SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of March 14, 2000 (this
"Agreement"), is entered into by and between USA Biomass Corporation, a Delaware
corporation (the "Company"), and Siete Investors LLC, a Delaware limited
liability company.
W I T N E S S E T H:
WHEREAS, the Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemptions from registration provided by
Regulation D ("Regulation D") promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), and/or Section 4(2) of the Securities Act; and
WHEREAS, the Purchaser wishes to purchase, and the Company wishes to issue
and sell, upon the terms and conditions of this Agreement for an aggregate
purchase price of three million dollars ($3,000,000), (i) three thousand (3,000)
shares (the "Shares") of the Company's 6% Convertible Series C Preferred Stock,
stated value one thousand dollars ($1,000) per share, par value $.001 per share
(the "Preferred Stock") which shall be governed by the Certificate of
Designations attached hereto as Exhibit A (the "Certificate of Designations")
and (ii) warrants ("Stock Purchase Warrants") to purchase one hundred thousand
(100,000) shares (the "Warrants") of the Company's common stock, par value $.001
per share (the "Common Stock"); and
WHEREAS, the Series A Preferred Stock shall be convertible into shares of
the Company's Common Stock on the terms set forth in the Certificate of
Designations, and the Stock Purchase Warrants (which shall be in substantially
the form attached as Exhibit B) may be exercised for the purchase of Common
Stock, on the terms set forth therein; and
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
Purchase of Shares and Warrants. Purchaser hereby agrees to purchase from
the Company, and the Company hereby agrees to issue and sell to the Purchaser,
the Shares and the Warrants for an aggregate purchase price of three million
dollars ($3,000,000) which shall be payable on the Closing Date (as defined
herein) in immediately available funds.
Closings. The Shares and the Warrants to be purchased by Purchaser
hereunder, in definitive form, and in such denominations as Purchaser or its
representative, if any, may request upon at least twenty-four hours' prior
notice to the Company, shall be delivered by or on behalf of the Company for the
account of Purchaser, against payment by the Purchaser of the aggregate purchase
price of three million dollars ($3,000,000) therefor by wire transfer to an
account of the Company, all at the offices of Xxxxx Xxxxxx Xxxxxxxx & Xxxxxx
LLP, 1350 Avenue of the Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, by 5:00
PM, New York time
on the date hereof, or at such other time and date as Purchaser or their
representative, if any, and the Company may agree upon in writing, such date
being referred to herein as the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION
The Purchaser represents and warrants to, and covenants and agrees with,
the Company as follows:
a. The Purchaser is (i) experienced in making investments of the kind
described in this Agreement and the related documents, (ii) able, by reason of
the business and financial experience of its management, to protect its own
interests in connection with the transactions described in this Agreement and
the related documents, and (iii) able to afford the entire loss of its
investment in the Shares and the Warrants.
b. All subsequent offers and sales of the Shares and the Warrants and the
Common Stock issuable upon conversion or exercise of, or in lieu of dividend
payments on, the Shares and the Warrants shall be made pursuant to an effective
registration statement under the Securities Act or pursuant to an applicable
exemption from such registration.
c. The Purchaser understands that the Shares and the Warrants are being
offered and sold to it in reliance upon exemptions from the registration
requirements of the United States federal securities laws, and that the Company
is relying upon the truth and accuracy of the Purchaser's representations and
warranties, and the Purchaser's compliance with its agreements, each as set
forth herein, in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Shares and the Warrants.
d. The Purchaser: (A) has been provided with sufficient information with
respect to the business of the Company and such documents relating to the
Company as the Purchaser has requested and Purchaser has carefully reviewed the
same including, without limitation, the Company's Form 10-KSB for the fiscal
year ended December 31, 1998, filed with the Securities and Exchange Commission
(the "Commission") and Form 10-QSB for the period ending September 30, 1999,
filed with the Commission, (B) has been provided with such additional
information with respect to the Company and its business and financial condition
as the Purchaser, or the Purchaser's agent or attorney, has requested, and (C)
has had access to management of the Company and the opportunity to discuss the
information provided by management of the Company and any questions that the
Purchaser had with respect thereto have been answered to the full satisfaction
of the Purchaser.
e. The Purchaser has the requisite corporate power and authority to enter
into this Agreement and the registration rights agreement, dated as of the date
hereof, between the Company and the Purchaser (the "Registration Rights
Agreement").
f. This Agreement and the Registration Rights Agreement and the
transactions contemplated hereby and thereby, have been duly and validly
authorized by the Purchaser; and such agreements, when executed and delivered by
each of the Purchaser and the Company will each be a valid and binding agreement
of the Purchaser, enforceable in accordance with their
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respective terms, except to the extent that enforcement of each such agreement
may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and to general principles of equity.
3. REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to the Purchaser that:
a. Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each of
the Company's subsidiaries, if any, is a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction.
Each of the Company and its subsidiaries, if any, is duly qualified as a foreign
corporation in all jurisdictions in which the failure to so qualify would have a
material adverse effect on the Company and its subsidiaries taken as a whole.
Schedule 3(a) lists all subsidiaries of the Company and, except as noted
therein, all of the outstanding capital stock of all such subsidiaries is owned
of record and beneficially by the Company.
b. Capitalization. On the date hereof, the authorized capital of the
Company consists of 25 million shares of Common Stock, par value $.001 per
share, of 9,726,000 shares are issued and outstanding; and 2,000,000 shares of
Preferred Stock, par value $.001 per share, of which 747,500 have been
designated as series A preferred stock, all of which are issued and outstanding
are issued and outstanding, 591,000 have been designated as series B preferred
stock, all of which have been converted into shares of Common Stock and may not
be reissued by the Company, and 3,000 have been designated as series C preferred
stock, none of which are issued and outstanding. Schedule 3(b) sets forth all of
the options, warrants and convertible securities of the Company, and any other
rights to acquire securities of the Company (collectively, the "Derivative
Securities") which are outstanding on the date hereof, including in each case
(i) the name and class of such Derivative Securities, (ii) the issue date of
such Derivative Securities, (iii) the number of shares of Common Stock of the
Company into which such Derivative Securities are convertible as of the date
hereof, (iv) the conversion or exercise price or prices of such Derivative
Securities as of the date hereof, (v) the expiration date of any conversion or
exercise rights held by the owners of such Derivative Securities and (vi) any
registration rights associated with such Derivative Securities or outstanding
Common Stock.
c. Concerning the Common Stock and the Warrants. The Shares, the Warrants
and Common Stock issuable upon conversion of, or in lieu of dividend payments
on, the Shares, and upon exercise of the Warrants when issued, shall be duly and
validly issued, fully paid and non-assessable, will not be subject to preemptive
rights and will not subject the holder thereof to personal liability by reason
of being such a holder. There are currently no preemptive rights of any
stockholder of the Company, as such, to acquire the Shares, the Warrants or the
Common Stock issuable to the Purchaser pursuant to the terms of the Shares and
the Warrants.
d. Reporting Company Status. The Common Stock is registered under Section
12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Except as provided in Schedule 3(d), the Company has duly and timely filed all
materials and documents required to be filed within the last twelve (12) months
pursuant to all reporting obligations under either
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Section 13(a) or 15(d) of the Exchange Act. The Common Stock is listed and
traded on the Nasdaq SmallCap Market, and the Company is not aware of any
pending or contemplated action or proceeding of any kind to suspend the trading
of the Common Stock.
e. Authorized Shares. The Company has available a sufficient number of
authorized and unissued shares of Common Stock as may be necessary to effect
conversion of the Shares and the exercise of the Warrants. The Company
understands and acknowledges the potentially dilutive effect to the Common Stock
of the issuance of shares of Common Stock upon the conversion of the Shares and
the exercise of the Warrants. The Company further acknowledges that its
obligation to issue shares of Common Stock upon conversion of the Shares and
upon exercise of the Warrants is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company and notwithstanding the commencement of any case
under 11 U.S.C. ss. 101 et seq. (the "Bankruptcy Code").
f. Legality. The Company has the requisite corporate power and authority to
enter into this Agreement and the Registration Rights Agreement, and to issue
and deliver the Shares, the Warrants and the Common Stock issuable upon
conversion of, or in lieu of dividend payments on, the Shares and the exercise
of the Warrants.
g. Transaction Agreements. This Agreement, the Registration Rights
Agreement, the Certificate of Designations and the Stock Purchase Warrants
(collectively, the "Primary Documents"), and the transactions contemplated
hereby and thereby, have been duly and validly authorized by the Company; this
Agreement has been duly executed and delivered by the Company and this Agreement
is, and the other Primary Documents, when executed and delivered by the Company,
will each be, a valid and binding agreement of the Company, enforceable in
accordance with their respective terms, except to the extent that enforcement of
each of the Primary Documents may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to creditors' rights generally and to general
principles of equity.
h. Non-contravention. The execution and delivery of this Agreement and each
of the other Primary Documents, and the consummation by the Company of the
transactions contemplated by this Agreement and each of the other Primary
Documents, does 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, the
Articles of Incorporation or By-laws of the Company, or any material indenture,
mortgage, deed of trust or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which they or any of their properties
or assets are bound, or any existing applicable law, rule, or regulation or any
applicable decree, judgment or order of any court or United States or foreign
federal or state regulatory body, administrative agency, or any other
governmental body having jurisdiction over the Company, its subsidiaries, or any
of their properties or assets, other than those which have been waived or
satisfied on or prior to the Closing Date. Neither the filing of the
registration statement required to be filed by the Company pursuant to the
Registration Rights Agreement nor the offering or sale of the Shares or the
Warrants as contemplated by this Agreement, and the shares of Common Stock into
which such securities may be converted or exercised, as applicable, gives rise
to any rights,
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other than those which have been waived or satisfied on or prior to the Closing
Date, for or relating to the registration of any shares of the Common Stock.
i. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the entry into or the performance of this Agreement and the
other Primary Documents.
j. SEC Filings. None of the reports or documents filed by the Company with
the Commission (the "SEC Documents") contained, at the time they were filed, any
untrue statement of a material fact or omitted 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.
k. Stabilization. Neither the Company, nor any of its affiliates, has taken
or may take, directly or indirectly, any action designed to cause or result in,
or which has constituted or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of the shares of Common Stock.
l. Absence of Certain Changes. Except as disclosed in the Company's SEC
Documents or set forth on Schedule 3(l) hereto, since October 31, 1999, there
has been no material adverse change nor any material adverse development in the
business, properties, operations, financial condition, prospects, outstanding
securities or results of operations of the Company.
m. Full Disclosure. There is no fact known to the Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser (i) that could reasonably be expected to
have a material adverse effect upon the condition (financial or otherwise) or
the earnings, business affairs, properties or assets of the Company or (ii) that
could reasonably be expected to materially and adversely affect the ability of
the Company to perform the obligations set forth in the Primary Documents. The
representations and warranties of the Company set forth in this Agreement (and
the schedules thereto) do not contain any untrue statement of a material fact or
omit any material fact necessary to make the statements contained herein, in
light of the circumstances under which they were made, not misleading.
n. Title to Properties; Liens and Encumbrances. The Company has good and
marketable title to all of its material properties and assets, both real and
personal, and has good title to all its leasehold interests, in each case
subject only to mortgages, pledges, liens, security interests, conditional sale
agreements, encumbrances or charges created in the ordinary course of business.
o. Patents and Other Proprietary Rights. The Company has sufficient title
and ownership of all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and processes
necessary for the conduct of its business as now conducted and as proposed to be
conducted, and such business does not and would not conflict with or constitute
an infringement on the rights of others.
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p. Permits. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its business as now conducted,
the lack of which would materially and adversely affect the business or
financial condition of the Company. The Company is not in default in any respect
under any of such franchises, permits, licenses or similar authority.
q. Absence of Litigation. Except as disclosed in the Company's SEC
Documents, 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 or any of its subsidiaries, threatened against or affecting the Company
or any of its subsidiaries, in which an unfavorable decision, ruling or finding
would have a material adverse effect on the properties, business, condition
(financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole, or the transactions contemplated by the Primary
Documents, or which would adversely affect the validity or enforceability of, or
the authority or ability of the Company to perform its obligations under, the
Primary Documents.
r. No Default. Except as set forth on Schedule 3(r) hereto, none of the
Company or any of its subsidiaries is in default in the performance or
observance of any obligation, covenant or condition contained in any indenture,
mortgage, deed of trust or other instrument or agreement to which it is a party
or by which it or its property may be bound.
s. Transactions with Affiliates. Except as disclosed in the Company's
public filings with the Commission or set forth on Schedule 3(s) hereto, there
are no agreements, understandings or proposed transactions between the Company
and any of its officers, directors or affiliates that, had they existed on
October 31, 1999, would have been required to be disclosed in the Company's 1999
Annual Report to stockholders.
t. Employment Matters. The Company is in compliance in all respects with
all presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification.
u. Insurance. The Company maintains property and casualty, general
liability, personal injury and other similar types of insurance with financially
sound and reputable insurers that is adequate, consistent with industry
standards and the Company's historical claims experience. The Company has not
received notice from, and has no knowledge of any threat by, any insurer (that
has issued any insurance policy to the Company) that such insurer intends to
deny coverage under or cancel, discontinue or not renew any insurance policy
covering the Company or any of its Subsidiaries presently in force.
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v. Taxes. All applicable tax returns required to be filed by the Company
and each of its subsidiaries have been prepared and filed in compliance with all
applicable laws, or if not yet filed have been granted extensions of the filing
dates which extensions have not expired, and all taxes, assessments, fees and
other governmental charges upon the Company, its subsidiaries, or upon any of
their respective properties, income or franchises, shown in such returns and on
assessments received by the Company or its subsidiaries to be due and payable
have been paid, or adequate reserves therefor have been set up if any of such
taxes are being contested in good faith; or if any of such tax returns have not
been filed or if any such taxes have not been paid or so reserved for, the
failure to so file or to pay would not in the aggregate have a material adverse
effect on the business or financial condition of the Company and its
subsidiaries, taken as a whole.
w. Foreign Corrupt Practices Act. Neither the Company nor any of its
directors, officers or other employees has (i) used any Company funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to any political activity; (ii) made any direct or indirect
unlawful payment of Company funds to any foreign or domestic government official
or employee; (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other similar payment to any person.
x. Internal Controls. The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
y. Investment Company Act. The Company is not conducting, and will not
conduct, its business in a manner which would cause it to become, an "investment
company," as defined in Section 3(a) of the Investment Company Act of 1940, as
amended.
z. Agent Fees. Except for Institutional; Finance Group, whose fees and
expenses shall be paid by the Company, the Company has not incurred any
liability for any finder's or brokerage fees or agent's commissions in
connection with the offer and sale of the transactions contemplated by this
Agreement.
aa. Private Offering. Subject to the accuracy of the Purchaser's
representations and warranties set forth in Section 2 hereof, (i) the offer,
sale and issuance of the Shares and the Warrants, (ii) the issuance of Common
Stock in lieu of dividend payments on the Shares, and (iii) the conversion
and/or exercise of such securities into shares of Common Stock, each as
contemplated by the Primary Documents are exempt from the registration
requirements of the Securities Act. The Company agrees that neither the Company
nor anyone acting on its behalf will offer any of the Preferred Stock, the Stock
Purchase Warrants or any similar securities for issuance or sale, or solicit any
offer to acquire any of the same from anyone so as to render the issuance and
sale of such securities subject to the registration requirements of the
Securities Act.
