Exhibit 10.37
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of August 3, 1999, is
entered into by and between ENVIRONMENTAL REMEDIATION HOLDINGS CORPORATION, a
Colorado corporation (the "Company") and TC HYDRO CARBON INC., a Delaware
corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, Common Stock of the Company, $.0001 par value
per share, (the "Shares"), upon the terms and subject to the conditions of such
Shares, and subject to acceptance of this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE
a. Purchase; Certain Definitions.
(i) Buyer hereby agrees to purchase from the Company 375,000,000
Shares for an aggregate purchase price of US$1,000,000. The
purchase price shall be payable in United States Dollars (the
"Purchase Price").
(ii) Buyer hereby agrees to provide the Company with a Working Capital
Line of Credit in the aggregate amount of US$4,000,000 to be
drawn down by the Company over a twenty four (24) month period
from the date hereof (the "Line"), such Line Agreement attached
hereto as Schedule A. (iii) As used herein, the term "Securities"
means the Shares.
b. Form of Payment. Buyer shall pay the purchase price for the Shares by
delivering immediately available good funds to the Company's Little
Rock, Arkansas bank account (the "Account") as identified in Section
1(d) herein.
c. Share Delivery. No later than the Closing Date (as defined below), the
Company shall deliver two certificates in equal amounts of 187,500,000
representing the Shares
duly executed on behalf of the Company (collectively, the
"Certificates") to the Buyer.
d. Method of Payment. Payment into the Account of the Purchase Price for
the Shares shall be made by Buyer via wire transfer of same day funds
to:
Regions Bank
Little Rock, AR
Attn: Xxxx Xxxxxxx
ABA#: 0 6 2 - 0 0 5 - 6 9 0
A/C: Environmental Remediation Holdings Corporation
A/C#: 8 0 0 - 9 6 3 - 3 6 2 6
Not later than 1:00 p.m., Central Standard Time, on the date which is
one New York Stock Exchange trading day after the Company shall have
accepted this Agreement and returned a signed counterpart of this
Agreement to the Buyer by facsimile, Buyer shall deposit with the
Buyer the Purchase Price for the Shares.
2. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that to the best of
its knowledge and after reasonable due diligence:
a. Authorized Shares. The Shares have been duly authorized and, when
issued, will be duly and validly issued, fully paid and non-assessable and will
not subject the holder thereof to personal liability by reason of being such
holder. There are no preemptive rights of any shareholder of the Company, as
such, to acquire the Shares, except for such antidilution rights as may exist
under outstanding options and warrants, or rights existing under the Company's
Shareholder Rights Plan.
b. Company Status. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado and has
the requisite corporate power to own its properties and to carry on its business
as now being conducted. The Company is duly qualified as a foreign corporation
to do business and is in good standing in each jurisdiction where the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those jurisdictions in which the failure to so qualify
would not have a material adverse effect on the business, operations or
prospects or condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole. The Company has registered its Common Stock
pursuant to Section 12 of the 1934 Act, and the Common Stock is listed and
traded on the Over The Counter Bulletin Board ("OTC-BB").
c. Enforceability. This Agreement and all other documents relating to
this transaction and the transactions contemplated hereby and thereby, have been
duly and validly authorized by the Company, when executed and delivered by or on
behalf of the Company, will be, valid and binding agreements of the Company
enforceable in accordance with their respective terms, subject, as to
enforceability, to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditor's
rights generally.
d. Non-contravention. The execution and delivery of this by the
Company, the issuance of the Securities, and the consummation by the Company of
the other transactions contemplated by this Agreement do not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under (i) the articles of incorporation
or by-laws of the Company, each as currently in effect, (ii) any indenture,
mortgage, deed of trust, or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound,
(except as herein set forth), (iii) to its knowledge, any existing applicable
law, rule, or regulation or any applicable decree, judgment, or order of any
court, United States federal or state regulatory body, administrative agency, or
other governmental body having jurisdiction over the Company or any of its
properties or assets, or (iv) any listing agreement for its Common Stock, except
such conflict, breach or default which would not have a material adverse effect
on the transactions contemplated herein.
e. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the shareholder of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
f. SEC Filings. None of the Company's SEC Reports, as amended,
contained, at the time they were filed, any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements made therein in light of the circumstances under which they
were made, not misleading.
