EXHIBIT 10.3
NOTE AND WARRANT PURCHASE AGREEMENT
THIS NOTE AND WARRANT PURCHASE AGREEMENT (this "AGREEMENT"), is made
and entered into as of the 8th day of March, 2005, by and between National Coal
Corp., a Florida corporation (the "COMPANY"), located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, National Coal Corporation, a Tennessee corporation also
located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "BORROWER") which is the
wholly-owned subsidiary of the Company, and the purchaser identified on the
signature page to this Agreement (the "PURCHASER"), located at the address set
forth on the Signature Page to this Agreement.
ARTICLE 1.
AUTHORIZATION AND SALE OF SECURITIES
1.1 AUTHORIZATION. The Company and the Borrower have authorized
the sale and issuance to the Purchaser and others, in one or more closings, of
(i) senior secured promissory notes due no later than August 8, 2005 (the
"MATURITY DATE") in the form attached hereto as EXHIBIT A (the "NOTES"), which
Notes are issuable on the Closing Date (as defined below) as determined by the
Company, the Borrower and the purchasers thereof, in an aggregate principal
amount not exceeding $5,137,726, and (ii) warrants expiring on the fifth
anniversary of the Closing Date to purchase Common Stock, par value $0.0001 per
share of the Company ("COMMON STOCK"), in the form attached hereto as EXHIBIT B
(the "WARRANTS"), each at an exercise price per share of $8.50, which Warrants
are issuable on the Closing Date. The shares of capital stock issuable upon
exercise of the Warrants are referred to as the "WARRANT SHARES." The Notes, the
Warrants, and the Warrant Shares are collectively referred to as the
"Securities." The Company shall also deliver to the Purchaser as Closing the
Continuing Corporate Guaranty of the Company guaranteeing full payment and
performance of the Notes and the Security Agreement by the Borrower in the form
of EXHIBIT D hereto (the "GUARANTY").
1.2 AGREEMENT TO PURCHASE AND SELL NOTES. The Borrower agrees to
issue and sell to the Purchaser, and the Purchaser agrees to purchase from the
Company, a Note in the principal amount set forth on the Signature Page to this
Agreement (the "COMMITTED AMOUNT") on the terms and conditions set forth herein.
Additionally, in further consideration of the Purchaser's purchase of the Note
hereunder, the Company agrees to issue to the Purchaser a Warrant initially
exercisable for a number of Warrant Shares determined by multiplying 140,000 by
a ratio determined by dividing the Commitment Amount by the aggregate principal
amount of the Notes. The number and type of shares issuable upon exercise of the
Warrant are subject to adjustment as set forth in the Warrant.
1.3 CLOSING AND DELIVERY. The purchase and sale of the Note and
the Warrant shall occur at 3:00p.m., Eastern Time, on March 8, 2005, or at such
other time on or before March 10, 2005 as is mutually agreed upon by the
Company, the Borrower and the Agent (as defined below) on behalf of itself and
all purchasers of Notes. Such purchase and sale is referred to herein as the
"CLOSING," and the date of the Closing is referred to herein as the "CLOSING
DATE." The Closing shall be held at the offices of the Company first set forth
above. At the Closing, the Borrower shall deliver to the Purchaser the Note
being purchased at such Closing and the Purchaser shall deliver as directed in
writing by ▇.▇. ▇▇▇▇▇▇▇▇▇, agent for Superior Highwall
Miners, NV for the benefit of the Borrower one-half of the Committed Amount by
cashier's check or wire transfer in immediately available funds, up to the
amount necessary to purchase the Highwall Miner, Serial No. SHM-37-V/800
manufactured by Superior Highwall Miners, NV. The balance of the Committed
Amount shall be paid to Superior Highwall Miners, NV when due pursuant to the
terms of the Purchase Agreement described in Section 2.1(c), unless the Notes
have been repaid in full prior to such further disbursement date. At the
Closing, the Company shall also deliver or cause to be delivered to the
Purchaser a Warrant and a fully executed copy of the Security Agreement as
defined below.
1.4 NATURE OF OFFERING. The investment in the Securities is being
made in reliance upon the provisions of Section 4(2) ("SECTION 4(2)") of the
United States Securities Act of 1933, as amended (the "SECURITIES ACT"), and
Regulation D ("REGULATION D") and the other rules and regulations promulgated
under the Securities Act and/or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to the
investment to be made hereunder.
1.5 SECURITY AGREEMENT. The Company's obligations under the Note
will be secured by the collateral set forth in that certain Security Agreement
(the "SECURITY AGREEMENT"), dated as of the Closing Date, by and between the
Company and Crestview Capital Master, LLC as agent for itself and the other
purchasers of the Notes ("Agent"), in the form attached hereto as EXHIBIT C.
