SECURITIES PURCHASE AGREEMENT
Exhibit
10.1
SECURITIES
PURCHASE AGREEMENT
(the
"Agreement"),
dated
as of December 21, 2006, by and among Rancher Energy Corp., a Nevada
corporation, with headquarters located at 999-18th
Street,
Suite 1740, Xxxxxx, Xxxxxxxx 00000 (the "Company")
and
the investors listed on the Schedule of Buyers attached hereto (individually,
a
"Buyer"
and
collectively, the "Buyers").
WHEREAS:
A. The
Company and each Buyer is executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Section 4(2) of
the
Securities Act of 1933, as amended (the "1933
Act"),
and
Rule 506 of Regulation D ("Regulation D")
as
promulgated by the United States Securities and Exchange Commission (the
"SEC")
under
the 1933 Act.
B. The
Company has authorized a new series of convertible notes of the Company, in
the
form attached hereto as Exhibit
A
(the
"Notes"),
which
Notes shall be convertible into the Company's common stock, par value $0.00001
per share (the "Common
Stock")
(as
converted, the "Conversion
Shares"),
in
accordance with the terms of the Notes.
C. Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) that number of shares of Common Stock
set forth opposite such Buyer's name in column (3) on the Schedule of Buyers
attached hereto (which aggregate number of shares for all Buyers shall not
exceed 50,895,420) (the "Common
Shares"),
(ii) that aggregate principal amount of the Notes set forth opposite such
Buyer's name in column (4) on the Schedule of Buyers attached hereto (which
aggregate amount for all Buyers shall be $0) and (iii) warrants, in
substantially the form attached hereto as Exhibit
B
(the
"Warrants"),
to
acquire up to that number of additional shares of Common Stock set forth
opposite such Buyer's name in column (5) of the Schedule of Buyers (as
exercised, collectively, the " Warrant
Shares").
D. Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, substantially in
the
form attached hereto as Exhibit
C
(the
"Registration
Rights Agreement"),
pursuant to which the Company will agree to provide certain registration rights
with respect to the Registrable Securities (as defined in the Registration
Rights Agreement) under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
E. The
Common Shares, the Notes, the Conversion Shares, the Warrants and the Warrant
Shares collectively are referred to herein as the "Securities".
NOW,
THEREFORE,
the
Company and each Buyer hereby agree as follows:
1. PURCHASE
AND SALE OF COMMON SHARES, NOTES AND WARRANTS.
(a) Purchase
of Common Shares, Notes and Warrants.
(i) Common
Shares, Notes and Warrants. Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 6 and
7
below, the Company shall issue and sell to each Buyer, and each Buyer severally,
but not jointly, agrees to purchase from the Company on the Closing Date (as
defined below), (x) the number of Common Shares set forth opposite such
Buyer's name in column (3) on the Schedule of Buyers, (y) a principal
amount of Notes as is set forth opposite such Buyer's name in column (4) on
the
Schedule of Buyers and (z) Warrants to acquire up to that number of Warrant
Shares as is set forth opposite such Buyer's name in column (5) on the Schedule
of Buyers, (the "Closing").
(ii) Closing.
The
date and time of the Closing (the "Closing
Date")
shall
be 10:00 a.m., New York City time, on the date hereof (or such later date as
is
mutually agreed to by the Company and each Buyer) after notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections
6 and 7 below at the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 unless the Company and the Buyers (as defined below)
agree otherwise.
(iii) Purchase
Price.
(1)
The
aggregate purchase price for the Common Shares, the Notes and the Warrants
to be
purchased by each such Buyer at the Closing (the "Purchase
Price")
shall
be the amount set forth opposite each Buyer's name in column (6) of the Schedule
of Buyers. Each Buyer shall pay $1.50 for each Common Share and related Warrants
and $1,000 for each $1,000 of principal amount of Notes and related Warrants
to
be purchased by such Buyer at the Closing.
(2) The
Buyers and the Company agree that the Common Shares, the Notes and the Warrants
constitute an "investment unit" for purposes of Section 1273(c)(2) of the
Internal Revenue Code of 1986, as amended (the "Code").
Not
later than two days before the Closing Date, the Buyers shall notify the Company
of their determination of the allocation of the issue price of such investment
unit among the Common Shares, the Notes and the Warrants in accordance with
Section 1273(c)(2) of the Code and Treasury Regulation Section 1.1273-2(h),
and
neither the Buyers nor the Company shall take any position inconsistent with
such allocation in any tax return or in any judicial or administrative
proceeding in respect of taxes.
(b) Form
of Payment.
On the
Closing Date, (i) each Buyer, shall pay its Purchase Price in accordance with
wire transfer instructions provided by the Company and (ii) the Company
shall deliver to each Buyer the Common Shares and the Notes (allocated in the
principal amounts as such Buyer shall request) which such Buyer is then
purchasing hereunder along with the Warrants (allocated in the amounts as such
Buyer shall request) which such Buyer is purchasing, in each case duly executed
on behalf of the Company and registered in the name of such Buyer or its
designee.
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(c) Subsequent
Sales of Common Shares, Notes and Warrants.
At any
time on or before the 30th
day
following the Closing, or such later time as the Company and the holders of
at
least 60% of the Registrable Securities purchased at the Closing may mutually
agree, the Company may sell additional securities up to a maximum raised hereby
(including the securities sold at the Closing) of $76,343,130 to such persons
(the “Additional Buyers”) as may be approved by the Board of Directors of the
Company. All such sales made at any additional closings (each an “Additional
Closing”), (i) shall be made on the terms and conditions set forth in this
Agreement, (ii) the representations and warranties of the Company set forth
in
Section 3 hereof (and the Schedules thereto) shall speak as of the Closing
and
the Company shall have no obligation to update any such disclosure, and (iii)
the representations and warranties of the Additional Buyers in Section 2 hereof
shall speak as of such Additional Closing. This Agreement, including without
limitation, the Schedule of Buyers, may be amended by the Company without the
consent of the Buyers to include any Additional Buyers and the Additional
Buyer(s) shall be entitled to rely upon the legal opinion delivered to the
Buyers at the Closing. Any Additional Buyers shall be deemed to be “Buyers” for
all purposes under this Agreement.
2. BUYER'S
REPRESENTATIONS AND WARRANTIES.
Each
Buyer, severally and not jointly, represents and warrants with respect to only
itself that:
(a) No
Sale or Distribution.
Such
Buyer is acquiring the Common Shares, the Notes and the Warrants, and upon
conversion of the Notes and exercise of the Warrants (other than pursuant to
a
Cashless Exercise (as defined in the Warrants)) will acquire the Conversion
Shares issuable upon conversion of the Notes and the Warrant Shares issuable
upon exercise of the Warrants, as principal for its own account and not with
a
view towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act;
provided, however, that by making the representations herein, such Buyer does
not agree to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the 1933
Act
and pursuant to the applicable terms of the Transaction Documents (as defined
in
Section 3(b)). Such Buyer is acquiring the Securities hereunder in the ordinary
course of its business. Such Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute any of
the
Securities.
(b) Accredited
Investor Status.
Such
Buyer is (i) an "accredited investor" as that term is defined in Rule 501(a)
of
Regulation D, or (ii) a resident of the Province of Ontario that is an
"Accredited Investor" for the purpose of National Instrument 45-106 of the
Canadian Securities Administration and, if such Buyer is relying on clause
(ii)
above, has delivered an executed representation letter concurrently with the
execution and delivery of this Agreement evidencing the manner in which such
Buyer satisfies such definition of "Accredited Investor" and containing certain
other representations, warranties and acknowledgements of the
Buyer.
(c) Reliance
on Exemptions.
Such
Buyer understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in
part
upon the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the
Securities.
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(d) Information.
Such
Buyer and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities that have been requested by such Buyer.
Such Buyer and its advisors, if any, have been afforded the opportunity to
ask
questions of the Company. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to rely on
the
Company's representations and warranties contained herein. Such Buyer
understands that its investment in the Securities involves a high degree of
risk
and is able to afford a complete loss of such investment. Such Buyer has sought
such accounting, legal and tax advice as it has considered necessary to make
an
informed investment decision with respect to its acquisition of the
Securities.
(e) No
Governmental Review.
Such
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
(f) Transfer
or Resale.
Such
Buyer understands that except as provided in the Registration Rights Agreement:
(i) the Securities have not been and are not being registered under the 1933
Act
or any state securities laws, and may not be offered for sale, sold, assigned
or
transferred unless (A) subsequently registered thereunder, (B) such Buyer shall
have delivered to the Company an opinion of counsel, in a form reasonably
acceptable to the Company, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, or (C) such Buyer provides the Company with
reasonable assurance that such Securities can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as amended
(or
a successor rule thereto) (collectively, "Rule
144"),
notwithstanding the forgoing, the requirement to deliver a legal opinion as
set
out in clause (B) above shall not apply to transfers to an affiliate of the
Buyer; (ii) any sale of the Securities made in reliance on Rule 144 may be
made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the Person (as defined in Section 3(s)) through whom the sale is made)
may
be deemed to be an underwriter (as that term is defined in the 0000 Xxx) may
require compliance with some other exemption under the 1933 Act or the rules
and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
Person is under any obligation to register the Securities under the 1933 Act
or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. The Securities may be pledged in connection with a bona
fide margin account or other loan or financing arrangement secured by the
Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Buyer effecting a pledge
of Securities shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or
any
other Transaction Document (as defined in Section 3(b)), including, without
limitation, this Section 2(f).
-4-
(g) Legends.
Such
Buyer understands that the certificates or other instruments representing the
Common Shares, the Notes and the Warrants and, until such time as the resale
of
the Conversion Shares and the Warrant Shares have been registered under the
1933
Act as contemplated by the Registration Rights Agreement, the stock certificates
representing the Conversion Shares and the Warrant Shares, except as set forth
below, shall bear any legend as required by the "blue sky" laws of any state
and
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
[NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]
HAVE
BEEN][THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which
it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection
with
a sale, assignment or other transfer, such holder provides the Company with
an
opinion of a law firm reasonably acceptable to the Company (with Xxxxxxx Xxxx
& Xxxxx LLP being deemed acceptable), in a form reasonably acceptable to the
Company, to the effect that such sale, assignment or transfer of the Securities
may be made without registration under the applicable requirements of the 1933
Act, or (iii) such holder provides the Company with reasonable assurance that
the Securities can be sold, assigned or transferred pursuant to Rule 144 or
Rule
144A.
(h) Validity;
Enforcement.
This
Agreement and the Registration Rights Agreement to which such Buyer is a party
have been duly and validly authorized, executed and delivered on behalf of
such
Buyer and shall constitute the legal, valid and binding obligations of such
Buyer enforceable against such Buyer in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity
or
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement
of
applicable creditors' rights and remedies.
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(i) No
Conflicts.
The
execution, delivery and performance by such Buyer of this Agreement and the
Registration Rights Agreement and the consummation by such Buyer of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the organizational documents of such Buyer or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Buyer is a party, or (iii) result in a violation of
any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to such Buyer, except in the case of clauses (ii)
and (iii) above, for such conflicts, defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.
(j) Residency.
Such
Buyer is a resident of that jurisdiction specified below its address on the
Schedule of Buyers.
(k) Buyer's
Broker Fees.
Each
Buyer shall be responsible for the payment of any placement agent's fees,
financial advisory fees, or brokers' commissions for placement agents, financial
advisors and/or brokers engaged by such Buyer relating to or arising out of
the
transactions contemplated hereby.
(l) Certain
Trading Activities.
Other
than the transactions contemplated herein, since the time that such Buyer was
first contacted by the Company, the Agent or any other Person regarding this
investment in the Company neither the Buyer nor any Affiliate of such Buyer
which (x) had knowledge of the transactions contemplated hereby, (y) has or
shares discretion relating to such Buyer's investments or trading or information
concerning such Buyer's investments and (z) is subject to such Buyer's review
or
input concerning such Affiliate's investments or trading (collectively,
"Trading
Affiliates")
has
directly or indirectly, nor has any Person acting on behalf of or pursuant
to
any understanding with such Buyer or Trading Affiliate, effected or agreed
to
effect any transactions in the securities of the Company. Such Buyer hereby
covenants and agrees not to, and shall cause its Trading Affiliates not to,
engage, directly or indirectly, in any transactions in the securities of the
Company or involving the Company's securities during the period from the date
hereof until (i) the later of (A) sixty (60) days after the Closing Date and
(B)
such time as the transactions contemplated by this Agreement are first publicly
announced as described in Section 4(i) hereof or (ii) such time as this
Agreement is terminated in full pursuant to Section 8 hereof. Other than to
other Persons party to this Agreement and those expressly acknowledged by the
Company, such Buyer has maintained the confidentiality of all disclosures made
to it in connection with this transaction (including the existence and terms
of
this transaction). Such Buyer acknowledges the SEC's position set forth in
Item
65, Section 5 under Section A, of the Manual of Publicly Available Telephone
Interpretations, dated July 1997, compiled by the Office of Chief Counsel,
Division of Corporation Finance, and such Buyer will adhere to such
position.
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3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to each of the Buyers that, as of the date
hereof and as of the Closing Date:
(a) Organization
and Qualification.
The
Company and its "Subsidiaries"
(which
for purposes of this Agreement means any joint venture or any entity in which
the Company, directly or indirectly, owns any of the capital stock or holds
an
equity or similar interest) are entities duly organized and validly existing
and
in good standing under the laws of the jurisdiction in which they are formed,
and have the requisite power and authorization to own their properties and
to
carry on their business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign entity to do business and, is in
good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not reasonably be expected to have a Material Adverse Effect. As used
in
this Agreement, "Material
Adverse Effect"
means
any material adverse effect on the business, properties, assets, operations,
results of operations, condition (financial or otherwise) or prospects of the
Company and its Subsidiaries, individually or taken as a whole, or on the
transactions contemplated hereby or in the other Transaction Documents or by
the
agreements and instruments to be entered into in connection herewith or
therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below). The Company
has
no Subsidiaries except as set forth on Schedule
3(a).
(b) Authorization;
Enforcement; Validity.
The
Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement, the Notes, the Registration Rights
Agreement, the Transfer Agent Instructions (as defined in Section 5(b)), the
Warrants and each of the other agreements entered into by the parties hereto
in
connection with the transactions contemplated by this Agreement (collectively,
the "Transaction
Documents")
and to
issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Common Shares, the Notes
and
the Warrants, the reservation for issuance and the issuance of the Conversion
Shares issuable
upon conversion of the Notes and the reservation for issuance and issuance
of
Warrant Shares issuable upon exercise of the Warrants have been duly authorized
by the Company's Board of Directors and, subject to obtaining the Stockholder
Approval (as defined below) and except as set forth in Section 3(e), no further
filing, consent, or authorization is required by the Company, its Board of
Directors or its stockholders. This Agreement and the other Transaction
Documents of even date herewith have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity
or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(c) Issuance
of Securities.
The
issuance of the Common Shares, the Notes and the Warrants are duly authorized
and are free from all taxes, liens and charges with respect to the issue
thereof. As of the Closing, 40,900,000 shares of Common Stock shall have been
duly authorized and reserved for issuance pursuant to the transactions
contemplated hereby. From and after the Stockholder Approval (as defined below),
the Company shall have reserved from its duly authorized capital stock not
less
than the sum of (i) 100% of the Common Shares issued hereunder, and (ii) 130%
of
the maximum number of shares of Common Stock issuable (x) upon conversion of
the
Notes (without taking into account any limitations on the conversion of the
Notes set forth in the Notes) and (y) upon exercise of the Warrants (without
taking into account any limitations on the exercise of the Warrants set forth
in
the Warrants). Upon conversion or exercise in accordance with the Notes or
the
Warrants, as the case may be, the Conversion Shares and the Warrant Shares,
respectively, will be validly issued, fully paid and nonassessable and free
from
all preemptive or similar rights, taxes, liens and charges with respect to
the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. Assuming the accuracy of each of the representations
and
warranties set forth in Section 2 of this Agreement, the offer and issuance
by
the Company of the Securities is exempt from registration under the 1933
Act.
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(d) No
Conflicts.
Except
as set forth on Schedule
3(d),
the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby
and
thereby (including, without limitation, the issuance of the Common Shares,
the
Notes and Warrants and reservation for issuance and issuance of the Conversion
Shares and the Warrant Shares) will not (i) result in a violation of any
articles of incorporation, articles of formation, any articles of designations
or other constituent documents of the Company or any of its Subsidiaries, any
capital stock of the Company or any of its Subsidiaries or bylaws of the Company
or any of its Subsidiaries or (ii) conflict with, or constitute a default (or
an
event which with notice or lapse of time or both would become a default) in
any
respect under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to
which
the Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
foreign, federal and state securities laws and regulations and the rules and
regulations of the OTC Bulletin Board (the "Principal
Market")
applicable to the Company or any of its Subsidiaries or by which any property
or
asset of the Company or any of its Subsidiaries is bound or
affected.
(e) Consents.
Neither
the Company nor any of its Subsidiaries is required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents, in each case in accordance
with the terms hereof or thereof, except for the following consents,
authorizations, orders, filings and registrations (none of which is required
to
be filed or obtained before the Closing): (i) the filing with the SEC of one
or
more Registration Statements in accordance with the requirements of the
Registration Rights Agreement and (ii) the filing of a listing application
for
the Common Shares, the Conversion Shares and the Warrant Shares with the
Principal Market, which shall be done pursuant to the rules of the Principal
Market. The Company and its Subsidiaries are unaware of any facts or
circumstances that might prevent the Company from obtaining or effecting any
of
the registration, application or filings pursuant to the preceding sentence.
The
Company is not in violation of the listing requirements of the Principal Market
and has no knowledge of any facts that would reasonably lead to delisting or
suspension of the Common Stock in the foreseeable future.
-8-
(f) Acknowledgment
Regarding Buyer's Purchase of Securities.
The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm's length purchaser with respect to the Transaction Documents and
the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company, (ii) an "affiliate" of the Company or any of its
Subsidiaries (as defined in Rule 144 of the 0000 Xxx) or (iii) to the knowledge
of the Company, a "beneficial owner" of more than 10% of the shares of Common
Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange Act
of
1934, as amended (the "1934
Act")).
The
Company further acknowledges that no Buyer is acting as a financial advisor
or
fiduciary of the Company or any of its Subsidiaries (or in any similar capacity)
with respect to the Transaction Documents and the transactions contemplated
hereby and thereby, and any advice given by a Buyer or any of its
representatives or agents in connection with the Transaction Documents and
the
transactions contemplated hereby and thereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to each
Buyer
that the Company's decision to enter into the Transaction Documents has been
based solely on the independent evaluation by the Company and its
representatives.
(g) No
General Solicitation; Placement Agent's Fees.
Neither
the Company, nor any of its Subsidiaries or affiliates, nor any Person acting
on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer
or
sale of the Securities. The Company shall be responsible for the payment of
any
placement agent's fees, financial advisory fees, or brokers' commissions (other
than for persons engaged by any Buyer or its investment advisor) relating to
or
arising out of the transactions contemplated hereby. The Company acknowledges
that it has engaged Knight Capital Markets, LLC as placement agent (the
"Agent")
in
connection with the sale of the Securities.
(h) No
Integrated Offering.
None of
the Company, its Subsidiaries, any of their affiliates, and any Person acting
on
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would require registration of any of the Securities under the 1933 Act or cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations
of
any exchange or automated quotation system on which any of the securities of
the
Company are listed or designated. None of the Company, its Subsidiaries, their
affiliates and any Person acting on their behalf will take any action or steps
referred to in the preceding sentence that would require registration of any
of
the Securities under the 1933 Act or cause the offering of the Securities to
be
integrated with other offerings.
(i) Dilutive
Effect.
The
Company understands and acknowledges that the number of Conversion Shares
issuable upon conversion of the Notes and the Warrant Shares issuable upon
exercise of the Warrants will increase in certain circumstances. The Company
further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Notes in accordance with this Agreement and the
Notes and
its
obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants is, in each case, absolute
and
unconditional, following the Stockholder Approval (as defined in
Section 4(p)) and the filing of the amended and restated Articles of
Incorporation (which the Company shall file with the Secretary of State of
the
State of Nevada immediately following Stockholder Approval), regardless of
the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
(j) Application
of Takeover Protections; Rights Agreement.
Except
as set forth on Schedule
3(j),
the
Company and its board of directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Articles of Incorporation
(as
defined in Section 3(r)) or the laws of the state of its incorporation which
is
or could become applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and any Buyer's ownership of the Securities. The
Company and its board of directors have taken all necessary action, if any,
in
order to render inapplicable any stockholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Common Stock or a change
in
control of the Company.
-9-
(k) SEC
Documents; Financial Statements.
Except
as set forth on Schedule
3(k),
during
the two (2) years prior to the date hereof, the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it
with
the SEC pursuant to the reporting requirements of the 1934 Act (all of the
foregoing filed prior to the date hereof and all exhibits included therein
and
financial statements, notes and schedules thereto and documents incorporated
by
reference therein being hereinafter referred to as the "SEC
Documents").
The
Company has delivered to the Buyers or their respective representatives true,
correct and complete copies of the SEC Documents not available on the XXXXX
system. As of their respective filing dates, the SEC Documents complied in
all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. As of their respective filing dates, the financial statements of
the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have
been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in
all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company
to
the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this Agreement or in
any
disclosure schedules, contains any untrue statement of a material fact or omits
to state any material fact necessary in order to make the statements therein,
in
the light of the circumstance under which they are or were made not misleading.
(l) Absence
of Certain Changes.
Except
as set forth on Schedule
3(l)(i),
since
March 31, 2006, there has been no material adverse change and no material
adverse development in the business, properties, operations, condition
(financial or otherwise), results of operations or prospects of the Company
or
its Subsidiaries. Except as disclosed in Schedule
3(l)(ii),
since
March 31, 2006, the Company has not (i) declared or paid any dividends, (ii)
sold any assets, individually or in the aggregate, in excess of $100,000 outside
of the ordinary course of business or (iii) had capital expenditures,
individually or in the aggregate, in excess of $500,000. Neither the Company
nor
any of its Subsidiaries has taken any steps to seek protection pursuant to
any
bankruptcy law nor does the Company have any knowledge or reason to believe
that
its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact that would reasonably lead a creditor to do so.
The
Company and its Subsidiaries, individually and on a consolidated basis, are
not
as of the date hereof, and after giving effect to the transactions contemplated
hereby to occur at the Closing, will not be Insolvent (as defined below). For
purposes of this Section 3(l), "Insolvent"
means,
with respect to any Person (as defined in Section 3(s)), (i) the present fair
saleable value of such Person's assets is less than the amount required to
pay
such Person's total Indebtedness (as defined in Section 3(s)), (ii) such Person
is unable to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured, (iii)
such
Person intends to incur or believes that it will incur debts that would be
beyond its ability to pay as such debts mature or (iv) such Person has
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be
conducted.
-10-
(m) No
Undisclosed Events, Liabilities, Developments or Circumstances.
No
event, liability, development or circumstance has occurred or exists, or is
contemplated to occur with respect to the Company, its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form S-1 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
(n) Conduct
of Business; Regulatory Permits.
Neither
the Company nor any of its Subsidiaries is in violation of any term of or in
default under its Articles of Incorporation or its Bylaws or their
organizational charter or bylaws, respectively. Neither the Company nor any
of
its Subsidiaries is in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to the Company or its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except for possible
violations which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Without limiting the generality
of
the foregoing, the Company is not in violation of any of the rules, regulations
or requirements of the Principal Market and has no knowledge of any facts or
circumstances that would reasonably lead to delisting or suspension of the
Common Stock by the Principal Market in the foreseeable future. Since December
16, 2005, (i) the Common Stock has been designated for quotation on the
Principal Market, (ii) trading in the Common Stock has not been suspended by
the
SEC or the Principal Market and (iii) the Company has received no communication,
written or oral, from the SEC or the Principal Market regarding the suspension
or delisting of the Common Stock from the Principal Market. Except as set forth
on Schedule
3(n),
the
Company and its Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate regulatory authorities necessary to conduct
their respective businesses, except where the failure to possess such
certificates, authorizations or permits would not have, individually or in
the
aggregate, a Material Adverse Effect, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation
or
modification of any such certificate, authorization or permit.
-11-
(o) Foreign
Corrupt Practices.
Neither
the Company nor any of its Subsidiaries nor any director, officer, agent,
employee or other Person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the Company
or any of its Subsidiaries (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign
or
domestic government official or employee.
(p) Xxxxxxxx-Xxxxx
Act.
The
Company is in compliance with any and all applicable requirements of the
Xxxxxxxx-Xxxxx Act of 2002 that are effective as of the date hereof, and any
and
all applicable rules and regulations promulgated by the SEC thereunder that
are
effective as of the date hereof.
(q) Transactions
With Affiliates.
Except
as set forth in the SEC Documents filed at least ten (10) days prior to the
date
hereof and other than the grant of stock options disclosed on Schedule
3(q),
none of
the officers, directors or employees of the Company or any of its Subsidiaries
is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for ordinary course services as employees, officers
or
directors), including any contract, agreement or other arrangement providing
for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
officer, director or employee or, to the knowledge of the Company or any of
its
Subsidiaries, any corporation, partnership, trust or other entity in which
any
such officer, director, or employee has a substantial interest or is an officer,
director, trustee or partner.
(r) Equity
Capitalization.
As of
the date hereof, the authorized capital stock of the Company consists of
100,000,000 shares of Common Stock, of which as of the date hereof, 49,104,580
are issued and outstanding, 10,000,000 shares are reserved for issuance pursuant
to the Company's stock option plan (the "Plan")
(of
which options to purchase 2,325,000 shares of Common Stock have been issued
under the Plan) and 22,140,405 shares are reserved for issuance pursuant to
securities (other than the aforementioned options, the Notes and the Warrants)
exercisable or exchangeable for, or convertible into, shares of Common Stock.
All of such outstanding shares have been, or upon issuance will be, validly
issued and are fully paid and nonassessable. Except as disclosed in Schedule
3(r):
(i)
none of the Company's capital stock is subject to preemptive rights or any
other
similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, or exercisable or exchangeable for,
any
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of
its
Subsidiaries is or may become bound to issue additional capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, or exercisable or exchangeable for,
any
capital stock of the Company or any of its Subsidiaries; (iii) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the aggregate,
filed in connection with the Company or any of its Subsidiaries; (v) there
are
no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933
Act
(except pursuant to the Registration Rights Agreement); (vi) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of
its
Subsidiaries is or may become bound to redeem a security of the Company or
any
of its Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance
of
the Securities; (viii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's
or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect. The Company
has
furnished to the Buyers true, correct and complete copies of the Company's
Articles of Incorporation, as amended and as in effect on the date hereof (the
"Articles
of Incorporation"),
and
the Company's Bylaws, as amended and as in effect on the date hereof (the
"Bylaws"),
and
the terms of all securities convertible into, or exercisable or exchangeable
for, shares of Common Stock and the material rights of the holders thereof
in
respect thereto.
-12-
(s) Indebtedness
and Other Contracts.
Except
as disclosed in Schedule
3(s),
neither
the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness
(as
defined below), (ii) is a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument could reasonably be expected to result in
a
Material Adverse Effect, (iii) is in violation of any term of or in default
under any contract, agreement or instrument relating to any Indebtedness, except
where such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of which,
in the judgment of the Company's officers, has or is expected to have a Material
Adverse Effect. Schedule
3(s)
provides
a detailed description of the material terms of any such outstanding
Indebtedness. For purposes of this Agreement: (x) "Indebtedness"
of any
Person means, without duplication (A) all indebtedness for borrowed money,
(B)
all obligations issued, undertaken or assumed as the deferred purchase price
of
property or services, including (without limitation) "capital leases" in
accordance with generally accepted accounting principles (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and
other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect
to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in
the
event of default are limited to repossession or sale of such property), (F)
all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment
of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) "Contingent
Obligation"
means,
as to any Person, any direct or indirect liability, contingent or otherwise,
of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) "Person"
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
-13-
(t) Absence
of Litigation.
Except
as set forth in Schedule
3(t),
there
is no action, suit, proceeding, inquiry or investigation before or by the
Principal Market, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries, the Common Stock
or
any of the Company's Subsidiaries or any of the Company's or its Subsidiaries'
officers or directors.
(u) Insurance.
Except
as set forth on Schedule
3(u),
the
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company
nor
any such Subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may
be necessary to continue its business at a cost that would not have a Material
Adverse Effect.
(v) Employee
Relations.
(i)
Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. The Company and its Subsidiaries
believe that their relations with their employees are good. No executive officer
of the Company or any of its Subsidiaries (as defined in Rule 501(f) of the
0000
Xxx) has notified the Company or any such Subsidiary that such officer intends
to leave the Company or any such Subsidiary or otherwise terminate such
officer's employment with the Company or any such Subsidiary. No executive
officer of the Company or any of its Subsidiaries, is, or is now expected to
be,
in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement,
or
any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any
of
its Subsidiaries to any liability with respect to any of the foregoing
matters.
-14-
(ii) The
Company and its Subsidiaries, to their knowledge, are in compliance with all
federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
(w) Title.
Except
as set forth on Schedule
3(w),
the
Company and its Subsidiaries have good and marketable title in fee simple to
all
real property and good and marketable title to all personal property owned
by
them which is material to the business of the Company and its Subsidiaries,
in
each case free and clear of all liens, encumbrances and defects except such
as
are described in Schedule
3(w)
or such
as do not materially affect the value of such property and do not interfere
with
the use made and proposed to be made of such property by the Company and any
of
its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting
and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by
the
Company and its Subsidiaries.
(x) Intellectual
Property Rights.
The
Company and its Subsidiaries own or possess adequate rights or licenses to
use
all trademarks, service marks and all applications and registrations therefor,
trade names, patents, patent rights, copyrights, original works of authorship,
inventions, trade secrets and other intellectual property rights ("Intellectual
Property Rights")
necessary to conduct their respective businesses as now conducted. None of
the
Company's registered, or applied for, Intellectual Property Rights, to the
extent the Company has such Intellectual Property Rights, have expired or
terminated or have been abandoned, or are expected to expire or terminate or
expected to be abandoned, within three years from the date of this Agreement.
The Company does not have any knowledge of any infringement by the Company
or
its Subsidiaries of Intellectual Property Rights of others. There is no claim,
action or proceeding being made or brought, or to the knowledge of the Company,
being threatened, against the Company or its Subsidiaries regarding its
Intellectual Property Rights. Neither the Company nor any of its Subsidiaries
is
aware of any facts or circumstances which might give rise to any of the
foregoing infringements or claims, actions or proceedings. The Company and
its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property
Rights.
(y) Environmental
Laws.
Except
as set forth on Schedule
3(y),
the
Company and its Subsidiaries, to their knowledge, (i) are in compliance with
any
and all Environmental Laws (as hereinafter defined), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses, (iii) are in
compliance with all terms and conditions of any such permit, license or
approval, (iv) do not own or operate any real property contaminated with any
substance that is in violation of Environmental Laws, and (v) is liable for
any
off-site disposal or contamination pursuant to any Environmental Laws where,
in
each of the foregoing clauses (i), (ii), (iii), (iv) and (v) the failure to
so
comply could be reasonably expected to have, individually or in the aggregate,
a
Material Adverse Effect. There is no civil, criminal or administrative action,
suit, investigation, inquiry or proceeding pending or, to the knowledge of
the
Company, threatened by or before any court or governmental authority against
the
Company or any of its Subsidiaries relating to or arising from the Company's
nor
any Subsidiary's non-compliance with any Environmental Laws, nor has the Company
received written notice of any alleged violations of Environmental Laws. The
term "Environmental
Laws"
means
all federal, state, local or foreign laws relating to pollution or protection
of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, "Hazardous
Materials") into
the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.
-15-
(z) Subsidiary
Rights.
The
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.
(aa) Tax
Status.
Except
as set forth on Schedule
3(aa),
the
Company and each of its Subsidiaries (i) has made or filed all foreign, federal
and state income and all other tax returns, reports and declarations required
by
any jurisdiction to which it is subject, (ii) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to
the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority
of
any jurisdiction, and the officers of the Company know of no basis for any
such
claim.
(bb) Internal
Accounting and Disclosure Controls.
The
Company and each of its Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to
maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management's
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities
at
reasonable intervals and appropriate action is taken with respect to any
difference. The Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-14 under the 0000 Xxx) that are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms of the
SEC, including, without limitation, controls and procedures designed in to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is accumulated and communicated
to
the Company's management, including its principal executive officer or officers
and its principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure. During the twelve months prior to
the
date hereof neither the Company nor any of its Subsidiaries have received any
notice or correspondence from any accountant relating to any potential material
weakness in any part of the system of internal accounting controls of the
Company or any of its Subsidiaries.
-16-
(cc) Ranking
of Notes.
Except
as set forth on Schedule
3(cc),
no
Indebtedness of the Company is senior to or ranks pari
passu
with the
Notes in right of payment, whether with respect of payment of redemptions,
interest, damages or upon liquidation or dissolution or otherwise.
(dd) Off
Balance Sheet Arrangements.
There
is no transaction, arrangement, or other relationship between the Company and
an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its 1934 Act filings and is not so disclosed or
that
otherwise would be reasonably likely to have a Material Adverse
Effect.
(ee) Investment
Company Status.
The
Company is not, and upon consummation of the sale of the Securities will not
be,
an "investment company," a company controlled by an "investment company" or
an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company" as such terms are defined in the Investment Company Act
of
1940, as amended.
(ff) Transfer
Taxes.
On the
Closing Date, all stock transfer or other taxes (other than income or similar
taxes) which are required to be paid in connection with the sale and transfer
of
the Securities to be sold to each Buyer hereunder will be, or will have been,
fully paid or provided for by the Company, and all laws imposing such taxes
will
be or will have been complied with.
(gg) Manipulation
of Price.
The
Company has not, and to its knowledge no one acting on its behalf has, (i)
taken, directly or indirectly, any action designed to cause or to result in
the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) other than the
Agent, sold, bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) other than the Agent, paid or
agreed to pay to any person any compensation for soliciting another to purchase
any other securities of the Company.
(hh) Disclosure.
All
disclosure provided by the Company to the Buyers regarding the Company or any
of
its Subsidiaries, their business and the transactions contemplated hereby in
the
Transaction Documents and the Schedules to this Agreement is true and correct
and does not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein, in
the
light of the circumstances under which they were made, not misleading. Each
press release issued by the Company or any of its Subsidiaries during the twelve
(12) months preceding the date of this Agreement did not at the time of release
contain any untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or
disclosed.
-17-
(ii) Material
Acquisition Agreements.
The
agreements set forth on Schedule
3(jj)
are all
of the material agreements relating to the acquisition of the Big Muddy Field,
Xxxx Creek South Field and South Glenrock Field and related interests therein
(the "Acquisition
Agreements").
Each
Acquisition Agreement is in full force and effect and is a valid and binding
obligation of the Company and any Subsidiary which is a party thereto,
enforceable against such parties in accordance with their terms. The non-binding
letter of intent set forth on Schedule
3(jj)
is the
only material agreement relating to the acquisition of the East Teapot Dome
Field and related interests therein. None of the Company, any Subsidiary which
is a party thereto, nor to the Company's knowledge, any third party, is in
material breach or default under any Acquisition Agreement, and to the Company's
knowledge, no event has occurred which, with notice or lapse of time, would
constitute a material breach or default by the Company, any Subsidiary or any
third party, or permit termination or modification by the other party under
such
Acquisition Agreement.
4. COVENANTS.
(a) Best
Efforts.
Each
party shall use its best efforts timely to satisfy each of the conditions to
be
satisfied by it as provided in Sections 6 and 7 of this Agreement.
(b) Form
D
and Blue Sky.
The
Company agrees to file a Form D with respect to the Securities as required
under
Regulation D and to provide a copy thereof to each Buyer promptly after such
filing. The Company shall, on or before the Closing Date, take such action
as
the Company shall reasonably determine is necessary in order to obtain an
exemption for or to qualify the Securities for sale to the Buyers at the Closing
pursuant to this Agreement under applicable securities or "Blue Sky" laws of
the
states of the United States (or to obtain an exemption from such qualification),
and shall provide evidence of any such action so taken to the Buyers on or
prior
to the Closing Date. The Company shall make all filings and reports relating
to
the offer and sale of the Securities required under applicable securities or
"Blue Sky" laws of the states of the United States following the Closing Date.
(c) Reporting
Status.