g. Absence of Certain Changes. Since December 31, 1998, except as
disclosed in the Company's SEC Reports, there has been no material adverse
change and no material adverse development in the business, properties,
operations, condition (financial or otherwise), or results of operations of the
Company and its subsidiaries, taken as a whole, and the Company has not (i)
incurred or become subject to any material liabilities (absolute or contingent)
except liabilities incurred in the ordinary course of business consistent with
past practices; (ii) discharged or satisfied any material lien or encumbrance or
paid any material obligation or liability (absolute or contingent), other than
current liabilities paid in the ordinary course of business consistent with past
practices; (iii) declared or made any payment or distribution of cash or other
property to shareholders with respect to its capital stock, or purchased or
redeemed, or made any agreements to purchase or redeem, any shares of its
capital stock; (iv) sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, except in the ordinary course of business
consistent with past practices; (v) suffered any substantial losses or waived
any rights of material value, whether or not in the ordinary course of business,
or suffered the loss of any material amount of existing business; (vi) made any
changes in employee compensation, except in the ordinary course of business
consistent with past practices; or (vii) experienced any material problems with
labor or management in connection with the terms and conditions of their
employment.
h. Full Disclosure. There is no fact known to the Company (other than
general economic conditions known to the public generally or as disclosed in the
Company's SEC Reports), that has not been disclosed in writing to the Buyer that
(i) would reasonably be expected to have a material adverse effect on the
business or financial condition of the Company or (ii) would reasonably be
expected to materially and adversely affect the ability of the Company to
perform its
obligations pursuant to this Agreement or any of the agreements contemplated
hereby (collectively, including this Agreement, the "Transaction Agreements").
i. Absence of Litigation. The Company's SEC Reports, which the Buyer
has reviewed, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business or financial condition, results of operation or prospects
of the Company and its subsidiaries taken as a whole or the transactions
contemplated by any of the Transaction Agreements or which would adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, any of the Transaction Agreements.
j. Prior Issues. During the twelve- (12) months preceding the date
hereof, to the best of the Company's knowledge the Company has not issued any
Common Stock, convertible or exchangeable securities in capital transactions
that have not been fully disclosed to the Buyer.
k. No Undisclosed Liabilities or Events. The Company has no liabilities
or obligations, other than those disclosed in the Company's SEC Reports or those
incurred in the ordinary course of the Company's business since December 31,
1998, which, individually or in the aggregate, do or would not have a material
adverse effect on the properties, business, condition (financial or otherwise),
results of operations or prospects of the Company and its subsidiaries, taken as
a whole. No event or circumstance has occurred or exists with respect to the
Company or its properties, business, condition (financial or otherwise), results
of operations or prospects, which, under applicable law, rule or regulation,
requires public disclosure or announcement prior to the date hereof by the
Company but which has not been so publicly announced or disclosed. The Buyer is
relying on all representations, both verbal and written, made by the Company in
connection with this transaction.
l. No Default. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it or its property is bound.
3. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO NFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, covenants and agrees with, the
Company as follows:
a. Buyer represents that it is purchasing the Shares for its own
account for investment and not with a view towards the public sale or
distribution thereof and not with a view to or for sale in connection with any
distribution thereof.
b. The Buyer is (i) an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its
affiliates or selling agents), to protect its own interests in connection with
the transactions described in this Agreement, and the related documents, and
(iv) able to afford the entire loss of its investment in the Securities.
c. All subsequent offers and sales of the Shares shall be made pursuant
to registration of the Shares under the 1933 Act or pursuant to an exemption
from registration.
d. The Buyer understands that the Shares are being offered and sold to
it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Shares.
e. The Buyer and its purchaser representative represent and acknowledge
that Buyer has been furnished with all materials relating to the business,
finances and operations of the Company and materials relating to the offer and
sale of the Shares which have been requested by the Buyer, and is relying on the
Company's representations, both verbal and written. The Buyer and its advisors,
if any, have been afforded the opportunity to ask questions of the Company and
have received complete and satisfactory answers to any such inquiries.
f. The Buyer understands that its investment in the Company is
speculative and that there can be no assurance that the Shares can be sold at or
above the Purchase Price.
g. The Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
h. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors rights generally.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the Shares
have not been registered under the 1933 Act and may not be sold, transferred or
otherwise disposed of unless (A) registered for resale under the 1933 Act or (B)
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that
such securities may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of such securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not
applicable, that any resale of such securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
another exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register such securities (other than pursuant to Section 4(c)
herein) under the 1933 Act or to comply with the terms and conditions of any
exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that, until
such time as the Shares have been registered for resale under the 1933 Act,
certificates and other instruments representing any of the Securities shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION, OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
c. Use of Proceeds. The Company will use the proceeds from the sale of
the Shares for the final contract payment in the amount of US$1,000,000 to the
Democratic Republic of the Government of Sao Tome and Principe ("DRSTP"). The
release of the $1,000,000 to the DRSTP is subject to the satisfaction of the
items listed on the Escrow Release Agreement attached hereto as Schedule B. The
Company will use the proceeds from the draw down of the Line to fund its ongoing
operating expenses.