1.6 USE OF PROCEEDS. The Company and the Borrower shall use the
proceeds of the loans represented by the Notes to purchase the Highwall Miner
and ancillary equipment described more particularly in the Security Agreement,
and for no other purposes. The Company acknowledges that it will receive a
direct benefit from the loans to its subsidiary, the Borrower, which shall be
good and valid consideration for the Company's issuance of the Warrants and for
the Guaranty.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
2.1 BY THE COMPANY AND BORROWER. The Company and the Borrower,
jointly and severally, hereby represent and warrant to the Purchaser as follows:
(a) STATUS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida,
and the Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of Tennessee, and each has the corporate
power to own and operate its properties and assets, to carry on its business as
now conducted and to enter into and to perform its respective obligations under
this Agreement, the Note, the Warrant, and the Security Agreement (collectively,
the "TRANSACTION DOCUMENTS"). The Company and the Borrower are each duly
qualified to do business and is in good standing in each state in which a
failure to be so qualified would have a material adverse effect on the Company's
financial condition or its ability to own and operate its properties and assets
and conduct its business in the manner now conducted.
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(b) AUTHORIZATION. The Company and the Borrower each have
full legal right, power and authority to conduct its business and affairs. The
Company and the Borrower each have full legal right, power and authority to
enter into and perform its obligations under the Transaction Documents,
including the issuance of the Securities. The execution and delivery of this
Agreement, the borrowing hereunder, the execution and delivery of the other
Transaction Documents, and the performance by the Company and the Borrower of
their respective obligations thereunder, including the issuance of the
Securities, are within the corporate powers of the Company and the Borrower and
have been duly authorized by all necessary corporate action properly taken and
the Company and the Borrower have received all necessary governmental approvals,
if any, that are required. The officer(s) executing this Agreement and all of
the other Transaction Documents are duly authorized to act on behalf of the
Company and the Borrower, respectively.
(c) VALIDITY AND BINDING EFFECT. This Agreement and the
other Transaction Documents are the legal, valid and binding obligations of the
Company and the Borrower, enforceable in accordance with their respective terms,
subject to limitations imposed by bankruptcy, insolvency, moratorium or other
similar laws affecting the rights of creditors generally or the application of
general equitable principles. The Borrower is the BUYER as defined in that
certain Purchase Agreement dated January 10, 2005 between National Mine
Corporation and Superior Highwall Mining Systems, NV with respect to the
Borrower's purchase of the Collateral. The reference in such contract to
National Mine Corporation is a typographical error. Neither the Company nor the
Borrower have any knowledge of the existence of any entity known as National
Mine Corporation.
(d) NO CONFLICTS. Consummation of the transactions
contemplated hereby and the performance of the obligations of the Company and
the Borrower under and by virtue of the Transaction Documents, including the
issuance of the Securities, do not conflict with, and will not result in any
breach of, or constitute a default or trigger a lien under, any mortgage,
security deed or agreement, deed of trust, lease, bank loan or credit agreement,
corporate charter or bylaws, agreement or certificate of limited partnership,
partnership agreement, license, franchise or any other instrument or agreement
to which the Company or the Borrower is a party or by which the Company, the
Borrower or their respective properties may be bound or affected or to which the
Company or the Borrower has not obtained an effective waiver.
(e) EXEMPTION FROM REGISTRATION; VALID ISSUANCES. Subject
to the accuracy of the Purchaser's representations in SECTION 2.2, the sale of
the Securities will not require registration under the Securities Act and/or any
applicable state securities laws. The Warrant Shares issuable by the Company
upon exercise of the Warrant shall, if and when the Warrant is exercised in
accordance with its terms, be duly and validly issued, fully-paid and
non-assessable shares of capital stock, free of all liens, claims, encumbrances,
preemptive rights, rights of first refusal and restrictions on transfer, except
as imposed by applicable securities laws. At all times, the Company shall have
reserved for issuance and delivery upon exercise of the Warrant such number of
shares of Common Stock or other shares of capital stock of the Company as are
from time to time issuable upon exercise of the Warrant and shall take all steps
necessary to amend its Articles of Incorporation to provide sufficient reserves
of shares of Common Stock issuable upon exercise of the Warrant.
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(f) SEC DOCUMENTS. The Company has made available to the
Purchaser true and complete copies of the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2003 and each report, proxy statement or
registration statement filed by the Company with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") or the Securities Act since the filing of such
Annual Report through the date hereof (collectively such documents are referred
to as the "SEC DOCUMENTS"). As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act, and
rules and regulations of the SEC promulgated thereunder and the SEC Documents
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
interim statements, to normal year-end audit adjustments). Neither the Company
nor any of its subsidiaries has any material indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or otherwise, and
whether due or to become due) that would have been required to be reflected in,
reserved against or otherwise described in the financial statements or in the
notes thereto in accordance with GAAP and the published rules and regulations of
the SEC, which was not fully reflected in, reserved against or otherwise
described in the financial statements or the notes thereto included in the SEC
Documents or was not incurred in the ordinary course of business consistent with
the Company's past practices since the last date of such financial statements.
There is no information which has not been publicly disclosed which, in the good
faith judgment of the Company, would cause a reasonable investor to not make the
investment contemplated hereby.
(g) NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO
THIS TRANSACTION. Neither the Company, the Borrower nor any of their affiliates
nor any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising with respect to the Securities, or (ii) made any offers
or sales of any security or solicited any offers to buy any security under any
circumstances that would require registration of the Securities under the
Securities Act; PROVIDED, that neither the Company nor the Borrower makes any
representation or warranty with respect to the Purchaser or any other purchaser
of the Notes.