Until
the date on which the Investors (as defined in the Registration Rights
Agreement) shall have sold all the Conversion Shares and Warrant
Shares and
none
of the Notes or
Warrants is outstanding, (the "Reporting
Period"),
the
Company shall timely file all reports required to be filed with the SEC pursuant
to the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination.
(d) Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Securities for general
corporate purposes, and not for (A) the repayment of any outstanding
Indebtedness of the Company or any of its Subsidiaries or (B) redemption or
repurchase of any of its or its Subsidiaries' equity securities.
-18-
(e) Financial
Information.
The
Company agrees to send the following to each Investor (as defined in the
Registration Rights Agreement) during the Reporting Period (i) unless the
following are filed with the SEC through XXXXX and are available to the public
through the XXXXX system, within one (1) Business Day after the filing thereof
with the SEC, a copy of its Annual Reports and Quarterly Reports on Form 10-K,
10-KSB, 10-Q or 10-QSB, any interim reports or any consolidated balance sheets,
income statements, stockholders' equity statements and/or cash flow statements
for any period other than annual, any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) or amendments filed pursuant
to
the 1933 Act, (ii) on the same day as the release thereof, facsimile or e-mailed
copies of all press releases issued by the Company or any of its Subsidiaries,
and (iii) copies of any notices and other information made available or given
to
the stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders. As used herein, "Business
Day"
means
any day other than Saturday, Sunday or other day on which commercial banks
in
the City of New York or the city of Denver are authorized or required by law
to
remain closed.
(f) Listing.
The
Company shall promptly secure the listing of all of the Registrable Securities
(as defined in the Registration Rights Agreement) upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock
is
then listed (subject to official notice of issuance) and shall maintain, in
accordance with the Notes and Warrants, such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents. The Company shall maintain the Common Stocks' authorization for
quotation on the Principal Market or an Approved Market (as defined below).
Neither the Company nor any of its Subsidiaries shall take any action which
would be reasonably expected to result in the delisting or suspension of the
Common Stock on the Principal Market or an Approved Market. In addition, the
Company shall use its best efforts to cause its shares of Common Stock,
including all Registrable Securities, to be approved for listing or quotation
(the "Listing")
on any
Approved Market as promptly as practicable, but in no event later than one
(1)
year after the Closing Date (the "Required
Listing Date").
If
the Company meets the applicable listing requirements of an Approved Market
and
the Listing has not occurred on or prior to the Required Listing Date (a
"Listing
Failure"),
then,
as partial relief for the damages to any holder of Registrable Securities by
reason of any such delay (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Company shall pay to each holder
of
Registrable Securities an amount in cash equal to one-quarter of one percent
(0.25%) of the aggregate Purchase Price of such Investor's Registrable
Securities on each of the following dates: the day of the Listing Failure and
on
every thirtieth day (pro rated for periods totaling less than thirty days)
thereafter until such Listing Failure is cured; provided that in no event shall
the aggregate payments for all Listing Failures exceed twenty-four percent
(24%)
of the Purchase Price paid by such holder of Registrable Securities. As used
herein, "Approved
Market"
shall
mean any of the following: The New York Stock Exchange, The NASDAQ Global Select
Market, The NASDAQ Global Market, The NASDAQ Capital Market or the American
Stock Exchange. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(f).
(g) Fees.
Subject
to Section 8 below, at Closing, the Company shall pay to Xxxxxxx Xxxx &
Xxxxx LLP or its designee(s) all reasonable legal fees and disbursements
incurred in connection with the transactions contemplated by the Transaction
Documents, which amount, in whole or in part, may be withheld by LP Rancher
Ltd.
(a Buyer) from its Purchase Price at the Closing. The Company shall be
responsible for the payment of any placement agent's fees, financial advisory
fees, or broker's commissions relating to or arising out of the transactions
contemplated hereby, including, without limitation, any fees payable to the
Agent, Source Capital and/or Falcon Capital. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, reasonable attorney's fees and out-of-pocket expenses) arising
in
connection with any claim relating to any such payment.
-19-
(h) Pledge
of Securities.
The
Company acknowledges and agrees that the Securities may be pledged by an
Investor (as defined in the Registration Rights Agreement) in connection with
a
bona fide margin agreement or other loan or financing arrangement that is
secured by the Securities. The pledge of Securities shall not be deemed to
be a
transfer, sale or assignment of the Securities hereunder, and no Investor
effecting a pledge of Securities shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document, including, without limitation,
Section 2(f) hereof; provided that an Investor and its pledgee shall be required
to comply with the provisions of Section 2(f) hereof in order to effect a sale,
transfer or assignment of Securities to such pledgee. The Company hereby agrees
to execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee
by an Investor.
(i) Disclosure
of Transactions and Other Material Information.
On or
before 11:00 a.m., New York City time, on the first Business Day following
the
date of this Agreement, the Company shall issue a press release and file a
Current Report on Form 8-K describing the terms of the transactions contemplated
by the Transaction Documents in the form required by the 1934 Act and attaching
the material Transaction Documents (including, without limitation, this
Agreement, the form of the Notes, the form of Warrant and the form of the
Registration Rights Agreement) as exhibits to such filing (including all
attachments, the "8-K
Filing").
The
Company shall publicly disclose on Form 8-K the terms of the studies to be
conducted by NITEC LLC as requested by the Company of tertiary oil recovery
potential of the fields related to the Acquisition Agreements using continuous
CO2
injection (the "Engineering
Report 8-K")
and
shall attach the same as exhibit thereto as promptly as practicable upon receipt
of same, but in no event later than June 30, 2007 unless, at such time, the
Company has filed a Registration Statement but such Registration Statement
has
not yet been declared effective by the SEC, in which case, the Company may
delay
the filing of the Engineering Report 8-K until after such Registration Statement
is declared effective, but in no event shall such Engineering Report 8-K be
filed after September 30, 2007. The Company shall not, and shall cause each
of
its Subsidiaries and its and each of their respective officers, directors,
employees and agents, not to, provide any Buyer with any material, nonpublic
information regarding the Company or any of its Subsidiaries from and after
the
filing of the 8-K Filing with the SEC without the express written consent of
such Buyer. From and after the deadlines specified above, if a Buyer has, or
believes it has, received any such material, nonpublic information regarding
the
Company or any of its Subsidiaries, it shall provide the Company with written
notice thereof. The Company shall, within five (5) Trading Days (as defined
in
the Notes) of receipt of such notice, make public disclosure of such material,
nonpublic information. In the event of a breach of the foregoing covenant by
the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents, in addition to any other remedy provided herein
or in the Transaction Documents, a Buyer shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material, nonpublic information without the prior approval by the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Buyer shall have any liability to the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, stockholders or agents for any such disclosure. Subject
to
the foregoing, neither the Company, its Subsidiaries nor any Buyer shall issue
any press releases or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall
be
entitled, without the prior approval of any Buyer, to make any press release
or
other public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as
is
required by applicable law and regulations. Without the prior written consent
of
any applicable Buyer, neither the Company nor any of its Subsidiaries or
affiliates shall disclose the name of such Buyer in any filing, announcement,
release or otherwise.
-20-
(j) Restriction
on Redemption and Cash Dividends.
So long
as any Notes are outstanding, the Company shall not, directly or indirectly,
redeem, or declare or pay any cash dividend or distribution on, the Common
Stock
without the prior express written consent of the holders of Notes representing
not less than a 60% of the aggregate principal amount of the then outstanding
Notes.
(k) Additional
Notes; Variable Securities; Dilutive Issuances.
So long
as any Buyer beneficially owns any Securities, the Company will not issue any
Notes other than to the Buyers as contemplated hereby and the Company shall
not
issue any other securities that would cause a breach or default under the Notes.
For so long as any Notes or Warrants remain outstanding, the Company shall
not,
in any manner, issue or sell any rights, warrants or options to subscribe for
or
purchase Common Stock or directly or indirectly convertible into or exchangeable
or exercisable for Common Stock at a price which varies or may vary with the
market price of the Common Stock, including by way of one or more reset(s)
to
any fixed price unless the conversion, exchange or exercise price of any such
security cannot be less than the then applicable Conversion Price (as defined
in
the Notes) with respect to the Common Stock into which any Note is convertible
or the then applicable Exercise Price (as defined in the Warrants) with respect
to the Common Stock into which any Warrant is exercisable; provided that
anti-dilution provisions similar to those contained in the Notes or Warrants
shall not be deemed for the purposes of this provision to be securities
convertible or exercisable at prices that vary with the market price of the
Common Stock. The Company shall not enter into or affect any Dilutive Issuances
(as defined in the Notes) unless or until Stockholder Approval is obtained.
For
so long as any Notes or Warrants remain outstanding, the Company shall not,
in
any manner, enter into or affect any Dilutive Issuances (as defined in the
Notes) if the effect of such Dilutive Issuance is to cause the Company to be
required to issue upon conversion of any Note or exercise of any Warrant any
shares of Common Stock in excess of that number of shares of Common Stock which
the Company may issue upon conversion of the Notes and exercise of the Warrants
without breaching the Company's obligations under the rules or regulations
of
the Principal Market.
(l) Corporate
Existence.
So long
as any Buyer beneficially owns any Securities, the Company shall not be party
to
any Fundamental Transaction (as defined in the Notes) unless the Company is
in
compliance with the applicable provisions governing Fundamental Transactions
set
forth in the Notes and the Warrants.
-21-
(m) Reservation
of Shares.
The
Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than (I) prior to the Stockholder
Approval Date, 40,900,000 shares of Common Stock, and (II) from and after the
Stockholder Approval Date, 130% of the sum of the number of shares of Common
Stock issuable (i) upon conversion of the Notes issued at the Closing and (ii)
upon exercise of the Warrants issued at the Closing (without taking into account
any limitations on the Conversion of the Notes or exercise of the Warrants
set
forth in the Notes and Warrants, respectively).
(n) Conduct
of Business.
The
business of the Company and its Subsidiaries shall not be conducted in violation
of any law, ordinance or regulation of any governmental entity, except where
such violations would not result, either individually or in the aggregate,
in a
Material Adverse Effect.
(o) Additional
Issuances of Securities.
(i) For
purposes of this Section 4(o), the following definitions shall
apply.
(1) "Convertible
Securities"
means
any stock or securities (other than Options) convertible into or exercisable
or
exchangeable for shares of Common
Stock.
(2) "Options"
means
any rights, warrants or options to subscribe for or purchase shares of
Common
Stock or
Convertible Securities.
(3) "Common
Stock Equivalents"
means,
collectively, Options and Convertible Securities.
(ii) From
the
date hereof until the earlier to occur of (i) the twelve month anniversary
of
the Closing Date and (ii) the date sixty days after the Effective Date of the
Registration Statement which caused the registration of the number Registrable
Securities equal to clause (I)(A) of the definition of Initial Required
Registration Amount in the Registration Rights Agreement (the "Trigger
Date"),
the
Company will not, directly or indirectly, file any registration statement with
the SEC other than the Registration Statement (as defined in the Registration
Rights Agreement). From the date hereof until the Trigger Date, the Company
will
not, directly or indirectly, offer, sell, grant any option to purchase, or
otherwise dispose of (or announce any offer, sale, grant or any option to
purchase or other disposition of) any of its or its Subsidiaries' equity or
equity equivalent securities, including without limitation any debt, preferred
stock or other instrument or security that is, at any time during its life
and
under any circumstances, convertible into or exchangeable or exercisable for
shares of Common Stock or Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a "Subsequent
Placement").
-22-
(iii) From
the
Trigger Date until the second anniversary of the Closing Date, the Company
will
not, directly or indirectly, effect any Subsequent Placement unless the Company
shall have first complied with this Section 4(o)(iii).
(1) The
Company shall deliver to each Buyer an irrevocable written notice
(the "Offer
Notice")
of any
proposed or intended issuance or sale or exchange (the "Offer")
of the
securities being offered (the "Offered
Securities")
in a
Subsequent Placement, which Offer Notice shall (v) identify and describe the
Offered Securities, (w) describe the price and other terms upon which they
are to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (x) identify the persons or
entities (if known) to which or with which the Offered Securities are to be
offered, issued, sold or exchanged, (y) offer to issue and sell to or exchange
with such Buyers at least forty percent (40%) of the Offered Securities,
allocated among such Buyers (a) based on such Buyer's pro rata portion of the
aggregate principal amount of Notes purchased hereunder (the "Basic
Amount"),
and
(b) with respect to each Buyer that elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic Amounts
of other Buyers as such Buyer shall indicate it will purchase or acquire should
the other Buyers subscribe for less than their Basic Amounts (the "Undersubscription
Amount"),
which
process shall be repeated until the Buyers shall have an opportunity to
subscribe for any remaining Undersubscription Amount.
(2) To
accept
an Offer, in whole or in part, such Buyer must deliver a written notice to
the
Company prior to the end of the tenth (10th)
Business Day after such Buyer's receipt of the Offer Notice (the "Offer
Period"),
setting forth the portion of such Buyer's Basic Amount that such Buyer elects
to
purchase and, if such Buyer shall elect to purchase all of its Basic Amount,
the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the "Notice
of Acceptance").
If
the Basic Amounts subscribed for by all Buyers are less than the total of all
of
the Basic Amounts, then each Buyer who has set forth an Undersubscription Amount
in its Notice of Acceptance shall be entitled to purchase, in addition to the
Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
for; provided,
however,
that if
the Undersubscription Amounts subscribed for exceed the difference between
the
total of all the Basic Amounts and the Basic Amounts subscribed for (the
"Available
Undersubscription Amount"),
each
Buyer who has subscribed for any Undersubscription Amount shall be entitled
to
purchase only that portion of the Available Undersubscription Amount as the
Basic Amount of such Buyer bears to the total Basic Amounts of all Buyers that
have subscribed for Undersubscription Amounts, subject to rounding by the
Company to the extent its deems reasonably necessary.
(3) The
Company shall have fifteen (15) Business Days from the expiration of the Offer
Period above to offer, issue, sell or exchange all or any part of such Offered
Securities as to which a Notice of Acceptance has not been given by the Buyers
(the "Refused
Securities"),
but
only to the offerees described in the Offer Notice (if so described therein)
and
only upon terms and conditions (including, without limitation, unit prices
and
interest rates) that are not more favorable to the acquiring person or persons
or less favorable to the Company than those set forth in the Offer Notice and
(ii) to publicly announce (a) the execution of such Subsequent Placement
Agreement (as defined below), and (b) either (x) the consummation of the
transactions contemplated by such Subsequent Placement Agreement or (y) the
termination of such Subsequent Placement Agreement, which shall be filed with
the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement
and any documents contemplated therein filed as exhibits thereto.
-23-
(4) In
the
event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section
4(o)(iii)(3) above), then each Buyer may, at its sole option and in its sole
discretion, reduce the number or amount of the Offered Securities specified
in
its Notice of Acceptance to an amount that shall be not less than the number
or
amount of the Offered Securities that such Buyer elected to purchase pursuant
to
Section 4(o)(iii)(2) above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to Section 4(o)(iii)(3) above prior to such
reduction) and (ii) the denominator of which shall be the original amount of
the
Offered Securities. In the event that any Buyer so elects to reduce the number
or amount of Offered Securities specified in its Notice of Acceptance, the
Company may not issue, sell or exchange more than the reduced number or amount
of the Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(o)(iii)(1)
above.
(5) Upon
the
closing of the issuance, sale or exchange of all or less than all of the Refused
Securities, the Buyers shall acquire from the Company, and the Company shall
issue to the Buyers, the number or amount of Offered Securities specified in
the
Notices of Acceptance, as reduced pursuant to Section 4(o)(iii)(4) above if
the
Buyers have so elected, upon the terms and conditions specified in the Offer.
Notwithstanding anything to the contrary contained in this Agreement, if the
Company does not consummate the closing of the issuance, sale or exchange of
all
or less than all of the Refused Securities within fifteen (15) Business Days
of
the expiration of the Offer Period, the Company shall issue to the Buyers the
number or amount of Offered Securities specified in the Notices of Acceptance,
as reduced pursuant to Section 4(o)(iii)(4) above if the Buyers have so elected,
upon the terms and conditions specified in the Offer. The purchase by the Buyers
of any Offered Securities is subject in all cases to the preparation, execution
and delivery by the Company and the Buyers of a purchase agreement relating
to
such Offered Securities reasonably satisfactory in form and substance to the
Buyers and their respective counsel.
(6) Any
Offered Securities not acquired by the Buyers or other persons in accordance
with Section 4(o)(iii)(3) above may not be issued, sold or exchanged until
they
are again offered to the Buyers under the procedures specified in this
Agreement.
(7) The
Company and the Buyers agree that if any Buyer elects to participate in the
Offer, (x) neither the operative agreement concerning the Subsequent Placement
(the "Subsequent
Placement Agreement"
with
respect to such Offer nor any other transaction documents related thereto
(collectively, the "Subsequent
Placement Documents")
shall
include any term or provisions whereby any Buyer shall be required to agree
to
any restrictions in trading as to any securities of the Company owned by such
Buyer prior to such Subsequent Placement, and (y) any registration rights set
forth in such Subsequent Placement Documents shall be similar in all material
respects to the registration rights contained in the Registration Rights
Agreement.
-24-
(8) Notwithstanding
anything to the contrary in this Section 4(o) and unless otherwise agreed to
by
the Buyers, the Company shall either confirm in writing to the Buyers that
the
transaction with respect to the Subsequent Placement has been abandoned or
shall
publicly disclose its intention to issue the Offered Securities, in either
case
in such a manner such that the Buyers will not be in possession of material
nonpublic information, by the fifteen (15th)
Business Day following expiration of the Offer Period. If by the fifteen
(15th)
following expiration of the Offer Period no public disclosure regarding a
transaction with respect to the Offered Securities has been made, and no notice
regarding the abandonment of such transaction has been received by the Buyers,
such transaction shall be deemed to have been abandoned and the Buyers shall
not
be deemed to be in possession of any material, non-public information with
respect to the Company. Should the Company decide to pursue such transaction
with respect to the Offered Securities, the Company shall provide each Buyer
with another Offer Notice and each Buyer will again have the right of
participation set forth in this Section 4(o)(iii). The Company shall not be
permitted to deliver more than one such Offer Notice to the Buyers in any 60
day
period.
(iv) The
restrictions contained in subsections (ii) and (iii) of this Section 4(o) shall
not apply in connection with the issuance of any Excluded Securities (as defined
in the Notes).
(p) Stockholder
Approval.
(i) The
Company shall provide each stockholder entitled to vote at a special or annual
meeting of stockholders of the Company (the "Stockholder
Meeting"),
which
initially shall be promptly called and held not later than sixty (60) days
after
the Closing Date (or one-hundred twenty (120) days after the Closing Date if
the
proxy statement relating to the calling of such Stockholder Meeting is subject
to SEC review) (the "Stockholder
Meeting Deadline"),
a
proxy statement, substantially in the form which has been previously reviewed
by
the Buyers and Xxxxxxx Xxxx & Xxxxx LLP (“SRZ”)
at the
expense of the Company, soliciting each such stockholder's affirmative vote
at
the Stockholder Meeting for approval of resolutions (the "Resolutions")
providing for the increase in the authorized Common Stock from 100,000,000
shares to no less than 225,000,000 shares (such affirmative approval being
referred to herein as the "Stockholder
Approval"
and the
date such approval is obtained, the "Stockholder
Approval Date"),
and
the Company shall use its best efforts to solicit its stockholders' approval
of
the Resolutions and to cause the Board of Directors of the Company to recommend
to the stockholders that they approve the Resolutions. The Company shall be
obligated to seek to obtain the Stockholder Approval by the Stockholder Meeting
Deadline. If, despite the Company's best efforts the Stockholder Approval is
not
obtained on or prior to the Stockholder Meeting Deadline (the "Stockholder
Approval Failure"),
the
Company shall cause an additional Stockholder Meeting to be held each three
month period thereafter until such Stockholder Approval is obtained or the
second anniversary of the Closing Date. In addition, if, despite the Company's
best efforts there is a Stockholder Approval Failure, then, as partial relief
for the damages to any holder by reason of any such Stockholder Approval Failure
(which remedy shall not be exclusive of any other remedies available at law
or
in equity), the Company shall pay to each holder of Registrable Securities
an
amount equal to two percent (2.0%) of the aggregate Purchase Price of such
Investor's Registrable Securities on the day of such Stockholder Approval
Failure and on every thirtieth day (pro rated for periods totaling less than
thirty days) thereafter until such Stockholder Approval Failure is cured by
obtaining the Stockholder Approval. The payments to which an Investor shall
be
entitled pursuant to this Section 4(p) are referred to herein as the
"Stockholder
Approval Payments."
The
date such Stockholder Approval Payments are due shall be referred to herein
as
the "Stockholder
Approval Payments Payment Date."
-25-
(ii) Stockholder
Approval Payments shall be payable on each Stockholder Approval Payments Payment
Date to each holder of Registrable Securities, in shares of Common Stock (the
"Stockholder
Approval Payments Shares")
so
long as there is no Equity Conditions Failure (as defined below); provided
however, that the Company, at its option following notice to the holder of
Registrable Securities, may pay Stockholder Approval Payments on any Stockholder
Approval Payments Payment Date in cash (the "Cash
Stockholder Approval Payments")
or in
a combination of Cash Stockholder Approval Payments and Stockholder Approval
Payments Shares. The Company shall deliver a written notice (each, a
"Stockholder
Approval Payments Election Notice")
to
each holder of Registrable Securities on or prior to the Stockholder Approval
Payments Payment Date (the date such notice is delivered to all of the holders,
the "Stockholder
Approval Payments Notice Date")
which
notice (i) either (A) confirms that Stockholder Approval Payments to be paid
on
such Stockholder Approval Payments Payment Date shall be paid entirely in
Stockholder Approval Payments Shares or (B) elects to pay Stockholder Approval
Payments as Cash Stockholder Approval Payments or a combination of Cash
Stockholder Approval Payments and Stockholder Approval Payments Shares and
specifies the amount of Stockholder Approval Payments that shall be paid as
Cash
Stockholder Approval Payments and the amount of Stockholder Approval Payments,
if any, that shall be paid in Stockholder Approval Payments Shares and (ii)
certifies that there is no Equity Conditions Failure. If the Equity Conditions
(as defined in the Registration Rights Agreement) are not satisfied as of the
Stockholder Approval Payments Notice Date, then unless the Company has elected
to pay such Stockholder Approval Payments as Cash Stockholder Approval Payments,
the Stockholder Approval Payments Election Notice shall indicate that unless
the
holder waives the Equity Conditions, the Stockholder Approval Payment shall
be
paid as Cash Stockholder Approval Payments. If the Equity Conditions were
satisfied as of the Stockholder Approval Payments Notice Date but the Equity
Conditions are no longer satisfied at any time prior to the Stockholder Approval
Payments Payment Date, the Company shall provide the holder a subsequent notice
to that effect indicating that unless the holder waives the Equity Conditions,
the Stockholder Approval Payments shall be paid as Cash Stockholder Approval
Payments. Stockholder Approval Payments to be paid on an Stockholder Approval
Payments Payment Date in Stockholder Approval Payments Shares shall be paid
in a
number of fully paid and nonassessable shares (rounded to the nearest whole
share) of Common Stock equal to the quotient of (1) the amount of Stockholder
Approval Payments payable on such Stockholder Approval Payments Payment Date
less any Cash Stockholder Approval Payments paid and (2) the Stockholder
Approval Payments Conversion Price in effect on the applicable Stockholder
Approval Payments Payment Date. Notwithstanding the foregoing, if the Company
elects to pay any Stockholder Approval Payments in Stockholder Approval Payments
Shares and the Stockholder Approval has not been obtained by the applicable
Stockholder Approval Payments Payment Date, the Company may not pay such
Stockholder Approval Payments in Stockholder Approval Payments Shares but
instead shall issue to each holder of Registrable Securities a convertible
note
with an original principal amount equal to the amount of such Stockholder
Approval Payments in the form attached hereto as Exhibit
A;
provided however that the conversion price of such convertible note shall be
equal to the applicable Stockholder Approval Payments Conversion Price. As
used
herein, "Stockholder
Approval Payments Conversion Price"
means,
with respect to any Stockholder Approval Payments Payment Date, that
price which shall be the price
computed as 90% of the arithmetic average of the Weighted Average Price (as
defined in the Notes) of the Common Stock on each of the ten (10) consecutive
Trading Days ending on the Trading Day immediately preceding the applicable
Stockholder Approval Payments Payment Date (each, a "Stockholder
Approval Payments Measuring Period").
All
such determinations to be appropriately adjusted for any stock split, stock
dividend, stock combination or other similar transaction during such Stockholder
Approval Payments Measuring Period. As used herein, "Equity
Conditions Failure"
means
that on any day during the period commencing ten (10) Trading Days prior to
the
applicable Stockholder Approval Payments Payment Date through the applicable
Stockholder Approval Payments Payment Date the Equity Conditions have not been
satisfied (or waived in writing by the applicable holder of Registrable
Securities).
-26-
(q) Each
Buyer shall vote in favor of the Resolutions. Notwithstanding the foregoing,
any
Buyer who fails vote in favor of the Resolutions shall not be entitled to any
Stockholder Approval Payments.
5. REGISTER;
TRANSFER AGENT INSTRUCTIONS.
(a) Register.
The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Notes and the Warrants in which the Company
shall record the name and address of the Person in whose name the Notes
and the
Warrants have been issued (including the name and address of each transferee),
the principal amount of Notes held by such Person, the number of Conversion
Shares issuable upon conversion of the Notes and the number of Warrant Shares
issuable upon exercise of the Warrants held by such Person. The Company shall
keep the register open and available at all times during business hours for
inspection of any Buyer or its legal representatives.
(b) Transfer
Agent Instructions.
The
Company shall issue irrevocable instructions to its transfer agent, and any
subsequent transfer agent, to issue certificates or credit shares to the
applicable balance accounts at The Depository Trust Company ("DTC"),
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares and the Warrant Shares issued at the Closing or upon
conversion of the Notes or exercise of the Warrants in such amounts as specified
from time to time by each Buyer to the Company upon conversion of the Notes
or
exercise of the Warrants in the form of Exhibit
D
attached
hereto (the "Transfer
Agent Instructions").
The
Company warrants that no instruction other than the Transfer Agent Instructions
referred to in this Section 5(b), and stop transfer instructions to give effect
to Section 2(g) hereof, will be given by the Company to its transfer agent,
and
that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and
the
other Transaction Documents. If a Buyer effects a sale, assignment or transfer
of the Securities in accordance with Section 2(f), the Company shall permit
the
transfer and shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in
such
name and in such denominations as specified by such Buyer to effect such sale,
transfer or assignment. In the event that such sale, assignment or transfer
involves Conversion Shares or Warrant Shares sold, assigned or transferred
pursuant to an effective registration statement or pursuant to Rule 144, the
transfer agent shall issue such Securities to the Buyer, assignee or transferee,
as the case may be, without any restrictive legend. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm
to
a Buyer. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5(b) will be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions
of this Section 5(b), that a Buyer shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being
required.
-27-
(c) Additional
Relief.
If the
Company shall fail for any reason or for no reason to issue to such holder
unlegended certificates or to credit the holder's balance account with DTC
within five (5) Trading Days of (x) receipt of documents necessary for the
removal of legend set forth above or (y) the date of its obligation to deliver
the shares of Common Stock as contemplated pursuant to clause (ii) below (the
"Deadline
Date")
and if
on or after the Trading Day (as defined in the Warrants) immediately following
such Deadline Date, the holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
holder of shares of Common Stock that the holder anticipated receiving from
the
Company (a "Buy-In"),
then
the Company shall, within three (3) Trading Days after the holder's request
and
in the holder's discretion, either (i) pay cash to the holder in an amount
equal
to the holder's total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased (the "Buy-In
Price"),
at
which point the Company's obligation to deliver such certificate (and to issue
such shares of Common Stock) shall terminate, or (ii) promptly honor its
obligation to deliver to the holder a certificate or certificates representing
such shares of Common Stock and pay cash to the holder in an amount equal to
the
excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Bid Price on the Deadline Date.
"Closing
Bid Price"
means,
for any security as of any date, the last closing price for such security on
Principal Market, as reported by Bloomberg, or, if the Principal Market begins
to operate on an extended hours basis and does not designate the closing bid
price then the last bid price of such security prior to 4:00:00 p.m., New York
Time, as reported by Bloomberg, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last closing price
of such security on the principal securities exchange or trading market where
such security is listed or traded as reported by Bloomberg, or if the foregoing
do not apply, the last closing price of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such security
as reported in the "pink sheets" by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If the Closing Bid Price cannot be calculated for
a
security on a particular date on any of the foregoing bases, the Closing Bid
Price of such security on such date shall be the fair market value as mutually
determined by the Company and the holder. If the Company and the holder are
unable to agree upon the fair market value of such security, then such dispute
shall be resolved pursuant to Section 12 of the Registration Rights Agreement.
All such determinations to be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during the
applicable calculation period.
-28-
6. CONDITIONS
TO THE COMPANY'S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Common Shares, the
Notes and the related Warrants to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:
(i) Such
Buyer shall have executed each of the Transaction Documents to which it is
a
party and delivered the same to the Company.
(ii) Such
Buyer and each other Buyer shall have delivered to the Company the Purchase
Price (less, in the case of LP Rancher, Ltd. (a Buyer), the amounts withheld
pursuant to Section 4(g)) for the Common Shares, the Notes and the related
Warrants being purchased by such Buyer at the Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by the
Company.
(iii) The
representations and warranties of such Buyer shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date, which shall be true and correct as of such specified
date), and such Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by
this
Agreement to be performed, satisfied or complied with by such Buyer at or prior
to the Closing Date.
7. CONDITIONS
TO EACH BUYER'S OBLIGATION TO PURCHASE.
The
obligation of each Buyer hereunder to purchase the Common Shares, the
Notes and
the
related Warrants at the Closing is subject to the satisfaction, at or before
the
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer
at
any time in its sole discretion by providing the Company with prior written
notice thereof:
(i) The
Company shall have duly executed and delivered (physically or by electronic
copy) to such Buyer (i) each of the Transaction Documents and (ii) the stock
certificates representing the Common Shares (allocated in such numbers as such
Buyer shall request), (iii) the Notes (allocated in such principal amounts
as such Buyer shall request), being purchased by such Buyer at the Closing
pursuant to this Agreement, and (iv) the related Warrants (allocated in such
amounts as such Buyer shall request) being purchased by such Buyer at the
Closing pursuant to this Agreement. The Company shall physically deliver the
foregoing to such Buyer no later than the second (2nd)
Business Day following the Closing.
-29-
(ii) Such
Buyer shall have received the opinion of Xxxxxx Xxxxx LLP, the Company's outside
counsel, dated as of the Closing Date, in substantially the form of Exhibit E
attached
hereto.
(iii) The
Company shall have delivered to such Buyer a copy of the Transfer Agent
Instructions, in the form of Exhibit D
attached
hereto, which instructions shall have been delivered to the Company's transfer
agent.
(iv) The
Company shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company and each of its Subsidiaries in
such
entity's jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction, as of a date within 10 days of the
Closing Date.
(v) The
Company shall have delivered to such Buyer a certificate evidencing the
Company's qualification as a foreign corporation and good standing issued by
the
Secretary of State (or comparable office) of each jurisdiction in which the
Company conducts business, as of a date within 10 days of the Closing
Date.
(vi) The
Company shall have delivered to such Buyer a certified copy of the Articles
of
Incorporation as certified by the Secretary of State of the State of Nevada
within ten (10) days of the Closing Date.
(vii) The
Company shall have delivered to such Buyer a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Company's Board
of
Directors in a form reasonably acceptable to such Buyer, (ii) the Articles
of
Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
form attached hereto as Exhibit F.
(viii) The
representations and warranties of the Company shall be true and correct in
all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date, which shall be true and correct as of such specified
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by
the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may be reasonably
requested by such Buyer in the form attached hereto as Exhibit
G.
(ix) The
Company shall have delivered to such Buyer a letter from the Company's transfer
agent certifying the number of shares of Common Stock outstanding as of a date
within five days of the Closing Date.
-30-
(x) The
Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Closing Date, by the
SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened, as of the
Closing Date, either (A) in writing by the SEC or the Principal Market or (B)
by
falling below the minimum listing maintenance requirements of the Principal
Market.
(xi) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities.
(xii) The
Company shall have delivered to each Buyer a lock-up agreement in the form
attached hereto as Exhibit
H
executed
and delivered by each director and officer of the Company.
(xiii) The
Company shall have delivered to each Buyer a voting agreement in the form
attached hereto as Exhibit
I
with the
stockholders listed on Appendix A thereto.
(xiv) The
Company shall have received waivers, in the form attached hereto as Exhibit
J
(a
"Piggy-Back
Waiver"),
from
holders of not less than 50% of the securities set forth on Schedule
7(xiv)
attached
hereto.
(xv) Contemporaneously
with the Closing, the Company shall have raised no less than $50 million
pursuant the transaction contemplated hereby.
(xvi) The
Company shall have delivered to such Buyer such other documents relating to
the
transactions contemplated by this Agreement as such Buyer or its counsel may
reasonably request.
8. TERMINATION.
In
the
event that the Closing shall not have occurred with respect to a Buyer on or
before five (5) Business Days from the date hereof due to the Company's or
such
Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above
(and the nonbreaching party's failure to waive such unsatisfied condition(s)),
the nonbreaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without
liability of any party to any other party; provided,
however,
that if
this Agreement is terminated pursuant to this Section 8, the Company shall
remain obligated to reimburse the non-breaching Buyers for the expenses
described in Section 4(g) above.
9. MISCELLANEOUS.
(a) Governing
Law; Jurisdiction; Jury Trial.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction
of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
-31-
(b) Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if
the
signature were an original, not a facsimile signature.
(c) Headings.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
(d) Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement; Amendments.
This
Agreement and the other Transaction Documents supersede all other prior oral
or
written agreements between the Buyers, the Company, their affiliates and Persons
acting on their behalf with respect to the matters discussed herein, and this
Agreement, the other Transaction Documents and the instruments referenced herein
and therein contain the entire understanding of the parties with respect to
the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of
this Agreement may be amended other than by an instrument in writing signed
by
the Company and the holders of at least 60% of the aggregate number of
Registrable Securities issued and issuable hereunder and under the Notes, and
any amendment to this Agreement made in conformity with the provisions of this
Section 9(e) shall be binding on all Buyers and holders of Securities as
applicable. No provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought. No such
amendment shall be effective to the extent that it applies to less than all
of
the holders of the applicable Securities then outstanding. No consideration
shall be offered or paid to any Person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents unless the
same consideration also is offered to all of the parties to the Transaction
Documents, holders of Notes or holders of the Warrants, as the case may be.
The
Company has not, directly or indirectly, made any agreements with any Buyers
relating to the terms or conditions of the transactions contemplated by the
Transaction Documents except as set forth in the Transaction Documents. Without
limiting the foregoing, the Company confirms that, except as set forth in this
Agreement, no Buyer has made any commitment or promise or has any other
obligation to provide any financing to the Company or otherwise.
-32-
(f) Notices.
Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with an overnight courier service,
in
each case properly addressed to the party to receive the same. The addresses
and
facsimile numbers for such communications shall be:
If
to the
Company:
999-18th
Street,
Suite 1740
Xxxxxx,
Xxxxxxxx 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxx
Works, President and CEO
Copy
to:
Xxxxxx
Xxxxx LLP
0000
Xxxxxxx Xxxxxx
Xxxxxx,
Xxxxxxxx 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxxxx
X.
Xxxxxxx, Esq. and Xxxx X. Xxxxxxxxxxx,
Esq.
If
to the
Transfer Agent:
Pacific
Stock Transfer Company
000
X.
Xxxx Xxxxxxx Xxxx, Xxxxx 000
Xxx
Xxxxx
XX 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention:
If
to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
with copies to such Buyer's representatives as set forth on the Schedule of
Buyers,
-33-
with
a
copy (for informational purposes only) to:
Xxxxxxx
Xxxx & Xxxxx LLP
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxxxxx
X. Xxxxx, Esq.
or
to
such other address and/or facsimile number and/or to the attention of such
other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated
by
the sender's facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided
by an
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.
(g) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns, including any purchasers of the Notes
or the Warrants. The Company shall not assign this Agreement or any rights
or
obligations hereunder without the prior written consent of the holders of at
least 60% of the aggregate number of Registrable Securities issued and issuable
hereunder, including by way of a Fundamental Transaction (unless the Company
is
in compliance with the applicable provisions governing Fundamental Transactions
set forth in the Notes and the Warrants). A Buyer may assign some or all of
its
rights hereunder without the consent of the Company, in which event such
assignee shall be deemed to be a Buyer hereunder with respect to such assigned
rights
(h) No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
(i) Survival.