d. Anti-dilution. The Shares issued herein shall be subject to upward
adjustment if the Buyer should determine, in its sole discretion, that as of the
date hereof, the fully diluted common shares of the Company are in excess of
160,000,000 shares. If any or all settlements, offers to settle, or claims
against the Company of any nature whatsoever having a genesis that predates the
date hereof ("Predate Claims") results in the issuance of common shares of the
Company ("Settlement Shares") to satisfy or fulfill such Predate Claims, then
the Settlement Shares shall be added to the actual shares outstanding as of the
date of the issuance of such Settlement Shares. If and when the Company's fully
diluted common shares exceeds 160,000,000, then the Company shall issue to the
Buyer additional Shares (Anti-dilution Shares) so that immediately subsequent to
the issuance of such Anti-dilution Shares, the buyer shall continue to own 70.0%
or more of the Company's fully diluted shares outstanding. 5. DELIVERY
INSTRUCTIONS.
The Shares shall be delivered by the Company to the Buyer as detailed
in Section 11(c) hereof, on a delivery against payment basis, no later than on
the Closing Date.
6. CLOSING DATE.
(i) The closing of the issuance and sale of the Shares shall occur on
the date (the "Closing Date") which is the first trading day after the
fulfillment or waiver of all closing conditions of Sections 7 and 8 herein or
such other date and time as is mutually agreed upon by the Company and the
Buyer. The date of an alternate Closing Date shall be the date specified by
either party upon at least three (3) business days advance notice to the other
party; provided, however, that it shall be a condition of an alternate Closing
Date that each of the conditions contemplated herein shall have been satisfied
or waived on or before such date.
(ii) The purchase and issuance of Shares shall occur at the offices of
the Buyer on the Closing Date no later than 12:00 Noon, Central Standard Time,
on such day, or at such other time as is mutually agreed upon by the Company and
the Buyer.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the Shares
on the Closing Date to the Buyer pursuant to this Agreement is conditioned upon:
a. Acceptance by the Buyer of this Agreement, as indicated by execution
of this Agreement;
b. Delivery by the Buyer of good funds into the Account as payment in
full of the Purchase Price for the Shares and the delivery of verification
thereof to the Company;
c. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date, and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before the
Closing Date; and
d. There shall not be in effect any law, rule or regulation prohibiting
or restricting the transactions contemplated hereby, or requiring any consent or
approval that shall not have been obtained.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the Shares on
the Closing Date is conditioned upon:
a. Acceptance by the Company of this Agreement, as indicated by
execution of this Agreement and the delivery to the Buyer of a duly executed
Board resolution authorizing and approving the transaction contemplated herein;
b. Delivery by the Company to the Buyer of the certificate for the
Shares in accordance with this Agreement;
c. The accuracy in all material respects on the Closing Date of the
representations, covenants and warranties of the Company contained in this
Agreement as if made on the Closing Date, and the performance by the Company on
or before the Closing Date of all covenants and agreements of the Company
required to be performed on or before the Closing Date;
d. On the Closing Date, the Buyer has received an opinion of counsel
for the Company, dated the Closing Date in form, scope and substance reasonably
satisfactory to the Buyer;
e. On the Closing Date, the Buyer has received a fairness opinion from
the Accountant for the Company, dated the Closing Date in form, scope and
substance reasonably satisfactory to the Buyer;
f. No statute, rule, regulation, executive order, decree, ruling or
injunction shall be enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits or adversely
effects any of the transactions contemplated by this Agreement, and no
proceeding or investigation shall have been commenced or threatened which may
have the effect of prohibiting or adversely effecting any of the transactions
contemplated by this Agreement; and
g. Deliver by the Company to the Buyer of signed resignations from the
Board of Directors for Xxx Xxxxxxxx, Xxx Xxxxxx, and Xxx Xxxxxx, along with the
appointment to the Board of Xxxxx Xxxxxx, Xxxx X. Xxx, Xxxxx Xxxxx, Xxxxxx
Xxxxxx and Xxxxxxxx Xxxxxx as Chairman.
