Exhibit 10.2
SECURITIES PURCHASE AGREEMENT
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LAURUS MASTER FUND, LTD.
AND
NEW CENTURY ENERGY CORP.
DATED: SEPTEMBER 19, 2005
TABLE OF CONTENTS
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PAGE
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1. Agreement to Sell and Purchase 2
2. Fees 2
3. Closing, Delivery and Payment 3
3.1 Closing 3
3.2 Delivery 3
4. Representations and Warranties of the Company 4
4.1 Organization, Good Standing and Qualification 4
4.2 Subsidiaries 6
4.3 Capitalization; Voting Rights. 7
4.4 Authorization; Binding Obligations 8
4.5 Liabilities 9
4.6 Agreements; Action 10
4.7 Obligations to Related Parties 13
4.8 Changes 15
4.9 Title to Properties and Assets; Liens, Etc 17
4.10 Intellectual Property 18
4.11 Compliance with Other Instruments 19
4.12 Litigation 20
4.13 Tax Returns and Payments 21
4.14 Employees 21
4.15 Registration Rights and Voting Rights 23
4.16 Compliance with Laws; Permits 23
4.17 Environmental and Safety Laws 24
4.18 Valid Offering 25
4.19 Full Disclosure 25
4.20 Insurance 26
4.21 SEC Reports 26
4.22 Listing 27
4.23 No Integrated Offering 28
4.24 Patriot Act 28
4.25 ERISA 29
5. Representations and Warranties of the Purchaser 30
5.1 No Shorting 30
5.2 Requisite Power and Authority 30
5.3 Investment Representations 31
5.4 The Purchaser Bears Economic Risk 32
5.5 Acquisition for Own Account 32
5.6 The Purchaser Can Protect Its Interest 32
5.7 Accredited Investor 33
5.8 Legends The Note shall bear substantially the following
legend: 33
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Page(s)
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6. Covenants of the Company 33
6.1 Stop-Orders 33
6.2 Listing 34
6.3 Market Regulations 34
6.4 Reporting Requirements 34
6.5 Use of Funds 35
6.6 Access to Facilities 35
6.7 Taxes 36
6.8 Insurance 37
6.9 Intellectual Property 39
6.10 Properties 40
6.11 Confidentiality 40
6.12 Required Approvals 41
6.13 Opinion 43
6.14 Margin Stock 43
6.15 Financing Right of First Refusal 44
6.16 Additional Investment 45
7. Covenants of the Purchaser 46
7.1 Confidentiality 46
7.2 Non-Public Information 46
8. Covenants of the Company and the Purchaser Regarding
Indemnification 46
8.1 Company Indemnification 46
8.2 Purchaser's Indemnification 48
8.3 Offering Restrictions 48
9. Miscellaneous 49
9.1 Governing Law, Jurisdiction and Waiver of Jury Trial 49
9.2 Severability 51
9.3 Survival 52
9.4 Successors 52
9.5 Entire Agreement; Maximum Interest 53
9.6 Amendment and Waiver 53
9.7 Delays or Omissions 54
9.8 Notices 54
9.9 Attorneys' Fees 56
9.10 Titles and Subtitles 57
9.11 Facsimile Signatures; Counterparts 57
9.12 Broker's Fees 57
9.13 Construction 58
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LIST OF EXHIBITS
Form of Term Note Exhibit A
Form of Opinion Exhibit B
Form of Escrow Agreement Exhibit C
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of September 19, 2005, by and between NEW CENTURY ENERGY CORP., a
Colorado corporation (the "Company"), and LAURUS MASTER FUND, LTD., a Cayman
Islands company (the "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale to the Purchaser of a Secured
Term Note in the aggregate principal amount of Nine Million Five Hundred
Thousand Dollars ($9,500,000) in the form of Exhibit A hereto (as amended,
modified or supplemented from time to time, the "Note");
WHEREAS, the Purchaser desires to purchase the Note on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note to the Purchaser on
the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Sell and Purchase. Pursuant to the terms and conditions set
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forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company shall sell to the Purchaser, and the Purchaser shall purchase from the
Company, the Note. The sale of the Note on the Closing Date shall be known as
the "Offering." The Note will mature on the Maturity Date (as defined in the
Note).
2. Fees. On the Closing Date:
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(a) Subject to the terms of Section 2(e) below, the Company shall pay
to Laurus Capital Management, L.L.C., the manager of the Purchaser, a
closing payment in an amount equal to four percent (4.00%) of the aggregate
principal amount of the Note. The foregoing fee is referred to herein as
the "Closing Payment."
(b) The Company shall reimburse the Purchaser for its reasonable
expenses (including legal fees and expenses) incurred in connection with
the preparation and negotiation of this Agreement and the Related
Agreements (as hereinafter defined), and expenses incurred in connection
with the Purchaser's due diligence review of the Company and its
Subsidiaries (as defined in Section 4.2) and all related matters; provided
that the due diligence fees may not exceed $5,000 (exclusive of third party
appraisals or extraordinary due diligence). Amounts required to be paid
under this Section 2(d) will be paid on the Closing Date.
(c) The Closing Payment and the expenses referred to in the preceding
clause (d) (net of deposits previously paid by the Company) shall be paid
at closing out of funds held pursuant to the Escrow Agreement (as defined
below) and a disbursement letter (the "Disbursement Letter").
3. Closing, Delivery and Payment.
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3.1 Closing. Subject to the terms and conditions herein, the closing
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of the transactions contemplated hereby (the "Closing"), shall take place
on the date hereof, at such time or place as the Company and the Purchaser
may mutually agree (such date is hereinafter referred to as the "Closing
Date").
3.2 Delivery. Pursuant to the Escrow Agreement, at the Closing on the
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Closing Date, the Company will deliver to the Purchaser, among other
things, the Note and the Purchaser will deliver to the Company, among other
things, the amounts set forth in the Disbursement Letter by certified funds
or wire transfer.
4. Representations and Warranties of the Company. The Company hereby
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represents and warrants to the Purchaser as follows
4.1 Organization, Good Standing and Qualification. Each of the Company
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and each of its Subsidiaries is a corporation, partnership or limited
liability company, as the case may be, duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization. Each
of the Company and each of its Subsidiaries has the corporate, limited
liability company or partnership, as the case may be, power and authority
to own and operate its properties and assets and, insofar as it is or shall
be a party thereto, to (a) execute and deliver (i) this Agreement, (ii) the
Note to be issued in connection with this Agreement, (iii) the
Reaffirmation and Ratification Agreement dated as of the date hereof among
the Company, certain Subsidiaries of the Company and the Purchaser (as
amended, modified and/or supplemented from time to time, the "Reaffirmation
Agreement") pursuant to which the Company and certain Subsidiaries of the
Company reaffirm their obligations under (A) the Master Security Agreement
dated as of June 30, 2005 among the Company, certain Subsidiaries of the
Company and the Purchaser (as amended, modified and/or supplemented from
time to time, the "Master Security Agreement"), (B) the Subsidiary Guaranty
dated as of June 30, 2005 made by certain Subsidiaries of the Company (as
amended, modified and/or supplemented from time to time, the "Subsidiary
Guaranty") and (C) the Stock Pledge Agreement dated as of June 30, 2005
among the Company, certain Subsidiaries of the Company and the Purchaser
(as amended, modified and/or supplemented from time to time, the "Stock
Pledge Agreement"), (iv) the Registration Rights Agreement dated as of June
30, 2005 between the Company and the Purchaser (as amended, modified and/or
supplemented from time to time, the "Registration Rights Agreement")
relating to any and all notes, options, warrants and other securities
delivered to the Purchaser by the Company and/or its Subsidiaries pursuant
to that certain Securities Purchase Agreement dated as of June 30, 2005 by
and between the Company and the Purchaser (collectively, the "June 2005
Securities"), (v) the Funds Escrow Agreement dated as of the date hereof
among the Company, the Purchaser and the escrow agent referred to therein,
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substantially in the form of Exhibit C hereto (as amended, modified and/or
supplemented from time to time, the "Escrow Agreement"), (viii) the
Mortgage, Deed of Trust, Security Agreement, Financing Statement and
Assignment of Production dated as of the date hereof made by the Company in
favor of the Purchaser and (ix) all other documents, instruments and
agreements entered into in connection with the transactions contemplated
hereby and thereby (the preceding clauses (ii) through (ix) including
subclauses (A) through (C) in clause (iii) above, collectively, the
"Related Agreements"); (b) issue and sell the Note; and (c) carry out the
provisions of this Agreement and the Related Agreements and to carry on its
business as presently conducted. Each of the Company and each of its
Subsidiaries is duly qualified and is authorized to do business and is in
good standing as a foreign corporation, partnership or limited liability
company, as the case may be, in all jurisdictions in which the nature or
location of its activities and of its properties (both owned and leased)
makes such qualification necessary, except for those jurisdictions in which
failure to do so has not, or could not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the
business, assets, liabilities, condition (financial or otherwise),
properties, operations or prospects of the Company and its Subsidiaries,
taken individually and as a whole (a "Material Adverse Effect").