Unless
this Agreement is terminated under Section 8, the representations and warranties
of the Company and the Buyers contained in Sections 2 and 3, and the agreements
and covenants set forth in Sections 4, 5 and 9 shall survive the Closing. Each
Buyer shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.
(j) Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(k) Indemnification.
In
consideration of each Buyer's execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of
the
Company's other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each other holder
of
the Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons' agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees")
from
and against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "Indemnified
Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to
(a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents
or
any other certificate, instrument or document contemplated hereby or thereby
or
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party (including for these purposes a derivative action brought
on
behalf of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by such Buyer pursuant to Section 4(i), or (iv) the status
of
such Buyer or holder of the Securities as an investor in the Company pursuant
to
the transactions contemplated by the Transaction Documents. The Company shall
not be obligated to indemnify an Indemnitee pursuant to this Section 9(k) for
Indemnified Liabilities to the extent such Indemnified Liabilities are caused
by
acts of gross negligence or willful misconduct on the part of such Indemnitee.
To the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities that is permissible
under applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 9(k)
shall be the same as those set forth in Section 6 of the Registration Rights
Agreement.
-34-
(l) No
Strict Construction.
The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
(m) Remedies.
Each
Buyer and each holder of the Securities shall have all rights and remedies
set
forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract
and
all of the rights which such holders have under any law. Any Person having
any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it fails to perform, observe, or discharge any or all
of
its obligations under the Transaction Documents, any remedy at law may prove
to
be inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to seek temporary and permanent injunctive relief in any
such
case without the necessity of proving actual damages and without posting a
bond
or other security.
-35-
(n) Rescission
and
Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) the Transaction Documents, whenever any Buyer exercises
a
right, election, demand or option under a Transaction Document and the Company
does not timely perform its related obligations within the periods therein
provided, then such Buyer may rescind or withdraw, in its sole discretion from
time to time upon written notice to the Company, any relevant notice, demand
or
election in whole or in part without prejudice to its future actions and
rights.
(o) Payment
Set Aside.
To the
extent that the Company makes a payment or payments to the Buyers hereunder
or
pursuant to any of the other Transaction Documents or the Buyers enforce or
exercise their rights hereunder or thereunder, and such payment or payments
or
the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other Person under any
law
(including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment
had
not been made or such enforcement or setoff had not occurred.
(p) Independent
Nature of Buyers' Obligations and Rights.
The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under
any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall
be
deemed to constitute the Buyers as, and the Company acknowledges that the Buyers
do not so constitute, a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group, and the Company will not assert any such claim
with respect to such obligations or the transactions contemplated by the
Transaction Documents and the Company acknowledges that the Buyers are not
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
and each Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. Each Buyer shall be entitled to independently protect
and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not
be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.
(q) Sales
to Buyers Resident in Canada.
Solicitations of and sales to Buyers resident in or otherwise subject to the
securities laws of Canada will be conducted by a Canadian affiliate of the
Agent
or other registered dealers in Canada selected by the Agent. Such Buyers will
also need to qualify under a prospectus exemption in their jurisdiction of
residence. The Company is not a "reporting issuer" in any province of Canada,
and the Securities will be subject to resale restrictions in
Canada.
[Signature
Page Follows]
-36-
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
|
COMPANY:
|
||
| |
|
|
| By: | /s/ Xxxx Works | |
|
Name: Xxxx Works
Title: President and Chief Executive Officers
|
||
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
|
BUYERS:
|
||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
| Address: | |||
|
|
|||
SCHEDULE
OF BUYERS
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
(7)
|
|||||||||||||
|
Buyer
|
Address
and
Facsimile
Number
|
Number
of
Common
Shares
|
Aggregate
Principal
Amount
of
Notes
|
Number
of
Warrant
Shares
|
Purchase
Price
|
Legal
Representative's Address
and Facsimile Number |
|||||||||||||
|
LP
Rancher Ltd
|
1,169,053
|
0
|
1,169,053
|
$
|
1,753,580.00
|
Xxxxxxx
Xxxx & Xxxxx LLP 000
Xxxxx
Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxxx Xxxxx, Esq.
Facsimile:
(000) 000-0000
Telephone:
(000) 000-0000
|
|||||||||||||
|
Latigo
Fund L.P.
|
164,280
|
0
|
164,280
|
$
|
246,420.00
|
Xxxxxxx
Xxxx & Xxxxx LLP 000
Xxxxx
Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxxx Xxxxx, Esq.
Facsimile:
(000) 000-0000
Telephone:
(000) 000-0000
|
|||||||||||||
|
Old
Westbury Real Return Fund
|
6,666,666
|
0
|
6,666,666
|
$
|
10,000,000.00
|
||||||||||||||
|
Bank
xxx. Xxxxxxxxx
|
250,000
|
0
|
250,000
|
$
|
375,000.00
|
||||||||||||||
|
Millennium
Global Natural Resources Fund Limited
|
1,333,333
|
0
|
1,333,333
|
$
|
1,999,999.50
|
||||||||||||||
|
Millennium
Global Natural Resources Fund Limited
|
4,000,000
|
0
|
4,000,000
|
$
|
6,000,000.00
|
||||||||||||||
|
Xxxxxx
Xxxxxxx Co. for a/c Persistency
|
3,333,333
|
0
|
3,333,333
|
$
|
5,000,000.00
|
||||||||||||||
|
Tenor
Opportunity Master Fund Ltd.
|
333,333
|
0
|
333,333
|
$
|
500,000.00
|
||||||||||||||
|
VR
Global Partners L.P.
|
1,333,333
|
0
|
1,333,333
|
$
|
2,000,000.00
|
||||||||||||||
|
Affaires
Financieres SA
|
666,666
|
0
|
666,666
|
$
|
1,000,000.00
|
||||||||||||||
|
Spartan
Arbitrage Fund LP
|
35,000
|
0
|
35,000
|
$
|
52,500.00
|
||||||||||||||
|
MMCap
International Inc.
|
200,000
|
0
|
200,000
|
$
|
300,000.00
|
||||||||||||||
|
NBCN
INC. ITF Xxxx Day
|
30,000
|
0
|
30,000
|
$
|
45,000.00
|
||||||||||||||
|
NBCN
INC. ITF Purling Holdings
|
35,000
|
0
|
35,000
|
$
|
52,500.00
|
||||||||||||||
|
NBCN
INC. ITF Xxxxx Xxxxxxxx
|
100,000
|
0
|
100,000
|
$
|
150,000.00
|
||||||||||||||
|
NBCN
INC. ITF Xxx Xxxxx
|
15,000
|
0
|
15,000
|
$
|
22,500.00
|
||||||||||||||
|
NBCN
INC. ITF Xxx XxXxxxxxx
|
33,800
|
0
|
33,800
|
$
|
50,700.00
|
||||||||||||||
|
Xxxx
Piranha Master Fund LTD
|
5,333,333
|
0
|
5,333,333
|
$
|
8,000,000.00
|
||||||||||||||
|
Passport
Global Master
|
2,000,000
|
0
|
2,000,000
|
$
|
3,000,000.00
|
||||||||||||||
|
Hound
Partners Offshore Fund
|
1,340,266
|
0
|
1,340,266
|
$
|
2,010,400.00
|
||||||||||||||
|
Hound
Partners, L.P.
|
1,326,400
|
0
|
1,326,400
|
$
|
1,989,600.00
|
||||||||||||||
|
Xxxxxxxx
Wisden
|
66,666
|
0
|
66,666
|
$
|
100,000
|
||||||||||||||
|
Xxxxxx
X Xxxxxx
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
Xxxxx
Xxxxxx
|
13,333
|
0
|
13,333
|
$
|
20,000
|
||||||||||||||
|
Xxxxxxxx
X Xxxx
|
13,333
|
0
|
13,333
|
$
|
20,000
|
||||||||||||||
|
Xxxxxxx
Xxxxxxx 25 Ambra
|
66,666
|
0
|
66,666
|
$
|
100,000
|
||||||||||||||
|
Xxxxx
X XxXxxxxx
|
10,000
|
0
|
10,000
|
$
|
15,000
|
||||||||||||||
|
Xxxxxx
N E
|
13,333
|
0
|
13,333
|
$
|
20,000
|
||||||||||||||
|
Xx
Xxxxxxxxx Xxxx Xxxxxx
|
13,333
|
0
|
13,333
|
$
|
20,000
|
||||||||||||||
|
Xxxxxxx
Xxxxxxxx
|
51,333
|
0
|
51,333
|
$
|
77,000
|
||||||||||||||
|
Xx.
X.X. Xxxxx
|
13,333
|
0
|
13,333
|
$
|
20,000
|
||||||||||||||
|
Louvre
RE Fitzwilliam
|
200,000
|
0
|
200,000
|
$
|
300,000
|
||||||||||||||
|
Legent
Clearing, LLC
|
10,666
|
0
|
10,666
|
$
|
16,000
|
|
Brewin
Dolphin
|
100,000
|
0
|
100,000
|
$
|
150,000
|
||||||||||||||
|
Abbey
National
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Xxxxx
Xxxxxxxxxx
|
13,333
|
0
|
13,333
|
$
|
20,000
|
||||||||||||||
|
Mrs.
S M Wild
|
20,000
|
0
|
20,000
|
$
|
30,000
|
||||||||||||||
|
Legent
Clearing, LLC
|
6,666
|
0
|
6,666
|
$
|
10,000
|
|
Xx
Xxxx X. Xxxxxx
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Xxxxxxxxxx
Xxxxxxxx Tst
|
18,666
|
0
|
18,666
|
$
|
28,000
|
||||||||||||||
|
Legent
Clearing, LLC
|
20,000
|
0
|
20,000
|
$
|
30,000
|
||||||||||||||
|
Xxxxxx
Xxx
|
26,666
|
0
|
26,666
|
$
|
40,000
|
||||||||||||||
|
Xxxxxx
Xxxxxx
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
Direct
Currency Exchange PLC
|
66,666
|
0
|
66,666
|
$
|
100,000
|
||||||||||||||
|
Xxxx
Xxxxxxx Xxxxxxx, Esq.
|
66,666
|
0
|
66,666
|
$
|
100,000
|
||||||||||||||
|
Legent
Clearing, LLC
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
Resolute
Investment Holdings
|
133,333
|
0
|
133,333
|
$
|
200,000
|
||||||||||||||
|
Xxxxx
X XxXxxxxx
|
3,333
|
0
|
3,333
|
$
|
5,000
|
||||||||||||||
|
Picon
Consultants Ltd
|
26,666
|
0
|
26,666
|
$
|
40,000
|
||||||||||||||
|
Xxxxxx
X Xxxxxxxxx
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
RBC
Trust Company
|
66,666
|
0
|
66,666
|
$
|
100,000
|
||||||||||||||
|
Mr
A S Xxxxx
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Legent
Clearing, LLC
|
10,000
|
0
|
10,000
|
$
|
15,000
|
|
Xxxxxxxx
X Xxxx
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Xx
Xxxx Xxxxxxx Xxxx Xxxxxxxxx
|
133,333
|
0
|
133,333
|
$
|
200,000
|
||||||||||||||
|
Xxxxxxxxxx
Xxxxxxxx Tst
|
66,666
|
0
|
66,666
|
$
|
100,000
|
||||||||||||||
|
Richmond
Restaurants Limited
|
26,666
|
0
|
26,666
|
$
|
40,000
|
||||||||||||||
|
Rensburg
Sheppards Investment Manag
|
16,666
|
0
|
16,666
|
$
|
25,000
|
||||||||||||||
|
Xxxxxx
X Xxxxxx
|
16,666
|
0
|
16,666
|
$
|
25,000
|
||||||||||||||
|
Xxxxx
Xxxxxxxx Xxxxxx
|
10,000
|
0
|
10,000
|
$
|
15,000
|
||||||||||||||
|
X
X
Xxxxxx-Carnac
|
8,333
|
0
|
8,333
|
$
|
12,500
|
||||||||||||||
|
XX
Xxxxxx
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Xxx
Xxxxxxx, Esq.
|
866
|
0
|
866
|
$
|
1,300
|
||||||||||||||
|
Tyrolese
Trust Co Ltd X X Xxxx as T Tees of the ABN
|
100,000
|
0
|
100,000
|
$
|
150,000
|
||||||||||||||
|
Xxxxxxx
Xxxx Xxxxxx /or Xxxxxxxxx
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
Xxxxxx
Xxxxxx Xxxxx
|
13,333
|
0
|
13,333
|
$
|
20,000
|
||||||||||||||
|
Xxxxxx
Xxxxxxx
|
100,000
|
0
|
100,000
|
$
|
150,000
|
||||||||||||||
|
Legent
Clearing, LLC
|
65,800
|
0
|
65,800
|
$
|
98,700
|
||||||||||||||
|
Legent
Clearing, LLC
|
40,000
|
0
|
40,000
|
$
|
60,000
|
||||||||||||||
|
T
G
Graveney
|
16,666
|
0
|
16,666
|
$
|
25,000
|
||||||||||||||
|
Legent
Clearing, LLC
|
15,333
|
0
|
15,333
|
$
|
23,000
|
|
Xxxx
Xxxxxxx
|
10,000
|
0
|
10,000
|
$
|
15,000
|
||||||||||||||
|
Xxxxxx
X Xxxxxxx
|
7,000
|
0
|
7,000
|
$
|
10,500
|
||||||||||||||
|
Monsieur
Xxxx Xxxxxx
|
66,666
|
0
|
66,666
|
$
|
100,000
|
||||||||||||||
|
CSTDN
for Xxxxx Xxxxxxx Xxxxxx Inc.
|
60,000
|
0
|
60,000
|
$
|
90,000
|
||||||||||||||
|
PFP
Group Limited
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
Legent
Clearing, LLC
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
Legent
Clearing, LLC
|
30,000
|
0
|
30,000
|
$
|
45,000
|
||||||||||||||
|
Xxxxxxx,
Xxxx Xxxxxxx (Mr.)
|
20,000
|
0
|
20,000
|
$
|
30,000
|
||||||||||||||
|
Xxxx
X. X. Xxxxxx
|
11,333
|
0
|
11,333
|
$
|
17,000
|
||||||||||||||
|
Barclays
Bank PLC
|
10,000
|
0
|
10,000
|
$
|
15,000
|
||||||||||||||
|
Miss
H Pearson
|
10,000
|
0
|
10,000
|
$
|
15,000
|
||||||||||||||
|
Xx
Xxxx X. Xxxxxx
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Xx.
X. Xxxxxx
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Xxxxxx
Xxxxx
|
50,000
|
0
|
50,000
|
$
|
75,000
|
||||||||||||||
|
Xxxxx
Xxxxxxx
|
13,333
|
0
|
13,333
|
$
|
20,000
|
||||||||||||||
|
Xx.
Xxxxx Xxxxx
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Van
Moer Xxxxxxxx ET BLD DU Souverain
|
13,333
|
0
|
13,333
|
$
|
20,000
|
||||||||||||||
|
Legent
Clearing, LLC
|
12,541
|
0
|
12,541
|
$
|
18,812
|
||||||||||||||
|
X.
Xxxxxxxxxxx Johannes Ingi
|
10,000
|
0
|
10,000
|
$
|
15,000
|
||||||||||||||
|
Xxxxx
Adelhag
|
4,666
|
0
|
4,666
|
$
|
7,000
|
||||||||||||||
|
M.
Et MME Whalley
|
4,666
|
0
|
4,666
|
$
|
7,000
|
||||||||||||||
|
Mr.
T.E.E. Xxxxxx
|
792
|
0
|
792
|
$
|
1,188
|
||||||||||||||
|
Purbeck
Pension
|
133,333
|
0
|
133,333
|
$
|
200,000
|
||||||||||||||
|
Direct
Currency Exchange PLC
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
X
X
Xxxxxxx
|
30,000
|
0
|
30,000
|
$
|
45,000
|
||||||||||||||
|
Monsieur
Xxxx Xxxxxx Van Den Broeck
|
23,333
|
0
|
23,333
|
$
|
35,000
|
||||||||||||||
|
Xxxxxx
X Xxxxxxxxx
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Xxxxxxxx
Xxxxx
|
9,333
|
0
|
9,333
|
$
|
14,000
|
||||||||||||||
|
Xxxxxx
X X
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Xx.
Xxxxx Xxxx Xxxxxxxxxxx
|
73,333
|
0
|
73,333
|
$
|
110,000
|
||||||||||||||
|
Xx
Xxxx X. Xxxxxxx
|
66,666
|
0
|
66,666
|
$
|
100,000
|
||||||||||||||
|
Xxxx
Xxxxxx
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
Xx.
Xxxxx W. E. Xxxxx
|
25,000
|
0
|
25,000
|
$
|
37,500
|
||||||||||||||
|
IR
Jessett
|
13,333
|
0
|
13,333
|
$
|
20,000
|
|
Xx
Xxxx M.D. Maclure
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Xxx.
X.X. Xxxxxxx
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Xxxxx
Xxxxx Bank Romford
|
200,000
|
0
|
200,000
|
$
|
300,000
|
||||||||||||||
|
NJ
& XX Xxxxxxx
|
13,000
|
0
|
13,000
|
$
|
19,500
|
||||||||||||||
|
HR
X X Xxxxx
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Alliance
Trust Pensions LTD
|
133,333
|
0
|
133,333
|
$
|
200,000
|
||||||||||||||
|
The
DirectorsMDL Manx Limited
|
66,666
|
0
|
66,666
|
$
|
100,000
|
||||||||||||||
|
Xxxxxxxxx
M.
|
66,666
|
0
|
66,666
|
$
|
100,000
|
||||||||||||||
|
Legent
Clearing, LLC
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
PPE
LTD
|
25,000
|
0
|
25,000
|
$
|
37,500
|
||||||||||||||
|
PPE
LTD
|
25,000
|
0
|
25,000
|
$
|
37,500
|
||||||||||||||
|
Xxxxxxx
Xxxxxxx Xxxxxxxxx
|
32,000
|
0
|
32,000
|
$
|
48,000
|
||||||||||||||
|
Farrant
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
Legent
Clearing, LLC
|
26,666
|
0
|
26,666
|
$
|
40,000
|
||||||||||||||
|
Xxxxxx
X. Xxxxx
|
25,000
|
0
|
25,000
|
$
|
37,500
|
||||||||||||||
|
Xxxx
Xxxxxxx Xxxxxxxx Xxxxxxx Xxxxxx
|
16,000
|
0
|
16,000
|
$
|
24,000
|
||||||||||||||
|
Capelin
Financial Management
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Xxxxx
Lawsonbrown
|
5,000
|
0
|
5,000
|
$
|
7,500
|
||||||||||||||
|
Xxxxxx
Xxxxxx
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
Xx.
Xxxx Xxxxxxx Xxxx Xxxxxxxxx
|
133,333
|
0
|
133,333
|
$
|
200,000
|
||||||||||||||
|
Alliance
Trust Pensions LTD
|
72,086
|
0
|
72,086
|
$
|
108,130
|
||||||||||||||
|
Xx.
Xxxx Xxxxx
|
61,246
|
0
|
61,246
|
$
|
91,870
|
||||||||||||||
|
Xxxxxxx
A M
|
10,000
|
0
|
10,000
|
$
|
15,000
|
||||||||||||||
|
Maypole
Contracts LTD
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Xx.
Xxxxxx Xxxxxxx
|
100,000
|
0
|
100,000
|
$
|
150,000
|
||||||||||||||
|
Xxxxxxxx
Wisden
|
66,666
|
0
|
66,666
|
$
|
100,000
|
||||||||||||||
|
Resolute
Investment Holdings
|
133,333
|
0
|
133,333
|
$
|
200,000
|
||||||||||||||
|
Legent
Clearing, LLC
|
66,666
|
0
|
66,666
|
$
|
100,000
|
||||||||||||||
|
Xxxxxx
X Xxxxxx
|
16,666
|
0
|
16,666
|
$
|
25,000
|
||||||||||||||
|
S.
R. Xxxxxx
|
13,333
|
0
|
13,333
|
$
|
20,000
|
||||||||||||||
|
Xxxxx
X. Xxxxxxx
|
39,333
|
0
|
39,333
|
$
|
59,000
|
||||||||||||||
|
Xxxxxxx
Xxxxxxx
|
41,666
|
0
|
41,666
|
$
|
62,500
|
||||||||||||||
|
Staunton
Sports, LTD
|
75,000
|
0
|
75,000
|
$
|
112,500
|
||||||||||||||
|
Xxx
X. Xxxxxxxxxx, Esq.
|
66,666
|
0
|
66,666
|
$
|
100,000
|
|
Xxxxx
Xx Xxxx
|
50,000
|
0
|
50,000
|
$
|
75,000
|
||||||||||||||
|
Xxxxxxx
Xxxxxx Xxxxxx
|
30,000
|
0
|
30,000
|
$
|
45,000
|
||||||||||||||
|
Xxxxxx
C T Gomarsall, Esq.
|
26,666
|
0
|
26,666
|
$
|
40,000
|
||||||||||||||
|
Xxx
X. Xxxxxxxx
|
20,000
|
0
|
20,000
|
$
|
30,000
|
||||||||||||||
|
Xxx
Xxxxxxx, Esq.
|
16,666
|
0
|
16,666
|
$
|
25,000
|
||||||||||||||
|
HSBC
Private Bank (Suisse) S.A.
|
13,333
|
0
|
13,333
|
$
|
20,000
|
||||||||||||||
|
Private
Pension
|
13,333
|
0
|
13,333
|
$
|
20,000
|
||||||||||||||
|
Xxxxxxx,
Xxxx Xxxxxxx (Mr.)
|
10,000
|
0
|
10,000
|
$
|
15,000
|
||||||||||||||
|
Xxxxx
Xxxxxx
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Monsieur
Xxxx Xxxxxx
|
66,666
|
0
|
66,666
|
$
|
100,000
|
||||||||||||||
|
Xxxxx
Xxxxx
|
40,000
|
0
|
40,000
|
$
|
60,000
|
||||||||||||||
|
Cat
All LTD Re Xxxxx Xxxxx Priv Bk
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
Mr.
Xxxxxxx Xxxxxx
|
53,333
|
0
|
53,333
|
$
|
80,000
|
||||||||||||||
|
Xxxx
XxXxxxx
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
X
X
Xxxxxxx
|
30,000
|
0
|
30,000
|
$
|
45,000
|
||||||||||||||
|
Xxxxx
Xxxxxx, Esq.
|
16,666
|
0
|
16,666
|
$
|
25,000
|
||||||||||||||
|
Monsieur
Xxxx Xxxxxx Van Den Broeck
|
10,000
|
0
|
10,000
|
$
|
15,000
|
||||||||||||||
|
Xxxxxxxxxx
Xxxxxxxx
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Xx
Xxxx M.D. Maclure
|
3,333
|
0
|
3,333
|
$
|
5,000
|
||||||||||||||
|
Wueger
Andreas/Chiaran
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
Xxxx
Xxxxxxx Wueger
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
Xxxxx
Xxxxxx
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
Xxxxxxx
Xxxxxx-Carnac
|
3,333
|
0
|
3,333
|
$
|
5,000
|
||||||||||||||
|
X
X
Xxxxxxx
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
Legent
Clearing, LLC
|
27,466
|
0
|
27,466
|
$
|
41,200
|
||||||||||||||
|
Xx
Xxxxxx Xxxxxx
|
16,666
|
0
|
16,666
|
$
|
25,000
|
||||||||||||||
|
De
Xxxx X. X. Bosch
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Xx.
X X Xxxxxx
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Xxxxxx
Xxx
|
20,000
|
0
|
20,000
|
$
|
30,000
|
||||||||||||||
|
Xx.
Xxxxxxxxx X. Xxxx
|
16,000
|
0
|
16,000
|
$
|
24,000
|
||||||||||||||
|
PFP
Group Limited
|
33,333
|
0
|
33,333
|
$
|
50,000
|
||||||||||||||
|
Legent
Clearing, LLC
|
16,000
|
0
|
16,000
|
$
|
24,000
|
||||||||||||||
|
Xxxxxxxxxxx
Xxxxxxx
|
10,000
|
0
|
10,000
|
$
|
15,000
|
||||||||||||||
|
Parasol
FX Client A/C
|
6,666
|
0
|
6,666
|
$
|
10,000
|
|
Osiris
Tsts Re X Xxxxxx Life 1
|
66,666
|
0
|
66,666
|
$
|
100,000
|
||||||||||||||
|
Xxxxxxxxxx
Xxxxxxxx
|
13,333
|
0
|
13,333
|
$
|
20,000
|
||||||||||||||
|
Xx
Xxxxx Xxxxxxx
|
6,666
|
0
|
6,666
|
$
|
10,000
|
||||||||||||||
|
Torben
Maersk
|
349,993
|
349,993
|
$
|
524,990
|
|||||||||||||||
|
PFP
Group Limited
|
66,653
|
66,653
|
$
|
99,980
|
|||||||||||||||
|
Legent
Clearing, LLC
|
29,969
|
29,969
|
$
|
44,954
|
|||||||||||||||
|
Xxxx
X. Xxxxxxx
|
14,660
|
14,660
|
$
|
21,990
|
|||||||||||||||
|
Xxxxxx
Xxxxx
|
33,333
|
33,333
|
$
|
50,000
|
EXHIBITS
|
Exhibit
A
|
Form
of Notes
|
|
Exhibit
B
|
Form
of Warrant
|
|
Exhibit
C
|
Form
of Registration Rights Agreement
|
|
Exhibit
D
|
Form
of Transfer Agent Instructions
|
|
Exhibit
E
|
Form
of Opinion of Company’s Counsel
|
|
Exhibit
F
|
Form
of Secretary's Certificate
|
|
Exhibit
G
|
Form
of Officers Certificate
|
|
Exhibit
H
|
Form
of Lock-Up Agreement
|
|
Exhibit
I
|
Form
of Voting Agreement
|
|
Exhibit
J
|
Form
of Waiver Letter
|
SCHEDULES
|
Schedule
3(a)
|
Subsidiaries
|
|
Schedule
3(d)
|
No
Conflicts
|
|
Schedule
3(j)
|
Application
of Takeover Protections
|
|
Schedule
3(k)
|
SEC
Documents
|
|
Schedule
3(l)(i) &(ii)
|
Absence
of Certain Changes
|
|
Schedule
3(n)
|
Regulatory
Permits
|
|
Schedule
3(q)
|
Transactions
with Affiliates
|
|
Schedule
3(r)
|
Equity
Capitalization
|
|
Schedule
3(s)
|
Indebtedness
and Other Contracts
|
|
Schedule
3(t)
|
Absence
of Litigation
|
|
Schedule
3(u)
|
Insurance
|
|
Schedule
3(w)
|
Title
|
|
Schedule
3(y)
|
Environmental
Laws
|
|
Schedule
3(aa)
|
Tax
Status
|
|
Schedule
3(cc)
|
Ranking
of Notes
|
|
Schedule
3(jj)
|
Material
Acquisition Agreements
|
|
Schedule
4(r)
|
Anadarko
Delivery Agreement
|
|
Schedule
7(xiv)
|
List
of Unitholders
|
[FORM
OF CONVERTIBLE NOTE]
NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
IN A
FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE
TERMS
OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL
AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF
PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.
RANCHER
ENERGY
CORP.
CONVERTIBLE
NOTE
|
Issuance
Date: December [__], 2006
|
Original
Principal Amount: U.S.
$_____________
|
FOR
VALUE RECEIVED,
Rancher
Energy Corp., a Nevada corporation (the "Company"),
hereby promises to pay to [BUYERS] or registered assigns ("Holder")
the
amount set out above as the Original Principal Amount (as reduced pursuant
to
the terms hereof pursuant to conversion or otherwise, the "Principal")
when
due, whether upon the Maturity Date (as defined below), acceleration, redemption
or otherwise (in each case in accordance with the terms hereof) and to pay
interest ("Interest"),
if
any, on any outstanding Principal at the Interest Rate as may be required by
Section 2 hereof. This Convertible Note (including all Convertible Notes issued
in exchange, transfer or replacement hereof, this "Note")
is one
of an issue of Convertible Notes issued pursuant to the Securities Purchase
Agreement (as defined below) on the Closing Date (collectively, the
"Notes"
and
such other Convertible Notes, the "Other Notes").
Certain capitalized terms used herein are defined in Section 26.
(1) PAYMENTS
OF PRINCIPAL.
On the
Maturity Date, the Company shall pay to the Holder an amount in cash
representing all outstanding Principal, accrued and unpaid Interest, if any,
and
accrued and unpaid Late Charges, if any, on such Principal and Interest. The
"Maturity Date"
shall
be [INSERT DATE THAT IS 120 DAYS FROM ISSUANCE DATE], as may be extended at
the
option of the Holder (i) in the event that, and for so long as, a Trigger Event
(as defined in Section 4(a)) shall have occurred and be continuing on the
Maturity Date (as may be extended pursuant to this Section 1) or any event
that
shall have occurred and be continuing that with the passage of time and the
failure to cure would result in a Trigger Event, (ii) through the date that
is
ten (10) Business Days after the consummation of a Change of Control in the
event that a Change of Control is publicly announced or a Change of Control
Notice (as defined in Section 5(b)) is delivered prior to the Maturity Date
and
(iii) for an additional ninety (90) day period in the event that as of the
Maturity Date the Stockholder Approval has not been obtained. Other than as
specifically permitted by the Note, the Company may not prepay any portion
of
the outstanding Principal, accrued and unpaid Interest or accrued and unpaid
Late Charges, if any, on Principal and Interest.
(2) INTEREST;
INTEREST RATE.
Prior
to
the occurrence of a Trigger Event, no Interest shall accrue on the outstanding
Principal of this Note. From
and
after the occurrence and during the continuance of a Trigger Event, Interest
shall accrue on such outstanding Principal at an interest rate equal to twelve
percent (12.0%) per annum commencing on the date of the occurrence of such
Trigger Event. In the event that such Trigger Event is subsequently cured,
and
no other Trigger Events have occurred and are continuing, Interest shall cease
to accrue hereunder as of the date of such cure; provided that the Interest
as
calculated and unpaid at such interest rate during the continuance of such
Trigger Event shall continue to apply to the extent relating to the days after
the occurrence of such Trigger Event through and including the date of cure
of
such Trigger Event.
Any
Interest that shall accrue hereunder shall be payable upon any conversion or
redemption of this Note in accordance with the terms set forth herein and on
the
Maturity Date.
(3) CONVERSION
OF NOTES.
This
Note shall be convertible into shares of the Company's common stock, par value
$0.00001 per share (the "Common
Stock"),
on
the terms and conditions set forth in this Section 3.
(a) Conversion
Right.
At any
time or times on or after the Stockholder Approval Date, the Holder shall be
entitled to convert any portion of the outstanding and unpaid Conversion Amount
(as defined below) into fully paid and nonassessable shares of Common Stock
in
accordance with Section 3(c), at the Conversion Rate (as defined below). The
Company shall not issue any fraction of a share of Common Stock upon any
conversion. If the issuance would result in the issuance of a fraction of a
share of Common Stock, the Company shall round such fraction of a share of
Common Stock up to the nearest whole share. The Company shall pay any and all
taxes that may be payable with respect to the issuance and delivery of Common
Stock upon conversion of any Conversion Amount; provided
that the
Company shall not be required to pay any tax that may be payable in respect
of
any issuance of Common Stock to any Person other than the converting Holder
or
with respect to any income tax due by the Holder with respect to such Common
Stock.
(b) Conversion
Rate.
The
number of shares of Common Stock issuable upon conversion of any Conversion
Amount pursuant to Section 3(a) shall be determined by dividing (x) such
Conversion Amount by (y) the Conversion Price (the "Conversion
Rate").
(i) "Conversion
Amount"
means
the sum of (A) the portion of the Principal to be converted, redeemed or
otherwise with respect to which this determination is being made, (B) accrued
and unpaid Interest with respect to such Principal, if any, and (C) accrued
and
unpaid Late Charges with respect to such Principal and Interest, if
any.
2
(ii) "Conversion
Price"
means,
as of any Conversion Date (as defined below) or other date of determination,
$1.50, subject to adjustment as provided herein.
(c) Mechanics
of Conversion.
(i) Optional
Conversion.
To
convert any Conversion Amount into shares of Common Stock on any date (a
"Conversion
Date"),
the
Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt
on or
prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice
of conversion in the form attached hereto as Exhibit
I
(the
"Conversion
Notice")
to the
Company and (B) if required by Section 3(c)(iii), surrender this Note to a
common carrier for delivery to the Company as soon as practicable on or
following such date (or an indemnification undertaking with respect to this
Note
in the case of its loss, theft or destruction). On or before the second
(2nd)
Trading
Day following the date of receipt of a Conversion Notice, the Company shall
transmit by facsimile a confirmation of receipt of such Conversion Notice to
the
Holder and the Company's transfer agent (the "Transfer
Agent").
On or
before the third (3rd)
Trading
Day following the date of receipt of a Conversion Notice (the "Share
Delivery Date"),
the
Company shall (X) provided that the Transfer Agent is participating in the
Depository Trust Company ("DTC")
Fast
Automated Securities Transfer Program, credit such aggregate number of shares
of
Common Stock to which the Holder shall be entitled to the Holder's or its
designee's balance account with DTC through its Deposit Withdrawal Agent
Commission system or (Y) if the Transfer Agent is not participating in the
DTC
Fast Automated Securities Transfer Program, issue and deliver to the address
as
specified in the Conversion Notice, a certificate, registered in the name of
the
Holder or its designee, for the number of shares of Common Stock to which the
Holder shall be entitled. If this Note is physically surrendered for conversion
as required by Section 3(c)(iii) and the outstanding Principal of this Note
is
greater than the Principal portion of the Conversion Amount being converted,
then the Company shall as soon as practicable and in no event later than three
(3) Business Days after receipt of this Note and at its own expense, issue
and
deliver to the holder a new Note (in accordance with Section 16(d)) representing
the outstanding Principal not converted. The Person or Persons entitled to
receive the shares of Common Stock issuable upon a conversion of this Note
shall
be treated for all purposes as the record holder or holders of such shares
of
Common Stock on the Conversion Date.
(ii) If
within
five (5) Trading Days after the Company's receipt of the facsimile copy of
a
Conversion Notice the Company shall fail to issue and deliver a certificate
to
the Holder or credit the Holder's balance account with DTC for the number of
shares of Common Stock to which the Holder is entitled upon such holder's
conversion of any Conversion Amount (a
"Conversion
Failure"),
and if
on or after such Trading Day the Holder purchases (in an open market transaction
or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder
of
Common Stock issuable upon such conversion that the Holder anticipated receiving
from the Company (a "Buy-In"),
then
the Company shall, within three (3) Trading Days after the Holder's request
and
in the Holder's discretion, either (i) pay cash to the Holder in an amount
equal
to the Holder's total purchase price (including brokerage commissions and other
out-of-pocket expenses, if any) for the shares of Common Stock so purchased
(the
"Buy-In
Price"),
at
which point the Company's obligation to deliver such certificate (and to issue
such Common Stock) shall terminate, or (ii) promptly honor its obligation to
deliver to the Holder a certificate or certificates representing such Common
Stock and pay cash to the Holder in an amount equal to the excess (if any)
of
the Buy-In Price over the product of (A) such number of shares of Common Stock,
times (B) the Closing Bid Price on the Conversion Date.
3
(iii) Registration;
Book-Entry.
The
Company shall maintain a register (the "Register")
for
the recordation of the names and addresses of the holders of each Note and
the
principal amount of the Notes held by such holders (the "Registered
Notes").
The
entries in the Register shall be conclusive and binding for all purposes absent
manifest error. The Company and the holders of the Notes shall treat each Person
whose name is recorded in the Register as the owner of a Note for all purposes,
including, without limitation, the right to receive payments of principal and
interest hereunder, notwithstanding notice to the contrary. A Registered Note
may be assigned or sold in whole or in part only by registration of such
assignment or sale on the Register. Upon its receipt of a request to assign
or
sell all or part of any Registered Note by a Holder, the Company shall record
the information contained therein in the Register and issue one or more new
Registered Notes in the same aggregate principal amount as the principal amount
of the surrendered Registered Note to the designated assignee or transferee
pursuant to Section 16. Notwithstanding anything to the contrary set forth
herein, upon conversion of any portion of this Note in accordance with the
terms
hereof, the Holder shall not be required to physically surrender this Note
to
the Company unless (A) the full Conversion Amount represented by this Note
is
being converted or (B) the Holder has provided the Company with prior written
notice (which notice may be included in a Conversion Notice) requesting
reissuance of this Note upon physical surrender of this Note. The Holder and
the
Company shall maintain records showing the Principal, Interest and Late Charges,
if any, converted and the dates of such conversions or shall use such other
method, reasonably satisfactory to the Holder and the Company, so as not to
require physical surrender of this Note upon conversion.