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The Company has not offered or sold the Preferred Stock or the Stock Purchase
Warrants by any form of general solicitation or general advertising, as such
terms are used in Rule 502(c) under the Securities Act.
bb. Year 2000 Processing. The computer systems used by the Company and its
subsidiaries (the "Systems"), both hardware and software, are in good working
order. As of the date of this Agreement, the Company has experienced no
disruptions in its business or operations as a result of the inability of its
information systems to process date and time data from, into and beyond the year
2000.
cc. Environmental Matters. Except as set forth on Schedule 3(cc) hereto:
(i) Neither the Company and its subsidiaries, nor any predecessor in interest
nor, to the Company's knowledge, after due inquiry, any other person has ever
caused or permitted any Hazardous Material (as defined below) to be released,
treated or disposed of on, at, under or within any real property owned, leased
or operated by the Company and its subsidiaries or any predecessor in interest,
and no such real property has ever been used (either by the Company and its
subsidiaries, any predecessor in interest or, to the Company's knowledge, after
due inquiry, by any other person) as a treatment, storage or disposal site for
any Hazardous Material; and (ii) The Company has no liabilities with respect to
Hazardous Materials, and to the knowledge of the Company, after due inquiry, no
facts or circumstances exist which could give rise to liabilities with respect
to Hazardous Materials, which could have any reasonable likelihood of having a
material adverse effect on the Company. For purposes of this Agreement
"Hazardous Materials" shall mean (a) any pollutants or contaminants, (b) any
asbestos or insulation or other material composed of or containing asbestos and
(c) any petroleum product and any hazardous, toxic or dangerous waste, substance
or material defined as such in, or for purposes of, the Comprehensive
Environmental Response, Compensation and Liability Act, any so-called
"Superfund" or "Superlien" law, or (d) any other applicable federal, state,
local or other statute, law, ordinance, code, rule, regulation, order or decree
concerning the protection of human health or the environment or otherwise
regulating, relating to, or imposing liability or standards of conduct
concerning, any hazardous, toxic or dangerous waste, substance or material, as
now or at any time hereafter in effect.
dd. Intellectual Property. Except as set forth in the SEC Documents, to the
best of the Company's knowledge, each of the Company and its subsidiaries owns
or possesses adequate rights to use all material patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names and
copyrights which are described in the SEC Documents; except as set forth in the
SEC Documents, the Company has not received any notice of, and has no knowledge
of, any infringement of or conflict with asserted rights of the Company by
others with respect to any patent, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business of the Company and its subsidiaries, taken as a
whole, as presently conducted; and, except as set forth in the SEC Documents,
the Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with the asserted rights of others with respect to
any patent, patent rights, inventions, trade secrets, know-how, trademarks,
service marks, trade names and copyrights which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would have a
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material adverse effect on the condition (financial or otherwise), earnings,
operations, or business of the Company and its subsidiaries, taken as a whole,
as presently conducted.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
a. Transfer Restrictions. The Purchaser acknowledges that, except as
provided in the Registration Rights Agreement, (1) neither the Shares, the
Warrants nor the Common Stock issuable upon conversion of, or in lieu of
dividend payments on, the Shares or upon exercise of the Warrants, have been, or
are being, registered under the Securities Act, and such securities may not be
transferred unless (A) subsequently registered thereunder or (B) they are
transferred pursuant to an exemption from such registration; and (2) any sale of
the Shares, the Warrants or the Common Stock issuable upon conversion or
exchange thereof (collectively, the "Securities") made in reliance upon Rule 144
under the Securities Act may be made only in accordance with the terms of said
Rule. The provisions of Section 4(a) and 4(b) hereof, together with the rights
of the Purchaser under this Agreement and the other Primary Documents, shall be
binding upon any subsequent transferee of the Preferred Stock and the Stock
Purchase Warrants.
b. Restrictive Legend. The Purchaser acknowledges and agrees that, until
such time as the Securities shall have been registered under the Securities Act
or the Purchaser demonstrates to the reasonable satisfaction of the Company and
its counsel that such registration shall no longer be required, such Securities
may be subject to a stop-transfer order placed against the transfer of such
Securities, and such Securities shall bear a restrictive legend in substantially
the following form:
THESE SECURITIES (INCLUDING ANY UNDERLYING SECURITIES) HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION SHALL NO LONGER BE REQUIRED.
c. Filings. The Company undertakes and agrees that it will make all
required filings in connection with the sale of the Securities to the Purchaser
as required by United States laws and regulations, or by any domestic securities
exchange or trading market, and if applicable, the filing of a notice on Form D
(at such time and in such manner as required by the Rules and Regulations of the
Commission), and to provide copies thereof to the Purchaser promptly after such
filing or filings.
d. NASDAQ Listing. The Company undertakes and agrees that it will promptly
file an additional application with the NASDAQ to list all of the shares of
Common Stock issuable upon conversion of, or in lieu of dividend payments on,
the Shares and upon exercise of the Warrants on the NASDAQ SmallCap Market. The
Company further agrees and covenants that it will use
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its best efforts to maintain its eligibility for trading on the NASDAQ SmallCap
Market and, if such trading of its Common Stock is suspended or terminated, will
use its best efforts to requalify its Common Stock or otherwise cause such
trading to resume. The Company shall promptly provide to the Purchaser copies of
any notices it receives from Nasdaq regarding the continued eligibility of the
Common Stock for listing on such automated quotation system. The Company shall
pay all fees and expenses in connection with satisfying its obligations under
this Section 4(d).
e. Reporting Status. So long as the Purchaser beneficially owns any of the
Securities or any shares of Common Stock issuable upon conversion thereof
(collectively with the Securities, the "Collective Securities"), the Company
shall timely file all reports required to be filed with the Commission pursuant
to Section 13 or 15(d) of the Exchange Act and shall not terminate its status as
an issuer required to file reports under the Exchange Act even if the Exchange
Act or the rules and regulations thereunder would permit such termination.
f. State Securities Filings. The Company shall from time to time promptly
take such action as the Purchaser or any of its representatives, if applicable,
may reasonably request to qualify the Collective Securities for offering and
sale under the securities laws (other than United States federal securities
laws) of the jurisdictions in the United States as shall be so identified to the
Company, and to comply with such laws so as to permit the continuance of sales
therein, provided that in connection therewith, the Company shall not be
required to qualify as a foreign corporation or to file a general consent to the
service of process in any jurisdiction.
g. Use of Proceeds. The Company will use the net proceeds from the issuance
of the Collective Securities for acquisitions, payment of accrued and unpaid
dividends relating to the Company's Series A Preferred Stock, reduction of up to
$100,000 in outstanding indebtedness and working capital purposes.
h. Reservation of Common Stock. The Company will at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the conversion of the Shares and the
exercise of the Warrants. The Company will use its best efforts at all times to
maintain a number of shares of Common Stock so reserved for issuance that is no
less than the sum of (i) one and one half (1.5) times the maximum number of
shares of Common Stock that could be issuable upon the conversion of the Shares
and (ii) the number of shares of Common Stock issuable upon exercise in full of
the Warrants.
i. Sales of Additional Shares. The Company shall not, directly or
indirectly, without the prior written consent of the Purchaser, offer, sell,
offer to sell, contract to sell or otherwise dispose of any shares of its
capital stock or any security or other instrument convertible into or
exchangeable for shares of Common Stock, in each case for a period of
two-hundred and seventy (270) days after the Closing Date (the "Lock-Up Period")
(i) at a price per share of Common Stock of less than four and 65/100 dollars
($4.65) or (ii) which contain provisions for re-pricing or (iii) are convertible
into Common Stock at a price which adjusts based upon changes in market price,
except that notwithstanding the foregoing the Company may issue shares of Common
Stock (a) for the aggregate consideration of at least ten million dollars in
connection with a bona fide, firm commitment, underwritten public offering under
the Securities Act. (ii) in connection with a bona fide transaction involving
the acquisition of another business entity or
10
segment of any such entity by the Company by merger, asset, purchase, stock
purchase or otherwise; and (iii) may issue common Stock in connection with a
stock split, stock dividend or similar recapitalization of the Company which
affects all holders of the Company's Common Stock on an equivalent basis, in
each case, without the prior written consent of the Purchaser. In addition, the
Company agrees that it will not cause any shares of its capital stock that were
issued in connection with any financing, acquisition or other transaction that
occurred prior to the date of this Agreement to be covered by a registration
statement to be filed or declared effective by the Commission until the date
that the registration statement filed by the Company pursuant to its obligations
under the Registration Rights Agreement has been effective under the Securities
Act for a period of at least one-hundred and eighty (180) days.
j. Right of First Refusal. Subject to Section 4(i), if during the eighteen
(18) month period following the Lock-Up Period the Company shall desire to sell,
offer to sell, contract to sell or otherwise dispose of any securities or any
security or other instrument convertible into or exchangeable for shares of
Common Stock (collectively, the "Offered Securities") to a prospective investor
(the "Prospective Investor"), the Company shall notify (the "Offer Notice") the
Purchaser in accordance with Section 10 hereof of the terms (the "Third Party
Terms") on which the Company proposes to sell, contract to sell or otherwise
dispose of the Offered Securities to the Prospective Investor. If, within the
five (5) day period following the Purchaser's receipt of the Offer Notice, the
Purchaser delivers a written notice (the "Acceptance Notice") to the Company
stating its desire to purchase all or any portion of the Offered Securities on
the Third Party Terms, the Company shall be required to sell the Offered
Securities (or any portion thereof so desired by the Purchaser) to the Purchaser
at the price and on the terms set forth in the Offer Notice and the Company
shall not be permitted to sell such Offered Securities to the Prospective
Investor. If the Purchaser does not deliver an Acceptance Notice to the Company
in such five (5) day period, then for a period of sixty (60) days following the
date of the Offer Notice the Company may sell the Offered Securities to the
Prospective Investor on the terms set forth in the Offer Notice.
k. Additional Registration Statements. At any time during the period
beginning on the date hereof and ending on the first date that follows a period
of one hundred eighty (180) consecutive days following the effectiveness of the
Registration Statement (as defined in the Registration Rights Agreement) during
which there has been no Blackout Event (as defined in the Registration Rights
Agreement) relating to such Registration Statement, the Company agrees that it
will neither file nor cause any registration statement to be declared effective
by the Commission other than (i) any Registration Statement relating to the
Securities or (ii) any Registration Statement relating to a proposed bona fide,
firm commitment underwritten public offering under the Securities Act of an
aggregate initial public offering price of at least ten million dollars or (iii)
the filing of a Form S-8 for the Common Stock currently included in the
Company's existing employee stock option plan, as reflected in the Form S-8 most
recently filed by the Company with the Commission.
l. Stockholder Approval. If required in accordance with Nasdaq Rule 4310 or
4460, the Company agrees to use its best efforts (including obtaining any vote
of its stockholders required by applicable law or Nasdaq rules) to authorize and
approve the issuance of the Common Stock issuable upon conversion of the Shares
and upon exercise of the Warrants, to the extent that such conversion or
issuance results in the issuance of 20% or more of the Company's
11
outstanding Common Stock, except that the conversion of the Shares and the
exercise of the Warrants will not equal 20% or more of the Company's common
stock as of the Closing Date; provided, however, that the failure to obtain any
such stockholder approval shall not limit any of Purchaser's rights hereunder or
pursuant to any Primary Document.
m. Ownership. At no time shall the Purchaser (including its officers,
directors and affiliates) maintain in the aggregate beneficial ownership (as
defined for purposes of Section 16 of the Securities Exchange Act of 1934, as
amended) of shares of Common Stock in excess of 9.99% of the Company's
outstanding Common Stock unless the Purchaser gives the Company at least
sixty-one (61) days notice that it intends to increase its ownership percentage.
n. Return of Certificates on Conversion and Stock Purchase Warrants on
Exercise. (i) Upon any conversion by Purchaser of less than all of the Shares of
Preferred Stock pursuant to the terms of the Certificate of Designations, the
Company shall issue and deliver to Purchaser within three (3) days of the Series
A Preferred Stock Conversion Date (as defined in the Certificate of
Designations), a new certificate or certificates for, as applicable, the total
number of shares of Preferred Stock, in each case, which Purchaser has not yet
elected to convert (with the number of and denomination of such new
certificate(s) designated by Purchaser).
(ii) Upon any partial exercise by Purchaser of Stock Purchase
Warrants, the Company shall issue and deliver to Purchaser within three (3)
days of the date on which such Stock Purchase Warrants are exercised, a new
Stock Purchase Warrant or Stock Purchase Warrants representing the number
of adjusted Shares covered thereby, in accordance with the terms thereof.
o. Replacement Certificates and Stock Purchase Warrants. (i) The
certificate(s) representing the shares of Preferred Stock, held by Purchaser
shall be exchangeable, at the option of Purchaser, at any time and from time to
time at the office of Company, for certificates with different denominations
representing, as applicable, an equal aggregate number of shares of Preferred
Stock, as requested by Purchaser upon surrendering the same. No service charge
will be made for such registration or transfer or exchange.
(ii) The Stock Purchase Warrants will be exchangeable, at the option
of Purchaser, at any time and from time to time at the office of the
Company, for other Stock Purchase Warrants of different denominations
entitling the holder thereof to purchase in the aggregate the same number
of shares of Common Stock as are purchasable under such Stock Purchase
Warrants. No service charge will be made for such transfer or exchange.
p. Dividends or Distributions; Purchases of Equity Securities. So long as
any portion of the Shares or the Warrants remain outstanding, the Company agrees
that it shall not (a) declare or pay any dividends or make any distributions to
any holder or holders of Common Stock, or (b) purchase or otherwise acquire for
value, directly or indirectly, any shares of Common Stock or equity security of
the Company.
q. Bankruptcy Waiver. In the event the Company becomes a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 X.X.X.xx. 362 in respect of the conversion
of the Shares and the exercise of the Warrants. At the direction of Purchaser,
the Company agrees, without cost or expense to the
12
Purchaser, to take or consent to any and all action necessary to effectuate
relief under 11 X.X.X.xx. 362.
5. TRANSFER AGENT INSTRUCTIONS
a. The Company warrants that no instruction, other than the instructions
referred to in this Section 5 and stop transfer instructions to give effect to
Sections 4(a) and 4(b) hereof prior to the registration and sale under the
Securities Act of the Common Stock issuable upon conversion of the Shares or the
shares of Common Stock issuable upon exercise of the Warrants, will be given by
the Company to the transfer agent and that the shares of Common Stock issuable
upon conversion of, or in lieu of dividend payments on, the Shares or upon
exercise of the Warrants, shall otherwise be freely transferable on the books
and records of the Company as and to the extent provided in this Agreement, the
Registration Rights Agreement and applicable law. Nothing in this Section shall
affect in any way the Purchaser's obligations and agreement to comply with all
applicable securities laws upon resale of the Collective Securities. If the
Purchaser provides the Company with an opinion of counsel that registration of a
resale by the Purchaser of any of the Collective Securities in accordance with
clause (1)(B) of Section 4(a) of this Agreement is not required under the
Securities Act, the Company shall permit the transfer of the Collective
Securities and, in the case of the Common Stock, promptly instruct the Company's
transfer agent to issue one or more certificates for Common Stock without legend
in such names and in such denominations as specified by the Purchaser.
b. Purchaser shall exercise its right to convert the Shares or to exercise
the Warrants by faxing an executed and completed Notice of Conversion or Form of
Election to Purchase, as applicable, to the Company, and delivering within three
(3) business days thereafter, the original Notice of Conversion (and the related
certificates representing the shares of Preferred Stock, as applicable) or Form
of Election to Purchase (and the related original Stock Purchase Warrants) to
the Company by hand delivery or by express courier, duly endorsed. Each date on
which a Notice of Conversion or Form of Election to Purchase is faxed in
accordance with the provisions hereof shall be deemed a "Conversion Date." The
Company will transmit the certificates representing the Common Stock issuable
upon conversion of any shares of Preferred Stock or upon exercise of any Stock
Purchase Warrants (together with the shares of Preferred Stock not so converted
or the Stock Purchase Warrants not so exercised) to the Purchaser via express
courier as soon as practicable, but in all events no later than three (3)
business days after the Conversion Date relating to shares of Preferred Stock or
Stock Purchase Warrants (each such delivery date, together with the Dividend
Delivery Date referred to in paragraph c below, is referred to herein as a
"Delivery Date"). For purposes of this Agreement, any conversion of the Shares
or the exercise of the Warrants shall be deemed to have been made immediately
prior to the close of business on the Conversion Date.
c. The Company will transmit the certificates representing the Common Stock
issuable in lieu of dividends payable on any shares of Preferred Stock to the
Purchaser via express courier as soon as practicable, but in all events no later
than three (3) business days after the dividend payment date applicable to which
such Common Stock is delivered (the "Dividend Delivery Date").
13
d. In lieu of delivering physical certificates representing the Common
Stock issuable upon the conversion of, or in lieu of dividends on, the Shares or
upon the exercise of the Warrants, provided the Company's transfer agent is
participating in the Depositary Trust Company ("DTC") Fast Automated Securities
Transfer program, on the written request of the Purchaser, who shall have
previously instructed the Purchaser's prime broker to confirm such request to
the Company's transfer agent, the Company shall cause its transfer agent to
electronically transmit such Common Stock to the Purchaser by crediting the
account of the Purchaser's prime broker with DTC through its Deposit Withdrawal
Agent Commission ("DWAC") system no later than the applicable Delivery Date.
e. The Company understands that a delay in the issuance of Common Stock
beyond the applicable Delivery Date could result in an economic loss to the
Purchaser. As compensation to the Purchaser for such loss, the Company agrees to
pay to the Purchaser for late issuance of Common Stock upon conversion of, or in
lieu of dividend payments on, the Shares or upon exercise of the Warrants, the
sum of five thousand dollars ($5,000) per day for each (i) one hundred thousand
dollars ($100,000) of aggregate Stated Value (as defined in the Certificate of
Designations) amount of Shares that are being converted, or (ii) twenty-five
thousand (25,000) shares of Common Stock purchased upon the exercise of
Warrants. The Company shall pay any payments that are payable to the Purchaser
pursuant to this Section 5 in immediately available funds upon demand. Nothing
herein shall limit the Purchaser's right to pursue actual damages for the
Company's failure to so issue and deliver Common Stock to the Purchaser.