4.2 Subsidiaries. Each direct and indirect Subsidiary of the Company,
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the direct owner of such Subsidiary and its percentage ownership thereof,
is set forth on Schedule 4.2. For the purpose of this Agreement, a
"Subsidiary" of any person or entity means (a) a corporation or other
entity whose shares of stock or other ownership interests having ordinary
voting power (other than stock or other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority
of the directors of such corporation, or other persons or entities
performing similar functions for such person or entity, are owned, directly
or indirectly, by such person or entity or (b) a corporation or other
entity in which such person or entity owns, directly or indirectly, more
than 50% of the equity interests at such time.
4.3 Capitalization; Voting Rights.
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(a) The authorized capital stock of the Company, as of the date hereof
consists of 120,000,000 shares, of which 100,000,000 are shares of Common
Stock, par value $0.001 per share, 54,610,612 shares of which are issued
and outstanding as of the date hereof, and 20,000,000 are shares of
preferred stock, par value $0.001 per share. The Company has 5,000 shares
of Series A convertible preferred stock designated and 5,000 shares of
Series A convertible preferred stock issued and outstanding as of the date
hereof, which can vote in the aggregate an amount equal to 1,500,000 shares
of the Company's Common Stock, and 2,000,000 shares of Series B convertible
preferred stock designated and 0 shares of Series B convertible preferred
stock issued and outstanding. The authorized, issued and outstanding
capital stock of each Subsidiary of the Company is set forth on Schedule
4.3.
(b) Except as disclosed on Schedule 4.3, other than: (i) the shares
reserved for issuance under the Company's stock option plans; and (ii)
shares which may be granted pursuant to this Agreement and the Related
Agreements, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), proxy or
stockholder agreements, or arrangements or agreements of any kind for the
purchase or acquisition from the Company of any of its securities. Except
as disclosed on Schedule 4.3, neither the offer, issuance or sale of any of
the Note nor the consummation of any transaction contemplated hereby will
result in a change in the price or number of any securities of the Company
outstanding, under anti-dilution or other similar provisions contained in
or affecting any such securities.
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(c) All issued and outstanding shares of the Company's common stock
(the "Common Stock"): (i) have been duly authorized and validly issued and
are fully paid and nonassessable; and (ii) were issued in compliance with
all applicable state and federal laws concerning the issuance of
securities.
(d) The rights, preferences, privileges and restrictions of the shares
of the Common Stock are as stated in the Company's Certificate of
Incorporation (the "Charter"). When issued in compliance with the
provisions of this Agreement and the Company's Charter, the Note will be
validly issued, fully paid and nonassessable, and will be free of any liens
or encumbrances; provided, however, that the Note may be subject to
restrictions on transfer under state and/or federal securities laws as set
forth herein or as otherwise required by such laws at the time a transfer
is proposed.
4.4 Authorization; Binding Obligations. All corporate, partnership or
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limited liability company, as the case may be, action on the part of the
Company and each of its Subsidiaries (including their respective officers
and directors) necessary for the authorization of this Agreement and the
Related Agreements, the performance of all obligations of the Company and
its Subsidiaries hereunder and under the other Related Agreements at the
Closing, and the authorization, sale, issuance and delivery of the Note has
been taken or will be taken prior to the Closing. This Agreement and the
Related Agreements, when executed and delivered and to the extent it is a
party thereto, will be valid and binding obligations of each of the Company
and each of its Subsidiaries, enforceable against each such entity in
accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and
(b) general principles of equity that restrict the availability of
equitable or legal remedies.
The sale of the Note will not be subject to any preemptive rights or rights of
first refusal that have not been properly waived or complied with.
4.5 Liabilities. Neither the Company nor any of its Subsidiaries has
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any liabilities, except current liabilities incurred in the ordinary course
of business and liabilities disclosed in any of the Company's filings under
the Securities Exchange Act of 1934 ("Exchange Act") made prior to the date
of this Agreement (collectively, the "Exchange Act Filings"), copies of
which have been provided to the Purchaser.
4.6 Agreements; Action. Except as set forth on Schedule 4.6 or as
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disclosed in any Exchange Act Filings:
(a) there are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the
Company or any of its Subsidiaries is a party or by which it is bound which
may involve: (i) obligations (contingent or otherwise) of, or payments to,
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the Company or any of its Subsidiaries in excess of $50,000 (other than
obligations of, or payments to, the Company or any of its Subsidiaries (1)
to the Purchaser and (2) arising from purchase or sale agreements entered
into in the ordinary course of business); or (ii) the transfer or license
of any patent, copyright, trade secret or other proprietary right to or
from the Company or any of its Subsidiaries (other than licenses arising
from the purchase of "off the shelf" or other standard products); or (iii)
provisions restricting the development, manufacture or distribution of the
Company's or any of its Subsidiaries' products or services; or (iv)
indemnification by the Company or any of its Subsidiaries with respect to
infringements of proprietary rights.
(b) Since December 31, 2004 (the "Balance Sheet Date"), neither the
Company nor any of its Subsidiaries has: (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to
any class or series of its capital stock; (ii) incurred any indebtedness
for money borrowed or any other liabilities (other than ordinary course
obligations) individually in excess of $50,000 or, in the case of
indebtedness and/or liabilities individually less than $50,000, in excess
of $100,000 in the aggregate; (iii) made any loans or advances to any
person or entity in excess, individually or in the aggregate, of $100,000,
other than ordinary course advances for travel expenses; or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than
the sale of its inventory in the ordinary course of business.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company or any Subsidiary of the Company
has reason to believe are affiliated therewith) shall be aggregated for the
purpose of meeting the individual minimum dollar amounts of such
subsections.
(d) The Company maintains disclosure controls and procedures
("Disclosure Controls") designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized, and reported, within the
time periods specified in the rules and forms of the Securities and
Exchange Commission ("SEC").