(iv) Pro
Rata Conversion; Disputes.
In the
event that the Company receives a Conversion Notice from more than one holder
of
Notes for the same Conversion Date and the Company can convert some, but not
all, of such portions of the Notes submitted for conversion, the Company shall
convert from each holder of Notes electing to have Notes converted on such
date
a pro rata amount of such holder's portion of its Notes submitted for conversion
based on the principal amount of Notes submitted for conversion on such date
by
such holder relative to the aggregate principal amount of all Notes submitted
for conversion on such date. In the event of a dispute as to the number of
shares of Common Stock issuable to the Holder in connection with a conversion
of
this Note, the Company shall issue to the Holder the number of shares of Common
Stock not in dispute and resolve such dispute in accordance with Section
21.
(v) Automatic
Conversion.
On the
Stockholder Approval Date all of the Conversion Amount then remaining under
this
Note shall be converted into fully paid, validly issued and nonassessable shares
of Common Stock in accordance with Section 3(c) hereof at the Conversion Rate
as
of the Mandatory Conversion Date (as defined below) with respect to the
Conversion Amount (the "Automatic
Conversion").
The
Company shall deliver, within not more than one (1) Trading Day following
the Stockholder Approval Date, a
written
notice thereof by facsimile and overnight courier to all, but not less than
all,
of the holders of Notes and the Transfer Agent (the "Automatic
Conversion Notice"
and the
date all of the holders received such notice is referred to as the "Automatic
Conversion Notice Date").
The
Mandatory Conversion Notice shall state (1) the aggregate Conversion Amount
of
the Notes that shall be subject to the Automatic Conversion pursuant hereto
(and
analogous provisions under the Other Notes) and (2) the number of shares of
Common Stock to be issued to the Holder on the applicable Conversion Date.
The
mechanics of conversion set forth in Section 3(c) shall apply to the Automatic
Conversion as if the Company and the Transfer Agent had received from the Holder
on the Stockholder Approval Date a Conversion Notice with respect to the
Conversion Amount remaining under this Note.
4
(4) RIGHTS
UPON TRIGGER EVENT.
(a) Trigger
Event.
Each of
the following events shall constitute a "Trigger
Event":
(i) the
failure of the applicable Registration Statement required to be filed pursuant
to the Registration Rights Agreement to be declared effective by the SEC on
or
prior to the date that is sixty (60) days after the applicable Effectiveness
Deadline (as defined in the Registration Rights Agreement), or, while the
applicable Registration Statement is required to be maintained effective
pursuant to the terms of the Registration Rights Agreement, the effectiveness
of
the applicable Registration Statement lapses for any reason (including, without
limitation, the issuance of a stop order) or is unavailable to any holder of
the
Notes for sale of all of such holder's Registrable Securities (as defined in
the
Registration Rights Agreement) in accordance with the terms of the Registration
Rights Agreement, and such lapse or unavailability continues for a period of
ten
(10) consecutive days or for more than an aggregate of thirty (30) days in
any
365-day period (other than days during an Allowable Grace Period (as defined
in
the Registration Rights Agreement));
(ii) the
suspension from trading or failure of the Common Stock to be listed on the
Principal Market or an Eligible Market for a period of five (5) consecutive
Trading Days or for more than an aggregate of ten (10) Trading Days in any
365-day period;
(iii) the
Company's (A) failure to cure a Conversion Failure by delivery of the required
number of shares of Common Stock within ten (10) Trading Days after the
applicable Conversion Date or (B) notice, written or oral, to any holder of
the
Notes, including by way of public announcement or through any of its agents,
at
any time, of its intention not to comply with a request for conversion of any
Notes into shares of Common Stock that is tendered in accordance with the
provisions of the Notes;
(iv) at
any
time following the tenth (10th)
consecutive Business Day that the Holder's Authorized Share Allocation is less
than the number of shares of Common Stock that the Holder would be entitled
to
receive upon a conversion of the full Conversion Amount of this Note (without
regard to any limitations on conversion);
5
(v) the
Company's failure to pay to the Holder any amount of Principal (including,
without limitation, any redemption payments), Interest, Late Charges or other
amounts when and as due under this Note or any other Transaction Document (as
defined in the Securities Purchase Agreement) or any other agreement, document,
certificate or other instrument delivered in connection with the transactions
contemplated hereby and thereby to which the Holder is a party, except, in
the
case of a failure to pay any Interest and Late Charges when and as due, in
which
case only if such failure continues for a period of at least five (5) Business
Days;
(vi) A)
any
payment default or other default occurs under any Indebtedness of the Company
or
any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase
Agreement) (other than Permitted Senior Indebtedness) that results in a
redemption of or acceleration prior to maturity of $1,000,000 or more of such
Indebtedness in the aggregate, (B) any material default occurs under any
Indebtedness of the Company (other than Permitted Senior Indebtedness) or any
of
its Subsidiaries having an aggregate outstanding balance in excess of $1,000,000
and such default continues uncured for more than ten (10) Business Days, other
than, in each case (A) or (B) above, a default with respect to any Other Notes,
or (C) any "event of default" occurs under the Permitted Senior
Indebtedness;
(vii) the
Company or any of its Subsidiaries, pursuant to or within the meaning of Title
11, U.S. Code, or any similar Federal, foreign or state law for the relief
of
debtors (collectively, "Bankruptcy
Law"),
(A)
commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a
receiver, trustee, assignee, liquidator or similar official (a "Custodian"),
(D)
makes a general assignment for the benefit of its creditors or (E) admits in
writing that it is generally unable to pay its debts as they become
due;
(viii) a
court
of competent jurisdiction enters an order or decree under any Bankruptcy Law
that (A) is for relief against the Company or any of its Subsidiaries in an
involuntary case, (B) appoints a Custodian of the Company or any of its
Subsidiaries or (C) orders the liquidation of the Company or any of its
Subsidiaries;
(ix) a
final
judgment or judgments for the payment of money aggregating in excess of
$1,000,000 are rendered against the Company or any of its Subsidiaries and
which
judgments are not, within sixty (60) days after the entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within sixty (60)
days after the expiration of such stay; provided, however, that any judgment
which is covered by insurance or an indemnity from a credit worthy party shall
not be included in calculating the $1,000,000 amount set forth above so long
as
the Company provides the Holder a written statement from such insurer or
indemnity provider (which written statement shall be reasonably satisfactory
to
the Holder) to the effect that such judgment is covered by insurance or an
indemnity and the Company will receive the proceeds of such insurance or
indemnity within thirty (30) days of the issuance of such judgment;
(x) the
Company breaches any representation, warranty, covenant or other term or
condition of any Transaction Document, except, in the case of a breach of a
covenant which is curable, only if such breach continues for a period of at
least ten (10) consecutive Business Days;
6
(xi) any
breach or failure in any respect to comply with Section 12 of this Note;
or
(xii) any
Trigger Event (as defined in the Other Notes) occurs with respect to any Other
Notes.
(b) Redemption
Right.
Upon
the occurrence of a Trigger Event with respect to this Note or any Other Note,
the Company shall within (1) Business Day deliver written notice thereof via
facsimile or e-mail and overnight courier (a "Trigger
Event Notice")
to the
Holder. At any time after the earlier of the Holder's receipt of a Trigger
Event
Notice and the Holder becoming aware of a Trigger Event, the Holder may require
the Company to redeem all or any portion of this Note by delivering written
notice thereof (the "Trigger
Event Redemption Notice")
to the
Company, which Trigger Event Redemption Notice shall indicate the portion of
this Note the Holder is electing to redeem. Each portion of this Note subject
to
redemption by the Company pursuant to this Section 4(b) shall be redeemed by
the
Company at a price equal to the Conversion Amount to be redeemed (the
"Trigger
Event Redemption
Price").
Redemptions required by this Section 4(b) shall be made in accordance with
the
provisions of Section 10. To the extent redemptions required by this Section
4(b) are deemed or determined by a court of competent jurisdiction to be
prepayments of the Note by the Company, such redemptions shall be deemed to
be
voluntary prepayments. The parties hereto agree that in the event of the
Company's redemption of any portion of the Note under this Section 4(b), the
Holder's damages would be uncertain and difficult to estimate because of the
parties' inability to predict future interest rates and the uncertainty of
the
availability of a suitable substitute investment opportunity for the Holder.
Accordingly, any Redemption Premium due under this Section 4(b) is intended
by
the parties to be, and shall be deemed, a reasonable estimate of the Holder's
actual loss of its investment opportunity and not as a penalty.
(5) RIGHTS
UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.
(a) Assumption.
The
Company shall not enter into or be party to a Fundamental Transaction unless
(i) the Successor Entity assumes in writing all of the obligations of the
Company under this Note and the other Transaction Documents in accordance with
the provisions of this Section 5(a) pursuant to written agreements in form
and
substance satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction, including agreements to deliver
to each holder of Notes in exchange for such Notes a security of the Successor
Entity evidenced by a written instrument substantially similar in form and
substance to the Notes, including, without limitation, having a principal amount
and interest rate equal to the principal amounts then outstanding and the
interest rates of the Notes held by such holder, having similar conversion
rights as the Notes and having similar ranking to the Notes, and satisfactory
to
the Required Holders and (ii) the Successor Entity (including its Parent
Entity) is a publicly traded corporation whose common stock is quoted on or
listed for trading on an Eligible Market. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for
(so
that from and after the date of such Fundamental Transaction, the provisions
of
this Note referring to the "Company" shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and shall assume
all of the obligations of the Company under this Note with the same effect
as if
such Successor Entity had been named as the Company herein. Upon consummation
of
the Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon conversion or redemption of this
Note at
any
time after the consummation of the Fundamental Transaction, in lieu of the
shares of the Company's Common Stock (or
other
securities, cash, assets or other property) issuable
upon the conversion or redemption of the Notes prior to such Fundamental
Transaction,
such
shares of the publicly traded common stock (or their equivalent) of the
Successor Entity (including its Parent Entity), as adjusted in accordance with
the provisions of this Note. The
provisions of this Section shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
on the conversion or redemption of this Note.
7
(b) Redemption
Right.
No
sooner than fifteen (15) days nor later than ten (10) days prior to the
consummation of a Change of Control, but not prior to the public announcement
of
such Change of Control, the Company shall deliver written notice thereof via
facsimile and overnight courier to the Holder (a "Change
of Control Notice").
At
any time during the period beginning on the date of the Holder's receipt of
a
Change of Control Notice and ending twenty (20) Trading Days after the
consummation of such Change of Control, the Holder may require the Company
to
redeem all or any portion of this Note by delivering written notice thereof
("Change
of Control Redemption Notice")
to the
Company, which Change of Control Redemption Notice shall indicate the Conversion
Amount the Holder is electing to redeem. The portion of this Note subject to
redemption pursuant to this Section 5 shall be redeemed by the Company in cash
at a price equal to the greater of (i) the product of (x) the Conversion Amount
being redeemed and (y) the quotient determined by dividing (A) the greater
of
the Closing Sale Price of the Common Stock immediately prior to the consummation
of the Change of Control, the Closing Sale Price immediately following the
public announcement of such proposed Change of Control and the Closing Sale
Price of the Common Stock immediately prior to the public announcement of such
proposed Change of Control by (B) the Conversion Price and (ii) 125% of the
Conversion Amount being redeemed (the "Change
of Control Redemption Price").
Redemptions required by this Section 5 shall be made in accordance with the
provisions of Section 10 and shall have priority to payments to stockholders
in
connection with a Change of Control. To the extent redemptions required by
this
Section 5(b) are deemed or determined by a court of competent jurisdiction
to be
prepayments of the Note by the Company, such redemptions shall be deemed to
be
voluntary prepayments. Notwithstanding anything to the contrary in this Section
5, until the Change of Control Redemption Price is paid in full, the Conversion
Amount submitted for redemption under this Section 5(c) may be converted, in
whole or in part, by the Holder into Common Stock pursuant to Section 3. The
parties hereto agree that in the event of the Company's redemption of any
portion of the Note under this Section 5(b), the Holder's damages would be
uncertain and difficult to estimate because of the parties' inability to predict
future interest rates and the uncertainty of the availability of a suitable
substitute investment opportunity for the Holder. Accordingly, any redemption
premium due under this Section 5(b) is intended by the parties to be, and shall
be deemed, a reasonable estimate of the Holder's actual loss of its investment
opportunity and not as a penalty.
8
(6) RIGHTS
UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.
(a) Purchase
Rights.
If at
any time the Company grants, issues or sells any Options, Convertible Securities
or rights to purchase stock, warrants, securities or other property pro rata
to
the record holders of any class of Common Stock (the "Purchase
Rights"),
then
the Holder will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable
upon complete conversion of this Note (without taking into account any
limitations or restrictions on the convertibility of this Note) immediately
before the date on which a record is taken for the grant, issuance or sale
of
such Purchase Rights, or, if no such record is taken, the date as of which
the
record holders of Common Stock are to be determined for the grant, issue or
sale
of such Purchase Rights.
(b) Other
Corporate Events.
In
addition to and not in substitution for any other rights hereunder, prior to
the
consummation of any Fundamental Transaction pursuant to which holders of shares
of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a "Corporate
Event"),
the
Company shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon a conversion of this Note, (i) in
addition to the shares of Common Stock receivable upon such conversion, such
securities or other assets to which the Holder would have been entitled with
respect to such shares of Common Stock had such shares of Common Stock been
held
by the Holder upon the consummation of such Corporate Event (without taking
into
account any limitations or restrictions on the convertibility of this Note)
or
(ii) in lieu of the shares of Common Stock otherwise receivable upon such
conversion, such securities or other assets received by the holders of shares
of
Common Stock in connection with the consummation of such Corporate Event in
such
amounts as the Holder would have been entitled to receive had this Note
initially been issued with conversion rights for the form of such consideration
(as opposed to shares of Common Stock) at a conversion rate for such
consideration commensurate with the Conversion Rate. Provision made pursuant
to
the preceding sentence shall be in a form and substance satisfactory to the
Required Holders. The provisions of this Section shall apply similarly and
equally to successive Corporate Events and shall be applied without regard
to
any limitations on the conversion or redemption of this Note.
(7) ADJUSTMENT
OF CONVERSION PRICE UPON SUBDIVISION OR COMBINATION OF COMMON
STOCK.
If the
Company at any time on or after the Subscription Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of
its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time on or after the Subscription
Date combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased.
(8) NONCIRCUMVENTION.
The
Company hereby covenants and agrees that the Company will not, by amendment
of
its Certificate of Incorporation, Bylaws or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement, dissolution, issue
or
sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Note, and will at all
times in good faith carry out all of the provisions of this Note and take all
action as may be required to protect the rights of the Holder of this Note.
9
(9) RESERVATION
OF AUTHORIZED SHARES.
(a) Reservation.
Following the Stockholder Approval Date, so long as any of the Notes are
outstanding, the Company shall take all action necessary to reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Notes, 130% of the number of shares
of Common Stock as shall from time to time be necessary to effect the conversion
of all of the Notes then outstanding; provided that at no time shall the number
of shares of Common Stock so reserved be less than the number of shares required
to be reserved by the previous sentence (without regard to any limitations
on
conversions) (the "Required
Reserve Amount").
The
number of shares of Common Stock reserved for conversions of the Notes and
each
increase in the number of shares so reserved shall be allocated pro rata among
the holders of the Notes based on the principal amount of the Notes held by
each
holder at the Closing (as defined in the Securities Purchase Agreement) or
increase in the number of reserved shares, as the case may be (the "Authorized
Share Allocation").
In
the event that a holder shall sell or otherwise transfer any of such holder's
Notes, each transferee shall be allocated a pro rata portion of such holder's
Authorized Share Allocation. Any shares of Common Stock reserved and allocated
to any Person which ceases to hold any Notes shall be allocated to the remaining
holders of Notes, pro rata based on the principal amount of the Notes then
held
by such holders.
(b) Insufficient
Authorized Shares.
If at
any time following the Stockholder Approval Date while any of the Notes remain
outstanding the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to reserve for
issuance upon conversion of the Notes at least a number of shares of Common
Stock equal to the Required Reserve Amount (an "Authorized
Share Failure"),
then
the Company shall immediately take all action necessary to increase the
Company's authorized shares of Common Stock to an amount sufficient to allow
the
Company to reserve the Required Reserve Amount for the Notes then outstanding.
Without limiting the generality of the foregoing sentence, as soon as
practicable after the date of the occurrence of an Authorized Share Failure,
but
in no event later than sixty (60) days after the occurrence of such Authorized
Share Failure, the Company shall hold a meeting of its stockholders for the
approval of an increase in the number of authorized shares of Common Stock.
In
connection with such meeting, the Company shall provide each stockholder with
a
proxy statement and shall use its best efforts to solicit its stockholders'
approval of such increase in authorized shares of Common Stock and to cause
its
board of directors to recommend to the stockholders that they approve such
proposal.
(10) HOLDER'S
REDEMPTIONS.
(a) Mechanics.
The
Company shall deliver the applicable Trigger Event Redemption Price to the
Holder within five (5) Business Days after the Company's receipt of the Holder's
Trigger Event Redemption Notice. If the Holder has submitted a Change of Control
Redemption Notice in accordance with Section 5(b), the Company shall deliver
the
applicable Change of Control Redemption Price to the Holder concurrently with
the consummation of such Change of Control if such notice is received prior
to
the consummation of such Change of Control and within five (5) Business Days
after the Company's receipt of such notice otherwise. In the event of a
redemption of less than all of the Conversion Amount of this Note, the Company
shall promptly cause to be issued and delivered to the Holder a new Note (in
accordance with Section 16(d)) representing the outstanding Principal which
has
not been redeemed. In the event that the Company does not pay the applicable
Redemption Price to the Holder within the time period required, at any time
thereafter and until the Company pays such unpaid Redemption Price in full,
the
Holder shall have the option, in lieu of redemption, to require the Company
to
promptly return to the Holder all or any portion of this Note representing
the
Conversion Amount that was submitted for redemption and for which the applicable
Redemption Price (together with any Late Charges thereon) has not been paid.
Upon the Company's receipt of such notice, (x) the Redemption Notice shall
be
null and void with respect to such Conversion Amount, (y) the Company shall
immediately return this Note, or issue a new Note (in accordance with Section
16(d)) to the Holder representing such Conversion Amount and (z) the Conversion
Price of this Note or such new Notes shall be adjusted to the lesser of (A)
the
Conversion Price as in effect on the date on which the Redemption Notice is
voided and (B) the lowest Closing Bid Price of the Common Stock during the
period beginning on and including the date on which the Redemption Notice is
delivered to the Company and ending on and including the date on which the
Redemption Notice is voided. The Holder's delivery of a notice voiding a
Redemption Notice and exercise of its rights following such notice shall not
affect the Company's obligations to make any payments of Late Charges which
have
accrued prior to the date of such notice with respect to the Conversion Amount
subject to such notice.
10
(b) Redemption
by Other Holders.
Upon
the Company's receipt of notice from any of the holders of the Other Notes
for
redemption or repayment as a result of an event or occurrence substantially
similar to the events or occurrences described in Section 4(b) or Section 5(b)
(each, an "Other
Redemption Notice"),
the
Company shall immediately, but no later than one (1) Business Day of its receipt
thereof, forward to the Holder by facsimile a copy of such notice. If the
Company receives a Redemption Notice and one or more Other Redemption Notices,
during the seven (7) Business Day period beginning on and including the date
which is three (3) Business Days prior to the Company's receipt of the Holder's
Redemption Notice and ending on and including the date which is three (3)
Business Days after the Company's receipt of the Holder's Redemption Notice
and
the Company is unable to redeem all principal, interest and other amounts
designated in such Redemption Notice and such Other Redemption Notices received
during such seven (7) Business Day period, then the Company shall redeem a
pro
rata amount from each holder of the Notes (including the Holder) based on the
principal amount of the Notes submitted for redemption pursuant to such
Redemption Notice and such Other Redemption Notices received by the Company
during such seven (7) Business Day period.
(11) VOTING
RIGHTS.
The
Holder shall have no voting rights as the holder of this Note, except
as
required by law, including, but not limited to, Chapter 78 of the Nevada Revised
Statutes, and as expressly provided in this Note.
11
(12) COVENANTS.
(a) Rank.
All
payments due under this Note (A) shall rank pari
passu
with all
Other Notes and (B) shall be senior to all other Indebtedness of the Company
and
its Subsidiaries, other than Permitted Senior Indebtedness.
(b) Incurrence
of Indebtedness.
So long
as this Note is outstanding, the Company shall not, and the Company shall not
permit any of its Subsidiaries to, directly or indirectly, incur or guarantee,
assume or suffer to exist any Indebtedness, other than (i) the Indebtedness
evidenced by this Note and the Other Notes and (ii) other Permitted
Indebtedness.
(c) Existence
of Liens.
So long
as this Note is outstanding, the Company shall not, and the Company shall not
permit any of its Subsidiaries to, directly or indirectly, allow or suffer
to
exist any mortgage, lien, pledge, charge, security interest or other encumbrance
upon or in any property or assets (including accounts and contract rights)
owned
by the Company or any of its Subsidiaries (collectively, "Liens")
other
than Permitted Liens.
(d) Restricted
Payments.
The
Company shall not, and the Company shall not permit any of its Subsidiaries
to,
directly or indirectly, redeem, defease, repurchase, repay or make any payments
in respect of, by the payment of cash or cash equivalents (in whole or in part,
whether by way of open market purchases, tender offers, private transactions
or
otherwise), all or any portion of any Permitted Indebtedness (other than this
Note and the Other Notes), whether by way of payment in respect of principal
of
(or premium, if any) or interest on such Indebtedness, if at the time such
payment is due or is otherwise made or, after giving effect to such payment,
an
event constituting, or that with the passage of time and without being cured
would constitute, a Trigger Event has occurred and is continuing.
(e) Restriction
on Redemption and Cash Dividends.
Until
all of the Notes have been converted, redeemed or otherwise satisfied in
accordance with their terms, the Company shall not, directly or indirectly,
redeem, repurchase or declare or pay any cash dividend or distribution on its
capital stock without the prior express written consent of the Required
Holders.
(13) PARTICIPATION.
The
Holder, as the holder of this Note, shall be entitled to receive such dividends
paid and distributions made to the holders of Common Stock to the same extent
as
if the Holder had converted this Note into Common Stock (without regard to
any
limitations on conversion herein or elsewhere) and had held such shares of
Common Stock on the record date for such dividends and distributions. Payments
under the preceding sentence shall be made concurrently with the dividend or
distribution to the holders of Common Stock.
(14) VOTE
TO ISSUE, OR CHANGE THE TERMS OF, NOTES.
The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting of the Required Holders shall be required for any
change or amendment to this Note or the Other Notes. No
consideration shall be offered or paid to any holder of Notes to amend or
consent to a waiver or modification of the Notes unless the same consideration
also is offered to all of the holders of Notes.
12
(15) TRANSFER.
This
Note may be offered, sold, assigned or transferred by the Holder without the
consent of the Company, subject only to the provisions of Section 2(f) of the
Securities Purchase Agreement.
(16) REISSUANCE
OF THIS NOTE.
(a) Transfer.
If this
Note is to be transferred, the Holder shall surrender this Note to the Company,
whereupon the Company will forthwith issue and deliver upon the order of the
Holder a new Note (in accordance with Section 16(d)), registered as the Holder
may request, representing the outstanding Principal being transferred by the
Holder and, if less then the entire outstanding Principal is being transferred,
a new Note (in accordance with Section 16(d)) to the Holder representing the
outstanding Principal not being transferred. The Holder and any assignee, by
acceptance of this Note, acknowledge and agree that, by reason of the provisions
of Section 3(c)(iii) following conversion or redemption of any portion of this
Note, the outstanding Principal represented by this Note may be less than the
Principal stated on the face of this Note.
(b) Lost,
Stolen or Mutilated Note.
Upon
receipt by the Company of evidence reasonably satisfactory to the Company of
the
loss, theft, destruction or mutilation of this Note, and, in the case of loss,
theft or destruction, of any indemnification undertaking by the Holder to the
Company in customary form and, in the case of mutilation, upon surrender and
cancellation of this Note, the Company shall execute and deliver to the Holder
a
new Note (in accordance with Section 16(d)) representing the outstanding
Principal.
(c) Note
Exchangeable for Different Denominations.
This
Note is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Note or Notes (in accordance with Section
16(d)
and in principal amounts of at least $100,000) representing in the aggregate
the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the
time
of such surrender.
(d) Issuance
of New Notes.
Whenever the Company is required to issue a new Note pursuant to the terms
of
this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall
represent, as indicated on the face of such new Note, the Principal remaining
outstanding (or in the case of a new Note being issued pursuant to Section
16(a)
or Section 16(c), the Principal designated by the Holder which, when added
to
the principal represented by the other new Notes issued in connection with
such
issuance, does not exceed the Principal remaining outstanding under this Note
immediately prior to such issuance of new Notes), (iii) shall have an issuance
date, as indicated on the face of such new Note, which is the same as the
Issuance Date of this Note, (iv) shall have the same rights and conditions
as
this Note, and (v) shall represent accrued and unpaid Interest and Late Charges
on the Principal and Interest of this Note, if any, from the Issuance
Date.
(17) REMEDIES,
CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF.
The
remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note and any of the other Transaction Documents
at
law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the Holder's right to pursue
actual and consequential damages for any failure by the Company to comply with
the terms of this Note. Amounts set forth or provided for herein with respect
to
payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the Holder and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at
law
for any such breach may be inadequate. The Company therefore agrees that, in
the
event of any such breach or threatened breach, the Holder shall be entitled,
in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond
or
other security being required.
13
(18) PAYMENT
OF COLLECTION, ENFORCEMENT AND OTHER COSTS.
If (a)
this Note is placed in the hands of an attorney for collection or enforcement
or
is collected or enforced through any legal proceeding or the Holder otherwise
takes action to collect amounts due under this Note or to enforce the provisions
of this Note or (b) there occurs any bankruptcy, reorganization, receivership
of
the Company or other proceedings affecting Company creditors' rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including,
but not limited to, financial advisory fees and attorneys' fees and
disbursements.
(19) CONSTRUCTION;
HEADINGS.
This
Note shall be deemed to be jointly drafted by the Company and all the Purchasers
and shall not be construed against any person as the drafter hereof. The
headings of this Note are for convenience of reference and shall not form part
of, or affect the interpretation of, this Note.
(20) FAILURE
OR INDULGENCE NOT WAIVER.
No
failure or delay on the part of the Holder in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.
(21) DISPUTE
RESOLUTION.
In the
case of a dispute as to the determination of the Closing Bid Price, the Closing
Sale Price or the Weighted Average Price or the arithmetic calculation of the
Conversion Rate or any Redemption Price, the Company shall submit the disputed
determinations or arithmetic calculations via facsimile within one (1) Business
Day of receipt, or deemed receipt, of the Conversion Notice or Redemption Notice
or other event giving rise to such dispute, as the case may be, to the Holder.
If the Holder and the Company are unable to agree upon such determination or
calculation within one (1) Business Day of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall,
within one (1) Business Day submit via facsimile (a) the disputed determination
of the Closing Bid Price, the Closing Sale Price or the Weighted Average Price
to an independent, reputable investment bank selected by the Company and
approved by the Holder or (b) the disputed arithmetic calculation of the
Conversion Rate or any Redemption Price to the Company's independent, outside
accountant. The Company, at the Company's expense, shall cause the investment
bank or the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the Holder of the results no later
than
five (5) Business Days from the time it receives the disputed determinations
or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.
14
(22) NOTICES;
PAYMENTS.
(a) Notices.
Whenever notice is required to be given under this Note, unless otherwise
provided herein, such notice shall be given in accordance with Section 9(f)
of
the Securities Purchase Agreement. The Company shall provide the Holder with
prompt written notice of all actions taken pursuant to this Note, including
in
reasonable detail a description of such action and the reason therefore. Without
limiting the generality of the foregoing, the Company will give written notice
to the Holder (i) immediately upon any adjustment of the Conversion Price,
setting forth in reasonable detail, and certifying, the calculation of such
adjustment and (ii) at least twenty (20) days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend
or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights
to
vote with respect to any Fundamental Transaction, dissolution or liquidation,
provided in each case that such information shall be made known to the public
prior to or in conjunction with such notice being provided to the
Holder.
(b) Payments.
Whenever any payment of cash is to be made by the Company to any Person pursuant
to this Note, such payment shall be made in lawful money of the United States
of
America by a check drawn on the account of the Company and sent via overnight
courier service to such Person at such address as previously provided to the
Company in writing (which address, in the case of each of the Purchasers, shall
initially be as set forth on the Schedule of Buyers attached to the Securities
Purchase Agreement); provided that the Holder may elect to receive a payment
of
cash via wire transfer of immediately available funds by providing the Company
with prior written notice setting out such request and the Holder's wire
transfer instructions. Whenever any amount expressed to be due by the terms
of
this Note is due on any day which is not a Business Day, the same shall instead
be due on the next succeeding day which is a Business Day and, in the case
of
any Interest Date which is not the date on which this Note is paid in full,
the
extension of the due date thereof shall not be taken into account for purposes
of determining the amount of Interest due on such date. Any amount of Principal
or other amounts due under the Transaction Documents which is not paid when
due
shall result in a late charge being incurred and payable by the Company in
an
amount equal to interest on such amount at the rate of twelve percent (12%)
per
annum from the date such amount was due until the same is paid in full
("Late
Charge").
(23) CANCELLATION.
After
all Principal, accrued Interest and other amounts at any time owed on this
Note
have been paid in full, this Note shall automatically be deemed canceled, shall
be surrendered to the Company for cancellation and shall not be
reissued.
(24) WAIVER
OF NOTICE.
To the
extent permitted by law, the Company hereby waives demand, notice, protest
and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note and the Securities Purchase
Agreement.
15
(25) GOVERNING
LAW; JURISDICTION;
SEVERABILITY; JURY TRIAL.
This
Note shall be construed and enforced in accordance with, and all questions
concerning the construction, validity, interpretation and performance of this
Note shall be governed by, the internal laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New York.
The Company hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or
with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that
the
venue of such suit, action or proceeding is improper. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Note.
Nothing contained herein shall be deemed or operate to preclude the Holder
from
bringing suit or taking other legal action against the Company in any other
jurisdiction to collect on the Company's obligations to the Holder, to realize
on any collateral or any other security for such obligations, or to enforce
a
judgment or other court ruling in favor of the Holder. THE
COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED
HEREBY.
(26) CERTAIN
DEFINITIONS.
For
purposes of this Note, the following terms shall have the following
meanings:
(a) "Approved
Stock Plan"
means
any employee benefit plan which has been or hereafter is approved by the Board
of Directors of the Company, pursuant to which the Company's securities may
be
issued to any employee, officer or director for services provided to the
Company.
(b) "Bloomberg"
means
Bloomberg Financial Markets.
(c) "Business
Day"
means
any day other than Saturday, Sunday or other day on which commercial banks
in
The City of New York or The City of Denver are authorized or required by law
to
remain closed.
(d) "Change
of Control"
means
any Fundamental Transaction other than (A) any reorganization, recapitalization
or reclassification of Common Stock, in which holders of the Company's voting
power immediately prior to such reorganization, recapitalization or
reclassification continue after such reorganization, recapitalization or
reclassification to hold publicly traded securities and, directly or indirectly,
the voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent if other
than a corporation) of such entity or entities, or (B) pursuant to a migratory
merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company.
16
(e) "Closing
Bid Price"
and
"Closing
Sale Price"
means,
for any security as of any date, the last closing bid price and last closing
trade price, respectively, for such security on the Principal Market, as
reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing
trade price, as the case may be, then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m., New York Time, as reported
by Bloomberg, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the last closing bid price or
last
trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or
last
trade price, respectively, of such security in the over-the-counter market
on
the electronic bulletin board for such security as reported by Bloomberg, or,
if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the "pink
sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).
If
the Closing Bid Price or the Closing Sale Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Closing Bid
Price or the Closing Sale Price, as the case may be, of such security on such
date shall be the fair market value as mutually determined by the Company and
the Holder. If the Company and the Holder are unable to agree upon the fair
market value of such security, then such dispute shall be resolved pursuant
to
Section 21. All such determinations to be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar transaction during
the
applicable calculation period.
(f) "Closing
Date"
shall
have the meaning set forth in the Securities Purchase Agreement, which date
is
the date the Company initially issued Notes pursuant to the terms of the
Securities Purchase Agreement.
(g) "Contingent
Obligation"
means,
as to any Person, any direct or indirect liability, contingent or otherwise,
of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto.
(h) "Convertible
Securities"
means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for Common Stock.
(i) "Eligible
Market"
means
The New York Stock Exchange, Inc., the American Stock Exchange, The NASDAQ
Global Select Market, The NASDAQ Global Market or The NASDAQ Capital
Market.
17
(j) "Effective
Date"
has the
meaning ascribed to such term in the Registration Rights Agreement.
(k) "Excluded
Securities"
means
any Common Stock issued or issuable: (i) in connection with any Approved Stock
Plan; (ii) upon conversion of the Notes or the exercise of the Warrants; (iii)
upon conversion of any Options or Convertible Securities which are outstanding
on the day immediately preceding the Subscription Date, provided that the terms
of such Options or Convertible Securities are not amended, modified or changed
on or after the Subscription Date; (iv) in connection with mergers,
acquisitions, strategic business partnerships or joint ventures, in each case
with non-affiliated third parties and otherwise on an arm's-length basis, the
primary purpose of which is not to raise additional capital and (v) upon the
issuance of Options or the exercise of any Options issued to financial
institutions in connection with commercial credit agreements or issuance of
non-convertible debt by the Company.
(l) "Fundamental
Transaction"
means
that the Company shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person or Persons, or (ii) sell, assign,
transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, or (iii) allow another
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than the 50% of the outstanding shares of Voting Stock (not
including any shares of Voting Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to,
such
purchase, tender or exchange offer), or (iv) consummate a stock purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than the 50% of the
outstanding shares of Voting Stock (not including any shares of Voting Stock
held by the other Person or other Persons making or party to, or associated
or
affiliated with the other Persons making or party to, such stock purchase
agreement or other business combination), (v) reorganize, recapitalize or
reclassify its Common Stock or (vi) any "person" or "group" (as these terms
are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall
become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act),
directly or indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock.
(m) "GAAP"
means
United States generally accepted accounting principles, consistently
applied.
(n) "Indebtedness"
of any
Person means, without duplication (i) all indebtedness for borrowed money,
(ii)
all obligations issued, undertaken or assumed as the deferred purchase price
of
property or services, including (without limitation) "capital leases" in
accordance with generally accepted accounting principles (other than trade
payables entered into in the ordinary course of business), (iii) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (iv) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses,
(v) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with respect
to any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in
the
Trigger Event are limited to repossession or sale of such property), (vi) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (vii) all
indebtedness referred to in clauses (i) through (vi) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment
of
such indebtedness, and (viii) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (i)
through (vii) above.
18
(o) "Options"
means
any rights, warrants or options to subscribe for or purchase shares of Common
Stock or Convertible Securities.
(p) "Parent
Entity"
of a
Person means an entity that, directly or indirectly, controls the applicable
Person and whose common stock or equivalent equity security is quoted or listed
on an Eligible Market, or, if there is more than one such Person or Parent
Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental
Transaction.
(q) "Permitted
Indebtedness"
means
(i) the Indebtedness evidenced by this Note and the Other Notes and (ii)
Permitted Senior Indebtedness and (iii) bonds required to be posted by the
company to obtain regulatory permits, licenses or insurance as part of
conducting its business.
(r) "Permitted
Senior Indebtedness"
the
principal of (and premium, if any), interest on, and all fees and other amounts
(including, without limitation, any reasonable out-of-pocket costs, enforcement
expenses (including reasonable out-of-pocket legal fees and disbursements),
collateral protection expenses and other reimbursement or indemnity obligations
relating thereto) payable by Company and/or its Subsidiaries under or in
connection with (1) [INSERT DESCRIPTION OF DEBT FINANCING] and (2) [INSERT
DESCRIPTION OF PRODUCTION BASED DEBT FINANCING]; provided, however, that the
aggregate amount of Indebtedness outstanding at any time under clause (2) of
the
foregoing does not exceed $7,500,000.