(h) NO MATERIAL ADVERSE EFFECT. Since September 30, 2004,
no Material Adverse Effect (as defined below) has occurred or exists with
respect to the Company, except as disclosed in the SEC Documents. For purposes
hereof, "MATERIAL ADVERSE EFFECT" shall mean any effect on the business,
operations, properties, prospects, material agreements or financial condition of
the Company or any subsidiary that is material and adverse to the Company and
its
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subsidiaries and affiliates, taken as a whole, and/or any condition,
circumstance, or situation that would prohibit or otherwise interfere with the
ability of the Company to enter into and perform any of its obligations under
the Transaction Documents in any material respect.
(i) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since
September 30, 2004, no event or circumstance has occurred or exists with respect
to the Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents.
(j) NO INTEGRATED OFFERING. Other than as described in
the SEC Documents or pursuant to an effective registration statement under the
Securities Act, or pursuant to the issuance or exercise of employee stock
options, or pursuant to its discussion with the Purchaser or any other purchaser
of the Notes in connection with the transactions contemplated hereby, the
Company has not issued, offered or sold the Notes or any shares of capital stock
within the six-month period next preceding the date hereof in a manner that
would make unavailable the exemption from Securities Act registration being
relied upon by the Company for the offer and sale to the Purchaser and the other
purchasers of the Securities as contemplated by this Agreement, and the Company
shall not permit any of its directors, officers or affiliates directly or
indirectly to take any action (including, without limitation, any offering or
sale to any person or entity of the Notes or shares of Common Stock), so as to
make unavailable the exemption from Securities Act registration being relied
upon by the Company for the offer and sale to the Purchaser and the other
purchasers of the Securities as contemplated by this Agreement.
(k) LITIGATION AND OTHER PROCEEDINGS. Except as disclosed
in the SEC Documents, there are no lawsuits or proceedings pending or, to the
knowledge of the Company, threatened, against the Company or any subsidiary,
including the Borrower, nor has the Company received any written or oral notice
of any such action, suit, proceeding or investigation, which could reasonably be
expected to either have a Material Adverse Effect or result in a judgment
against the Company in an amount in excess of $75,000. Except as set forth in
the SEC Documents, no judgment, order, writ, injunction or decree or award has
been issued by or, to the knowledge of the Company, requested of any court,
arbitrator or governmental agency which could result in a Material Adverse
Effect.
(l) NO MISLEADING OR UNTRUE COMMUNICATION. The Company
and, to the knowledge of the Company, any person representing the Company, or
any other person selling or offering to sell the Notes or Warrants in connection
with the transaction contemplated by this Agreement, have not made, at any time,
any oral communication in connection with the offer or sale of the same which
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
2.2 BY THE PURCHASER. The Purchaser hereby represents and warrants
to the Company and the Borrower as follows:
(a) STATUS. If Purchaser is a corporation, partnership,
trust or limited liability company, Purchaser is duly organized, validly
existing and in good standing (to the extent
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applicable) under the laws of the state of its formation, and has the power to
own and operate its properties, to carry on its business as now conducted and to
enter into and to perform its obligations under this Agreement and the other
Transaction Documents to which it is a party.
(b) AUTHORIZATION. Purchaser has the full legal right,
power and authority to enter into and perform its obligations under the
Transaction Documents. The execution and delivery of this Agreement, the
execution and delivery of each Transaction Document to which the Purchaser is a
party, and the performance by the Purchaser of its obligations hereunder and
thereunder are within the powers of the Purchaser and have been duly authorized
by all necessary action properly taken and the Purchaser has received all
necessary governmental approvals, if any, that are required. The person
executing this Agreement and all of the other Transaction Documents to which the
Purchaser is a party is duly authorized to act on behalf of the Purchaser.
(c) VALIDITY AND BINDING EFFECT. This Agreement and the
other Transaction Documents are the legal, valid and binding obligations of the
Purchaser, enforceable in accordance with their respective terms, subject to
limitations imposed by bankruptcy, insolvency, moratorium or other similar laws
affecting the rights of creditors generally or the application of general
equitable principles.
(d) INVESTMENT REPRESENTATIONS.
(i) Purchaser has such knowledge and experience
in financial and business matters, including investments of the type represented
by the Note and the Warrant and the capital stock issuable upon exercise of the
Warrant, as to be capable of evaluating the merits of investment in the Company
and can bear the economic risk of an investment in the Note and the Warrant and
the capital stock issuable upon exercise of the Warrant;
(ii) Purchaser is an "accredited investor" as
such term is defined in Rule 501 of Regulation D under the Securities Act; and
(iii) Purchaser is acquiring the Note and the
Warrant and, to the extent exercised, will be acquiring the capital stock
issuable upon exercise of the Warrant, for its own account and not with a view
to, or for resale in connection with, the distribution or other disposition
thereof in contravention of the Securities Act or any state securities law,
without prejudice, however, to Purchaser's right at all times to sell or
otherwise dispose of all or any part of the Securities pursuant to an effective
registration statement under the Securities Act and applicable state securities
laws, or under an exemption from such registration available under the
Securities Act and other applicable state securities laws.