(e) The Company makes and keep books, records, and accounts, that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the Company's assets. The Company maintains internal
control over financial reporting ("Financial Reporting Controls") designed
by, or under the supervision of, the Company's principal executive and
principal financial officers, and effected by the Company's board of
directors, management, and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles ("GAAP"), including that:
(i) transactions are executed in accordance with management's
general or specific authorization;
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(ii) unauthorized acquisition, use, or disposition of the
Company's assets that could have a material effect on the financial
statements are prevented or timely detected;
(iii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP, and that
the Company's receipts and expenditures are being made only in
accordance with authorizations of the Company's management and board
of directors;
(iv) transactions are recorded as necessary to maintain
accountability for assets; and
(v) the recorded accountability for assets is compared with the
existing assets at reasonable intervals, and appropriate action is
taken with respect to any differences.
(f) There is no weakness in any of the Company's Disclosure Controls
or Financial Reporting Controls that is required to be disclosed in any of
the Exchange Act Filings, except as so disclosed.
4.7 Obligations to Related Parties. Except as set forth on Schedule
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4.7, there are no obligations of the Company or any of its Subsidiaries to
officers, directors, stockholders or employees of the Company or any of its
Subsidiaries other than:
(a) for payment of salary for services rendered and for bonus
payments;
(b) reimbursement for reasonable expenses incurred on behalf of the
Company and its Subsidiaries;
(c) for other standard employee benefits made generally available to
all employees (including stock option agreements outstanding under any
stock option plan approved by the Board of Directors of the Company and
each Subsidiary of the Company, as applicable); and
(d) obligations listed in the Company's and each of its Subsidiary's
financial statements or disclosed in any of the Company's Exchange Act
Filings. Except as described above or set forth on Schedule 4.7, none of
the officers, directors or, to the best of the Company's knowledge, key
employees or stockholders of the Company or any of its Subsidiaries or any
members of their immediate families, are indebted to the Company or any of
its Subsidiaries, individually or in the aggregate, in excess of $50,000 or
have any direct or indirect ownership interest in any firm or corporation
with which the Company or any of its Subsidiaries is affiliated or with
which the Company or any of its Subsidiaries has a business relationship,
or any firm or corporation which competes with the Company or any of its
Subsidiaries, other than passive investments in publicly traded companies
(representing less than one percent (1%) of such company) which may compete
with the Company or any of its Subsidiaries. Except as described above, no
officer, director, stockholder of the Company or any of its Subsidiaries,
or any member of their immediate families, is, directly or indirectly,
interested in any material contract with the Company or any of its
Subsidiaries and no agreements, understandings or proposed transactions are
contemplated between the Company or any of its Subsidiaries and any such
person. Except as set forth on Schedule 4.7, neither the Company nor any of
its Subsidiaries is a guarantor or indemnitor of any indebtedness of any
other person, firm or entity.
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4.8 Changes. Since the Balance Sheet Date, except as disclosed in any
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Exchange Act Filing or in any Schedule to this Agreement or to any of the
Related Agreements, there has not been:
(a) any change in the business, assets, liabilities, condition
(financial or otherwise), properties, operations or prospects of the
Company or any of its Subsidiaries, which individually or in the aggregate
has had, or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(b) any resignation or termination of any officer, key employee or
group of employees of the Company or any of its Subsidiaries;
(c) any material change, except in the ordinary course of business, in
the contingent obligations of the Company or any of its Subsidiaries by way
of guaranty, endorsement, indemnity, warranty or otherwise;
(d) any damage, destruction or loss, whether or not covered by
insurance, which has had, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(e) any waiver by the Company or any of its Subsidiaries of a valuable
right or of a material debt owed to it;
(f) any direct or indirect loans made by the Company or any of its
Subsidiaries to any stockholder, employee, officer or director of the
Company or any of its Subsidiaries, other than advances made in the
ordinary course of business;
(g) any material change in any compensation arrangement or agreement
with any employee, officer, director, stockholder of the Company or any of
its Subsidiaries;
(h) any declaration or payment of any dividend or other distribution
of the assets of the Company or any of its Subsidiaries;
(i) any labor organization activity related to the Company or any of
its Subsidiaries;
(j) any debt, obligation or liability incurred, assumed or guaranteed
by the Company or any of its Subsidiaries, except those for immaterial
amounts and for current liabilities incurred in the ordinary course of
business;
(k) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets owned by the Company
or any of its Subsidiaries;
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(l) any change in any material agreement to which the Company or any
of its Subsidiaries is a party or by which either the Company or any of its
Subsidiaries is bound which either individually or in the aggregate has
had, or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(m) any other event or condition of any character that, either
individually or in the aggregate, has had, or could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect; or
(n) any arrangement or commitment by the Company or any of its
Subsidiaries to do any of the acts described in subsection (a) through (m)
above.
4.9 Title to Properties and Assets; Liens, Etc. Except as set forth on
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Schedule 4.9, each of the Company and each of its Subsidiaries has good and
marketable title to its properties and assets, and good title to its
leasehold interests, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than:
(a) those resulting from taxes which have not yet become delinquent;
(b) minor liens and encumbrances which do not materially detract from
the value of the property subject thereto or materially impair the
operations of the Company or any of its Subsidiaries, so long as in each
such case, such liens and encumbrances have no effect on the lien priority
of the Purchaser in such property; and
(c) those that have otherwise arisen in the ordinary course of
business, so long as they have no effect on the lien priority of the
Purchaser in such property.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company and its Subsidiaries are in good operating
condition and repair and are reasonably fit and usable for the purposes for
which they are being used. Except as set forth on Schedule 4.9, the Company and
its Subsidiaries are in compliance with all material terms of each lease to
which it is a party or is otherwise bound.
4.10 Intellectual Property.
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(a) Each of the Company and each of its Subsidiaries owns or possesses
sufficient legal rights to all patents, trademarks, service marks, trade
names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes necessary for its business as now
conducted and, to the Company's knowledge, as presently proposed to be
conducted (the "Intellectual Property"), without any known infringement of
the rights of others. There are no outstanding options, licenses or
agreements of any kind relating to the foregoing proprietary rights, nor is
the Company or any of its Subsidiaries bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes of any other person
or entity other than such licenses or agreements arising from the purchase
of "off the shelf" or standard products.
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(b) Neither the Company nor any of its Subsidiaries has received any
communications alleging that the Company or any of its Subsidiaries has
violated any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person
or entity, nor is the Company or any of its Subsidiaries aware of any basis
therefor.
(c) The Company does not believe it is or will be necessary to utilize
any inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company or any of its
Subsidiaries, except for inventions, trade secrets or proprietary
information that have been rightfully assigned to the Company or any of its
Subsidiaries.
4.11 Compliance with Other Instruments. Neither the Company nor any of
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its Subsidiaries is in violation or default of (a) any term of its Charter
or Bylaws, or (b) any provision of any indebtedness, mortgage, indenture,
contract, agreement or instrument to which it is party or by which it is
bound or of any judgment, decree, order or writ, which violation or
default, in the case of this clause (b), has had, or could reasonably be
expected to have, either individually or in the aggregate, a Material
Adverse Effect. Subject to the requirement that the Company obtain any
consents set forth on Schedule 4.11, the Company's or any of its
Subsidiary's execution, delivery and performance of and compliance with
this Agreement and the Related Agreements to which it is a party, and the
issuance and sale of the Note by the Company pursuant hereto and thereto,
will not, with or without the passage of time or giving of notice, result
in any such material violation, or be in conflict with or constitute a
default under any such term or provision, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or any of its Subsidiaries or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to the Company, its business or
operations or any of its assets or properties.
4.12 Litigation. Except as set forth on Schedule 4.12 hereto, there is
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no action, suit, proceeding or investigation pending or, to the Company's
knowledge, currently threatened against the Company or any of its
Subsidiaries that prevents the Company or any of its Subsidiaries from
entering into this Agreement or the other Related Agreements, or from
consummating the transactions contemplated hereby or thereby, or which has
had, or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect or any change in the current equity
ownership of the Company or any of its Subsidiaries, nor is the Company
aware that there is any basis to assert any of the foregoing. Neither the
Company nor any of its Subsidiaries is a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company or any of its Subsidiaries
currently pending or which the Company or any of its Subsidiaries intends
to initiate.