(s) "Permitted
Liens"
means
(i) any Lien for taxes not yet due or delinquent or being contested in good
faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, (ii) any statutory Lien arising in the
ordinary course of business by operation of law with respect to a liability
that
is not yet due or delinquent, (iii) any Lien created by operation of law, such
as materialmen's liens, mechanics' liens and other similar liens, arising in
the
ordinary course of business with respect to a liability that is not yet due
or
delinquent or that are being contested in good faith by appropriate proceedings,
(iv) Liens (A) upon or in any equipment acquired or held by the Company or
any
of its Subsidiaries to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition or
lease of such equipment, or (B) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment, (v)
Liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by Liens of the type described in clauses (i) and (iv)
above, provided that any extension, renewal or replacement Lien shall be limited
to the property encumbered by the existing Lien and the principal amount of
the
Indebtedness being extended, renewed or refinanced does not increase, (vi)
leases or subleases and licenses and sublicenses granted to others in the
ordinary course of the Company's business, not interfering in any material
respect with the business of the Company and its Subsidiaries taken as a whole,
(vii) Liens in favor of customs and revenue authorities arising as a matter
of law to secure payments of custom duties in connection with the importation
of
goods, (viii)
Liens
arising from judgments, decrees or attachments in circumstances not constituting
a Trigger Event under Section 4(a)(vii), and (ix) Liens securing Permitted
Senior Indebtedness.
19
(t) "Person"
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization, any other entity and
a
government or any department or agency thereof.
(u) "Principal
Market"
means
the NASD OTC Bulletin Board.
(v) "Redemption
Notices"
means,
collectively, the Trigger Event Redemption Notices and the Change of Control
Redemption Notices, each of the foregoing, individually, a Redemption
Notice.
(w) "Redemption
Premium"
means
(i) in the case of the Trigger Events described in Section 4(a)(i) - (vi) and
(ix) - (xii), 125% or (ii) in the case of the Trigger Events described in
Section 4(a)(vii) - (viii), 100%.
(x) "Redemption
Prices"
means,
collectively, the Trigger Event Redemption Price and the Change of Control
Redemption Price, each of the foregoing, individually, a Redemption
Price.
(y) "Registration
Rights Agreement"
means
that certain registration rights agreement dated as of the Subscription Date
by
and among the Company and the initial holders of the Notes relating to, among
other things, the registration of the resale of the Common Stock issuable upon
conversion of the Notes and exercise of the Warrants.
(z) "Required
Holders"
means
the holders of Notes representing at least two-thirds (2/3rd)
of the
aggregate principal amount of the Notes then outstanding.
(aa) "SEC"
means
the United States Securities and Exchange Commission.
(bb) "Securities
Purchase Agreement"
means
that certain securities purchase agreement dated as of the Subscription Date
by
and among the Company and the initial holders of the Notes pursuant to which
the
Company issued the Notes.
(cc) "Stockholder
Approval"
has the
meaning ascribed to such term in the Securities Purchase Agreement.
20
(dd) "Stockholder
Approval Date"
has the
meaning ascribed to such term in the Securities Purchase Agreement.
(ee) "Subscription
Date"
means
December [__], 2006.
(ff) "Subsidiary"
means
any
entity in which the Company, directly or indirectly, owns any of the capital
stock or holds an equity or similar interest.
(gg) "Successor
Entity"
means
the Person, which may be the Company, formed by, resulting from or surviving
any
Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been made, provided that if such Person is not a publicly traded
entity whose common stock or equivalent equity security is quoted or listed
for
trading on an Eligible Market, Successor Entity shall mean such Person's Parent
Entity.
(hh) "Trading
Day"
means
any day on which the Common Stock is traded on the Principal Market, or, if
the
Principal Market is not the principal trading market for the Common Stock,
then
on the principal securities exchange or securities market on which the Common
Stock is then traded; provided that "Trading Day" shall not include any day
on
which the Common Stock is scheduled to trade on such exchange or market for
less
than 4.5 hours or any day that the Common Stock is suspended from trading during
the final hour of trading on such exchange or market (or if such exchange or
market does not designate in advance the closing time of trading on such
exchange or market, then during the hour ending at 4:00:00 p.m., New York
Time).
(ii) "Voting
Stock"
of a
Person means capital stock of such Person of the class or classes pursuant
to
which the holders thereof have the general voting power to elect, or the general
power to appoint, at least a majority of the board of directors, managers or
trustees of such Person (irrespective of whether or not at the time capital
stock of any other class or classes shall have or might have voting power by
reason of the happening of any contingency).
(jj) "Warrants"
has the
meaning ascribed to such term in the Securities Purchase Agreement, and shall
include all warrants issued in exchange therefor or replacement
thereof.
(kk) "Weighted
Average Price"
means,
for any security as of any date, the dollar volume-weighted average price for
such security on the Principal Market during the period beginning at 9:30:01
a.m., New York Time (or such other time as the Principal Market publicly
announces is the official open of trading), and ending at 4:00:00 p.m., New
York
Time (or such other time as the Principal Market publicly announces is the
official close of trading) as reported by Bloomberg through its "Volume at
Price" functions, or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market
on
the electronic bulletin board for such security during the period beginning
at
9:30:01 a.m., New York Time (or such other time as such market publicly
announces is the official open of trading), and ending at 4:00:00 p.m., New
York
Time (or such other time as such market publicly announces is the official
close
of trading) as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours, the average
of
the highest closing bid price and the lowest closing ask price of any of the
market makers for such security as reported in the "pink sheets" by Pink Sheets
LLC (formerly the National Quotation Bureau, Inc.). If the Weighted Average
Price cannot be calculated for a security on a particular date on any of the
foregoing bases, the Weighted Average Price of such security on such date shall
be the fair market value as mutually determined by the Company and the Holder.
If the Company and the Holder are unable to agree upon the fair market value
of
such security, then such dispute shall be resolved pursuant to Section 21.
All
such determinations to be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period.
21
(27) DISCLOSURE.
Upon
receipt or delivery by the Company of any notice in accordance with the terms
of
this Note, unless the Company has in good faith determined that the matters
relating to such notice do not constitute material, nonpublic information
relating to the Company or its Subsidiaries, the Company shall within four
(4)
Business Days after any such receipt or delivery publicly disclose such
material, nonpublic information on a Current Report on Form 8-K or otherwise.
In
the event that the Company believes that a notice contains material, nonpublic
information, relating to the Company or its Subsidiaries, the Company shall
indicate to the Holder contemporaneously with delivery of such notice, and
in
the absence of any such indication, the Holder shall be allowed to presume
that
all matters relating to such notice do not constitute material, nonpublic
information relating to the Company or its Subsidiaries.
[Signature
Page Follows]
22
IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed as of
the
Issuance Date set out above.
| |
|
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| By: | ||
|
Name:
Title:
|
||
EXHIBIT
I
CONVERSION
NOTICE
Reference
is made to the Convertible Note (the "Note")
issued
to the undersigned by Rancher Energy Corp. (the "Company").
In
accordance with and pursuant to the Note, the undersigned hereby elects to
convert the Conversion Amount (as defined in the Note) of the Note indicated
below into shares of Common Stock par value $0.00001 per share (the
"Common
Stock")
of the
Company, as of the date specified below.
|
Date
of Conversion:
___________________________________________________________________________________
|
|||||||||||
|
Aggregate
Conversion Amount to be converted:
_____________________________________________________________
|
|||||||||||
|
Please
confirm the following information:
|
|||||||||||
|
Conversion
Price:
_____________________________________________________________________________________
|
|||||||||||
|
Number
of shares of Common Stock to be issued:
_____________________________________________________________
|
|||||||||||
|
Please
issue the Common Stock into which the Note is being converted in
the
following name and to the following address:
|
|||||||||||
|
Issue
to:
____________________________________________________________________________________________
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|||||||||||
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_________________________________________________________________________________
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_________________________________________________________________________________
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Facsimile
Number:
_____________________________________________________________________________________
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|||||||||||
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Authorization:
________________________________________________________________________________________
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|||||||||||
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By:
__________________________________________________________________________________________
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|||||||||||
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Title:
___________________________________________________________________________________
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|||||||||||
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Dated:
_____________________________________________________________________________________________________
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|||||||||||
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Account
Number:
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ACKNOWLEDGMENT
The
Company hereby acknowledges this Conversion Notice and hereby directs Pacific
Stock Transfer Company to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated November __,
2006
from the Company and acknowledged and agreed to by Pacific Stock Transfer
Company.
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Name:
Title:
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[FORM
OF WARRANT]
NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
IN A
FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.
WARRANT
TO
PURCHASE
COMMON
STOCK
Warrant
No.:
Number
of
Shares of Common Stock:_____________
Date
of
Issuance: December __, 2006 ("Issuance
Date")
Rancher
Energy Corp., a Nevada corporation (the "Company"),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, [BUYERS], the registered holder
hereof or its permitted assigns (the "Holder"),
is
entitled, subject to the terms set forth below, to purchase from the Company,
at
the Exercise Price (as defined below) then in effect, upon surrender of this
Warrant to Purchase Common Stock (including any Warrants to Purchase Common
Stock issued in exchange, transfer or replacement hereof, the "Warrant"),
at
any time or times on or after the date hereof, but not after 11:59 p.m., New
York time, on the Expiration Date (as defined below), ______________
(_____________)1
fully
paid nonassessable shares of Common Stock (as defined below) (the
"Warrant
Shares").
Except as otherwise defined herein, capitalized terms in this Warrant shall
have
the meanings set forth in Section 15. This Warrant is one of the Warrants to
purchase Common Stock (the "SPA
Warrants")
issued
pursuant to Section 1 of that certain Securities Purchase Agreement, dated
as of
December __, 2006 (the "Subscription
Date"),
by
and among the Company and the investors (the "Buyers")
referred to therein (the "Securities
Purchase Agreement").
1 Insert
an
amount equal to the sum of (x) the number of Common Shares and (y) the
Conversion Shares underlying the Notes being issued to the Holder pursuant
to
the Securities Purchase Agreement.
1. EXERCISE
OF WARRANT.
(a) Mechanics
of Exercise.
Subject
to the terms and conditions hereof (including, without limitation, the
limitations set forth in Section 1(f)), this Warrant may be exercised by the
Holder on any day on or after the date hereof, in whole or in part, by
(i) delivery of a written notice, in the form attached hereto as
Exhibit
A
(the
"Exercise
Notice"),
of
the Holder's election to exercise this Warrant and (ii) (A) payment to the
Company of an amount equal to the applicable Exercise Price multiplied by the
number of Warrant Shares as to which this Warrant is being exercised (the
"Aggregate
Exercise Price")
in
cash or by wire transfer of immediately available funds or (B) by notifying
the
Company that this Warrant is being exercised pursuant to a Cashless Exercise
(as
defined in Section 1(d)). The Holder shall not be required to deliver the
original Warrant in order to effect an exercise hereunder. Execution and
delivery of the Exercise Notice with respect to less than all of the Warrant
Shares shall have the same effect as cancellation of the original Warrant and
issuance of a new Warrant evidencing the right to purchase the remaining number
of Warrant Shares. On or before the first (1st)
Business Day following the date on which the Company has received each of the
Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless
Exercise) (the "Exercise
Delivery Documents"),
the
Company shall transmit by facsimile an acknowledgment of confirmation of receipt
of the Exercise Delivery Documents to the Holder and the Company's transfer
agent (the "Transfer
Agent").
On or
before the third (3rd)
Business Day following the date on which the Company has received all of the
Exercise Delivery Documents (the "Share
Delivery Date"),
the
Company shall (X) provided that the Transfer Agent is participating in The
Depository Trust Company ("DTC")
Fast
Automated Securities Transfer Program, upon the request of the Holder, credit
such aggregate number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder's or its designee's balance account
with
DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and dispatch by overnight courier to the address as
specified in the Exercise Notice, a certificate, registered in the Company's
share register in the name of the Holder or its designee, for the number of
shares of Common Stock to which the Holder is entitled pursuant to such
exercise. Upon delivery of the Exercise Notice and Aggregate Exercise Price
referred to in clause (ii)(A) above or notification to the Company of a Cashless
Exercise referred to in Section 1(d), the Holder shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised, irrespective of the
date
of delivery of the certificates evidencing such Warrant Shares. If this Warrant
is submitted in connection with any exercise pursuant to this Section 1(a)
and
the number of Warrant Shares represented by this Warrant submitted for exercise
is greater than the number of Warrant Shares being acquired upon an exercise,
then the Company shall as soon as practicable and in no event later than three
Business Days after any exercise and at its own expense, issue a new Warrant
(in
accordance with Section 7(d)) representing the right to purchase the number
of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant
is
exercised. No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common Stock to
be
issued shall be rounded up to the nearest whole number. The Company shall pay
any and all taxes which may be payable with respect to the issuance and delivery
of Warrant Shares upon exercise of this Warrant. NOTWITHSTANDING
ANY PROVISION OF THIS WARRANT TO THE CONTRARY, UNTIL THE STOCKHOLDER APPROVAL
DATE (AS DEFINED IN THE SECURITIES PURCHASE AGREEMENT), THIS WARRANT NOT BE
EXERCISABLE.
-2-
(b) Exercise
Price.
For
purposes of this Warrant, "Exercise
Price"
means
$1.50, subject to adjustment as provided herein.
(c) Company's
Failure to Timely Deliver Securities.
If
within five (5) Trading Days after the Company's receipt of the facsimile copy
of a Exercise Notice the Company shall fail to issue and deliver a certificate
to the Holder and register such shares of Common Stock on the Company's share
register or credit the Holder's balance account with DTC for the number of
shares of Common Stock to which the Holder is entitled upon the Holder's
exercise hereunder, and if on or after such Trading Day the Holder purchases
(in
an open market transaction or otherwise) shares of Common Stock to deliver
in
satisfaction of a sale by the Holder of shares of Common Stock issuable upon
such exercise that the Holder anticipated receiving from the Company (a
"Buy-In"),
then
the Company shall, within three (3) Business Days after the Holder's request
and
in the Holder's discretion, either (i) pay cash to the Holder in an amount
equal
to the Holder's total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased (the "Buy-In
Price"),
at
which point the Company's obligation to deliver such certificate (and to issue
such shares of Common Stock) shall terminate, or (ii) promptly honor its
obligation to deliver to the Holder a certificate or certificates representing
such shares of Common Stock and pay cash to the Holder in an amount equal to
the
excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Weighted Average Price on the date of
exercise.
(d) Cashless
Exercise.
Notwithstanding
anything contained herein to the contrary, if at any time after the twelve
(12)
month anniversary of the Issuance Date, a Registration Statement (as defined
in
the Registration Rights Agreement) covering the Warrant Shares that are the
subject of an Exercise Notice (the "Unavailable
Warrant Shares")
is not
available for the resale of such Unavailable Warrant Shares, the Holder may,
in
its sole discretion, exercise this Warrant in whole or in part and, in lieu
of
making the cash payment otherwise contemplated to be made to the Company upon
such exercise in payment of the Aggregate Exercise Price, elect instead to
receive upon such exercise the "Net Number" of shares of Common Stock determined
according to the following formula (a "Cashless
Exercise"):
Net
Number = (A
x
B) - (A x C)
B
For
purposes of the foregoing formula:
A
= the
total number of shares with respect to which this Warrant is then being
exercised.
B
= the
arithmetic average of the Weighted Average Prices of the shares of Common Stock
(as reported by Bloomberg) for the five (5) consecutive Trading Days ending
on
the date immediately preceding the date of the Exercise Notice.
-3-
C
= the
Exercise Price then in effect for the applicable Warrant Shares at the time
of
such exercise.
(e) Disputes.
In the
case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall promptly issue
to the Holder the number of Warrant Shares that are not disputed and resolve
such dispute in accordance with Section 12.
(f) Limitations
on Exercises.
(1) Beneficial
Ownership.
The
Company shall not effect the exercise of this Warrant, and the Holder shall
not
have the right to exercise this Warrant, to the extent that after giving effect
to such exercise, such Person (together with such Person's affiliates) would
beneficially own in excess of 9.99% (the "Maximum
Percentage")
of the
shares of Common Stock outstanding immediately after giving effect to such
exercise. For purposes of the foregoing sentence, the aggregate number of shares
of Common Stock beneficially owned by such Person and its affiliates shall
include the number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which the determination of such sentence is being made,
but shall exclude shares of Common Stock which would be issuable upon (i)
exercise of the remaining, unexercised portion of this Warrant beneficially
owned by such Person and its affiliates and (ii) exercise or conversion of
the
unexercised or unconverted portion of any other securities of the Company
beneficially owned by such Person and its affiliates (including, without
limitation, any convertible notes or convertible preferred stock or warrants)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein. Except as set forth in the preceding sentence, for purposes
of
this paragraph, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes
of this Warrant, in determining the number of outstanding shares of Common
Stock, the Holder may rely on the number of outstanding shares of Common Stock
as reflected in (1) the Company's most recent Form 10-K, Form 10-KSB, Form
10-Q,
Form 10-QSB, Current Report on Form 8-K or other public filing with the
Securities and Exchange Commission, as the case may be, (2) a more recent public
announcement by the Company or (3) any other notice by the Company or the
Transfer Agent setting forth the number of shares of Common Stock outstanding.
For any reason at any time, upon the written or oral request of the Holder,
the
Company shall within one Business Day confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding. In any case,
the
number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including
the
SPA Notes and the SPA Warrants, by the Holder and its affiliates since the
date
as of which such number of outstanding shares of Common Stock was reported.
By
written notice to the Company, the Holder may from time to time increase or
decrease the Maximum Percentage to any other percentage not in excess of 9.99%
specified in such notice; provided that (i) any such increase will not be
effective until the sixty-first (61st)
day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of SPA
Warrants.
-4-
(2) Principal
Market Regulation.
The
Company shall not be obligated to issue any shares of Common Stock upon exercise
of this Warrant or conversion of SPA Notes and no Buyer shall be entitled to
receive any shares of Common Stock if the issuance of such shares of Common
Stock would exceed that number of shares of Common Stock which the Company
may
issue upon exercise or conversion, as applicable, of the SPA Warrants and SPA
Notes or otherwise without breaching the Company's obligations under the rules
or regulations of any applicable Eligible Market (the "Exchange
Cap"),
except that such limitation shall not apply in the event that the Company (A)
obtains the approval of its stockholders as required by the applicable rules
of
the Eligible Market for issuances of shares of Common Stock in excess of such
amount or (B) obtains a written opinion from outside counsel to the Company
that
such approval is not required, which opinion shall be reasonably satisfactory
to
the Required Holders. Until such approval or written opinion is obtained, no
Buyer shall be issued in the aggregate, upon exercise or conversion, as
applicable, of any SPA Warrants or SPA Notes, shares of Common Stock in an
amount greater than the product of the Exchange Cap multiplied by a fraction,
the numerator of which is the total number of shares of Common Stock underlying
the SPA Warrants issued to such Buyer pursuant to the Securities Purchase
Agreement on the Issuance Date and the denominator of which is the aggregate
number of shares of Common Stock underlying the SPA Warrants issued to the
Buyers pursuant to the Securities Purchase Agreement on the Issuance Date (with
respect to each Buyer, the "Exchange
Cap Allocation").
In
the event that any Buyer shall sell or otherwise transfer any of such Buyer's
SPA Warrants, the transferee shall be allocated a pro rata portion of such
Buyer's Exchange Cap Allocation, and the restrictions of the prior sentence
shall apply to such transferee with respect to the portion of the Exchange
Cap
Allocation allocated to such transferee. In the event that any holder of SPA
Warrants shall exercise all of such holder's SPA Warrants into a number of
shares of Common Stock which, in the aggregate, is less than such holder's
Exchange Cap Allocation, then the difference between such holder's Exchange
Cap
Allocation and the number of shares of Common Stock actually issued to such
holder shall be allocated to the respective Exchange Cap Allocations of the
remaining holders of SPA Warrants on a pro rata basis in proportion to the
shares of Common Stock underlying the SPA Warrants then held by each such
holder. In the event that the Company is prohibited from issuing any Warrant
Shares for which an Exercise Notice has been received as a result of the
operation of this Section 1(f)(2), the Company shall pay cash in exchange for
cancellation of such Warrant Shares, at a price per Warrant Share equal to
the
difference between the Weighted Average Price and the Exercise Price as of
the
date of the attempted exercise.
-5-
(g) Insufficient
Authorized Shares.
If at
any time from and after the Stockholder Approval Date and while any of the
Warrants remain outstanding the Company does not have a sufficient number of
authorized and unreserved shares of Common Stock to satisfy its obligation
to
reserve for issuance upon exercise of the Warrants no less than 130% of the
number of shares of Common Stock as shall from time to time be necessary to
effect the exercise of all of the Warrants then outstanding (the "Required
Reserve Amount")
(an
"Authorized
Share Failure"),
then
the Company shall immediately take all action necessary to increase the
Company's authorized shares of Common Stock to an amount sufficient to allow
the
Company to reserve the Required Reserve Amount for the Warrants then
outstanding. Without limiting the generality of the foregoing sentence, as
soon
as practicable after the date of the occurrence of an Authorized Share Failure,
but in no event later than sixty (60) days after the occurrence of such
Authorized Share Failure, the Company shall hold a meeting of its stockholders
for the approval of an increase in the number of authorized shares of Common
Stock. In connection with such meeting, the Company shall provide each
stockholder with a proxy statement and shall use its best efforts to solicit
its
stockholders' approval of such increase in authorized shares of Common Stock
and
to cause its board of directors to recommend to the stockholders that they
approve such proposal.
(h) Accelerated
Maturity.
Notwithstanding the foregoing, in the event that the Conditions to Accelerated
Maturity (as defined below) are satisfied, then the Company shall have the
right
to send a written notice (the "Accelerated
Maturity Notice")
to the
Holder on the Business Day immediately after the Measuring Period (as defined
below) (the "Accelerated
Maturity Notice Date")
indicating that the Expiration Date shall be accelerated to not earlier than
the
thirtieth (30th)
day
(the "Warrant
Cancellation Date")
following receipt of such written notice; provided, that nothing in this
subsection shall prevent the Holder from exercising this Warrant, in whole
or
part, prior to such accelerated Expiration Date. "Conditions
to Accelerated Maturity"
means
the following conditions: (i) the Common Stock shall have traded at or above
$3.50 per share on each day during the twenty (20) consecutive Trading Days
immediately prior to the Accelerated Maturity Notice Date; (ii) on each day
during the period beginning forty-five (45) days prior to the applicable date
of
determination and ending on and including the applicable date of determination
(the "Measuring
Period"),
(x)
the
Registration Statement filed pursuant to the Registration Rights Agreement
shall
be effective and available for the resale of all remaining Warrant Shares in
accordance with the terms of the Registration Rights Agreement and there shall
not have been any Grace Periods (as defined in the Registration Rights
Agreement) or
(y)
all
shares of Common Stock issuable upon exercise of the Warrants shall be eligible
for sale without restriction and without the need for registration under any
applicable federal or state securities laws;
(iii)
the
Company shall have no knowledge of any fact that would cause (x) the
Registration Statement required pursuant to the Registration Rights Agreement
not to be effective and available for the resale of all remaining Warrant Shares
in accordance with the terms of the Registration Rights Agreement or (y) any
shares of Common Stock issuable upon exercise of the Warrants not to be eligible
for sale without restriction pursuant to Rule 144(k) and any applicable state
securities laws; (iv) during
the twenty (20) consecutive Trading Days immediately prior to the Accelerated
Maturity Notice Date an average of 500,000 shares of Common Stock shall have
traded per day; provided,
that
all trades executed by the Holder or any Affiliate thereof shall be disregarded
for purposes of determining compliance with clause (iv) of the Conditions to
Accelerated Maturity; (v) on each day during the Measuring Period, the
Common
Stock
is
designated for quotation on its principal market and shall not have been
suspended from trading on such market; (vi) any applicable shares of
Common
Stock that
may
be issuable upon exercise of this Warrant after the Accelerated Maturity Notice
(without regard to any limitation on exercise of the Warrants), may be issued
in
full without violating Section 1(f) hereof and the rules or regulations of
the
Principal Market or any applicable Eligible Market; (vii) the Company otherwise
shall have been in material compliance with and shall not have materially
breached any provision, covenant, representation or warranty of any Transaction
Document (as defined in the Securities Purchase Agreement) and (viii) the
Stockholder Approval has been obtained.
-6-
2. ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
The
Exercise Price and the number of Warrant Shares shall be adjusted from time
to
time as follows:
(a) Adjustment
upon Issuance of shares of Common Stock.
If and
whenever on or after the Subscription Date and through the first anniversary
of
the later to occur of (i) the Additional Effective Date and (ii) the Initial
Effective Date (each as defined in the Registration Rights Agreement) (the
"Full
Rachet Period"),
the
Company issues or sells, or in accordance with this Section 2 is deemed to
have
issued or sold, any shares of Common Stock (including the issuance or sale
of
shares of Common Stock owned or held by or for the account of the Company,
but
excluding shares of Common Stock deemed to have been issued by the Company
in
connection with any Excluded Securities (as defined in the SPA Notes) for a
consideration per share (the "New
Issuance Price")
less
than a price (the "Applicable
Price")
equal
to the Exercise Price in effect immediately prior to such issue or sale or
deemed issuance or sale (the foregoing a "Dilutive
Issuance"),
then
immediately after such Dilutive Issuance, the Exercise Price then in effect
shall be reduced to an amount equal to the New Issuance Price. In the event
of
any Dilutive Issuance after the end of the Full Ratchet Period, then immediately
after such Dilutive Issuance, the Exercise Price then in effect shall be reduced
to an amount equal to the product of (A) the Exercise Price in effect
immediately prior to such Dilutive Issuance and (B) the quotient determined
by
dividing (1) the sum of (I) the product derived by multiplying the Exercise
Price in effect immediately prior to such Dilutive Issuance and the number
of
shares of Common Stock Deemed Outstanding immediately prior to such Dilutive
Issuance plus (II) the consideration, if any, received by the Company upon
such
Dilutive Issuance, by (2) the product derived by multiplying (I) the Exercise
Price in effect immediately prior to such Dilutive Issuance by (II) the number
of shares of Common Stock Deemed Outstanding immediately after such Dilutive
Issuance.
Upon
each such adjustment of the Exercise Price hereunder, the number of Warrant
Shares shall be adjusted to the number of shares of Common Stock determined
by
multiplying the Exercise Price in effect immediately prior to such adjustment
by
the number of Warrant Shares acquirable upon exercise of this Warrant
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment. For purposes of determining
the
adjusted Exercise Price under this Section 2(a), the following shall be
applicable:
-7-
(i)
Issuance
of Options.
If the
Company in any manner grants any Options and the lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such Option
or upon conversion, exercise or exchange of any Convertible Securities issuable
upon exercise of any such Option is less than the Applicable Price, then such
share of Common Stock shall be deemed to be outstanding and to have been issued
and sold by the Company at the time of the granting or sale of such Option
for
such price per share. For purposes of this Section 2(a)(i), the "lowest price
per share for which one share of Common Stock is issuable upon exercise of
such
Options or upon conversion, exercise or exchange of such Convertible Securities"
shall be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one share of Common
Stock upon the granting or sale of the Option, upon exercise of the Option
and
upon conversion, exercise or exchange of any Convertible Security issuable
upon
exercise of such Option. No further adjustment of the Exercise Price or number
of Warrant Shares shall be made upon the actual issuance of such shares of
Common Stock or of such Convertible Securities upon the exercise of such Options
or upon the actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Convertible Securities.
(ii)
Issuance
of Convertible Securities.
If the
Company in any manner issues or sells any Convertible Securities and the lowest
price per share for which one share of Common Stock is issuable upon the
conversion, exercise or exchange thereof is less than the Applicable Price,
then
such share of Common Stock shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this
Section 2(a)(ii), the "lowest price per share for which one share of Common
Stock is issuable upon the conversion, exercise or exchange" shall be equal
to
the sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to one share of Common Stock upon the issuance
or
sale of the Convertible Security and upon conversion, exercise or exchange
of
such Convertible Security. No further adjustment of the Exercise Price or number
of Warrant Shares shall be made upon the actual issuance of such shares of
Common Stock upon conversion, exercise or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is
made
upon exercise of any Options for which adjustment of this Warrant has been
or is
to be made pursuant to other provisions of this Section 2(a), no further
adjustment of the Exercise Price or number of Warrant Shares shall be made
by
reason of such issue or sale.
-8-
(iii)
Change
in Option Price or Rate of Conversion.
If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion, exercise or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible
into
or exercisable or exchangeable for shares of Common Stock increases or decreases
at any time, the Exercise Price and the number of Warrant Shares in effect
at
the time of such increase or decrease shall be adjusted to the Exercise Price
and the number of Warrant Shares which would have been in effect at such time
had such Options or Convertible Securities provided for such increased or
decreased purchase price, additional consideration or increased or decreased
conversion rate, as the case may be, at the time initially granted, issued
or
sold. For purposes of this Section 2(a)(iii), if the terms of any Option or
Convertible Security that was outstanding as of the date of issuance of this
Warrant are increased or decreased in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the shares
of
Common Stock deemed issuable upon exercise, conversion or exchange thereof
shall
be deemed to have been issued as of the date of such increase or decrease.
No
adjustment pursuant to this Section 2(a) shall be made if such adjustment would
result in an increase of the Exercise Price then in effect or a decrease in
the
number of Warrant Shares.
(iv)
Calculation
of Consideration Received.
In case
any Option is issued in connection with the issue or sale of other securities
of
the Company, together comprising one integrated transaction, the Options will
be
deemed to have been issued for the difference of (x) the aggregate fair market
value of such Options and other securities issued or sold in such integrated
transaction, less (y) the fair market value of the securities other than such
Option, issued or sold in such transaction and the other securities issued
or
sold in such integrated transaction will be deemed to have been issued or sold
for the balance of the consideration received by the Company. If any shares
of
Common Stock, Options or Convertible Securities are issued or sold or deemed
to
have been issued or sold for cash, the consideration received therefor will
be
deemed to be the net amount received by the Company therefor. If any shares
of
Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of such consideration received by
the
Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the Weighted Average Price of such security
on
the date of receipt. If any shares of Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of such portion
of
the net assets and business of the non-surviving entity as is attributable
to
such shares of Common Stock, Options or Convertible Securities, as the case
may
be. The fair value of any consideration other than cash or securities will
be
determined jointly by the Company and the Required Holders. If such parties
are
unable to reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the "Valuation
Event"),
the
fair value of such consideration will be determined within five (5) Business
Days after the tenth day following the Valuation Event by an independent,
reputable appraiser jointly selected by the Company and the Required Holders.
The determination of such appraiser shall be final and binding upon all parties
absent manifest error and the fees and expenses of such appraiser shall be
borne
by the Company.
-9-
(v)
Record
Date.
If the
Company takes a record of the holders of shares of Common Stock for the purpose
of entitling them (A) to receive a dividend or other distribution payable
in shares of Common Stock, Options or in Convertible Securities or (B) to
subscribe for or purchase shares of Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue
or
sale of the shares of Common Stock deemed to have been issued or sold upon
the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case
may
be.
(b) Adjustment
upon Subdivision or Combination of Common Stock.
If the
Company at any time on or after the Subscription Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of
its
outstanding shares of Common Stock into a greater number of shares, the Exercise
Price in effect immediately prior to such subdivision will be proportionately
reduced and the number of Warrant Shares will be proportionately increased.
If
the Company at any time on or after the Subscription Date combines (by
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately decreased.
Any adjustment under this Section 2(b) shall become effective at the close
of
business on the date the subdivision or combination becomes
effective.
(c) Other
Events.
If any
event occurs of the type contemplated by the provisions of this Section 2 but
not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of Warrant Shares
so
as to protect the rights of the Holder; provided that no such adjustment
pursuant to this Section 2(c) will increase the Exercise Price or decrease
the
number of Warrant Shares as otherwise determined pursuant to this Section
2.
-10-
3. RIGHTS
UPON DISTRIBUTION OF ASSETS.
If the
Company shall declare or make any dividend or other distribution of its assets
(or rights to acquire its assets) to holders of shares of Common Stock, by
way
of return of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property or options by way
of a
dividend, spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a "Distribution"),
at
any time after the issuance of this Warrant, then, in each such
case:
(a) any
Exercise Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of shares of Common Stock
entitled to receive the Distribution shall be reduced, effective as of the
close
of business on such record date, to a price determined by multiplying such
Exercise Price by a fraction of which (i) the numerator shall be the Weighted
Average Price of the shares of Common Stock on the Trading Day immediately
preceding such record date minus the value of the Distribution (as determined
in
good faith by the Company's Board of Directors) applicable to one share of
shares of Common Stock, and (ii) the denominator shall be the Weighted Average
Price of the shares of Common Stock on the Trading Day immediately preceding
such record date; and
(b) the
number of Warrant Shares shall be increased to a number of shares equal to
the
number of shares of Common Stock obtainable immediately prior to the close
of
business on the record date fixed for the determination of holders of shares
of
Common Stock entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding paragraph (a); provided
that in the event that the Distribution is of shares of Common Stock (or common
stock) ("Other
Shares of Common Stock")
of a
company whose common shares are traded on a national securities exchange or
a
national automated quotation system, then the Holder may elect to receive a
warrant to purchase Other Shares of Common Stock in lieu of an increase in
the
number of Warrant Shares, the terms of which shall be identical to those of
this
Warrant, except that such warrant shall be exercisable into the number of shares
of Other Shares of Common Stock that would have been payable to the Holder
pursuant to the Distribution had the Holder exercised this Warrant immediately
prior to such record date and with an aggregate exercise price equal to the
product of the amount by which the exercise price of this Warrant was decreased
with respect to the Distribution pursuant to the terms of the immediately
preceding paragraph (a) and the number of Warrant Shares calculated in
accordance with the first part of this paragraph (b).
4. PURCHASE
RIGHTS; FUNDAMENTAL TRANSACTIONS.
(a) Purchase
Rights.
In
addition to any adjustments pursuant to Section 2 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights
to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the "Purchase
Rights"),
then
the Holder will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any limitations on
the
exercise of this Warrant) immediately before the date on which a record is
taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of shares of Common Stock
are
to be determined for the grant, issue or sale of such Purchase
Rights.
-11-
(b) Fundamental
Transactions.
The
Company shall not enter into or be party to a Fundamental Transaction unless
(i) the Successor Entity assumes in writing all of the obligations of the
Company under this Warrant and the other Transaction Documents in accordance
with the provisions of this Section (4)(b) pursuant to written agreements in
form and substance satisfactory to the Required Holders and approved by the
Required Holders prior to such Fundamental Transaction, including agreements
to
deliver to each holder of Warrants in exchange for such Warrants a security
of
the Successor Entity evidenced by a written instrument substantially similar
in
form and substance to this Warrant, including, without limitation, an adjusted
exercise price equal to the value for the shares of Common Stock reflected
by
the terms of such Fundamental Transaction, and exercisable for a corresponding
number of shares of capital stock equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without regard to
any
limitations on the exercise of this Warrant) prior to such Fundamental
Transaction, and satisfactory to the Required Holders. Upon the occurrence
of
any Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant referring to the "Company" shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under
this
Warrant with the same effect as if such Successor Entity had been named as
the
Company herein. Upon consummation of the Fundamental Transaction, the Successor
Entity shall deliver to the Holder confirmation that there shall be issued
upon
exercise of this Warrant at
any
time after the consummation of the Fundamental Transaction, in lieu of the
shares of the Common Stock (or
other
securities, cash, assets or other property) issuable
upon the exercise of the Warrant prior to such Fundamental Transaction, such
shares of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights) which the Holder
would have been entitled to receive upon the happening of such Fundamental
Transaction had this Warrant been converted immediately prior to such
Fundamental Transaction, as adjusted in accordance with the provisions of this
Warrant.
In
addition to and not in substitution for any other rights hereunder, prior to
the
consummation of any Fundamental Transaction pursuant to which holders of shares
of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a "Corporate
Event"),
the
Company shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon an exercise of this Warrant
at
any
time after the consummation of the Fundamental Transaction but
prior
to the Expiration Date,
in lieu
of the shares of the Common Stock (or
other
securities, cash, assets or other property) issuable
upon the exercise of this Warrant prior to such Fundamental
Transaction,
such
shares of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights) which the Holder
would have been entitled to receive upon the happening of such Fundamental
Transaction had this Warrant been exercised immediately prior to such
Fundamental Transaction. Provision
made pursuant to the preceding sentence shall be in a form and substance
reasonably satisfactory to the Required Holders. The provisions of this Section
shall apply similarly and equally to successive Fundamental Transactions and
Corporate Events and shall be applied without regard to any limitations on
the
exercise of this Warrant.
