KFX , INC.
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
Dated March 28, 2003
KFX, INC.
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement")
is entered into on March 28, 2003, by and among KFx, Inc., a Delaware
corporation (the "Company"), and the parties listed on the "Schedule of
Investors" attached hereto as Schedule A (each, an "Investor" and
collectively, the "Investors"), with reference to the following facts:
WHEREAS, the Company has authorized the sale and issuance of up to
two million (2,000,000) shares (the "Shares") of its common stock, par value
$.001 per share (the "Common Stock") pursuant to the terms of this Agreement;
WHEREAS, the Company has authorized the issuance of warrants, in
substantially the form attached hereto as Exhibit A, to purchase up to four
hundred thousand (400,000) shares of Common Stock (the "Warrants") pursuant to
the terms of this Agreement; and
WHEREAS, the Company wishes to sell to the Investors, and the
Investors wish to purchase from the Company, the Shares and Warrants on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions set forth in this Agreement and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties agree as
follows:
1. Authorization and Sale of the Shares.
1.1 Authorization. The Company has authorized the issuance and
sale pursuant to the terms and conditions hereof of up to two million
(2,000,000) shares of its Common Stock and Warrants to purchase four hundred
thousand (400,000) shares of Common Stock on exercise of the Warrants.
1.2 Issuance and Sale of the Shares and Warrants. Subject to the
terms and conditions hereof, and in consideration of and in express reliance
upon the representations, warranties, covenants, terms and conditions of this
Agreement, each Investor agrees, severally but not jointly, to purchase, and
the Company agrees to issue and sell to each such Investor, at the Closing (as
defined in Section 1.3): (a) the number of shares of Common Stock set forth
opposite the name of such Investor on the Schedule of Investors (as such
number is subject to change pursuant to Sections 1.5 and 1.6 hereof) (the
"Investment"), at the Purchase Price (as defined in Section 1.4) per share as
calculated pursuant to Section 1.4 below, and (b) Warrants to purchase
initially the number of shares of Common Stock set forth opposite the name of
such Investor on the Schedule of Investors initially at an exercise price of
$2.75 per share of Common Stock. The total purchase price payable by each
Investor for the number of Shares and Warrants that such Investor is hereby
agreeing to purchase is set forth opposite the name of such Investor under the
heading "Aggregate Investment Amount" on the Schedule of Investors. The
Company has authorized and has reserved and covenants to continue to reserve,
free of preemptive rights and other similar contractual rights of
stockholders, a number of its authorized but unissued shares of its Common
Stock equal to the aggregate number of shares of Common Stock necessary to
effect the full exercise of the Warrants.
1.3 Closing; Delivery.
(a) Closing. Upon satisfaction of the conditions set forth in
Sections 5 and 6, the closing of the purchase, sale and issuance of the Shares
and Warrants listed on the Schedule of Investors attached hereto shall take
place at the offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, on March 28, 2003 (the "Closing Date"), at
10:00 a.m. (New York City time) or at such other time and place as the parties
may agree (the "Closing"). At the Closing, the Company and the Investors shall
enter into the registration rights agreement attached hereto as Exhibit B (the
"Registration Rights Agreement"), relating to the Shares and the Common Stock
issuable upon conversion of the Warrants.
(b) Delivery at the Closing. Subject to the terms and conditions
of this Agreement, at the Closing the Company will deliver to each Investor:
(i) a stock certificate representing the number of Shares set forth opposite
the name of such Investor on the Schedule of Investors; and (ii) a Warrant to
purchase the number of shares of Common Stock set forth opposite the name of
such Investor on the Schedule of Investors against delivery to the Company by
each such Investor at the Closing of a check or wire transfer of funds for the
aggregate purchase price of the Shares acquired by such Investor.
(c) Common Stock Purchase Price. The purchase price of the
Shares (the "Purchase Price") shall be calculated based upon a 5.0% discount
from the average closing price for shares of the Common Stock at the close of
trading during the ten (10) consecutive trading days immediately preceding the
Closing Date, provided, that the Purchase Price shall be no less than $2.50 per
share and no greater than $2.75 per share.
2. Representations, Warranties and Agreements of the Company. For
purposes of this Section 2, all references to the "Company" in Sections
2.1(a), 2.5, 2.7, 2.8, 2.10 through 2.26, 2.28 and 2.29 shall be deemed to be
a reference to the Company and its significant subsidiaries listed on Schedule
2.0. The Company hereby represents and warrants to each Investor that except
as set forth on the Schedules attached hereto (which exceptions shall be
deemed to be representations and warranties as if made hereunder):
2.1 Organization; Standing and Power.
(a) The Company (i) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation, (ii) has all requisite corporate power and authority to own,
operate and occupy its properties and to carry on its businesses as presently
conducted and as proposed hereafter to be conducted, and (iii) is duly
qualified and in good standing to do business as a foreign corporation in each
and every jurisdiction where such qualification is necessary to carry out its
business and operations, except where the failure to so qualify or be in good
standing would not have a material adverse effect on the condition (financial
or otherwise), business, operations or assets of the Company (the "Condition
of the Company");
(b) The Company has all requisite corporate power and authority
to execute and deliver, and perform all of its obligations and the
transactions contemplated under this Agreement, the Registration Rights
Agreement and the Warrants (collectively, the "Related Documents") and to
issue, sell and deliver the Shares and the Warrants in accordance with the
terms hereof and the Warrants, as applicable; and
(c) All of the Company's assets and liabilities are owned by,
or the obligation of, the Company or the significant subsidiaries listed on
Schedule 2.0.
2.2 Capitalization; Reserved Stock, Preemptive Rights. The total
authorized capital stock of the Company consists of 80,000,000 shares of
Common Stock, of which 44,360,879 shares of Common Stock are issued and
outstanding as of March 4, 2003, and 20,000,000 shares of Preferred Stock, of
which no shares are issued. All issued and outstanding shares of Common Stock
(i) have been duly and validly authorized and issued, (ii) are fully paid and
nonassessable and (iii) have been issued in compliance with all applicable
federal and state securities laws. Except for (a) the 7,049,090 shares of
Common Stock reserved for issuance on exercise of options that are outstanding
or reserved for issuance under the Company's equity incentive and stock option
plans described in SEC Reports (as defined in Section 2.6), (b) the 26,023,563
shares of common stock to be issued upon the exercise of outstanding warrants
and options and (c) the 400,000 shares of Common Stock reserved for issuance
on exercise of the Warrants, no other shares have been reserved for issuance
and there are no outstanding options, warrants or other rights to subscribe
for or purchase from the Company any shares of its capital stock or any
securities convertible into, exercisable for or exchangeable for its capital
stock, and no shares of Common Stock or any other security of the Company,
except as otherwise disclosed on Schedule 2.2, are entitled to preemptive
rights, co-sale rights, registration rights, rights of first refusal or any
other similar rights. Furthermore, except as set forth in this Agreement and
as otherwise disclosed on Schedule 2.2, there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except as otherwise disclosed on Schedule 2.2, the Company is not a party to
or bound by any agreement or understanding granting registration rights or
anti-dilution rights to any person with respect to any of its equity or debt
securities, and, except for customary transfer restrictions, the Company is
not a party to any agreement or understanding restricting the voting or
transfer of any shares of the capital stock of the Company. The offer and sale
of all capital stock, convertible securities, rights, warrants, or options of
the Company issued prior to the Closing complied with all applicable federal
and state securities laws, and no holder of such securities has a right of
rescission or claim for damages with respect thereto which could have a
material adverse effect on the Condition of the Company. The designations,
powers, preferences, rights, qualifications, limitations and restrictions in
respect of each class and series of authorized capital stock of the Company
are as set forth in the certificate of incorporation of the Company, and all
such designations, powers, preferences, rights, qualifications, limitations
and restrictions are valid, binding and enforceable against the Company and in
accordance with all applicable laws, rules and regulations.
2.3 Authorization and Binding Obligation.
(a) The execution and delivery by the Company of this Agreement,
the other Related Documents, the performance of the Company's obligations
hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby (including the issuance and delivery of the
Shares, Warrants and the shares of Common Stock issuable on exercise of the
Warrants (collectively referred to herein as the "Securities")) have been duly
authorized by all necessary corporate action on the part of the Company and
its officers and directors and will not, either prior to or as a result of the
consummation of the transactions contemplated by this Agreement and the other
Related Documents: (i) violate any law or any governmental rule or regulation
applicable to the Company, any provision of the certificate of incorporation
or bylaws of the Company, or any contract, indenture, agreement or other
instrument to which the Company is a party, or by which the Company or any of
its assets or property is bound, or (ii) be in conflict with, result in a
breach of, or constitute (after the giving of notice or lapse of time or both)
a default under, or result in the creation or imposition of any lien of any
nature whatsoever upon any of the property or assets of the Company pursuant
to the provisions of any contract, indenture, agreement or other instrument to
which the Company is a party or by which its assets or property is bound. The
Company is not required to obtain any approval, consent or authorization from,
or to file any declaration or statement with, any governmental instrumentality
or agency in connection with or as a condition to the execution, delivery or
performance of this Agreement (including the issuance and delivery of the
Securities) or the other Related Documents, other than (x) approval of the
Board of Directors of the Company, which has been obtained, (y) the filing of
a registration statement as contemplated by the Registration Rights Agreement
with the Securities and Exchange Commission ("SEC") and the listing of the
Common Stock with the American Stock Exchange, and (z) any applicable state
securities law filings, which filing or filings, as the case may be, will be
made in accordance with applicable laws and regulations. No other corporate
action on the part of the Company is necessary to authorize the execution,
delivery and performance of this Agreement and the other Related Documents and
the consummation of the transactions contemplated hereby and thereby.
(b) The Agreement and the Related Documents have been duly
executed and delivered by the Company and each of the Agreement and the other
Related Documents is the legally valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability, and the consummation of the transactions
contemplated hereby or thereby has been authorized by all necessary corporate
action on the part of the Company.
(c) The Common Stock that is being issued hereunder, when
issued, sold, paid for and delivered in accordance with the terms of this
Agreement will be duly and validly issued, fully paid and non-assessable, and
free and clear of any restrictions on transfer (other than any restrictions
under the Securities Act of 1933, as amended (the "Securities Act"), and state
securities laws or restrictions imposed by agreements with the Investors) and
any taxes, security interests, options, warrants, purchase rights, preemptive
rights (other than those preemptive rights which have been waived), contracts,
commitments, equities, claims or demands. The shares of Common Stock issuable
on exercise of the Warrants, when issued in accordance with the terms of the
Warrants, will be duly and validly issued, fully paid and non-assessable, and
free and clear of any restrictions on transfer (other than any restrictions
under the Securities Act and state securities laws) and any taxes, security
interests, options, warrants, purchase rights, preemptive rights (other than
those preemptive rights which have been waived), contracts, commitments,
equities, claims or demands.
2.4 Securities Law Exemption. Assuming the truth and accuracy of
each Investor's representations herein, the offer, sale and issuance of the
Securities as contemplated by this Agreement are exempt from the registration
requirements of the Securities Act and applicable state securities laws, and
neither the Company nor any authorized agent acting on its behalf has taken or
will take any action hereafter that would cause the loss of such exemption.
2.5 Non-contravention. The Company is not in violation or breach
of or in default with respect to, any provision of any contract, agreement,
instrument, lease, license, arrangement or understanding to which it is a
party, except for violations, breaches or defaults that do not, individually
or in the aggregate, have a material adverse effect on the Condition of the
Company.