(e) ABSENCE OF CONFLICTS. The execution and delivery of
this Agreement and the other Transaction Documents to which the Purchaser is a
party, and the consummation of the transactions contemplated thereby, and
compliance with the requirements thereof, will not violate any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on
Purchaser or (a) violate any provision of any indenture, instrument or agreement
to which Purchaser is a party or is subject, or by which Purchaser or any of its
assets is bound; (b) conflict with or constitute a material default thereunder;
(c) result in the creation or imposition of any lien
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pursuant to the terms of any such indenture, instrument or agreement, or
constitute a breach of any fiduciary duty owed by Purchaser to any third party;
or (d) require the approval of any third-party (which has not been obtained)
pursuant to any material contract, agreement, instrument, relationship or legal
obligation to which Purchaser is subject or to which any of its assets,
operations or management may be subject.
(f) DISCLOSURE; ACCESS TO INFORMATION. The Purchaser has
received all documents, records, books and other publicly available information
pertaining to Purchaser's investment in the Company that the Purchaser has
requested. The Company is subject to the periodic reporting requirements of the
Exchange Act, and the Purchaser has reviewed or received copies of all SEC
Documents that the Purchaser has requested.
(g) MANNER OF SALE. At no time was Purchaser presented
with or solicited by or through any leaflet, public promotional meeting,
television advertisement or any other form of general solicitation or
advertising.
ARTICLE 3.
LEGEND
Unless the Warrant Shares have been registered for resale or are
eligible to be sold pursuant to Rule 144(k), each certificate representing the
Warrant Shares will bear a legend in substantially the following form (the
"LEGEND"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION
THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
Notwithstanding the foregoing, the Warrants and the Warrant Shares may
be pledged to a financial institution which is an accredited investor as part of
a margin loan account.
ARTICLE 4.
DEFAULT AND REMEDIES
4.1 EVENTS OF DEFAULT. The occurrence of any of the following
shall constitute an Event of Default hereunder:
(a) Default in the payment of the principal of or
interest on the indebtedness evidenced by the Note in accordance with the terms
of the Note, which default is not cured
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and/or corrected by the Borrower or the Company within five (5) business days of
written notice thereof by Purchaser;
(b) The Borrower or the Company shall be liquidated,
dissolved, partitioned or terminated, or the charter thereof shall expire or be
revoked;
(c) The Borrower or the Company (i) shall generally not
pay or shall be unable to pay its debts as such debts become due, or (ii) shall
make an assignment for the benefit of creditors or petition or apply to any
tribunal for the appointment of a custodian, receiver or trustee for it or a
substantial part of its assets, or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution,
liquidation or other similar law or statute of any jurisdiction, whether now or
hereafter in effect, or (iv) shall have had any such petition or application
filed or any such proceeding commenced against it that is not dismissed within
sixty (60) days, or (v) shall indicate, by any act or intentional and purposeful
omission, its consent to, approval of or acquiescence in any such petition,
application, proceeding or order for relief or the appointment of a custodian,
receiver, trustee or other similar official for it or a substantial part of its
assets, or (vi) shall suffer any such custodianship, receivership or trusteeship
to continue undischarged for a period of sixty (60) days or more; or
(d) A material default by the Borrower or the Company in
the performance of any of its material obligations under this Agreement or any
of the other Transaction Documents (other than the payment of the principal of
or interest on the indebtedness evidenced by the Note, which shall be subject to
SECTION 4.1(a) above and not this CLAUSE (d)).
With respect to any material default described above in SECTION 4.1(d)
that is capable of being cured and that does not already provide its own cure
procedure, the occurrence of such material default shall not constitute an Event
of Default hereunder if such material default is fully cured and/or corrected
within fifteen (15) days of written notice thereof by Purchaser.
4.2 ACCELERATION OF MATURITY; REMEDIES. Upon the occurrence of any
Event of Default described in SECTION 4.1(c), the indebtedness evidenced by the
Note shall be immediately due and payable in full; and upon the occurrence of
any other Event of Default described above, the Agent, on behalf of the
Purchaser, at any time thereafter may at its option accelerate the maturity of
the indebtedness evidenced by the Note without notice of any kind. Upon the
occurrence of any such Event of Default and the acceleration of the maturity of
the indebtedness evidenced by the Note:
(a) The Agent, on behalf of the Purchaser, shall be
immediately entitled to exercise any and all rights and remedies possessed by
the Purchaser pursuant to the terms of the Note and all of the other Transaction
Documents; and
(b) The Agent, on behalf of the Purchaser, shall have any
and all other rights and remedies that the Purchaser may now or hereafter
possess at law, in equity or by statute.
4.3 REMEDIES CUMULATIVE; NO WAIVER. No right, power or remedy
conferred upon or reserved to the Purchaser by this Agreement or any of the
other Transaction Documents is intended to be exclusive of any other right,
power or remedy, but each and every such right, power and remedy shall be
cumulative and concurrent and shall be in addition to any other right,
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power and remedy given hereunder, under any of the other Transaction Documents
or now or hereafter existing at law, in equity or by statute. No delay or
omission by the Agent to exercise any right, power or remedy accruing upon the
occurrence of any Event of Default shall exhaust or impair any such right, power
or remedy or shall be construed to be a waiver of any such Event of Default or
an acquiescence therein, and every right, power and remedy given by this
Agreement and the other Transaction Documents to the Agent or the Purchaser may
be exercised from time to time and as often as may be deemed expedient by the
Agent or the Purchaser.