4.13 Tax Returns and Payments. Each of the Company and each of its
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Subsidiaries has timely filed all tax returns (federal, state and local)
required to be filed by it. All taxes shown to be due and payable on such
returns, any assessments imposed, and all other taxes due and payable by
the Company or any of its Subsidiaries on or before the Closing, have been
paid or will be paid prior to the time they become delinquent. Except as
set forth on Schedule 4.13, neither the Company nor any of its Subsidiaries
has been advised:
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(a) that any of its returns, federal, state or other, have been or are
being audited as of the date hereof; or
(b) of any adjustment, deficiency, assessment or court decision in
respect of its federal, state or other taxes.
The Company has no knowledge of any liability for any tax to be
imposed upon its properties or assets as of the date of this Agreement that
is not adequately provided for.
4.14 Employees. Except as set forth on Schedule 4.14, neither the
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Company nor any of its Subsidiaries has any collective bargaining
agreements with any of its employees. There is no labor union organizing
activity pending or, to the Company's knowledge, threatened with respect to
the Company or any of its Subsidiaries. Except as disclosed in the Exchange
Act Filings or on Schedule 4.14, neither the Company nor any of its
Subsidiaries is a party to or bound by any currently effective employment
contract, deferred compensation arrangement, bonus plan, incentive plan,
profit sharing plan, retirement agreement or other employee compensation
plan or agreement. To the Company's knowledge, no employee of the Company
or any of its Subsidiaries, nor any consultant with whom the Company or any
of its Subsidiaries has contracted, is in violation of any term of any
employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by,
or to contract with, the Company or any of its Subsidiaries because of the
nature of the business to be conducted by the Company or any of its
Subsidiaries; and to the Company's knowledge the continued employment by
the Company and its Subsidiaries of their present employees, and the
performance of the Company's and its Subsidiaries' contracts with its
independent contractors, will not result in any such violation. Neither the
Company nor any of its Subsidiaries is aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments
of any nature) or other agreement, or subject to any judgment, decree or
order of any court or administrative agency that would interfere with their
duties to the Company or any of its Subsidiaries. Neither the Company nor
any of its Subsidiaries has received any notice alleging that any such
violation has occurred. Except for employees who have a current effective
employment agreement with the Company or any of its Subsidiaries, no
employee of the Company or any of its Subsidiaries has been granted the
right to continued employment by the Company or any of its Subsidiaries or
to any material compensation following termination of employment with the
Company or any of its Subsidiaries. Except as set forth on Schedule 4.14,
the Company is not aware that any officer, key employee or group of
employees intends to terminate his, her or their employment with the
Company or any of its Subsidiaries, nor does the Company or any of its
Subsidiaries have a present intention to terminate the employment of any
officer, key employee or group of employees.
4.15 Registration Rights and Voting Rights. Except as set forth on
----------------------------------------
Schedule 4.15 and except as disclosed in Exchange Act Filings, neither the
Company nor any of its Subsidiaries is presently under any obligation, and
neither the Company nor any of its Subsidiaries has granted any rights, to
register any of the Company's or its Subsidiaries' presently outstanding
securities or any of its securities that may hereafter be issued. Except as
10
set forth on Schedule 4.15 and except as disclosed in Exchange Act Filings,
to the Company's knowledge, no stockholder of the Company or any of its
Subsidiaries has entered into any agreement with respect to the voting of
equity securities of the Company or any of its Subsidiaries.
4.16 Compliance with Laws; Permits. Neither the Company nor any of its
-----------------------------
Subsidiaries is in violation of any provision of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of
2002 or any SEC regulation or rule or any rule of the Principal Market (as
hereafter defined) promulgated thereunder or any applicable statute, rule,
regulation, order or restriction of any domestic or foreign government or
any instrumentality or agency thereof in respect of the conduct of its
business or the ownership of its properties which has had, or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with
the execution and delivery of this Agreement or any other Related Agreement
and the issuance of the Note, except such as have been duly and validly
obtained or filed, or with respect to any filings that must be made after
the Closing, as will be filed in a timely manner. Each of the Company and
its Subsidiaries has all material franchises, permits, licenses and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
4.17 Environmental and Safety Laws. Neither the Company nor any of its
-----------------------------
Subsidiaries is in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to its
knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation. Except as set
forth on Schedule 4.17, no Hazardous Materials (as defined below) are used
or have been used, stored, or disposed of by the Company or any of its
Subsidiaries or, to the Company's knowledge, by any other person or entity
on any property owned, leased or used by the Company or any of its
Subsidiaries. For the purposes of the preceding sentence, "Hazardous
Materials" shall mean:
(a) materials which are listed or otherwise defined as "hazardous" or
"toxic" under any applicable local, state, federal and/or foreign laws and
regulations that govern the existence and/or remedy of contamination on
property, the protection of the environment from contamination, the control
of hazardous wastes, or other activities involving hazardous substances,
including building materials; or
(b) any petroleum products or nuclear materials.
4.18 Valid Offering. Assuming the accuracy of the representations and
-------------
warranties of the Purchaser contained in this Agreement, the offer, sale
and issuance of the Note will be exempt from the registration requirements
of the Securities Act of 1933, as amended (the "Securities Act"), and will
have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements
of all applicable state securities laws.
11
4.19 Full Disclosure. Each of the Company and each of its Subsidiaries
---------------
has provided the Purchaser with all information requested by the Purchaser
in connection with its decision to purchase the Note, including all
information the Company and its Subsidiaries believe is reasonably
necessary to make such investment decision. Neither this Agreement, the
Related Agreements, the exhibits and schedules hereto and thereto nor any
other document delivered by the Company or any of its Subsidiaries to
Purchaser or its attorneys or agents in connection herewith or therewith or
with the transactions contemplated hereby or thereby, contain any untrue
statement of a material fact nor omit to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading. Any financial
projections and other estimates provided to the Purchaser by the Company or
any of its Subsidiaries were based on the Company's and its Subsidiaries'
experience in the industry and on assumptions of fact and opinion as to
future events which the Company or any of its Subsidiaries, at the date of
the issuance of such projections or estimates, believed to be reasonable.
4.20 Insurance. Each of the Company and each of its Subsidiaries has
--------
general commercial, product liability, and will deliver to the Purchaser,
within thirty (30) days of the Closing Date, evidence of fire and casualty
insurance policies, in each case, with coverages which the Company believes
are customary for companies similarly situated to the Company and its
Subsidiaries in the same or similar business.
4.21 SEC Reports. Except as set forth on Schedule 4.21, the Company
------------
has filed all proxy statements, reports and other documents required to be
filed by it under the Securities ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, as amended (the
"Exchange Act"). The Company has furnished the Purchaser copies of: (a) its
Annual Reports on Form 10-KSB for its fiscal years ended December 31, 2004;
and (b) its Quarterly Reports on Form 10-QSB for its fiscal quarter ended
March 31, 2005, and the Form 8-K filings which it has made during the
fiscal year 2005 to date (collectively, the "SEC Reports"). Except as set
forth on Schedule 4.21, each SEC Report was, at the time of its filing, in
substantial compliance with the requirements of its respective form and
none of the SEC Reports, nor the financial statements (and the notes
thereto) included in the SEC Reports, as of their respective filing dates,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
4.22 Listing. The Company's Common Stock is listed or quoted, as
-------
applicable, on a Principal Market (as hereafter defined) and satisfies and
at all times hereafter will satisfy, all requirements for the continuation
of such listing or quotation, as applicable. The Company has not received
any notice that its Common Stock will be delisted from, or no longer quoted
on, as applicable, the Principal Market or that its Common Stock does not
meet all requirements for such listing or quotation, as applicable. For
purposes hereof, the term "Principal Market" means the NASD OTC Bulletin
Board, NASDAQ SmallCap Market, NASDAQ National Market System, American
Stock Exchange or New York Stock Exchange (whichever of the foregoing is at
the time the principal trading exchange or market for the Common Stock).
