchange Fund, L.P.
Xxx Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
SECTION 12. MISCELLANEOUS.
12.1. FURTHER ASSURANCES. The parties hereto shall execute
and deliver, and file and record, as the case may be, such further or additional
documents, agreements or instruments as the other parties hereto shall
reasonably require to consummate the transactions contemplated herein.
12.2. BINDING EFFECT; CONSTRUCTION. The covenants contained
herein shall bind, and the benefits hereof shall inure to the benefit of, the
respective heirs, personal representatives, administrators, and successors and
permitted assigns, to the extent applicable, of the parties hereto. Unless the
context otherwise requires, the singular shall be construed to include the
plural and the plural the singular, and the masculine shall be construed to
include the feminine and the neuter.
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12.3. ENTIRE AGREEMENT; SEVERABILITY. This Agreement
contains the entire agreement among the parties hereto relating to the matters
provided herein, and no representations, promises or agreements, oral or
otherwise, not expressly contained or incorporated by reference herein or
therein shall be binding on the parties hereto. The provisions of this Agreement
are severable and the invalidity of one or more of the provisions herein shall
not have any effect upon the validity or enforceability of any other provision
hereof.
12.4. GOVERNING LAW. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of New York,
without giving effect to any principles of conflict of laws.
12.5. COUNTERPARTS. This Agreement may be executed in two
or more counterparts, via facsimile or otherwise, each of which shall be deemed
an original, and all of which together shall constitute one and the same
agreement.
12.6. AUTHORIZATION. The Company represents and warrants to
Four Corners and Exchange Fund that this Agreement, the Revised Warrants, the
Revised Registration Rights Agreement and the revised Options are legal, binding
and enforceable obligations of the Company, and such agreements and the
transactions contemplated hereby and thereby have been duly authorized and
approved by all necessary corporate action on the part of the Company, and there
is no proceeding, claim, rule, order, regulation or contractual provision
applicable to the Company which restricts, conflicts, impedes or interferes with
the Company's obligations set forth herein or therein.
12.7. UNDERSTANDING OF THE PARTIES. EACH OF THE UNDERSIGNED
PARTIES ACKNOWLEDGES AND AGREES THAT SUCH PARTY HAS CAREFULLY READ EACH OF THE
TERMS AND PROVISIONS OF THIS AGREEMENT AND UNDERSTANDS ITS CONTENTS AND THAT
SUCH PARTY EXECUTED OR CAUSED TO BE EXECUTED THIS AGREEMENT AS SUCH PARTY'S OWN
FREE ACT AND DEED.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, each of the parties hereto has executed and
delivered this Agreement or caused this Agreement to be executed and delivered
by its duly authorized officer, as the case may be, all as of the date and year
first written above.
FOUR CORNERS CAPITAL, LLC
By:
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Name:
------------------------------------------
Its:
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DC INVESTMENT PARTNERS EXCHANGE
FUND, L.P.
By: DC Investment Partners, LLC
its General Partner
By:
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Name:
------------------------------------------
Its:
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ERESOURCE CAPITAL GROUP, INC.
By: (SEAL)
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Name:
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Its:
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EXHIBIT B
WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR ERESOURCE CAPITAL GROUP, INC. SHALL HAVE
RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
eResource Capital Group, Inc.
Expires on the Expiration Date
No.: W-__ Number of Shares: 123,802
Date of Issuance: January 23, 2001
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth,
the undersigned, eResource Capital Group, Inc., a Delaware corporation f/k/a
xxxxxxxxxx.xxx (together with its successors and assigns, the "Issuer"), hereby
certifies that DC Investment Partners Exchange Fund, L.P. or its registered
assigns is entitled to subscribe for and purchase, during the period specified
in this Warrant, up to 123,802 shares (subject to adjustment as hereinafter
provided) of the duly authorized, validly issued, fully paid and non-assessable
Common Stock of the Issuer, at an exercise price per share equal to $0.75,
subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. Capitalized terms used in this Warrant and not otherwise
defined herein shall have the respective meanings specified in Section 7 hereof.
1. Term. The right to subscribe for and purchase shares of
Warrant Stock represented hereby shall commence on the date of issuance of this
Warrant and shall expire on the Expiration Date (such period being the "Term").
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2. Method of Exercise Payment: Issuance of New Warrant: Transfer
and Exchange.
(a) Time of Exercise. The purchase rights represented by this
Warrant may be exercised in whole or in part at any time and from time to time
during the Term.
(b) Method of Exercise. The Holder hereof may exercise this
Warrant, in whole or in part, by the surrender of this Warrant (with the
exercise form attached hereto duly executed) at the principal office of the
Issuer, and by the payment to the Issuer of an amount of consideration therefor
equal to the Warrant Price in effect on the date of such exercise multiplied by
the number of shares of Warrant Stock with respect to which this Warrant is then
being exercised, payable at such Holder's election by certified or official bank
check or wire transfer of immediately available funds.
(c) Issuance of Stock Certificates. In the event of any exercise
of the rights represented by this Warrant in accordance with and subject to the
terms and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three Trading Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been canceled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.
(d) Transferability of Warrant. Subject to Section 2(e), this
Warrant may be transferred by a Holder without the consent of the Company. If
transferred pursuant to this paragraph and subject to the provisions of
subsection (e) of this Section 2, this Warrant may be transferred on the books
of the Issuer by the Holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant at the principal office of the Issuer, properly
endorsed (by the Holder executing an assignment in the form attached hereto) and
upon payment of any necessary transfer tax or other governmental charge imposed
upon such transfer. This Warrant is exchangeable at the principal office of the
Issuer for Warrants for the purchase of the same aggregate number of shares of
Warrant Stock, each new Warrant to represent the right to purchase such number
of shares of Warrant Stock as the Holder hereof shall designate at the time of
such exchange. All Warrants issued on transfers or exchanges shall be dated the
Original Issue Date and shall be identical with this Warrant except as to the
number of shares of Warrant Stock issuable pursuant hereto.
(e) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant or the shares of Warrant Stock to be
issued upon exercise hereof are being acquired solely for the Holder's
own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except
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pursuant to an effective registration statement, or an exemption from
registration, under the Securities Act and any applicable state
securities laws.
(ii) Except as provided in paragraph (iii) below, this
Warrant and all certificates representing shares of Warrant Stock
issued upon exercise hereof shall be stamped or imprinted with a legend
in substantially the following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR eRESOURCE
CAPITAL GROUP, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL
ACCEPTABLE TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
(iii) The restrictions imposed by this subsection (e) upon
the transfer of this Warrant and the shares of Warrant Stock to be
purchased upon exercise hereof shall terminate: (A) when such
securities shall have been effectively registered under the Securities
Act; (B) upon the Issuer's receipt of an opinion of counsel, in form
and substance reasonably satisfactory to the Issuer, addressed to the
Issuer to the effect that such restrictions are no longer required to
ensure compliance with the Securities Act and state securities laws; or
(C) upon the Issuer's receipt of other evidence reasonably satisfactory
to the Issuer that such registration and qualification under state
securities laws is not required. Whenever such restrictions shall cease
and terminate as to any such securities, the Holder thereof shall be
entitled to receive from the Issuer (or its transfer agent and
registrar), without expense (other than applicable transfer taxes, if
any), new Warrants (or, in the case of shares of Warrant Stock, new
stock certificates) of like tenor not bearing the applicable legend
required by paragraph (ii) above relating to the Securities Act and
state securities laws.
(f) Continuing Rights of Holder. The Issuer will, at the time of
or at any time after each exercise of this Warrant, upon the request of the
Holder hereof, acknowledge in writing the extent, if any, of its continuing
obligation to afford to such Holder all rights to which such Holder shall
continue to be entitled after such exercise in accordance with the terms of this
Warrant, provided that if any such Holder shall fail to make any such request,
the failure shall not affect the continuing obligation of the Issuer to afford
such rights to such Holder.
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3. Stock Fully Paid: Reservation and Listing of Shares:
Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants
and agrees that all shares of Warrant Stock which may be issued upon the
exercise of this Warrant or otherwise hereunder will, upon issuance, be duly
authorized, validly issued, fully paid and non-assessable and free from all
taxes, liens and charges created by or through Issuer. The Issuer further
covenants and agrees that during the period within which this Warrant may be
exercised, the Issuer will at all times have authorized and reserved for the
purpose of the issue upon exercise of this Warrant a sufficient number of shares
of Common Stock to provide for the exercise of this Warrant.
(b) Reservation. If any shares of Common Stock required to be
reserved for issuance upon exercise of this Warrant or as otherwise provided
hereunder require registration or qualification with any governmental authority
under any federal or state law before such shares may be so issued, the Issuer
will in good faith use its best efforts as expeditiously as possible at its
expense to cause such shares to be duly registered or qualified. If the Issuer
shall list any shares of Common Stock on any securities exchange or market it
will, at its expense, list thereon, maintain and increase when necessary such
listing, of all shares of Warrant Stock from time to time issued upon exercise
of this Warrant or as otherwise provided hereunder, and, to the extent
permissible under the applicable securities exchange rules, all unissued shares
of Warrant Stock which are at any time issuable hereunder, so long as any shares
of Common Stock shall be so listed. The Issuer will also so list on each
securities exchange or market, and will maintain such listing of, any other
securities which the Holder of this Warrant shall be entitled to receive upon
the exercise of this Warrant if at the time any securities of the same class
shall be listed on such securities exchange or market by the Issuer.