ARTICLE 5.
CONDITIONS TO CLOSING
5.1 CONDITIONS TO THE OBLIGATIONS OF PURCHASER. The obligations of
Purchaser to purchase the Note and the Warrant at the Closing and the other
obligations of Purchaser under this Agreement are subject to the satisfaction as
of the Closing of the following conditions, any of which may be waived in
writing in whole or in part by Purchaser:
(a) REPRESENTATIONS AND WARRANTIES. Each and every
representation and warranty of the Company and the Borrower contained in this
Agreement shall be true and correct as of the date hereof and as of the Closing
Date with the same force and effect as though each and every such representation
and warranty had been made at and as of such date (i.e., with respect to a
representation that a state of facts exists on or as of the date hereof, it is a
condition that such state of facts exists on or as of the Closing Date, and with
respect to a representation that a state of facts has or has not changed between
a date prior to the date hereof and the date hereof, it is a condition that such
state of facts has or has not changed between such prior date and the Closing
Date), except as affected by transactions contemplated hereby and except that
any such representation or warranty made as of a specified date (other than the
date of this Agreement) shall only need to have been true on and as of such
date.
(b) PERFORMANCE. The Company and the Borrower shall have
performed all obligations and complied with all covenants required by this
Agreement to be performed or complied with by the Company or the Borrower on or
prior to the Closing Date.
(c) DELIVERY OF GUARANTY. The Company shall have
delivered to the Purchaser the Guaranty, duly executed by the Company.
(d) DELIVERY OF SECURITY AGREEMENT. The Borrower shall
have delivered to the Agent the Security Agreement, duly executed by the
Borrower.
5.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE BORROWER.
The obligations of the Company and the Borrower to sell the Note and the Warrant
to Purchaser at the Closing and the other obligations of the Company and the
Borrower under this Agreement are subject to the satisfaction as of the Closing
of the following conditions, any of which may be waived in writing in whole or
in part by the Company and the Borrower:
(a) REPRESENTATIONS AND WARRANTIES. Each and every
representation and warranty of the Purchaser contained in this Agreement shall
be true and correct as of the date hereof and as of the Closing Date with the
same force and effect as though each and every such
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representation and warranty had been made at and as of such date (i.e., with
respect to a representation that a state of facts exists on or as of the date
hereof, it is a condition that such state of facts exists on or as of the
Closing Date, and with respect to a representation that a state of facts has or
has not changed between a date prior to the date hereof and the date hereof, it
is a condition that such state of facts has or has not changed between such
prior date and the Closing Date), except as affected by transactions
contemplated hereby and except that any such representation or warranty made as
of a specified date (other than the date of this Agreement) shall only need to
have been true on and as of such date.
(b) PERFORMANCE. The Purchaser shall have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by the Purchaser on or prior to the Closing Date.
ARTICLE 6.
TERMINATION
6.1 TERMINATION PRIOR TO CLOSING. Any party (the "TERMINATING
PARTY") may (but shall not be obligated to) terminate this Agreement prior to
the Closing by giving written notice to the other parties if any of the
conditions to the Terminating Party's obligations provided for in SECTION 5 have
not been satisfied as of the Closing (other than due to the Terminating Party's
failure to comply with its obligations under this Agreement) and the Terminating
Party has not expressly waived such condition in writing on or before the
Closing; PROVIDED, HOWEVER, that the right to terminate this Agreement under
this SECTION 6.1 shall not be available to a party if the failure of the
transactions contemplated by this Agreement to have been consummated is the
result of the breach of this Agreement or the bad faith or willful misconduct of
such party; provided, further, that no party shall be relieved of any liability
or obligation for any breach of this Agreement prior to such termination or for
any breach of this Agreement which arises out of or results from such party's
bad faith or willful misconduct.
6.2 TERMINATION FOLLOWING THE CLOSING. If the Closing occurs, this
Agreement shall remain in full force and effect until the later of (i) payment
in full by the Borrower or the Company of the full principal amount of the Note
and all accrued interest thereon, at which time the Purchaser shall cancel the
Note and deliver it to the Borrower, and (ii) the expiration of the Warrant.
6.3 EFFECT OF TERMINATION. The termination of this Agreement
pursuant to SECTION 6.1 shall not affect the right of any party to bring any
action for breach of this Agreement.
ARTICLE 7.
APPOINTMENT OF AGENT
7.1 APPOINTMENT. The Purchaser hereby designates Crestview Capital
Master, LLC as Agent to act as specified herein and in the other Transaction
Documents. The Purchaser hereby irrevocably authorizes the Agent to take such
action on its behalf under the provisions of this Agreement, the other
Transaction Documents and any other instruments and agreements referred to
herein or therein and to exercise such powers and to perform such duties
hereunder
10
and thereunder as are specifically delegated to or required of the Agent by the
terms hereof and thereof and such other powers as are reasonably incidental
thereto. The Agent may perform any of its duties hereunder by or through its
officers, directors, agents or employees.