2.6 SEC Reports. The Common Stock of the Company is registered
pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the Company has timely filed all required
reports, schedules, forms, statements, and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of
the Exchange Act and filings incorporated therein, since January 1, 2001
(together with other documents that revise or supersede earlier filed
documents, the "SEC Reports"). The Company has delivered or made available to
the Investors true and complete copies of the SEC Reports. As of their
respective filing dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act, and the
rules and regulations of the SEC promulgated thereunder applicable to such SEC
Reports. None of the SEC Reports, at the time of their respective filings,
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 light of the circumstances under which they were made,
not misleading. All material contracts and other documents of the Company
required to be filed as exhibits to the SEC Reports have been filed as
required. The financial statements of the Company included in the SEC Reports
complied as of their respective filing dates in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements,
as permitted by Regulation S-X promulgated by the SEC) applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto), and fairly present 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). As of the date hereof, the Company has, on a timely basis,
made all filings required to be made by the Company with the SEC and the
Company is eligible to file a registration statement on Form S-3 with respect
to outstanding shares of its Common Stock to be offered for sale for the
account of any person other than the Company.
2.7 Litigation. Except as disclosed in the SEC Reports under the
heading "Legal Proceedings" or in the notes to the Company's financial
statements filed with the SEC Reports and on Schedule 2.7, there is no action,
suit, arbitration or other proceeding or, to the Company's knowledge, any
investigation pending or threatened in which an unfavorable outcome, ruling or
finding in any said matter, or for all matters taken as a whole, might have a
material adverse effect on the Condition of the Company. There are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
arbitrator or governmental or regulatory body against the Company or any
officers or directors of the Company in their capacities as such, which
individually or in the aggregate, would have a material adverse effect on the
Condition of the Company. There are no requests for confidential treatment of
information currently pending before the SEC. There is no investigation,
inquiry or proceeding by the SEC of or against the Company currently pending,
and, to the Company's knowledge, no such investigation, inquiry or proceeding
has been threatened.
2.8 Financial Statements. The financial statements and the notes
related thereto of the Company included in the SEC Reports (the "Financial
Statements") (a) have been prepared (i) in accordance with generally accepted
accounting principles ("GAAP") (except that the unaudited Financial Statements
have not been reviewed by the independent public accountants of the Company
and do not contain footnotes and are subject to year-end adjustments, which
will not be material), (ii) on a consistent basis for all periods presented,
and (iii) in accordance with the books and records of the Company, (b) are
complete and correct in all material respects, and (c) fairly present the
financial condition of the Company as at said dates, and the results of
operations and cash flows for the periods stated. As of the date hereof, there
are no liabilities or obligations of the Company ("Liabilities"), accrued,
absolute, contingent or otherwise, and whether due or to become due, other
than Liabilities that are reflected in the SEC Reports or the Financial
Statements or Liabilities incurred since the date of the Financial Statements
that are not and would not be, individually or in the aggregate, material to
the Condition of the Company. The Company is not aware of any reasonable basis
for the assertion against the Company of any other debt, duty, liability,
obligation or loss contingency, other than Liabilities, that are not and would
not be, individually or in the aggregate, material to the Condition of the
Company.
2.9 Use of Proceeds. The proceeds from the sale of the shares of
Common Stock shall be used for general corporate purposes and to partially
fund the Company's development of and investment in a K-Fuel production
facility to be constructed in accordance with agreements between the Company,
Kennecott Alternative Fuels, Inc., and K-Fuel, LLC. The Company is not
currently, and upon the execution and performance of this Agreement and the
Related Documents and the transactions contemplated hereby and thereby, will
not be, restricted from using the proceeds of the Purchase Price in the manner
described in this Section 2.9.
2.10 Intellectual Property.
(a) The Company owns, or has the contractual right to use, sell
or license all intellectual property necessary or required for the conduct of
its business as presently conducted and as proposed to be conducted,
including, without limitation, all trade secrets, processes, source code,
licenses, trademarks, service marks, trade names, logos, brands, copyrights,
patents, franchises, domain names and permits (all such intellectual property
and the rights thereto are collectively referred to as the "Company IP
Rights"), except for any failure to own or have the right to use, sell or
license that would not have a material adverse effect on the Condition of the
Company. No employee, consultant or agent of the Company has any rights to the
Company's IP Rights and the Company is the sole owner of all IP Rights
developed by anyone employed by the Company whether or not such employment is
full time, part time or on a consulting basis.
(b) Neither the execution, delivery and performance of this
Agreement or the other Related Documents nor the consummation of the
transactions contemplated hereby or thereby will (i) constitute a breach of
any instrument or agreement governing any Company IP Rights, (ii) cause the
forfeiture or termination or give rise to a right of forfeiture or termination
of any Company IP Rights or (iii) impair the right of the Company to use, sell
or license any Company IP Rights or portions thereof, except for any such
breach, forfeiture, termination, right of forfeiture or termination or
impairment that would not, individually or in the aggregate, have a material
adverse effect on the Condition of the Company.
(c) The manufacture, marketing, license, sale or intended use
of any product currently licensed or sold by the Company is not in breach of any
material license or agreement between the Company and any third party or has
not infringed and is not infringing on any intellectual property right of any
other party. To the best of the Company's knowledge, there is no claim or
litigation, pending or threatened, which contests the validity, ownership or
right to use, sell, license or dispose of any Company IP Rights.
(d) The Company owns the Company IP Rights free and clear of all
liens or other encumbrances. The Company has not received any communications
alleging that the Company has violated or, by conducting its business
presently conducted or as proposed to be conducted, violates or will violate
any intellectual property rights of any other person or entity.
2.11 Title to Property and Assets. The Company does not own any
real property. The Company has good and marketable title to or, in the case of
leases and licenses, has valid, subsisting and enforceable leasehold interests
or licenses in, all of its properties and assets of whatever kind (whether
real or personal, tangible or intangible) free and clear of any mortgage,
pledges, charges, liens, security interests, claims of record or other
encumbrances, except for liens or other encumbrances that are not,
individually or in the aggregate, material to the Condition of the Company. No
person other than the Company owns any equipment or other tangible assets or
property situated on the premises of the Company that is necessary to the
operation of the business of the Company as conducted or as proposed to be
conducted, except for items that are leased. With respect to property leased
by the Company, the Company has a valid leasehold interest in such property
pursuant to leases which are in full force and effect, and the Company is in
compliance in all material respects with the provisions of such leases. All
facilities, equipment and other material items of tangible property and assets
of the Company are in good operating condition and repair, subject to normal
wear and maintenance, and suitable for their respective uses. The Company
leases all such properties as are necessary to its business or operations as
now conducted.
2.12 Compliance with Laws. The Company is and has been in
compliance with all applicable federal, state and local government statutes,
laws, rules, regulations, ordinances, orders, judgments or decrees of any
court or government agency, arbitration panel or other governmental authority,
that are applicable to the Company, the conduct of its business as presently
conducted and as proposed to be conducted, and the ownership of its property
and assets (including, without limitation, all Environmental Laws (as defined
below) and laws related to occupational safety, health, wage and hour, and
employment discrimination), the noncompliance with which could have a material
adverse effect on the Condition of the Company, and the Company is not aware
of any state of facts, events, conditions or occurrences that may now or
hereafter constitute or result in a violation of any such applicable federal,
state and local government statutes, laws, rules, regulations, ordinances,
orders, judgments or decrees of any court or government agency, arbitration
panel or other governmental authority, or that may give rise to the assertion
of any such violation, the effect of which could have a material adverse
effect on the Condition of the Company. All required reports and filings with
governmental authorities have been properly made as and when required, except
where the failure to report or file would not, individually or in the
aggregate, have a material adverse effect on the Condition of the Company.
"Environmental Laws" means all federal, state, local and foreign laws,
ordinances, treaties, rules, regulations, guidelines and permit conditions
relating to contamination, pollution or the environment (including ambient
air, surface water, ground water, land surface or subsurface strata) or the
protection of human health and worker safety, including, without limitation,
laws and regulations relating to transportation, storage, use, manufacture,
disposal or release of, or exposure of employees or others to, Hazardous
Materials (as defined below) or emissions, discharges, releases or threatened
releases of Hazardous Materials. "Hazardous Materials" means any substance
that has been designated by any governmental entity or by applicable
Environmental Laws to be radioactive, toxic, hazardous or otherwise a danger
to health or the environment, including, without limitation, PCBs, asbestos,
petroleum, urea formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to
the Resource Conservation and Recovery Act of 1976, as amended, and the
regulations promulgated pursuant to Environmental Laws, but excluding office
and janitorial supplies maintained in accordance with Environmental Laws.
2.13 Licenses and Permits. The Company has obtained and maintains
all federal, state and local licenses, permits, consents, approvals,
registrations, memberships, authorizations and qualifications required to be
maintained in connection with the operations of the Company as presently
conducted and as proposed to be conducted, and all such licenses, permits,
consents, approvals, registrations, memberships, authorizations and
qualifications obtained are valid and in full force and effect, other than
those the failure of which to maintain would not have a material adverse
effect on the condition of the Company.
2.14 Related Entities. The Company does not presently own or
control, directly or indirectly, any interest in any other subsidiary,
corporation, association or other business entity.
2.15 Changes. Since the date of the most recent SEC Report, and
except as set forth on Schedule 2.15, the Company has operated its business
diligently and in the ordinary course of business and there has not been, or
the Company has not caused, permitted or suffered to exist:
(a) any material adverse change in the Condition of the
Company;
(b) any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the Condition of the Company;
(c) any waiver or compromise by the Company of a valuable
right or of a material debt owed it;
(d) sold, encumbered, assigned or transferred any assets or
properties of the Company, other than in the ordinary course of business;
(e) incurred any liability whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than in the
ordinary course of business;
(f) created, incurred, assumed or guaranteed any indebtedness
or subjected any of its assets to any lien or encumbrance, except for
indebtedness, liens or encumbrances that are not, individually or in the
aggregate, material to the Condition of the Company;
(g) declared, set aside or paid any dividends or made any
other distributions in cash or property on the Company's capital stock;
(h) directly or indirectly redeemed, purchased or otherwise
acquired any shares of capital stock of the Company;
(i) suffered any resignation or termination of employment of
any key officers or employees;
(j) except in the ordinary course of business of the Company,
increased the compensation payable or to become payable by the Company to any
of its officers, employees or directors or increased any bonus, insurance,
pension or other employee benefit plan, payment or arrangement made by the
Company for or with any such officers, employees or directors;
(k) made any direct or indirect loan to any stockholder,
employee, officer or director of the Company, other than advances made in the
ordinary course of business;
(l) changed any agreement to which the Company is a party
which materially and adversely affects the Condition of the Company;
(m) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible assets
or intellectual property rights;
(n) entered into any other material transaction other than in
the ordinary course of business;
(o) made charitable contributions or pledges in excess of
$25,000;
(p) experienced any material problems with labor or management
in connection with the terms and conditions of their employment; or
(q) entered into any agreement or commitment to do any of the
things described in this Section 2.15.
2.16 Investment Company Act Status. The Company is not, and as a
result of and immediately upon Closing will not be subject to registration and
regulation as an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
2.17 Employee Benefit Plans. Set forth in the SEC Reports or on
Schedule 2.17 are all "employee benefit plans," as such term is defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), to
which the Company has any liability or obligation, contingent or otherwise.
All such employee benefit plans comply and have been maintained and
administered in compliance with ERISA, the Code and all other statutes, orders
and governmental rules and regulations applicable to such employee benefit
plans. The Company or any trade or business, whether or not incorporated,
which, together with the Company, is part of a group that is under "common
control" as defined in Section 414(b), 414(c), 414(m) or 414(o) of the Code
(an "ERISA Affiliate"), has not incurred any liability pursuant to ERISA or
the penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in ERISA), and no event, transaction or condition has
occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company, or in the imposition of any
lien on any of the rights, properties or assets of the Company pursuant to
ERISA or to such penalty or excise tax provisions of the Code. Neither the
Company nor any ERISA Affiliate maintains, sponsors or contributes to, and
have not maintained, sponsored or contributed to, any "multiemployer plan," as
such term is defined in ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company which is
or would cause a material adverse effect to the Condition of the Company. The
execution and delivery of this Agreement and the issuance and sale of the
Shares and the Warrants will not involve any transaction which is subject to
the prohibitions of Section 406 of ERISA or in connection with which a tax
could be imposed pursuant to Section 4975 of the Code, provided that, if
Investors, or any person or entity that owns a beneficial interest in
Investors, is an "employee pension benefit plan" (within the meaning of
Section 3(2) of ERISA) with respect to which the Company or any ERISA
Affiliate is a "party in interest" (within the meaning of Section 3(14) of
ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 2.17, the term "Plan" shall mean
an "employee pension benefit plan" (as defined in Section 3 of ERISA) which is
or has been established or maintained, or to which contributions are or have
been made, by the Company or by any ERISA Affiliate.