(c) Covenants. The Issuer shall not by any action including,
without limitation, amending the Certificate of Incorporation or the by-laws of
the Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect in any way the powers,
preferences or relative participating, optional or other special rights of the
Common Stock or which would adversely affect the rights of the Holders of the
Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (iv) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.
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(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
(e) Rights and Obligations under the Registration Rights
Agreement. The shares of Warrant Stock are entitled to the benefits and subject
to the terms of the Registration Rights Agreement dated as of even date herewith
between the Issuer, Four Corners Capital, LLC and DC Investment Partners
Exchange Fund, L.P. (as amended from time to time, the "Registration Rights
Agreement"). The Issuer shall keep or cause to be kept a copy of the
Registration Rights Agreement, and any amendments thereto, at its chief
executive office and shall furnish, without charge, copies thereof to the Holder
upon request.
4. Adjustment of Warrant Price and Warrant Share Number. The
number and kind of Securities purchasable upon the exercise of this Warrant and
the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events as follows:
(a) Recapitalization, Reorganization, Reclassification,
Consolidation, Merger or Sale.
(1) In case the Issuer after the Original Issue Date
shall do any of the following (each, a "Triggering Event"): (a) consolidate with
or merge into any other Person and the Issuer shall not be the continuing or
surviving corporation of such consolidation or merger, or (b) permit any other
Person to consolidate with or merge into the Issuer and the Issuer shall be the
continuing or surviving Person but, in connection with such consolidation or
merger, any Capital Stock of the Issuer shall be changed into or exchanged for
Securities of any other Person or cash or any other property, or (c) transfer
all or substantially all of its properties or assets to any other Person, or (d)
effect a capital reorganization or reclassification of its Capital Stock, then,
and in case of each such Triggering Event, proper provision shall be made so
that, upon the basis and the terms and in the manner provided in this Warrant,
the Holder of this Warrant shall be entitled (x) upon the exercise hereof at any
time after the consummation of such Triggering Event, to the extent this Warrant
is not exercised prior to such Triggering Event, or is redeemed in connection
with such Triggering Event, to receive at the Warrant Price in effect at the
time immediately prior to the consummation of such Triggering Event in lieu of
the Common Stock issuable upon such exercise of this Warrant prior to such
Triggering Event, the Securities, cash and property to which such Holder would
have been entitled upon the consummation of such Triggering Event if such Holder
had exercised the rights represented by this Warrant immediately prior thereto,
subject to adjustments and increases (subsequent to such corporate action) as
nearly equivalent as possible to the adjustments provided for in Section 4
hereof or (y) to sell this Warrant (or, at such Holder's election, a portion
hereof) concurrently with the Triggering Event to the Person continuing after or
surviving such Triggering Event, or to the Issuer (if Issuer is the continuing
or surviving Person) at a sales price equal to the amount of cash, property
and/or Securities to which a holder of the number of shares of Common Stock
which would otherwise have been delivered upon the exercise of this Warrant
would have been entitled upon the effective date or closing of any such
Triggering Event (the "Event
-5-
14
Consideration"), less the amount or portion of such Event Consideration having a
fair value equal to the aggregate Warrant Price applicable to this Warrant or
the portion hereof so sold.
(2) Notwithstanding anything contained in this Warrant to
the contrary, the Issuer will not effect any Triggering Event unless, prior to
the consummation thereof, each Person (other than the Issuer) which may be
required to deliver any Securities, cash or property upon the exercise of this
Warrant as provided herein shall assume, by written instrument delivered to, and
reasonably satisfactory to, the Holder of this Warrant, (A) the obligations of
the Issuer under this Warrant (and if the Issuer shall survive the consummation
of such Triggering Event, such assumption shall be in addition to, and shall not
release the Issuer from, any continuing obligations of the Issuer under this
Warrant) and (B) the obligation to deliver such Holder such shares of
Securities, cash or property as, in accordance with the foregoing provisions of
this subsection (a), such Holder shall be entitled to receive, and such Person
shall have similarly delivered to such Holder an opinion of counsel for such
Person, which counsel shall be reasonably satisfactory to such Holder, stating
that this Warrant shall thereafter continue in full force and effect and the
terms hereof (including, without limitation, all of the provisions of this
subsection (a)) shall be applicable to the Securities, cash or property which
such Person may be required to deliver upon any exercise of this Warrant or the
exercise of any rights pursuant hereto.
(3) If with respect to any Triggering Event, the Holder
of this Warrant has exercised its right as provided in clause (y) of
subparagraph (i) of this subsection (a) to sell this Warrant or a portion
thereof, the Issuer agrees that as a condition to the consummation of any such
Triggering Event the Issuer shall secure such right of Holder to sell this
Warrant to the Person continuing after or surviving such Triggering Event and
the Issuer shall not effect any such Triggering Event unless upon or prior to
the consummation thereof the amounts of cash, property and/or Securities
required under such clause (y) are delivered to the Holder of this Warrant. The
obligation of the Issuer to secure such right of the Holder to sell this Warrant
shall be subject to such Holder's cooperation with the Issuer, including,
without limitation, the giving of customary representations and warranties to
the purchaser in connection with any such sale. Prior notice of any Triggering
Event shall be given to the Holder of this Warrant in accordance with Section 11
hereof.
(b) Subdivision or Combination of Shares. If the Issuer, at any
time while this Warrant is outstanding, shall subdivide or combine any shares of
Common Stock, (i) in case of subdivision of shares, the Warrant Price shall be
proportionately reduced (as at the effective date of such subdivision or, if the
Issuer shall take a record of Holders of its Common Stock for the purpose of so
subdividing, as at the applicable record date, whichever is earlier) to reflect
the increase in the total number of shares of Common Stock outstanding as a
result of such subdivision, or (ii) in the case of a combination of shares, the
Warrant Price shall be proportionately increased (as at the effective date of
such combination or, if the Issuer shall take a record of Holders of its Common
Stock for the purpose of so combining, as at the applicable record date,
whichever is earlier) to reflect the reduction in the total number of shares of
Common Stock outstanding as a result of such combination; or
-6-
15
(c) Certain Dividends and Distributions. If the Issuer, at any
time while this Warrant is outstanding, shall:
(1) Stock Dividends and Distributions. Pay a dividend in,
or make any other distribution to its stockholders (without consideration
therefor) of, shares of Common Stock, the Warrant Price shall be adjusted, as at
the date the Issuer shall take a record of the Holders of the Issuer's Capital
Stock for the purpose of receiving such dividend or other distribution (or if no
such record is taken, as at the date of such payment or other distribution), to
that price determined by multiplying the Warrant Price in effect immediately
prior to such record date (or if no such record is taken, then immediately prior
to such payment or other distribution), by a fraction (i) the numerator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of shares of Common Stock outstanding immediately after such
dividend or distribution (plus in the event that the Issuer paid cash for
fractional shares, the number of additional shares which would have been
outstanding had the Issuer issued fractional shares in connection with said
dividends); or
(2) Other Dividends. Pay a dividend on, or make any
distribution of its assets upon or with respect to (including, but not limited
to, a distribution of its property as a dividend in liquidation or partial
liquidation or by way of return of capital), the Common Stock (other than as
described in clause (1) of this subsection (c)), or in the event that the
Company shall offer options or rights to subscribe for shares of Common Stock,
or issue any Common Stock Equivalents, to all of its holders of Common Stock,
then on the record date for such payment, distribution or offer or, in the
absence of a record date, on the date of such payment, distribution or offer,
the Holder shall receive what the Holder would have received had it exercised
this Warrant in full immediately prior to the record date of such payment,
distribution or offer, or in the absence of a record date, immediately prior to
the date of such payment, distribution or offer. Notwithstanding the foregoing
set forth in clause (2) of this subsection (c) to the contrary, if the Company
gives the Holder at least twenty Business Days prior written notice of the
record date for such dividend, then the Warrant Price shall not be adjusted and
the Holder shall have the option to exercise this Warrant prior to the record
date, and if the Holder does not exercise this Warrant prior to such record
date, then the Holder shall not be entitled to receive such payment,
distribution or offer as contemplated by this clause (2) of subsection (c).
(d) Other Action Affecting Common Stock. If after the
Original Issue Date the Issuer shall take any action affecting its Common Stock,
other than an action described in any of the foregoing subsections (a) through
(c) of this Section 4, inclusive, and the failure to make any adjustment would
not fairly protect the purchase rights represented by this Warrant in accordance
with the essential intent and principle of this Section 4, then the Warrant
Price shall be adjusted in such manner and at such time as the Board may in good
faith determine to be equitable in the circumstances.
(e) Adjustment of Warrant Share Number. Upon each
adjustment in the Warrant Price pursuant to any of the foregoing provisions of
this Section 4, the Warrant Share Number shall be adjusted, to the nearest one
hundredth of a whole share, to the product obtained by multiplying the Warrant
Share Number immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price immediately before
giving
-7-
16
effect to such adjustment and the denominator of which shall be the Warrant
Price immediately after giving effect to such adjustment. If the Issuer shall be
in default under any provision contained in Section 3 of this Warrant so that
shares issued at the Warrant Price adjusted in accordance with this Section 4
would not be validly issued, the adjustment of the Warrant Share Number provided
for in the foregoing sentence shall nonetheless be made and the Holder of this
Warrant shall be entitled to purchase such greater number of shares at the
lowest price at which such shares may then be validly issued under applicable
law. Such exercise shall not constitute a waiver of any claim arising against
the Issuer by reason of its default under Section 3 of this Warrant.