7.2 NATURE OF DUTIES. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and the
other Transaction Documents. Neither the Agent nor any of its officers,
directors, agents or employees shall be liable for any action taken or omitted
by any of them hereunder or under any other Transaction Document or in
connection herewith or therewith, unless caused by its or their gross negligence
or willful misconduct. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement
or any other Transaction Document a fiduciary relationship in respect of the
Purchaser and nothing in this Agreement or any other Transaction Document,
expressed or implied, is intended to or shall be so construed as to impose upon
the Agent any obligations in respect of this Agreement or any other Transaction
Document except as expressly set forth herein. The Agent shall promptly transmit
to the Purchaser a copy of each notice given to it by the Company pursuant to
the terms of this Agreement and shall give notice to the Purchaser of any
default or Event of Default of which it becomes aware.
7.3 LACK OF RELIANCE ON THE AGENT. Independently and without
reliance upon the Agent, the Purchaser, to the extent it deems appropriate, has
made (i) its own independent investigation of the financial condition and
affairs of the Company and the Borrower in connection with the making of the
loan provided for hereunder and the taking or not taking of any action in
connection herewith and (ii) its own appraisal of the creditworthiness of the
Company and the Borrower and, except as expressly provided in this Agreement,
the Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide the Purchaser with any credit or other information
with respect thereto, whether coming into its possession before the making of
the loan or at any time or times thereafter. The Agent shall not be responsible
to the Purchaser for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing delivered in
connection herewith or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of this
Agreement or any other Transaction Document or the financial condition of the
Company or the Borrower or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any other Transaction Document, or the financial condition of the
Company or the existence or possible existence of any default or Event of
Default. Purchaser acknowledges that Crestview Capital Master, LLC is a
purchaser hereunder.
7.4 RELIANCE. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any person that the Agent believed to be the proper person, and, with respect to
all legal matters pertaining to this Agreement and any other Transaction
Document and its duties hereunder and thereunder, upon advice of counsel
selected by it.
7.5 INDEMNIFICATION. To the extent the Agent is not reimbursed and
indemnified by the Company or the Borrower, the Purchaser will reimburse and
indemnify the Agent, in proportion to the principal amount of the amounts owing
to the Purchaser and all other
11
purchasers of Notes, for and against any and all liabilities, obligations,
losses, damages, penalties, claims, actions, judgments, suits, costs, expenses
or disbursements of whatsoever kind or nature which may be imposed on, asserted
against or incurred by the Agent in performing its duties hereunder or under any
other Transaction Document; PROVIDED, HOWEVER, that the Purchaser shall not be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful misconduct.
7.6 THE AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its
obligation to purchase one or more of the Notes, the Agent shall have the rights
and powers specified in the Agent's respective purchase agreement as a purchaser
thereof and may exercise the same rights and powers as though it were not
performing the duties specified herein. Crestview Capital Master, LLC may lend
money to and generally engage in any kind of business with the Company or the
Borrower or any affiliate of the Company as if it were not performing the duties
specified herein, and may accept fees and other consideration from the Company
or the Borrower for services in connection with this Agreement and otherwise
without having to account for the same to the Purchaser.
7.7 SUCCESSION. The Agent may resign from the performance of all
its functions and duties hereunder and/or under the other Transaction Documents
at any time by giving fifteen (15) business days' prior written notice to the
Company and the Purchaser. Such resignation shall take effect upon the
appointment of a successor Agent as provided below. Upon any such notice of
resignation, the holders of at least a majority of the principal amount of the
Notes shall appoint a successor Agent hereunder which shall be a person or
entity reasonably acceptable to the Company and the Borrower. If a successor
Agent shall not have been so appointed within such fifteen (15) business day
period, the Agent, with the consent of the Company and the Borrower, may then
appoint a successor Agent which shall serve as Agent hereunder until such time,
if any, as the holders of at least a majority of the principal amount of the
Notes appoint a successor Agent as provided above.
ARTICLE 8.
MISCELLANEOUS
8.1 SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES. Whenever in this
Agreement one of the parties hereto is named or referred to, the heirs, legal
representatives, successors, successors-in-title and assigns of such parties
shall be included, and all covenants and agreements contained in this Agreement
by or on behalf of the Company or the Borrower or by or on behalf of the
Purchaser shall bind and inure to the benefit of their respective heirs, legal
representatives, successors-in-title and assigns, whether so expressed or not.
8.2 SEVERABILITY. Wherever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such 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 Agreement and shall be interpreted
so as to be effective and valid.