Furthermore, in addition to any other remedies which may be available to the
Purchaser, in the event that the Company fails for any reason to effect delivery
of such Common Stock within five (5) business days after the relevant Delivery
Date, the Purchaser will be entitled to revoke the relevant Notice of Conversion
or Form of Election to Purchase by delivering a notice to such effect to the
Company, whereupon the Company and the Purchaser shall each be restored to their
respective positions immediately prior to delivery of such Notice of Conversion
or Form of Election to Purchase. For purposes of this Section 5, "business day"
shall mean any day in which the financial markets of New York are officially
open for the conduct of business therein.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO ISSUE THE SHARES AND THE WARRANTS
The Purchaser understands that the Company's obligation to issue the Shares
and the Warrants on the Closing Date to the Purchaser pursuant to this Agreement
is conditioned upon:
a. The accuracy on the Closing Date of the representations and warranties
of the Purchaser contained in this Agreement as if made on the Closing Date and
the performance by the Purchaser on or before the Closing Date of all covenants
and agreements of the Purchaser required to be performed on or before the
Closing Date.
b. The absence or inapplicability of any and all laws, rules or regulations
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
14
7. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE THE SHARES AND THE
WARRANTS
The Company understands that the Purchaser's obligation to purchase the
Shares and the Warrants on the Closing Date is conditioned upon:
a. The Certificate of Designations shall have been filed with the Secretary
of State of the State of Delaware and a copy thereof certified by such Secretary
of State shall have been delivered to the Purchaser.
b. The accuracy on the Closing Date of the representations 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.
c. On the Closing Date, the Purchaser shall have received an opinion of
counsel for the Company, dated the Closing Date, in substantially the form as
attached in Exhibit D.
d. The Company shall have executed and delivered to the Purchaser (i) a
signed counterpart to the Registration Rights Agreement in substantially the
form as attached in Exhibit C, (ii) the Shares and (iii) the Warrants.
e. On the Closing Date, the Purchaser shall have received a certificate
executed by the President or the Chairman of the Company and by the Chief
Financial Officer of the Company, stating that all of the representations and
warranties of the Company set forth in this Agreement are accurate as of the
Closing Date and that the Company has performed all of its covenants and
agreements required to be performed under this Agreement on or before the
Closing Date.
f. On the Closing Date, the Purchaser shall have received from the Company
such other certificates and documents as it or its representatives, if
applicable, shall reasonably request, and all proceedings taken by the Company
in connection with the Primary Documents contemplated by this Agreement and the
other Primary Documents and all documents and papers relating to such Primary
Documents shall be satisfactory to the Purchaser.
g. On or prior to the Closing Date, there shall not have occurred any of
the following: (i) a suspension or material limitation in the trading of
securities generally on the New York Stock Exchange, NASDAQ or the NASDAQ
Bulletin Board; (ii) a general moratorium on commercial banking activities in
New York declared by the applicable banking authorities; (iii) the outbreak or
escalation of hostilities involving the United States, or the declaration by the
United States of a national emergency or war; or (iv) a change in international,
political, financial or economic conditions, if the effect of any such event, in
the judgment of the Purchaser, makes it impracticable or inadvisable to proceed
with the purchase of the Securities on the terms and in the manner contemplated
in this Agreement and in the other Primary Documents.
h. The Company shall have delivered to the Purchaser reimbursement of the
Purchaser's out-of-pocket costs and expenses incurred in connection with the
transactions contemplated by
15
this Agreement (including fees and disbursements of the Purchaser's legal
counsel) in accordance with Section 8 hereof.
8. EXPENSES
The Company covenants and agrees with the Purchaser that the Company will
pay or cause to be paid the following: (a) the fees, disbursements and expenses
of the Purchaser and Purchaser's counsel in connection with the issuance of the
Collective Securities payable on the Closing Date up to twenty-five thousand
dollars ($25,000), (b) all expenses in connection with registration or
qualification of the Collective Securities for offering and sale under state
securities laws as provided in Section 4(f) hereof, and (c) all other costs and
expenses incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section 8, including the fees and
disbursements of the Company's counsel, accountants and other professional
advisors, if any. If the Company fails to satisfy its obligations or to satisfy
any condition set forth in this Agreement, as a result of which the Collective
Securities are not delivered to the Purchaser on the terms and conditions set
forth herein, the Company shall reimburse the Purchaser for any out-of-pocket
expenses reasonably incurred in making preparations for the purchase, sale and
delivery of the Collective Securities not so delivered.
9. GOVERNING LAW; MISCELLANEOUS
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York, without regard to principles of conflict of laws.
Each of the parties consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state courts of the
State of New York sitting in the City of New York in connection with any dispute
arising under this Agreement or any of the transactions contemplated hereby, and
hereby waives, to the maximum extent permitted by law, any objection, including
any objections based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference only and shall not form part of, or
affect the interpretation of this Agreement. This Agreement and each of the
Primary Documents have been entered into freely by each of the parties,
following consultation with their respective counsel, and shall be interpreted
fairly in accordance with its respective terms, without any construction in
favor of or against either party. 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 unenforceability of this
Agreement in any other jurisdiction. This Agreement shall inure to the benefit
of, and be binding upon the successors and assigns of each of the parties
hereto, including any transferees of the Shares and the Warrants. This Agreement
may be amended only by an instrument in writing signed by the party to be
charged with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
10. NOTICES
Any notice required or permitted hereunder shall be given in writing
(unless otherwise specified herein) and shall be effective upon personal
delivery, via facsimile (upon receipt of confirmation of error-free transmission
and mailing a copy of such confirmation,
16
postage prepaid by certified mail, return receipt requested) or two business
days following deposit of such notice with an internationally recognized courier
service, with postage prepaid and addressed to each of the other parties
thereunto entitled at the following addresses, or at such other addresses as a
party may designate by five days advance written notice to each of the other
parties hereto.
Company: USA Biomass Corporation
0000 Xxxxx Xxxxxx
Xxxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxx Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Stetpp, Jr., Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
Purchaser: Siete Investors LLC
c\o WEC Asset Management LLC
000 Xxxxxxxxx Xxxx Xxxx
Xxxxxx-xx-xxx-Xxxxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
1350 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
11. SURVIVAL
The agreements, covenants representations and warranties of the Company and
the Purchaser shall survive the execution and delivery of this Agreement and the
delivery of the Securities hereunder.
17
12. INDEMNIFICATION
Each of the Company and the Purchaser (the "Indemnifying Party") agrees to
indemnify the other party and each officer, director, employee, agent, partner,
stockholder, member and affiliate of such other party (collectively, the
"Indemnified Parties") for, and hold each Indemnified Party harmless from and
against: (i) any and all damages, losses, claims and other liabilities of any
and every kind, including, without limitation, judgments and costs of
settlement, and (ii) any and all reasonable out-of-pocket costs and expenses of
any and every kind, including, without limitation, reasonable fees and
disbursements of counsel for such Indemnified Parties (all of which expenses
periodically shall be reimbursed as incurred), in each case, arising out of or
suffered or incurred in connection with any of the following: (a) any
misrepresentation or any breach of any warranty made by the Indemnifying Party
herein or in any of the other Primary Documents, (b) any breach or
non-fulfillment of any covenant or agreement made by the Indemnifying Party
herein or in any of the other Primary Documents and (c) any claim relating to or
arising out of a violation of applicable federal or state securities laws by the
Indemnifying Party in connection with the sale or issuance of the Shares or
Warrants by the Indemnifying Party to the Indemnified Party (collectively, the
"Indemnified Liabilities"). To the extent that the foregoing undertaking by the
Indemnifying Party may be unenforceable for any reason, the Indemnifying Party
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.
[REMAINDER OF PAGE INTENTIONALLY BLANK, SIGNATURE PAGE FOLLOWS]
18
IN WITNESS WHEREOF, this Securities Purchase Agreement has been duly
executed by each of the undersigned.
USA BIOMASS CORPORATION
By:
----------------------------------
Name:
Title:
SIETE INVESTORS LLC
By: WEC Asset Management LLC, Manager
By:
----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Managing Director
EXHIBIT INDEX
EXHIBIT A FORM OF CERTIFICATE OF DESIGNATIONS
EXHIBIT B FORM OF STOCK PURCHASE WARRANT
EXHIBIT C FORM OF REGISTRATION RIGHTS AGREEMENT
OPINION OF COUNSEL
EXHIBIT D
SCHEDULE INDEX
SCHEDULE 3(a) LIST OF SUBSIDIARIES
SCHEDULE 3(b) CAPITALIZATION, DERIVATIVE SECURITIES AND
REGISTRATION RIGHTS
SCHEDULE 3(d) REPORTING COMPANY STATUS EXCEPTIONS
SCHEDULE 3(l) CERTAIN CHANGES
SCHEDULE 3(r) DEFAULTS
SCHEDULE 3(s) TRANSACTIONS WITH AFFILIATES
SCHEDULE 3(cc) ENVIRONMENTAL MATTERS
SCHEDULE 3(a)
LIST OF SUBSIDIARIES
Continuing Operations
USA Waste Transport, Inc., USA Biomass-Greenwaste, Inc., TransPacific
Environmental, Inc., AMCOR Biomass Farms, LLC
Discontinued Operations
Sun Goddess Farms, Inc., AMCOR Properties, Inc., Las Palomas Country Club
Estates, LLC, AMCOR Builders, LLC.
SCHEDULE 3(b)
CAPITALIZATION, DERIVATIVE SECURITIES AND REGISTRATION RIGHTS
Number of Shares Conversion
Issue upon exercise of or exercise Expiration Registration
Name Date Conversion Price Date Rights
---- ---- ---------- ----- ---- ------
Stock Option
Plans various 2,403,867 Market value 5 years from Form S-8
at date of date of grant
Series A Sept. 97 1,346,847 $5.55 None Yes
Preferred
Stock
Warrants various 142,500 $2.00 to February Yes
$4.50 2001
Common Stock 100,000 Yes(1)
--------
(1) The acquisition of American Waste Transport will result in the issuance of
up to 1,000,000 shares, of which 100,000 have registration rights.
SCHEDULE 3(d)
REPORTING COMPANY STATUS
The Company has timely filed all materials and documents pursuant to its
obligations under either Section 13(a) or 5(d) of the Exchange Act, except for
its 1998 10-KSB which was not timely filed due to extensive financial statement
revisions as a result of the Company's Plan of Discontinued Operations approved
by its Board oF Directors in late 1998. It expects to make all filings on a
timely basis in the future.
SCHEDULE 3(l)
CERTAIN CHANGES
1. Material changes since September 30, 1999 include the following:
A. Conversion of $4,044,140 Series B preferred stock to 591,621 common
shares in fourth quarter.
B. Conversion of 1,770,071 of short-term notes for 574,709 common shares
at 11/30/99.
C. During the fourth quarter, the spin-off of most discontinued
operations to AMCOR Financial Corporation. Excluded from the spin-off
was the Company's $2.5 million Oregon Farming Joint Venture which is
presently being appraised pursuant to a planned sale by 6/30/00.
D. The exercise, during the fourth quarter, 1999 and first quarter, 2000
of stock options at prices from $1.60 to $3.00 per share, totaling
approximately 881,133 shares for about $1,608,333.
E. The acquisition of American Waste Transport as of 3/1/00 for $750,000
cash and 1 million shares of Company Common Stock, all but 100,000
shares restricted.
SCHEDULE 3(r)
DEFAULTS
1. Subsequent to October 31, 1999 the Company spun off substantially all of
its real estate operations. As part of this transaction, AMCOR Financial
Corporation (AFC) agreed to service debt for which the Company is primarily
liable and is collateralized by property included in the spin-off. In early
2000, AFC allowed the golf course, which was part of the spin-off assets,
to be foreclosed upon by the Lender. AFC is in discussions with the lender
to recollateralize any deficiency on the $3 million note with other
property included in the spin-off. The Company believes that the property
held by AFC has sufficient value to collateralize this deficiency along
with all other liabilities assumed by AFC. The Company does not expect to
realize any loss related to this obligations.
2. As discussed, the Company has not declared dividends on its Series A
Preferred stock and is currently six quarters in arrears. It intends to use
approximately $500,000 of the proceeds from this offering to pay dividends
on these shares. The current voluntary conversion rate of the Series A is
$5.55 per share (1.8 common shares for one $10 preferred) and the Company
can force conversion at $6.67 per share. During the year, should the Series
A trade at or above that level for a sustained period of time, the Company
may elect to force conversion of the preferred to common.
SCHEDULE 3(s)
TRANSACTIONS WITH AFFILIATES
At 12/31/99 a partnership controlled by two principals of the Company was
indebted to the Company for approximately $1.5 million. In turn, the Company
owed the two individuals approximately $1,125,000. The two amounts were applied
to offset each other, with the difference (approximately $375,000 owed to the
Company) paid by the individuals through common stock (87,000 shares at $4.313)
transferred to the Company.
SCHEDULE 3(cc)
ENVIRONMENTAL MATTERS
The Company's history is in agriculture, and as a result, it has regularly used
chemical fertilizers and petroleum products. Other than its 6,000-acre Oregon
property, it has sold all of its agricultural land, the sales being subject to
extensive environmental review. To date, no problems have been incurred. One
600-acre property, on which the company conducted a green waste processing pilot
program, has been sold. As a condition of the sale, the Company agreed to clean
up and remediate certain residual green waste processing material, confined to
approximately 25-acres. The Company is in the process of this clean up now. The
clean up consists strictly of removing residual debris. Chemical tests reveal no
toxic or hazardous contamination. The buyer of the property has agreed to pay
$50,000 of clean up. an additional $100,000 is in escrow for this purpose. The
Company believes that the entire remediation can be done for approximately
$150,000, which has been reserved on its financial statements.
In addition to processing green waste, the Company is a major contract hauler
for Waste Management for non-hazardous municipal solid waste. Waste Management
is responsible for any claims and liability resulting from contamination. To
date there have been none.
EXHIBIT A
CERTIFICATE OF DESIGNATIONS OF
SERIES C 6% CONVERTIBLE PREFERRED STOCK OF
USA BIOMASS CORPORATION
Pursuant to Section ____________ of the General
Corporation Law of the State of Delaware
The undersigned, Xxxx X. Xxxxxxx and Hilly X. Xxxxx, hereby certify that:
I. They are the duly elected and acting Chairman and Secretary,
respectively, of USA Biomass Corporation, a Delaware corporation (the
"Corporation").
II. The Certificate of Incorporation of the Corporation authorizes three
thousand (3,000) shares of preferred stock, $0.001 par value per share.
III. The following is a true and correct copy of resolutions duly adopted
by the Board of Directors of the Corporation (the "Board of Directors") on March
14, 2000 pursuant to the Articles of Incorporation of the Corporation and in
accordance with the provisions of the General Corporation Law of the State of
Delaware.
RESOLUTIONS
WHEREAS, the Board of Directors is authorized to provide for the issuance
of the shares of preferred stock, and by filing a certificate pursuant to the
applicable law of the State of Delaware to establish and issue preferred stock
with such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other special
rights, and with such qualifications, limitations or restrictions thereon as the
Board of Directors may determine.
WHEREAS, the Board of Directors desires, pursuant to its authority as
aforesaid, to designate a new series of preferred stock, set the number of
shares constituting such series and fix the rights, preferences, privileges and
restrictions of such series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
designates a new series of preferred stock and the number of shares constituting
such series and fixes the rights, preferences, privileges and restrictions
relating to such series as follows:
A. Designation, Amount and Par Value. The series of preferred stock shall
be designated as the Series C 6% Convertible Preferred Stock (the "Series C
Preferred Stock"), and the number of shares so designated shall be three
thousand (3,000) (which shall not be subject to increase or decrease). Each
share of Series C Preferred Stock shall have a par value of $0.001 per share and
a stated value (the "Stated Value") of the Liquidation Preference (as
hereinafter defined in Section C(1)).
B. Dividends.
(1) Holders of the Series C Preferred Stock shall be entitled to receive,
out of funds legally available therefor, dividends at a rate equal to 6% (the
"Dividend Rate") of the Liquidation Preference per share per annum (subject to
appropriate adjustments in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares), and no
more, payable in accordance with the provisions of this Certificate of
Designations.
(2) At the election of the Corporation, each dividend on Series C Preferred
Stock shall be paid either in shares of Common Stock of the Corporation, $0.001
par value per share ("Common Stock") or in cash on the Delivery Date (as defined
in Subsection G(2)(a) of this Certificate of Designations) with respect to any
shares of Series C Preferred Stock which are the subject of a Notice of
Conversion (as defined in Subsection G(2) of this Certificate of Designations).