4.23 Intentionally Deleted.
---------------------
12
4.24 Patriot Act. The Company certifies that, to the best of Company's
-----------
knowledge, neither the Company nor any of its Subsidiaries has been
designated, nor is or shall be owned or controlled by, a "suspected
terrorist" as defined in Executive Order 13224. The Company hereby
acknowledges that the Purchaser seeks to comply with all applicable laws
concerning money laundering and related activities. In furtherance of those
efforts, the Company hereby represents, warrants and covenants that: (a)
none of the cash or property that the Company or any of its Subsidiaries
will pay or will contribute to the Purchaser has been or shall be derived
from, or related to, any activity that is deemed criminal under United
States law; and (b) no contribution or payment by the Company or any of its
Subsidiaries to the Purchaser, to the extent that they are within the
Company's and/or its Subsidiaries' control shall cause the Purchaser to be
in violation of the United States Bank Secrecy Act, the United States
International Money Laundering Control Act of 1986 or the United States
International Money Laundering Abatement and Anti-Terrorist Financing Act
of 2001. The Company shall promptly notify the Purchaser if any of these
representations, warranties or covenants ceases to be true and accurate
regarding the Company or any of its Subsidiaries. The Company shall provide
the Purchaser any and all additional information regarding the Company or
any of its Subsidiaries that the Purchaser deems necessary or convenient to
ensure compliance with all applicable laws concerning money laundering and
similar activities. The Company understands and agrees that if at any time
it is discovered that any of the foregoing representations, warranties or
covenants are incorrect, or if otherwise required by applicable law or
regulation related to money laundering or similar activities, the Purchaser
may undertake appropriate actions to ensure compliance with applicable law
or regulation, including but not limited to segregation and/or redemption
of the Purchaser's investment in the Company. The Company further
understands that the Purchaser may release confidential information about
the Company and its Subsidiaries and, if applicable, any underlying
beneficial owners, to proper authorities if the Purchaser, in its sole
discretion, determines that it is in the best interests of the Purchaser in
light of relevant rules and regulations under the laws set forth in
subsection (b) above.
4.25 ERISA. Based upon the Employee Retirement Income Security Act of
-----
1974 ("ERISA"), and the regulations and published interpretations
------
thereunder: (a) neither the Company nor any of its Subsidiaries has engaged
in any Prohibited Transactions (as defined in Section 406 of ERISA and
Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code")); (b) each of the Company and each of its Subsidiaries has met all
----
applicable minimum funding requirements under Section 302 of ERISA in
respect of its plans; (c) neither the Company nor any of its Subsidiaries
has any knowledge of any event or occurrence which would cause the Pension
Benefit Guaranty Corporation to institute proceedings under Title IV of
ERISA to terminate any employee benefit plan(s); (d) neither the Company
nor any of its Subsidiaries has any fiduciary responsibility for
investments with respect to any plan existing for the benefit of persons
other than the Company's or such Subsidiary's employees; and (e) neither
the Company nor any of its Subsidiaries has withdrawn, completely or
partially, from any multi-employer pension plan so as to incur liability
under the Multiemployer Pension Plan Amendments Act of 1980.
13
5. Representations and Warranties of the Purchaser. The Purchaser hereby
-------------------------------------------------
represents and warrants to the Company as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement):
5.1 No Shorting. The Purchaser or any of its affiliates and investment
----------
partners has not, will not and will not cause any person or entity, to
directly or indirectly engage in "short sales" of the Company's Common
Stock as long as the Note shall be outstanding.
5.2 Requisite Power and Authority. The Purchaser has all necessary
-------------------------------
power and authority under all applicable provisions of law to execute and
deliver this Agreement and the Related Agreements and to carry out their
provisions. All corporate action on the Purchaser's part required for the
lawful execution and delivery of this Agreement and the Related Agreements
have been or will be effectively taken prior to the Closing. Upon their
execution and delivery, this Agreement and the Related Agreements will be
valid and binding obligations of the Purchaser, enforceable in accordance
with their terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and
(b) as limited by general principles of equity that restrict the
availability of equitable and legal remedies.
5.3 Investment Representations. The Purchaser understands that the
---------------------------
Note is being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon the Purchaser's
representations contained in this Agreement, including, without limitation,
that the Purchaser is an "accredited investor" within the meaning of
Regulation D under the Securities Act of 1933, as amended (the "Securities
Act"). The Purchaser confirms that it has received or has had full access
to all the information it considers necessary or appropriate to make an
informed investment decision with respect to the Note to be purchased by it
under this Agreement. The Purchaser further confirms that it has had an
opportunity to ask questions and receive answers from the Company regarding
the Company's and its Subsidiaries' business, management and financial
affairs and the terms and conditions of the Offering, the Note and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to the Purchaser or to which
the Purchaser had access.
5.4 The Purchaser Bears Economic Risk. The Purchaser has substantial
----------------------------------
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has
the capacity to protect its own interests.
5.5 Acquisition for Own Account. The Purchaser is acquiring the Note
----------------------------
for the Purchaser's own account for investment only, and not as a nominee
or agent and not with a view towards or for resale in connection with their
distribution.
5.6 The Purchaser Can Protect Its Interest. The Purchaser represents
---------------------------------------
that by reason of its, or of its management's, business and financial
experience, the Purchaser has the capacity to evaluate the merits and risks
of its investment in the Note and to protect its own interests in
connection with the transactions contemplated in this Agreement and the
Related Agreements. Further, the Purchaser is aware of no publication of
any advertisement in connection with the transactions contemplated in the
Agreement or the Related Agreements.
14
5.7 Accredited Investor. The Purchaser represents that it is an
-------------------
accredited investor within the meaning of Regulation D under the Securities
Act.
5.8 Legends. The Note shall bear substantially the following legend:
-------
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH
SHARES UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO NEW CENTURY ENERGY CORP.
THAT SUCH REGISTRATION IS NOT REQUIRED."
6. Covenants of the Company. The Company covenants and agrees with the
--------------------------
Purchaser as follows:
6.1 Stop-Orders. The Company will advise the Purchaser, promptly after
-----------
it receives notice of issuance by the SEC, any state securities commission
or any other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the Company, or
of the suspension of the qualification of the Common Stock of the Company
for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.
6.2 Listing. The Company will maintain the listing or quotation, as
-------
applicable, of its Common Stock on the Principal Market, and will comply in
all material respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of
Securities Dealers ("NASD") and such exchanges, as applicable.
6.3 Market Regulations. The Company shall notify the SEC, NASD and
-------------------
applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other
necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of
the Securities to the Purchaser and promptly provide copies thereof to the
Purchaser.
6.4 Reporting Requirements. The Company shall timely file with the SEC
----------------------
all reports required to be filed pursuant to the Exchange Act and refrain
from terminating its status as an issuer required by the Exchange Act to
file reports thereunder even if the Exchange Act or the rules or
regulations thereunder would permit such termination.
6.5 Use of Funds. The Company shall use the proceeds of the sale of
--------------
the Note as set forth on Schedule 6.5.
