EXHIBIT J
SECURITIES PURCHASE AGREEMENT
THIS IS A SECURITIES PURCHASE AGREEMENT (this "Agreement") by and
between the undersigned ("Purchasers"), and AER Energy Resources, Inc., a
Georgia corporation ("AER"), dated as of January 31, 2002, and by which
Purchasers and AER, in consideration of the agreements set forth below (the
mutuality, adequacy and sufficiency of which are hereby acknowledged), hereby
agree as follows:
1. Agreement to Purchase and Sell. Upon the terms set forth in
this Agreement, each Purchaser hereby agrees to purchase from AER and AER
agrees to sell to each Purchaser (i) (A) such number of shares of AER's no par
value Series D Convertible Preferred Stock (the "Shares") set forth next to
such Purchaser's name on Exhibit A hereto and (ii) a warrant to purchase such
number of shares of AER's no par value Common Stock set forth next to such
Purchaser's name on Exhibit A hereto (collectively, the "Warrants") in the form
attached hereto as Exhibit B. The aggregate purchase price for each Purchaser
for its Shares and Warrants shall be the amount set forth next to such
Purchaser's name on Exhibit A hereto.
2. The Closing. The closing shall occur at 10:00 a.m. on January
31, 2002 (the "Closing") at the offices of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or as the parties shall
otherwise agree. At the Closing, the following shall occur:
(a) AER shall deliver to each Purchaser (i) a duly
completed and executed share certificate in the name of each Purchaser
representing its Shares, and (ii) a duly completed and executed Warrant.
(b) Each Purchaser shall deliver to AER by wire transfer
in immediately available federal funds the aggregate purchase price of its
Shares and its Warrant.
3. Representations and Warranties.
(a) By AER. AER hereby represents and warrants to each
Purchaser that:
(i) AER is a duly incorporated and organized
Georgia corporation validly existing and in good standing under Georgia law;
(ii) AER has the power and authority to issue
the Shares and the Warrant to Purchaser pursuant to this Agreement and to
execute, deliver and otherwise perform this Agreement, and without limiting the
foregoing, the Board of Directors of AER has authorized and approved the
execution, delivery and performance of this Agreement;
(iii) the Shares, the AER Common Stock ("Common
Stock") issuable upon exercise of the Warrants (the "Warrant Shares") and the
Common Stock issuable upon conversion of the Shares (the "Conversion Shares")
when issued will be validly issued, fully paid and non-assessable shares of
capital stock of AER free and clear of any liens, encumbrances,
adverse rights or claims of any kind whatsoever, and AER will at all times
maintain a number of authorized but unissued shares of Common Stock for
issuance of the Warrant Shares and the Conversion Shares;
(iv) this Agreement and the Warrants each has
been duly executed and delivered by AER, and constitutes the legal, valid and
binding obligation of AER, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency and other
laws and equitable principles affecting creditors' rights generally and the
discretion of the courts in granting equitable remedies;
(v) the execution, delivery and performance of
this Agreement and the Warrants each is in compliance with, and is not and will
not be, after the giving of notice or the passage of time or both, in violation
of (A) the articles of incorporation or bylaws of AER as amended or restated,
(B) any applicable law, regulation or order to which AER or its assets is
subject or bound, or (C) any agreement to which AER or its assets is subject or
bound (and without limiting the foregoing, will not result in any preemptive
rights or otherwise require the issuance of stock or other securities to
satisfy antidilution or other similar requirements);
(vi) all of the documents (the "SEC Documents")
filed by AER within the last thirty-six months prior to the date of this
Agreement with the Securities and Exchange Commission (the "Commission") in
accordance with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended
(collectively the "Securities Acts"), conformed in all material respects to the
requirements of the Securities Acts and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
(vii) the authorized capital stock of AER
consists of 100,000,000 shares of common stock, no par value ("Common Stock")
and 10,000,000 shares of preferred stock, no par value. As of December 31,
2001, AER had 25,522,121 shares of Common Stock outstanding, 609,000 shares of
preferred stock outstanding and warrants and options to purchase 4,616,601
shares of common stock outstanding. Other than warrants previously issued to FW