Dividends paid in shares of Common Stock shall be paid (based on an assumed
value of $1,000 per share) in full shares only, with a cash payment equal to the
value of any fractional shares. Each dividend paid in cash shall be mailed to
the holders of record of the Series C Preferred Stock as their names and
addresses appear on the share register of the Corporation or at the office of
the transfer agent on the corresponding dividend payment date. Holders of Series
C Preferred Stock will receive written notification from the Corporation or the
transfer agent if a dividend is paid in kind, which notification will specify
the number of shares of Common Stock paid as a dividend and the recipient's
aggregate holdings of Common Stock as of that dividend payment date and after
giving effect to the dividend. All holders of shares of Common Stock issued as
dividends shall be entitled to all of the rights and benefits relating to shares
of Common Stock as set forth in the Corporation's Articles of Incorporation, as
amended, and By-laws.
(3) Holders of the Series C Preferred Stock shall be entitled to payment of
any dividends in preference and priority to any payment of any cash dividend on
Common Stock or any other class or series of capital stock of the Corporation,
other than holders of shares of the issued and outstanding Series A Preferred
Stock of the Company, as of the date hereof, who shall be entitled to receive
such dividends on a pari passu basis with the holders of the Series C Preferred
Stock. Dividends on the Series C Preferred Stock shall accrue with respect to
each share of the Series C Preferred Stock from the date on which such share is
issued and outstanding and thereafter shall be deemed to accrue from day to day
whether or not earned or declared and whether or not there exists profits,
surplus or other funds legally available for the payment of dividends, and shall
be cumulative so that if such dividends on the Series C Preferred Stock shall
not have been paid, or declared and set apart for payment, the deficiency shall
be fully paid or declared and set apart for payment before any dividend shall be
paid or declared or set apart for any Common Stock or other class or series of
capital stock ranking junior to the Series C Preferred Stock (such stock being
collectively referred to herein as the "Junior Stock") and before any purchase
or acquisition of any Junior Stock is made by the Corporation. At the earlier
of: (1) the redemption or conversion of the Series C Preferred Stock or (2) the
liquidation of the Corporation, any accrued but undeclared dividends shall be
paid to the holders of record of outstanding shares of the Series C Preferred
Stock in accordance with the provisions of this Certificate of Designations. No
accumulation of dividends on the Series C Preferred Stock shall bear interest.
2
C. Liquidation, Dissolution or Winding Up. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, the
holders of shares of the Series C Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders, before any payment shall be made to the
holders of Junior Stock by reason of their ownership thereof, an amount equal to
one thousand dollars ($1,000) per share of Series C Preferred Stock (the
"Liquidation Preference") plus any accrued but unpaid dividends (whether or not
declared). If upon any such liquidation, dissolution or winding up of the
Corporation the remaining assets of the Corporation available for distribution
to its stockholders shall be insufficient to pay the holders of shares of the
Series C Preferred Stock the full amount to which they shall be entitled, the
holders of shares of the Series C Preferred Stock shall share ratably in any
distribution of the remaining assets and funds of the Corporation in proportion
to the respective amounts which would otherwise be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
D. Voting.
(1) Each holder of outstanding shares of Series C Preferred Stock shall be
entitled, at each meeting of stockholders of the Corporation (and with respect
to written consents of stockholders in lieu of meetings) with respect to any and
all matters presented to the stockholders of the Corporation for their action or
consideration, to the number of votes equal to the number of whole shares of
Common Stock into which the shares of Series C Preferred Stock held by such
holder are convertible (as adjusted from time to time pursuant to Subsection I
hereof) immediately after the close of business on the record date fixed for
such meeting or the effective date of such written consent. Except as provided
by law, and by the provisions of Section K below, holders of Series C Preferred
Stock shall vote together with the holders Common Stock as a single class.
(2) The holders of the Series C Preferred Stock shall not be entitled to
any rights of cumulative voting with respect to their shares.
E. Other Securities. Subject to any limitations contained in this
Certificate of Designations, the Corporation's Articles of Incorporation and/or
the Primary Documents (as defined in the Securities Purchase Agreement, dated as
of March 14, 2000, hereinafter the "Securities Purchase Agreement"), the Board
of Directors of the Corporation reserves the right to establish additional
classes and/or series of capital stock of the Corporation and to designate the
preferences, limitations and relative rights of any such classes and/or series;
provided, however, that no such class and/or series may have preferences,
limitations and relative rights which are superior to or senior to the
preferences, limitations and relative rights granted to the holders of the
Series C Preferred Stock.
F. Capital Reorganization. If the Corporation shall at any time hereafter
subdivide or combine its outstanding shares of Common Stock, declare a dividend
payable in Common Stock, or in case of any capital reorganization or
reclassification of the shares of Common Stock of the Corporation, the number of
shares of the Series C Preferred Stock and the Stated Value of the Series C
Preferred Stock shall be adjusted appropriately to allow the holders of the
Series C Preferred Stock, as nearly as reasonably possible, to maintain (i) the
aggregate
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Stated Value of the Series C Preferred Stock and (ii) their pro rata interest in
the Corporation and in the Common Stock upon conversion of the Series C
Preferred Stock, that each holder had prior to any such subdivision,
combination, stock dividend, reorganization or reclassification.
G. Conversion.
(1) The holders of the Series C Preferred Stock shall have conversion
rights as follows (the "Series C Preferred Stock Conversion Rights"):
(a) Each share of Series C Preferred Stock shall be convertible, at
the option of the holder thereof, at any time and from time to time, into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing $1,000, plus the amount of any accrued and unpaid
dividends the Corporation elects to pay in Common Stock, by the Conversion
Price (as defined below) in effect at the time of conversion. The
Conversion Price at which shares of Common Stock shall be deliverable upon
conversion of Series C Preferred Stock without the payment of additional
consideration by the holder thereof (the "Conversion Price") shall be the
lower of (i) four and 65/100 dollars ($4.65) or (ii) 85% of the average of
the three lowest Closing Bid Prices of the shares of Common Stock for the
fifteen (15) trading days immediately preceding the Series C Preferred
Stock Conversion Date (as hereinafter defined). For purposes of these
Articles of Amendment, the term "Closing Bid Price" means, for any security
as of any date, the closing bid price on the principal securities exchange
or trading market where the Common Stock is listed or traded as reported by
Bloomberg, L.P. ("Bloomberg") or, if applicable, the closing bid price of
the Common Stock in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing bid
price is reported for the Common Stock by Bloomberg, then the average of
the bid prices of any market makers for such security as reported in the
"pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid
Price of the Common Stock can not be calculated on such date on any of the
foregoing bases, the Closing Bid Price of the Common Stock on such date
shall be the fair market value as determined by the holders of a majority
of the outstanding shares of Series C Preferred Stock being converted for
which the calculation of the Closing Bid Price is required in order to
determine the Conversion Price of such shares. "Trading day" shall mean any
day on which the Corporation's Common Stock is traded for any period on the
principal securities exchange or other securities market on which the
Common Stock is then being traded. If, during any period following March
14, 2000 (the "Original Issue Date"), as a result of the occurrence of any
of the events set forth in Section 3(f) or 3(g) of the Registration Rights
Agreement, dated as of March 14, 2000, by and between the Corporation and
the Purchaser set forth therein (the "Registration Rights Agreement"), the
Purchasers set forth therein are not able to sell shares of Common Stock
issuable upon conversion of, or in lieu of dividends on, shares of Series C
Preferred Stock pursuant to a registration statement filed pursuant to such
agreement, the holders of shares of Series C Preferred Stock shall have the
right, for any purpose during such period and thereafter, to designate as
the Conversion Price any Conversion Price that would have been applicable
during such period had such Series C Preferred Stock shareholder delivered
a Notice of Conversion with respect to any such Series C Preferred Stock.
4
(b) At any time that the number of shares of Common Stock issued (A)
upon conversion of the Series C Preferred Stock and (B) in lieu of dividend
payments on the Series C Preferred Stock, shall equal 20% or more of the
Corporation's outstanding Common Stock (a "Common Stock Redemption Event"),
the Corporation shall (x) redeem, at a price per share equal to (A) the
quotient of (i) the Liquidation Preference per share of Series C Preferred
Stock plus all accrued but unpaid dividends on such shares of Series C
Preferred Stock and (ii) the Conversion Price as if the Series C Preferred
Stock had been converted on the Series C Preferred Stock Redemption Date
multiplied by (B) the average Closing Bid Price of shares of Common Stock
for the five (5) trading days immediately preceding the Series C Preferred
Stock Redemption Date, all of the outstanding Series C Preferred Stock or
(y) call a special meeting of its stockholders for the purpose of approving
the transactions contemplated by the Securities Purchase Agreement,
including the issuance of the Series C Preferred Stock on the terms set
forth therein, together with any other approvals that shall be required so
as to cause the transactions contemplated by the Securities Purchase
Agreement to remain in compliance with the Rules and Regulations of The
Nasdaq Stock Market (including Rules 4300 and 4310 of Nasdaq's
Non-Qualitative Designation Criteria in connection with conversions of
Series C Preferred Stock; such approvals are referred to herein as the
"Required Approvals"). The Corporation shall determine within five (5)
business days following the receipt of a Notice of Conversion which of such
actions it shall take, and shall promptly furnish notice to each of the
holders of Series C Preferred Stock as to such determination, including, if
applicable, a notice of redemption. In no event shall the Corporation issue
shares of Common Stock upon conversion of, or in lieu of dividend payments
on, the Series C Preferred Stock, after the occurrence of a Common Stock
Redemption Event until the Required Approvals, if any, are obtained.
(c) If the Corporation elects to call a special meeting of its
stockholders pursuant to Subsection G(1)(b) of this Certificate of
Designations to obtain the Required Approvals, the Corporation shall use
its best efforts to obtain such Required Approvals within thirty (30) days
of the Closing Date (as defined in the Securities Purchase Agreement) (such
thirty (30) day period is referred to herein as an "Approval Period"). If
the Corporation does not obtain the Required Approvals within the Approval
Period and the Corporation receives a Notice of Conversion after the
termination of the Approval Period, the Corporation must redeem, in
accordance with this Subsection G of this Certificate of Designations, any
shares of Series C Preferred Stock outstanding after the Corporation has
issued in excess of 1,944,227 shares of Common Stock in connection with
conversions of the Series C Preferred Stock.
(d) If the Corporation elects, pursuant to this Subsection G, to
redeem the Series C Preferred Stock on the occurrence of a Common Stock
Redemption Event, it shall redeem such Series C Preferred Stock at the
price determined in accordance with Subsection G(1)(b) of this Certificate
of Designations. If the Corporation shall have elected, pursuant to this
Subsection G(1), to obtain the Required Approvals but shall not have done
so by the later of the occurrence of the Common Stock Redemption Event or
the expiration of the Approval Period, it shall furnish a redemption notice
to the Purchaser within three (3) business days after the expiration of the
Approval Period.
5
(2) The Series C Preferred Stock Conversion Rights shall be exercised as
follows:
(e) The Corporation will permit each holder of Series C Preferred
Stock to exercise its right to convert the Series C Preferred Stock by
faxing an executed and completed notice of conversion (the "Notice of
Conversion") to the Corporation, and delivering within three (3) business
days thereafter, the original Notice of Conversion (and the certificates
representing the related shares of Series C Preferred Stock) to the
Corporation by hand delivery or by express courier, duly endorsed. Each
date on which a Notice of Conversion is faxed in accordance with the
provisions hereof shall be deemed a "Series C Preferred Stock Conversion
Date." The Corporation will transmit the certificates representing the
Common Stock issuable upon conversion of the Series C Preferred Stock
(together with certificates representing the related shares of Series C
Preferred Stock not so converted and, if applicable, a check representing
any fraction of a share not converted) to such holder via express courier
as soon as practicable, but in all events no later than (the "Delivery
Date") three (3) business days after the Series C Preferred Stock
Conversion Date. For purposes of this Certificate of Designations, such
conversion of the Series C Preferred Stock shall be deemed to have been
made immediately prior to the close of business on the Series C Preferred
Stock Conversion Date.
(f) In lieu of delivering physical certificates representing the
Common Stock issuable upon the conversion of the Series C Preferred Stock,
provided that the Corporation's transfer agent is participating in the
Depository Trust Corporation ("DTC") Fast Automated Securities Transfer
program, on the written request of a holder of Series C Preferred Stock who
shall have previously instructed such holder's prime broker to confirm such
request to the Corporation's transfer agent, the Corporation shall use its
best efforts to cause its transfer agent to electronically transmit such
Common Stock to such holder by crediting the account of the holder's prime
broker with DTC through its Deposit Withdrawal Agent Commission system no
later than the applicable Delivery Date.
(g) The Corporation will at all times have authorized and reserved for
the purpose of issuance a sufficient number of shares of Common Stock to
provide for the conversion of the Series C Preferred Stock. The Corporation
will use its best efforts at all times to maintain a number of shares of
Common Stock so reserved for issuance that is no less than the sum of (i)
one and one-half (1.5) times the number that would then actually be
issuable upon the conversion of three thousand (3,000) shares of Series C
Preferred Stock and (ii) the exercise of the Warrants (as defined in the
Securities Purchase Agreement). Before taking any action which would cause
an adjustment reducing the Conversion Price below the established par value
of the shares of Common Stock issuable upon conversion of the Series C
Preferred Stock, the Corporation shall take any corporate action which may,
in the opinion of its counsel or in the opinion of counsel to holders of
the Series C Preferred Stock, be necessary in order that the Corporation
may validly and legally issue fully paid and nonassessable shares of Common
Stock at such adjusted Conversion Price.
6
(3) In the event of a liquidation of the Corporation, the Series C
Preferred Stock Conversion Rights shall terminate at the close of business on
the first full day preceding the date fixed for the payment of any amounts
distributable on liquidation to the holders of the Series C Preferred Stock.
(4) If the conversion is in connection with an underwritten offer of
securities registered pursuant to the Securities Act of 1933, as amended, the
conversion may, at the option of any holder tendering Series C Preferred Stock
for conversion, be conditioned upon the closing with the underwriter of the sale
of securities pursuant to such offering, in which event the person(s) entitled
to receive the Common Stock issuable upon such conversion of the Series C
Preferred Stock shall not be deemed to have converted such Series C Preferred
Stock until immediately prior to the closing of the sale of securities.
(5) At no time shall any holder of the Series C Preferred Stock convert
such amount of Series C Preferred Stock as shall result in such Purchaser's
ownership, after such conversion, exceeding 9.99% of the Corporation's
outstanding Common Stock.
(6) No fractional shares of Common Stock shall be issued upon conversion of
the Preferred Stock. In lieu of fractional shares, the Corporation shall pay
cash equal to such fraction multiplied by the then effective and applicable
Conversion Price.
(7) The Corporation will not, by amendment of its Articles of Incorporation
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed under this Certificate of Designations by the Corporation, but will
at all times in good faith assist in the carrying out of all the provisions of
this Certificate of Designations and in the taking of all such action as may be
necessary or appropriate in order to protect the Series C Preferred Stock
Conversion Rights of the holders of the Series C Preferred Stock against
impairment.
(8) In the event (a) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other securities of
the Corporation, (b) that the Corporation subdivides or combines its outstanding
shares of Common Stock, (c) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its outstanding shares
of Common Stock or a stock dividend or stock distribution thereon), (d) of any
consolidation or merger of the Corporation into or with another corporation, (e)
of the sale of all or substantially all of the assets of the Corporation, or (f)
of the involuntary or voluntary dissolution, liquidation or winding up of the
Corporation, then the Corporation shall cause to be filed at its principal
office or at the office of the transfer agent of the Series C Preferred Stock,
and shall cause to be mailed to each holder of the Series C Preferred Stock at
their last address as shown on the records of the Corporation or such transfer
agent, at least ten (10) days prior to the record date specified in (i) below or
twenty (20) days before the date specified in (ii) below, a notice stating
(i) the record date of such dividend, distribution, subdivision or
combination, or, if a record is not to be taken, the date as of which the
holders of
7
Common Stock of record to be entitled to such dividend, distribution,
subdivision or combination are to be determined, or
(ii) the date on which such reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock
for securities or other property deliverable upon such reclassification,
consolidation, merger, sale, dissolution or winding up.
H. Sinking Fund. There shall be no sinking fund for the payment of
dividends, or liquidation preferences on the Series C Preferred Stock or the
redemption of any shares thereof.