-12-
(c) Notwithstanding
the foregoing, in the event of a Fundamental Transaction other than one in
which
a Successor Entity that is a publicly traded corporation whose stock is quoted
or listed for trading on an Eligible Market assumes this Warrant such that
the
Warrant shall be exercisable for the publicly traded Common Stock of such
Successor Entity, at the request of the Holder delivered before the 90th day
after such Fundamental Transaction, the
Company (or the Successor Entity) shall purchase this Warrant from the Holder
by
paying to the Holder, within five Business Days after such request (or, if
later, on the effective date of the Fundamental Transaction),
cash in
an amount equal to the Black Scholes Value of the remaining unexercised portion
of this Warrant on the date of such Fundamental Transaction.
5. NONCIRCUMVENTION.
The
Company hereby covenants and agrees that the Company will not, by amendment
of
its Articles of Incorporation, Bylaws or through any reorganization, transfer
of
assets, consolidation, merger, scheme of arrangement, dissolution, issue or
sale
of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, and will at
all
times in good faith carry out all the provisions of this Warrant and take all
action as may be required to protect the rights of the Holder. Without limiting
the generality of the foregoing, the Company (i) shall not increase the par
value of any shares of Common Stock receivable upon the exercise of this Warrant
above the Exercise Price then in effect, (ii) shall take all such actions
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant, and (iii) shall, so long as any of the SPA Warrants
are outstanding, subsequent to the Stockholder Approval Date take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of
the
SPA Warrants, 130% of the number of shares of Common Stock as shall from time
to
time be necessary to effect the exercise of the SPA Warrants then outstanding
(without regard to any limitations on exercise).
6. WARRANT
HOLDER NOT DEEMED A STOCKHOLDER.
Except
as otherwise specifically provided herein, the Holder, solely in such Person's
capacity as a holder of this Warrant, shall not be entitled to vote or receive
dividends or be deemed the holder of share capital of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the Holder, solely in such Person's capacity as the Holder of this Warrant,
any of the rights of a stockholder of the Company or any right to vote, give
or
withhold consent to any corporate action (whether any reorganization, issue
of
stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares
which such Person is then entitled to receive upon the due exercise of this
Warrant. In addition, nothing contained in this Warrant shall be construed
as
imposing any liabilities on the Holder to purchase any securities (upon exercise
of this Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 6, the Company shall provide the Holder with copies
of the same notices and other information given to the stockholders of the
Company generally, contemporaneously with the giving thereof to the
stockholders.
-13-
7. REISSUANCE
OF WARRANTS.
(a) Transfer
of Warrant.
If this
Warrant is to be transferred, the Holder shall surrender this Warrant to the
Company, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Warrant (in accordance with Section 7(d)), registered as
the
Holder may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less then the total number of
Warrant Shares then underlying this Warrant is being transferred, a new Warrant
(in accordance with Section 7(d)) to the Holder representing the right to
purchase the number of Warrant Shares not being transferred.
(b) Lost,
Stolen or Mutilated Warrant.
Upon
receipt by the Company of evidence reasonably satisfactory to the Company of
the
loss, theft, destruction or mutilation of this Warrant, and, in the case of
loss, theft or destruction, of any indemnification undertaking by the Holder
to
the Company in customary form and, in the case of mutilation, upon surrender
and
cancellation of this Warrant, the Company shall execute and deliver to the
Holder a new Warrant (in accordance with Section 7(d)) representing the right
to
purchase the Warrant Shares then underlying this Warrant.
(c) Exchangeable
for Multiple Warrants.
This
Warrant is exchangeable, upon the surrender hereof by the Holder at the
principal office of the Company, for a new Warrant or Warrants (in accordance
with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant
will represent the right to purchase such portion of such Warrant Shares as
is
designated by the Holder at the time of such surrender; provided, however,
that
no Warrants for fractional shares of Common Stock shall be given.
(d) Issuance
of New Warrants.
Whenever the Company is required to issue a new Warrant pursuant to the terms
of
this Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
(ii) shall represent, as indicated on the face of such new Warrant, the right
to
purchase the Warrant Shares then underlying this Warrant (or in the case of
a
new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant
Shares designated by the Holder which, when added to the number of shares of
Common Stock underlying the other new Warrants issued in connection with such
issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of such
new Warrant which is the same as the Issuance Date, and (iv) shall have the
same
rights and conditions as this Warrant.
8. NOTICES.
Whenever notice is required to be given under this Warrant, unless otherwise
provided herein, such notice shall be given in accordance with Section 9(f)
of
the Securities Purchase Agreement. The Company shall provide the Holder with
prompt written notice of all actions taken pursuant to this Warrant, including
in reasonable detail a description of such action and the reason therefore.
Without limiting the generality of the foregoing, the Company will give written
notice to the Holder (i) immediately upon any adjustment of the Exercise Price,
setting forth in reasonable detail, and certifying, the calculation of such
adjustment and (ii) at least fifteen days prior to the date on which the Company
closes its books or takes a record (A) with respect to any dividend or
distribution upon the shares of Common Stock, (B) with respect to any grants,
issuances or sales of any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property to holders of shares of Common
Stock or (C) for determining rights to vote with respect to any Fundamental
Transaction, dissolution or liquidation, provided in each case that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to the Holder.
-14-
9. AMENDMENT
AND WAIVER.
Except
as otherwise provided herein, the provisions of this Warrant may be amended
and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company has obtained the
written consent of the Required Holders; provided that no such action may
increase the exercise price of any SPA Warrant or decrease the number of shares
or class of stock obtainable upon exercise of any SPA Warrant without the
written consent of the Holder. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the SPA Warrants
then
outstanding.
10. GOVERNING
LAW.
This
Warrant shall be governed by and construed and enforced in accordance with,
and
all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the
State
of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than
the
State of New York.
11. CONSTRUCTION;
HEADINGS.
This
Warrant shall be deemed to be jointly drafted by the Company and all the Buyers
and shall not be construed against any person as the drafter hereof. The
headings of this Warrant are for convenience of reference and shall not form
part of, or affect the interpretation of, this Warrant.
12. DISPUTE
RESOLUTION.
In the
case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within two
Business Days of receipt of the Exercise Notice giving rise to such dispute,
as
the case may be, to the Holder. If the Holder and the Company are unable to
agree upon such determination or calculation of the Exercise Price or the
Warrant Shares within three Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall,
within two Business Days submit via facsimile (a) the disputed determination
of
the Exercise Price to an independent, reputable investment bank selected by
the
Company and approved by the Holder or (b) the disputed arithmetic calculation
of
the Warrant Shares to the Company's independent, outside accountant. The Company
shall cause at its expense the investment bank or the accountant, as the case
may be, to perform the determinations or calculations and notify the Company
and
the Holder of the results no later than ten Business Days from the time it
receives the disputed determinations or calculations. Such investment bank's
or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.
-15-
13. REMEDIES,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder
right
to pursue actual damages for any failure by the Company to comply with the
terms
of this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at
law
for any such breach may be inadequate. The Company therefore agrees that, in
the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
14. TRANSFER.This
Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company, except as may otherwise be required by Section 2(f)
of
the Securities Purchase Agreement.
15. CERTAIN
DEFINITIONS.
For
purposes of this Warrant, the following terms shall have the following
meanings:
(a) "Black
Scholes Value"
means
the value of this Warrant based on the Black and Scholes Option Pricing Model
obtained from the "OV" function on Bloomberg determined as of the day
immediately following the public announcement of the applicable Fundamental
Transaction and reflecting (i) a risk-free interest rate corresponding to the
U.S. Treasury rate for a period equal to the remaining term of this Warrant
as
of such date of request and (ii) an expected volatility equal to the greater
of
60% and the 100 day volatility obtained from the HVT function on
Bloomberg.
(b) "Bloomberg"
means
Bloomberg Financial Markets.
(c) "Business
Day"
means
any day other than Saturday, Sunday or other day on which commercial banks
in
The City of New York are authorized or required by law to remain
closed.
(d) "Common
Stock"
means
(i) the Company's shares of Common Stock, par value $0.00001 per share, and
(ii) any share capital into which such Common Stock shall have been changed
or any share capital resulting from a reclassification of such Common
Stock.
(e) "Common
Stock Deemed Outstanding"
means,
at any given time, the number of shares of Common Stock actually outstanding
at
such time, plus the number of shares of Common Stock deemed to be outstanding
pursuant to Sections 2(a)(i) and 2(a)(ii) hereof regardless of whether the
Options or Convertible Securities are actually exercisable at such time, but
excluding any shares of Common Stock owned or held by or for the account of
the
Company or issuable upon exercise of the SPA Warrants.
-16-
(f) "Convertible
Securities"
means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock.
(g) "Eligible
Market"
means
the Principal Market, The New York Stock Exchange, Inc., the American Stock
Exchange, The NASDAQ Global Market, The NASDAQ Global Select Market or The
NASDAQ Capital Market.
(h) "Expiration
Date"
means
the date sixty (60) months after the date the Stockholder Approval (as defined
in the Securities Purchase Agreement) is obtained or, if such date falls on
a
day other than a Business Day or on which trading does not take place on the
Principal Market (a "Holiday"),
the
next date that is not a Holiday.
(i) "Fundamental
Transaction"
means
that the Company shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, or (ii) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or
assets of the Company to another Person, or (iii) allow another Person to make
a
purchase, tender or exchange offer that is accepted by the holders of more
than
the 50% of the outstanding shares of Common Stock (not including any shares
of
Common Stock held by the Person or Persons making or party to, or associated
or
affiliated with the Persons making or party to, such purchase, tender or
exchange offer), or (iv) consummate a stock purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than the 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the other Person or other Persons
making or party to, or associated or affiliated with the other Persons making
or
party to, such stock purchase agreement or other business combination), (v)
reorganize, recapitalize or reclassify its Common Stock, or (vi) any "person"
or
"group" (as these terms are used for purposes of Sections 13(d) and 14(d) of
the
Exchange Act) is or shall become the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate
ordinary voting power represented by issued and outstanding Common
Stock.
(j) "Options"
means
any rights, warrants or options to subscribe for or purchase shares of Common
Stock or Convertible Securities.
(k) "Parent
Entity"
of a
Person means an entity that, directly or indirectly, controls the applicable
Person and whose common stock or equivalent equity security is quoted or listed
on an Eligible Market, or, if there is more than one such Person or Parent
Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental
Transaction.
(l) "Person"
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization, any other entity and
a
government or any department or agency thereof.
(m) "Principal
Market"
means
the NASD OTC Bulletin Board.
-17-
(n) "Registration
Rights Agreement"
means
that certain registration rights agreement by and among the Company and the
Buyers.
(o) "Required
Holders"
means
the holders of the SPA Warrants representing at least a majority of shares
of
Common Stock underlying the SPA Warrants then outstanding.
(p) "SPA
Notes"
means
the Notes (as defined in the Securities Purchase Agreement).
(q) "Successor
Entity"
means
the Person (or, if so elected by the Required Holders, the Parent Entity) formed
by, resulting from or surviving any Fundamental Transaction or the Person (or,
if so elected by the Required Holders, the Parent Entity) with which such
Fundamental Transaction shall have been entered into.
(r) "Trading
Day"
means
any day on which the Common Stock are traded on the Principal Market, or, if
the
Principal Market is not the principal trading market for the Common Stock,
then
on the principal securities exchange or securities market on which the Common
Stock are then traded; provided that "Trading Day" shall not include any day
on
which the Common Stock are scheduled to trade on such exchange or market for
less than 4.5 hours or any day that the Common Stock are suspended from trading
during the final hour of trading on such exchange or market (or if such exchange
or market does not designate in advance the closing time of trading on such
exchange or market, then during the hour ending at 4:00:00 p.m., New York
time).
(s) "Weighted
Average Price"
means,
for any security as of any date, the dollar volume-weighted average price for
such security on the Principal Market during the period beginning at 9:30:01
a.m., New York City time, and ending at 4:00:00 p.m., New York City time, as
reported by Bloomberg through its "Volume at Price" function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York City time,
and ending at 4:00:00 p.m., New York City time, as reported by Bloomberg, or,
if
no dollar volume-weighted average price is reported for such security by
Bloomberg for such hours, the average of the highest closing bid price and
the
lowest closing ask price of any of the market makers for such security as
reported in the "pink sheets" by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If the Weighted Average Price cannot be calculated
for
such security on such date on any of the foregoing bases, the Weighted Average
Price of such security on such date shall be the fair market value as mutually
determined by the Company and the Required Holders. If the Company and the
Required Holders are unable to agree upon the fair market value of the such
security, then such dispute shall be resolved pursuant to Section 12 with the
term "Weighted Average Price" being substituted for the term "Exercise Price."
All such determinations shall be appropriately adjusted for any share dividend,
share split or other similar transaction during such period.
[Signature
Page Follows]
-18-
IN
WITNESS WHEREOF,
the
Company has caused this Warrant to Purchase Common Stock to be duly executed
as
of the Issuance Date set out above.
|
RANCHER
ENERGY CORP.
|
||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
EXHIBIT
A
EXERCISE
NOTICE
TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT
TO PURCHASE COMMON STOCK
RANCHER
ENERGY CORP.
The
undersigned holder hereby exercises the right to purchase _________________
of
the shares of Common Stock ("Warrant
Shares")
of
Rancher Energy Corp., a Nevada corporation (the "Company"),
evidenced by the attached Warrant to Purchase Common Stock (the "Warrant").
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
1.
Form
of Exercise Price. The Holder intends that payment of the Exercise Price shall
be made as:
____________ a
"Cash
Exercise"
with
respect to _________________ Warrant Shares; and/or
____________ a
"Cashless
Exercise"
with
respect to _______________ Warrant Shares.
2.
Payment of Exercise Price. In the event that the holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.
3.
Delivery of Warrant Shares. The Company shall deliver to the holder __________
Warrant Shares in accordance with the terms of the Warrant.
Date:
_______________ __, ______
______________________________
Name
of
Registered Holder
| By: | |||
|
Name:
Title:
|
ACKNOWLEDGMENT
The
Company hereby acknowledges this Exercise Notice and hereby directs [Transfer
Agent]
to issue
the above indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated December __, 2006 from the Company and
acknowledged and agreed to by [Transfer
Agent].
|
RANCHER
ENERGY CORP.
|
||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
REGISTRATION
RIGHTS AGREEMENT
REGISTRATION
RIGHTS AGREEMENT
(this
"Agreement"),
dated
as of December __, 2006, by and among Rancher Energy Corp., a Nevada
corporation,
with
headquarters located at 999-18th
Street,
Suite 1740, Xxxxxx, Xxxxxxxx 00000
(the "Company"),
and
the undersigned buyers (each, a "Buyer",
and
collectively, the "Buyers").
WHEREAS:
A. In
connection with the Securities Purchase Agreement by and among the parties
hereto of even date herewith (the "Securities
Purchase Agreement"),
the
Company has agreed, upon the terms and subject to the conditions set forth
in
the Securities Purchase Agreement, to issue and sell to each Buyer (i)
convertible notes of the Company (the "Notes")
which
will, among other things, be convertible into shares of the Company's common
stock, par value $.00001 value per share (the "Common
Stock")
(as
converted, the "Conversion
Shares")
in
accordance with the terms of the Notes, (ii) shares (the "Common
Shares")
of
Common Stock and (iii) warrants (the "Warrants")
which
will be exercisable to purchase shares of Common Stock (as exercised
collectively, the "Warrant
Shares").
B. To
induce
the Buyers to execute and deliver the Securities Purchase Agreement, the Company
has agreed to provide certain registration rights under the Securities Act
of
1933, as amended, and the rules and regulations thereunder, or any similar
successor statute (collectively, the "1933
Act"),
and
applicable state securities laws.
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and each of the Buyers hereby agree as
follows:
1. Definitions.
Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
a. "Additional
Effectiveness Date"
means
the date the Additional Registration Statement is declared effective by the
SEC.
b. "Additional
Effectiveness Deadline"
means
the earlier to occur of (i) the date which is five (5) days after the Company
learns that no review of the Additional Registration Statement will be made
by
the staff of the SEC or that the staff has no further comments on the Additional
Registration Statement, and (ii) the date which is one hundred and twenty (120)
days after the Additional Filing Date (as defined below), or if there is a
full
review of the Additional Registration Statement by the SEC, one hundred and
fifty (150) days after the Additional Filing Date.
c. "Additional
Filing Date"
means
the date on which the Additional Registration Statement (as defined below)
is
filed with the SEC.
1
d. "Additional
Filing Deadline"
means
(i) if the Stockholder Approval (as defined in the Securities Purchase
Agreement) is not obtained by the Initial Filing Deadline and no Cutback Shares
are required to be included in the Additional Registration Statement, the date
five (5) days after the Stockholder Approval is obtained or (ii) if Cutback
Shares are required to be included in the Additional Registration Statement,
the
date six (6) months from the Initial Filing Date.
e. "Additional
Registrable Securities"
means,
(i) if the Stockholder Approval is not obtained by the Initial Filing Deadline,
(x) the Conversion Shares issuable upon conversion or redemption of the Notes
and (y) any Warrant Shares issued or issuable upon exercise of the Warrants
not
previously included on a Registration Statement, (ii) any Cutback Shares not
previously included on a Registration Statement and (iii) any share capital
of
the Company issued or issuable with respect to the Notes, the Conversion Shares,
the Warrants, the Warrant Shares or Cutback Shares, as applicable, as a result
of any stock split, stock dividend, recapitalization, exchange or similar event
or otherwise, without regard to any limitations on conversions of Notes or
exercises of the Warrants.
f. "Additional
Registration Statement"
means a
registration statement or registration statements of the Company filed under
the
1933 Act covering any Additional Registrable Securities.
g. "Additional
Required Registration Amount"
means
the sum of 130% of (i) if the Stockholder Approval is not obtained by the
Initial Filing Deadline, (x) the number of Conversion Shares issuable pursuant
to the Notes as of the trading day immediately preceding the applicable date
of
determination, and (y) the number of Warrant Shares issued and issuable pursuant
to the Warrants as of the trading day immediately preceding the applicable
date
of determination not previously included on a Registration Statement and (ii)
any Cutback Shares not previously included on a Registration Statement, all
subject to adjustment as provided in Section 2(e), without regard to any
limitations on conversions of the Notes or exercises of the
Warrants.
h. "Business
Day"
means
any day other than Saturday, Sunday or any other day on which commercial banks
in the City of New York or the City of Denver are authorized or required by
law
to remain closed.
i. "Closing
Date"
shall
mean the initial Closing Date, as set forth in the Securities Purchase
Agreement.
j. "Effective
Date"
means
the Initial Effective Date and the Additional Effective Date, as
applicable.
k. "Effectiveness
Deadline"
means
the Initial Effectiveness Deadline (as defined below) and the Additional
Effectiveness Deadline (as defined below), as applicable.
l. "Equity
Conditions"
means
each of the following conditions on each applicable date of determination:
(i)
the Common
Stock
is
designated for quotation on the Principal Market or any applicable Eligible
Market (each as defined in the Securities Purchase Agreement) and shall not
have
been suspended from trading on such exchange or market (other than suspensions
of not more than two (2) days and occurring prior to the applicable date of
determination due to business announcements by the Company) nor shall delisting
or suspension by such exchange or market been threatened or pending either
(A)
in writing by such exchange or market or (B) by falling below the then effective
minimum listing maintenance requirements of such exchange or market; (ii) the
Company shall have delivered Conversion Shares upon conversion of the Notes
and
Warrant Shares upon exercise of the Warrants to the holders on a timely basis
as
set forth in Section 2(c)(ii) of the Notes and Sections 2(a) of the Warrants;
(iii) any applicable shares of Common
Stock to
be
issued in connection with the event requiring determination may be issued in
full without violating the rules or regulations of the exchange or market upon
which the Company's Common Stock is then listed or quoted; (iv) the Company
shall not have failed to timely make any payments within five (5) Business
Days
of when such payment is due pursuant to any Transaction Document (as defined
in
the Securities Purchase Agreement; (v) there shall not have occurred either
(A)
the public announcement of a pending, proposed or intended Fundamental
Transaction (as defined in the Notes) which has not been abandoned, terminated
or consummated, or (B) an
Event
of Default (as defined in the Notes) or (C) an event that with the passage
of
time or giving of notice would constitute an Event of Default; and (vi)
the
Company otherwise shall have been in material compliance with and shall not have
materially breached any provision, covenant, representation or warranty of
any
Transaction Document.
2
m. "Equity
Conditions Failure"
means
that on any day during the period commencing ten (10) Trading Days prior to
the
applicable Registration Delay Payments Payment Date through the applicable
Registration Delay Payments Payment Date, the Equity Conditions have not been
satisfied (or waived in writing by the applicable holder of Registrable
Securities).
n. "Filing
Deadline"
means
the Initial Filing Deadline (as defined below) and the Additional Filing
Deadline, as applicable.
o. "Initial
Effective Date"
means
the date the Initial Registration Statement is declared effective by the
SEC.
p. "Initial
Effectiveness Deadline"
means
the earlier to occur of (i) the date which is five (5) days after the Company
learns that no review of the Initial Registration Statement will be made by
the
staff of the SEC or that the staff has no further comments on the Initial
Registration Statement, (ii) the date which is one hundred and twenty (120)
days
after the Closing Date, or if there is a full review of the Initial Registration
Statement by the SEC, one hundred and fifty (150) days after the Closing
Date.
q. "Initial
Filing Date"
means
the date on which the Initial Registration Statement (as defined below) is
filed
with the SEC.
r. "Initial
Filing Deadline"
means
the date seventy-five (75) days after the Closing Date.
s. "Initial
Registrable Securities"
means
(A) if the Stockholder Approval is obtained by the Initial Filing Deadline,
(i)
the Conversion Shares issued or issuable upon conversion or redemption of the
Notes, (ii) the Common Shares, (iii) the Warrant Shares issued or issuable
upon
exercise of the Warrants and (iv) any share capital of the Company issued or
issuable with respect to the Common Shares, the Warrant Shares or the Warrants,
the Conversion Shares and the Notes, as a result of any stock split, stock
dividend, recapitalization, exchange or similar event or otherwise, without
regard to any limitations on conversions of the Notes or exercises of the
Warrants and (B) if the Stockholder Approval is not obtained by the Initial
Filing Deadline, the Common Shares.
3
t. "Initial
Required Registration Amount"
means
(I) (A) if the Stockholder Approval is obtained by the Initial Filing Deadline,
130% of the sum of (i), the number of Conversion Shares issued or issuable
pursuant to the Notes as of the trading day immediately preceding the applicable
date of determination, (ii) the number of Common Shares issued and (iii) the
number of Warrant Shares issued and issuable pursuant to the Warrants as of
the
trading day immediately preceding the applicable date of determination, all
subject to adjustment as provided in Section 2(e), without regard to any
limitations on conversions of the Notes or exercises of the Warrants, and (B)
if
the Stockholder Approval is not obtained by the Initial Filing Deadline, the
number of Common Shares issued or (II) such other amount as may be required
by
the staff of the SEC. Any shares included under clause (I) of the immediately
preceding sentence but excluded from the definition of Initial Required
Registration Amount because of clause (II), are referred to herein as the
"Cutback
Shares".
u. "Initial
Registration Statement"
means a
registration statement or registration statements of the Company filed under
the
1933 Act covering the Initial Registrable Securities.
v. "Investor"
means a
Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights
under this Agreement and who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 and any transferee or assignee thereof
to
whom a transferee or assignee assigns its rights under this Agreement and who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9.
w. "Person"
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
x. "register,"
"registered,"
and
"registration"
refer
to a registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant
to
Rule 415 and the declaration or ordering of effectiveness of such Registration
Statement(s) by the SEC.
y. "Registrable
Securities"
means
the Initial Registrable Securities and the Additional Registrable
Securities.
z. "Registration
Delay Payments Conversion Price"
means,
with respect to any Registration Delay Payments Payment Date, that
price which shall be the price
computed as 90% of the arithmetic average of the Weighted Average Price (as
defined in the Notes) of the Common Stock on each of the ten (10) consecutive
Trading Days ending on the Trading Day immediately preceding the applicable
Registration Delay Payments Payment Date (each, a "Registration
Delay Payments Measuring Period").
All
such determinations to be appropriately adjusted for any stock split, stock
dividend, stock combination or other similar transaction during such
Registration Delay Payments Measuring Period.
4
aa. "Registration
Statement"
means a
registration statement or registration statements of the Company filed under
the
1933 Act covering the Registrable Securities.
bb. "Required
Holders"
means
the holders of at least a majority of the Registrable Securities.
cc. "Rule
415"
means
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis.
dd. "SEC"
means
the United States Securities and Exchange Commission.
2. Registration.
a. Initial
Mandatory Registration.
The
Company shall prepare, and, as soon as practicable, but in no event later than
the Initial Filing Deadline, file with the SEC the Initial Registration
Statement on Form S-3 covering the resale of all of the Initial Registrable
Securities. In the event that Form S-3 is unavailable for such a registration,
the Company shall use such other form as is available for such a registration
on
another appropriate form reasonably acceptable to the Required Holders, subject
to the provisions of Section 2(e). The Initial Registration Statement prepared
pursuant hereto shall register for resale at least the number of shares of
Common Stock equal to the Initial Required Registration Amount determined as
of
date the Registration Statement is initially filed with the SEC. The Initial
Registration Statement shall contain (except if otherwise directed by the
Required Holders) the "Selling
Stockholders"
and
"Plan
of Distribution"
sections in substantially the form attached hereto as Exhibit
B.
The
Company shall use its best efforts to have the Initial Registration Statement
declared effective by the SEC as soon as practicable, but in no event later
than
the Initial Effectiveness Deadline. By 9:30 am on the date following the Initial
Effective Date,
the
Company shall file with the SEC in accordance with Rule 424 under the 1933
Act
the final prospectus to be used in connection with sales pursuant to such
Registration Statement.
b. Additional
Mandatory Registrations.
The
Company shall prepare, and, as soon as practicable but in no event later than
the Additional Filing Deadline, file with the SEC an Additional Registration
Statement on Form S-3 covering the resale of all of the Additional Registrable
Securities not previously registered on an Additional Registration Statement
hereunder. To the extent the staff of the SEC does not permit the Additional
Required Registration Amount to be registered on the Additional Registration
Statement, which are Cutback Shares hereunder, the Company shall file Additional
Registration Statements successively trying to register on each such Additional
Registration Statement the maximum number of remaining Additional Registrable
Securities until the Additional Required Registration Amount has been registered
with the SEC. In the event that Form S-3 is unavailable for such a registration,
the Company shall use such other form as is available for such a registration
on
another appropriate form reasonably acceptable to the Required Holders, subject
to the provisions of Section 2(e). Each Additional Registration Statement
prepared pursuant hereto shall register for resale at least that number of
shares of Common Stock equal to the Additional Required Registration Amount
as
of date the Registration Statement is initially filed with the SEC. Each
Additional Registration Statement shall contain (except if otherwise directed
by
the Required Holders) the "Selling
Stockholders"
and
"Plan
of Distribution"
sections in substantially the form attached hereto as Exhibit
B.
The
Company shall use its best efforts to have each Additional Registration
Statement declared effective by the SEC as soon as practicable, but in no event
later than the Additional Effectiveness Deadline. By 9:30 am on the date
following the Additional Effective Date,
the
Company shall file with the SEC in accordance with Rule 424 under the 1933
Act
the final prospectus to be used in connection with sales pursuant to such
Registration Statement.
5
c. Allocation
of Registrable Securities.
The
initial number of Registrable Securities included in any Registration Statement
and any increase in the number of Registrable Securities included therein shall
be allocated pro rata among the Investors based on the number of Registrable
Securities held by each Investor at the time the Registration Statement covering
such initial number of Registrable Securities or increase thereof is declared
effective by the SEC. In the event that an Investor sells or otherwise transfers
any of such Investor's Registrable Securities, each transferee shall be
allocated a pro rata portion of the then remaining number of Registrable
Securities included in such Registration Statement for such transferor. Any
shares of Common Stock included in a Registration Statement and which remain
allocated to any Person which ceases to hold any Registrable Securities covered
by such Registration Statement shall be allocated to the remaining Investors,
pro rata based on the number of Registrable Securities then held by such
Investors which are covered by such Registration Statement. In no event shall
the Company include any securities other than Registrable Securities on any
Registration Statement filed with the SEC during the 12-month period following
the Closing Date without the prior written consent of the Required Holders
except for those shares of Common Stock and warrants to purchase shares of
Common Stock identified on Schedule
2(c)(i)
attached
hereto (which shall exclude any securities for which the Company has obtained
waivers pursuant to Section 7(xiv) of the Securities Purchase Agreement). In
no
event shall the Company include any securities other than Registrable Securities
on any Registration Statement filed with the SEC after the 12-month period
following the Closing Date without the prior written consent of the Required
Holders except for up to 3,500,000 shares of Common Stock issuable by the
Company upon exercise of warrants issued by the Company to Knight Capital
Markets, LLC, and the Company's other placement agents on the Closing Date,
no
more than 5,000,000 shares of Common Stock issuable by the Company upon exercise
of warrants to be issued by the Company to the Company's secured lenders and
those shares of Common Stock and warrants to purchase shares of Common Stock
identified on Schedule
2(c)(ii)
attached
hereto. If the SEC requires that the Company register less than the amount
of
shares of Common Stock originally included on any Registration Statement at
the
time it was filed, the Registrable Securities on such registration statement
and
any other securities allowed to be registered on such Registration Statement
(as
set forth below) shall be decreased on a pro rata basis.
d. Legal
Counsel.
Subject
to Section 5 hereof, the Required Holders shall have the right to select one
legal counsel to review and oversee any registration pursuant to this Section
2
("Legal
Counsel"),
which
shall be Xxxxxxx Xxxx & Xxxxx LLP or such other counsel as thereafter
designated by the Required Holders. The Company and Legal Counsel shall
reasonably cooperate with each other in performing the Company's obligations
under this Agreement.
6
e. Ineligibility
for Form S-3.
In the
event that Form S-3 is not available for the registration of the resale of
Registrable Securities hereunder, the Company shall (i) register the resale
of
the Registrable Securities on another appropriate form reasonably acceptable
to
the Required Holders and (ii) undertake to register the Registrable Securities
on Form S-3 as soon as such form is available, provided that the Company shall
maintain the effectiveness of the Registration Statement then in effect until
such time as a Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the SEC.
f. Sufficient
Number of Shares Registered.
In the
event the number of shares available under a Registration Statement filed
pursuant to Section 2(a) is insufficient to cover all of the Registrable
Securities required to be covered by such Registration Statement or an
Investor's allocated portion of the Registrable Securities pursuant to Section
2(b), the Company shall amend the applicable Registration Statement, or file
a
new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover at least the Required Registration Amount
as of the trading day immediately preceding the date of the filing of such
amendment or new Registration Statement, in each case, as soon as practicable,
but in any event not later than fifteen (15) days after the necessity therefor
arises. The Company shall use its best efforts to cause such amendment and/or
new Registration Statement to become effective as soon as practicable following
the filing thereof. For purposes of the foregoing provision, the number of
shares available under a Registration Statement shall be deemed "insufficient
to
cover all of the Registrable Securities" if at any time the number of shares
of
Common Stock available for resale under the Registration Statement is less
than
the product determined by multiplying (i) the Required Registration Amount
as of
such time by (ii) 0.90. The calculation set forth in the foregoing sentence
shall be made without regard to any limitations on the conversion of the Notes
or the exercise of the Warrants and such calculation shall assume that the
Notes
are then convertible into shares of Common Stock at the then prevailing
Conversion Rate (as defined in the Notes) and that the Warrants are then
exercisable for shares of Common Stock at the then prevailing Exercise Price
(as
defined in the Warrants).
g. Effect
of Failure to File and Obtain and Maintain Effectiveness of Registration
Statement.
(a) If
(i) a
Registration Statement covering all of the Registrable Securities required
to be
covered thereby and required to be filed by the Company pursuant to this
Agreement is (A) not filed with the SEC on or before the respective Filing
Deadline (a "Filing
Failure")
or (B)
not declared effective by the SEC on or before the respective Effectiveness
Deadline (an "Effectiveness
Failure")
or
(ii) on any day after the Effective Date sales of all of the Registrable
Securities required to be included on such Registration Statement cannot be
made
(other than during an Allowable Grace Period (as defined in Section 3(r))
pursuant to such Registration Statement or otherwise (including, without
limitation, because of a failure to keep such Registration Statement effective,
to disclose such information as is necessary for sales to be made pursuant
to
such Registration Statement, to register a sufficient number of shares of Common
Stock or to maintain the listing of the shares of Common Stock) (a "Maintenance
Failure")
then,
as liquidated damages and not as a penalty to any holder by reason of any such
delay in or reduction of its ability to sell the underlying shares of Common
Stock (which remedy shall be the exclusive economic remedy available with
respect to Filing Failures, Effectiveness Failures and Maintenance Failures),
the Company shall pay to each holder of Registrable Securities relating to
such
Registration Statement an amount equal to one percent (1.0%) of the aggregate
Purchase Price (as such term is defined in the Securities Purchase Agreement)
of
such Investor's Registrable Securities included in such Registration Statement
on each of the following dates: (i) the day of a Filing Failure and on every
thirtieth day (pro rated for periods totaling less than thirty days) thereafter
until such Filing Failure is cured; (ii) the day of an Effectiveness Failure
and
on every thirtieth day (pro rated for periods totaling less than thirty days)
thereafter until such Effectiveness Failure is cured; (iii) the initial day
of a
Maintenance Failure and on every thirtieth day (pro rated for periods totaling
less than thirty days) thereafter until such Maintenance Failure is cured.
If
all of the Cutback Shares, if any, have not been registered on a Registration
Statement which has been declared effective by the SEC on or before the six
(6)
month anniversary of the Closing Date (a "Cutback
Failure")
then,
as liquidated damages and not as a penalty to any holder by reason of any such
delay in or reduction of its ability to sell any Cutback Shares (which remedy
shall be the exclusive economic remedy available with respect to Cutback
Failures), the Company shall pay to each holder of Cutback Shares relating
to
such Registration Statement an amount equal to one half of a percent (0.5%)
of
the aggregate Purchase Price (as such term is defined in the Securities Purchase
Agreement) of such Investor's Cutback Shares included in such Registration
Statement on the day of a Cutback Failure and on every thirtieth day (pro rated
for periods totaling less than thirty days) thereafter until such Cutback
Failure is cured. The payments to which a holder shall be entitled pursuant
to
this Section 2(g) are referred to herein as "Registration
Delay Payments."
Registration Delay Payments shall be paid on the day of the Filing Failure,
Effectiveness Failure, Cutback Failure or the initial day of Maintenance
Failure, as applicable, and thereafter on the earlier of (I) on the thirtieth
day after the event or failure giving rise to the Registration Delay Payments
are incurred and (II) the third Business Day after the event or failure giving
rise to the Registration Delay Payments is cured. The date such Registration
Delay Payments are due shall be referred to herein as a "Registration
Delay Payments Payment Date."
In the
event the Company fails to make Registration Delay Payments in a timely manner,
such Registration Delay Payments shall bear interest at the rate of one and
one-half percent (1.5%) per month (prorated for partial months) until paid
in
full. Notwithstanding anything herein or in the Securities Purchase Agreement
to
the contrary, in no event shall the aggregate amount of Registration Delay
Payments (other than Registration Delay Payments payable pursuant to events
that
are within the control of the Company) exceed, in the aggregate, 24% of the
aggregate Purchase Price.