2.18 Taxes. The Company has accurately prepared and timely filed
all tax returns and reports (federal, state and local) required to be filed
and these returns and reports are true and correct in all material respects.
The Company has paid all taxes and other assessments shown to be due on such
returns or reports. Neither the Internal Revenue Service nor any state or
local taxing authority has, during the past five years, examined or informed
the Company it is in the process of examining, any such tax returns and
reports. The provision for taxes of the Company, as shown on the most recent
Financial Statements, is adequate for taxes due or accrued as of the date
thereof. The Company has provided adequate accruals in accordance with
generally accepted accounting principles in its financial statements for any
taxes that have not been paid, whether or not shown as being due on any tax
returns.
2.19 Insurance. The Company has in full force and effect fire,
casualty and liability insurance policies, with extended coverage, sufficient
in amount (subject to reasonable deductibles) to allow the Company to replace
any of its properties that might be damaged or destroyed to the extent and in
the manner customary for companies in similar businesses similarly situated.
2.20 Employees. The Company does not have any collective
bargaining agreements with any of its employees. There is no labor union
organizing activity pending or, to the Company's knowledge, threatened with
respect to the Company. The Company is not aware that any officer or key
employee, or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing.
2.21 Material Contracts. Set forth in the SEC Reports are all
contracts, agreements, commitments and arrangements that are material to the
Company's business ("Material Contracts"). The Material Contracts are valid
and in full force and effect as to the Company, and, to the Company's
knowledge, to the other parties thereto. Except as otherwise disclosed herein,
the Company is not in violation of, or default under (and there does not exist
any event or condition which, after notice or lapse of time or both, would
constitute such a default under), the Material Contracts, except to the extent
that such violations or defaults, individually or in the aggregate, could not
reasonably be expected to (a) affect the validity of this Agreement or the
other Related Documents, (b) have a material adverse effect on the Condition
of the Company, or (c) impair the ability of the Company to perform fully on a
timely basis any material obligation which the Company has or will have under
this Agreement or the other Related Documents, including, but not limited to,
the issuance of the Shares, the Warrants and the shares of Common Stock
necessary to effect the full exercise of the Warrants. To the Company's
knowledge, none of the other parties to any Material Contract is in violation
of or default under any Material Contract in any material respect. The Company
has not received any notice of cancellation or any written communication
threatening cancellation of any Material Contract by any other party thereto.
2.22 Transactions with Affiliates. Except as set forth in the SEC
Reports, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions between (a) the Company, on the one hand, and (b) on the other
hand, any officer, employee, consultant or director of the Company or any
person owning in excess of 5% of the outstanding capital stock of the Company
or any member of the immediate family of such officer, employee, consultant,
director or stockholder or any corporation or other entity controlled by such
officer, employee, consultant, director or stockholder, or a member of the
immediate family of such officer, employee, consultant, director or
stockholder.
2.23 AMEX Compliance. The Company's Common Stock is listed on the
American Stock Exchange (the "AMEX"), and the Company has taken no action
designed to, or likely to have the effect of, terminating the registration of
the Common Stock under the Exchange Act or delisting the Common Stock from the
AMEX. The Company has not received a delisting notification from the AMEX
except as otherwise disclosed in the SEC Documents.
2.24 No Manipulation of Stock. The Company has not taken any
action outside the ordinary course of business designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares,
the Warrants or the Common Stock to be issued upon conversion of the Warrants.
2.25 Accountants. To the knowledge of the Company, Deloitte &
Touche LLP, who the Company expects will express their opinion with respect to
the financial statements to be incorporated by reference from the Company's
year-end report on Form 10-K for the year ended December 31, 2002 into the
initial Registration Statement (as defined in the Registration Rights
Agreement) and the Prospectus which forms a part thereof, are independent
accountants as required by the Securities Act and the rules and regulations
promulgated thereunder.
2.26 Significant Customers and Suppliers. No customer or supplier
that was significant to the Company during the period covered by the Financial
Statements for the past two years from the date hereof or that has been
significant to the Company thereafter, has terminated, materially reduced or
threatened to terminate or materially reduce its purchases from or provision
of products or services to the Company.
2.27 Brokers and Finders. The Company has not employed any
broker, finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement that would be entitled to a broker's, finder's
or similar fee or commission payable by any Investor in connection herewith
and therewith.
2.28 Foreign Corrupt Practices. Neither the Company nor any
director, officer, employee, agent or other person acting on behalf of the
Company has, in the course of that person's actions for, or on behalf of, the
Company, (a) used any corporate assets for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity, (b)
made any direct or indirect unlawful payment to any foreign or domestic
governmental official or employee, (c) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, or (d) made any
bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to any foreign or domestic governmental official or employee.
2.29 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration under the
Securities Act of the issuance of the Securities to the Investors. The
issuance of the Securities to the Investors will not be integrated with any
other issuance of the Company's securities (past, current or future) for
purposes of the Securities Act or any applicable rules of the American Stock
Exchange or any other exchange or market on which the Company's securities are
then listed or traded.
3. Representations and Warranties of each Investor. Each
Investor, severally but not jointly, represents and warrants to the Company
that:
3.1 Investment Intent. The Investor is acquiring the Securities
pursuant to this Agreement with its own funds for its own account and not as a
nominee or agent for the account of any other person. No other person has any
interest, beneficial or otherwise, in any of the Securities to be purchased by
the Investor. Except as provided herein, the Investor is not obligated to
transfer any Securities to any other person, nor does the Investor have any
agreement or understanding with any other person to do so. The Investor is
purchasing the Securities for investment purposes and not with a view towards
their distribution in violation of the Securities Act. Notwithstanding the
foregoing, the disposition of the Investor's property shall be at all times
within the Investor's own control, and the Investor's right to sell or
otherwise dispose of all or any part of the Securities purchased by it
pursuant to an effective registration statement under the Securities Act or
under an exemption under the Securities Act shall not be prejudiced. Nothing
herein shall prevent the distribution of any Securities to any member, partner
or stockholder, former member, partner or stockholder of the Investor in
compliance with the Securities Act and applicable state "blue sky" laws.
3.2 No Public Offering. The Investor is able to bear the economic
risk of its investment in the Securities. The Investor is aware that it must
be prepared to hold the Securities for an indefinite period and that the
Securities have not been, and when issued will not be, registered under the
Securities Act or registered or qualified under any state securities law, on
the ground that the Securities are being issued by the Company without any
public offering within the meaning of Section 4(2) of the Securities Act. The
Investor has had an opportunity to discuss the Company's business, management
and financial affairs with the Company's management. The Investor is not
subscribing for the Securities as a result of or subsequent to any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio or
any solicitation of a subscription by any person not previously known to the
Investor in connection with investments in securities generally.
3.3 Securities will be "Restricted Securities". The Investor
understands that the Securities will be "restricted securities" as that term
is defined in Rule 144 promulgated under the Securities Act and, accordingly,
that the Securities must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. The Investor understands and agrees that, except as provided herein
and in the Registration Rights Agreement, the Company is not under any
obligation to register the Securities under the Securities Act.
3.4 Accredited Investor. The Investor has been advised or is
aware of the provisions of Regulation D under the Securities Act relating to
the accreditation of investors, and the Investor is an "accredited investor"
as defined in Rule 501 of Regulation D promulgated under the Securities Act.
3.5 Sophistication of the Investor. The Investor has such
knowledge and experience in financial and business matters that the Investor
is capable of evaluating the merits and risks of the investment contemplated
by this Agreement and has the capacity to protect its own interests. The
Investor acknowledges that investment in the Securities is highly speculative
and involves a substantial and high degree of risk of loss of the Investor's
entire investment. The Investor has adequate means of providing for current
and anticipated financial needs and contingencies, is able to bear the
economic risk of the investment for an indefinite period of time and has no
need for liquidity of the investment in the Securities and could afford
complete loss of such investment.
3.6 Brokers' Fees. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission payable by the
Company in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Investor.
3.7 Organization. The Investor is a corporation, limited
liability company or limited partnership, as the case may be, duly organized,
validly existing and in good standing in the jurisdiction of its formation.
The Investor has all requisite corporate, limited liability company or limited
partnership power and authority, as the case may be, to execute, deliver and
carry out the terms of this Agreement and the Registration Rights Agreement.
3.8 Execution and Binding Effect. The execution and delivery of
this Agreement and the Registration Rights Agreement and the consummation of
the transactions contemplated hereby or thereby have been duly authorized by
all necessary action on the part of the Investor. Upon the execution and
delivery by the Investor, this Agreement and the Registration Rights Agreement
shall constitute the legal, valid and binding obligations of the Investor
enforceable against the Investor in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy, insolvency,
liquidation, reorganization, moratorium or other laws relating to or limited
by creditors' rights generally or by equitable principles relating to
enforceability.
4. Certain Covenants of the Company. The Company covenants with
the Investors as follows, which covenants are for the benefit of the Investors
and their respective permitted assignees.
4.1 Efforts. The Company shall cooperate and use its best efforts
to take, or cause to be taken, all appropriate action, and to make, or cause
to be made, all filings necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the transactions contemplated
by this Agreement and the other Related Documents and to fulfill the
conditions to the sale and issuance of the Securities, including, without
limitation, its best efforts to (a) obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental
authorities and parties to contracts with the Company, and (b) defend against
and respond to any action, suit, proceeding or investigation relating to the
transactions contemplated by this Agreement and the other Related Documents,
in each case as are necessary for consummation of the transactions
contemplated by this Agreement, and the other Related Documents and to fulfill
the conditions to the sale and issuance of the Securities. The Company shall
file on Form D with the SEC in accordance with its rules and regulations,
relating to the transactions contemplated by this Agreement and the Related
Documents and shall take all other necessary action and proceedings as may be
required by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Investors.
4.2 No Integration. The Company will not make any offers or sales
of any security (other than the Securities) under circumstances that would
cause the offering of the Securities to be integrated with any other offering
of securities by the Company for purposes of any registration requirement
under the Securities Act.
4.3 Registration and Listing. The Company will cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the
Exchange Act, will comply in all material respects with its reporting and
filing obligations under the Exchange Act, will comply with all requirements
related to any registration statement filed pursuant to this Agreement, and
will not take any action or file any document (whether or not permitted by the
Securities Act or the rules promulgated thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under the Exchange Act or Securities Act, except as permitted
herein or in the Registration Rights Agreement. The Company shall use its best
efforts to continue the listing or trading of its Common Stock on the AMEX,
any successor market or any other national securities exchange. The Company
will promptly file the "Listing Application" for, or in connection with, the
issuance and delivery of the Securities.
4.4 Compliance with Laws. The Company shall comply, and cause
each of its subsidiaries to comply, with all applicable laws, rules,
regulations and orders, noncompliance with which could have a material adverse
effect on the Condition of the Company.
4.5 Keeping of Records and Books of Account. The Company shall
keep and cause each of its subsidiaries to keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and
other purposes in connection with its business shall be made.
4.6 Other Agreements. The Company and its subsidiaries shall not
enter into any agreement in which the terms of such agreement would restrict
or impair the right or ability of the Company or any of its subsidiaries to
perform its respective obligations under any agreements or documents
contemplated by this Agreement and the Related Documents.
4.7 Reservation of Shares. So long as the Warrants remain
outstanding, the Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, the maximum number of
shares of Common Stock required to fully effect the exercise of the Warrants.