15
6.6 Access to Facilities. Each of the Company and each of its
----------------------
Subsidiaries will permit any representatives designated by the Purchaser
(or any successor of the Purchaser), upon reasonable notice and during
normal business hours, at such person's expense and accompanied by a
representative of the Company or any Subsidiary (provided that no such
prior notice shall be required to be given and no such representative of
the Company or any Subsidiary shall be required to accompany the Purchaser
in the event the Purchaser believes such access is necessary to preserve or
protect the Collateral (as defined in the Master Security Agreement) or
following the occurrence and during the continuance of an Event of Default
(as defined in the Note)), to:
(a) visit and inspect any of the properties of the Company or any of
its Subsidiaries;
(b) examine the corporate and financial records of the Company or any
of its Subsidiaries (unless such examination is not permitted by federal,
state or local law or by contract) and make copies thereof or extracts
therefrom; and
(c) discuss the affairs, finances and accounts of the Company or any
of its Subsidiaries with the directors, officers and independent
accountants of the Company or any of its Subsidiaries.
Notwithstanding the foregoing, neither the Company nor any of its
Subsidiaries will provide any material, non-public information to the
Purchaser unless the Purchaser signs a confidentiality agreement and
otherwise complies with Regulation FD, under the federal securities laws.
6.7 Taxes. Each of the Company and each of its Subsidiaries will
-----
promptly pay and discharge, or cause to be paid and discharged, when due
and payable, all taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Company and
its Subsidiaries; provided, however, that any such tax, assessment, charge
or levy need not be paid currently if (a) the validity thereof shall
currently and diligently be contested in good faith by appropriate
proceedings, (b) such tax, assessment, charge or levy shall have no effect
on the lien priority of the Purchaser in any property of the Company or any
of its Subsidiaries and (c) if the Company and/or such Subsidiary shall
have set aside on its books adequate reserves with respect thereto in
accordance with GAAP; and provided, further, that the Company and its
Subsidiaries will pay all such taxes, assessments, charges or levies
forthwith upon the commencement of proceedings to foreclose any lien which
may have attached as security therefor.
6.8 Insurance. Each of the Company and its Subsidiaries will keep its
---------
assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion and other
risks customarily insured against by companies in similar business
similarly situated as the Company and its Subsidiaries; and the Company and
its Subsidiaries will maintain, and in the case of casualty insurance,
within thirty (30) days of the Closing Date, will procure and thereafter
maintain, in each case, with financially sound and reputable insurers,
16
insurance against other hazards and risks and liability to persons and
property to the extent and in the manner which the Company reasonably
believes is customary for companies in similar business similarly situated
as the Company and its Subsidiaries and to the extent available on
commercially reasonable terms. The Company, and each of its Subsidiaries,
will jointly and severally bear the full risk of loss from any loss of any
nature whatsoever with respect to the assets pledged to the Purchaser as
security for their respective obligations hereunder and under the Related
Agreements. At the Company's and each of its Subsidiaries' joint and
several cost and expense in amounts and with carriers reasonably acceptable
to the Purchaser, each of the Company and each of its Subsidiaries shall
(a) keep all its insurable properties and properties in which it has an
interest insured against the hazards of fire, flood, sprinkler leakage,
those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies
engaged in businesses similar to the Company's or the respective
Subsidiary's including business interruption insurance; (b) maintain a
bond, in such amounts as is customary in the case of companies engaged in
businesses similar to the Company's or the respective Subsidiary's,
insuring against larceny, embezzlement or other criminal misappropriation
of insured's officers and employees who may either singly or jointly with
others at any time have access to the assets or funds of the Company or any
of its Subsidiaries either directly or through governmental authority to
draw upon such funds or to direct generally the disposition of such assets;
(c) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (d) maintain
all such worker's compensation or similar insurance as may be required
under the laws of any state or jurisdiction in which the Company or the
respective Subsidiary is engaged in business; and (e) furnish the Purchaser
with (i) copies of all policies and evidence of the maintenance of such
policies at least thirty (30) days before any expiration date, (ii)
excepting the Company's workers' compensation policy, endorsements to such
policies naming the Purchaser as "co-insured" or "additional insured" and
appropriate loss payable endorsements in form and substance satisfactory to
the Purchaser, naming the Purchaser as loss payee, and (iii) evidence that
as to the Purchaser the insurance coverage shall not be impaired or
invalidated by any act or neglect of the Company or any Subsidiary and the
insurer will provide the Purchaser with at least thirty (30) days notice
prior to cancellation. The Company and each Subsidiary shall instruct the
insurance carriers that in the event of any loss thereunder, the carriers
shall make payment for such loss to the Company and/or the Subsidiary and
the Purchaser jointly. In the event that as of the date of receipt of each
loss recovery upon any such insurance, the Purchaser has not declared an
event of default with respect to this Agreement or any of the Related
Agreements, then the Company and/or such Subsidiary shall be permitted to
direct the application of such loss recovery proceeds toward investment in
property, plant and equipment that would comprise "Collateral" secured by
the Purchaser's security interest granted by the Company pursuant to the
Master Security Agreement and reaffirmed by the Company pursuant to the
Reaffirmation Agreement, any Related Agreement and/or such other security
agreement as shall be required by the Purchaser, with any surplus funds to
be applied toward payment of the obligations of the Company to the
Purchaser. In the event that the Purchaser has properly declared an event
of default with respect to this Agreement or any of the Related Agreements,
then all loss recoveries received by the Purchaser upon any such insurance
thereafter may be applied to the obligations of the Company hereunder and
under the Related Agreements, in such order as the Purchaser may determine.
Any surplus (following satisfaction of all Company obligations to the
Purchaser) shall be paid by the Purchaser to the Company or applied as may
be otherwise required by law. Any deficiency thereon shall be paid by the
Company or the Subsidiary, as applicable, to the Purchaser, on demand.
17
6.9 Intellectual Property. Each of the Company and each of its
---------------------
Subsidiaries shall maintain in full force and effect its existence, rights
and franchises and all licenses and other rights to use Intellectual
Property owned or possessed by it and reasonably deemed to be necessary to
the conduct of its business.
6.10 Properties. Each of the Company and each of its Subsidiaries will
----------
keep its properties in good repair, working order and condition, reasonable
wear and tear excepted, and from time to time make all needful and proper
repairs, renewals, replacements, additions and improvements thereto; and
each of the Company and each of its Subsidiaries will at all times comply
with each provision of all leases to which it is a party or under which it
occupies property if the breach of such provision could, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.11 Confidentiality. The Company will not, and will not permit any of
--------------
its Subsidiaries to, disclose, and will not include in any public
announcement, the name of the Purchaser, unless expressly agreed to by the
Purchaser or unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement.
Notwithstanding the foregoing, the Company may disclose the Purchaser's
identity and the terms of this Agreement to its current and prospective
debt and equity financing sources.