I. Redemption Events. In case one or more of the following events, each a
redemption event, shall have occurred:
(a) failure to deliver the shares of Common Stock required to be
delivered upon conversion of the shares of Series C Preferred Stock in the
manner and at the time required by Section 5 of the Securities Purchase
Agreement; or
(c) failure of the Corporation to have authorized the number of shares
of Common Stock issuable upon conversion of the shares of Series C
Preferred Stock or exercise of the Stock Purchase Warrants (as defined in
the Securities Purchase Agreement); or
(d) failure on the part of the Corporation to duly observe or perform
any of the provisions of this Certificate of Designations or any of its
other covenants or agreements contained in the Securities Purchase
Agreement, or to cure any material breach in a material representation or
covenant contained in the Securities Purchase Agreement or the Registration
Rights Agreement for a period of ten (10) days after the date on which
written notice of such failure or breach requiring the same to be remedied
has been given by a registered holder of shares of Series C Preferred Stock
to the Corporation;
then, and in each and every such case, so long as such redemption
event has not been remedied, the holders of not less than fifty-one percent
(51%) of the shares of Series C Preferred Stock then outstanding, by notice
in writing to the Corporation (the date of such notice the "Redemption
Notice Date"), may demand that the Corporation redeem, and the Corporation
shall redeem, each share of Series C Preferred Stock then outstanding at a
price per share equal to one hundred twenty-five percent (125%) of the sum
of (x) the Stated Value and (y) the aggregate accrued and unpaid dividends
on such Redemption Notice Date
For purposes of this Section I "Material Subsidiary" means any subsidiary
with respect to which the Corporation has directly or indirectly invested,
loaned, advanced or guaranteed the obligations of, an aggregate amount exceeding
fifteen percent (15%) of the Corporation's gross assets, or the Corporation's
proportionate share of the assets or net income
8
of which (based on the subsidiary's most recent financial statements) exceed
fifteen percent (15%) of the Corporation's gross assets or net income,
respectively, or the gross revenues of which exceed fifteen percent (15%) of the
gross revenues of the Corporation based upon the most recent financial
statements of such subsidiary and the Corporation.
J. Amendment. This Certificate of Designations constitutes an agreement
between the Corporation and the holders of the Series C Preferred Stock. The
Corporation shall not amend this Certificate of Designations or alter or repeal
the preferences, rights, powers or other terms of the Series C Preferred Stock
so as to affect adversely the Series C Preferred Stock, without the written
consent or affirmative vote of the holders of at least sixty-six and two-thirds
percent (66-2/3%) of the then outstanding shares of Series C Preferred Stock,
given in writing or
9
by vote at a meeting, consenting or voting (as the case may be) separately as a
class.
IN WITNESS WHEREOF, USA Biomass Corporation has caused its corporate seal
to be hereunto affixed and this certificate to be signed by _____________, its
Chairman, and attested by ____________, its Secretary, this 14th day of March,
2000.
USA BIOMASS CORPORATION
By:
------------------------------
Name:
Title: Chairman
Attest:
By:
-----------------------------
Name:
Title: Secretary
EXHIBIT B
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND
REGULATIONS THEREUNDER OR ANY STATE SECURITIES LAWS OR THE PROVISIONS OF THIS
WARRANT.
No. of Shares of Common Stock: _____________
WARRANT
To Purchase Common Stock of
USA BIOMASS CORPORATION
THIS IS TO CERTIFY THAT Siete Investors LLC, a Delaware limited liability
company, or its registered assigns, is entitled, at any time from the Warrant
Issuance Date (as hereinafter defined) to the Expiration Date (as hereinafter
defined), to purchase from USA BIOMASS CORPORATION, a Delaware corporation (the
"Company"), one hundred thousand (100,000 shares of Common Stock (as hereinafter
defined and subject to adjustment as provided herein), in whole or in part,
including fractional parts, at a purchase price per share equal to four and
65/100 ($4.65) (subject to any adjustments made to such amount pursuant to
Section 4 hereto) on the terms and conditions and pursuant to the provisions
hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective meanings
set forth below:
10
"Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Company after the Closing Date, other than Warrant Stock.
"Book Value" shall mean, in respect of any share of Common Stock on any
date herein specified, the consolidated book value of the Company as of the last
day of any month immediately preceding such date, divided by the number of Fully
Diluted Outstanding shares of Common Stock as determined in accordance with GAAP
(assuming the payment of the exercise prices for such shares) by a firm of
independent certified public accountants of recognized national standing
selected by the Company and reasonably acceptable to the Holder.
"Business Day" shall mean any day that is not a Saturday or Sunday or a day
on which banks are required or permitted to be closed in the State of New York.
"Closing Date" shall have the meaning set forth in the Securities Purchase
Agreement.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise indicates)
the Common Stock, par value $.001 per share, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.4.
"Convertible Securities" shall mean evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for shares of
Common Stock, either immediately or upon the occurrence of a specified date or a
specified event.
"Current Warrant Price" shall mean four and 65/100 dollars ($4.65) subject
to any adjustments to such amount made in accordance with Section 4 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean March 13, 2005.
"Fully Diluted Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all shares of
3
Common Stock Outstanding at such date and all shares of Common Stock issuable in
respect of this Warrant, outstanding on such date, and other options or warrants
to purchase, or securities convertible into, including without limitation the
shares of Common Stock outstanding on such date which would be deemed
outstanding in accordance with GAAP for purposes of determining book value or
net income per share.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as from time to time in effect.
"Holder" shall mean the Person in whose name the Warrant or Warrant Stock
set forth herein is registered on the books of the Company maintained for such
purpose.
"Market Price" per Common Share means the average of the closing bid prices
of the Common Shares as reported on the National Association of Securities
Dealers Automated Quotation System for the National Market, ("NASDAQ") or, if
such security is not listed or admitted to trading on the NASDAQ, on the
principal national security exchange or quotation system on which such security
is quoted or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation system, the
closing bid price of such security on the over-the-counter market on the day in
question as reported by the National Association of Security Dealers, Inc., or a
similar generally accepted reporting service, as the case may be, for the five
(5) trading days immediately preceding the date of determination.
"Other Property" shall have the meaning set forth in Section 4.5.
"Outstanding" shall mean, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any subsidiary thereof, and shall include all shares issuable
in respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated a date even herewith by and between the Company and Siete
Investors LLC, as it may be amended from time to time.
"Restricted Common Stock" shall mean shares of Common Stock which are, or
which upon their issuance on the exercise of this Warrant would be, evidenced by
a certificate bearing the restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
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"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement dated as of a date even herewith by and between the Company and Siete
Investors LLC, as it may be amended from time to time.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock or of
any interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Warrant Issuance Date" shall mean any date on which Warrants are issued
pursuant to the Securities Purchase Agreement.
"Warrants" shall mean this Warrant and all warrants issued upon transfer,
division or combination of, or in substitution for, any thereof. All Warrants
shall at all times be identical as to terms and conditions and date, except as
to the number of shares of Common Stock for which they may be exercised.
"Warrant Price" shall mean an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of this Warrant pursuant to Section
2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. From and after the Warrant Issuance Date and until
5:00 P.M., New York City time, on the Expiration Date, Holder may exercise this
Warrant, on any Business Day, for all or any part of the number of shares of
Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at the office or agency designated by the Company
pursuant to Section 12, (i) a written notice of Holder's election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock to
be purchased, (ii) payment by cash, check or bank draft payable to the Company
of the Warrant Price in cash or by wire transfer or cashier's check drawn on a
United States bank or by the Holder's surrender of Warrant Stock (or the right
to receive such number of shares) having an aggregate Market Price equal to the
Warrant Price for all shares then being purchased and (iii) this Warrant. Such
notice shall be substantially in the form of the subscription form appearing at
the end of this Warrant as Exhibit A, duly executed by Holder or its agent or
attorney. Upon receipt of the items referred to in clauses (i), (ii) and (iii)
above, the Company shall, as promptly as practicable, and in any event within
five (5) Business Days thereafter, execute or cause to be executed and deliver
or cause to be delivered to Holder a certificate or certificates representing
the aggregate number of full shares of Common Stock issuable upon such exercise,
together with cash in lieu of any fraction of a share, as hereinafter provided.
The stock certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as Holder shall request in the
notice and shall be registered in
5
the name of Holder or, subject to Section 9, such other name as shall be
designated in the notice. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and
Holder or any other Person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
the Warrant has been exercised by payment to the Company of the Warrant Price.
If this Warrant shall have been exercised in part, the Company shall, at the
time of delivery of the certificate or certificates representing Warrant Stock,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased shares of Common Stock called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant.
The Holder shall be entitled to exercise the Warrant notwithstanding the
commencement of any case under 11 U.S.C. ss. 101 et seq. (the "Bankruptcy
Code"). In the event the Company is a debtor under the Bankruptcy Code, the
Company hereby waives to the fullest extent permitted any rights to relief it
may have under 11 U.S.C. ss. 362 in respect of the Holder's exercise right. The
Company hereby waives to the fullest extent permitted any rights to relief it
may have under 11 U.S.C. ss. 362 in respect of the exercise of the Warrant. The
Company agrees, without cost or expense to the Holder, to take or consent to any
and all action necessary to effectuate relief under 11 U.S.C. ss. 362.
2.2. Payment of Taxes and Charges. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable, and without any preemptive rights. The
Company shall pay all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the issue or delivery
thereof.
2.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Market Price per share
of Common Stock on the relevant exercise date.
2.4. Continued Validity. A holder of shares of Common Stock issued upon the
exercise of this Warrant, in whole or in part (other than a holder who acquires
such shares after the same have been publicly sold pursuant to a Registration
Statement under the Securities Act or sold pursuant to Rule 144 thereunder),
shall continue to be entitled with respect to such shares to all rights to which
it would have been entitled as Holder under Sections 9, 10 and 14 of this
Warrant. The Company will, at the time of exercise of this Warrant, in whole or
in part, upon the request of Holder, acknowledge in writing, in form reasonably
satisfactory to Holder, its continuing obligation to afford Holder all such
rights; provided, however, that if Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to Holder all such rights.
2.5. Right to Convert Warrant. The Holder shall have the right to convert,
in whole or in part, this Warrant (the "Conversion Right") at any time prior to
the expiration of the Exercise Period, into shares of Common Stock in accordance
with this Section 2.5. Upon exercise of the Conversion Right, the Company shall
deliver to the Holder (without payment by the Holder of the Warrant Price) that
number of shares of Common Stock equal to the quotient
6
obtained by dividing (x) the value of the portion of this Warrant being
converted at the time the Conversion Right is exercised (determined by
subtracting the Warrant Price for the portion of this Warrant being converted
(in effect immediately prior to the exercise of the Conversion Right) from the
amount obtained by multiplying the number of shares of Common Stock issuable
upon the whole or partial exercise of this Warrant, as the case may be, by the
Market Price immediately prior to the exercise of the Conversion Right) by (y)
the Market Price of one share of Common Stock immediately prior to the exercise
of the Conversion Right.
The Conversion Right may be exercised by the Holder, at any time or from
time to time, prior to its expiration, on any business day by delivering a
written notice (the "Conversion Notice") to the Company at the offices of the
Company, exercising the Conversion Right and specifying (i) the total number of
shares of Common Stock the Holder will purchase pursuant to the conversion and
(ii) a place and date not less than two (2) nor more than twenty (20) Business
Days from the date of the Subscription Notice for the closing of such purchase.
At any closing under this Section 2.5, (i) the Holder will surrender this
Warrant and (ii) the Company will deliver to the Holder a certificate or
certificates for the number of shares of Common Stock issuable upon such
conversion. If this Warrant shall have been converted only in part, the Company
shall, at the time of delivery of said stock certificate or certificates,
deliver to the Holder a new Warrant evidencing the rights of the Holder to
purchase the remaining shares of Common Stock called for by this Warrant, which
new Warrant shall in all other respects be identical to this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant and the
same returned to the Holder. The Company shall pay all expenses, taxes and other
charges payable in connection with the preparation, issue and delivery of such
stock certificates and new Warrants, except that, in case such stock
certificates and/or new Warrants shall be registered in a name or names other
than the name of the Holder, funds sufficient to pay all stock transfer taxes
that are payable upon the issuance of such stock certificates or new Warrants
shall be paid by the Holder at the time of delivering the notice of exercise
mentioned above.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Sections 9, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered on
the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred to in Section 2.1
or the office or agency designated by the Company pursuant to Section 12,
together with a written assignment of this Warrant substantially in the form of
Exhibit B hereto duly executed by Holder or its agent or attorney. Upon such
surrender, the Company shall, subject to Section 9, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination specified in such instrument of assignment, and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. A Warrant, if properly assigned in
compliance with Section 9, may be exercised by a new Holder for the purchase of
shares of Common Stock without having a new Warrant issued.
3.2. Division and Combination. Subject to Section 9, this Warrant may be
divided or combined with other Warrants upon presentation hereof at the
aforesaid office or
7
agency of the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by Holder or its
agent or attorney. Subject to compliance with Section 3.1 and with Section 9, as
to any transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and deliver at its own
expense the new Warrant or Warrants under this Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at its aforesaid
office or agency, books for the registration and the registration of transfer of
the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is exercisable,
or the price at which such shares may be purchased upon exercise of this
Warrant, shall be subject to adjustment from time to time as set forth in this
Section 4. The Company shall give Holder notice of any event described below
which requires an adjustment pursuant to this Section 4 at the time of such
event.
4.1. Stock Dividends, Subdivisions and Combinations. If at any time the
Company shall:
(a) take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger number
of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2. Certain Other Distributions.
In case the Company shall issue any Common Stock or any rights, options or
warrants to all holders of record of its Common Stock entitling all holders to
subscribe for or
8
purchase shares of Common Stock at a price per share less than the Market Price
per share of the Common Stock on the date fixed for such issue, the Current
Warrant Price in effect immediately prior to the close of business on the date
fixed for such determination shall be reduced to the amount determined by
multiplying such Current Warrant Price by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
the close of business on the date fixed for such determination plus the number
of shares of Common Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for subscription or purchase would
purchase at such Market Price and the denominator of which shall be the number
of shares of Common Stock outstanding immediately prior to the close of business
on the date fixed for such determination plus the number of shares of Common
Stock so offered for subscription or purchase, such reduced amount to become
effective immediately after the close of business on the date fixed for such
determination. For the purposes of this clause (b), (i) the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company and (ii) in the case of any rights, options or warrants
which expire by their terms not more than 60 days after the date of issue, sale,
grant or assumption thereof, no adjustment of the Current Warrant Price shall be
made until the expiration or exercise of all rights, options or warrants,
whereupon such adjustment shall be made in the manner provided in this clause
(b), but only with respect to the shares of Common Stock actually issued
pursuant thereto. Such adjustment shall be made successively whenever any event
specified above shall occur. In the event that any or all rights, options or
warrants covered by this clause (b) are not so issued or expire or terminate
before being exercised, the Current Warrant Price then in effect shall be
appropriately readjusted.
4.3. Common Share Distribution.
(a) If, other than in an Exempt Distribution, the Company shall issue or
otherwise sell any shares of its Common Stock (any such issuance or sale other
than an Exempt Distribution, including any event described in paragraphs (b) and
(c) of this Section 4.3, hereafter being called a "Common Share Distribution"),
the Current Warrant Price shall be reduced to the price (calculated to the
nearest cent) determined by multiplying the Current Warrant Price in effect
immediately prior to such Common Share Distribution by a fraction, the numerator
of which shall be the sum of (A) the number of shares of Common Stock
outstanding immediately prior to such Common Share Distribution multiplied by
the Market Price per share on the date of such Common Share Distribution plus
(B) the consideration received by the Company upon such Common Share
Distribution, and the denominator of which shall be the product of (1) the total
number of shares of Common Stock outstanding immediately after such Common Share
Distribution, multiplied by (2) the Market Price per share on the date of such
Common Share Distribution.
No adjustment of the Current Warrant Price shall be made in an amount less
than 1% of such Current Warrant Price, but any such lesser adjustment shall be
carried forward and shall be made at the time of, and together with, the next
subsequent adjustment which together with any adjustments so carried forward
shall aggregate an amount equal to or greater than 1% of such Current Warrant
Price.
If any Common Share Distribution shall require an adjustment to the Current
Warrant Price pursuant to the foregoing provisions of this Section 4.3, then
effective at the time
9
such adjustment is made, the number of shares of Common Stock subject to
purchase upon exercise of this Warrant shall be increased to a number determined
by multiplying the number of shares of Common Stock subject to purchase
immediately before such Common Share Distribution by a fraction, the numerator
of which shall be the number of shares outstanding immediately after giving
effect to such Common Share Distribution and the denominator shall be the sum of
the number of shares outstanding immediately before giving effect to such Common
Share Distribution plus the number of shares of Common Stock which the aggregate
consideration received by the Company with respect to such Common Share
Distribution would purchase at the Market Price on the date of such Common Share
Distribution (before giving effect to such Common Share Distribution). The
provisions of this Section 4.3 shall not operate to increase the Current Warrant
Price or reduce the number of shares of Common Stock subject to purchase upon
exercise of this Warrant.