AER II, L.P., Elmwood Partners II (or their affiliates) and Rayovac
Corporation, stock options granted to employees, restricted stock issued to
directors and AER's outstanding Series A, Series B and Series C Convertible
Preferred Stock, all as described in the SEC Documents, AER has no outstanding
securities convertible into (or exercisable or exchangeable for) or evidencing
the right to purchase or subscribe for, shares of its capital stock or
authorized subscriptions, options, warrants, calls, rights, commitments or any
other agreements or arrangements, obligating it to issue any shares of its
capital stock or securities convertible into capital stock;
(viii) the financial statements (including any
related notes) included in the SEC Documents (the "Financial Statements"), have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as may be noted
therein) and fairly present, in all material respects, the financial condition,
results of operations and cash flows of AER as of the dates thereof and for the
periods ended on such
-2-
dates (in each case subject, as to interim statements, to changes resulting
from year-end adjustments (none of which were or could be expected to be
material in amount or effect)); and
(ix) except as set forth in the Financial
Statements and the August 15, 2001 Confidential Private Placement Memorandum,
as supplemented by the November 7, 2001 Supplement No. 1, the December 31, 2001
Supplement No. 2 and the January 25, 2002 Supplement ▇▇. ▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇,
▇▇▇▇, ▇▇▇ has conducted its business only in the ordinary course in
substantially the same manner as theretofore conducted, and AER has not
undergone or suffered any material adverse change in its condition, financial
or otherwise, business, operations, affairs, properties, assets or prospects.
(b) By Purchasers. Each Purchaser hereby represents and
warrants to AER:
(i) this Agreement has been duly executed and
delivered by Purchaser, and constitutes the legal, valid and binding obligation
of Purchaser, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency and other
laws and equitable principles affecting creditors' rights generally and the
discretion of the courts in granting equitable remedies;
(ii) Purchaser will acquire the Shares, the
Conversion Shares, the Warrant and the Warrant Shares (collectively the
"Securities") for its own account, to hold for investment, and with no present
intention of dividing its participation with others or reselling or otherwise
participating, directly or indirectly, in a distribution of the Securities, and
it will not make any sale, transfer, or other disposition of the Securities in
violation of the Securities Act or any applicable state securities laws (the
"State Acts"). There will be placed on the Warrant and any certificates for the
Shares, the Conversion Shares and the Warrant Shares, a legend stating in
substance:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS IN RELIANCE ON ONE OR MORE
EXEMPTIONS THEREUNDER AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN TRANSACTIONS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT THEREUNDER. THE
SECURITIES EVIDENCED HEREBY ARE SUBJECT TO
RESTRICTIONS ON TRANSFER CONTAINED IN A SECURITIES
PURCHASE AGREEMENT TO WHICH THE CORPORATION IS A
PARTY. ANY TRANSFER OF THE SECURITIES REPRESENTED
HEREBY IN VIOLATION OF SAID AGREEMENT SHALL BE VOID.
THE CORPORATION WILL MAIL TO THE
-3-
HOLDER OF THESE SECURITIES A COPY OF SUCH
RESTRICTIONS WITHOUT CHARGE WITHIN FIVE (5) DAYS
AFTER RECEIPT OF WRITTEN REQUEST THEREFOR ADDRESSED
TO THE CORPORATION.
(iii) Purchaser, in offering to subscribe for the
Securities hereunder, has been given access to all material and relevant
information concerning AER, thereby enabling Purchaser to make an informed
investment decision concerning the Securities. Purchaser has relied solely upon
an independent investigation made by it and its representatives, if any, and
has, prior to the date hereof, been given access to and the opportunity to
examine data and information relating to AER. In making its investment decision
to purchase the Securities, Purchaser is not relying on any oral or written
representations or assurances from AER or any other person or any
representation of AER or any other person other than as set forth in this
Agreement. Without limiting the foregoing, Purchaser has reviewed AER's Annual
Report on Form 10-K for the year ended December 31, 2000 and AER's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2001. Purchaser is an
"accredited investor" as defined in Rule 501 of Regulation D under the
Securities Act.