(f) Form of Warrant after Adjustments. The form of this
Warrant need not be changed because of any adjustments in the Warrant Price or
the number and kind of Securities purchasable upon the exercise of this Warrant.
5. Notice of Adjustments. Whenever the Warrant Price or Warrant
Share Number shall be adjusted pursuant to Section 4 hereof (for purposes of
this Section 5, each an "adjustment"), the Issuer shall cause its Chief
Financial Officer to prepare and execute a certificate setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated (including a
description of the basis on which the Board made any determination hereunder),
and the Warrant Price and Warrant Share Number after giving effect to such
adjustment, and shall cause copies of such certificate to be delivered to the
Holder of this Warrant promptly after each adjustment. Any dispute between the
Issuer and the Holder of this Warrant with respect to the matters set forth in
such certificate may at the option of the Holder of this Warrant be submitted to
one of the national accounting firms currently known as the "big five" selected
by the Holder, provided that the Issuer shall have ten days after receipt of
notice from such Holder of its selection of such firm to object thereto, in
which case such Holder shall select another such firm and the Issuer shall have
no such right of objection. The firm selected by the Holder of this Warrant as
provided in the preceding sentence shall be instructed to deliver a written
opinion as to such matters to the Issuer and such Holder within thirty days
after submission to it of such dispute. Such opinion shall be final and binding
on the parties hereto. The fees and expenses of such accounting firm shall be
paid by the Issuer.
6. Fractional Shares. No fractional shares of Warrant Stock will
be issued in connection with and exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value then
in effect.
7. Definitions. For the purposes of this Warrant, the following
terms have the following meanings:
"Additional Shares of Common Stock" mean all shares of Common
Stock issued by the Issuer after the Original Issue Date, and all
shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except the Warrant Stock, Common Stock reserved for
issuance upon exercise of existing stock options issued under any
employee incentive stock option, any qualified stock option plan and/or
stock purchase plan adopted by the Issuer, Common Stock issued in
conjunction with strategic corporate
-8-
17
partnering transactions and Common Stock issued upon exercise of
options and warrants authorized by the Board prior to the Original
Issue Date.
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without limitation,
shares of preferred or preference stock, (ii) all partnership interests
(whether general or limited) in any Person which is a partnership,
(iii) all membership interests or limited liability company interests
in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Issuer as in effect on the Original Issue Date,
and as hereafter from time to time amended, modified, supplemented or
restated in accordance with the terms hereof and thereof and pursuant
to applicable law.
"Common Stock" means the Common Stock, $.04 par value, of the
Issuer and any other Capital Stock into which such stock may hereafter
be changed.
"Common Stock Equivalent" means any Convertible Security or
warrant, option or other right to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Security.
"Convertible Securities" means evidences of Indebtedness,
shares of Capital Stock or other Securities which are or may be at any
time convertible into or exchangeable for Additional Shares of Common
Stock. The term "Convertible Security" means one of the Convertible
Securities.
"Expiration Date" means January 23, 2006.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority,
commission, board, agency or instrumentality, whether federal, state or
local, and whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Issuer) that is
regularly engaged in the business of appraising the Capital Stock or
assets of corporations or other entities as going concerns, and which
is not affiliated with either the Issuer or the Holder of any Warrant.
"Issuer" means eResource Capital Group, Inc., a Delaware
corporation, f/k/a xxxxxxxxxxx.xxx, and its successors.
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18
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable
under the Warrants at the time outstanding.
"Original Issue Date" means January 23, 2001.
"Other Common" means any other Capital Stock of the Issuer of
any class which shall be authorized at any time after the date of this
Warrant (other than Common Stock) and which shall have the right to
participate in the distribution of earnings and assets of the Issuer
without limitation as to amount.
"OTC Bulletin Board" means the over-the-counter electronic
bulletin board.
"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated
organization, joint venture, Governmental Authority or other entity of
whatever nature.
"Per Share Market Value" means on any particular date (a) the
last sales price per share of the Common Stock on such date on the
American Stock Exchange or other registered national stock exchange on
which the Common Stock is then listed or if there is no such price on
such date, then the closing bid price on such exchange or quotation
system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the American Stock Exchange or any
registered national stock exchange, the closing bid price for a share
of Common Stock in the over-the-counter market, as reported by the OTC
Bulletin Board or in the National Quotation Bureau Incorporated or
similar organization or agency succeeding to its functions of reporting
prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the OTC Bulletin Board or the National
Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of
the "Pink Sheet" quotes for the relevant date, as determined in good
faith by the holder, or (d) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined
by an Independent Appraiser selected in good faith by the Majority
Holders; provided, however, that the Issuer, after receipt of the
determination by such Independent Appraiser, shall have the right to
select an additional Independent Appraiser, in which case, the fair
market value shall be equal to the average of the determinations by
each such Independent Appraiser; and provided, further that all
determinations of the Per Share Market Value shall be appropriately
adjusted for any stock dividends, stock splits or other similar
transactions during such period. The Issuer shall pay all costs and
expenses of each Independent Appraiser. The determination of fair
market value by an Independent Appraiser shall be based upon the fair
market value of the Issuer determined on a going concern basis as
between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and
binding on all parties. In determining the fair market value of any
shares of Common Stock, no consideration shall be given to any
restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws, or to the existence or absence of, or
any limitations on, voting rights.
-10-
19
"Registration Rights Agreement" has the meaning specified in
Section 3(e) hereof.
"Securities" means any debt or equity securities of the
Issuer, whether now or hereafter authorized, any instrument convertible
into or exchangeable for Securities or a Security, and any option,
warrant or other right to purchase or acquire any Security. "Security"
means one of the Securities.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose
outstanding Voting Stock shall at the time be owned directly or
indirectly by the Issuer or by one or more of its Subsidiaries, or by
the Issuer and one or more of its Subsidiaries.
"Trading Day" means (a) a day on which the Common Stock is
traded on the American Stock Exchange as reported by Bloomberg L.P., or
(b) if the Common Stock is not listed on the American Stock Exchange, a
day on which the Common Stock is traded on any other registered
national stock exchange, or (c) if the Common Stock is not quoted on
the OTC Bulletin Board, a day on which the Common Stock is quoted in
the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in
(a), (b) and (c) hereof, then Trading Day shall mean 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 New York are authorized or
required by law or other government action to close.
"Term" has the meaning specified in Section 1 hereof.
"Voting Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
designated) having ordinary voting power for the election of a majority
of the members of the Board of Directors (or other governing body) of
such corporation, other than Capital Stock having such power only by
reason of the happening of a contingency.
"Warrants" means this Warrant, and any other warrants of like
tenor issued in substitution or exchange for this Warrant pursuant to
the provisions of Section 2(c), 2(d) or 2(e) hereof.
"Warrant Price" means $0.75, as such price may be adjusted
from time to time as shall result from adjustments specified in Section
4 hereof and hereunder. If the Company Registration Statement (as
defined in the Registration Rights Agreement) covering the resale of
the Warrant Stock is not filed pursuant to the terms set forth therein
within one hundred eighty (180) days following the date hereof, the
Warrant Price hereof shall be reduced by ten percent (10%) and by an
additional ten percent (10%) for each thirty day period thereafter
until the Registration Statement has been filed in accordance
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20
with the terms set forth in the Registration Rights Agreement;
provided, however, that the Warrant Price shall not be reduced to less
than $0.375.
"Warrant Share Number" means at any time the aggregate number
of shares of Warrant Stock which may at such time be purchased upon
exercise of this Warrant, after giving effect to all prior adjustments
and increases to such number made or required to be made under the
terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of
any Warrant or Warrants or otherwise issuable pursuant to any Warrant
or Warrants.
8. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to the holders of
Common Stock;
(B) the Issuer shall authorize the granting to all holders of its
Common Stock of rights to subscribe for or purchase any shares of Capital Stock
of any class or of any Common Stock Equivalents or Convertible Securities or
other rights;
(C) there shall be any reclassification of the Capital Stock of
the Issuer;
(D) there shall be any capital reorganization by the Issuer;
(E) there shall be any (i) consolidation or merger involving the
Issuer or (ii) sale, transfer or other disposition of all or substantially all
of the Issuer's property, assets or business (except a merger or other
reorganization in which the Issuer shall be the surviving corporation and its
shares of Capital Stock shall continue to be outstanding and unchanged and
except a consolidation, merger, sale, transfer or other disposition involving a
wholly-owned Subsidiary); or
(F) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Issuer or any partial liquidation of the Issuer
or distribution to holders of Common Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
days prior to the action in question and not less than twenty days prior to the
record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any meetings of stockholders is required to be given to
stockholders who do not waive such notice (or, if such requires no notice, then
two Trading Days written notice thereof describing the matters upon which action
is to be taken). The Holder shall have the right
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to send two representatives selected by it to each meeting, who shall be
permitted to attend, but not vote at, such meeting and any adjournments thereof.
This Warrant entitles the Holder to receive copies of all financial and other
information distributed or required to be distributed to the holders of the
Common Stock.
9. Amendment and Waiver. Any term, covenant, agreement or
condition in this Warrant may be amended, or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share Number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 10 without the consent of the Holder of this Warrant.