6.12 Required Approvals. Except as set forth on Schedule 6.12, the
-------------------
Company, without the prior written consent of the Purchaser, shall not, and
shall not permit any of its Subsidiaries to:
(a) (i) directly or indirectly declare or pay any dividends, other
than dividends paid to the parent of the Company, the Company or any of its
wholly-owned Subsidiaries, (ii) issue any preferred stock that is
mandatorily redeemable prior to the one year anniversary of Maturity Date
(as defined in the Note) or (iii) redeem any of its preferred stock or
other equity interests;
(b) liquidate, dissolve or effect a material reorganization (it being
understood that in no event shall the Company or any of its Subsidiaries
dissolve, liquidate or merge with any other person or entity (unless, in
the case of such a merger, the Company or, in the case of merger not
involving the Company, such Subsidiary, as applicable, is the surviving
entity);
(c) become subject to (including, without limitation, by way of
amendment to or modification of) any agreement or instrument which by its
terms would (under any circumstances) restrict the Company's or any of its
Subsidiaries' right to perform the provisions of this Agreement, any
Related Agreement or any of the agreements contemplated hereby or thereby;
(d) materially alter or change the scope of the business of the
Company and its Subsidiaries taken as a whole;
(e) (i) create, incur, assume or suffer to exist any indebtedness
(exclusive of trade debt and debt incurred to finance the purchase of
equipment (not in excess of five percent (5%) of the fair market value of
the Company's and its Subsidiaries' assets)) whether secured or unsecured
other than (x) the Company's obligations owed to the Purchaser, (y)
18
indebtedness set forth on Schedule 6.12(e) attached hereto and made a part
hereof and any refinancings or replacements thereof on terms no less
favorable to the Purchaser than the indebtedness being refinanced or
replaced, and (z) any indebtedness incurred in connection with the purchase
of assets (other than equipment) in the ordinary course of business, or any
refinancings or replacements thereof on terms no less favorable to the
Purchaser than the indebtedness being refinanced or replaced, so long as
any lien relating thereto shall only encumber the fixed assets so purchased
and no other assets of the Company or any of its Subsidiaries; (ii) cancel
any indebtedness owing to it in excess of $50,000 in the aggregate during
any 12 month period; (iii) assume, guarantee, endorse or otherwise become
directly or contingently liable in connection with any obligations of any
other person or entity, except the endorsement of negotiable instruments by
the Company or any Subsidiary thereof for deposit or collection or similar
transactions in the ordinary course of business or guarantees of
indebtedness otherwise permitted to be outstanding pursuant to this clause
(e);
(f) create or acquire any Subsidiary after the date hereof unless (i)
such Subsidiary is a wholly-owned Subsidiary of the Company and (ii) such
Subsidiary becomes a party to the Master Security Agreement, the Stock
Pledge Agreement and the Subsidiary Guaranty (either by executing a
counterpart thereof or an assumption or joinder agreement in respect
thereof) and, to the extent required by the Purchaser, satisfies each
condition of this Agreement and the Related Agreements as if such
Subsidiary were a Subsidiary on the Closing Date; and
(g) transfer or assign in any manner whatsoever any of its assets to
any person or entity, including without limitation any subsidiary created
after the date hereof.
6.13 Opinion. On the Closing Date, the Company will deliver to the
-------
Purchaser an opinion acceptable to the Purchaser from the Company's
external legal counsel in the form of Exhibit B hereto.
6.14 Margin Stock. The Company will not permit any of the proceeds of
------------
the Note to be used directly or indirectly to "purchase" or "carry" "margin
stock" or to repay indebtedness incurred to "purchase" or "carry" "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now
and from time to time hereafter in effect.
6.15 Financing Right of First Refusal.
--------------------------------
(a) The Company hereby grants to the Purchaser a right of first
refusal to provide any Additional Financing (as defined below) to be issued
by the Company and/or any of its Subsidiaries, subject to the following
terms and conditions. From and after the date hereof, prior to the
incurrence of any additional indebtedness and/or the sale or issuance of
any equity interests of the Company or any of its Subsidiaries (an
"Additional Financing"), the Company and/or any Subsidiary of the Company,
as the case may be, shall notify the Purchaser of its intention to enter
into such Additional Financing. In connection therewith, the Company and/or
the applicable Subsidiary thereof shall submit a fully executed term sheet
(a "Proposed Term Sheet") to the Purchaser setting forth the terms,
19
conditions and pricing of any such Additional Financing (such financing to
be negotiated on "arm's length" terms and the terms thereof to be
negotiated in good faith) proposed to be entered into by the Company and/or
such Subsidiary. The Purchaser shall have the right, but not the
obligation, to deliver its own proposed term sheet (the "Purchaser Term
Sheet") setting forth the terms and conditions upon which the Purchaser
would be willing to provide such Additional Financing to the Company and/or
such Subsidiary. The Purchaser Term Sheet shall contain terms no less
favorable to the Company and/or such Subsidiary than those outlined in
Proposed Term Sheet. The Purchaser shall deliver such Purchaser Term Sheet
within ten business days of receipt of each such Proposed Term Sheet. If
the provisions of the Purchaser Term Sheet are at least as favorable to the
Company and/or such Subsidiary, as the case may be, as the provisions of
the Proposed Term Sheet, the Company and/or such Subsidiary shall enter
into and consummate the Additional Financing transaction outlined in the
Purchaser Term Sheet.
(b) The Company will not, and will not permit its Subsidiaries to,
agree, directly or indirectly, to any restriction with any person or entity
which limits the ability of the Purchaser to consummate an Additional
Financing with the Company or any of its Subsidiaries.
6.16 Additional Investment. The Company agrees and acknowledges that
----------------------
the Purchaser shall have the right (at its sole option), on or prior to the
date which is 180 days following the Closing Date, to issue an additional
note to the Company in an aggregate principal amount of up to $15,000,000
but not less than $1,000,000 on the same terms and conditions then in
effect, a proportionate amortization schedule, etc.) set forth in, and
pursuant to substantially similar documentation as, this Agreement and the
Related Agreements. The Purchaser agrees and acknowledges that no new
warrants or options must be granted by the Company to the Purchaser in
connection with such additional investment.
7. Covenants of the Purchaser. The Purchaser covenants and agrees with the
-------------------------
Company as follows:
7.1 Confidentiality. The Purchaser will not disclose, and will not
--------------
include in any public announcement, the name of the Company, unless
expressly agreed to by the Company or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of
such requirement.
7.2 Non-Public Information. The Purchaser will not effect any sales in
----------------------
the shares of the Company's Common Stock while in possession of material,
non-public information regarding the Company if such sales would violate
applicable securities law.
8. Covenants of the Company and the Purchaser Regarding Indemnification.
--------------------------------------------------------------------
8.1 Company Indemnification. The Company agrees to indemnify, hold
------------------------
harmless, reimburse and defend the Purchaser, each of the Purchaser's
officers, directors, agents, affiliates, control persons, and principal
shareholders, against any and all claims, costs, expenses, liabilities,
obligations, losses or damages (including reasonable legal fees) of any
nature, incurred by or imposed upon the Purchaser which result, arise out
of or are based upon: (a) any misrepresentation by the Company or any of
its Subsidiaries or breach of any warranty by the Company or any of its
Subsidiaries in this Agreement, any other Related Agreement or in any
20
exhibits or schedules attached hereto or thereto; (b) any breach or default
in performance by the Company or any of its Subsidiaries of any covenant or
undertaking to be performed by the Company or any of its Subsidiaries
hereunder, under any other Related Agreement or any other agreement entered
into by the Company and/or any of its Subsidiaries and the Purchaser
relating hereto or thereto or (c) (i) the violation of any local, state or
federal law, rule or regulation pertaining to environmental regulation,
contamination or cleanup (collectively, "Environmental Laws"), including
without limitation, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (42 U.S.C. Sec.9601 et seq. and 40 CFR Sec.302.1
et seq.), the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
Sec.6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C.
Sec.1251 et seq., and 40 CFR Sec.116.1 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Sec.1801 et seq.) and the regulations
promulgated pursuant to said laws, all as amended and relating to or
affecting the Company and/or any Subsidiary and the Company's and/or any
Subsidiary's properties, whether or not caused by or within the control of
the Purchaser and/or (ii) the presence, release or threat of release of any
hazardous, toxic or harmful substances, wastes, materials, pollutants or
contaminants (including, without limitation, asbestos, polychlorinated
biphenyls, petroleum products, flammable explosives, radioactive materials,
infectious substances or raw materials which include hazardous
constituents) or any other substances or raw materials which are included
under or regulated by Environmental Laws on, in, under or affecting all or
any portion of any property of the Company and/or any Subsidiary or any
surrounding areas, regardless of whether or not caused by or within the
control of the Purchaser.