(iv) Purchaser understands and acknowledges that
an investment in the Securities involves a high degree of risk. Purchaser
represents that Purchaser is able to bear the economic risk of an investment in
the Securities, which Purchaser acknowledges are currently illiquid and may
remain illiquid indefinitely, including a possible total loss of its
investment. In making this statement Purchaser hereby represents and warrants
to AER that Purchaser has adequate means of providing for Purchaser's current
needs and contingencies, that Purchaser is able to afford to hold the
Securities for an indefinite period and that Purchaser has such knowledge and
experience in financial and business matters that Purchaser is capable of
evaluating the merits and risks of the investment in the Securities. Further,
Purchaser represents that Purchaser has no present need for liquidity in the
Securities and Purchaser is willing to accept such investment risks.
(v) Purchaser understands that no United States
federal or state agency, or similar agency of any other country, has reviewed,
approved, passed upon or made any recommendation or endorsement of AER or the
Securities.
(vi) This Agreement is made by AER with
Purchaser in reliance upon Purchaser's representations and covenants made in
this Section 3(b), which reliance by its execution of this Agreement Purchaser
hereby confirms.
(vii) Purchaser understands that the Securities
have not been registered under the Securities Act or any State Acts and are
being offered and sold pursuant to exemptions therefrom based in part upon the
representations of Purchaser contained herein.
(viii) Purchaser knows of no public solicitation
or advertisement of an offer in connection with the proposed issuance and sale
of the Securities.
-4-
(ix) Purchaser has reviewed with its tax
advisors the U.S. federal, state, local and foreign tax consequences of an
investment in the Securities and the transactions contemplated by this
Agreement. Purchaser is relying solely on such advisors and not on any
statements or representations of AER or any of its agents and understands that
Purchaser (and not AER) shall be responsible for Purchaser's own tax liability
that may arise as a result of this investment or the transactions contemplated
by this Agreement.
(x) Purchaser's acquisition of the Securities
is not a transaction (or any element of a series of transactions) that is a
part of a plan or scheme to evade the registration provisions of the Securities
Act.
4. Registration of Shares.
(a) Demand Registration. If at any time prior to eight
(8) years from the date of the Closing, AER shall receive a written request
from a Purchaser or Purchasers holding Shares, Conversion Shares, Warrants and
Warrant Shares representing at least 25% of the Common Stock issuable upon
conversion of the Shares and exercise of the Warrants that AER file a
registration statement under the Securities Act, covering the registration of
at least $2,000,000 of the Warrant Shares, the Conversion Shares, to the extent
such shares of Common Stock are not then freely tradable under the Securities
Act, AER shall first notify in writing any Purchaser who has not joined in such
request of such request. Each such Purchaser shall have ten (10) days in which
to notify AER of its intention to join in the request to register its shares.
Not later than ninety (90) days after receipt by AER of a written request for a
demand registration pursuant to this Section 4(a), AER shall file a
registration statement with the Commission relating to the shares as to which
such request for a demand registration relates (the "Requested Shares") and AER
shall use its best efforts to cause the registration statement (which may
cover, without limitation, an offering on a delayed or continuous basis open
for up to one hundred eighty (180) days pursuant to Commission Rule 415) for
the Requested Shares to become effective under the Securities Act. AER shall be
obligated to effect only three (3) registrations pursuant to this Section 4(a)
for all Purchasers, and only if the proposed aggregate selling price in any
such offering is at least $2,000,000.