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
11. 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 delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., eastern
standard time, on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice later than 5:00 p.m., central
standard time, on any date and earlier than 11:59 p.m., eastern standard time,
on such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service or (iv) actual receipt by the
party to whom such notice is required to be given. With respect to notices
delivered by the Issuer pursuant to clauses (i) or (ii) above, a copy of such
notice shall also be concurrently sent via U.S. mail to the mailing address of
the Holder. The addresses for such communications shall be with respect to the
Holder of this Warrant or of Warrant Stock issued pursuant hereto, addressed to
such Holder at its last known address or facsimile number appearing on the books
of the Issuer maintained for such purposes, or with respect to the Issuer,
addressed to:
eResource Capital Group, Inc.
0000 Xxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx
Attention: Xxxxxxx Xxxxxx Xxxxxx
Telephone: (000) 000-0000 x00
Facsimile: (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 Issuer shall be sent to Xxxxxx & Xxxxxx
LLP, 0000 Xxxxxxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx, Xxxxxxx 00000,
Attn: Xxxxxx X. Xxxxxx, Facsimile no.: (000) 000-0000. Copies of notices to the
Holder shall be sent to Boult, Cummings, Xxxxxxx & Xxxxx, PLC, 414
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00
Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxxx 00000, Attention: Xxxxxxx X.
Xxxxxx, Esq., Facsimile No.: (000) 000-0000.
12. Warrant Agent. The Issuer may, by written notice to each
Holder of this Warrant, appoint an agent having an office in New York, New York
for the purpose of issuing shares of Warrant Stock on the exercise of this
Warrant pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant
pursuant to subsection (d) of Section 2 hereof or replacing this Warrant
pursuant to subsection (d) of Section 3 hereof, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be, shall
be made at such office by such agent.
13. Remedies. The Issuer stipulates that the remedies at law of
the Holder of this Warrant in the event of any default or threatened default by
the Issuer in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
14. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof and (to the extent provided herein) the
Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any
such Holder or Holder of Warrant Stock.
15. Modification and Severability. If, in any action before any
court or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
16. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day
and year first above written.
ERESOURCE CAPITAL GROUP, INC.
By:
----------------------------
Name:
Title:
-15-
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EXERCISE FORM
[NAME OF ISSUER]
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of
___________________ covered by the within Warrant.
Dated: Signature
------------------------ -------------------------------
Address
-------------------------------
-------------------------------
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: Signature
------------------------ -------------------------------
Address
-------------------------------
-------------------------------
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: Signature
------------------------ -------------------------------
Address
-------------------------------
-------------------------------
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ cancelled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
25
EXHIBIT C
WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR ERESOURCE CAPITAL GROUP, INC. SHALL HAVE
RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
eResource Capital Group, Inc.
Expires on the Expiration Date
No.: W-__ Number of Shares: 2,599,866
Date of Issuance: January 23, 2001
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth,
the undersigned, eResource Capital Group, Inc., a Delaware corporation f/k/a
xxxxxxxxxx.xxx (together with its successors and assigns, the "Issuer"), hereby
certifies that Four Corners Capital, LLC or its registered assigns is entitled
to subscribe for and purchase, during the period specified in this Warrant, up
to 2,599,866 shares (subject to adjustment as hereinafter provided) of the duly
authorized, validly issued, fully paid and non-assessable Common Stock of the
Issuer, at an exercise price per share equal to $0.75, subject, however, to the
provisions and upon the terms and conditions hereinafter set forth. Capitalized
terms used in this Warrant and not otherwise defined herein shall have the
respective meanings specified in Section 7 hereof.
1. Term. The right to subscribe for and purchase shares of
Warrant Stock represented hereby shall commence on the date of issuance of this
Warrant and shall expire on the Expiration Date (such period being the "Term").
2. Method of Exercise Payment: Issuance of New Warrant: Transfer
and Exchange.
(a) Time of Exercise. The purchase rights represented by this
Warrant may be exercised in whole or in part at any time and from time to time
during the Term.
26
(b) Method of Exercise. The Holder hereof may exercise this
Warrant, in whole or in part, by the surrender of this Warrant (with the
exercise form attached hereto duly executed) at the principal office of the
Issuer, and by the payment to the Issuer of an amount of consideration therefor
equal to the Warrant Price in effect on the date of such exercise multiplied by
the number of shares of Warrant Stock with respect to which this Warrant is then
being exercised, payable at such Holder's election by certified or official bank
check or wire transfer of immediately available funds.
(c) Issuance of Stock Certificates. In the event of any exercise
of the rights represented by this Warrant in accordance with and subject to the
terms and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three Trading Day after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been canceled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.
(d) Transferability of Warrant. Subject to Section 2(e), this
Warrant may be transferred by a Holder without the consent of the Company. If
transferred pursuant to this paragraph and subject to the provisions of
subsection (e) of this Section 2, this Warrant may be transferred on the books
of the Issuer by the Holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant at the principal office of the Issuer, properly
endorsed (by the Holder executing an assignment in the form attached hereto) and
upon payment of any necessary transfer tax or other governmental charge imposed
upon such transfer. This Warrant is exchangeable at the principal office of the
Issuer for Warrants for the purchase of the same aggregate number of shares of
Warrant Stock, each new Warrant to represent the right to purchase such number
of shares of Warrant Stock as the Holder hereof shall designate at the time of
such exchange. All Warrants issued on transfers or exchanges shall be dated the
Original Issue Date and shall be identical with this Warrant except as to the
number of shares of Warrant Stock issuable pursuant hereto.
(e) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant or the shares of Warrant Stock to be
issued upon exercise hereof are being acquired solely for the Holder's
own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration
statement, or an exemption from registration, under the Securities Act
and any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this
Warrant and all certificates representing shares of Warrant Stock
issued upon exercise hereof shall be stamped or imprinted with a legend
in substantially the following form:
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THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR eRESOURCE
CAPITAL GROUP, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL
ACCEPTABLE TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
(iii) The restrictions imposed by this subsection (e) upon
the transfer of this Warrant and the shares of Warrant Stock to be
purchased upon exercise hereof shall terminate: (A) when such
securities shall have been effectively registered under the Securities
Act; (B) upon the Issuer's receipt of an opinion of counsel, in form
and substance reasonably satisfactory to the Issuer, addressed to the
Issuer to the effect that such restrictions are no longer required to
ensure compliance with the Securities Act and state securities laws; or
(C) upon the Issuer's receipt of other evidence reasonably satisfactory
to the Issuer that such registration and qualification under state
securities laws is not required. Whenever such restrictions shall cease
and terminate as to any such securities, the Holder thereof shall be
entitled to receive from the Issuer (or its transfer agent and
registrar), without expense (other than applicable transfer taxes, if
any), new Warrants (or, in the case of shares of Warrant Stock, new
stock certificates) of like tenor not bearing the applicable legend
required by paragraph (ii) above relating to the Securities Act and
state securities laws.
(f) Continuing Rights of Holder. The Issuer will, at the time of
or at any time after each exercise of this Warrant, upon the request of the
Holder hereof, acknowledge in writing the extent, if any, of its continuing
obligation to afford to such Holder all rights to which such Holder shall
continue to be entitled after such exercise in accordance with the terms of this
Warrant, provided that if any such Holder shall fail to make any such request,
the failure shall not affect the continuing obligation of the Issuer to afford
such rights to such Holder.
3. Stock Fully Paid: Reservation and Listing of Shares:
Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants
and agrees that all shares of Warrant Stock which may be issued upon the
exercise of this Warrant or otherwise hereunder will, upon issuance, be duly
authorized, validly issued, fully paid and non-assessable and free from all
taxes, liens and charges created by or through Issuer. The Issuer further
covenants and agrees that during the period within which this Warrant may be
exercised, the Issuer will at all times have authorized and reserved for the
purpose of the issue upon exercise of
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this Warrant a sufficient number of shares of Common Stock to provide for the
exercise of this Warrant.
(b) Reservation. If any shares of Common Stock required to be
reserved for issuance upon exercise of this Warrant or as otherwise provided
hereunder require registration or qualification with any governmental authority
under any federal or state law before such shares may be so issued, the Issuer
will in good faith use its best efforts as expeditiously as possible at its
expense to cause such shares to be duly registered or qualified. If the Issuer
shall list any shares of Common Stock on any securities exchange or market it
will, at its expense, list thereon, maintain and increase when necessary such
listing, of all shares of Warrant Stock from time to time issued upon exercise
of this Warrant or as otherwise provided hereunder, and, to the extent
permissible under the applicable securities exchange rules, all unissued shares
of Warrant Stock which are at any time issuable hereunder, so long as any shares
of Common Stock shall be so listed. The Issuer will also so list on each
securities exchange or market, and will maintain such listing of, any other
securities which the Holder of this Warrant shall be entitled to receive upon
the exercise of this Warrant if at the time any securities of the same class
shall be listed on such securities exchange or market by the Issuer.
(c) Covenants. The Issuer shall not by any action including,
without limitation, amending the Certificate of Incorporation or the by-laws of
the Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect in any way the powers,
preferences or relative participating, optional or other special rights of the
Common Stock or which would adversely affect the rights of the Holders of the
Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (iv) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.
(d) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
(e) Rights and Obligations under the Registration Rights
Agreement. The shares of Warrant Stock are entitled to the benefits and subject
to the terms of the Registration Rights
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Agreement dated as of even date herewith between the Issuer, Four Corners
Capital, LLC and DC Investment Partners Exchange Fund, L.P. (as amended from
time to time, the "Registration Rights Agreement"). The Issuer shall keep or
cause to be kept a copy of the Registration Rights Agreement, and any amendments
thereto, at its chief executive office and shall furnish, without charge, copies
thereof to the Holder upon request.