7
(b) Registration
Delay Payments shall be payable on each Registration Delay Payments Payment
Date, to each holder of Registrable Securities relating to such Registration
Statement, in shares of Common Stock ("Registration
Delay Payments Shares")
so
long as there is no Equity Conditions Failure; provided however, that the
Company, at its option following notice to the holder of Registrable Securities,
may pay Registration Delay Payments on any Registration Delay Payments Payment
Date in cash ("Cash
Registration Delay Payments")
or in
a combination of Cash Registration Delay Payments and Registration Delay
Payments Shares. The Company shall deliver a written notice (each, an
"Registration
Delay Payments Election Notice")
to
each holder of Registrable Securities relating to such Registration Statement
on
or prior to the Registration Delay Payments Payment Date (the date such notice
is delivered to all of the holders, the "Registration
Delay Payments Notice Date")
which
notice (i) either (A) confirms that Registration Delay Payments to be paid
on
such Registration Delay Payments Payment Date shall be paid entirely in
Registration Delay Payments Shares or (B) elects to pay Registration Delay
Payments as Cash Registration Delay Payments or a combination of Cash
Registration Delay Payments and Registration Delay Payments Shares and specifies
the amount of Registration Delay Payments that shall be paid as Cash
Registration Delay Payments and the amount of Registration Delay Payments,
if
any, that shall be paid in Registration Delay Payments Shares and (ii) certifies
that there is no Equity Conditions Failure. If the Equity Conditions are not
satisfied as of the Registration Delay Payments Notice Date, then unless the
Company has elected to pay such Registration Delay Payments as Cash Registration
Delay Payments, the Registration Delay Payments Election Notice shall indicate
that unless the holder waives the Equity Conditions, the Registration Delay
Payment shall be paid as Cash Registration Delay Payments. If the Equity
Conditions were satisfied as of the Registration Delay Payments Notice Date
but
the Equity Conditions are no longer satisfied at any time prior to the
Registration Delay Payments Payment Date, the Company shall provide the holder
a
subsequent notice to that effect indicating that unless the holder waives the
Equity Conditions, the Registration Delay Payments shall be paid as Cash
Registration Delay Payments. Registration Delay Payments to be paid on an
Registration Delay Payments Payment Date in Registration Delay Payments Shares
shall be paid in a number of fully paid and nonassessable shares (rounded to
the
nearest whole share in accordance) of Common Stock equal to the quotient of
(1)
the amount of Registration Delay Payments payable on such Registration Delay
Payments Payment Date less any Cash Registration Delay Payments paid and (2)
the
Registration Delay Payments Conversion Price in effect on the applicable
Registration Delay Payments Payment Date. Notwithstanding the foregoing, if
the
Company elects to pay any Registration Delay Payments in Registration Delay
Payment Shares and the Stockholder Approval (as defined in the Securities
Purchase Agreement) has not been obtained by the applicable Registration Delay
Payments Payment Date, the Company may not pay such Registration Delay Payments
in Registration Delay Payments Shares but instead shall issue to each holder
of
Registrable Securities relating to such Registration Statement a convertible
note with an original principal amount equal to the amount of such Registration
Delay Payments in the form attached hereto as Exhibit
A
to the
Securities Purchase Agreement; provided however that the conversion price of
such convertible note shall be equal to the applicable Registration Delay
Payments Conversion Price.
8
3. Related
Obligations.
At
such
time as the Company is obligated to file a Registration Statement with the
SEC
pursuant to Section 2(a), 2(d) or 2(e), the Company will use its best efforts
to
effect the registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company shall
have the following obligations:
a. The
Company shall submit to the SEC, within two (2) Business Days after the Company
learns that no review of a particular Registration Statement will be made by
the
staff of the SEC or that the staff has no further comments on a particular
Registration Statement, as the case may be, a request for acceleration of
effectiveness of such Registration Statement to a time and date not later than
48 hours after the submission of such request. The Company shall keep each
Registration Statement effective pursuant to Rule 415 at all times until the
earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or any successor thereto) promulgated
under
the 1933 Act or (ii) the date on which the Investors shall have sold all of
the
Registrable Securities covered by such Registration Statement (the "Registration
Period").
The
Company shall ensure that each Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain
any
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 case
of
prospectuses, in the light of the circumstances in which they were made) not
misleading.
9
b. The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and
the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
be
necessary to keep such Registration Statement effective at all times during
the
Registration Period, and, during such period, comply with the provisions of
the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth
in
such Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of the Company filing a
report on Form 10-QSB, Form 10-KSB or any analogous report under the Securities
Exchange Act of 1934, as amended (the "1934
Act"),
the
Company shall have incorporated such report by reference into such Registration
Statement, if applicable, or shall file such amendments or supplements with
the
SEC on the same day on which the 1934 Act report is filed which created the
requirement for the Company to amend or supplement such Registration
Statement.
c. The
Company shall (A) permit Legal Counsel to review and comment upon (i) a
Registration Statement at least five (5) Business Days prior to its filing
with
the SEC and (ii) all amendments and supplements to all Registration Statements
(except for Annual Reports on Form 10-KSB, and Reports on Form 10-QSB and any
similar or successor reports) within a reasonable number of days prior to their
filing with the SEC, and (B) not file any Registration Statement or amendment
or
supplement thereto in a form to which Legal Counsel reasonably objects. The
Company shall not submit a request for acceleration of the effectiveness of
a
Registration Statement or any amendment or supplement thereto without the prior
approval of Legal Counsel, which consent shall not be unreasonably withheld.
The
Company shall furnish to Legal Counsel, without charge, (i) copies of any
correspondence from the SEC or the staff of the SEC to the Company or its
representatives relating to any Registration Statement, (ii) promptly after
the
same is prepared and filed with the SEC, one copy of any Registration Statement
and any amendment(s) thereto, including financial statements and schedules,
all
documents incorporated therein by reference, if requested by an Investor, and
all exhibits and (iii) upon the effectiveness of any Registration Statement,
one
copy of the prospectus included in such Registration Statement and all
amendments and supplements thereto. The Company shall reasonably cooperate
with
Legal Counsel in performing the Company's obligations pursuant to this Section
3.
10
d. The
Company shall furnish to each Investor whose Registrable Securities are included
in any Registration Statement, without charge, (i) promptly after the same
is
prepared and filed with the SEC, at least one copy of such Registration
Statement and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference, if requested by
an
Investor, all exhibits and each preliminary prospectus, (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the prospectus
included in such Registration Statement and all amendments and supplements
thereto (or such other number of copies as such Investor may reasonably request)
and (iii) such other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to time in order
to facilitate the disposition of the Registrable Securities owned by such
Investor.
e. The
Company shall use its best efforts to (i) register and qualify, unless an
exemption from registration and qualification applies, the resale by Investors
of the Registrable Securities covered by a Registration Statement under such
other securities or "blue sky" laws of all applicable jurisdictions in the
United States, (ii) prepare and file in those jurisdictions, such amendments
(including post-effective amendments) and supplements to such registrations
and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary
to
maintain such registrations and qualifications in effect at all times during
the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(e), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction.
The Company shall promptly notify Legal Counsel and each Investor who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of
any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
f. The
Company shall notify Legal Counsel and each Investor in writing of the happening
of any event, as promptly as practicable after becoming aware of such event,
as
a result of which the prospectus included in a Registration Statement, as then
in effect, includes an untrue statement of a material fact or omission 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 (provided that in no event shall such notice contain any
material, nonpublic information), and, subject to Section 3(r), promptly prepare
a supplement or amendment to such Registration Statement to correct such untrue
statement or omission, and deliver ten (10) copies of such supplement or
amendment to Legal Counsel and each Investor (or such other number of copies
as
Legal Counsel or such Investor may reasonably request). The Company shall also
promptly notify Legal Counsel and each Investor in writing (i) when a prospectus
or any prospectus supplement or post-effective amendment has been filed, and
when a Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to Legal
Counsel and each Investor by facsimile on the same day of such effectiveness
and
by overnight mail), (ii) of any request by the SEC for amendments or supplements
to a Registration Statement or related prospectus or related information, and
(iii) of the Company's reasonable determination that a post-effective amendment
to a Registration Statement would be appropriate.
11
g. The
Company shall use its best efforts to prevent the issuance of any stop order
or
other suspension of effectiveness of a Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible moment and
to
notify Legal Counsel and each Investor who holds Registrable Securities being
sold of the issuance of such order and the resolution thereof or its receipt
of
actual notice of the initiation or threat of any proceeding for such
purpose.
h. If
any
Investor is required under applicable securities laws to be described in the
Registration Statement as an underwriter, at the reasonable request of such
Investor, the Company shall furnish to such Investor, on the date of the
effectiveness of the Registration Statement and thereafter from time to time
on
such dates as an Investor may reasonably request (i) a letter, dated such date,
from the Company's independent certified public accountants in form and
substance as is customarily given by independent certified public accountants
to
underwriters in an underwritten public offering, addressed to the Investors,
and
(ii) an opinion, dated as of such date, of counsel representing the Company
for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
Investors.
i. Upon
the
request of any Investor in connection with such Investor's due diligence
requirements, if any, the Company shall make available for inspection by (i)
any
Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents
retained by the Investors (collectively, the "Inspectors"),
all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "Records"),
as
shall be reasonably deemed necessary by each Inspector, and cause the Company's
officers, directors and employees to supply all information which any Inspector
may reasonably request; provided, however, that each Inspector shall agree
to
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors
are
so notified, unless (a) the disclosure of such Records is necessary to avoid
or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the 1933 Act, (b) the release of such Records is ordered pursuant
to a final, non-appealable subpoena or order from a court or government body
of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of
this
or any other agreement of which the Inspector has knowledge. Each Investor
agrees that it shall, upon learning that disclosure of such Records is sought
in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential. Nothing herein (or in
any
other confidentiality agreement between the Company and any Investor) shall
be
deemed to limit the Investors' ability to sell Registrable Securities in a
manner which is otherwise consistent with applicable laws and
regulations.
12
j. The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor provided to the Company unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to
the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure
of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
k. The
Company shall use its best efforts either to (i) cause all of the Registrable
Securities covered by a Registration Statement to be listed on the Principal
Market or each securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange.
The
Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(k).
l. The
Company shall cooperate with the Investors who hold Registrable Securities
being
offered and, to the extent applicable, facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing
the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case
may
be, as the Investors may reasonably request and registered in such names as
the
Investors may request.
m. If
requested by an Investor, the Company shall (i) as soon as practicable
incorporate in a prospectus supplement or post-effective amendment such
information as an Investor reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being offered or sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such offering;
(ii) as soon as practicable make all required filings of such prospectus
supplement or post-effective amendment after being notified of the matters
to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) as soon as practicable, supplement or make amendments to any Registration
Statement if reasonably requested by an Investor holding any Registrable
Securities.
n. The
Company shall use its best efforts to cause the Registrable Securities covered
by a Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to consummate the
disposition of such Registrable Securities.
13
o. The
Company shall make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with, and in the
manner provided by, the provisions of Rule 158 under the 0000 Xxx) covering
a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of a Registration
Statement.
p. The
Company shall otherwise use its best efforts to comply with all applicable
rules
and regulations of the SEC in connection with any registration
hereunder.
q. Within
two (2) Business Days after a Registration Statement which covers Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and
shall
cause legal counsel for the Company to deliver, to the transfer agent for such
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit
A.
r. Notwithstanding
anything to the contrary herein, at any time after the Effective Date, the
Company may delay the disclosure of material, non-public information concerning
the Company the disclosure of which at the time is not, in the good faith
opinion of the Board of Directors of the Company and its counsel, in the best
interest of the Company and, in the opinion of counsel to the Company, otherwise
required (a "Grace
Period");
provided, that the Company shall promptly (i) notify the Investors in writing
of
the existence of material, non-public information giving rise to a Grace Period
(provided that in each notice the Company will not disclose the content of
such
material, non-public information to the Investors) and the date on which the
Grace Period will begin, and (ii) notify the Investors in writing of the date
on
which the Grace Period ends; and, provided further, that no Grace Period shall
exceed fifteen (15) consecutive days and during any three hundred sixty five
(365) day period such Grace Periods shall not exceed an aggregate of forty
(40)
days and the first day of any Grace Period must be at least five (5) trading
days after the last day of any prior Grace Period (each, an "Allowable
Grace Period").
For
purposes of determining the length of a Grace Period above, the Grace Period
shall begin on and include the date the Investors receive the notice referred
to
in clause (i) and shall end on and include the later of the date the Investors
receive the notice referred to in clause (ii) and the date referred to in such
notice. The provisions of Section 3(g) hereof shall not be applicable during
the
period of any Allowable Grace Period. Upon expiration of the Grace Period,
the
Company shall again be bound by the first sentence of Section 3(f) with respect
to the information giving rise thereto unless such material, non-public
information is no longer applicable. Notwithstanding anything to the contrary,
the Company shall cause its transfer agent to deliver unlegended shares of
Common Stock to a transferee of an Investor in accordance with the terms of
the
Securities Purchase Agreement in connection with any sale of Registrable
Securities with respect to which an Investor has entered into a contract for
sale, and delivered a copy of the prospectus included as part of the applicable
Registration Statement (unless an exemption from such prospectus delivery
requirements exists), prior to the Investor's receipt of the notice of a Grace
Period and for which the Investor has not yet settled.
s. The
Company shall make any filing as may be required by NASD Rule 2710 in connection
with the offering under any Registration Statement of the applicable Registrable
Securities and shall make any such filing concurrently with its initial filing
of such Registration Statement with the SEC.
14
t. Until
the
twelve month anniversary of the later to occur of (i) the Initial Effective
Date
and (ii) the Additional Effective Date, the Company shall not enter into any
Subsequent Placement (as defined in the Securities Purchase Agreement) where
such Subsequent Placement provides for registration rights (including piggy-back
registration right) to any one or more of the investors in such Subsequent
Placement, without the prior written consent of the Required
Holders.
u. From
the
date hereof until the date that is ninety (90) days following the later to
occur
of (i) the Initial Effective Date and (ii) the Additional Effective Date, the
Company will not, directly or indirectly, file any registration statement (other
than on Form S-8 or the filing of any post-effective amendments filed solely
for
the purpose of updating financial or other information in any registration
statement of the Company that has been declared effective by the SEC prior
to
the date of this Agreement) with the SEC other than the Registration Statement.
4. Obligations
of the Investors.
a. At
least
five (5) Business Days prior to the first anticipated filing date of a
Registration Statement, the Company shall notify each Investor in writing of
the
information the Company requires from each such Investor if such Investor elects
to have any of such Investor's Registrable Securities included in such
Registration Statement. It shall be a condition precedent to the obligations
of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the
effectiveness of the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company
may
reasonably request.
b. Each
Investor, by such Investor's acceptance of the Registrable Securities, agrees
to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of any Registration Statement hereunder, unless
such Investor has notified the Company in writing of such Investor's election
to
exclude all of such Investor's Registrable Securities from such Registration
Statement.
c. Each
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(g) or the first
sentence of 3(f), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(g) or the first
sentence of 3(f) or receipt of notice that no supplement or amendment is
required. Notwithstanding anything to the contrary, the Company shall cause
its
transfer agent to deliver unlegended shares of Common Stock to a transferee
of
an Investor in accordance with the terms of the Securities Purchase Agreement
in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the Investor's receipt
of
a notice from the Company of the happening of any event of the kind described
in
Section 3(g) or the first sentence of 3(f) and for which the Investor has not
yet settled.
15
d. Each
Investor covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act as applicable to it or an exemption therefrom
in
connection with sales of Registrable
Securities pursuant to the Registration Statement.
5. Expenses
of Registration.
All
reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements
of
counsel for the Company shall be paid by the Company. The Company shall also
reimburse the Investors for the fees and disbursements of Legal Counsel in
connection with registration, filing or qualification pursuant to Sections
2 and
3 of this Agreement which amount shall be limited to $20,000.
6. Indemnification.
In
the
event any Registrable Securities are included in a Registration Statement under
this Agreement:
a. To
the
fullest extent permitted by law, the Company will, and hereby does, indemnify,
hold harmless and defend each Investor, the directors, officers, members,
partners, employees, agents, representatives of, and each Person, if any, who
controls any Investor within the meaning of the 1933 Act or the 1934 Act (each,
an "Indemnified
Person"),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, reasonable attorneys' fees, amounts paid in settlement or
expenses, joint or several, (collectively, "Claims")
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("Indemnified
Damages"),
to
which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of
or are based upon: (i) any untrue statement or alleged untrue statement of
a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any jurisdiction
in
which Registrable Securities are offered ("Blue
Sky Filing"),
or
the omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact contained in
any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented,
if
the Company files any amendment thereof or supplement thereto with the SEC)
or
the omission or alleged omission to state therein any material fact necessary
to
make the statements made therein, in the light of the circumstances under which
the statements therein were made, not misleading, (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any violation of this
Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, "Violations").
Subject to Section 6(c), the Company shall reimburse the Indemnified Persons,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by such Indemnified Person
for such Indemnified Person expressly for use in connection with the preparation
of the Registration Statement or any such amendment thereof or supplement
thereto, if such prospectus was timely made available by the Company pursuant
to
Section 3(d) and (ii) shall not be available to the extent such Claim is based
on a failure of the Investor to deliver or to cause to be delivered the
prospectus made available by the Company, including a corrected prospectus,
if
such prospectus or corrected prospectus was timely made available by the Company
pursuant to Section 3(d); and (iii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld or
delayed. Such indemnity shall remain in full force and effect regardless of
any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
16
b. In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement and each Person, if any, who controls
the
Company within the meaning of the 1933 Act or the 1934 Act (each, an
"Indemnified
Party"),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
or
Indemnified Damages arise out of or are based upon any Violation, in each case
to the extent, and only to the extent, that such Violation occurs in reliance
upon and in conformity with written information furnished to the Company by
such
Investor expressly for use in connection with such Registration Statement;
and,
subject to Section 6(c), such Investor will reimburse any legal or other
expenses reasonably incurred by an Indemnified Party in connection with
investigating or defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 6(b) and the agreement with respect to
contribution contained in Section 7 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld
or
delayed; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim or Indemnified Damages as
does
not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made
by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
c. Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section
6
of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person
or
Indemnified Party shall, if a Claim in respect thereof is to be made against
any
indemnifying party under this Section 6, deliver to the indemnifying party
a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party
so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as
the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses of
not
more than one counsel for such Indemnified Person or Indemnified Party to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by
such
counsel in such proceeding. In the case of an Indemnified Person, legal counsel
referred to in the immediately preceding sentence shall be selected by the
Investors holding at least a majority in
interest of the Registrable Securities included in the Registration Statement
to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or Claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or Claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying
party
shall, without the prior written consent of the Indemnified Party or Indemnified
Person, consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving
by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of
a
release from all liability in respect to such Claim or litigation, and such
settlement shall not include any admission as to fault on the part of the
Indemnified Party. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party
or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure
to
deliver written notice to the indemnifying party within a reasonable time of
the
commencement of any such action shall not relieve such indemnifying party of
any
liability to the Indemnified Person or Indemnified Party under this Section
6,
except to the extent that the indemnifying party is prejudiced in its ability
to
defend such action.
17
d. The
indemnification required by this Section 6 shall be made by periodic payments
of
the amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Damages are incurred.
e. The
indemnity agreements contained herein shall be in addition to (i) any cause
of
action or similar right of the Indemnified Party or Indemnified Person against
the indemnifying party or others, and (ii) any liabilities the indemnifying
party may be subject to pursuant to the law.
18
7. Contribution.
To
the
extent any indemnification by an indemnifying party is prohibited or limited
by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however, that: (i) no Person involved
in the sale of Registrable Securities which Person is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) in
connection with such sale shall be entitled to contribution from any Person
involved in such sale of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities pursuant to such Registration
Statement.
8. Reports
Under the 1934 Act.
With
a
view to making available to the Investors the benefits of Rule 144 promulgated
under the 1933 Act or any other similar rule or regulation of the SEC that
may
at any time permit the Investors to sell securities of the Company to the public
without registration ("Rule
144"),
the
Company agrees to:
a. make
and
keep public information available, as those terms are understood and defined
in
Rule 144;
b. file
with
the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains
subject to such requirements and the filing of such reports and other documents
is required for the applicable provisions of Rule 144; and
c. furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company, if true, that it has
complied with the reporting requirements of Rule 144, the 1933 Act and the
1934
Act, (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested to permit the Investors to
sell
such securities pursuant to Rule 144 without registration.
9. Assignment
of Registration Rights.
The
rights under this Agreement shall be automatically assignable by the Investors
to any transferee of all or any portion of such Investor's Registrable
Securities if: (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to
the
Company within a reasonable time after such assignment; (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee,
and
(b) the securities with respect to which such registration rights are being
transferred or assigned; (iii) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws; (iv) at
or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein; and (v) such
transfer shall have been made in accordance with the applicable requirements
of
the Securities Purchase Agreement.
19
10. Amendment
of Registration Rights.
Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Required
Holders. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company. No such amendment shall
be
effective to the extent that it applies to less than all of the holders of
the
Registrable Securities. No consideration shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of any of
this
Agreement unless the same consideration also is offered to all of the parties
to
this Agreement.
11. Miscellaneous.
a. A
Person
is deemed to be a holder of Registrable Securities whenever such Person owns
or
is deemed to own of record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more Persons with
respect to the same Registrable Securities, the Company shall act upon the
basis
of instructions, notice or election received from the such record owner of
such
Registrable Securities.
b. Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall
be:
If
to the
Company:
Rancher
Energy Corp.
999-18th
Street,
Suite 1740
Xxxxxx,
Xxxxxxxx 00000
Telephone:
(000) 000-0000
Facsimile: (000)
000-0000
Attention: Xxxx
Works, President and CEO
With
a
copy to:
Xxxxxx
Xxxxx LLP
0000
Xxxxxxx Xxxxxx
Xxxxxx,
Xxxxxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxxx Xxxxxxx, Esq. and Xxxx Xxxxxxxxxxx, Esq.
20
If
to
Legal Counsel:
|
Xxxxxxx
Xxxx & Xxxxx LLP
|
|
000
Xxxxx Xxxxxx
|
|
Xxx
Xxxx, Xxx Xxxx 00000
|
|
Telephone:
(000) 000-0000
|
|
Facsimile:
(000) 000-0000
|
|
Attention:
Xxxxxxx X. Xxxxx, Esq.
|
If
to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers
attached hereto, with copies to such Buyer's representatives as set forth on
the
Schedule of Buyers, or to such other address and/or facsimile number and/or
to
the attention of such other Person as the recipient party has specified by
written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by
the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
c. Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as
a
waiver thereof.
d. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction
of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
21
e. This
Agreement, the other Transaction Documents (as defined in the Securities
Purchase Agreement) and the instruments referenced herein and therein constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein.
This
Agreement, the other Transaction Documents and the instruments referenced herein
and therein supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
f. Subject
to the requirements of Section 9, this Agreement shall inure to the benefit
of
and be binding upon the permitted successors and assigns of each of the parties
hereto.
g. The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
h. This
Agreement may be executed in identical counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same agreement.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
i. Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
j. All
consents and other determinations required to be made by the Investors pursuant
to this Agreement shall be made, unless otherwise specified in this Agreement,
by the Required Holders.
k. The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent and no rules of strict construction
will
be applied against any party.
l. This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
m. The
obligations of each Investor hereunder are several and not joint with the
obligations of any other Investor, and no provision of this Agreement is
intended to confer any obligations on any Investor vis-à-vis any other Investor.
Nothing contained herein, and no action taken by any Investor pursuant hereto,
shall be deemed to constitute the Investors as a partnership, an association,
a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated herein.
*
* * * *
*
22
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Registration Rights Agreement to be duly executed as of the date first written
above.
|
COMPANY:
|
||
|
RANCHER
ENERGY CORP.
|
||
| |
|
|
| By: | ||
|
Name:
|
||
|
Title:
|
||
23
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Registration Rights Agreement to be duly executed as of the date first written
above.
|
BUYERS:
|
||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
|
Address:
|
||
|
|
||
24
SCHEDULE
OF BUYERS
|
Buyer
|
Buyer's
Address
and
Facsimile Number
|
Buyer's
Representative's Address
and
Facsimile Number
|
||
|
[
]
|
Xxxxxxx
Xxxx & Xxxxx LLP
000
Xxxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attn:
Xxxxxxx Xxxxx, Esq.
Facsimile:
(000) 000-0000
Telephone:
(000) 000-0000
|
|||
|
[Other
Buyers]
|
25
EXHIBIT
A
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
[Transfer
Agent]
[Address]
Attention:
Re: Rancher
Energy Corp.
Ladies
and Gentlemen:
[We
are][I am] counsel to Rancher Energy Corp., a Nevada corporation (the
"Company"),
and
have represented the Company in connection with that certain Securities Purchase
Agreement (the "Securities
Purchase Agreement")
entered into by and among the Company and the buyers named therein
(collectively, the "Holders")
pursuant to which the Company issued to the Holders (i) senior convertible
notes
(the "Notes")
convertible into the Company's common stock, par value $0.00001 per share
(the "Common
Stock), (ii)
shares (the "Common
Shares")
of
Common Stock and (iii) warrants exercisable for shares of Common Stock (the
"Warrants").
Pursuant to the Securities Purchase Agreement, the Company also has entered
into
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),
including the Common Shares, the shares of Common Stock issuable upon conversion
of the Notes and the shares of Common Stock issuable upon exercise of the
Warrants, under the Securities Act of 1933, as amended (the "1933
Act").
In
connection with the Company's obligations under the Registration Rights
Agreement, on ____________ ___, 200_, the Company filed a Registration Statement
on Form SB-2 (File No. 333-_____________) (the "Registration
Statement")
with
the Securities and Exchange Commission (the "SEC")
relating to the Registrable Securities which names each of the Holders as a
selling stockholder thereunder.
In
connection with the foregoing, [we][I] advise you that a member of the SEC's
staff has advised [us][me] 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][I] 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.
This
letter shall serve as our standing instruction to you that the shares of Common
Stock are freely transferable by the Holders pursuant to the Registration
Statement. You need not require further letters from us to effect any future
legend-free issuance or reissuance of shares of Common Stock to the Holders
as
contemplated by the Company's Transfer Agent Instructions dated December __,
2006.
1
|
Very
truly yours,
[ISSUER'S
COUNSEL]
|
||
| |
|
|
| By: | ||
|
|
||
|
CC: [LIST
NAMES OF HOLDERS]
|
||
2
EXHIBIT
B
SELLING
STOCKHOLDERS
The
shares of Common Stock being offered by the selling stockholders are common
stock previously issued and shares of common stock issuable upon conversion
of
the convertible notes and upon exercise of the warrants. For additional
information regarding the issuance of those convertible notes and warrants,
see
"Private Placement of Convertible Notes Common Shares and Warrants" above.
We
are registering the shares of Common Stock in order to permit the selling
stockholders to offer the shares for resale from time to time. Except for the
ownership of the Common Shares, Convertible Notes and Warrants issued pursuant
to the Securities Purchase Agreement, the selling stockholders have not had
any
material relationship with us within the past three years.
The
table
below lists the selling stockholders and other information regarding the
beneficial ownership of the shares of Common Stock by each of the selling
stockholders. The second column lists the number of shares of Common Stock
beneficially owned by each selling stockholder, based on its ownership of the
shares of common stock previously, the convertible notes and warrants, as of
________, 200_, assuming conversion of all convertible notes and exercise of
the
warrants held by the selling stockholders on that date, without regard to any
limitations on conversions or exercise.
The
third
column lists the shares of Common Stock being offered by this prospectus by
each
selling stockholder.
In
accordance with the terms of a registration rights agreement among the Company
and the selling stockholders, this prospectus generally covers the resale of
at
least 130% of the sum of (i) the number of shares of Common Stock issuable
upon
conversion of the convertible notes as of the trading day immediately preceding
the date the registration statement is initially filed with the SEC, (ii) the
shares of common stock previously issued and (iii) the number of shares of
Common Stock issuable upon exercise of the related warrants as of the trading
day immediately preceding the date the registration statement is initially
filed
with the SEC.
Because
the conversion price of the convertible notes and the exercise price of the
warrants may be adjusted, the number of shares that will actually be issued
may
be more or less than the number of shares being offered by this prospectus.
The
fourth column assumes the sale of all of the shares offered by the selling
stockholders pursuant to this prospectus.
Under
the
terms of the convertible notes and the warrants, a selling stockholder may
not
convert the convertible notes or exercise the warrants to the extent such
conversion or exercise would cause such selling stockholder, together with
its
affiliates, to beneficially own a number of shares of Common Stock which would
exceed [9.99][4.99]% of our then outstanding shares of Common Stock following
such conversion or exercise, excluding for purposes of such determination shares
of Common Stock issuable upon conversion of the convertible notes which have
not
been converted and upon exercise of the warrants which have not been exercised.
The number of shares in the second column does not reflect this limitation.
The
selling stockholders may sell all, some or none of their shares in this
offering. See "Plan of Distribution."
1
|
Name
of Selling Stockholder
|
Number
of Shares Owned Prior to Offering
|
Maximum
Number of
Shares to be Sold Pursuant to this Prospectus |
Number
of Shares Owned
After
Offering
|
|||
|
[
] (1)
|
0
|
|||||
|
(1)
|
2
PLAN
OF DISTRIBUTION
We
are
registering the shares of Common Stock previously issued and the shares of
common stock issuable upon conversion of the convertible notes and upon exercise
of the warrants to permit the resale of these shares of Common Stock by the
holders of the shares of common stock, the convertible notes and warrants from
time to time after the date of this prospectus. We will not receive any of
the
proceeds from the sale by the selling stockholders of the shares of Common
Stock. We will bear all fees and expenses incident to our obligation to register
the shares of Common Stock.
The
selling stockholders may sell all or a portion of the shares of Common Stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the shares of
Common Stock are sold through underwriters or broker-dealers, the selling
stockholders will be responsible for underwriting discounts or commissions
or
agent's commissions. The shares of Common Stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions,
| · |
on
any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of
sale;
|
| · |
in
the over-the-counter market;
|
| · |
in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
|
| · |
through
the writing of options, whether such options are listed on an options
exchange or otherwise;
|
| · |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
| · |
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
| · |
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
| · |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| · |
privately
negotiated transactions;
|
| · |
short
sales;
|
| · |
sales
pursuant to Rule 144;
|
1
| · |
broker-dealers
may agree with the selling securityholders to sell a specified number
of
such shares at a stipulated price per
share;
|
| · |
a
combination of any such methods of sale;
and
|
| · |
any
other method permitted pursuant to applicable
law.
|
If
the
selling stockholders effect such transactions by selling shares of Common Stock
to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of Common Stock for whom they may act as agent or
to
whom they may sell as principal (which discounts, concessions or commissions
as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales
of
the shares of Common Stock or otherwise, the selling stockholders may enter
into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the shares of Common Stock in the course of hedging in positions they
assume. The selling stockholders may also sell shares of Common Stock short
and
deliver shares of Common Stock covered by this prospectus to close out short
positions and to return borrowed shares in connection with such short sales.
The
selling stockholders may also loan or pledge shares of Common Stock to
broker-dealers that in turn may sell such shares.
The
selling stockholders may pledge or grant a security interest in some or all
of
the shares of common stock, convertible notes or warrants or shares of Common
Stock owned by them and, if they default in the performance of their secured
obligations, the pledgees or secured parties may offer and sell the shares
of
Common Stock from time to time pursuant to this prospectus or any amendment
to
this prospectus under Rule 424(b)(3) or other applicable provision of the
Securities Act of 1933, as amended, amending, if necessary, the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus. The selling stockholders also
may
transfer and donate the shares of Common Stock in other circumstances in which
case the transferees, donees, pledgees or other successors in interest will
be
the selling beneficial owners for purposes of this prospectus.
The
selling stockholders and any broker-dealer participating in the distribution
of
the shares of Common Stock may be deemed to be "underwriters" within the meaning
of the Securities Act, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act. At the time a particular offering of
the
shares of Common Stock is made, a prospectus supplement, if required, will
be
distributed which will set forth the aggregate amount of shares of Common Stock
being offered and the terms of the offering, including the name or names of
any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to
broker-dealers.
Under
the
securities laws of some states, the shares of Common Stock may be sold in such
states only through registered or licensed brokers or dealers. In addition,
in
some states the shares of Common Stock may not be sold unless such shares have
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
2
There
can
be no assurance that any selling stockholder will sell any or all of the shares
of Common Stock registered pursuant to the registration statement, of which
this
prospectus forms a part.
The
selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of
1934,
as amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of Common Stock by the selling
stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of Common
Stock to engage in market-making activities with respect to the shares of Common
Stock. All of the foregoing may affect the marketability of the shares of Common
Stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of Common Stock.
We
will
pay all expenses of the registration of the shares of Common Stock pursuant
to
the registration rights agreement, estimated to be
$[ ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with
state securities or "blue sky" laws; provided, however, that a selling
stockholder will pay all underwriting discounts and selling commissions, if
any.
We will indemnify the selling stockholders against liabilities, including some
liabilities under the Securities Act, in accordance with the registration rights
agreements, or the selling stockholders will be entitled to contribution. We
may
be indemnified by the selling stockholders against civil liabilities, including
liabilities under the Securities Act, that may arise from any written
information furnished to us by the selling stockholder specifically for use
in
this prospectus, in accordance with the related registration rights agreement,
or we may be entitled to contribution.
Once
sold
under the registration statement, of which this prospectus forms a part, the
shares of Common Stock will be freely tradable in the hands of persons other
than our affiliates.
3
TRANSFER
AGENT INSTRUCTIONS
RANCHER
ENERGY CORP.
December
__, 2006
Pacific
Stock Transfer Company
Las
Vegas, Nevada
Ladies
and Gentlemen:
Reference
is made to that certain Securities Purchase Agreement, dated as of December
__,
2006
(the "Agreement"),
by
and among Rancher Energy Corp., a Nevada corporation (the "Company"),
and
the investors named on the Schedule of Buyers attached thereto (collectively,
the "Holders"),
pursuant to which the Company is issuing to the Holders (i) convertible notes
of
the Company (the "Notes"),
which
will be convertible into shares of the Company's common stock, $0.00001 par
value per share (the "Common
Stock"),
(i)
share (the "Common
Shares")
of
Common Stock and (iii) warrants (the "Warrants"),
which
are exercisable to purchase shares of Common Stock.
This
letter shall serve as our authorization and direction to you (provided that
you
are the transfer agent of the Company at such time), subject
to any stop transfer instructions that we may issue to you from time to time,
if
at all:
(i) to
issue
shares of Common Stock upon transfer or resale of the Common Shares;
and
(ii) to
issue
shares of Common Stock upon conversion of the Notes (the "Conversion
Shares")
to or
upon the order of a Holder from time to time upon delivery to you of a properly
completed and duly executed Conversion Notice, in the form attached hereto
as
Exhibit
I,
which
has been acknowledged by the Company as indicated by the signature of a duly
authorized officer of the Company thereon;
(iii) to
issue
shares of Common Stock upon exercise of the Warrants (the "Warrant
Shares")
to or
upon the order of a Holder from time to time upon delivery to you of a properly
completed and duly executed Exercise Notice, in the form attached hereto as
Exhibit
II,
which
has been acknowledged by the Company as indicated by the signature of a duly
authorized officer of the Company thereon.
You
acknowledge and agree that so long as you have previously received (a) written
confirmation from the General Counsel of the Company (or its outside legal
counsel) that either (i) a registration statement covering resales of the Common
Shares, the Conversion Shares or the Warrant Shares has been declared effective
by the Securities and Exchange Commission (the "SEC")
under
the Securities Act of 1933, as amended (the "1933
Act"),
or
(ii) that sales of the Common
Shares, the Conversion
Shares and the Warrant Shares may be made in conformity with Rule 144 under
the
1933 Act, and (b) if applicable, a copy of such registration statement, then,
within
three (3) business days after
your receipt of a notice of transfer, Conversion Notice or the Exercise Notice,
you shall issue the certificates representing the Common Shares, Conversion
Shares and/or the Warrant Shares, as applicable, and such certificates shall
not
bear any legend restricting transfer of the Common Shares, Conversion Shares
or
the Warrant Shares thereby and should not be subject to any stop-transfer
restriction; provided,
however,
that if
such Common Shares, Conversion Shares and Warrant Shares are not registered
for
resale under the 1933 Act or able to be sold under Rule 144, then the
certificates for such Common Shares, Conversion Shares and/or Warrant Shares
shall bear the following legend:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I)
IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE
SECURITIES.
A
form of
written confirmation from the General Counsel of the Company or the Company's
outside legal counsel that a registration statement covering resales of the
Common Shares, Conversion Shares and the Warrant Shares has been declared
effective by the SEC under the 1933 Act is attached hereto as Exhibit
III.
Please
execute this letter in the space indicated to acknowledge your agreement to
act
in accordance with these instructions. Should you have any questions concerning
this matter, please contact me at (000)
000-0000.
|
Very
truly yours,
RANCHER ENERGY CORP.
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||
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Title:
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Enclosures
EXHIBIT
I
RANCHER
ENERGY CORP.