5. The Investor's Conditions to the Closing. Each Investor's
obligation to purchase and pay for the Securities is subject to the
fulfillment to such Investor's satisfaction or waiver thereof by the Investor
at or prior to the Closing of the conditions set forth below. These conditions
are for the Investor's sole benefit and may be waived by the Company at any
time in its sole discretion.
5.1 Representations and Warranties. The representations and
warranties of the Company contained in this Agreement and the Registration
Rights Agreement shall be true and correct on and as of the Closing with the
same effect as though such representations and warranties had been made as of
the date of the Closing.
5.2 Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement
that are required to be performed by it or with which it is required to have
complied on or before the Closing.
5.3 Securities Compliance. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with the lawful
issuance and sale of the Securities pursuant to this Agreement shall be duly
obtained and effective as of the Closing.
5.4 No Suspension, Etc. Trading in the Company's Common Stock
shall not have been suspended by the SEC (except for any suspension of trading
of limited duration agreed to by the Company, which suspension shall be
terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets
("Bloomberg") shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported by
Bloomberg, or on the AMEX, nor shall a banking moratorium have been declared
either by the United States or New York State authorities, nor shall there
have occurred any national or international calamity or crisis of such
magnitude in its effect on any financial market which, in each case, in the
reasonable judgment of the Investors, makes it impracticable or inadvisable to
purchase the Shares and Warrants.
5.5 Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, licenses, permits, orders, authorizations,
waivers and the like necessary or appropriate for consummation of the
transactions contemplated by this Agreement and the other Related Documents
(except for such as may be properly obtained subsequent to the Closing).
5.6 Stockholder Approval. The Company shall have satisfied all
stockholder approval requirements of applicable law, rule or regulation,
including provisions of the American Stock Exchange, or any other exchange or
market on which the Common Stock is then listed or traded.
5.7 No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by
this Agreement.
5.8 Absence of Litigation. No action, suit or proceeding
challenging this Agreement, the other Related Documents or the transactions
contemplated hereby or thereby, or seeking to prohibit, alter, prevent or
delay the Closing, shall have been instituted before any court, arbitrator or
governmental body, agency or official and shall be pending.
5.9 Reservation of Shares. As of the Closing Date, the Company
shall have reserved out of its authorized and unissued Common Stock, solely
for the purpose of effecting the issuance of the Shares and the full exercise
of the Warrants, a number of shares of Common Stock equal to the aggregate
number of the Shares and the number of Common Shares issuable upon full
exercise of the Warrants assuming the Warrants were granted on the Closing
Date and were fully exercised on such date regardless of any limitation on the
timing or amount of such exercises.
5.10 Compliance Certificate. The Company shall deliver to each
Investor at the Closing, relating to such Investor's purchase of shares of
Common Stock and the issuance of the Warrants, a certificate signed by the
President of the Company stating that the Company has complied with or
satisfied each of the conditions to the Investor's obligation to consummate
the Closing set forth in Sections 5.1 through 5.9, unless waived in writing by
the Investor.
5.11 Registration Rights Agreement. The Registration Rights
Agreement shall have been executed by all the parties thereto on or prior to
such Closing.
5.12 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
and all documents incident thereto shall be reasonably satisfactory in form
and substance to the Investor, and the Investor shall have received all such
counterpart original and certified or other copies of such documents as they
may reasonably request.
6. The Company's Conditions to the Closing. The Company's
obligation to deliver the Securities at the Closing is subject to the
fulfillment to the Company's satisfaction or waiver thereof by the Investors
at or prior to the Closing of the conditions set forth below. These conditions
are for the Company's sole benefit and may be waived by the Company at any
time in its sole discretion.
6.1 Representations and Warranties. The representations and
warranties of each Investor contained in Section 3 hereof shall be true and
correct on and as of the Closing.
6.2 Performance. The Investors shall have performed and complied
in all material respects with all agreements, obligations, and conditions
contained in the Agreement that are required to be performed by it or them or
with which it or they are required to have complied on or before the Closing.
7. Transfer of Securities; Legends.
7.1 Nontransferability. The Securities are not transferable
except upon the conditions specified in the Registration Rights Agreement and
applicable federal and state securities laws.
7.2 Certificates to be Legended. The Investor understands that
each stock certificate representing Securities acquired hereunder will bear a
legend on the face thereof (or on the reverse thereof with a reference to such
legend on the face thereof) in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS AND THUS MAY NOT BE TRANSFERRED UNLESS
REGISTERED OR QUALIFIED UNDER THAT ACT OR SUCH LAWS OR UNLESS, IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER, SUCH
REGISTRATION OR QUALIFICATION IS NOT REQUIRED.
7.3 Removal of Legend. The Company shall promptly reissue
unlegended certificates at the request of any holder thereof if the holder
shall have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably satisfactory to the Company to the effect that the
securities proposed to be disposed of may lawfully be so disposed of without
registration, qualification or legend.
8. Miscellaneous.
8.1 Transfer Taxes. On the Closing Date, all stock transfer or
other taxes (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Shares and the Warrants to be
sold to the Investors 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 fully complied with.
8.2 Public Statements or Press Releases. None of the parties to
this Agreement shall make, issue, or release any announcement, whether to the
public generally, or to any of its suppliers or customers, with respect to
this Agreement or the other Related Documents or the transactions provided for
herein or therein, or make any statement or acknowledgment of the existence
of, or reveal the status of, this Agreement or the transactions provided for
herein, without the prior consent of the other parties, which shall not be
unreasonably withheld, conditioned or delayed, provided, that nothing in this
Section 8.2 shall prevent any of the parties hereto from making such public
announcements as it may consider necessary in order to satisfy its legal or
regulatory obligations, but to the extent not inconsistent with such
obligations, it shall provide the other parties with an opportunity to review
and comment on any proposed public announcement before it is made.
8.3 Survival of Warranties. The warranties, representations and
covenants of the Company and each Investor contained in or made pursuant to
this Agreement or the other Related Documents shall survive the execution and
delivery of this Agreement and the Closing. The Company agrees to indemnify
and hold harmless each Investor and its respective members, managers,
partners, officers, directors, employees and agents from and against all
losses, claims, reasonable expenses, judgments, damages and liabilities,
including reasonable attorney fees and expert fees, which arise in connection
with or arise out of the breach of any representations, warranties, agreements
and/or covenants of the Company contained in this Agreement or the other
Related Documents. Each Investor severally and not jointly agrees to indemnify
and hold harmless the Company and its significant subsidiaries from and
against all losses, claims, reasonable expenses, judgments, damages and
liabilities, including reasonable attorney fees, which arise in connection
with or arise out of the breach of any representations, warranties, agreements
and/or covenants of such Investor contained in this Agreement or the other
Related Documents.
8.4 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement 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 Investors
holding more than 50% of the outstanding shares of Common Stock acquired
hereunder. Any amendment or waiver effective in accordance with this Section
8.4 shall be binding upon each Investor, his, her or its heirs,
representatives or permitted assigns, and the Company and its heirs,
representatives and permitted assigns.
8.5 Notices. Any notice, consent, authorization or other
communication to be given hereunder shall be in writing and shall be deemed
duly given and received when delivered personally or transmitted by facsimile
transmission with receipt acknowledged by the addressee, three days after
being mailed by first class mail, or the next business day after being
deposited for next-day delivery with a nationally recognized, receipted,
overnight delivery service, charges and postage prepaid, properly addressed to
the party to receive such notice at the address(es) specified on the signature
page of this Agreement for the Company and each Investor (or at such other
address as shall be specified by like notice).
8.6 Entire Agreement. This Agreement (including the Schedules and
Exhibits, and the other Related Documents) contains the entire agreement of
the parties and supersedes all prior negotiations, correspondence, term
sheets, agreements and understandings, written and oral, between or among the
parties regarding the subject matter hereof.
8.7 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the respective heirs, representatives,
successors and permitted assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the
parties hereto or their respective heirs, representatives, successors and
permitted assigns any rights, remedies, obligations, or liabilities under or
by reason of this Agreement, except as expressly provided in this Agreement.
8.8 Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be unenforceable under applicable law, such
provision shall be replaced with a provision that accomplishes, to the extent
possible, the original business purpose of such provision in a valid and
enforceable manner, and the balance of the Agreement shall be interpreted as
if such provision were so modified and shall be enforceable in accordance with
its terms.
8.9 Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with the law of the State of New York
without giving effect to the choice of law provisions.
8.10 Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement or the other
Related Documents, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
8.11 Interpretation. This Agreement and the other Related
Documents shall be construed according to its fair language. The rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement
and the other Related Documents.
8.12 Further Assurances. Each party shall execute such other and
further certificates, instruments and other documents as may be reasonably
necessary and proper to implement, complete and perfect the transactions
contemplated by this Agreement.
8.13 Counterparts. This Agreement and the other Related Documents
may be executed in any number of counterparts, each of which shall constitute
an original, and all of which together shall be considered one and the same
agreement.
8.14 Assignment. Each Investor may assign or transfer all or any
part of the Securities acquired hereunder provided that the conditions
specified in Section 7 are satisfied, which conditions are, among other
things, intended to insure compliance with the provisions of the Securities
Act and state securities laws in respect of the transfer of any of the
Securities acquired hereunder. The Company shall not assign this Agreement or
any rights hereunder or delegate any duties hereunder. Any attempted or
purported assignment or delegation in violation of the preceding sentence
shall be void.
8.15 Titles and Subtitles. The titles and subtitles used in this
Agreement or the other Related Documents are used for convenience only and are
not to be considered in construing or interpreting this Agreement or the other
Related Documents.
[Remainder of this page intentionally left blank; signature page follows]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered on the date first set forth above.
THE COMPANY
KFX, INC.
By: ______________________________________
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & Chief Executive
Officer
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
THE INVESTORS:
Phoenix Partners, L.P.
By: ______________________________________
Name:
Title:
Address: c/o Morgens Waterfall Vintiadis
& Company, Inc.
Rockefeller Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Phaeton International (BVI) Ltd.
By: ______________________________________
Name:
Title:
Address: c/o Morgens Waterfall Vintiadis
& Company, Inc.
Rockefeller Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SCHEDULE A
SCHEDULE OF INVESTORS
-------------------------------------------------------------------------------------------------------
Investors Common Stock Warrant Stock Purchase
Price
-------------------------------------------------------------------------------------------------------
Phoenix Partners, L.P. 1,037,000 207,400 $2,592,500
-------------------------------------------------------------------------------------------------------
Phaeton International (BVI) Ltd. 708,000 141,600 $1,770,000
-------------------------------------------------------------------------------------------------------
TOTAL 1,745,000 349,000 $4,362,500
-------------------------------------------------------------------------------------------------------
EXHIBIT A
[FORM OF WARRANT]
THE WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE
WARRANT HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933, AS AMENDED OR ANY STATE SECURITIES LAWS AND THUS MAY NOT BE TRANSFERRED
UNLESS REGISTERED OR QUALIFIED UNDER THAT ACT OR SUCH LAWS OR UNLESS, IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER, SUCH REGISTRATION OR
QUALIFICATION IS NOT REQUIRED.
WARRANT TO PURCHASE COMMON STOCK
OF
KFX INC.
______, 2003
No. ____
This certifies that ________________ (the "Holder") is entitled,
subject to the terms and conditions of this Warrant, to purchase from KFx
Inc., a Delaware corporation (the "Company"), all or any part of an aggregate
of ____________________ shares of the Company's authorized and unissued Common
Stock, par value $0.001 per share (the "Warrant Stock"), at the Warrant Price
(as defined herein), upon surrender of this Warrant at the principal offices
of the Company, together with a duly executed subscription form in the form
attached hereto as Exhibit A and simultaneous payment of the Warrant Price for
each share of Warrant Stock so purchased in lawful money of the United States.