4. Adjustment of Warrant Price and Warrant Share Number. The
number and kind of Securities purchasable upon the exercise of this Warrant and
the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events as follows:
(a) Recapitalization, Reorganization, Reclassification,
Consolidation, Merger or Sale.
(1) In case the Issuer after the Original Issue Date
shall do any of the following (each, a "Triggering Event"): (a) consolidate with
or merge into any other Person and the Issuer shall not be the continuing or
surviving corporation of such consolidation or merger, or (b) permit any other
Person to consolidate with or merge into the Issuer and the Issuer shall be the
continuing or surviving Person but, in connection with such consolidation or
merger, any Capital Stock of the Issuer shall be changed into or exchanged for
Securities of any other Person or cash or any other property, or (c) transfer
all or substantially all of its properties or assets to any other Person, or (d)
effect a capital reorganization or reclassification of its Capital Stock, then,
and in case of each such Triggering Event, proper provision shall be made so
that, upon the basis and the terms and in the manner provided in this Warrant,
the Holder of this Warrant shall be entitled (x) upon the exercise hereof at any
time after the consummation of such Triggering Event, to the extent this Warrant
is not exercised prior to such Triggering Event, or is redeemed in connection
with such Triggering Event, to receive at the Warrant Price in effect at the
time immediately prior to the consummation of such Triggering Event in lieu of
the Common Stock issuable upon such exercise of this Warrant prior to such
Triggering Event, the Securities, cash and property to which such Holder would
have been entitled upon the consummation of such Triggering Event if such Holder
had exercised the rights represented by this Warrant immediately prior thereto,
subject to adjustments and increases (subsequent to such corporate action) as
nearly equivalent as possible to the adjustments provided for in Section 4
hereof or (y) to sell this Warrant (or, at such Holder's election, a portion
hereof) concurrently with the Triggering Event to the Person continuing after or
surviving such Triggering Event, or to the Issuer (if Issuer is the continuing
or surviving Person) at a sales price equal to the amount of cash, property
and/or Securities to which a holder of the number of shares of Common Stock
which would otherwise have been delivered upon the exercise of this Warrant
would have been entitled upon the effective date or closing of any such
Triggering Event (the "Event Consideration"), less the amount or portion of such
Event Consideration having a fair value equal to the aggregate Warrant Price
applicable to this Warrant or the portion hereof so sold.
(2) Notwithstanding anything contained in this Warrant to
the contrary, the Issuer will not effect any Triggering Event unless, prior to
the consummation thereof, each Person (other than the Issuer) which may be
required to deliver any Securities, cash or property upon the exercise of this
Warrant as provided herein shall assume, by written instrument delivered to, and
reasonably satisfactory to, the Holder of this Warrant, (A) the obligations of
the Issuer under this Warrant (and if the Issuer shall survive the consummation
of such Triggering Event, such assumption shall be in addition to, and shall not
release the Issuer from, any
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continuing obligations of the Issuer under this Warrant) and (B) the obligation
to deliver such Holder such shares of Securities, cash or property as, in
accordance with the foregoing provisions of this subsection (a), such Holder
shall be entitled to receive, and such Person shall have similarly delivered to
such Holder an opinion of counsel for such Person, which counsel shall be
reasonably satisfactory to such Holder, stating that this Warrant shall
thereafter continue in full force and effect and the terms hereof (including,
without limitation, all of the provisions of this subsection (a)) shall be
applicable to the Securities, cash or property which such Person may be required
to deliver upon any exercise of this Warrant or the exercise of any rights
pursuant hereto.
(3) If with respect to any Triggering Event, the Holder
of this Warrant has exercised its right as provided in clause (y) of
subparagraph (i) of this subsection (a) to sell this Warrant or a portion
thereof, the Issuer agrees that as a condition to the consummation of any such
Triggering Event the Issuer shall secure such right of Holder to sell this
Warrant to the Person continuing after or surviving such Triggering Event and
the Issuer shall not effect any such Triggering Event unless upon or prior to
the consummation thereof the amounts of cash, property and/or Securities
required under such clause (y) are delivered to the Holder of this Warrant. The
obligation of the Issuer to secure such right of the Holder to sell this Warrant
shall be subject to such Holder's cooperation with the Issuer, including,
without limitation, the giving of customary representations and warranties to
the purchaser in connection with any such sale. Prior notice of any Triggering
Event shall be given to the Holder of this Warrant in accordance with Section 11
hereof.
(b) Subdivision or Combination of Shares. If the Issuer, at any
time while this Warrant is outstanding, shall subdivide or combine any shares of
Common Stock, (i) in case of subdivision of shares, the Warrant Price shall be
proportionately reduced (as at the effective date of such subdivision or, if the
Issuer shall take a record of Holders of its Common Stock for the purpose of so
subdividing, as at the applicable record date, whichever is earlier) to reflect
the increase in the total number of shares of Common Stock outstanding as a
result of such subdivision, or (ii) in the case of a combination of shares, the
Warrant Price shall be proportionately increased (as at the effective date of
such combination or, if the Issuer shall take a record of Holders of its Common
Stock for the purpose of so combining, as at the applicable record date,
whichever is earlier) to reflect the reduction in the total number of shares of
Common Stock outstanding as a result of such combination; or
(c) Certain Dividends and Distributions. If the Issuer, at any
time while this Warrant is outstanding, shall:
(1) Stock Dividends and Distributions. Pay a dividend in,
or make any other distribution to its stockholders (without consideration
therefor) of, shares of Common Stock, the Warrant Price shall be adjusted, as at
the date the Issuer shall take a record of the Holders of the Issuer's Capital
Stock for the purpose of receiving such dividend or other distribution (or if no
such record is taken, as at the date of such payment or other distribution), to
that price determined by multiplying the Warrant Price in effect immediately
prior to such record date (or if no such record is taken, then immediately prior
to such payment or other distribution), by a fraction (i) the numerator of which
shall be the total number of shares of Common Stock
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outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution (plus in the event
that the Issuer paid cash for fractional shares, the number of additional shares
which would have been outstanding had the Issuer issued fractional shares in
connection with said dividends); or
(2) Other Dividends. Pay a dividend on, or make any
distribution of its assets upon or with respect to (including, but not limited
to, a distribution of its property as a dividend in liquidation or partial
liquidation or by way of return of capital), the Common Stock (other than as
described in clause (1) of this subsection (c)), or in the event that the
Company shall offer options or rights to subscribe for shares of Common Stock,
or issue any Common Stock Equivalents, to all of its holders of Common Stock,
then on the record date for such payment, distribution or offer or, in the
absence of a record date, on the date of such payment, distribution or offer,
the Holder shall receive what the Holder would have received had it exercised
this Warrant in full immediately prior to the record date of such payment,
distribution or offer, or in the absence of a record date, immediately prior to
the date of such payment, distribution or offer. Notwithstanding the foregoing
set forth in clause (2) of this subsection (c) to the contrary, if the Company
gives the Holder at least twenty Business Days prior written notice of the
record date for such dividend, then the Warrant Price shall not be adjusted and
the Holder shall have the option to exercise this Warrant prior to the record
date, and if the Holder does not exercise this Warrant prior to such record
date, then the Holder shall not be entitled to receive such payment,
distribution or offer as contemplated by this clause (2) of subsection (c).
(d) Other Action Affecting Common Stock. If after the
Original Issue Date the Issuer shall take any action affecting its Common Stock,
other than an action described in any of the foregoing subsections (a) through
(c) of this Section 4, inclusive, and the failure to make any adjustment would
not fairly protect the purchase rights represented by this Warrant in accordance
with the essential intent and principle of this Section 4, then the Warrant
Price shall be adjusted in such manner and at such time as the Board may in good
faith determine to be equitable in the circumstances.
(e) Adjustment of Warrant Share Number. Upon each
adjustment in the Warrant Price pursuant to any of the foregoing provisions of
this Section 4, the Warrant Share Number shall be adjusted, to the nearest one
hundredth of a whole share, to the product obtained by multiplying the Warrant
Share Number immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price immediately before
giving effect to such adjustment and the denominator of which shall be the
Warrant Price immediately after giving effect to such adjustment. If the Issuer
shall be in default under any provision contained in Section 3 of this Warrant
so that shares issued at the Warrant Price adjusted in accordance with this
Section 4 would not be validly issued, the adjustment of the Warrant Share
Number provided for in the foregoing sentence shall nonetheless be made and the
Holder of this Warrant shall be entitled to purchase such greater number of
shares at the lowest price at which such shares may then be validly issued under
applicable law. Such exercise shall not constitute a waiver of any claim arising
against the Issuer by reason of its default under Section 3 of this Warrant.
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(f) Form of Warrant after Adjustments. The form of this
Warrant need not be changed because of any adjustments in the Warrant Price or
the number and kind of Securities purchasable upon the exercise of this Warrant.
5. Notice of Adjustments. Whenever the Warrant Price or Warrant
Share Number shall be adjusted pursuant to Section 4 hereof (for purposes of
this Section 5, each an "adjustment"), the Issuer shall cause its Chief
Financial Officer to prepare and execute a certificate setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated (including a
description of the basis on which the Board made any determination hereunder),
and the Warrant Price and Warrant Share Number after giving effect to such
adjustment, and shall cause copies of such certificate to be delivered to the
Holder of this Warrant promptly after each adjustment. Any dispute between the
Issuer and the Holder of this Warrant with respect to the matters set forth in
such certificate may at the option of the Holder of this Warrant be submitted to
one of the national accounting firms currently known as the "big five" selected
by the Holder, provided that the Issuer shall have ten days after receipt of
notice from such Holder of its selection of such firm to object thereto, in
which case such Holder shall select another such firm and the Issuer shall have
no such right of objection. The firm selected by the Holder of this Warrant as
provided in the preceding sentence shall be instructed to deliver a written
opinion as to such matters to the Issuer and such Holder within thirty days
after submission to it of such dispute. Such opinion shall be final and binding
on the parties hereto. The fees and expenses of such accounting firm shall be
paid by the Issuer.