12
8.3 INTEREST AND LOAN CHARGES NOT TO EXCEED MAXIMUM ALLOWED BY
LAW. Anything in this Agreement, the Note or any of the other Transaction
Documents to the contrary notwithstanding, in no event whatsoever, whether by
reason of advancement of proceeds of the Committed Amount, acceleration of the
maturity of the unpaid balance of the indebtedness evidenced by the Note or
otherwise, shall the interest and other charges agreed to be paid to the
Purchaser for the use of the money advanced or to be advanced hereunder exceed
the maximum amounts collectible under applicable laws in effect from time to
time. It is understood and agreed by the parties that, if for any reason
whatsoever the interest or loan charges paid or contracted to be paid by the
Borrower or the Company in respect of the indebtedness evidenced by the Note
shall exceed the maximum amounts collectible under applicable laws in effect
from time to time, then IPSO FACTO, the obligation to pay such interest and/or
loan charges shall be reduced to the maximum amounts collectible under
applicable laws in effect from time to time, and any amounts collected by the
Purchaser that exceed such maximum amounts shall be applied to the reduction of
the principal balance of the indebtedness evidenced by the Note and/or refunded
to the Company or the Borrower, as applicable, so that at no time shall the
interest or loan charges paid or payable in respect of the indebtedness
evidenced by the Note exceed the maximum amounts permitted from time to time by
applicable law.
8.4 ARTICLE AND SECTION HEADINGS, DEFINED TERMS. Numbered and
titled article and section headings and defined terms are for convenience only
and shall not be construed as amplifying or limiting any of the provisions of
this Agreement.
8.5 NOTICES. Any and all notices, elections or demands permitted
or required to be made under this Agreement shall be in writing, signed by the
party giving such notice, election or demand and shall be delivered personally,
telecopied, or sent by certified mail or overnight via nationally recognized
courier service (such as Federal Express), to the other party at the address set
forth in the introductory paragraph to this Agreement, or at such other address
as may be supplied in writing and of which receipt has been acknowledged in
writing. The date of personal delivery or telecopy or two (2) business days
after the date of mailing (or the next business day after delivery to such
courier service), as the case may be, shall be the date of such notice, election
or demand.
8.6 ENTIRE AGREEMENT. This Agreement and the other written
agreements between the Company, the Borrower and the Purchaser represent the
entire agreement between the parties concerning the subject matter hereof, and
all oral discussions and prior agreements are merged herein; PROVIDED, if there
is a conflict between this Agreement and any other document executed
contemporaneously herewith with respect to the obligations described herein, the
provision of this Agreement shall control.
8.7 GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with, and shall be governed by, the laws of the State of
Tennessee, without regard to conflict of law principles thereof.
8.8 AMENDMENT. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought. Neither the Company nor the Borrower shall
offer any consideration to any purchaser of Notes in
13
connection with any waiver or modification of their respect Notes or any other
agreement entered into in connection therewith unless the Company or the
Borrower offers the same consideration to every other purchaser of Notes.
8.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
8.10 CONSTRUCTION AND INTERPRETATION. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Company, the Borrower, the Purchaser and their respective agents have
participated in the preparation hereof.
8.11 COSTS AND ATTORNEYS' FEES. If any action, suit, arbitration or
other proceeding is instituted to remedy, prevent or obtain relief from a
default in the performance by any party to this Agreement of its obligations
under this Agreement, the prevailing party (as determined by the court or other
fact-finder) will be entitled to recover from the losing party all actual costs
incurred in each and every such action, suit, arbitration or other proceeding,
including any and all appeals or petitions therefrom, including, without
limitation, reasonable attorneys' fees and disbursements. Crestview Capital
Master, LLC shall deduct the sum of $15,000 from its purchase price of the Note
to pay the legal fees of the several Purchasers.
8.12 WAIVER OF JURY TRIAL. The Purchaser and the Company each waive
all right to trial by jury in any action or proceeding to enforce or defend any
rights or remedies hereunder or relating hereto.
8.13 SURVIVAL. All representations and warranties and, to the
extent expressly provided herein, covenants, shall survive the Closing, and no
such representations, warranties and covenants shall merge into any instrument
of conveyance.
[SIGNATURE PAGE FOLLOWS]
14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
COMPANY:
NATIONAL COAL CORP.,
a Florida corporation
By: /s/ ▇▇▇ ▇▇▇
-----------------------------------
▇▇▇ ▇▇▇
Title: Chief Executive Officer
BORROWER:
NATIONAL COAL CORPORATION,
a Tennessee corporation
By: /s/ ▇▇▇ ▇▇▇
-----------------------------------
▇▇▇ ▇▇▇
Title: Chief Executive Officer
PURCHASER:
--------------------------------------------
(Print Name of Purchaser)
--------------------------------------------
(Signature)
(Title, if applicable)
(Address)
---------------------------------
---------------------------------
---------------------------------
Committed Amount: $
-------------------------
Accepted and Acknowledged
as Agent under Article 7 by:
___________________________________
Crestview Capital Master, LLC
15
EXHIBIT A
SECURED CONVERTIBLE
PROMISSORY NOTE
THIS SENIOR SECURED PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAS BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. THIS SENIOR SECURED PROMISSORY NOTE MAY NOT BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED
OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION.
$_______________ March 8, ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
NATIONAL COAL CORPORATION, A TENNESSE CORPORATION
SECURED
PROMISSORY NOTE
FOR VALUE RECEIVED, National Coal Corporation, a Tennessee corporation
("BORROWER"), located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, hereby
unconditionally promises to pay to the order of ____________________ ("LENDER"),
and its successors, endorsees, transferees and assigns (together with Lender,
"HOLDER"), the principal sum of ________ Dollars ($________), and any unpaid
accrued interest thereon, as set forth below; or such lesser amount as may have
been advanced by Lender to Borrower. The advance under this Note has been offset
by an origination fee in he amount of 4% of the principal amount of this loan,
which such amount shall nevertheless be a part of the principal amount of the
loan evidenced hereby. The principal amount of this Note, and any unpaid
interest accrued thereon, shall be due and payable in full on August 8, 2005
(the "MATURITY DATE") in the manner provided for in SECTION 3 below, unless this
Note shall have been previously paid as provided in SECTION 4 below.