The term of this Warrant shall expire on the fifth anniversary of the date of
issuance of this Warrant (the "Expiration Date"). The Holder may exercise the
Warrant at any time after the date of this Warrant and prior to the Expiration
Date.
This Warrant is one of a series of warrants issued pursuant to that
certain Common Stock and Warrant Purchase Agreement, dated _______, 2003 (the
"Purchase Agreement"), by and among the Company and the investors listed on
Schedule A to the Purchase Agreement.
1. Definitions. The following definitions shall apply for purposes of
this Warrant:
1.1 "Certificate of Incorporation" means the Certificate of
Incorporation of the Company as in effect on the Original Issue Date, and as
hereafter from time to time amended, modified, supplemented or restated in
accordance with the terms hereof and thereof and pursuant to applicable law.
1.2 "Company" means the "Company" as defined above and includes
any corporation or other entity that succeeds to or assumes the obligations of
the Company under this Warrant.
1.3 "Fair Market Value" of a share of Warrant Stock means (a) if
the Common Stock is traded on a securities exchange, the average of the
closing price each day over the thirty consecutive day period ending three
Trading Days before the date on which the fair market value of the securities
is being determined, (b) if the Common Stock is actively traded over-the
counter, the average of the closing bid and asked prices quoted on the Nasdaq
system (or similar system) each day over the thirty consecutive day period
ending three Trading Days before the date on which the fair market value of
the securities is being determined, or (c) if at any time the Common Stock is
not listed on any securities exchange or quoted in the Nasdaq System or the
over-the-counter market, then as determined by mutual agreement of the Holder
and the Company.
1.4 "Holder" means the "Holder" as defined above.
1.5 "Original Issue Date" means ______, 2003.
1.6 "Registration Rights Agreement" means that certain
Registration Rights Agreement, dated as of ______, 2003, as it may be amended
and restated from time to time, by and among the Company and the investors
listed on Schedule A attached thereto.
1.7 "Securities Act" means the Securities Act of 1933, as
amended.
1.8 "Trading Day" means (a) a day on which the Common Stock is
traded on the AMEX, or (b) if the Common Stock is not listed on the AMEX, a
day on which the Common Stock is traded on any other registered national stock
exchange, or (c) if the Common Stock is not traded on any other registered
national stock exchange, a day on which the Common Stock is traded on the OTC
Bulletin Board, or (d) if the Common Stock is not traded on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting prices);
provided, however, that in the event that the Common Stock is not listed or
quoted as set forth in subclauses (a), (b) and (c) hereof, then Trading Day
shall mean any day except Saturday, Sunday and any day which shall be a legal
holiday or a day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.
1.9 "Warrant" means this Warrant and any warrant(s) delivered in
substitution or exchange therefor, as provided herein.
1.10 "Warrant Price" means $2.75 per share of Warrant Stock, as
the same may be adjusted pursuant to the terms of this Warrant.
1.11 "Warrant Stock" means the Common Stock of the Company. The
number and character of shares of Warrant Stock are subject to adjustment as
provided herein and the term "Warrant Stock" shall include stock and other
securities and property at any time receivable or issuable upon exercise of
this Warrant in accordance with its terms.
2. Exercise.
2.1 Method of Exercise. Subject to the terms and conditions of
this Warrant, the Holder may exercise the purchase rights represented by this
Warrant in whole or in part, at any time or from time to time, on or after the
date hereof and before the Expiration Date, by surrendering this Warrant at
the principal offices of the Company, together with the subscription form
attached hereto, duly completed and executed by the Holder, and payment of an
amount equal to the product obtained by multiplying (a) the number of shares
of Warrant Stock so purchased by (b) the Warrant Price.
2.2 Form of Payment. Payment may be made by (a) a bank or
cashiers check payable to the Company's order, (b) wire transfer of funds to
the Company, or (c) as mutually agreed to by the parties in writing.
2.3 Partial Exercise. Upon a partial exercise of this Warrant,
this Warrant shall be surrendered by the Holder and replaced with a new
Warrant or Warrants of like tenor for the balance of the shares of Warrant
Stock purchasable under the Warrant surrendered upon such purchase. The
Warrant or Warrants will be delivered to the Holder thereof within a
reasonable time.
2.4 No Fractional Shares. No fractional shares may be issued upon
any exercise of this Warrant, and any fractions shall be rounded down to the
nearest whole number of shares. If upon any exercise of this Warrant a
fraction of a share results, the Company will pay to the Holder an amount
equal to such fraction multiplied by the Fair Market Value of a share of
Warrant Stock.
3. Issuance of Stock.
3.1 Issuance of Stock. This Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive
the shares of Warrant Stock issuable upon such exercise shall be treated for
all purposes as the holder of record of such shares as of the close of
business on such date. As soon as practicable after such date, the Company
shall issue and deliver to the person or persons entitled to receive the same
a certificate or certificates for the number of whole shares of Warrant Stock
issuable upon such exercise. The Company shall pay all expenses, taxes and
other charges payable in connection with the preparation, execution and
delivery of stock certificates pursuant to this Section 3.1.
3.2 Stock Fully Paid. The Company represents, warrants, covenants
and agrees that all shares of Warrant Stock which may be issued upon the
exercise of this Warrant or otherwise hereunder will, upon issuance and
payment therefor in accordance with the terms hereof, be duly authorized,
validly issued, fully paid and non-assessable and free from all taxes, liens,
charges or any other encumbrances created by or through Company. The Company
further covenants and agrees that during the period within which this Warrant
may be exercised, the Company will at all times have authorized and reserved
for the purpose of the issue upon exercise of this Warrant a sufficient number
of shares of Common Stock to provide for the full exercise of this Warrant.
3.3 Reservation. If any shares of Common Stock required to be
reserved for issuance upon exercise of this Warrant or as otherwise provided
hereunder require registration or qualification with any governmental
authority under any federal or state law before such shares may be so issued,
the Company will in good faith use its best efforts as expeditiously as
possible at its expense to cause such shares to be duly registered or
qualified. If the Company shall list any shares of Common Stock on any
securities exchange or market it will, at its expense, list thereon, maintain
and increase when necessary such listing, of all shares of Warrant Stock from
time to time issued upon exercise of this Warrant or as otherwise provided
hereunder, and, to the extent permissible under the applicable securities
exchange rules, all unissued shares of Warrant Stock which are at any time
issuable hereunder, so long as any shares of Common Stock shall be so listed.
The Company will also so list on each securities exchange or market, and will
maintain such listing of, any other securities which the Holder of this
Warrant shall be entitled to receive upon the exercise of this Warrant if at
the time any securities of the same class shall be listed on such securities
exchange or market by the Company.
3.4 Exempt from Registration. The offer, sale and issuance of the
Warrant Stock issued upon the exercise of this Warrant shall be exempt from
the registration requirements of the Securities Act and applicable state
securities laws, and neither the Company nor any authorized agent acting on
its behalf has taken or will take any action hereafter that would cause the
loss of such exemption.
3.5 Transferability of Warrant. This Warrant and all rights
hereunder may be transferred by a Holder without the consent of the Company
subject to all applicable securities laws. If transferred pursuant to this
paragraph, this Warrant and all rights hereunder may be transferred on the
books of the Company by the Holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant at the principal office of the
Company, properly endorsed (by the Holder executing an assignment) and upon
payment of any necessary transfer tax or other governmental charge imposed
upon such transfer. This Warrant is exchangeable at the principal office of
the Company for Warrants for the purchase of the same aggregate number of
shares of Warrant Stock, each new Warrant to represent the right to purchase
such number of shares of Warrant Stock as the Holder hereof shall designate at
the time of such exchange. All Warrants issued on transfers or exchanges shall
be dated the Original Issue Date and shall be identical with this Warrant
except as to the number of shares of Warrant Stock issuable pursuant hereto.
3.6 Restrictions. The restrictions upon the transfer of this
Warrant or the shares of Warrant Stock to be purchased upon exercise hereof
shall terminate (A) when the shares of Warrant Stock shall have been resold
pursuant to an effective registration statement under the Securities Act, (B)
upon the Company's receipt of an opinion of counsel, in form and substance
reasonably satisfactory to the Company, addressed to the Company to the effect
that such restrictions are no longer required to ensure compliance with the
Securities Act and state securities laws or (C) upon the Company's receipt of
other evidence reasonably satisfactory to the Company that such registration
and qualification under the Securities Act and state securities laws are not
required. Whenever such restrictions shall cease and terminate as to any such
securities, the Holder thereof shall be entitled to receive from the Company
(or its transfer agent and registrar), without expense (other than applicable
transfer taxes, if any), new Warrants (or, in the case of shares of Warrant
Stock, new stock certificates) of like tenor not bearing the applicable legend
required by Appendix I relating to the Securities Act and state securities
laws.
4. Adjustment Provisions. The number and character of shares of
Warrant Stock issuable on exercise of this Warrant (or any shares of stock or
other securities or property at the time receivable or issuable upon exercise
of this Warrant) and the Warrant Price therefor, are subject to adjustment
upon the occurrence of the following events between the date this Warrant is
issued and the date it is exercised:
4.1 Adjustments for Subdivisions, Combinations, etc. If the
Company shall at any time after the date of issuance of this Warrant (a)
subdivide the outstanding shares of the Company, (b) combine the outstanding
shares of the Company into a smaller number of shares, or (c) declare any
stock dividend, reclassification or recapitalization or other similar event
affecting the number of outstanding shares of Warrant Stock (or such other
stock or securities), then the Warrant Price and the number and kind of shares
of Warrant Stock receivable on exercise, in effect at the time of the
effective date of such subdivision, combination, stock dividend,
reclassification or recapitalization or other similar event, shall be
proportionally adjusted so that on exercise of the Warrant after such time the
Holder shall receive the same number and kind of shares which, if this Warrant
had been exercised immediately prior to such date, the Holder would have owned
upon such exercise and been entitled to receive by virtue of such subdivision,
combination, stock dividend, reclassification or recapitalization. Any
adjustment made pursuant to this Section 4.1 shall be made successively when
any event listed above shall occur and shall be retroactive to the record
date, if any, for such event. All calculations made under this Section 4.1
shall be made to the nearest 1/100th cent or to the nearest share, as the case
may be.
4.2 Adjustment for Other Dividends and Distributions. In case the
Company shall make or issue, or shall fix a record date for the determination
of eligible holders entitled to receive, a dividend or other distribution
payable with respect to the Warrant Stock that is payable in (a) securities of
the Company (other than issuances with respect to which adjustment is made
under Section 4.1), or (b) assets, then, and in each such case, the Holder,
upon exercise of this Warrant at any time after the consummation, effective
date or record date of such event, shall receive, in addition to the shares of
Warrant Stock issuable upon such exercise prior to such date, the securities
or such other assets of the Company to which the Holder would have been
entitled upon such date if the Holder had exercised this Warrant immediately
prior thereto (all subject to further adjustment as provided in this Warrant).
4.3 Adjustment for Reorganization, Consolidation, Merger. In case
of any reorganization of the Company (or of any other corporation or entity,
the stock or other securities of which are at the time receivable upon the
exercise of this Warrant) after the date of this Warrant, or in case, after
such date, the Company (or any such corporation or entity) shall consolidate
with or merge into another corporation or entity or convey all or
substantially all its assets to another corporation or entity, then, and in
each such case, the Holder, upon the exercise of this Warrant (as provided in
Section 2), at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu of
the stock or other securities and property receivable upon the exercise of
this Warrant prior to such consummation, the stock or other securities or
property to which the Holder would have been entitled upon the consummation of
such reorganization, consolidation, merger or conveyance if the Holder had
exercised this Warrant immediately prior thereto, all subject to further
adjustment as provided in this Warrant. The successor or purchasing
corporation or entity in such reorganization, consolidation, merger or
conveyance (if other than the Company) shall duly execute and deliver to the
Holder a supplement hereto acknowledging such corporation's or entity's
obligations under this Warrant. In each such case, the terms of this Warrant
shall be applicable to the shares of stock or other securities or property
receivable upon the exercise of this Warrant after the consummation of such
reorganization, consolidation, merger or conveyance.