6. Fractional Shares. No fractional shares of Warrant Stock will
be issued in connection with and exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value then
in effect.
7. Definitions. For the purposes of this Warrant, the following
terms have the following meanings:
"Additional Shares of Common Stock" mean all shares of Common
Stock issued by the Issuer after the Original Issue Date, and all
shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except the Warrant Stock, Common Stock reserved for
issuance upon exercise of existing stock options issued under any
employee incentive stock option, any qualified stock option plan and/or
stock purchase plan adopted by the Issuer, Common Stock issued in
conjunction with strategic corporate partnering transactions and Common
Stock issued upon exercise of options and warrants authorized by the
Board prior to the Original Issue Date.
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without limitation,
shares of preferred or preference stock, (ii) all partnership interests
(whether general or limited) in any Person which is a partnership,
(iii) all membership
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interests or limited liability company interests in any limited
liability company, and (iv) all equity or ownership interests in any
Person of any other type.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Issuer as in effect on the Original Issue Date,
and as hereafter from time to time amended, modified, supplemented or
restated in accordance with the terms hereof and thereof and pursuant
to applicable law.
"Common Stock" means the Common Stock, $.04 par value, of the
Issuer and any other Capital Stock into which such stock may hereafter
be changed.
"Common Stock Equivalent" means any Convertible Security or
warrant, option or other right to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Security.
"Convertible Securities" means evidences of Indebtedness,
shares of Capital Stock or other Securities which are or may be at any
time convertible into or exchangeable for Additional Shares of Common
Stock. The term "Convertible Security" means one of the Convertible
Securities.
"Expiration Date" means January 23, 2006.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority,
commission, board, agency or instrumentality, whether federal, state or
local, and whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Issuer) that is
regularly engaged in the business of appraising the Capital Stock or
assets of corporations or other entities as going concerns, and which
is not affiliated with either the Issuer or the Holder of any Warrant.
"Issuer" means eResource Capital Group, Inc., a Delaware
corporation, f/k/a xxxxxxxxxxx.xxx, and its successors.
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable
under the Warrants at the time outstanding.
"Original Issue Date" means January 23, 2001.
"Other Common" means any other Capital Stock of the Issuer of
any class which shall be authorized at any time after the date of this
Warrant (other than Common Stock)
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and which shall have the right to participate in the distribution of
earnings and assets of the Issuer without limitation as to amount.
"OTC Bulletin Board" means the over-the-counter electronic
bulletin board.
"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated
organization, joint venture, Governmental Authority or other entity of
whatever nature.
"Per Share Market Value" means on any particular date (a) the
last sales price per share of the Common Stock on such date on the
American Stock Exchange or other registered national stock exchange on
which the Common Stock is then listed or if there is no such price on
such date, then the closing bid price on such exchange or quotation
system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the American Stock Exchange or any
registered national stock exchange, the closing bid price for a share
of Common Stock in the over-the-counter market, as reported by the OTC
Bulletin Board or in the National Quotation Bureau Incorporated or
similar organization or agency succeeding to its functions of reporting
prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the OTC Bulletin Board or the National
Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of
the "Pink Sheet" quotes for the relevant date, as determined in good
faith by the holder, or (d) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined
by an Independent Appraiser selected in good faith by the Majority
Holders; provided, however, that the Issuer, after receipt of the
determination by such Independent Appraiser, shall have the right to
select an additional Independent Appraiser, in which case, the fair
market value shall be equal to the average of the determinations by
each such Independent Appraiser; and provided, further that all
determinations of the Per Share Market Value shall be appropriately
adjusted for any stock dividends, stock splits or other similar
transactions during such period. The Issuer shall pay all costs and
expenses of each Independent Appraiser. The determination of fair
market value by an Independent Appraiser shall be based upon the fair
market value of the Issuer determined on a going concern basis as
between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and
binding on all parties. In determining the fair market value of any
shares of Common Stock, no consideration shall be given to any
restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws, or to the existence or absence of, or
any limitations on, voting rights.
"Registration Rights Agreement" has the meaning specified in
Section 3(e) hereof.
"Securities" means any debt or equity securities of the
Issuer, whether now or hereafter authorized, any instrument convertible
into or exchangeable for Securities or a Security, and any option,
warrant or other right to purchase or acquire any Security. "Security"
means one of the Securities.
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35
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose
outstanding Voting Stock shall at the time be owned directly or
indirectly by the Issuer or by one or more of its Subsidiaries, or by
the Issuer and one or more of its Subsidiaries.
"Trading Day" means (a) a day on which the Common Stock is
traded on the American Stock Exchange as reported by Bloomberg L.P., or
(b) if the Common Stock is not listed on the American Stock Exchange, a
day on which the Common Stock is traded on any other registered
national stock exchange, or (c) if the Common Stock is not quoted on
the OTC Bulletin Board, a day on which the Common Stock is quoted in
the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in
(a), (b) and (c) hereof, then Trading Day shall mean 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 New York are authorized or
required by law or other government action to close.
"Term" has the meaning specified in Section 1 hereof.
"Voting Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
designated) having ordinary voting power for the election of a majority
of the members of the Board of Directors (or other governing body) of
such corporation, other than Capital Stock having such power only by
reason of the happening of a contingency.
"Warrants" means this Warrant, and any other warrants of like
tenor issued in substitution or exchange for this Warrant pursuant to
the provisions of Section 2(c), 2(d) or 2(e) hereof.
"Warrant Price" means $0.75, as such price may be adjusted
from time to time as shall result from adjustments specified in Section
4 hereof and hereunder. If the Company Registration Statement (as
defined in the Registration Rights Agreement) covering the resale of
the Warrant Stock is not filed pursuant to the terms set forth therein
within one hundred eighty (180) days following the date hereof, the
Warrant Price hereof shall be reduced by ten percent (10%) and by an
additional ten percent (10%) for each thirty day period thereafter
until the Registration Statement has been filed in accordance
with the terms set forth in the Registration Rights Agreement;
provided, however, that the Warrant Price shall not be reduced to less
than $0.375.
"Warrant Share Number" means at any time the aggregate number
of shares of Warrant Stock which may at such time be purchased upon
exercise of this Warrant, after giving effect to all prior adjustments
and increases to such number made or required to be made under the
terms hereof.
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"Warrant Stock" means Common Stock issuable upon exercise of
any Warrant or Warrants or otherwise issuable pursuant to any Warrant
or Warrants.
8. Other Notices. In case at any time:
(A) the Issuer shall make any distributions to the holders of
Common Stock;
(B) the Issuer shall authorize the granting to all holders of its
Common Stock of rights to subscribe for or purchase any shares of Capital Stock
of any class or of any Common Stock Equivalents or Convertible Securities or
other rights;
(C) there shall be any reclassification of the Capital Stock of
the Issuer;
(D) there shall be any capital reorganization by the Issuer;
(E) there shall be any (i) consolidation or merger involving the
Issuer or (ii) sale, transfer or other disposition of all or substantially all
of the Issuer's property, assets or business (except a merger or other
reorganization in which the Issuer shall be the surviving corporation and its
shares of Capital Stock shall continue to be outstanding and unchanged and
except a consolidation, merger, sale, transfer or other disposition involving a
wholly-owned Subsidiary); or
(F) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Issuer or any partial liquidation of the Issuer
or distribution to holders of Common Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
days prior to the action in question and not less than twenty days prior to the
record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any meetings of stockholders is required to be given to
stockholders who do not waive such notice (or, if such requires no notice, then
two Trading Days written notice thereof describing the matters upon which action
is to be taken). The Holder shall have the right
to send two representatives selected by it to each meeting, who shall be
permitted to attend, but not vote at, such meeting and any adjournments thereof.
This Warrant entitles the Holder to receive copies of all financial and other
information distributed or required to be distributed to the holders of the
Common Stock.
9. Amendment and Waiver. Any term, covenant, agreement or
condition in this Warrant may be amended, or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written
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37
instruments executed by the Issuer and the Majority Holders; provided, however,
that no such amendment or waiver shall reduce the Warrant Share Number, increase
the Warrant Price, shorten the period during which this Warrant may be exercised
or modify any provision of this Section 10 without the consent of the Holder of
this Warrant.
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
11. 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 delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., eastern
standard time, on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice later than 5:00 p.m., central
standard time, on any date and earlier than 11:59 p.m., eastern standard time,
on such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service or (iv) actual receipt by the
party to whom such notice is required to be given. With respect to notices
delivered by the Issuer pursuant to clauses (i) or (ii) above, a copy of such
notice shall also be concurrently sent via U.S. mail to the mailing address of
the Holder. The addresses for such communications shall be with respect to the
Holder of this Warrant or of Warrant Stock issued pursuant hereto, addressed to
such Holder at its last known address or facsimile number appearing on the books
of the Issuer maintained for such purposes, or with respect to the Issuer,
addressed to:
eResource Capital Group, Inc.