(b) Delay of Registration. Notwithstanding anything to
the contrary in Section 4(a), AER shall have the right (i) to defer the initial
filing or request for acceleration of effectiveness of any registration
pursuant to Section 4(a) or (ii) after effectiveness, to suspend effectiveness
of any such registration statement or to require holders to suspend further
sales pending amendment (collectively a "Delay"), if, in the good faith
judgment of the Board of Directors of AER and upon the advice of counsel to
AER, such delay in filing or requesting acceleration of effectiveness or such
suspension of effectiveness or suspension of sales is necessary in light of the
existence of material non-public information (financial or otherwise)
concerning AER disclosure of which at the time is not, in the opinion of the
Board of Directors of AER and upon the advice of counsel, (A) otherwise
required and (B) in the best interests of AER; provided, however that AER will
not invoke a Delay for more than three (3) months, unless the reason for the
Delay is that AER is then engaged in an acquisition, in which case it will use
its best efforts to end the Delay as soon as possible and provided, further
that AER will not invoke Delays for more than an aggregate of six (6) months in
any calendar year.
-5-
The one hundred eighty (180) day period referred to herein during which the
registration statement may be kept current after its effective date shall be
extended for an additional number of business days equal to the number of
business days during which the right to sell shares was suspended pursuant to
the preceding sentence, and, if and to the extent necessary to effect such
extension, the eight (8)-year period referred to above shall also be extended.
In addition, the eight (8)-year period will also be extended if any
registration has been delayed pursuant to the foregoing and cannot be completed
within such period.
(c) "Piggyback" Registration. If at any time prior to
eight (8) years from the date of the Closing, AER shall determine to proceed
with the preparation and filing of a registration statement under the
Securities Act in connection with the proposed offer and sale for money of any
of its equity securities by it or any of its security holders (other than on
Form S-4 or Form S-8 promulgated under the Securities Act or any successor or
similar form), AER will give written notice of its determination to each
Purchaser. Upon the written request of a Purchaser given to AER within ten (10)
days after Purchaser's receipt of any such notice by AER, AER will cause all
the Conversion Shares and Warrant Shares and other shares of Common Stock which
Purchasers have requested to have registered (the "Piggyback Shares") to be
included in such registration statement; provided, however, that, if the
managing underwriter, in the case of an underwritten public offering,
determines and advises in writing that the inclusion in the registration
statement of all the Piggyback Shares proposed to be included by Purchasers
would interfere with the successful marketing of the securities proposed to be
registered by AER, then the number of such Piggyback Shares to be included in
the registration statement shall be reduced in accordance with the
recommendations of the managing underwriter, except that if the managing
underwriter determines and advises that the inclusion in such registration
statement of any Piggyback Shares would so interfere, then no Piggyback Shares
shall be included in such registration statement; provided that any such
reduction shall be made pro rata with respect to all Purchasers requesting such
registration.
(d) Expenses. With respect to each inclusion of shares
in a registration statement pursuant to Section 4(a) or 4(b), AER shall bear
the following fees, costs and expenses: all registration, filing and NASD fees,
printing expenses, fees and disbursements of counsel and accountants for AER
and all legal fees and disbursements and other expenses of complying with state
securities or blue sky laws of any jurisdictions in which the securities to be
offered are to be registered or qualified. Fees and disbursements not expressly
included above shall be borne pro rata by the Purchasers whose shares are
included in such registration statement.
(e) Indemnification, Etc. In the event that shares are
registered pursuant to Section 4(a) or 4(b), AER, Purchasers shall execute
reasonable and customary underwriting, indemnification and lock-up agreements
relating to such registration and shall undertake reasonable and customary
registration procedures.
(f) Termination of Rights. Notwithstanding anything to
the contrary in this Section 4, all registration rights set forth in this
Section 4 shall terminate with respect to each Purchaser at such time as it or
he is able to sell all of its or his Common Stock subject to such
-6-
registration rights pursuant to Rule 144 under the Securities Act within a
single three (3)-month period.