4.4 Notice of Adjustments. Whenever the Warrant Price or number
of shares of Warrant Stock issuable upon exercise hereof shall be adjusted
pursuant to Section 4 hereof, the Company shall issue a written notice setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated and the
Warrant Price and number of shares of Warrant Stock purchasable hereunder
after giving effect to such adjustment, and shall cause a copy of such notice
to be mailed to the Holder. The Company shall provide the Holder with not less
than 10 days prior written notice of (a) any event resulting in an adjustment
under Section 4 and (b) any sale, lease or other disposition of all or
substantially all of the assets of the Company.
4.5 No Change Necessary. The form of this Warrant need not be
changed because of any adjustment in the Warrant Price or in the number of
shares of Warrant Stock issuable upon its exercise.
5. No Rights or Liabilities as Stockholder. This Warrant does not
by itself entitle the Holder to any voting rights or other rights as a
stockholder of the Company. In the absence of affirmative action by the Holder
to purchase Warrant Stock by exercise of this Warrant, no provisions of this
Warrant, and no enumeration herein of the rights or privileges of the Holder,
shall cause the Holder to be a stockholder of the Company for any purpose.
6. Attorneys' Fees. In the event any party is required to engage
the services of any attorneys for the purpose of enforcing this Warrant, or
any provision thereof, the prevailing party shall be entitled to recover its
reasonable expenses and costs in enforcing this Warrant, including attorneys'
fees.
7. Loss or Mutilation. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership and the loss, theft,
destruction or mutilation of this Warrant, and of indemnity reasonably
satisfactory to it, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver in lieu
thereof a new Warrant of like tenor.
8. Governing Law. This Warrant shall be governed by and construed
and interpreted in accordance with the laws of the State of New York without
giving effect to principles of conflicts of laws.
9. Headings. The headings and captions used in this Warrant are
used for convenience only and are not to be considered in construing or
interpreting this Warrant. All references in this Warrant to sections and
exhibits shall, unless otherwise provided, refer to sections hereof and
exhibits attached hereto, all of which exhibits are incorporated herein by
this reference.
10. Notices. Any request, consent, notice or other communication
required or permitted under this Warrant shall be in writing and shall be
deemed duly given and received when delivered personally or transmitted by
facsimile, one business day after being deposited for next-day delivery with a
nationally recognized overnight delivery service, or three days after being
deposited as first class mail with the United States Postal Service, all
charges or postage prepaid, and properly addressed to the party to receive the
same at the address indicated for such party on the signature pages of the
Purchase Agreement. Any party may, at any time, by providing ten days' advance
notice to the other party hereto, designate any other address in substitution
of an address established pursuant to the foregoing. All correspondence to the
Company shall be addressed as follows:
KFx Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
11. Amendment; Waiver. Any term of this Warrant may be amended, and
the observance of any term of this Warrant 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 Holder.
12. Severability. If one or more provisions of this Warrant are held
to be unenforceable under applicable law, such provision(s) shall be replaced
with a provision that accomplishes, to the extent possible, the original
business purpose of such provision in a valid and enforceable manner, and the
balance of the Warrant shall be interpreted as if such provision were so
modified and shall be enforceable in accordance with its terms.
13. Terms Binding. By acceptance of this Warrant, the Holder accepts
and agrees to be bound by all the terms and conditions of this Warrant.
14. Registration Rights. All shares of Warrant Stock issuable upon
exercise of this Warrant shall be deemed to be "Registrable Securities" or
such other definition of securities entitled to registration rights pursuant
to the Registration Rights Agreement, and are entitled, subject to the terms
and conditions of that agreement, to all registration rights granted to
holders of Registrable Securities thereunder.
15. No Impairment. The Company will not, by amendment of its
certificate of incorporation or bylaws, or through reorganization,
consolidation, merger, dissolution, issue or sale of securities, sale of
assets or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights
of the Holder of this Warrant against impairment. Without limiting the
generality of the foregoing, the Company (a) will not increase the par value
of any shares of stock issuable upon the exercise of this Warrant above the
amount payable therefor upon such exercise, and (b) will take all such action
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable shares of Warrant Stock upon
exercise of this Warrant.
16. Remedies. The Company stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
17. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Company, the Holder hereof and (to the extent provided herein)
the Holders of Warrant Stock issued pursuant hereto, and shall be enforceable
by any such Holder or Holder of Warrant Stock.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of
the date set forth below.
Dated: _______, 2003
KFX INC.
By: _______________________________________
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
EXHIBIT A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
To: KFx Inc.
(1) The undersigned Holder hereby elects to purchase ___________
shares of Common Stock of KFx Inc. (the "Warrant Stock"), pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price for such shares in full.
(2) In exercising the Warrant, the undersigned Holder hereby makes
the representations and warranties set forth on Appendix I hereto as of the
date hereof.
(3) Please issue a certificate or certificates representing such
shares of Warrant Stock in the name or names specified below:
________________________________________ _________________________________________
(Name) (Name)
________________________________________ _________________________________________
(Address) (Address)
________________________________________ _________________________________________
(City, State, Zip Code) (City, State, Zip Code)
________________________________________ _________________________________________
(Federal Tax Identification Number) (Federal Tax Identification Number)
________________________________________ _________________________________________
(Date) (Signature of Holder)
Appendix I
INVESTMENT REPRESENTATION
The undersigned, _____________________ (the "Holder"), intends to acquire
shares of Common Stock (the "Common Stock") of KFx Inc. (the "Company") from
the Company pursuant to the exercise or conversion of a Warrant to Purchase
Common Stock held by the Holder. The Company intends to issue the Common Stock
to the Holder in a transaction not involving a public offering and pursuant to
an exemption from registration under the Securities Act of 1933, as amended
(the "Securities Act"), and applicable state securities laws. In connection
with such purchase and in order to comply with the exemptions from
registration relied upon by the Company, the Holder represents, warrants and
agrees as follows:
1. The Holder is acquiring the Common Stock with its own funds for its
own account and not as a nominee or agent for the account of any
other person. No other person has any interest, beneficial or
otherwise, in any of the Common Stock to be purchased by the Holder.
Except as provided herein, the Holder is not obligated to transfer
any Securities to any other person, nor does the Holder have any
agreement or understanding with any other person to do so. The Holder
is purchasing the Common Stock for investment purposes and not with a
view to the sale or distribution of any Securities, by public or
private sale or other disposition, and the Holder has no intention of
selling, granting any participation in or otherwise distributing or
disposing of any of the Common Stock. The Holder does not intend to
subdivide or transfer to any other person the Common Stock acquired
by the Holder herewith. Notwithstanding the foregoing, the
disposition of the Holder's property shall be at all times within the
Holder's own control, and the Holder's right to sell or otherwise
dispose of all or any part of the Common Stock purchased by it
pursuant to an effective registration statement under the Securities
Act or under an exemption under the Securities Act shall not be
prejudiced. Nothing herein shall prevent the distribution of any
Securities to any member, partner or stockholder, former member,
partner or stockholder of the Holder in compliance with the
Securities Act and applicable state "blue sky" laws.
2. The Holder is able to bear the economic risk of its investment in the
Common Stock. The Holder is aware that it must be prepared to hold
the Common Stock for an indefinite period and that the Common Stock
has not been, and when issued will not be, registered under the
Securities Act or registered or qualified under any state securities
law, on the grounds that the Common Stock is being issued by the
Company without any public offering within the meaning of Section
4(2) of the Securities Act. The Holder has had an opportunity to
discuss the Company's business, management and financial affairs with
the Company's management. The Holder is not subscribing for the
Common Stock as a result of or subsequent to any advertisement,
article, notice or other communication published in any newspaper,
magazine or similar media or broadcast over television or radio or
any solicitation of a subscription by any person not previously known
to the Holder in connection with investments in securities generally.
3. The Holder understands that the Common Stock will be "restricted
securities" as that term is defined in Rule 144 promulgated under the
Securities Act and, accordingly, that the Common Stock must be held
indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available.
The Holder understands and agrees that, except as provided in the
Registration Rights Agreement dated as of ________, 2003, by and
among the Company and the Investors listed on Schedule A attached
thereto, the Company is not under any obligation to register the
Common Stock under the Securities Act.
The Holder also understands and agrees that there will be placed on
the certificate(s) for the Common Stock or any substitutions
therefor, a legend stating in substance:
"The securities represented by this certificate have not
been registered or qualified under the Securities Act of 1933, as
amended, or any state securities laws and thus may not be transferred
unless restricted or qualified under that act or such laws or unless,
in the opinion of counsel reasonably satisfactory to the issuer, such
registration or qualification is not required."
4. The Holder has been advised or is aware of the provisions of
Regulation D under the Securities Act relating to the accreditation
of investors, and the Holder is an "accredited investor" as defined
in Rule 501 of Regulation D promulgated under the Securities Act.
5. The Holder has such knowledge and experience in financial and
business matters that the Holder is capable of evaluating the merits
and risks of the investment in the Common Stock and has the capacity
to protect its own interests. The Holder acknowledges that investment
in the Common Stock is highly speculative and involves a substantial
and high degree of risk of loss of the Holder's entire investment.
The Holder has adequate means of providing for current and
anticipated financial needs and contingencies, is able to bear the
economic risk of the investment for an indefinite period of time and
has no need for liquidity of the investment in the Common Stock and
could afford complete loss of such investment.
EXHIBIT B
KFX INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
March 28, 2003, by and among KFx Inc., a Delaware corporation (the "Company"),
and the Investors listed on Schedule A hereto (each of whom is herein called
individually, an "Investor" and all of whom are herein called, collectively,
the "Investors"), with reference to the following facts:
WHEREAS, the Investors are parties to the Common Stock and Warrant
Purchase Agreement, dated March 28, 2003 (the "Purchase Agreement");
WHEREAS, as a condition to the closing of the transactions described
in the Purchase Agreement, the Company and the Investors have agreed to enter
into this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein and for other consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto further agree as follows:
1. Certain Definitions. Capitalized terms not defined herein are
defined in the Purchase Agreement. The following definitions shall apply for
purposes of this Agreement:
1.1 "Business Day" means any day except Saturday, Sunday and any
day which is a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
1.2 "Form S-3" means such form under the Securities Act as in
effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the Securities and Exchange Commission (the "SEC")
that permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
1.3 "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 2.9 hereof.
1.4 "Prospectus" means the prospectus included in the
Registration Statement (including, without limitation, a prospectus that
includes any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by the Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference in such Prospectus.
1.5 "register", "registered", and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such Registration Statement or document.
1.6 "Registrable Securities" means (a) the shares of the
Company's Common Stock issued pursuant to the Purchase Agreement and, if
applicable, this Agreement, (b) shares of the Company's Common Stock issuable
on exercise of the Warrants issued pursuant to the Purchase Agreement and, if
applicable, this Agreement, and (c) any Common Stock of the Company issued as
(or issuable on the conversion or exercise of any warrant, right or other
security that is issued as) a stock split, stock dividend, distribution,
recapitalization or other distribution with respect to, or in exchange for, or
in replacement of, the shares referenced in clauses (a) and (b) above;
provided that there shall be excluded any Registrable Securities sold by a
person in a transaction in which that person's rights under Section 2 are not
assigned.
1.7 The number of shares of "Registrable Securities" outstanding
shall be determined by the number of shares of Common Stock outstanding that
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities that are, Registrable Securities.
1.8 "Registration Statement" means any Registration Statement of
the Company which covers the sale of any of the Registrable Securities
pursuant to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such Registration Statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference in such Registration Statement.
1.9 "Rule 144" means Rule 144 promulgated by the SEC pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC having substantially
the same effect as such Rule.
1.10 "Rule 158" means Rule 158 promulgated by the SEC pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC having substantially
the same effect as such Rule.