9. CONDITIONS OF RELEASE OF ESCROW FUNDS TO DEMOCRATIC REPUBLIC OF SAO TOME
AND PRINCIPE.
The release of the US$1,000,000 to the DRSTP is conditioned upon the
satisfaction of the items detailed in Escrow Release Agreement attached hereto
as Schedule B.
10. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Colorado for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws.
b. A facsimile transmission of this signed Agreement shall be legal and
binding on all parties hereto.
c. This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original.
d. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
e. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
f. This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof.
g. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.
h. Except as otherwise set forth herein, all costs and expenses,
including reasonable attorney's fees, incurred in the enforcement of this
Agreement shall be paid to the prevailing party by the non-prevailing party,
upon demand.
11. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of: (i) the date delivered, if delivered by personal
delivery as against written receipt therefor or by confirmed facsimile
transmission, (ii) the fourth business day after deposit, postage prepaid, in
the United States Postal Service by registered or certified mail, or (iii) the
third business day after mailing by international express courier, with delivery
costs and fees prepaid, in each case, addressed to each of the other parties
thereunto entitled at the following addresses (or at such other addresses as
such party may designate by advance written notice similarly given to each of
the other parties hereto):
COMPANY: ERHC
Attn: Xxx Xxxxxxxxx
000Xxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxx Xxxx Xxxxx, XX 00000
T: 318.258.3001; F: 318.258.5629
BUYER: TC Hydro Carbon Inc.
Attn: Xxxxxxxx Xxxxxx
00000 XxXxxxxx Xxxxx, Xxxxx 000, Xxxxxx Xxxx, XX 00000
T: 501.821.6800; F: 501.821.6888
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's
representations and warranties herein shall survive the execution and delivery
of this Agreement and the delivery of the Shares and the Purchase Price, and
shall inure to the benefit of the Buyer and its successors and assigns.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto
as of the date first above written.
BUYER
TC Hydro Carbon, Inc.
By:/s/ Xxxxxxxx Xxxxxx
Print Name:
Date:
COMPANY
ERHC, Inc.
By:/s/ Xxxxx Xxxxxxxxx Xx.
Print Name: ____________________________
Date: __________________________________
By: /s/ Xxxxx Xxxxxxx
Print Name: ____________________________
Date: __________________________________
By: /s/ Xxxxxx XxXxxxxx
Print Name: ____________________________
Date: _________________________________
By: /s/ Xxx Xxxxxx
Print Name: ____________________________
Date: __________________________________
SCHEDULE A
THE SECURITIES REPRESENTED HEREBY OR INTO WHICH THIS NOTE MAY BE CONVERTED HAVE
NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY AND ITS
COUNSEL AND FROM ATTORNEYS REASONABLY ACCEPTABLE TO THE COMPANY AND ITS COUNSEL,
THAT SUCH REGISTRATION IS NOT REQUIRED.
No. 1 August , 1999
ENVIRONMENTAL REMEDIATION HOLDING CORPORATION
SENIOR SECURED 8.00% EXCHANGEABLE PROMISSORY NOTE
DUE SEPTEMBER 1, 2004
FOR VALUE RECEIVED, ENVIRONMENTAL REMEDIATION HOLDING CORPORATION, a
Colorado corporation (the "Company") hereby promises to pay to TC HYDRO CARBON
INC., a Delaware corporation (the "Noteholder" or "Lender"), or registered
assigns, on or before September 1, 2004 (the "Maturity Date"), the principal sum
of Four Million Dollars (US$4,000,000.00) or such other or lesser amount as may
be outstanding from time to time. The principal and interest hereon shall be
payable in lawful money of the United States of America at the principal office
of the Noteholder or at such other place as the registered Noteholder may
designate from time to time in writing to the Company. The aggregate unpaid
amounts reflected on the records of the Noteholder shall be deemed rebuttably
presumptive evidence of the principal amount remaining outstanding and unpaid on
this Note. No failure of the Noteholder to record any advance or payment shall
limit or otherwise affect the obligation of the Company hereunder with respect
to any amounts advanced under this Note. All payments to be made by the Company
on account of principal and interest under this Note shall be made without set
off or counterclaim.
1. INTEREST. The Company agrees to pay interest from the date hereof on the
principal sum remaining unpaid at the rate of 8.00% per annum (or such higher
rate set forth in Section 3) based on a 360-day year. Interest shall accrue and
be convertible common stock of the Company pursuant to Section 4 herein.