(b) If, other than in an Exempt Distribution, the Company shall issue,
sell, distribute or otherwise grant in any manner (whether directly or by
assumption in a merger or otherwise) any rights to subscribe for or to purchase,
or any warrants or options for the purchase of, Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (such rights,
warrants or options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible Securities"),
whether or not such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per share for
which shares of Common Stock are issuable upon exercise of such Options or upon
conversion or exchange of such Convertible Securities (determined by dividing
(i) the aggregate amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Company upon the exercise of
all such Options, plus, in the case of Options to acquire Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the exercise of
such Options) shall be less than the Market Price per share on the date of
granting such Options (before giving effect to such grant), then, for purposes
of paragraph (a) above, the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of all
such Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued as of the date of granting of such Options and
thereafter shall be deemed to be outstanding and the Company shall be deemed to
have received as consideration such price per share, determined as provided
above, therefor, provided, however upon the expiration or termination of
Convertible Securities or Options, if any thereof shall not have been converted,
exchanged or exercised, the number of shares of Common Stock deemed to be issued
and outstanding pursuant to this subsection (b) shall be reduced by such number
of shares as to which Convertible Securities or Options shall have expired or
terminated unexercised, and such shares shall no longer be deemed to be issued
and outstanding, and the Current Warrant Price then in effect shall be
readjusted and thereafter be the price which it would have been had adjustment
been made on the basis of the issuance only of shares actually issued pursuant
to such Convertible Securities or Options. Except as otherwise provided in
paragraph (c) below, no additional adjustment of the Current Warrant Price shall
be made upon the actual exercise of such Options or upon conversion or exchange
of such Convertible Securities.
10
(c) If the purchase price provided for in any Option referred to in
paragraph (b) above, the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in paragraph
(b) above, or the rate at which any Convertible Securities referred to in
paragraph (b) above are convertible into or exchangeable for Common Stock shall
change at any time (other than under or by reason of provisions designed to
protect against dilution upon an event which results in a related adjustment
pursuant to this Section 4), the Current Warrant Price then in effect shall
forthwith be readjusted (effective only with respect to any exercise of this
Warrant after such readjustment) to the Current Warrant Price which would then
be in effect had the adjustment made upon the issue, sale, distribution or grant
of such Options or Convertible Securities been made based upon such changed
purchase price, additional consideration or conversion rate, as the case may be;
provided, however, that such readjustment shall give effect to such change only
with respect to such Options and Convertible Securities as then remain
outstanding.
(d) If any shares of Common Stock, Options or Convertible Securities shall
be issued, sold or distributed for cash, the consideration received therefor
shall be deemed to be the amount received by the Company therefor, after
deduction therefrom of any expenses incurred and any underwriting commission or
concessions paid or allowed by the Company in connection therewith. If any
shares of Common Stock, Options or Convertible Securities shall be issued, sold
or distributed for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall be deemed to be the
fair market value of such consideration, after deduction of any expenses
incurred and any underwriting commissions or concessions paid or allowed by the
Company in connection therewith. If any shares of Common Stock, Options or
Convertible Securities shall be issued in connection with any merger in which
the Company is the surviving corporation, the amount of consideration therefor
shall be deemed to be the fair market value of such portion of the assets and
business of the nonsurviving corporation as shall be attributable to such shares
of Common Stock, Option or Convertible Securities, as the case may be. If any
Options shall be issued in connection with the issue and sale of other
securities of the Company, together comprising one integral transaction in which
no specific consideration is allocated to such Options by the parties thereto,
such Options shall be deemed to have been issued for an amount of consideration
equal to the fair market value thereof.
(e) For the purposes of this Section 4, "Exempt Distribution" shall means
an issuance or other sale by the Company of any shares of its Common Stock:
(i) (a) to the Company's officers or directors or (b) to the Company's
officers, directors or employees pursuant to employee stock option, benefit
or incentive plans established for their benefit, whether in existence on
the date hereof or approved by the Board of Directors of the Company after
the date hereof, provided that the number of shares of Common Stock issued
from and after March 14, 2000 pursuant to all issuances and sales pursuant
to this subparagraph (i) does not exceed, in the aggregate, ten percent
(10%) of the Fully Diluted Outstanding of the Company March 14, 2000;
(ii) at a price per share of more than the greater of (a) the Current
Warrant Price or (b) eighty five percent (85%) of the Market Price;
11
(iii) upon the conversion or exercise of any options, warrants or
other convertible securities of the Company outstanding on March 14, 2000
and disclosed on the disclosure schedules to the Securities Purchase
Agreement;
4.4. Other Provisions Applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) When Adjustments to Be Made. The adjustments required by this Section 4
shall be made whenever and as often as any specified event requiring an
adjustment shall occur. For the purpose of any adjustment, any specified event
shall be deemed to have occurred at the close of business on the date of its
occurrence.
(b) Fractional Interests. In computing adjustments under this Section 4,
fractional interests in Common Stock shall be taken into account to the nearest
1/10th of a share.
(c) When Adjustment Not Required. If the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(d) Challenge to Good Faith Determination. Whenever the Board of Directors
of the Company shall be required to make a determination in good faith of the
fair value of any item under this Section 4, such determination may be
challenged in good faith by the Holder, and any dispute shall be resolved by an
investment banking firm of recognized national standing selected by the Holder
and reasonably acceptable to the Company.
(e) Proceeding Prior to Any Action Requiring Adjustment. As a condition
precedent to the taking of any action which would require an adjustment pursuant
to this Section 4, the Company shall take any action which may be necessary,
including obtaining regulatory approvals or exemptions, in order that the
Company may thereafter validly and legally issue as fully paid and nonassessable
all shares of Common Stock which the Holder is entitled to receive upon exercise
hereof.
4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
12
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of the Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate, subject to the Holder's consent, in order to provide for
adjustments of shares of Common Stock for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 4. For purposes of this Section 4.5, "common stock of the
successor or acquiring corporation" shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 4.4 shall similarly
apply to successive reorganizations, reclassifications, mergers, consolidations
or disposition of assets.
4.6. Other Action Affecting Common Stock. In case at any time or from time
to time the Company shall take any action in respect of its Common Stock, other
than any action taken in the ordinary course of the Company's business or any
action described in this Section 4, which would have a material adverse effect
upon the rights of the Holder, the number of shares of Common Stock and/or the
purchase price thereof shall be adjusted in such manner as may be equitable in
the circumstances, as determined in good faith by an investment bank selected by
Holder.
4.6. Certain Limitations. Notwithstanding anything herein to the contrary,
the Company agrees not to enter into any transaction which, by reason of any
adjustment hereunder, would cause the Current Warrant Price to be less than the
par value per share of Common Stock.
4.7. No Voting Rights. This Warrant shall not entitle its Holder to any
voting rights or other rights as a shareholder of the Company.
5. NOTICES TO HOLDER
5.1. Notice of Adjustments. Whenever the number of shares of Common Stock
for which this Warrant is exercisable, or whenever the price at which a share of
such Common Stock may be purchased upon exercise of the Warrants, shall be
adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by an executive officer of the Company setting forth,
in reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated, specifying the number of shares of
13
Common Stock for which this Warrant is exercisable and (if such adjustment was
made pursuant to Section 4.4 or 4.5) describing the number and kind of any other
shares of stock or Other Property for which this Warrant is exercisable, and any
change in the purchase price or prices thereof, after giving effect to such
adjustment or change. The Company shall promptly cause a signed copy of such
certificate to be delivered to the Holder in accordance with Section 14.2. The
Company shall keep at its office or agency designated pursuant to Section 12
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by the Holder, its
representatives, or any prospective purchaser of a Warrant designated by the
Holder.
5.2. Notice of Corporate Action. If at any time
(a) the Company shall take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend or other distribution
(whether in cash, , or any right to subscribe for or purchase any evidences of
its indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever, or to receive any warrants or other rights
(including, without limitation, rights to subscribe for or purchase any
evidences of its indebtedness, any shares of its stock or any other securities
or property of any nature whatsoever), or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least thirty (30) Business Days' prior written notice of the date on which a
record date shall be selected for such dividend, distribution or right or for
determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, and (ii) in the case of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least thirty (30)
Business Days' prior written notice of the date when the same shall take place.
Such notice in accordance with the foregoing clause also shall specify (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 14.2.
14
A reclassification of the Common Stock (other than a change in par value,
or from par value to no par value or from no par value to par value) into shares
of Common Stock and shares of any other class of stock shall be deemed a
distribution by the Company to the holders of its Common Stock of such shares of
such other class of stock within the meaning of this Section and, if the
outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change
shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 4.1.
6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the period
this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Closing Date, the Company shall at all times reserve and
keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants. All shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable, and not subject to preemptive rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the number
of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price,
15
the Company shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public regulatory body or bodies
having jurisdiction thereof.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to the
holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Company will in each such
case take such a record as of the close of business on a Business Day. The
Company will not at any time close its stock transfer books or Warrant transfer
books so as to result in preventing or delaying the exercise or transfer of any
Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred, hypothecated
or assigned before satisfaction of the conditions specified in this Section 9,
which conditions are intended to ensure compliance with the provisions of the
Securities Act with respect to the Transfer of any Warrant or any Warrant Stock.
Holder, by acceptance of this Warrant, agrees to be bound by the provisions of
this Section 9.
9.1. Restrictive Legend. The Holder by accepting this Warrant and any
Warrant Stock agrees that this Warrant and the Warrant Stock issuable upon
exercise hereof may not be assigned or otherwise transferred unless and until
(i) the Company has received an opinion of counsel for the Holder that such
securities may be sold pursuant to an exemption from registration under the
Securities Act or (ii) a registration statement relating to such securities has
been filed by the Company and declared effective by the Commission.
(a) Each certificate for Warrant Stock issuable hereunder shall bear a
legend substantially worded as follows unless such securities have been sold
pursuant to an effective registration statement under the Securities Act:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act") or any
state securities laws. The securities may not be offered for sale, sold,
assigned, offered, transferred or otherwise distributed for value except
(i) pursuant to an effective registration statement under the Act or any
state securities laws or (ii) pursuant to an exemption from registration or
prospectus delivery requirements under the Act or any state securities laws
in respect of which the Company has received an opinion of counsel
satisfactory to the Company to such effect. Copies of the agreement
covering both the purchase of the securities and restricting their transfer
may be obtained at no cost by written request made by the holder of record
of this certificate to the Secretary of the Company at the principal
executive offices of the Company."
(b) Except as otherwise provided in this Section 9, the Warrant shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
16
"This Warrant and the securities represented hereby have not been
registered under the Securities Act of 1933, as amended, or any state
securities laws and may not be transferred in violation of such Act, the
rules and regulations thereunder or any state securities laws or the
provisions of this Warrant."
9.2. Notice of Proposed Transfers. Prior to any Transfer or attempted
Transfer of any Warrants or any shares of Restricted Common Stock, the Holder
shall give five (5) days' prior written notice (a "Transfer Notice") to the
Company of Holder's intention to effect such Transfer, describing the manner and
circumstances of the proposed Transfer, and obtain from counsel to Holder an
opinion that the proposed Transfer of such Warrants or such Restricted Common
Stock may be effected without registration under the Securities Act or state
securities laws. After the Company's receipt of the Transfer Notice and opinion,
such Holder shall thereupon be entitled to Transfer such Warrants or such
Restricted Common Stock, in accordance with the terms of the Transfer Notice.
Each certificate, if any, evidencing such shares of Restricted Common Stock
issued upon such Transfer and the Warrant issued upon such Transfer shall bear
the restrictive legends set forth in Section 9.1, unless in the opinion of such
counsel such legend is not required in order to ensure compliance with the
Securities Act.
9.3. Required Registration. Pursuant to the terms and conditions set forth
in the Registration Rights Agreement, the Company shall prepare and file with
the Commission not later than the thirtieth (30th) day after the Closing Date, a
Registration Statement relating to the offer and sale of the Common Stock
issuable upon exercise of the Warrants and shall use its best efforts to cause
the Commission to declare such Registration Statement effective in accordance
with the terms set forth in Section 2(a) of the Registration Rights Agreement.
9.4. Termination of Restrictions. Notwithstanding the foregoing provisions
of Section 9, the restrictions imposed by this Section upon the transferability
of the Warrants, the Warrant Stock and the Restricted Common Stock (or Common
Stock issuable upon the exercise of the Warrants) and the legend requirements of
Section 9.1 shall terminate as to any particular Warrant or share of Warrant
Stock or Restricted Common Stock (or Common Stock issuable upon the exercise of
the Warrants) (i) when and so long as such security shall have been effectively
registered under the Securities Act and applicable state securities laws and
disposed of pursuant thereto or (ii) when the Company shall have received an
opinion of counsel that such shares may be transferred without registration
thereof under the Securities Act and applicable state securities laws. Whenever
the restrictions imposed by Section 9 shall terminate as to this Warrant, as
hereinabove provided, the Holder hereof shall be entitled to receive from the
Company upon written request of the Holder, at the expense of the Company, a new
Warrant bearing the following legend in place of the restrictive legend set
forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED
IN SECTION 9 HEREOF TERMINATED ON ________, 20__, AND ARE OF NO FURTHER
FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed
17
thereon. Whenever the restrictions imposed by this Section shall terminate as to
any share of Restricted Common Stock, as hereinabove provided, the holder
thereof shall be entitled to receive from the Company, at the Company's expense,
a new certificate representing such Common Stock not bearing the restrictive
legends set forth in Section 9.1.
9.5. Listing on Securities Exchange. If the Company shall list any shares
of Common Stock on any securities exchange, it will, at its expense, list
thereon, maintain and, when necessary, increase such listing of, all shares of
Common Stock issued or, to the extent permissible under the applicable
securities exchange rules, issuable upon the exercise of this Warrant so long as
any shares of Common Stock shall be so listed during the Exercise Period.
10. SUPPLYING INFORMATION
The Company shall cooperate with Holder in supplying such information as
may be reasonably necessary for Holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from Holder of evidence reasonably satisfactory
to it of the ownership of and the loss, theft, destruction or mutilation of this
Warrant and indemnity reasonably satisfactory to it (it being understood that
the written agreement of the Holder shall be sufficient indemnity), and in case
of mutilation upon surrender and cancellation hereof, the Company will execute
and deliver in lieu hereof a new Warrant of like tenor to Holder; provided, in
the case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant, such office to be
initially located at 0000 Xxxxx Xxxxxx, Xxxx Xxxxxxx, Xxxxxxxxxx 00000 fax:
(000) 000-0000, provided, however, that the Company shall provide prior written
notice to Holder of a change in address no less than thirty (30) days prior to
such change.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
18
14. MISCELLANEOUS
14.1. Nonwaiver and Expenses. No course of dealing or any delay or failure
to exercise any right hereunder on the part of Holder shall operate as a waiver
of such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Expiration Date. If the
Company fails to make, when due, any payments provided for hereunder, or fails
to comply with any other provision of this Warrant, the Company shall pay to
Holder such amounts as shall be sufficient to cover any direct and indirect
losses, damages, costs and expenses including, but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.
14.2. Notice Generally. Except as may be otherwise provided herein, any
notice or other communication or delivery required or permitted hereunder shall
be in writing and shall be delivered personally or sent by certified mail,
postage prepaid, or by a nationally recognized overnight courier service, and
shall be deemed given when so delivered personally or by overnight courier
service, or, if mailed, three (3) days after the date of deposit in the United
States mails, as follows:
(a) if to the Company, to:
USA Biosmass Corporation
0000 Xxxxx Xxxxxx
Xxxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxx Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to: Xxxxx & Xxxxxxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Stetpp, Jr., Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
(b) if to the Purchaser to: Siete Investors LLC
c\o WEC Asset Management LLC
000 Xxxxxxxxx Xxxx Xxxx
Xxxxxx-xx-xxx-Xxxxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to: Xxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
1350 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
19
The Company or the Holder may change the foregoing address by notice given
pursuant to this Section 14.2.
14.3. Indemnification. The Company agrees to indemnify and hold harmless
Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of any failure by the
Company to perform or observe in any respect any of its covenants, agreements,
undertakings or obligations set forth in this Warrant.
14.4. Remedies. Holder in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
14.5. Successors and Assigns. Subject to the provisions of Sections 3.1 and
9, this Warrant and the rights evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of
all Holders from time to time of this Warrant and, with respect to Section 9
hereof, holders of Warrant Stock, and shall be enforceable by any such Holder or
holder of Warrant Stock.