CONVERSION
NOTICE
Reference
is made to the Convertible Note (the "Note")
issued
to the undersigned by Rancher Energy Corp. (the "Company").
In
accordance with and pursuant to the Note, the undersigned hereby elects to
convert the Conversion Amount (as defined in the Note) of the Note indicated
below into shares of Common Stock par value $0.00001 per share (the
"Common
Stock")
of the
Company, as of the date specified below.
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Date
of Conversion:
__________________________________________________________________________________
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Aggregate
Conversion Amount to be converted:
____________________________________________________________
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Please
confirm the following information:
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Conversion
Price:
____________________________________________________________________________________
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Number
of shares of Common Stock to be issued:
____________________________________________________________
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Please
issue the Common Stock into which the Note is being converted in
the
following name and to the following address:
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Issue
to:
___________________________________________________________________________________________
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________________________________________________________________________________
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________________________________________________________________________________
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Facsimile
Number:
____________________________________________________________________________________
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Authorization:
_______________________________________________________________________________________
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By:
_________________________________________________________________________________________
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Title:
___________________________________________________________________________________
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Dated:
_____________________________________________________________________________________________________
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Account
Number:
______________________________________________________________________________________
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(if
electronic book entry transfer)
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Transaction
Code Number:
_______________________________________________________________________________
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(if
electronic book entry transfer)
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ACKNOWLEDGMENT
The
Company hereby acknowledges this Conversion Notice and hereby directs
Pacific
Stock Transfer Company
to issue
the above indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated December 20, 2006 from the Company and
acknowledged and agreed to by Pacific
Stock Transfer Company.
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RANCHER
ENERGY CORP.
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| By: | ||
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Name:
Title:
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EXHIBIT
II
EXERCISE
NOTICE
TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT
TO PURCHASE COMMON STOCK
RANCHER
ENERGY CORP.
The
undersigned holder hereby exercises the right to purchase _________________
of
the shares of Common Stock ("Warrant
Shares")
of
Rancher Energy Corp., a Nevada corporation (the "Company"),
evidenced by the attached Warrant to Purchase Common Stock (the "Warrant").
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
1.
Form
of Exercise Price. The Holder intends that payment of the Exercise Price shall
be made as:
____________ a
"Cash
Exercise"
with
respect to _________________ Warrant Shares; and/or
____________ a
"Cashless
Exercise"
with
respect to _______________ Warrant Shares.
2.
Payment of Exercise Price. In the event that the holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.
3.
Delivery of Warrant Shares. The Company shall deliver to the holder __________
Warrant Shares in accordance with the terms of the Warrant.
Date:
_______________ __, ______
_____________________________
Name
of
Registered Holder
| By: | ||||
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Name:
Title:
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ACKNOWLEDGMENT
The
Company hereby acknowledges this Exercise Notice and hereby directs Pacific
Stock Transfer Company to
issue
the above indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated December 20, 2006 from the Company and
acknowledged and agreed to by Pacific
Stock Transfer Company.
| RANCHER ENERGY CORP. | ||
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| By: | ||
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Name:
Title:
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EXHIBIT
III
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
Pacific
Stock Transfer Company
Las
Vegas, Nevada
Re: Rancher
Energy Corp.
Ladies
and Gentlemen:
[We
are][I am] counsel to Rancher Energy Corp., a Nevada corporation (the
"Company"),
and
have represented the Company in connection with that certain Securities Purchase
Agreement (the "Securities
Purchase Agreement")
entered into by and among the Company and the buyers named therein
(collectively, the "Holders")
pursuant to which the Company issued to the Holders (i) senior convertible
notes
(the "Notes")
convertible into the Company's common stock, par value $0.00001 per share
(the "Common
Stock), (ii)
shares (the "Common
Shares")
of
Common Stock and (iii) warrants exercisable for shares of Common Stock (the
"Warrants").
Pursuant to the Securities Purchase Agreement, the Company also has entered
into
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),
including the Common Shares, the shares of Common Stock issuable upon conversion
of the Notes and the shares of Common Stock issuable upon exercise of the
Warrants, under the Securities Act of 1933, as amended (the "1933
Act").
In
connection with the Company's obligations under the Registration Rights
Agreement, on ____________ ___, 200_, the Company filed a Registration Statement
on Form SB-2 (File No. 333-_____________) (the "Registration
Statement")
with
the Securities and Exchange Commission (the "SEC")
relating to the Registrable Securities which names each of the Holders as a
selling stockholder thereunder.
In
connection with the foregoing, [we][I] advise you that a member of the SEC's
staff has advised [us][me] 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][I] 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.
This
letter shall serve as our standing instruction to you that the shares of Common
Stock are freely transferable by the Holders pursuant to the Registration
Statement. You need not require further letters from us to effect any future
legend-free issuance or reissuance of shares of Common Stock to the Holders
as
contemplated by the Company's Irrevocable Transfer Agent Instructions dated
December 20, 2006.
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Very
truly yours,
[ISSUER'S
COUNSEL]
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| By: | ||
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| CC: [LIST NAMES OF HOLDERS] | ||
FORM
OF LEGAL OPINION
1. The
Company and each of its Subsidiaries is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of its incorporation.
The Company has the requisite corporate power to own, lease and operate its
properties and to conduct its business as
presently conducted. The Company and each of its Subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in each
jurisdiction in which such qualification is necessary to conduct its
business.
2. The
Company has the requisite corporate power and authority to execute, deliver
and
perform all of its obligations under the Transaction Documents, including the
issuance of the Common Shares, the Notes, the Conversion Shares, the Warrants
and the Warrant Shares in accordance with the terms thereof. The execution
and
delivery of the Transaction Documents by the Company and the consummation of
the
transactions contemplated therein (including without limitation, the issuance
and sale of the Common Shares, Notes and Warrants) have been duly authorized
by
the Company's Board of Directors, and no further consent or authorization of
the
Company, its Board of Directors or its stockholders is required therefor. The
Transaction Documents have been duly executed and delivered by the Company.
The
Transaction Documents constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective
terms.
3. The
execution, delivery and performance by the Company of the Transaction Documents,
including without limitation, the issuance of the Common Shares, the Notes,
the
Warrants, the Conversion Shares, and the Warrant Shares, and the consummation
by
the Company of the transactions contemplated by the Transaction Documents and
the compliance by the Company with the terms thereof (a) do not and will not
violate, conflict with or constitute a default (or an event which, with the
giving of notice or lapse of time or both, constitutes or would constitute
a
default) under, give rise to any right of termination, cancellation or
acceleration under, (i) the Certificate of Incorporation or By-laws of the
Company; (ii) any agreement, note, lease, mortgage, deed or other instrument
to
which the Company is a party or by which the Company is bound or affected that
has been publicly filed (the "Publicly
Filed Documents");
or
(iii) any statute, law, rule or regulation of the United States, the Principal
Market or the State of Nevada applicable to the Company or any order, writ,
injunction or decree; and (b) do not and will not result in or require the
creation of any lien, security interest or other charge or encumbrance (other
than pursuant to the Transactions Documents) upon or with respect to any of
its
respective properties.
4. When
so
issued, Common Shares, the Notes, the Warrants, the Conversion Shares and the
Warrant Shares will be duly authorized and validly issued, fully paid and
nonassessable, and free of any all liens and charges and preemptive or similar
rights contained in the Company's Certificate of Incorporation or Bylaws or
any
agreement, note, lease, publicly filed mortgage deed or other instrument to
which the Company is a party or by which the Company is bound that are Publicly
Filed Documents. Subject to obtaining the Stockholder Approval, the Common
Shares, the Conversion Shares and the Warrant Shares have been duly and validly
authorized and reserved for issuance by all proper corporate
action.
5. As
of the
date hereof, the authorized capital stock of the Company consists of (i)
100,000,000 shares of Common Stock, of which as of the date hereof,
[ ] are issued
and outstanding,
[
] shares are reserved for issuance pursuant to the Company's stock option
and purchase plans and
[ ] shares are
reserved for issuance pursuant to securities (other than the aforementioned
options, the Common Shares, the Notes and the Warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock. None of such
Common Stock is subject to preemptive rights or other rights of the stockholders
of the Company pursuant to the Certificate of Incorporation or the By-laws
or
under the Nevada Corporation Law or pursuant to any agreement, note, lease,
mortgage deed or other instrument to which the Company is a party or by which
the Company is bound. There are no securities or instruments of the Company
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Common Shares, the Notes, the Conversion Shares, the Warrants
or
the Warrant Shares.
6. The
offer
and sale of the Common Shares, the Notes and the Warrants in accordance with
the
Securities Purchase Agreement and the issuance of the Conversion Shares and
the
Warrant Shares in accordance with the Transaction Documents constitute
transactions exempt from the registration requirements of the Securities Act
of
1933, as amended.
7. No
authorization, approval, consent, filing, or other order of any federal or
state
governmental body, regulatory agency, self-regulatory organization or stock
exchange or market, or the stockholders of the Company, or any court, or to
our
knowledge, any third party is required to be obtained by the Company to enter
into and perform its obligations under the Transaction Documents or for the
issuance and sale of the Common Shares, the Notes, the Conversion Shares, the
Warrants or the Warrant Shares in accordance with the Transaction Documents,
or
for the exercise of any rights and remedies under any Transaction Documents
except (i) the filing of a Form D under Regulation D of the Securities
Act of 1933, as amended, (ii) obtaining the Stockholder Approval, and
(iii) the filing of a Form 8-K pursuant to the Securities Exchange Act of
1934, as amended.
8. To
our
knowledge, no action, suit, proceeding, inquiry or investigation before or
by
any court, public board or body or any governmental agency or self-regulatory
organization is pending or threatened against the Company or any of its
Subsidiaries or any of the properties or assets of the Company or any of its
Subsidiaries.
9. The
Company is not an "investment company" or any entity controlled by an
"investment company," as such term is defined in the Investment Company Act
of
1940, as amended.
RANCHER
ENERGY CORP.
SECRETARY’S
CERTIFICATE
The
undersigned hereby certifies that he is the duly elected, qualified and acting
Secretary of Rancher Energy Corp., a Nevada corporation (the "Company"),
and
that as such he is authorized to execute and deliver this certificate in the
name and on behalf of the Company and in connection with the Securities Purchase
Agreement, dated as of December 21, 2006, by and among the Company and the
investors listed on the Schedule of Buyers attached thereto (the "Securities
Purchase Agreement"),
and
further certifies in his official capacity, in the name and on behalf of the
Company, the items set forth below. Capitalized terms used but not otherwise
defined herein shall have the meaning set forth in the Securities Purchase
Agreement.
| 1. |
Attached
hereto as Exhibit
A
is
a true, correct and complete copy of the resolutions duly adopted
by the
Board of Directors of the Company at a meeting of the Board of Directors
held on December 20, 2006. Such resolutions have not in any way been
amended, modified, revoked or rescinded, have been in full force
and
effect since their adoption to and including the date hereof and
are now
in full force and effect.
|
| 2. |
Attached
hereto as Exhibit
B
is
a true, correct and complete copy of the Certificate of Incorporation
of
the Company, together with any and all amendments thereto currently
in
effect, and no action has been taken to further amend, modify or
repeal
such Certificate of Incorporation, the same being in full force and
effect
in the attached form as of the date hereof.
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| 3. |
Attached
hereto as Exhibit
C
is
a true, correct and complete copy of the Bylaws of the Company and
any and
all amendments thereto currently in effect, and no action has been
taken
to further amend, modify or repeal such Bylaws, the same being in
full
force and effect in the attached form as of the date
hereof.
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| 4. |
Each
person listed below has been duly elected or appointed to the position(s)
indicated opposite his name and is duly authorized to sign the Securities
Purchase Agreement and each of the Transaction Documents on behalf
of the
Company, and the signature appearing opposite such person’s name below is
such person’s genuine signature.
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Name
|
Position
|
Signature
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|
Xxxx
Works
|
Chief
Executive Officer
|
_________________________
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Xxxxxx
Xxxxxxx
|
Chief
Operating Officer
|
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IN
WITNESS WHEREOF, the undersigned has hereunto set his hand as of this 21 day
of
December, 2006.
|
Xxxx Works
Secretary, Chief Executive
Officer
|
I,
Xxxxxx
Xxxxxxx, Chief Operating Officer, hereby certify that [Name] is the duly
elected, qualified and acting Secretary of the Company and that the signature
set forth above is his true signature.
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Xxxxxx Xxxxxxx
Chief Operating
Officer
|
EXHIBIT
A
Resolutions
EXHIBIT
B
Certificate
of Incorporation
EXHIBIT
C
Bylaws
RANCHER
ENERGY CORPORATION
OFFICER'S
CERTIFICATE
The
undersigned, the Chief Executive Officer of Rancher Energy Corporation, a Nevada
corporation (the "Company"),
pursuant to Section 7(viii) of the Securities Purchase Agreement, dated as
of
December 20, 2006, by and among the Company and the investors identified on
the
Schedule of Buyers attached thereto (the "Securities
Purchase Agreement"),
hereby represents, warrants and certifies to the Buyers as follows (capitalized
terms used but not otherwise defined herein shall have the meaning set forth
in
the Securities Purchase Agreement):
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1.
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The
representations and warranties made by the Company as set forth in
Section
3 of the Securities Purchase Agreement are true and correct in all
material respects (except for those representations and warranties
that
are qualified by materiality or Material Adverse Effect, which shall
be
true and correct in all respects) as of the date hereof (except for
representations and warranties that speak as of a specific date,
which
shall be true and correct as of such specified date which shall be
true
and correct as of such specified
date).
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2.
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The
Company has, in all respects, performed or complied with all covenants,
agreements and conditions required to be performed or complied with
by it
at or prior to the date hereof under the Transaction
Documents.
|
IN
WITNESS WHEREOF,
the
undersigned has executed this certificate this 21 day of December,
2006.
|
Xxxx
Works
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Chief
Executive Officer
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RANCHER
ENERGY CORP.
Form
of Lock-Up Agreement
December
__, 2006
Rancher
Energy Corp.
999-18th
Street,
Suite 1740
Xxxxxx,
Xxxxxxxx 00000
Re:
Rancher
Energy Corp. - Lock-Up Agreement
Dear
Sirs:
This
Lock-Up Agreement is being delivered to you in connection with the Securities
Purchase Agreement (the "Purchase
Agreement"),
dated
as of December __, 2006 by and among Rancher Energy Corp. (the "Company")
and
the investors party thereto (the "Buyers"),
with
respect to the issuance of (i) convertible notes of the Company (the
"Notes")
which
Notes shall be convertible into the common stock, par value $0.00001 per share,
of the Company (the "Common
Stock")
(ii)
shares of Common Stock and (iii) warrants to acquire additional shares of Common
Stock.
Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Purchase Agreement.
In
order
to induce you to enter into the Purchase Agreement, the undersigned agrees
that
commencing
on the date hereof and ending on the later of (i) the date 180 days from the
Closing Date (as defined in the Purchase Agreement) and (ii) the
date
the
Initial Registration Statement (as defined in the Registration Rights Agreement)
filed by the Company pursuant to the Registration Rights Agreement is declared
effective by the United States Securities and Exchange Commission,
but in
no event later than the one year anniversary of the Closing Date (the
"Lock-Up
Period"),
the
undersigned will not, without the written consent of the Required Holders (as
defined in the Registration Rights Agreement), (i)
sell,
offer to sell, contract or agree to sell, hypothecate, hedge, pledge, grant
any
option to purchase,
make any
short sale
or
otherwise dispose of or agree to dispose of, directly or indirectly,
any
shares
of Common Stock, owned directly by the undersigned (including holding as a
custodian) or with respect to which the undersigned has beneficial ownership
within the rules and regulations of the Securities and Exchange
Commission,
or (ii)
enter into any swap or other arrangement that transfers to another, in whole
or
in part, any of the economic consequences of ownership of any
shares of Common Stock, owned directly by the undersigned (including holding
as
a custodian) or with respect to which the undersigned has beneficial ownership
within the rules and regulations of the Securities and Exchange
Commission,
whether
any such transaction is to be settled by delivery of such securities, in cash
or
otherwise, (collectively, the "Undersigned’s
Shares").
This
Lock-Up Agreement shall not apply to any shares of Common Stock acquired by
the
undersigned on the open market or otherwise after the Closing Date.
The
foregoing restriction is expressly agreed to preclude the undersigned or any
affiliate of the undersigned from engaging in, without the written consent
of
the Required Holders, any hedging or other transaction which is designed to
or
which reasonably could be expected to lead to or result in a sale or disposition
of the Undersigned’s Shares even if the Undersigned’s Shares would be disposed
of by someone other than the undersigned. Such prohibited hedging or other
transactions would include, without limitation, any short sale or any purchase,
sale or grant of any right (including, without limitation, any put or call
option) with respect to any of the Undersigned’s Shares or with respect to any
security that includes, relates to, or derives any significant part of its
value
from the Undersigned’s Shares.
Notwithstanding
the foregoing, the undersigned may transfer the Undersigned’s Shares (i) as a
bona
fide
gift or
gifts, provided that the donee or donees thereof agree to be bound in writing
by
the restrictions set forth herein or (ii) to any trust for the direct or
indirect benefit of the undersigned or the immediate family of the undersigned,
provided that the trustee of the trust agrees to be bound in writing by the
restrictions set forth herein, and provided further that any such transfer
shall
not involve a disposition for value. For purposes of this Lock-Up Agreement,
“immediate family” shall mean any relationship by blood, marriage or adoption,
not more remote than first cousin. The undersigned now has, and, except as
contemplated by clauses (i) and (ii) above, for the duration of this Lock-Up
Agreement will have, good and marketable title to the Undersigned’s Shares, free
and clear of all liens, encumbrances, and claims whatsoever. The undersigned
also agrees and consents to the entry of stop transfer instructions with the
Company’s transfer agent and registrar against the transfer of the Undersigned’s
Shares except in compliance with the foregoing restrictions.
The
undersigned understands and agrees that this Lock-Up Agreement is irrevocable
and shall be binding upon the undersigned’s heirs, legal representatives,
successors, and assigns.
This
Lock-Up Agreement may be executed in two counterparts, each of which shall
be
deemed an original but both of which shall be considered one and the same
instrument.
This
Lock-Up Agreement will be governed by and construed in accordance with the
laws
of the State of New York, without giving effect to any choice of law or
conflicting provision or rule (whether of the State of New York, or any other
jurisdiction) that would cause the laws of any jurisdiction other than the
State
of New York to be applied. In furtherance of the foregoing, the internal laws
of
the State of New York will control the interpretation and construction of this
Lock-Up Agreement, even if under such jurisdiction's choice of law or conflict
of law analysis, the substantive law of some other jurisdiction would ordinarily
apply.
The
Buyers shall be intended third party beneficiaries of this Agreement to the
same
extent as if they were parties hereto, and shall be entitled to enforce the
provisions hereof. No provision of this Agreement may be amended or waived
without the written consent of the Required Holders.
|
Very
truly yours,
|
||
| |
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|
|
Exact
Name of Stockholder
|
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|
Authorized
Signature
|
||
|
Title
|
||
| Agreed to and Acknowledged: | |||
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RANCHER
ENERGY CORP.
|
|||
| By: | |||
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Name:
Title:
|
VOTING
AGREEMENT
VOTING
AGREEMENT, dated as of December __, 2006 (this "Agreement"),
by
and among Rancher Energy Corp., a Nevada corporation (the "Company"),
and
the stockholders listed on the signature pages hereto under the heading
"Stockholders"
(each a
"Stockholder"
and
collectively, the "Stockholders").
WHEREAS,
as of the date hereof, the Stockholders own collectively __________ shares
of
Common Stock, which represent in the aggregate approximately ___% of the total
issued and outstanding capital stock of the Company; and
WHEREAS,
as a condition to the willingness of the Investors to enter into the Securities
Purchase Agreement and to consummate the transactions contemplated thereby
(collectively, the "Transaction"),
the
Investors have required that each Stockholder agree, and in order to induce
the
Investors to enter into the Securities Purchase Agreement, each Stockholder
has
agreed, to enter into this Agreement with respect to all the Common Stock now
owned and which may hereafter be acquired by the Stockholder and any other
securities, if any, which such Stockholder is currently entitled to vote, or
after the date hererof becomes entitled to vote, at any meeting of stockholders
of the Company (the "Other
Securities").
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements contained herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE
I
VOTING
AGREEMENT OF THE STOCKHOLDER
SECTION
1.01. Voting
Agreement.
Subject
to the last sentence of this Section 1.01, each Stockholder hereby agrees
that at any meeting of the stockholders of the Company, however called, and
in
any action by written consent of the Company's stockholders, each of the
Stockholders shall vote the Common Stock and the Other Securities: (a) in favor
of the Stockholder Approval (as defined in the Securities Purchase Agreement)
as
described in Section 4(p) of the Securities Purchase Agreement; and (b)
against any proposal or any other corporate action or agreement that would
result in a breach of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Securities Purchase Agreement
or which could result in any of the conditions to the Company's obligations
under the Securities Purchase Agreement not being fulfilled. Each Stockholder
acknowledges receipt and review of a copy of the Securities Purchase Agreement
and the other Transaction Documents (as defined in the Securities Purchase
Agreement). The obligations of the Stockholders under this Section 1.01 shall
terminate immediately following the occurrence of the Stockholder Approval.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF THE STOCKHOLDER
Each
Stockholder hereby represents and warrants, severally but not jointly, to each
of the Investors as follows:
SECTION
2.01. Authority
Relative to This Agreement.
Each
Stockholder has all necessary power and authority to execute and deliver this
Agreement, to perform his or its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by such Stockholder and constitutes a legal, valid and binding
obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms, except (a) as such enforceability may be limited
by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws now or hereafter in effect relating to, or affecting
generally the enforcement of creditors' and other obligees' rights, (b) where
the remedy of specific performance or other forms of equitable relief may be
subject to certain equitable defenses and principles and to the discretion
of
the court before which the proceeding may be brought, and (c) where rights
to
indemnity and contribution thereunder may be limited by applicable law and
public policy.
SECTION
2.02. No
Conflict.
(a)
The
execution and delivery of this Agreement by such Stockholder does not, and
the
performance of this Agreement by such Stockholder shall not, (i) conflict with
or violate any federal, state or local law, statute, ordinance, rule,
regulation, order, judgment or decree applicable to any Stockholder or by which
the Common Stock or the Other Securities owned by such Stockholder are bound
or
affected or (ii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
give
to others any rights of termination, amendment, acceleration or cancellation
of,
or result in the creation of a lien or encumbrance on any of the Common Stock
or
the Other Securities owned by such Stockholder pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or
other instrument or obligation to which such Stockholder is a party or by which
such Stockholder or the Common Stock or Other Securities owned by such
Stockholder are bound.
(b) The
execution and delivery of this Agreement by such Stockholder does not, and
the
performance of this Agreement by such Stockholder shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental entity or other third party by such
Stockholder.
SECTION
2.03. Title
to the Stock.
As of
the date hereof, each Stockholder is the owner of the number of shares of Common
Stock set forth opposite its name on Appendix
A
attached
hereto, entitled to vote, without restriction, on all matters brought before
holders of capital stock of the Company, which Common Stock represent on the
date hereof the percentage of the outstanding stock and voting power of the
Company set forth on such Appendix. Such Common Stock are all the securities
of
the Company owned, either of record or beneficially, by such Stockholder. Such
Common Stock are owned free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on such
Stockholder's voting rights, charges and other encumbrances of any nature
whatsoever. No Stockholder has appointed or granted any proxy, which appointment
or grant is still effective, with respect to the Common Stock or Other
Securities owned by such Stockholder.
2
ARTICLE
III
COVENANTS
SECTION
3.01. No
Disposition or Encumbrance of Stock.
Each
Stockholder hereby covenants and agrees that, until the Stockholder Approval
has
been obtained, except as contemplated by this Agreement, such Stockholder shall
not offer or agree to sell, transfer, tender, assign, hypothecate or otherwise
dispose of, grant a proxy or power of attorney with respect to, or create or
permit to exist any security interest, lien, claim, pledge, option, right of
first refusal, agreement, limitation on such Stockholder's voting rights, charge
or other encumbrance of any nature whatsoever ("Encumbrance")
with
respect to the Common Stock or Other Securities, or directly or indirectly,
initiate, solicit or encourage any person to take actions which could reasonably
be expected to lead to the occurrence of any of the foregoing; provided,
however,
that
any such Stockholder may assign, sell or transfer any Common Stock or Other
Securities provided that any such recipient of the Common Stock or Other
Securities has delivered to the Company and each Investor a written agreement
in
a form reasonably satisfactory to the Investors that the recipient shall be
bound by, and the Common Stock and/or Other Securities so transferred, assigned
or sold shall remain subject to this Agreement.
SECTION
3.02. Company
Cooperation.
The
Company hereby covenants and agrees that it will not, and each Stockholder
irrevocably and unconditionally acknowledges and agrees that the Company will
not (and waives any rights against the Company in relation thereto), recognize
any Encumbrance or agreement on any of the Common Stock or Other Securities
subject to this Agreement unless the provisions of Section 3.01 have been
complied with.
ARTICLE
IV
MISCELLANEOUS
SECTION
4.01. Further
Assurances.
Each
Stockholder will execute and deliver such further documents and instruments
and
take all further action as may be reasonably necessary in order to consummate
the transactions contemplated hereby.
SECTION
4.02. Specific
Performance.
The
parties hereto agree that irreparable damage would occur in the event any
provision of this Agreement was not performed in accordance with the terms
hereof and that any Investor (without being joined by any other Investor) shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or in equity. Any Investor shall be entitled to its
reasonable attorneys' fees in any action brought to enforce this Agreement
in
which it is the prevailing party.
SECTION
4.03. Entire
Agreement.
This
Agreement constitutes the entire agreement among the Company and the
Stockholders (other than the Securities Purchase Agreement and the other
Transaction Documents) with respect to the subject matter hereof and supersedes
all prior agreements and understandings, both written and oral, among the
Company and the Stockholders with respect to the subject matter
hereof.
3
SECTION
4.04. Amendment.
This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
SECTION
4.05. Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of this Agreement is not affected
in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced,
the
parties hereto shall negotiate in good faith to modify this Agreement so as
to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the terms of this Agreement remain as originally
contemplated to the fullest extent possible.
SECTION
4.06. Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New York. The parties hereby agree that all actions or proceedings arising
directly or indirectly from or in connection with this Agreement shall be
litigated only in the Supreme Court of the State of New York or the United
States District Court for the Southern District of New York located in New
York
County, New York. The parties consent to the jurisdiction and venue of the
foregoing courts and consent that any process or notice of motion or other
application to any of said courts or a judge thereof may be served inside or
outside the State of New York or the Southern District of New York by registered
mail, return receipt requested, directed to the party being served at its
address set forth on the signature ages to this Agreement (and service so made
shall be deemed complete three (3) days after the same has been posted as
aforesaid) or by personal service or in such other manner as may be permissible
under the rules of said courts. Each of the Company and each Stockholder
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit,
action, or proceeding brought in such a court and any claim that suit, action,
or proceeding has been brought in an inconvenient forum. EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
SECTION
4.07. Third-Party
Beneficiaries.
The
Investors shall be intended third party beneficiaries of this Agreement to
the
same extent as if they were parties hereto, and shall be entitled to enforce
the
provisions hereof.
SECTION
4.08. Termination.
This
Agreement shall terminate immediately following the occurrence of the
Stockholder Approval or upon the mutual consent of each Stockholder and the
Investors.
[Signature
Page Follows]
4
IN
WITNESS WHEREOF, each Stockholder and the Company has duly executed this
Agreement.
|
THE
COMPANY:
|
||||
|
RANCHER
ENERGY CORP.
|
||||
|
By:
|
||||
|
Name:
|
||||
|
Title:
|
||||
|
Dated:
December __, 2006
|
||||
|
Address:
|
999-18th
Street, Suite 1740
Xxxxxx,
Xxxxxxxx 00000
|
|||
|
STOCKHOLDER:
|
|||
|
[
]
|
|||
|
|
|||
|
Dated:
December __, 2006
|
|||
|
Address:
|
|||
APPENDIX
A
|
Stockholder
|
Common
Stock
Owned
|
Percentage
of Stock Outstanding
|
Voting
Percentage
of
Stock
Outstanding
|
|||
|
|
 |
|
08
December 2006
|
To:
|
The
holders of units (individually a “Unit
Holder”
and collectively the “Unit
Holders”)
consisting of shares (the “Shares”)
of common stock, $.0001 par value (the “Common
Stock”),
and warrants (the “Warrants”)
to purchase shares of Common Stock (the Shares and Warrants together
are
collectively the “Units”
and each a “Unit”)
of Rancher Energy Corp. (the “Company”)
|
Dear
Unit
Holder:
This
letter agreement (the “Agreement”)
sets
forth the terms and conditions under which certain of the Unit Holders who
participated in the Company’s Regulation S offering from approximately 10 July
2006 through 02 November 2006 (the “Unit
Offering”)
agree
to (i) waive temporarily the ability to exercise Warrants received as part
of
the Unit Offering, and (ii) to modify the registration rights concerning the
Warrants and Shares received in the Unit Offering. Capitalized terms used herein
and not defined herein shall have the meanings set forth in the Warrant
Certificate (as defined below) or the Unit Purchase Agreement (as defined
below).
As
you
may be aware, the Company has entered into agreements to (i) acquire certain
property located in Big Muddy Field (located in the Powder River Basin in
Wyoming), and (ii) acquire working interests in Xxxx Xxxxx Xxxxx Xxxxx xxx
Xxxxx
Xxxxxxxx X Field (both of which are located in the Powder River Basin) and
is in
the process of obtaining funds through one or more financings (each a
“Financing”)
sufficient to consummate one or more acquisitions (the “Acquisitions”).
The
Company currently has 100,000,000 shares of Common Stock, $.0001 par value
(“Common
Stock”),
authorized under its Articles of Incorporation, as amended (the “Articles”),
and
such amount of authorized shares is insufficient to accomplish the Financing(s)
required to obtain funds sufficient to consummate the Acquisitions. The Company
intends to amend the Articles to increase its authorized shares of Common Stock
to 225,000,000 shares of Common Stock as promptly as practicable after the
closing of the Financing(s).
Each
of
the Unit Holders is a party to (i) a Warrant Certificate from the Company (the
“Warrant
Certificate”),
which
states that (A) the Unit Holder, pursuant to Section 2 thereof, may exercise
the
Warrants at any time prior to the Expiration Date, and (B) the Company, pursuant
to Section 4 of the Warrant Certificate, shall keep available out of its
authorized stock a sufficient number of shares as shall then be issuable upon
the exercise of all outstanding Warrants, and (ii) a Unit Purchase Agreement
with the Company (the “Unit
Purchase Agreement”)
which
provides for certain registration rights, pursuant to Section 3 thereof (the
“Registration
Rights”),
concerning certain securities (the “Securities”).
To
facilitate the Company’s ability to accomplish the Financing(s) and to raise
funds sufficient to consummate the Acquisitions, the undersigned Unit Holder
agrees to waive certain rights under the Warrant Certificate and Unit Purchase
Agreement and enter into certain other agreements as further described below.
Xxxxxxx
000-00xx
Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000 XXX ● Phone
x0.000.000.0000
Fax
x0.000.000.0000 ● Xxxxx--xxxxxxxxx@xxxxxxxxxxxxx.xxx●
Xxx--xxx.xxxxxxxxxxxxx.xxx
In
consideration of the foregoing, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the undersigned
agrees as follows:
1.
Waiver
and Agreement.
Each of
the undersigned Unit Holders, severally and not jointly with the other Unit
Holders, hereby waives certain rights and makes certain agreements as described
as follows:
(a)
Warrant
Exercise.
Such
Unit Holder (i) hereby waives its right and ability to exercise its Warrants,
pursuant to Section 2 of the Warrant Certificate, until such time as the Company
has amended its Articles to increase its authorized shares of Common Stock
to at
least 225,000,000 shares; and (ii) hereby waives its rights under Section 4
of
the Warrant Certificate, which requires the Company to reserve and keep
available out of its authorized stock such number of shares of Common Stock
as
shall be issuable upon the exercise of all outstanding Warrants, until such
time
as the Company has amended its Articles to increase its authorized shares of
Common Stock to at least 225,000,000 shares.
(b)
Registration
Rights.
(i)
Each
of the undersigned Unit Holders, severally and not jointly with the other Unit
Holders, hereby waives, any claims against the Company for failing to register
such Unit Holder’s Securities within the 90 day period specified in Section 3 of
the Unit Purchase Agreement.
(ii)
Each
of the undersigned Unit Holders hereby agrees, severally and not jointly with
the other Unit Holders, with the Company that the Registration Rights set forth
in the Unit Purchase Agreement are hereby terminated and superseded by the
registration rights set forth in this subsection 1(b)(ii). The Company shall
register (A) the shares of Common Stock issued to the Unit Holder as part of
the
Unit, and (B) the shares of Common Stock issued or issuable upon exercise of
the
Warrants issued to the Unit Holder as part of the Unit (collectively, the
“Registrable
Securities”)
by
filing (unless at such time the Registrable Securities may be resold pursuant
to
Rule 144(k) of the Securities Act of 1933, as amended, or
any
other rule of similar effect) with the Securities and Exchange Commission (the
“SEC”)
and
using the Company’s best efforts to cause to become effective one or more
registration statements beginning 12 months following the closing of the
Financing. If the SEC requires that the Company reduce the number of shares
so
registered, then the Registrable Securities shall be decreased pro rata with
the
other shares included in any such registration, based on the number of
Registrable Securities held by the Unit Holders and the number of other
registrable securities held by the other participants in such registration.
Each
of the Unit Holders acknowledges that the foregoing registration rights may
be
amended, or compliance by the Company with the terms thereof waived, with the
written consent of two-thirds in interest of the undersigned Unit
Holders.
2.
Governing
Law.
THIS
AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
AND DECISIONS OF THE STATE OF COLORADO, WITHOUT REGARD TO THE CONFLICT OF LAWS
PROVISIONS THEREOF.
3.
Captions.
Section
captions and headings used in this Agreement are for convenience only, and
shall
not affect the construction of this Agreement.
4.
Severability.
Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of
this
Agreement shall be prohibited by or invalid under such law, such provision
shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this
Agreement.
5.
Counterparts
& Execution of Agreement.
This
Agreement may be executed in any number of counterparts and by the different
parties hereto on separate counterparts, and each such counterpart shall be
deemed to be an original, but all such counterparts shall together constitute
one and the same agreement. The exchange of copies of this Agreement and of
signature pages by facsimile transmission shall constitute effective execution
and delivery of this Agreement as to the parties and may be used in lieu of
the
original Agreement for all purposes. Signatures of the parties transmitted
by
facsimile shall be deemed to be their original signatures of all
purposes.
6.
Successors
& Assigns.
This
Agreement shall be binding upon the parties hereto and their respective
successors and assigns, and shall inure to the benefit of such parties and
their
respective successors and assigns.
7.
Enforceability.
The
parties further acknowledge and agree that the enforceability of this Agreement
as it pertains to the undersigned Unit Holder shall not be dependent upon
obtaining an executed Agreement from any other Unit Holder or any other holder
of the Company’s securities.
8.
Full
Force & Effect.
Except
as specifically stated in this Agreement (i) this Agreement shall not
limit, diminish or waive the obligations of the parties under the Warrant
Certificate or Unit Purchase Agreement, and (ii) the parties reaffirm their
obligations under the Warrant Certificate and Unit Purchase Agreement to which
they are a party and agree that the Warrant Certificate and Unit Purchase
Agreement remain in full force.
9.
Information.
The
Unit Holder acknowledges that it has all information needed to enter into the
agreements and make the waivers contemplated by this Agreement and if it has
requested any information from the Company it acknowledges receiving the
same.
[Remainder
of Page Intentionally Left Blank]
If
you
accept the foregoing terms, please execute in the space provided below and
return one copy to the Company at the above fax number.
Sincerely,
RANCHER
ENERGY CORP.
By:
__________________________
Name:
Xxxx Works
Title:
President & Chief Executive Officer
AGREED
& ACCEPTED effective as of the date set forth above:
UNIT
HOLDER:
Signature
of Individual Unit Holder: ________________________________________
Printed
Name of Individual Unit Holder:
_____________________________________
______________________________________
Printed
Name of Entity (if applicable)
By
(Signature): _____________________________________
Name
(printed) _____________________________________
Title:
_______________________________
__________________________________________________
Address
__________________________________________________
City,
State, Postal or Zip Code, Country
[Signature
Page to Unit Holder Letter Agreement]