Notwithstanding anything in this Note to the contrary, in no event shall the
rate of interest charged with respect to this Note exceed the highest rate of
interest
which may be lawfully charged under the laws of any jurisdiction governing this
Note and the payment of interest thereon.
2. ADVANCES. Notwithstanding anything in this Note to the contrary, the
procedures for the requesting and making of advances under this Note (each, an
"Advance") shall be governed by this Section 2.
(a) The maximum aggregate amount of Advances to be made during any calendar
month shall average on a trailing six -(6) month basis $250,000.00 per month,
but shall not in any one calendar month be greater than $350,000.00.
(b) This Note is being issued in connection with the acquisition by the
Noteholder or an affiliate thereof of an approximate 70% equity interest in the
Company (the "Acquisition"). Until such time as a super-majority of the
Company's Board of Directors consists of appointees or representatives of the
Noteholder, the maximum aggregate amount of all Advances under this Note shall
not exceed $100,000.00.
(c) No Advance may be made or requested under this Note after September 1,
2001.
(d) The Company shall request an Advance under this Note by giving written
notice to the Noteholder at least three (3) business days before the proposed
Advance which notice shall indicate the date of the requested Advance which
shall not be less than three (3) business days from the date of the notice.
(e) This Note is not a revolving note, and amounts advanced hereunder may
not be reborrowed after they have been repaid.
(f) Advances under this Note may not be prepaid by the Company.
3. DEFAULT INTEREST. Notwithstanding the foregoing provisions of Section 1, upon
the occurrence and during the continuance of an Event of Default, the principal
of and unpaid interest on this Note shall bear interest, from the date of the
occurrence of the Event of Default until such Event of Default is cured or
waived, payable on demand in immediately available funds at a rate equal the
rate otherwise in effect pursuant to Section 1, plus 10.00% per annum.
4. NOTE EXCHANGE. Except as otherwise provided in Section 5, on the 180th day
following the date of each Advance, all of the principal and accrued interest
represented by such Advance shall be automatically converted (each such act
herein referred to as a "Conversion") into such number of fully paid, validly
issued and nonassessable shares of common stock of the Company (hereinafter the
"Common Stock" or the "Common Shares") as shall be determined by dividing (i)
the Conversion Amount, as determined in Section 4(b) herein, of the Advance by
(ii) the Conversion Price, as determined in Section 4(a) herein, in effect on
the Conversion Date, as determined in
Section 4(c) herein (the Common Stock received by the Noteholder in each
Conversion shall be referred to as "Conversion Shares"). All Conversion Shares
shall be free and clear of any liens, claims or encumbrances. Each Conversion
shall reduce the face amount of the Note by a like amount.
(a) Determination of Conversion Price. The "Conversion Price" shall be
$0.20 per share of Common Stock of the Company subject to adjustment in
accordance with Sections 4(g), 4(h) and 4(i).
(b) Conversion Amount. The "Conversion Amount" for each Advance shall be
equal to the sum of (i) the principal amount of the Advance being Converted
plus (ii) any and all accrued and unpaid interest on the principal portion
of such Advance.
(c) Conversion Date. The 180th day following the date of each Advance shall
be the "Conversion Date" for such Advance.
(d) Conversion Mechanics. To the extent that any portion of the Note is
Converted, the rights of the Noteholder with respect to such portion of the
Note shall cease and the Noteholder shall be deemed to have become the
holder of record of the Conversion Shares represented thereby. No
fractional Common Shares shall be issued upon Conversion of the Note or any
part thereof. In lieu of any fractional share to which the Noteholder would
otherwise be entitled, the Company shall round up to the nearest whole
Common Share. In the case of a dispute as to the calculation of the
Conversion Price, the Noteholder's calculation shall be deemed conclusive
absent manifest error.
(e) Share Delivery. Within five (5) days after the Conversion Date, the
Company will deliver, either via Express Mail or DTC/DWAC electronic
transfer to the Noteholder a certificate or certificates representing the
number of Conversion Shares issuable by reason of each Conversion in the
name of the Noteholder in such denomination or denominations as the
Noteholder has specified.
(f) Common Share Reservation. The Company shall at all times have
authorized, reserved and set aside a sufficient number of Common Shares to
facilitate Conversion of the entire principal amount of this Note, together
with all accrued and unpaid interest thereon. The Company shall at all
times reserve and keep available, out of its authorized but unused shares
of Common Stock, solely for the purpose of effecting the Conversion of the
Note, the full number of shares deliverable upon Conversion of all the Note
from time to time outstanding. The Company shall, from time to time in
accordance with the laws of its state of formation, increase the authorized
number of shares of Common Stock if at any time the unused number of
authorized shares shall not be sufficient to permit the conversion of all
of the Note at the time outstanding. In such connection, the Company shall
hold a special meeting of stockholders for the purpose of authorizing
additional shares of Common Stock not later than 90 days after any date in
which the Company shall have insufficient shares of Common Stock so
reserved.