8.2 Purchaser's Indemnification. The Purchaser agrees to indemnify,
----------------------------
hold harmless, reimburse and defend the Company and each of the Company's
officers, directors, agents, affiliates, control persons and principal
shareholders, at all times against any claims, costs, expenses,
liabilities, obligations, losses or damages (including reasonable legal
fees) of any nature, incurred by or imposed upon the Company which result,
arise out of or are based upon: (a) any misrepresentation by the Purchaser
or breach of any warranty by the Purchaser in this Agreement or in any
exhibits or schedules attached hereto or any Related Agreement; or (b) any
breach or default in performance by the Purchaser of any covenant or
undertaking to be performed by the Purchaser hereunder, or any other
agreement entered into by the Company and the Purchaser relating hereto.
8.3 Offering Restrictions. Except as previously disclosed in the SEC
----------------------
Reports or in the Exchange Act Filings, or stock or stock options granted
to employees or directors of the Company (these exceptions hereinafter
referred to as the "Excepted Issuances"), neither the Company nor any of
its Subsidiaries will, prior to the full repayment of the Note (together
with all accrued and unpaid interest and fees related thereto), (a) enter
into any equity line of credit agreement or similar agreement or (b) issue,
or enter into any agreement to issue, any securities with a
variable/floating conversion and/or pricing feature which are or could be
(by conversion or registration) free-trading securities (i.e. common stock
subject to a registration statement).
9. Miscellaneous.
-------------
9.1 Governing Law, Jurisdiction and Waiver of Jury Trial.
----------------------------------------------------
(a) THIS AGREEMENT AND THE OTHER RELATED AGREEMENTS SHALL BE GOVERNED
BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
21
(b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
THE COMPANY, ON THE ONE HAND, AND THE PURCHASER, ON THE OTHER HAND,
PERTAINING TO THIS AGREEMENT OR ANY OF THE RELATED AGREEMENTS OR TO ANY
MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER
RELATED AGREEMENTS; PROVIDED, THAT THE PURCHASER AND THE COMPANY
--------
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A
COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND
FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE
---------------
TO PRECLUDE THE PURCHASER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION
IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE
COLLATERAL (AS DEFINED IN THE MASTER SECURITY AGREEMENT) OR ANY OTHER
SECURITY FOR THE OBLIGATIONS (AS DEFINED IN THE MASTER SECURITY AGREEMENT),
OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE PURCHASER.
THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION
IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY
WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. THE COMPANY HEREBY
--------------------
WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED
IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS,
COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN SECTION 11.9 AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY'S
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS,
PROPER POSTAGE PREPAID.
(c) THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES
HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING
BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR
OTHERWISE BETWEEN THE PURCHASER AND/OR THE COMPANY ARISING OUT OF,
CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, ANY OTHER RELATED AGREEMENT
OR THE TRANSACTIONS RELATED HERETO OR THERETO.
9.2 Severability. Wherever possible each provision of this Agreement
------------
and the Related Agreements shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Agreement or any Related Agreement shall be prohibited by or invalid or
illegal under applicable law such provision shall be ineffective to the
extent of such prohibition or invalidity or illegality, without
invalidating the remainder of such provision or the remaining provisions
thereof which shall not in any way be affected or impaired thereby.
22
9.3 Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by the
Purchaser and the closing of the transactions contemplated hereby to the
extent provided therein. All statements as to factual matters contained in
any certificate or other instrument delivered by or on behalf of the
Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument. All
indemnities set forth herein shall survive the execution, delivery and
termination of this Agreement and the Note and the making and repayment of
the obligations arising hereunder, under the Note and under the other
Related Agreements.
9.4 Successors. Except as otherwise expressly provided herein, the
---------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, heirs, executors and administrators of the parties hereto and
shall inure to the benefit of and be enforceable by each person or entity
which shall be a holder of the Note from time to time. The Purchaser may
not assign its rights hereunder or under any Related Agreement to a
competitor of the Company unless an Event of Default (as defined in the
Note) has occurred and is continuing.
9.5 Entire Agreement; Maximum Interest. This Agreement, the Related
------------------------------------
Agreements, the exhibits and schedules hereto and thereto and the other
documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by
any representations, warranties, covenants and agreements except as
specifically set forth herein and therein. Nothing contained in this
Agreement, any Related Agreement or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or require
the payment of a rate of interest or other charges in excess of the maximum
rate permitted by applicable law. In the event that the rate of interest or
dividends required to be paid or other charges hereunder exceed the maximum
rate permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company to the Purchaser and thus
refunded to the Company.
9.6 Amendment and Waiver.
--------------------
(a) This Agreement may be amended or modified only upon the written
consent of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the Purchaser
under this Agreement may be waived only with the written consent of the
Purchaser.
(c) The obligations of the Purchaser and the rights of the Company
under this Agreement may be waived only with the written consent of the
Company.
23
9.7 Delays or Omissions. It is agreed that no delay or omission to
---------------------
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the
Related Agreements, shall impair any such right, power or remedy, nor shall
it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. All remedies, either under
this Agreement or the Related Agreements, by law or otherwise afforded to
any party, shall be cumulative and not alternative.
9.8 Notices. All notices required or permitted hereunder shall be in
-------
writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile if sent during normal business
hours of the recipient, if not, then on the next business day;
(c) three (3) business days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or
(d) one (1) day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of
receipt.
All communications shall be sent as follows:
If to the Company to: New Century Energy Corp.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to the Purchaser to: Laurus Master Fund, Ltd.
c/o M&C Corporate Services Limited
▇.▇. ▇▇▇ ▇▇▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
South Church Street
Grand Cayman, Cayman Islands
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
24
with a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: Loeb & Loeb LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
or at such other address as the Company or the Purchaser may designate
by written notice to the other parties hereto given in accordance herewith.
9.9 Attorneys' Fees. In the event that any suit or action is
----------------
instituted to enforce any provision in this Agreement or any Related
Agreement, the prevailing party in such dispute shall be entitled to
recover from the losing party all fees, costs and expenses of enforcing any
right of such prevailing party under or with respect to this Agreement
and/or such Related Agreement, including, without limitation, such
reasonable fees and expenses of attorneys and accountants, which shall
include, without limitation, all fees, costs and expenses of appeals.
9.10 Titles and Subtitles. The titles of the sections and subsections
--------------------
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
9.11 Facsimile Signatures; Counterparts. This Agreement may be
------------------------------------
executed by facsimile signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
agreement.
9.12 Broker's Fees. Except as set forth on Schedule 11.12 hereof, each
-------------
party hereto represents and warrants that no agent, broker, investment
banker, person or firm acting on behalf of or under the authority of such
party hereto is or will be entitled to any broker's or finder's fee or any
other commission directly or indirectly in connection with the transactions
contemplated herein. Each party hereto further agrees to indemnify each
other party for any claims, losses or expenses incurred by such other party
as a result of the representation in this Section 11.13 being untrue.
9.13 Construction. Each party acknowledges that its legal counsel
------------
participated in the preparation of this Agreement and the Related
Agreements and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be
applied in the interpretation of this Agreement or any Related Agreement to
favor any party against the other.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
25
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
NEW CENTURY ENERGY CORP. LAURUS MASTER FUND, LTD.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ Grin
----------------------- ------------------------
Name: President Name:▇▇▇▇▇▇ Grin
--------------------- ----------------------
Title: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Title: Director
------------------- ---------------------
26