14.6. Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived only with the prior written consent of
the Company and the Holder.
14.7. Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Warrant.
14.8. Headings. The headings used in this Warrant are for the convenience
of reference only and shall not, for any purpose, be deemed a part of this
Warrant.
14.9. Governing Law. This Warrant shall be governed by the laws of the
State of New York, without regard to the provisions thereof relating to conflict
of laws. The Company consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state courts of the
State of New York sitting in the City of New York in connection with any dispute
arising under this Warrant or any of the transactions contemplated hereby, and
hereby waives, to the maximum extent permitted by law, any objection, including
any objections based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
20
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and its corporate seal to be impressed hereon and attested by its Secretary or
an Assistant Secretary.
Dated: March 14, 2000
USA BIOMASS CORPORATION
By:
----------------------------
Name:
Title: Chairman
Attest:
By:
------------------------
Name:
Title:
21
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for the purchase of ______ Shares of Common Stock of USA Biomass
Corporation, and herewith makes payment therefor in cash or by check or bank
draft made payable to the Company, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
_____________ whose address is _________________ and, if such shares of Common
Stock shall not include all of the shares of Common Stock issuable as provided
in this Warrant, that a new Warrant of like tenor and date for the balance of
the shares of Common Stock issuable hereunder be delivered to the undersigned.
-------------------------------
(Name of Registered Owner)
-------------------------------
(Signature of Registered Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
22
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
Name and Address of Assignee No. of Shares of
---------------------------- ----------------
Common Stock
and does hereby irrevocably constitute and appoint _______ ________________
attorney-in-fact to register such transfer on the books of USA Biomass
Corporation maintained for the purpose, with full power of substitution in the
premises.
Dated:__________________ Print Name:___________________
Signature:_____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
23
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 14, 2000 (this
"Agreement"), is made by and between USA Biomass Corporation, a Delaware
corporation (the "Company") and Siete Investors LLC, a Delaware limited
liability company (the "Purchaser").
W I T N E S S E T H:
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of the date
hereof among the Purchaser and the Company (the "Securities Purchase
Agreement"), the Company has agreed to issue and sell to the Purchaser, (i)
three thousand (3,000) shares of the Company's 6% Convertible Series C Preferred
Stock, stated value $1,000 per share (the "Preferred Stock") and (ii) warrants
(the "Warrants") to purchase one hundred thousand (100,000) shares of the common
stock par value $.001 per share of the Company (the "Common Stock");
WHEREAS, pursuant to the terms of the Preferred Stock and the Warrants, (i)
upon the conversion of the Preferred Stock, (ii) in lieu of dividend payments on
the Preferred Stock and (iii) upon exercise of the Warrants, the Company will
issue to the Purchaser shares of Common Stock (such shares are referred to
herein as the "Shares"); and
WHEREAS, to induce the Purchaser to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchaser
hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the following
meanings:
(i) "Effectiveness Deadline" shall have the meaning set forth in
section 2(a)(i) hereof.
(ii) "Filing Deadline" shall have the meaning set forth in Section
2(a)(i) hereof.
(iii) "Purchase Price" means the aggregate purchase price paid by the
Purchaser for the Preferred Stock and the Warrants.
(iv) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415
under the Securities Act or any successor rule providing for offering
securities on a continuous basis ("Rule 415"), and the declaration or
ordering of
24
effectiveness of such Registration Statement by the United States
Securities and Exchange Commission (the "Commission").
(v) "Registrable Securities" means the Shares.
(vi) "Registration Statement" means a registration statement or
registration statements of the Company filed under the Securities Act
covering Registrable Securities relating to the Shares.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings set-forth in the Securities Purchase Agreement.
2. Registration.
(a) Mandatory Registrations.
(i) Registration Statement. The Company shall prepare, and, as soon as
practicable but in no event later than thirty (30) days after the Closing
Date (as defined in the Securities Purchase Agreement) (the "Filing
Deadline"), file with the Commission a Registration Statement or
Registration Statements (as necessary) on Form S-3, covering the resale of
all of the Registrable Securities. In the event that Form S-3 is
unavailable for such a registration, the Company shall use Form S-1 or such
other form as is available for such a registration. Any Registration
Statement prepared pursuant hereto shall register for resale at least that
number of shares of Common Stock equal to the product of (x) two and, (y)
the sum of (i) the maximum number of Shares that are issuable upon
conversion of the Preferred Stock on the date of filing, and (ii) the
maximum number of Shares issuable upon exercise of the Warrants, in each
case, without regard to any limitation on any holder's ability to convert
any of the Warrants or the Preferred Stock and without regard to whether
any or all of such Preferred Stock or Warrants have been issued to
Purchaser (on the date calculated, the "Minimum Conversion Amount"). Such
Registration Statement shall state that, in accordance with Rule 416 under
the Securities Act, it also covers such indeterminate number of additional
Shares as may become issuable upon conversion of such Preferred Stock or
exercise of such Warrants (i) resulting from any adjustment in the
applicable Conversion Price of such Preferred Stock or the Exercise Price
of such Warrants or (ii) to prevent dilution resulting from stock splits or
stock dividends. If at any time the Minimum Conversion Amount exceeds the
total number of Shares so registered, the Company shall, within five (5)
business days after receipt of a written notice from the Purchaser, either
(i) amend the Registration Statement or Registration Statements filed by
the Company pursuant to the preceding sentence, if such Registration
Statement has not been declared effective by the Commission at that time,
to register all of the Shares into which the Preferred Stock and the
Warrants may be converted or exercised, as applicable, or (ii) if such
Registration Statement has been declared effective by the Commission at
that time, file with the Commission an additional Registration Statement on
Form S-3, or such other appropriate form, to register the number of shares
of Common Stock into which the Preferred Stock and Warrants may be
converted or exercised, as applicable, that exceed the number of Shares
already registered. The Company shall use its best efforts to have the
Registration Statement declared effective within the earliest to occur of
(i) ninety (90) days following the Closing Date (ii) if the Commission
elects not to conduct a review of the Registration Statement, the date
which is three (3) business days after the date upon which either the
Company or its counsel is so notified, whether orally or in writing; or
(iii) if the Registration Statement is reviewed by the Commission, the date
which is three (3) business days after the date upon which the Company or
its counsel is notified by the
2
Commission, whether orally or in writing, that the Commission has no
further comments with respect to the Registration Statement or that the
Registration Statement may be declared effective. The earliest of such
dates is referred to herein as the "Required Effective Date."
Notwithstanding the use of the terms "Required Filing Date" and "Required
Effective Date" herein, the Company shall at all times use its best efforts
to file each required Registration Statement or amendment to a Registration
Statement as soon as possible after the Closing Date or after the date the
Company becomes obligated to file such Registration Statement or amendment,
as the case may be, and to cause each such Registration Statement or
amendment to become effective as soon as possible thereafter. No securities
of the Company other than the Registrable Securities shall be included in
any such Registration Statement.
(ii) The Company shall keep each Registration Statement effective
pursuant to Rule 415 at all times until such date as is the earlier of (i)
the date on which all of the Registrable Securities have been sold, (ii)
the date on which the Registrable Securities (in the opinion of counsel to
the Purchaser) may be immediately sold without restriction (including
without limitation as to volume by each holder thereof) without
registration under the Securities Act and (iii) the date which is twenty
four (24) months following the date on which the Registration Statement was
declared effective (the "Registration Period").
(b) Payments by the Company.
(i) (A) If the Registration Statement covering the Registrable
Securities is not filed in proper form with the Commission on or prior to
the Filing Deadline, (B) if the Registration Statement covering the
Registrable Securities is not effective on or prior to the Effectiveness
Deadline, (C) if the number of Shares listed for trading on the NASDAQ
National Market, as applicable, or reserved by the Company for issuance
shall be insufficient, for any period of five (5) consecutive days at any
time after the Effectiveness Deadline, for issuance upon the conversion of
the Shares and the exercise of the Warrants, or (D) upon the occurrence of
a Blackout Event (as described in Section 3(f) or Section 3(g) below), for
any period of five (5) consecutive days at any time after the Effectiveness
Deadline (each of the events described in clauses (A) through (D) of this
paragraph are referred to herein as a "Registration Default"), the Company
will make payments to the Purchaser in such amounts and at such times as
shall be determined pursuant to this Section 2(b).
(ii) The amount (the "Periodic Amount") to be paid by the Company to
the Purchaser as of each thirty (30) day period during which a Registration
Default shall be in effect (each such period, a "Default Period") shall be
equal to (x) with respect to any Registration Default described in Section
2(b)(i) clause (A) or (B), one percent (1%) of the Purchase Price paid by
the Purchaser for the first thirty (30) day period and two percent (2%) of
such amount for each thirty (30) day period thereafter and (y) with respect
to any Registration Default described in Section 2(b)(i) clause (C) or (D),
one percent (1%) of the Purchase Price paid by the Purchaser of any
securities affected by such event as described in Section 2(b)(i) clause
(C) or (D) for the first thirty (30) day period and two percent (2%) of
such amount for each thirty (30) day period thereafter; provided that, with
respect to any Default Period during which the relevant Registration
Defaults shall have been cured, the Periodic Amount shall be pro rated for
the number of days during such period during which the Registration
Defaults were pending; and provided, however, that the payment of such
Periodic Amounts shall not relieve the Company from its continuing
obligations to register the Shares pursuant to Section 2(a).
3
(iii) Each Periodic Amount shall be payable by the Company in cash or
other immediately available funds to the Purchaser monthly, without demand
therefor by the Purchaser.
(iv) The parties acknowledge that the damages which may be incurred by
the Purchaser if the Registration Statement is not filed by the Filing
Deadline, if the Registration Statement has not been declared effective by
the Effectiveness Deadline, or if the provisions of Section 3(e) or 3(f)
become applicable, may be difficult to ascertain. The parties agree that
the Periodic Amount represents a reasonable estimate on the part of the
parties, as of the date of this Agreement, of the amount of such damages.
(c) Piggyback Registration. (i) If at any time or from time to time, the
Company shall determine to register any of its securities, for its own account
or the account of any of its shareholders, other than a Registration relating
solely to employee share option plans or pursuant to an acquisition transaction
on Form S-4, the Company will:
(A) provide to the Purchaser written notice thereof as soon as
practicable prior to filing the Registration Statement; and
(B) include in such Registration Statement and in any underwriting
involved therein, all of the Registrable Securities specified in a written
request by the Purchaser made within fifteen (15) days after receipt of
such written notice from the Company.
(ii) If the Registration is for a registered public offering involving
an underwriting, the Company shall so advise the Purchaser as a part of the
written notice given pursuant to this Section. In such event, the rights of
the Purchaser hereunder shall include participation in such underwriting
and the inclusion of the Registrable Securities in the underwriting to the
extent provided herein. To the extent that the Purchaser proposes to
distribute its securities through such underwriting, the Purchaser shall
(together with the Company and any other security holders of the Company
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding
any other provision of this Section, if the managing underwriter of such
underwriting determines that marketing factors require a limitation of the
number of shares to be offered in connection with such underwriting, the
managing underwriter may limit the number of Registrable Securities to be
included in the Registration and underwriting (provided, however, (a) the
Registrable Securities shall not be excluded from such underwritten
offering prior to any securities held by officers and directors of the
Company or their affiliates, (b) the Registrable Securities shall be
entitled to at least the same priority in an underwritten offering as any
of the Company's existing security holders, and (c) the Company shall not
enter into any agreement that would provide any security holder with
priority in connection with an underwritten offering greater than the
priority granted to the Purchaser hereunder). The Company shall so advise
any of its other security holders who are distributing their securities
through such underwriting pursuant to their respective piggyback
registration rights, and the number of shares of Registrable Securities and
other securities that may be included in the registration and underwriting
shall be allocated among the Purchaser and all other security holders of
the Company in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by the Purchaser and such other
security holders at the time of the filing of the registration statement.
If the Purchaser disapproves of the terms of any such underwriting, it may
elect to withdraw therefrom by written
4
notice to the Company. Any Registrable Securities so excluded or withdrawn
from such underwriting shall be withdrawn from such Registration.
(d) Eligibility for Form S-1. The Company represents and warrants that it
meets all of the requirements for the use of Form S-1 for the Registration, of
the sale by the Purchaser of the Registrable Securities and any transferee who
purchases the Registrable Securities, and the Company shall file all reports
required to be filed by the Company with the Commission in a timely manner, and
shall take such other actions as may be necessary to maintain such eligibility
for the use of Form S-1.
(e) Priority in filing. From the date hereof until one hundred eighty (180)
days following the effective date of the Registration Statement pursuant to
Section 2(a) of this Agreement, provided, however, that such one hundred eighty
day period shall be extended by the number of days after the effective date of
such Registration Statement when the Purchaser is not permitted to utilize the
prospectus or otherwise to resell Registrable Securities, the Company shall not
permit the registration of any of its securities under the Securities Act to be
filed or to become effective, other than those covered by this Agreement,
without the prior written approval of the Purchaser.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following:
(a) Prepare and file with the Commission the Registration Statements
required by Section 2 of this Agreement and such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectuses used in connection with the Registration Statement, each in such
form as to which the Purchaser and its counsel shall not have objected, as may
be necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all of the
Registrable Securities and all of the Warrants of the Company covered by the
Registration Statement until such time as all of such Registrable Securities and
all of such Warrants have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(b) Furnish to the Purchaser, if the Registrable Securities of the
Purchaser are included in the Registration Statement, and its legal counsel
identified to the Company, promptly after the same is prepared and publicly
distributed, filed with the Commission, or received by the Company, a copy of
the Registration Statement, each preliminary prospectus, each final prospectus,
and all amendments and supplements thereto and such other documents, as the
Purchaser may reasonably request in order to facilitate the disposition of its
Registrable Securities and Warrants;
(c) Furnish to the Purchaser and its counsel copies of any correspondence
between the Company and the Commission with respect to any registration
statement or amendment or supplement thereto filed pursuant to this Agreement;
(d) Use all best efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Purchaser may reasonably request,
(ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations
5
and qualifications as may be necessary to maintain the effectiveness thereof at
all times during the Registration Period, (iii) take such other actions as may
be necessary to maintain such registrations and qualifications in effect at all
times during the Registration Period and (iv) take all other actions necessary
or advisable to qualify the Registrable Securities for sale in such
jurisdictions, provided that in connection therewith, the Company shall not be
required to qualify as a foreign corporation or to file a general consent to the
service of process in any jurisdiction;
(e) List such securities on the Nasdaq National Market and all the other
national securities exchanges on which any securities of the Company are then
listed, and file any filings required by the Nasdaq National Market and/or such
other exchanges.
(f) As promptly as practicable after becoming aware of such event, notify
each Purchaser of the occurrence of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and to use its best efforts to promptly prepare a
supplement or amendment to the Registration Statement or other appropriate
filing with the Commission to correct such untrue statement of omission, and to
deliver a number of copies of such supplement or amendment to the Purchaser as
the Purchaser may reasonably request;
(g) As promptly as practicable after becoming aware of such event, notify
the Purchaser who holds Warrants or Registrable Securities being sold (or, in
the event of an underwritten offering, the underwriters) of the issuance by the
Commission or any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time, and to use its best
efforts to promptly obtain the withdrawal of such stop order or other suspension
of effectiveness;
(h) As promptly as practicable after becoming aware of such event, notify
the Purchaser who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance by the
Commission or any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time, and to use its best
efforts to promptly obtain the withdrawal of such stop order or other suspension
of effectiveness (the occurrence of any of the events described in paragraphs
(f) and (g) of this Section 3 is referred to herein as a "Blackout Event");
(i) During the period commencing upon (i) the Purchaser's receipt of a
notification pursuant to Section 3(f) above, or (ii) the entry of a stop order
or other suspension of effectiveness of the Registration Statement described in
Section 3(g) above, and ending at such time as (y) the Company shall have
completed the applicable filings (and if applicable, such filings shall have
been declared effective) and shall have delivered to the Purchaser the documents
required pursuant to Section 3(f) above, or (z), such stop order or other
suspension of the effectiveness of the Registration Statement shall have been
removed, the Company shall be liable to remit the payments required to be paid
pursuant to Section 2(b) above;
(j) If the offering is underwritten, at the request of a Purchaser, to
furnish on the date that Registrable Securities are delivered to the
underwriters for sale pursuant to such registration: (i) an opinion dated such
date of counsel representing the Company for the purposes of such registration,
addressed to the underwriters and to any Purchaser selling Registrable
6
Securities in connection with such underwriting, stating that such registration
statement has become effective under the Securities Act and that (A) to the best
knowledge of such counsel, no stop order suspending the effectiveness thereof
has been issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act and (B) the registration
statement, the related prospectus and each amendment or supplement thereof
comply as to form in all material respects with the requirements of the
Securities Act (except that such counsel need not express any opinion as to
financial statements or other financial data contained therein) and (ii) a
letter dated such date from the Company's independent public accountants
addressed to the underwriters and to the Purchaser, stating that they are
independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the
Company included in the registration statement or the prospectus, or any
amendment or supplement thereof, comply as to form in all material respects with
the applicable accounting requirements of the Securities Act, and such letter
shall additionally cover such other financial matters (including information as
to the period ending no more than five (5) business days prior to the date of
such letter) with respect to such registration as such underwriters may
reasonably request; and
(k) Cooperate with the Purchaser to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be offered pursuant
to the Registration Statement and to enable such certificates for the
Registrable Securities to be in such denominations or amounts, as the case may
be, as the Purchaser may reasonably request, and registered in such names as the
Purchaser may request; and, within three (3) business days after a Registration
Statement which includes Registrable Securities is ordered effective by the
Commission, the Company shall deliver, and shall cause legal counsel selected by
the Company to deliver, to the transfer agent for the Registrable Securities
(with copies to the Purchaser) an appropriate instruction and opinion of such
counsel.