(g) Stock Dividends. If after the date hereof the number of outstanding
Common Shares is increased by a stock dividend payable in Common Shares or
F-2
by a split-up of Common Shares or other similar event, then, on the effect
date thereof, the number of Common Shares issuable on conversion hereunder
shall be increased in proportion to such increase in outstanding Common
Shares and the then applicable conversion Price shall e correspondingly
decreased.
(h) Merger or Consolidation. If after the date hereof any capital
reorganization or reclassification of the Common Stock of the Company, or
consolidation or merger of the Company with another corporation, or the
sale of all or substantially all of its assets to another corporation or
other similar event shall be effected, then, as a condition of such
reorganization, reclassification, consolidation, merger, or sale, lawful
and fair provision shall be made whereby the Noteholder shall thereafter
have the right to convert this Note and receive, upon the basis and upon
the terms and conditions specified in this Note and in lieu of the Common
Shares of the Company immediately theretofore receivable upon the
Conversion of this Note, such shares of stock, securities or assets as may
be issued or payable with respect to or in Conversion for the number of
outstanding Common Shares equal to the number of shares of such stock
immediately theretofore receivable upon the conversion of this Note, had
such reorganization, reclassification, consolidation, merger, or sale not
taken place and in such event appropriate provision shall be made with
respect to the rights and interests of the Noteholder to the end that the
provisions hereof shall thereafter be applicable, as nearly as may be in
relation to any share of stock hereof shall thereafter be applicable, as
nearly as may be in relation to any share of stock, securities, or assets
thereafter deliverable upon the Conversion of this Note. The Company shall
not effect any consolidation, merger, or sale unless prior to the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing
such assets, shall assume by written instrument executed and delivered to
the Noteholder the obligation to deliver to the Noteholder such shares of
stock, securities, or assets as, in accordance with the foregoing
provisions, such Noteholder may be entitled to acquire upon Conversion of
this Note.
(i) Subsequent Share Issuance or Sale. Without the express prior written
consent of the Lender, which can be withheld in the sole discretion of the
Lender, the Company shall not issue any Common Stock or incur any
indebtedness.
(j) Taxes. The Company shall pay any and all issue and other taxes,
excluding federal, state or local income taxes, that may be payable in
respect of any issue or delivery of shares of Common Stock on Conversion of
this Note pursuant hereto; provided that the Company shall not be obligated
to pay any transfer taxes resulting from any transfer requested by any
Noteholder in connection with any such Conversion.
5. EVENTS OF DEFAULT.
(a) Events of Default. The Company shall be in default under this Note upon
the occurrence of any of the events specified in Section 4 hereof and
failure to cure such default within the number of days specified in each
Subsection hereof, upon receipt of written notice thereof from the
Noteholder, any such occurrence of any one or more of such events, herein
specified, being an "Event of Default":
(I) Failure to make any principal or interest payment required under this
Note on the due date of such payment, and such Event of Default not
being cured within ten (10) calendar days of such payment due date;
(II) If the Company shall default in the performance of or compliance with
any of its material covenants or agreements contained herein, whether
expressed or implied, and such default shall not have been remedied
within ten (10) calendar days after written notice thereof shall have
been delivered to the Company by the Noteholder;
(III)If the Company shall not, at the time of a scheduled Conversion, have
a sufficient number of authorized and unissued shares of its Common
Stock available for issuance to the Noteholder upon the scheduled
Conversion in accordance with the terms hereof, and such default shall
not have been remedied within twenty (20) calendar days from the
scheduled date of such Conversion;
(IV) If any representation or warranty made in writing by or on behalf of
the Company in this Note shall prove to have been false or incorrect
in any material respect, either by misstatement or omission, on the
date as of which made;
(V) If the Company or one of its subsidiaries shall become insolvent, make
an assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts as they become due, or shall file a
voluntary petition in bankruptcy or shall have an order for relief
under the Bankruptcy Act granted against it or them, or shall be
adjudicated bankrupt or insolvent, or shall file any answer seeking
for itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future
statute, law or regulation, or shall file any answer admitting or not
contesting the material allegations of a petition filed against the
Company or one of its subsidiaries in any such proceeding, or shall
seek or consent to or acquiesce in the appointment of any trustee,
custodian, receiver or liquidator of the Company or one of its
subsidiaries or of all or any substantial part of the properties of
the Company or one of its subsidiaries, or the Company or one of its
subsidiaries or its respective directors shall take any action looking
to the dissolution or liquidation of the Company or one of its
subsidiaries.