0000 Xxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx
Attention: Xxxxxxx Xxxxxx Xxxxxx
Telephone: (000) 000-0000 x00
Facsimile: (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 Issuer shall be sent to Xxxxxx & Xxxxxx
LLP, 0000 Xxxxxxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx, Xxxxxxx 00000,
Attn: Xxxxxx X. Xxxxxx, Facsimile no.: (000) 000-0000. Copies of notices to the
Holder shall be sent to Boult, Cummings, Xxxxxxx & Xxxxx, PLC, 000 Xxxxx Xxxxxx,
Xxxxx 0000, Xxxxxxxxx, Xxxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxx, Esq.,
Facsimile No.: (000) 000-0000.
12. Warrant Agent. The Issuer may, by written notice to each
Holder of this Warrant, appoint an agent having an office in New York, New York
for the purpose of issuing shares of Warrant Stock on the exercise of this
Warrant pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant
pursuant to subsection (d) of Section 2 hereof or replacing this Warrant
pursuant to subsection (d) of Section 3 hereof, or any of the foregoing, and
thereafter any such
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38
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
13. Remedies. The Issuer stipulates that the remedies at law of
the Holder of this Warrant in the event of any default or threatened default by
the Issuer in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
14. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof and (to the extent provided herein) the
Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any
such Holder or Holder of Warrant Stock.
15. Modification and Severability. If, in any action before any
court or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
16. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day
and year first above written.
ERESOURCE CAPITAL GROUP, INC.
By:
-----------------------------
Name:
Title:
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EXERCISE FORM
[NAME OF ISSUER]
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of
___________________ covered by the within Warrant.
Dated: Signature
---------------------- ----------------------------
Address
----------------------------
----------------------------
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: Signature
---------------------- ----------------------------
Address
----------------------------
----------------------------
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: Signature
---------------------- ----------------------------
Address
----------------------------
----------------------------
FOR USE BY THE ISSUER ONLY:
This Warrant No. W-_____ cancelled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.
41
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of January 23, 2001, among ERESOURCE CAPITAL GROUP, INC., a
Delaware corporation f/k/a xxxxxxxxxx.xxx (the "Company"), DC INVESTMENT
PARTNERS EXCHANGE FUND, L.P., a Tennessee limited partnership ("Exchange Fund"),
and FOUR CORNERS CAPITAL, LLC, a Delaware limited liability company ("Four
Corners").
WHEREAS, the Company, Exchange Fund and Four Corners have entered into
that certain General Release and Settlement Agreement dated January 23, 2001
(the "Settlement Agreement") and pursuant to the terms of such agreement the
Company, Exchange Fund and Four Corners are terminating that certain
Registration Rights Agreement dated January 18, 2000 between the Company and
Four Corners;
WHEREAS, in connection with the Settlement Agreement the Company has
issued to Exchange Fund, pursuant to a certain Warrant Agreement of even date, a
warrant to purchase 123,802 shares of Common Stock (the "Exchange Fund
Warrant");
WHEREAS, in connection with the Settlement Agreement the Company has
issued to Four Corners, pursuant to a certain Warrant Agreement of even date, a
warrant to purchase 2,599,866 shares of Common Stock (the "Four Corners Warrant"
and, together with the Exchange Fund Warrant, the "Warrants");
WHEREAS, in connection with the Settlement Agreement the Company has
issued to Four Corners, pursuant to an Option Agreement of even date, an option
to purchase 1,000,000 shares of Common Stock (the "Four Corners Option");
WHEREAS, in connection with the Settlement Agreement the Company has
issued to Four Corners 200,000 shares of Common Stock;
WHEREAS, the Settlement Agreement is conditioned upon the Company,
Exchange Fund and Four Corners entering into this Agreement; and
WHEREAS, the Company desires to grant to Four Corners and Exchange Fund
registration rights as set forth herein with respect to the Registrable
Securities, as defined herein.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions contained
herein, the sufficiency of which is hereby acknowledged, the Company, Four
Corners and Exchange Fund hereby agree as follows:
1. Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
42
"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.
"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
New York 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 $.04 per
share.
"Effectiveness Period" shall have the meaning set forth in Section 2.
"Event" shall have the meaning set forth in Section 8(e).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means the 180th day following the date hereof.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 6(c).
"Indemnifying Party" shall have the meaning set forth in Section 6(c)
"Losses" shall have the meaning set forth in Section 6(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.
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"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 the 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 the 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 (i) the shares of Common Stock issuable
to Four Corners upon exercise of the Four Corners Warrant; (ii) the shares of
Common Stock issuable to Exchange Fund upon exercise of the Exchange Fund
Warrant; (iii) the shares of Common Stock issuable to Four Corners upon exercise
of the Four Corners Option; (iv) the 200,000 shares of Common Stock issued to
Four Corners pursuant to the Settlement Agreement; (v) all shares of Common
Stock held by Four Corners and Exchange Fund as of the date hereof; and (vi) any
other dividend or other distribution with respect to, conversion or exchange of,
or in replacement of, the foregoing (i), (ii), (iii), (iv) or (v).
"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 such registration
statement.
"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 any special counsel to the Holders, for which
the Holders will be reimbursed by the Company pursuant to Section 4.
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2. Registration Rights.
The Company shall prepare, and file by the Filing Date, with
the Commission a "shelf" registration statement, complete in form and substance,
covering the resale of all Registrable Securities for an offering to be made on
a continuous basis pursuant to Rule 415. Such shelf registration statement shall
be on Form S-3 (except if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3, in which case such registration
shall be on another appropriate form in accordance herewith).
The Company shall use its best efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof and to keep such Registration
Statement continuously effective under the Securities Act until such date as is
the earlier of (x) the date when all Registrable Securities covered by such
Registration Statement have been sold or (y) the date on which all the
Registrable Securities may be sold without any restriction pursuant to Rule
144(k) or any successor provision 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"). If the Company is notified orally
or in writing by the Commission that the Commission has no comments with respect
to the Registration Statement (the "Commission Notice"), the Company shall use
its best efforts to cause the Registration Statement to be declared effective no
later than five (5) business days after receipt of the Commission Notice. If an
additional Registration Statement is required to be filed because the actual
number of shares of Common Stock into which the Warrants/Four Corners Options
are exercisable exceeds the number of shares of Common Stock initially
registered in respect of the shares issuable pursuant to the Warrants/Four
Corners Options as based upon the computation on the Filing Date, the Company
shall have sixty (60) Business Days to file such additional Registration
Statement, and the Company shall use its best efforts to cause such additional
Registration Statement to be declared effective by the Commission as soon as
possible, but in no event later than thirty (30) days after filing.
If, during the Effectiveness Period, any of the Registrable
Securities have not been sold pursuant to the shelf registration statement
contemplated in the two preceding paragraphs and such Registrable Securities may
not be sold without any restriction pursuant to the Securities Act or the rules
and regulations promulgated thereunder, then a Holder of such Registrable
Securities may exercise demand registration rights with respect thereto by
delivering to the Company a written notice (a "Demand Registration Notice")
informing the Company of such exercise and specifying the number of Registrable
Securities to be offered by such Holder. Upon receipt of a Demand Registration
Notice, the Company will cause to be filed with the Commission as soon as
reasonably practicable after receiving the Demand Registration Notice a new
registration statement and related prospectus (a "New Registration Statement")
that complies as to form in all material respects with applicable Commission
rules providing for the sale by the exercising Holder of the Registrable
Securities, and agrees to use its best efforts to cause such new Registration
Statement to be declared effective by the Commission as soon as practicable (but
in any event no later than 90 days following delivery of the respective Demand
Registration Notice); provided that, the Company shall not be required to
prepare, file and effect more than one New Registration Statement per year as
contemplated by this third paragraph of Section 2.
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45
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 the Company is not
then eligible to register for resale the Registrable Securities on Form S-3 such
registration shall be on another appropriate form in accordance herewith) in
accordance with the method or methods of distribution set forth in such
Registration Statement and use its best efforts to cause the Registration
Statement to become effective and remain effective as provided herein; provided,
however, that not less than five (5) Business Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated therein by
reference), the Company shall (i) furnish to the Holders and any Special
Counsel, copies of all such documents proposed to be filed and shall use its
reasonable best efforts to reflect in each such document, when so filed with the
Commission, such comments as any Holder may reasonably propose 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 any
Special Counsel shall reasonably object in writing within three (3) Business
Days of 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 applicable Registrable Securities for the Effectiveness Period and
prepare and file with the Commission such amendments in order to register for
resale under the Securities Act all of the 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 and Special Counsel 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.
(c) Notify the Holders of Registrable Securities to be
sold and any Special Counsel as promptly as possible (and, in the case of (i)(A)
below, not less than five (5) Business Days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no
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46
later than one (1) Business Day following the day (i)(A) when a Prospectus or
any Prospectus supplement or post-effective amendment to the Registration
Statement is proposed to be filed; (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 thereto,
when the same has become effective; (ii) 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; (iii) 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; (iv) 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 (v) of the occurrence of any event 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.
(d) Use its best efforts to avoid the issuance of, or, if
issued, 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 the Holders of the 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.
(f) Furnish to each Holder and any Special Counsel,
without charge, at least one conformed copy of each Registration Statement and
each amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by reference, 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 any 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.
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(h) Prior to any public offering of Registrable
Securities, use its reasonable best efforts to register or qualify or cooperate
with the selling Holders and any 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
such 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
be sold pursuant to a Registration Statement, which certificates shall be free
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.