4. Obligations of the Purchaser. In connection with the registration of the
Registrable Securities, the Purchaser shall have the following obligations:
(a) Take all other reasonable actions necessary to expedite and facilitate
the disposition by the Purchaser of the Registrable Securities pursuant to the
Registration Statement.
(b) Furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of and
the Registrable Securities held by it, as shall be reasonably required to effect
the registration of such Registrable Securities, and the Purchaser shall execute
such documents in connection with such registration as the Company may
reasonably request. At least five (5) days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify the Purchaser of
the information the Company included in the Registration Statement.
(c) The Purchaser, by its acceptance of the Registrable Securities, agrees
to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of any Registration Statement
hereunder.
(d) The Purchaser agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(f) or 3(g)
above, it will immediately discontinue disposition of its Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such copies of the supplemented or amended prospectus contemplated by
Section 3(f) or 3(g) shall be furnished to the Purchaser.
7
5. Expenses of Registration. All expenses, other than underwriting
discounts and commissions and other fees and expenses of investment bankers and
other than brokerage commissions, incurred in connection with registrations,
filings or qualifications pursuant to Section 3, but including, without
limitation, all registration, listing, and qualification fees, printing and
accounting fees, and the fees and disbursements of counsel for the Company, and
the fees of one counsel to the Purchaser with respect to each Registration
Statement filed pursuant hereto, shall be borne by the Company.
6. Indemnification. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) The Company will indemnify and hold harmless the Purchaser, each of its
officers, directors, shareholders and members, and each person, if any, who
controls the Purchaser within the meaning of the Securities Act or the Exchange
Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) incurred (collectively, "Claims") to
which any of them may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the
Commission) or the omission to state therein any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state or
foreign securities law or any rule or regulation under the Securities Act, the
Exchange Act or any state or foreign securities law (the matters in foregoing
clauses (i) through (iii) being, collectively, "Violations"). The Company shall,
subject to the provisions of Section 6(b) below, reimburse the Purchaser,
promptly as such expenses are incurred and are due and payable, for any legal
and other costs, expenses and disbursements in giving testimony or furnishing
documents in response to a subpoena or otherwise, including without limitation,
the costs, expenses and disbursements, as and when incurred, of investigating,
preparing or defending any such action, suit, proceeding or investigation
(whether or not in connection with litigation in which the Purchaser is a
party), incurred by it in connection with the investigation or defense of any
such Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (i) apply to
any Claim arising out of or based upon a modification which occurs in reliance
upon and in conformity with information furnished in writing to the Company by
or on behalf of any Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto; (ii) with respect to any preliminary prospectus, inure to
the benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the final prospectus, as then amended or supplemented, if such final
prospectus was timely made available by the Company pursuant to Section 3(b)
hereof; (iii) be available to the extent that such Claim is based upon a failure
of the Purchaser to deliver or to
8
cause to be delivered the prospectus made available by the Company, if such
prospectus was timely made available by the Company pursuant to Section 3(b)
hereof; or (iv) apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Purchaser pursuant to Section 9. The Purchaser will indemnify the Company
and its officers and directors against any Claims arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company, by or on behalf of the Purchaser, expressly
for use in connection with the preparation of the Registration Statement,
subject to such limitations and conditions as are applicable to the
Indemnification provided by the Company in this Section 6.
(b) Promptly after receipt by an Indemnified Person under this Section 6 of
notice of the commencement of any action (including any governmental action),
such Indemnified Person shall, if a Claim in respect thereof is to be made
against any indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement thereof, and the indemnifying party
shall have the right to participate in, and to the extent that the indemnifying
party so desires, jointly with any other indemnifying party similarly notified,
to assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying party and the Indemnified Person, provided, however, that an
Indemnified Person shall have the right to retain its own counsel with the
reasonable fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person and any other party represented by such counsel
in such proceeding. In such event, the Company shall pay for only one separate
legal counsel for the Purchaser, and such legal counsel shall be selected by the
Purchaser. The failure to deliver written notice to an indemnifying party within
a reasonable time after the commencement of any such action shall not relieve
such indemnifying party of any liability to the Indemnified Person under this
Section 6, except to the extent that the indemnifying party is materially
prejudiced in its ability to such action. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
(c) No indemnifying party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Person of an unconditional and irrevocable release from all
liability in respect of such claim or litigation.
(d) Notwithstanding the foregoing, to the extent that any provisions
relating to indemnification or contribution contained in the underwriting
agreements entered into among the Company, the underwriters and the Purchaser in
connection with the underwritten public offering are in conflict with the
foregoing provisions, the provisions in such underwriting agreements shall be
controlling as to the Registrable Securities included in the public offering;
provided, however, that if, as a result of this Section 6(d), the Purchaser, its
officers, directors, shareholders, members or any person controlling the
Purchaser is or are held liable with respect to any Claim for which they would
be entitled to indemnification hereunder but for this Section
9
6(d) in an amount which exceeds the aggregate proceeds received by the Purchaser
from the sale of Registrable Securities included in a registration pursuant to
such underwriting agreement (the "Excess Liability"), the Company shall
reimburse the Purchaser for such Excess Liability.
7. Contribution. To the extent any indemnification by an indemnifying party
is prohibited or limited under applicable law, the indemnifying party agrees to
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage, liability or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the Indemnified Person on the other hand in connection with the
statements or omissions which resulted in such Claim, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and the Indemnified Person shall be determined by reference to, among other
things, whether the untrue statement of a material fact or the omission to state
a material fact on which such Claim is based relates to information supplied by
the indemnifying party or by the Indemnified Person, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding the forgoing, (a) no contribution
shall be made under circumstances where the payor would not have been liable for
indemnification under the fault standards set forth in Section 6, (b) no seller
of Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
such fraudulent misrepresentation and (c) contribution by any seller of
Registrable Securities shall be limited in amount to the net proceeds received
by such seller from the sale of such Registrable Securities. The Company and the
Purchaser agree that it would not be just and equitable if contribution pursuant
to this Section 7 were determined by pro-rata allocation (even if the Purchaser
and any other party were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in this Section.
8. Reports Under Exchange Act.
With a view to making available to the Purchaser the benefits of Rule 144
promulgated under the Securities Act or any other similar rule or regulation of
the Commission that may at any time permit the Purchaser to sell securities of
the Company to the public without registration ("Rule 144"), the Company agrees
to:
(i) make and keep public information available, as those terms are
understood and defined in Rule 144;
(ii) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and
(iii) furnish to the Purchaser so long as the Purchaser owns
Registrable Securities, promptly upon request, (i) a written statement by
the Company that it has complied with the reporting requirements of the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual
or periodic report of the Company and such other reports and documents so
filed by the Company and (iii) such other information as may be reasonably
requested to permit the Purchaser to sell such securities pursuant to Rule
144 without registration.
9. Assignment of the Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by Purchaser to any transferee of all or any portion of
the Shares, Warrants or the underlying
10
Common Stock held by Purchaser if: (a) Purchaser agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the Securities with respect to which such registration rights
are being transferred or assigned; (c) at or before the time the Company
receives the written notice contemplated by clause (b) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein; and (d) the transfer of the relevant Securities
complies with the restrictions set forth in Section 4 of the Securities Purchase
Agreement.
10. Amendment of Registration Rights. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Purchaser. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon Purchaser and
the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Warrants or Registrable
Securities whenever such person or entity owns of record such Warrants or
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Warrants or Registrable Securities, the Company shall act upon the basis of
the instructions, notice or election received from the registered owner of such
Warrants or Registrable Securities.
(b) Any notice required or permitted hereunder shall be given in writing
(unless otherwise specified herein) and shall be effective upon personal
delivery, via facsimile (upon receipt of confirmation of error-free transmission
and mailing a copy of such confirmation postage prepaid by certified mail,
return receipt requested) or two business days following deposit of such notice
with an internationally recognized courier service, with postage prepaid and
addressed to each of the other parties thereunto entitled at the following
addresses, or at such other addresses as a party may designate by ten (10) days
advance written notice to each of the other parties hereto.
COMPANY: USA Biomass Corporation
0000 Xxxxx Xxxxxx
Xxxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxx Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
11
With a copy to:
Xxxxx & Xxxxxxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Stetpp, Jr., Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
PURCHASER:
Siete Investors LLC
000 Xxxxxxxxx Xxxx Xxxx
Xxxxxx-xx-xxx-Xxxxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxx X. Xxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
1350 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York, except for provisions with respect to
internal corporate matters of the Company which shall be governed by the
corporate laws of the State of Virginia. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such validity 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. Subject to the provisions of Section 10 hereof, this
Agreement may be amended only by an instrument in writing signed by the party to
be charged with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
12
(e) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. This Agreement supersedes all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement shall
inure for the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The Company acknowledges that any failure by the Company to perform its
obligations under Section 2(a), or any delay in such performance could result in
direct damages to the Purchaser, and the Company agrees that, in addition to any
other liability the Company may have by reason of any such failure or delay, the
Company shall be liable for all direct damages caused by any such failure or
delay. Nothing herein shall limit the Purchaser's right to pursue any claim
seeking such direct damages.
[REMAINDER OF PAGE INTENTIONALLY BLANK, SIGNATURE PAGE FOLLOWS]
13
IN WITNESS WHEREOF, this Agreement has been duly executed by the
undersigned.
"COMPANY"
USA BIOMASS CORPORATION
By:
---------------------------------
Name:
Title:
"PURCHASER"
SIETE INVESTORS LLC
By: WEC ASSET MANAGEMENT LLC, Manager
By:
---------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Managing Director
14
EXHIBIT D
[FORM OF OPINION OF COUNSEL]
March 14, 2000
Siete Investors LLC
c\o WEC Asset Management LLC
000 Xxxxxxxxx Xxxx Xxxx
Xxxxxx-xx-xxx-Xxxxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Re: USA Biomass Corporation
-----------------------
Dear Sirs:
This opinion is delivered to you pursuant to a Securities Purchase
Agreement (the "Purchase Agreement") dated as of March 14, 2000, between Siete
Investors LLC, Delaware limited liability company (the "Purchaser") and USA
Biomass Corporation, a Delaware corporation (the "Company"), in connection with
the sale by the Company and purchase by the Purchaser of the Company's Shares
and Warrants (as such terms are defined in the Purchase Agreement). All
capitalized terms not otherwise defined herein shall have the meanings given
them in the Purchase Agreement.
I have examined and am familiar with the Certificate of Incorporation and
By-laws of the Company any and all amendments thereto. I have also examined and
am familiar with the Primary Agreements and any and all other instruments
executed and delivered by or on behalf of the Company in connection with the
Purchase Agreement and the transactions contemplated thereunder. In addition to
the foregoing, I have examined such minutes and other corporate proceedings of
the Company and such matters of law, documents and certificates of public
officials as I have deemed necessary in rendering my opinion. In all such
examinations, I have assumed the genuineness of all the signatures on original
documents and the conformity to original and certified documents of all copies
submitted to us as conformed or photostatic copies.
Based upon the foregoing, I am of the opinion that:
1. The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to own its
properties and to carry on its business as now being conducted and is duly
qualified and in good standing as a foreign corporation in, and is authorized to
do business under the laws of, each jurisdiction where the character of the
properties owned or leased by it or the transaction of its business makes such
qualification or authorization necessary and in which the failure to so qualify
would have a material adverse effect on the Company and its subsidiaries taken
as a whole.
[________] Investors LLC
March __, 2000
Page 2
2. The authorized and issued and outstanding capital stock of the Company
are as stated in Section 3(b) of the Purchase Agreement. All shares of the
outstanding capital stock of the Company have been validly issued and are fully
paid and non-assessable. To my knowledge, Schedule 3 (b) of the Purchase
Agreement accurately sets forth the information to be provided therein pursuant
to Section 3 (b) of the Purchase Agreement.
3. The issuance by the Company of the Shares and Warrants (collectively,
the "Initial Securities"), and the shares of Common Stock issuable upon
conversion of, or in lieu of dividend payments on, the Shares and Additional
Shares and exercise of the Warrants (collectively, the "Shares") have been duly
authorized and the Initial Securities have been validly issued and the
consideration to be paid therefor under the Purchase Agreement has been fully
paid. The Common Stock issuable upon conversion of, or in lieu of dividend
payments on, the Preferred Stock, and upon exercise of the Warrants, when issued
in accordance with the Primary Documents, shall 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 a holder. There are no preemptive
rights of any stockholder of the Company to acquire any of the Initial
Securities or the Shares (collectively, the "Collective Securities").
4. The Common Stock is registered under Section 12 of the Securities
Exchange Act of 1934, as amended. The Company has duly and timely filed all
materials and documents required to be filed pursuant to all reporting
obligations under either Section 13(a) or 15(d) of the Exchange Act, if any,
through the date hereof (prior to the offer and sale of the Securities). The
Common Stock is listed and traded on the Nasdaq National Market, and to my
knowledge there is no pending or contemplated action or proceeding of any kind
to suspend the trading of the Common Stock.
5. The Company has the requisite corporate power and authority to enter
into the Purchase Agreement and to issue and deliver the Collective Securities.
6. The Primary Documents and the transactions contemplated thereby, have
been duly and validly authorized by the Company and are legal, valid and binding
agreements of the Company, enforceable in accordance with their respective
terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors' rights
generally and to general principles of equity.
7. The execution and delivery of the Primary Documents and the consummation
by the Company of the other transactions contemplated thereby, does 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, the Certificate of Incorporation
or By-laws of the Company, or, to my knowledge, (i) any material indenture,
mortgage, deed of trust or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which they or any of their properties
or assets are bound, or (ii) any existing applicable law, rule, or regulation or
any applicable decree, judgment or order of any court or United States Federal
or state regulatory body, administrative agency, or any other governmental body
having jurisdiction over the Company, its subsidiaries, or any of their
properties or assets. Except as set forth on
[________] Investors LLC
March __, 2000
Page 3
Schedule 3(h) to the Purchase Agreement, neither the filing of the registration
statement required to be filed by the Company pursuant to the Registration
Rights Agreement nor the offering or sale of the Collective Securities gives
rise to any rights for or relating to the registration of any shares of the
Common Stock.
8. No authorization, approval or consent of any court, governmental body,
regulatory agency, self-regulatory organization, stock exchange or market or the
stockholders of the Company is required to be obtained by the Company for the
entry into or the performance of the Primary Documents by the Company.
9. To my knowledge, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or threatened
against or affecting the Company or any of its subsidiaries, in which an
unfavorable decision, ruling or finding would have a material adverse effect on
the properties, business, condition (financial or other) or results of
operations of the Company and its subsidiaries, taken as a whole, or the
transactions contemplated by the Primary Documents, or which would adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, the Primary Documents.
10. To my knowledge, neither the Company nor any of its subsidiaries is in
default in the performance or observance of any obligation, covenant or
condition contained in any material indenture, mortgage, deed of trust or other
instrument or agreement to which it is a party or by which it or its property
may be bound.
11. Subject to the accuracy of the Purchaser's representations and
warranties set forth in Section 2 of the Purchase Agreement, the offer, sale and
issuance of the Securities and the other securities as contemplated by the
Purchase Agreement are exempt from the registration requirements of the
Securities Act.
This opinion is rendered only with regard to the matters set out in the
numbered paragraphs above. No other opinions are intended nor should they be
inferred.
The opinions expressed herein are given to you solely for your use in
connection with the transaction contemplated by the Purchase Agreement and may
not be relied upon by, or delivered to, any other person or entity or for any
other purpose without my prior written consent.
Sincerely,