(b) Remedies and Acceleration Upon the Occurrence of an Event of Default.
Upon the occurrence of an Event of Default, the Company agrees that
monetary damages may be difficult or impossible to determine, and alone are
inadequate protections for the Noteholders. Therefore,
(I) The Noteholder shall have all the rights and remedies, at law and in
equity, by statute or otherwise, and no remedy herein conferred upon
the Noteholder is intended to be exclusive of any other remedy and
each remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law, in
equity, by statute or otherwise.
(II) The Noteholder shall be able to call on injunctive relief and/or a
specific order for compliance as determined by the Noteholders in
their sole discretion and as so ordered by a court of law.
(III)If an Event of Default occurs under Section 4(a)(v) hereof, then the
outstanding principal of and all accrued interest on this Note shall
automatically become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are expressly
waived.
(IV) If any other Event of Default occurs and is continuing, the
Noteholder, by written notice to the Company, may declare the
principal of and the accrued interest on this Note immediately due and
payable.
(V) The Noteholder may rescind an acceleration notice and its consequences
if all existing Events of Default have been cured or waived, such
waiver to be granted at the Noteholders sole discretion.
(VI) No course of dealing between the Company and the Noteholder or any
delay on the part of the Noteholder in exercising any rights hereunder
shall serve as a waiver of any right.
(VII)The Noteholder may seek to foreclose on all collateral associated
with this Note in the Event of Default.
(c) Suit for Enforcement. Upon the occurrence of any one or more Events of
Default, the Noteholder may proceed to protect and enforce its rights by
suit in equity, action at law or by other appropriate proceeding, whether
for specific performance of any covenant or agreement contained in this
Note or in the aid of the exercise of any power granted in this Note, or
may proceed to enforce the payment of this Note, or to enforce any other
legal or equitable right of the Noteholder of this Note. In case of any
default under this Note, the Company will pay to the Noteholder such amount
as shall be sufficient to cover the expenses and costs of the Noteholder
due to such default.
6. RANK.
This Note shall rank senior to all of the Company's existing obligations
and the Company shall not incur any indebtedness in the future ranking pari
passu with or senior to the Note.
7. VOTING RIGHTS.
The Company shall provide the Noteholder with prior notification of any
meeting of the stockholders (and copies of proxy materials and all other
information sent to stockholders). If the Company takes a record of its
stockholders for the purpose of determining stockholders entitled to (a) receive
payment of any dividend or other distribution, any right to subscribe for,
purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or (b) to vote in connection with any proposed sale,
lease or conveyance of all or substantially all of the assets of the Company, or
any proposed merger, consolidation, liquidation, dissolution or winding up of
the Company, the Company shall mail a notice to the Lender, at least twenty (20)
days prior to the record date specified therein (or thirty (30) days prior to
the consummation of the transaction or event, whichever is earlier, but in no
event earlier than public announcement of such proposed transaction), of the
date on which any such record is to be taken for the purpose of such vote,
dividend, distribution, right or other event, and a brief statement regarding
the amount and character of such vote, dividend, distribution, right or other
event to the extent known at such time.
8. MISCELLANEOUS.
(a) Dividends. The Company shall not, while any or all of the principal
amount of this Note is outstanding, or while any amount of interest is
accrued, due and payable, declare, make or pay any dividend or other
distribution, whether in cash, securities or other property with
respect to its Common Shares.
(b) Maturity. Effective as of September 1, 2004, all remaining principal
amount of this Note not Converted, plus all accrued and unpaid
interest thereon, shall automatically, and without further action on
the part of such Noteholder, be Converted into the equity of the
Company at maturity pursuant to the terms herein.