1.11 "Rule 415" means Rule 415 promulgated by the SEC pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC having substantially
the same effect as such Rule.
1.12 "Special Counsel" means the special counsel specified by the
Holders, in writing, holding at least a majority of the Registrable
Securities.
2. Registration Rights. The Company covenants and agrees as
follows:
2.1 Mandatory Registration. The Company shall prepare and file
with the SEC as soon as reasonably possible, but in no event later than five
Business Days after filing its Form 10-K for the year ended December 31, 2002
(the "Filing Date"), a Registration Statement on Form S-3 (except if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration shall be on another appropriate
form in accordance with the Securities Act and the rules promulgated
thereunder necessary to effect a registration of all Registrable Securities)
for the purpose of registering under the Securities Act all of the Registrable
Securities for resale by the Holders as selling stockholders thereunder, and
shall use its best efforts to cause the SEC to declare such Registration
Statement effective under the Securities Act as promptly as practicable, but
not later than 120 days after the Closing (as defined in the Purchase
Agreement) (the "Effectiveness Deadline"). The Company shall have the right to
permit any securities, in addition to the Registrable Securities, to be
included in the Registration Statement. The Company shall use its reasonable
best efforts to cause the Registration Statement to be declared effective
under the Securities Act (including filing with the SEC a request for
acceleration of effectiveness in accordance with Rule 12dl-2 promulgated under
the Exchange Act within five (5) Business Days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the SEC that a
Registration Statement will not be "reviewed," or not be subject to further
review) as soon as possible after the filing thereof. The Company shall keep
such Registration Statement continuously effective under the Securities Act at
all times until the earlier of the date (A) on which all the Registrable
Securities have been sold, or (B) on which all the Registrable Securities can
be sold by all the Holders (and any affiliate of the Holder with whom such
Holder must aggregate its sales under Rule 144) in any three-month period
without volume limitation and without registration in compliance with Rule 144
(the "Effectiveness Period"). If the initial Registration Statement or any
subsequent Registration Statement ceases to be effective for any reason as a
result of the issuance of a stop order by the SEC at any time during the
Effectiveness Period, the Company shall use its best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof, and in
any event shall within 30 Business Days of such cessation of effectiveness
amend such Registration Statement in a manner reasonably expected to obtain
the withdrawal of the order suspending the effectiveness thereof, or file an
additional Registration Statement covering all of the Registrable Securities.
If such an additional Registration Statement is filed, the Company shall use
its best efforts to cause such additional Registration Statement to be
declared effective as soon as practicable after such filing and to keep such
additional Registration Statement continuously effective until the end of the
Effectiveness Period.
2.2 Registration Default. If the Registration Statement covering
the Registrable Securities required to be filed by the Company pursuant to
Section 2.1 is not (i) filed with the SEC by the Filing Date, or (ii) declared
effective by the SEC by the Effectiveness Deadline, then the Company shall
issue an additional warrant (on the same terms and conditions as the Warrants,
including the Exercise Price then in effect (a "Registration Warrant")), to
acquire that number of shares of Common Stock equal to two percent (2%) of the
number of shares of Common Stock issued to the Investors pursuant to the
Purchase Agreement for each 30-day period from (x) the Filing Deadline until
the Registration Statement has been filed by the Company pursuant to Section
2.1, and (y) the Effectiveness Deadline until the Registration Statement has
been declared effective by the SEC pursuant to Section 2.1, pro rated with
respect to both subparts (x) and (y) of this sentence for any period less than
30 days. The Registration Warrant shall be issued by the Company to the
Investors within three Business Days after the end of any calendar month
during which any Registration Statement default occurs or is occurring. The
parties agree that the issuance of the Registration Warrant represents a
reasonable estimate on the part of the parties, as of the date of this
Agreement, of the amount of damages that may be incurred by Investors if the
Registration Statement has not been declared effective by the SEC on or prior
to the Effectiveness Deadline.
2.3 Piggy-Back Registration.
(a) Right to Include Common Stock. If the Company at any time
proposes to register any offer or sale of Common Stock under the Securities
Act (other than the registration agreement contemplated by the Registration
Rights Agreement), whether or not for sale for its own account, it will give
at least 30 days prior written notice (the "Piggy-Back Notice"), which
Piggy-Back Notice shall specify the aggregate number of shares of Common Stock
to be registered and will also specify the intended method of disposition
thereof, to all Holders of Registrable Securities of its intention to file a
registration statement under the Securities Act and of the Holder's rights
under this Section 2.3(a). Upon the written request of any Holder of
Registrable Securities made within 20 days of the date of delivery of the
Piggy-Back Notice, the Company will use its best efforts to effect the
registration under the Securities Act of the offer and sale of all Registrable
Securities which the Company has been so requested to register by the Holders
thereof (a "Piggy-Back Registration") to the extent required to permit the
public disposition (in accordance with such intended methods thereof) of the
Registrable Securities subject to such requests; provided, however, that (i)
if, any time after giving written notice of its intention to register the
offer and sale of shares of Common Stock and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason not to effect such registration, the
Company shall give written notice of such determination to each Holder of
Registrable Securities and, thereupon, shall be relieved of its obligation to
register any offer and sale of Registrable Securities in connection with such
registration (but not from its obligation to pay the registration expenses (in
accordance with Section 2.6) in connection therewith); and (ii) any Holder of
Registrable Securities requesting to be included in such registration may
elect, in writing at least 20 days prior to the effective date of the
registration statement filed in connection with such registration, not to
register the offer and sale of such Holder's Registrable Securities in
connection with such registration.
(b) Priority in Piggy-Back Registrations. If any of the
Registrable Securities subject to a Piggy-Back Registration are to be sold in
a firm commitment underwritten offering (as described in Section 4.1) and the
managing underwriter or underwriters advise the Company in writing that, in
its or their opinion, the total number of shares of Common Stock to be
included in such registration, including the Registrable Securities requested
to be included pursuant to this Section 2.3, exceeds the maximum number of
shares of Common Stock specified by the managing underwriter that may be
distributed without materially and adversely affecting the price, timing or
distribution of such shares of Common Stock, then the Company shall include in
such registration only such maximum number of Registrable Securities which, in
the reasonable opinion of such underwriter or underwriters, can be sold in the
following order of priority: (i) first, all of the shares of Common Stock that
the Company proposes to sell for its own account, (ii) second, the shares of
Common Stock of any other person having a contractual right to have its shares
included in such registration, and (iii) third, the Registrable Securities of
any Holder of Registrable Securities that are requested to be included in such
Piggy-Back Registration. To the extent that shares of Common Stock to be
included in the Piggy-Back Registration must be allocated among the Holder(s)
of Registrable Securities pursuant to clause (iii) above, such shares shall be
allocated pro rata among the applicable Holder(s) of Registrable Securities
based on the number of shares of Common Stock that such Holder(s) of
Registrable Securities shall have requested to be included therein.
2.4 Obligations of the Company. Whenever required under this
Section 2 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC on or prior to the Filing
Date a Registration Statement with respect to the resale of the Registrable
Securities and use best efforts to cause such Registration Statement to be
declared effective by the SEC by the Effective Deadline, and, on the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such Registration Statement effective for a period of up to
180 days or, if earlier, until the distribution contemplated in the
Registration Statement has been completed; provided that (i) such 180-day
period shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the
Company; and (ii) in the case of any registration of Registrable Securities on
Form S-3 (or any other Form, to the extent permitted by law) that are intended
to be offered on a continuous or delayed basis, such 180-day period shall be
extended, if necessary, to keep the Registration Statement effective until all
such Registrable Securities are sold, except to the extent that the Holders
(and any affiliate of the Holder with whom such Holder must aggregate its
sales under Rule 144) of such Registrable Securities may sell those
Registrable Securities in any three-month period without regard to the volume
limitation and without registration in compliance with Rule 144.
(b) (i) Prepare and file with the SEC such amendments,
including post-effective amendments, and supplements to such Registration
Statement and the Prospectus used in connection with such Registration
Statement as may be necessary to keep the Registration Statement continuously
effective as to the applicable Registrable Securities for the Effectiveness
Period in order to register for resale under the Securities Act all of the
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; (iii) respond promptly to any
comments received from the SEC with respect to the Registration Statement or
any amendment thereto and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration
Statement during the Effectiveness Period in accordance with the intended
methods of disposition by the Holders thereof set forth in the Registration
Statement as so amended or in such Prospectus as so supplemented. The Company
shall ensure that (i) any Registration Statement and any amendment thereto and
any Prospectus forming a part thereof and any amendment or supplement thereto
complies in all material respects with the Securities Act and the rules and
regulations thereunder, (ii) any Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading and (iii) any Prospectus forming
part of any Registration Statement, and any amendment or supplement to such
Prospectus, does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(c) Notify the Holder of Registrable Securities to be sold
and any Special Counsel promptly (and, in the case of (i)(A) below, not less
than three (3) Business Days prior to such filing and, in the case of (i)(B)
or (i)(C) below, no later than the first (1st) Business Day following the date
on which the Registration Statement becomes effective) and (if requested by
any such person) confirm such notice in writing no later than three (3)
Business Days following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is
proposed to be filed; (B) when the SEC notifies the Company whether there will
be a "review" of such Registration Statement and (C) with respect to the
Registration Statement or any post-effective amendment, when the same has
become effective; (ii) of any request by the SEC or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance
by the SEC of any stop order suspending the effectiveness of the Registration
Statement covering any or all of the Registrable Securities or the initiation
of any Proceedings for that purpose; and (iv) of the receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any Proceeding for such
purpose.
(d) Use its reasonable best efforts to avoid the issuance
of, or, if issued, obtain the withdrawal of, (i) any order suspending the
effectiveness of the Registration Statement or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any U.S. jurisdiction, at the earliest practicable
moment; provided that the Company shall not be required to qualify to do
business in any state where it is not then qualified to take action that would
subject it to tax or to general service of process.
(e) Promptly furnish to the Holders, without charge, such
numbers of copies of a Prospectus, including a preliminary Prospectus and any
amendment thereto including financial statements and schedules, and all
exhibits (including those previously incorporated by reference), as such
Holder may reasonably request, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request to
facilitate the disposition of Registrable Securities owned by them.
(f) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering subject to the
Company's right to select such managing underwriter.
(g) Use its best efforts to register or qualify or cooperate
with the selling Holders and any Special Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or "blue sky" laws of such jurisdictions within the United States
as the Holder reasonably requests in writing, to keep each such registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement; provided, however, that the Company shall
not be required to qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action that would subject it to
general service of process in any such jurisdiction where it is not then so
subject or subject the Company to any tax in any such jurisdiction where it is
not then so subject.
(h) During the period of time such Registration Statement
remains effective, notify each Holder (in accordance with Section 2.4(c)) of
Registrable Securities covered by such Registration Statement at any time when
a Prospectus relating thereto is required to be delivered under the Securities
Act or the happening of any event as a result of which the Prospectus included
in such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing; and, thereafter, the Company
will promptly prepare (and, when completed, deliver to each selling Holder) a
supplement or amendment to such Prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such Prospectus will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing; provided that,
at any time after the date which is 30 days after the Registration Statement
is declared effective by the SEC for not more than thirty (30) consecutive
calendar days (or a total of not more than ninety (90) calendar days in any
twelve (12) month period), the Company may delay the disclosure of material
non-public information concerning the Company (as well as Prospectus or
Registration Statement updating) the disclosure of which at the time is not,
in the good faith opinion of the Company, in the best interests of the Company
(an "Allowed Delay"); provided, further, that the Company shall promptly (i)
notify the Holders in writing of the existence of (but in no event, without
the prior written consent of an Holders, shall the Company disclose to such
investor any of the facts or circumstances regarding) material non-public
information giving rise to an Allowed Delay and (ii) advise the Investors in
writing to cease all sales under such Registration Statement until the end of
the Allowed Delay.