(j) Upon the occurrence of any event contemplated by
Section 3(c)(v), as promptly as possible, (i) 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, and (ii) advise the Holders as to when they may resume
distribution of the Registrable Securities.
(k) The Company shall promptly secure the listing of all
of the Registrable Securities upon each national securities exchange, automated
quotation system or bulletin board system, if any, upon which shares of the
Company's common stock are then listed (subject to official notice of issuance)
and shall maintain, so long as any other shares of common stock shall be so
listed, such listing of all Registrable Securities.
(l) Comply in all material respects with all applicable
rules and regulations of the Commission and make generally available to its
security holders earning 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
12-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 of the Registration Statement, 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 to
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48
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 after receiving such request.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
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)(ii), 3(c)(iii), 3(c)(v) or 3(n),
such Holder will forthwith 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.
(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, or (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, then the Company may postpone or suspend
filing or effectiveness of a registration statement for a period not to exceed
forty-five (45) consecutive days, provided that the Company may not postpone or
suspend its obligation under this Section 3(n) for more than ninety (90) days in
the aggregate during any 12 month period (each, a "Blackout Period"); and
provided further, that if the Company decides to postpone or suspend its
obligation pursuant to this sentence, it shall give written notice of such
postponement or suspension to the Holders to that effect. If the Company shall
give notice of the occurrence of any event of the kind described in Section
3(c)(ii), 3(c)(iii), 3(c)(iv) and 3(c)(v) or of the postponement or suspension
of the Registration Statement pursuant to this Section 3(n), then the
Effectiveness Period shall be extended by the number of days during such period
from and including the date of the giving of such notice to and including the
date when each Holder shall have received (i) the copies of the supplement or
amendment to the Registration Statement contemplated by Section 3(n) (if an
amended or supplemental prospectus is required) or (ii) the Advice (if no
supplement or amendment to the Registration Statement is required).
4. Registration Expenses
All fees and expenses incident to the performance of or
compliance with this
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49
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 the
American Stock Exchange and each other securities exchange or market on which
Registrable Securities are required hereunder to be listed, (B) with respect to
filings required to be made with the Commission, (C) with respect to filings
required to be made under the NASD and the NASD Regulation, Inc. and (D) in
compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel for the Holders in
connection with Blue Sky qualifications of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the Holders of a majority of Registrable
Securities may designate)), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities and of
printing prospectuses if the printing of prospectuses is requested by the
holders of a majority of the Registrable Securities included in the Registration
Statement), (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 the
expenses of any comfort letters or costs associated with the delivery by
independent public accountants of a comfort letter or comfort letters). 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, and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder.
5. Underwritten Registrations.
If any of the Registrable Securities covered by a Registration
Statement are to be sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will administer the offering
will be selected by the Company, subject to the consent of a majority in
aggregate principal amount of such Registrable Securities included in such
offering (which consent shall not be unreasonably withheld or delayed);
notwithstanding anything else herein to the contrary, such holders shall be
responsible for underwriting commissions and discounts in connection with sale
of their Registrable Securities.
No Holder may participate in any underwritten registration
hereunder unless such person (i) agrees to sell its Registrable Securities on
the basis reasonably provided in any underwriting arrangements agreed to by
Holders of a majority in aggregate principal amount of the Registrable
Securities included in such offering and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents agreed to by Holders of a majority in aggregate principal amount
of the Registrable Securities included in such offering and reasonably required
under the terms of such underwriting arrangements.
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50
6. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents and employees of each of them, each
Person who controls (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) any such Holder and the officers, directors,
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, reasonable 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 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 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 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. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of an Indemnified
Party 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, the
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 or 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 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 such
untrue statement or omission is contained in any information so furnished 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 such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities 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. Notwithstanding anything to the contrary
contained herein, a Holder shall be liable under this Section 6(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.
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51
(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 may assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with 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 to the extent 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 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 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.
(d) Contribution. If a claim for indemnification under
Section 6(a) or 6(b) is unavailable or insufficient to an Indemnified Party,
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 Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and 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 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
reasonably 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
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52
available to such party in accordance with its terms. Notwithstanding anything
to the contrary contained herein, the Holders shall be liable or required to
contribute under this Section 6(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. No party shall be liable for
contribution with respect to any action or claim settled without its written
consent; provided however, that such written consent was not unreasonably
withheld.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6(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
7. Rule 144.
As long as any Holder owns Common Stock, Warrants, or other
Registrable Securities, the Company shall 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 and to promptly furnish such Holders with
true and complete copies of all such filings, and the Company shall take such
further action and file such other documents and information to permit the
Holders to sell such securities pursuant to Rule 144 without registration. As
long as any Holder owns Common Stock, Warrants, Four Corners Options or other
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 shall 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 the Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 promulgated under
the Securities Act, including providing any legal opinions required in
connection therewith. Upon the written 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.
8. 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
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53
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.
(b) No Inconsistent Agreements. The Company has not, as
of the date hereof entered into any agreement that is currently in effect, nor
shall the Company, 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.
(c) [Intentionally Omitted]
(d) Piggy-Back Registrations. If at any time when there
is not an effective Registration Statement covering all the Registrable
Securities, and 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, the Company shall send to each Holder of Registrable Securities
written notice of such determination and, if within thirty (30) 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 Holders), the Company will use its best efforts to 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 necessary 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 8(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 8(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 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)
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54
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) [Intentionally Omitted]
(f) 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 specific performance of the provisions of this
Agreement in addition to any other remedy to which any of them may be entitled
at law or in equity.
(ii) Each of the Company and the Holders (i)
hereby irrevocably submits to the jurisdiction of the United States District
Court sitting in the Southern District of New York and if jurisdiction of such
federal courts is not available, the state courts of 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 8(f) shall affect or limit any right to serve process in any other
manner permitted by law.
(g) 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 each of the Holders. 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 any other Holders may be given by Holders 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.
(h) 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 to have been given on (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice prior to 5:00 p.m., eastern standard time, on a
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55
Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., eastern standard time, on any
date and earlier than 11:59 p.m., eastern standard time, on such date, (iii) the
second Business Day following the date of mailing, if sent by nationally
recognized overnight courier service or (iv) actual receipt by the party to whom
such notice is required to be given, whichever shall first occur. The addresses
for such communications shall be with respect to each Holder, or with respect to
the Company, as follows:
If to Four Corners Capital, LLC:
Four Corners Capital, LLC
Xxx Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to DC Investment Partners Exchange Fund, L.P.
DC Investment Partners Exchange Fund, L.P.
Xxx Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Company:
eResource Capital Group, Inc.
0000 Xxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx Xxxxxx
Telephone: (000) 000-0000 x00
Facsimile: (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 &
Xxxxxx LLP, 0000 Xxxxxxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000,
Attention: Xxxxxx X. Xxxxxx, Facsimile No.: (000) 000-0000. Copies of notices to
any Holder shall be sent to Boult, Cummings, Xxxxxxx & Xxxxx, PLC, 000 Xxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxxx, Attention: Xxxxxxx X. Xxxxxx, Esq.,
Facsimile No.: (000) 000-0000.
(i) Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of
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56
the parties and their successors and permitted assigns and shall inure to the
benefit of each Holder and its successors and assigns. The Company may not
assign this Agreement or any of its rights or obligations hereunder without the
prior written consent of each Holder. Each Holder may assign its rights
hereunder in the manner and to the Persons as permitted hereunder.
(j) 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 shares of Common Stock, Warrants, Four Corners Option or
other 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 as promptly as possible after such assignment, (ii) the
Company is, as promptly as possible 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, the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions of this Agreement. In addition, each Holder
shall have the right to assign its rights hereunder to any other Person with the
prior written consent of the Company, which consent shall not be unreasonably
withheld. Additionally, each Holder shall have the right to assign its rights
hereunder to any Affiliate of such Holder, or to any partner or member of such
Holder if such Holder is partnership, limited partnership or limited liability
company, without the consent of the Company. The rights to assignment shall
apply to the Holders (and to subsequent) successors and assigns.
(k) Counterparts. 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 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 facsimile signature were the original
thereof.
(l) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
(m) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(n) Severability. If any term, provision, covenant or
restriction of this Agreement is held 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
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57
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(o) Headings. 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.
(p) Within two (2) Business Days after any Registration
Statement which includes the Registrable Securities is ordered effective by the
Commission, the Company shall deliver, or 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 such Registration Statement has been
declared effective by the Commission in the form attached hereto as Exhibit A.
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58
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
eRESOURCE CAPITAL GROUP, INC.
By:
-------------------------------------------------------
Name:
Title:
FOUR CORNERS CAPITAL, LLC
By:
-------------------------------------------------------
Name:
Title:
DC INVESTMENT PARTNERS EXCHANGE FUND, L.P.
By: DC Investment Partners, LLC,its General Partner
By:
------------------------------------------------
Name:
Title:
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59
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
ATTN:_____________________
RE: ERESOURCE CAPITAL GROUP, INC.
-----------------------------
Ladies and Gentlemen:
We are counsel to eResource Capital Group, Inc., a Delaware corporation
(the "COMPANY"), and have represented the Company in connection with a
Registration Rights Agreement with the Holders (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement) under the Securities Act of 1933, as amended (the "1933 ACT"). In
connection with the Company's obligations under the Registration Rights
Agreement dated January 23, 2001, the Company filed a Registration Statement on
Form _____ (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 stockholder 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,
[COMPANY'S COUNSEL]
cc: [LIST NAMES OF HOLDERS]
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