(c) Security. It is intended that this Note will be secured by the
creation of a mortgage, security interest or other lien upon all of
the property and assets of the Company. The Company and the Noteholder
acknowledge that contemporaneously with the execution of this Note,
the Company and the Noteholder are executing a Security Agreement
(Stock); however, the Company agrees to execute any further collateral
documents which the Noteholder requests. (d) Registration of
Noteholder. The Company shall maintain at its principal office a
register of the Notes and shall record therein the names and addresses
of the registered holders of the Notes, the address to which notices
are to be sent and the address to which payments are to be made as
designated by the registered holder if other than the address of the
holder, and the particulars of all transfers, exchanges and
replacements of Notes. No transfer of a Note shall be valid unless the
registered holder or his or its duly appointed attorney request such
transfer to be made on such register, upon surrender thereof for
exchange as hereinafter provided, accompanied by an instrument in
writing. Each Note issued hereunder, whether originally or
upon transfer, exchange or replacement of a Note, shall be registered
on the date of execution thereof by the Company. The registered holder
of a Note shall be that person or entity in whose name the Note has
been so registered by the Company. A registered holder shall be deemed
the owner of a Note for all purposes, and the Company shall not be
affected by any notice to the contrary.
(e) Replacement of Lost, Stolen or Destroyed Notes. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction,
or mutilation of any Note and, if requested by the Company in the case
of any such loss, theft or destruction, upon delivery of an indemnity
bond or other agreement or security reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and
cancellation of such Note, the Company will issue a new Note, of like
tenor, in the amount of unpaid principal of such Note, and dated the
date to which interest has been paid, in lieu of such lost, stolen,
destroyed or mutilated Note.
(f) Changes: Parties. This Note can only be changed by an agreement in
writing signed by the Company and the Noteholder. This Note shall
inure to the benefit of and be binding upon the Company and the
Noteholder and their respective successors and assigns.
(g) Waiver of Presentment. The Company hereby waives, presentment, demand,
notice, protest and all other demands and notices in connection with
the delivery acceptance, performance, default or enforcement of this
Note.
(h) Payments. All payments due under this Note shall be made in lawful
money of the United States of America.
(i) Covenants Bind Successors and Assigns. All covenants, stipulations,
promises and agreements in this Note made by or on behalf of the
Company shall bind its successors and assigns, whether so expressed or
not.
(j) Headings and Pronouns. All pronouns and any variation thereof shall
refer to the masculine, feminine or neuter, singular or plural, as the
context may require. The headings in this Note are for convenience of
reference only and shall not limit or otherwise affect the meaning
hereof.
(k) Governing Law. THIS AGREEMENT SHALL BE CONSTRUED ACCORDING TO THE LAWS
OF THE STATE OF COLORADO WITHOUT GIVING EFFECT TO THE PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAWS.
IN WITNESS WHEREOF, the Company has executed this Note as of the date
first written above.
ENVIRONMENTAL REMEDIATION HOLDING
CORPORATION
By: /s/ Xxxxx Xxxxxxxxx, Xx.
Its: ________________________________
SCHEDULE B
ESCROW RELEASE AGREEMENT
Dated as of the date of the Securities Purchase Agreement to Which This
Escrow Release Agreement Is Attached
These Escrow Release Conditions sets forth the items necessary (the
"Conditions") for the release of US$1,000,000 (the "Proceeds") to the Democratic
Republic of Sao Tome and Principe ("DRSTP") pursuant to the Securities Purchase
Agreement to which this document is attached.
The Conditions are written assurances from the Honorable President and
Honorable Prime Minister of DRSTP that:
(i) ERHC and its assigns and/or successors will retain an unencumbered 49%
ownership stake in STPetro;
(ii) ERHC's management and cost recovery terms shall remain intact as
outlined in the Act;
(iii)ERHC and its assigns and/or successors will retain a 5% over-ride on
all oil & gas production from within the DRSTP EEZ will remain in full
force and effect;
(iv) Island Oil/ERHC retain the rights to build and operate the logistics
center and deep water free-port, along with related services, in and
around DRSTP; and
(v) STPetro will retain the rights to a minimum of 4 offshore "blocks" of
its choice within the DRSTP EEZ.
Furthermore, ERHC and its assigns and/or successors will receive:
(i) A certified or equivalent copy and translation of the Act;
(ii) A certified or equivalent copy and translation of the Memorandum of
Agreement, as amended, between the DRSTP and ERHC;
(iii)A certified or equivalent copy and translation of the Memorandum of
Understanding, as amended, between the DRSTP and ERHC; and
(iv) A certified or equivalent copy and translation of the Technical
Assistance Agreement, as amended, between the DRSTP, STPetro and Mobil
Exploration and Producing Services Inc.
Upon the fulfillment of the Conditions listed herein in a form satisfactory to
ERHC and TC Hydro Carbon in their sole discretion, then within 24 hours the
Proceeds shall be wire transferred pursuant to the account instructions provided
to ERHC by the DRSTP.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings provided in the Agreement.