5. Survival; Indemnification. The representations, warranties
and agreements made in this Agreement shall survive the Closing. Each party,
acknowledging that each of the others is entitled to rely on its
representations, warranties and agreements in this Agreement in order to
preserve the benefit of the bargain otherwise represented by this Agreement,
agrees that neither the survival of such representations, warranties and
agreements, nor their enforceability nor any remedies for breaches of them
shall be affected by any knowledge of a party regardless of when or how such
party acquired such knowledge.
6. Miscellaneous.
(a) Good Faith Efforts; Further Assurances; Cooperation.
The parties shall in good faith undertake to perform their obligations in this
Agreement, to satisfy all conditions and to cause the transactions contemplated
in this Agreement to be carried out promptly in accordance with the terms of
this Agreement. Upon the execution of this Agreement and thereafter, each party
shall do such things as may be reasonably requested by the others in order more
effectively to consummate or document the transactions contemplated by this
Agreement. The parties shall cooperate with each other and their respective
counsel, accountants or representatives in connection with any actions required
to be taken as part of their respective rights and obligations under this
Agreement.
(b) Notices. Each notice, communication and delivery
under this Agreement (i) shall be made in writing signed by the party making
the same, (ii) shall specify the section of this Agreement pursuant to which it
is given, (iii) shall be given either in person or by a nationally recognized
next business day delivery service or by telecopier, and (iv) if not given in
person, shall be given to a party at the address set forth below such party's
signature (or at such other address as a party may furnish to the other parties
to this Agreement pursuant to this Section 6(b)). If notice is given pursuant
to this Section 6(b) of a permitted successor or assign of a party, then notice
shall also thereafter be given as set forth above to such successor or assign
of such party.
(c) Assignment. No assignment or transfer by Purchasers
of their respective rights and obligations under this Agreement shall be made
by merger or other operation of law or otherwise except with the prior written
consent of AER. This Agreement is binding upon the parties and their successors
and assigns and inures to the benefit of the parties and their permitted
successors and assigns and, when appropriate to effect the binding nature of
this Agreement for the benefit of the other parties, of any other successor or
assign.
(d) Severability. Any determination by any court of
competent jurisdiction of the invalidity of any provision of this Agreement
that is not essential for accomplishing its purposes shall not affect the
validity of any other provision of this Agreement, which shall remain in full
force and effect and which shall be construed as to be valid under applicable
law.
-7-
(e) Controlling Law; Integration; Amendment; Waiver.
This Agreement is governed by, and shall be construed and enforced in
accordance with, the laws of the State of Georgia (except the laws of that
state that would render such choice of laws ineffective). This Agreement
supersedes all prior negotiations, agreements and understandings among the
parties as to its subject matter, constitutes the entire agreement among the
parties as to its subject matter and may not be altered or amended except in
writing signed by the parties. The failure of any party at any time or times to
require performance of any provision of this Agreement shall in no manner
affect the right to enforce the same; and no waiver by any party of any
provision or of a breach of any provision of this Agreement, whether by conduct
or otherwise, in any one of more instances shall be deemed or construed either
as a further or continuing waiver of any such provision or breach or as a
waiver of any other provision or of a breach of any other provision of this
Agreement.
(f) Copies. This Agreement may be executed in two or
more copies, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or its terms to produce or account
for more than one of such copies.
-8-
DULY EXECUTED and delivered by Purchasers and AER, as of January 31,
2002.
PURCHASERS:
Elmwood Partners II
-------------------------------------------
[name of Purchaser - please print]
[By:] /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
[signature of Purchaser
or authorized officer]
Name ▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Title: Managing Partner
--------------------------------
Address:
-------------------------------------------
-------------------------------------------
-------------------------------------------
AER: AER ENERGY RESOURCES, INC.
By: /s/ ▇.▇. ▇▇▇▇▇
----------------------------------------
▇.▇. ▇▇▇▇▇
Vice President and Chief Financial
Officer
Address:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
* * * * *
-9-