(i) Cause all such Registrable Securities registered
hereunder to be listed on each securities exchange on which securities of the
same class issued by the Company are then listed.
(j) Comply in all material respects with all applicable
rules and regulations of the SEC and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than forty-five (45) days after the end
of any twelve (12) month period (or ninety (90) days after the end of any
twelve (12) month period if such period is a fiscal year) commencing on the
first day of the first fiscal quarter of the Company after the effective date
of the Registration Statement, which statement shall conform to the
requirements of Rule 158.
(k) Provide a transfer agent and registrar for all
Registrable Securities registered hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(l) Within two (2) Business Days after the Registration
Statement which includes the Registrable Securities is ordered effective by
the SEC, the Company shall deliver to the transfer agent for such Registrable
Securities (with copies to the Holder whose Registrable Securities are
included in such Registration Statement) confirmation that the Registration
Statement has been declared effective by the SEC.
(m) Cooperate and assist in any filing required to be made
with the National Association of Securities Dealers, Inc.
2.5 Information from Holder. It shall be a condition precedent to
the obligations of the Company to take any reasonable action pursuant to this
Section 2 with respect to the Registrable Securities of any selling Holder
that such Holder shall furnish to the Company such information regarding such
Holder, the Registrable Securities held by such Holder, and the intended
method of disposition of such securities as shall be required to effect the
registration of such Registrable Securities.
2.6 Expenses of Registration. All fees and expenses incurred in
connection to the performance of or compliance with registrations, filings or
qualifications pursuant to this Section 2, including (without limitation) all
registration, filing and qualification fees, printing fees and expenses,
accounting fees and expenses, fees and disbursements of counsel for the
Company, and the fees and disbursements of counsel for the selling Holders,
including any Special Counsel as contemplated by this Section 2, selected by
the Holders up to a maximum of $10,000, shall be borne by the Company whether
or not any of the Registration Statements are filed or become effective and
whether or not any Registrable Securities are sold pursuant to such
Registration Statements. In addition, the Company shall be responsible for all
of its internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder and the fees and expenses of any
person, including special experts, retained by the Company. Anything herein to
the contrary notwithstanding, all underwriting discounts, commissions and
transfer taxes incurred in connection with a sale of Registrable Securities
shall be borne and paid by the Holder thereof, and the Company shall have no
responsibility therefor.
2.7 Indemnification.
(a) To the extent permitted by law, and notwithstanding any
termination of this Agreement, the Company will indemnify and hold harmless
each Holder, the partners, officers, directors, stockholders, members and
managers of such Holder, any underwriter (as defined in the Securities Act)
for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the Exchange Act, and
any of the foregoing's assignees (provided that such assignee is an affiliate
of the Investors), against any losses, claims, damages or liabilities (joint
or several) to which they may become subject under the Securities Act, the
Exchange Act or any other federal or state securities law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or relating to any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such Registration Statement,
including any preliminary Prospectus or final Prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission
to state therein a material fact required to be stated therein, or necessary
to make the statements therein not misleading, or (iii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities law; and the Company
will reimburse such Holder, underwriter or controlling person for any legal or
other expenses reasonably incurred, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided that the indemnity agreement in this Section 2.7(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld, conditioned or delayed),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based on
a Violation that occurs in reliance on and in conformity with written
information furnished expressly for use in connection with such registration
by such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
severally and not jointly indemnify and hold harmless the Company, each of its
directors, each of its officers who shall have signed the Registration
Statement, each person, if any, who controls the Company within the meaning of
the Securities Act, any underwriter, any other Holder selling securities in
such Registration Statement and any controlling person of any such underwriter
or other Holder, against any losses, claims, damages or liabilities to which
any of the foregoing persons may become subject, under the Securities Act, the
Exchange Act or any other federal or state securities law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based on any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance on and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will reimburse any person
intended to be indemnified pursuant to this Section 2.7(b), for any legal or
other expenses reasonably incurred, as incurred, by such person in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided that the indemnity agreement in this Section 2.7(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Holder
(which consent shall not be unreasonably withheld or delayed); and provided
further that in no event shall any indemnity by such Holder under this Section
2.7(b), when aggregated with amounts contributed, if any, pursuant to Section
2.7(d), exceed the net proceeds from the sale of Registrable Securities
hereunder received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 2.7,
deliver to the indemnifying party notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
that the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided that an indemnified party (together with
all other indemnified parties that may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees
and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to notify the indemnifying party within a reasonable
time of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.7, but the omission so to notify
the indemnifying party will not relieve it of any liability that it may have
to any indemnified party otherwise than under this Section 2.7.
(d) If the indemnification provided in this Section 2.7 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that shall have resulted
in such loss, liability, claim, damage or expense, as well as any other
relevant equitable considerations; provided that in no event shall any
contribution by a Holder under this Section 2.7(d), when aggregated with
amounts paid, if any, pursuant to Section 2.7(b), exceed the net proceeds from
the sale of Registrable Securities hereunder received by such Holder. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in any underwriting
agreement entered into in connection with an underwritten public offering are
in conflict with the foregoing provisions, the provisions in such underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 2.7 shall survive the completion of any offering of Registrable
Securities in a Registration Statement under this Section 2, and otherwise.
2.8 Reports under Exchange Act. With a view to making available
to the Holders the benefits of Rule 144 promulgated under the Securities Act
and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company covenants to timely:
(a) Make and keep public information available, as those
terms are used in SEC Rule 144, at all times;
(b) Take such action as is necessary to enable the Holders to
utilize Form S-3 for the sale of their Registrable Securities;
(c) File with the SEC in a timely manner, including any
permitted extensions, all reports and other documents required of the Company
under the Securities Act and the Exchange Act;
(d) Furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon reasonable request, (i) a written
statement by the Company that it has complied with the reporting requirements
of SEC Rule 144, the Securities Act and the Exchange Act, or that it qualifies
as a registrant whose securities may be resold pursuant to Form S-3, (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 unless such documents are
publicly filed with the SEC, and (iii) such other information as may be
reasonably requested in availing any Holder of any rule or regulation of the
SEC that permits the selling of any such securities without registration or
pursuant to such form; and
(e) Undertake any additional actions reasonably necessary to
maintain the availability of the Registration Statement or the use of Rule
144.
2.9 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
assigned (provided that such transferee or assignee simultaneously assumes in
writing the related obligations) by a Holder to a transferee or assignee of
such Registrable Securities that (a) is a subsidiary, parent, current or
former partner, current or former limited partner, current or former member,
current or former manager or stockholder of a Holder, (b) is an entity
controlling, controlled by or under common control, or under common investment
management, with a Holder, including without limitation a corporation,
partnership or limited liability company that is a direct or indirect parent
or subsidiary of the Holder, or (c) is a transferee or assignee of at least
5,000 (as adjusted for stock splits, combinations, dividends and the like)
shares of such Registrable Securities; provided that: (i) the Company is,
within a reasonable time after such transfer, notified of the name and address
of such transferee or assignee and the Registrable Securities with respect to
which such registration rights are being assigned; (ii) such transferee or
assignee agrees in writing to be bound by and subject to the terms and
conditions of this Agreement; and (iii) such assignment shall be effective
only if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Securities
Act.
3. Covenants.
3.1 Reserve for Exercise Shares. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock such number of shares of Common Stock (the "Exercise Shares") as shall
be sufficient to enable it to comply with its exercise obligations under the
Warrants. If at any time the number of Exercise Shares shall not be sufficient
to effect the exercise of the Warrants, the Company will forthwith take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number as will be sufficient for such purposes.
The Company will obtain authorization, consent, approval or other action by,
or make any filing with, any administrative body that may be required under
applicable state securities laws in connection with the issuance of Exercise
Shares.
3.2 Termination of Covenants. The covenants set forth in Section
3.1 shall terminate as to each Holder and be of no further force and effect at
the time the Holders (and their assignees, provided that such assignee is an
affiliate of the Investors) no longer hold any Registrable Securities.
4. Miscellaneous.
4.1 Lock-Up Agreement. At any time after the date which is thirty
(30) days after the date the Registration Statement is declared effective by
the SEC, the underwriters in connection with any firm commitment underwritten
public offering of the Common Stock resulting in gross proceeds to the Company
of at least $10,000,000 led by at least one underwriter of nationally
recognized standing (a "Qualified Public Offering") shall have the right to
require that the Holders enter into an agreement (a "Lock-Up Agreement")
restricting the Holders from selling Registrable Securities pursuant to the
Registration Statement in any public sale for a period not to exceed ninety
(90) days following the consummation of such Qualified Public Offering (the
"Underwriters Lock-Up Period"); provided that such underwriters deem this to
be reasonably necessary to effect such Qualified Public Offering; and further,
provided that all of the Company's directors, executive officers and
affiliates shall have also agreed to similar restrictions. The Holders shall
be subject to no more than one such restriction in each twelve (12) month
period during the Effectiveness Period.
4.2 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement 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 Investors
holding more than a majority of the Registrable Securities then outstanding.
Any amendment or waiver effective in accordance with this Section 4.1 shall be
binding upon each Investor, his, her or its heirs, representatives or
permitted assigns, and the Company and its heirs, representatives and
permitted assigns.
4.3 Notices. Any notice, consent, authorization or other
communication to be given hereunder shall be in writing and shall be deemed
duly given and received when delivered personally or transmitted by facsimile
transmission with receipt acknowledged by the addressee, three days after
being mailed by first class mail, or the next Business Day after being
deposited for next-day delivery with a nationally recognized overnight
delivery service, charges and postage prepaid, properly addressed to the party
to receive such notice at the address(es) specified on the signature page of
this Agreement for the Company and each Investor (or at such other address as
shall be specified by like notice).
4.4 Entire Agreement. This Agreement (including Schedule A
attached hereto), the Purchase Agreement and the Warrants contain the entire
agreement of the parties and supersede all prior negotiations, correspondence,
term sheets, agreements and understandings, written and oral, between or among
the parties regarding the subject matter hereof.
4.5 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the respective heirs, representatives,
successors and permitted assigns of the parties (including transferees of any
shares of Registrable Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective heirs, representatives, successors and permitted assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
4.6 Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be unenforceable under applicable law, such
provision shall be replaced with a provision that accomplishes, to the extent
possible, the original business purpose of such provision in a valid and
enforceable manner, and the balance of the Agreement shall be interpreted as
if such provision were so modified and shall be enforceable in accordance with
its terms.
4.7 Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with the law of the State of New York
without regard to principals of conflicts of law thereof.
4.8 Further Assurances. Each party shall execute such other and
further certificates, instruments and other documents as may be reasonably
necessary and proper to implement, complete and perfect the transactions
contemplated by this Agreement.
4.9 Aggregation of Stock. All shares of Registrable Securities
held or acquired by affiliated entities or persons, or entities or persons
under common investment management, shall be aggregated for the purpose of
determining the availability of any rights under this Agreement.
4.10 Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
[remainder of page intentionally left blank; signature page follows]
IN WITNESS WHEREOF, this Registration Rights Agreement has been duly
executed by or on behalf of the parties hereto as of the date first above
written.
KFx INC.
By: _______________________________________
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & Chief Executive Officer
Address:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
THE INVESTORS:
Phoenix Partners, L.P.
By: _______________________________________
Name:
Title:
Address: c/o Morgens Waterfall Vintiadis &
Company, Inc.
Rockefeller Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Phaeton International (BVI) Ltd.
By: _______________________________________
Name:
Title:
Address: c/o Morgens Waterfall Vintiadis
& Company, Inc.
Rockefeller Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SCHEDULE A
SCHEDULE OF INVESTORS
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Investors Common Stock Warrant Stock Purchase
Price
---------------------------------------------------------------------------------------------------------
Phoenix Partners, L.P. 1,037,000 207,400 $2,592,500
---------------------------------------------------------------------------------------------------------
Phaeton International (BVI) Ltd. 708,000 141,600 $1,770,000
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TOTAL 1,745,000 349,000 $4,362,500
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