1. PURCHASE AGREEMENT. This Note has been executed and delivered
by Borrower pursuant to that certain Note and Warrant Purchase Agreement, dated
as of March 8, 2005, between Borrower and Lender (the "PURCHASE Agreement").
Borrower herein agrees with Holder that Borrower will perform and discharge each
of its covenants and agreements contained in the Purchase Agreement as from time
to time amended and supplemented, the provisions of which Purchase Agreement are
hereby incorporated in this Note by reference with the same effect as if it were
set forth in full. The Purchase Agreement is subject to amendment in the manner
provided therein, and any such amendment shall be binding upon the Holder and
any subsequent holders of this Note. All capitalized terms used herein and not
defined herein shall have the meanings given such terms in the Purchase
Agreement.
2. INTEREST. Borrower agrees to pay interest on the unpaid
principal amount hereof. Interest shall accrue from the 61st day after the date
first above set forth until this Note is paid in full at a rate equal to
eighteen percent (18%) per annum. Interest shall be computed on the basis of the
actual number of days elapsed and a year of 365 days. Interest shall be due and
payable in
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the manner provided for in SECTION 3 below. In no event shall the interest paid
hereunder, together with any other consideration paid or agreed to be paid for
the use, forbearance or detention of money advanced hereunder, exceed the
highest lawful rate permissible under any law which a court of competent
jurisdiction may deem applicable hereto. In the event that such a court
determines that the Holder has charged, received or contracted to receive
interest hereunder in excess of the highest lawful rate permissible, the
interest payable hereunder shall automatically be reduced to the maximum rate
permitted by law, and any amounts collected by the Holder that exceed such
maximum amounts shall be applied to the reduction of the principal balance of
the indebtedness evidenced by this Note and/or refunded to the Borrower. It is
the intent hereof that Borrower not pay or contract to pay, and that the Holder
not receive or contract to receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may lawfully be paid by Borrower
under applicable law.
3. PAYMENTS OF PRINCIPAL AND INTEREST. All payments of principal,
accrued but unpaid interest and all other amounts payable in respect of this
Note shall be made by wire transfer in lawful money of the United States of
America in immediately available Federal funds, to an account furnished to
Borrower in writing for that purpose on the Maturity Date. Holder shall, before
disposing of this Note or any part hereof, make a notation hereon of all
principal and interest payments previously made hereunder and of the date to
which interest hereon has been paid; PROVIDED, HOWEVER, that the failure to
correctly make a notation of any payment made on this Note shall not limit or
otherwise affect the obligation of Borrower under this Note with respect to any
loan evidenced hereby or payments of principal or interest on this Note. Holder
and Borrower each acknowledge receipt and payment, respectively, of the first 60
days' interest on this Note as of the date of this Note.
4. PREPAYMENT. Borrower may prepay this Note, in whole or in
part, at any time and from time to time without the prior written consent of the
Holder. Any partial prepayment shall not affect the obligation to continue to
pay in full the amount of the payments hereunder until the entire unpaid
principal balance hereof and all accrued interest hereon has been paid in full.
Any such prepayment shall be applied first to interest and then to principal.
5. TRANSFER BY HOLDER.
(a) This Note and all rights hereunder are transferable,
in whole or in part, upon surrender of the Note with a properly executed
assignment, in the form prescribed by Borrower, at the principal office of
Borrower.
(b) Until any transfer of this Note is made in the Note
register, Borrower may treat the registered Holder as the absolute owner hereof
for all purposes; PROVIDED, HOWEVER, that if and when this Note is properly
assigned in blank, Borrower may (but shall not be required to) treat the bearer
hereof as the absolute owner hereof for all purposes, notwithstanding any notice
to the contrary.
(c) Borrower will maintain a register containing the
names and addresses of the registered Holders of this Note. Any registered
Holder may change such registered Holder's address as shown on the Note register
by written notice to Borrower requesting such change.
A-2
6. TRANSFER BY BORROWER. Borrower may not assign, and no person
may assume, any of the obligations of Borrower under this Note without the prior
written consent of Holder, which consent may be granted or withheld in Holder's
sole discretion, and any attempt to do so without such consent shall be void.
7. EVENTS OF DEFAULT; REMEDIES.
(a) EVENTS OF DEFAULT. The occurrence of any of the
following shall constitute an Event of Default hereunder:
(i) Default in the payment of the principal of
or interest on the indebtedness evidenced by this Note in accordance with the
terms of this Note, which default is not cured and/or corrected by Borrower
within five (5) business days of written notice thereof by Holder;
(ii) Borrower shall be liquidated, dissolved,
partitioned or terminated, or the charter thereof shall expire or be revoked;
(iii) Borrower (i) shall generally not pay or
shall be unable to pay its debts as such debts become due, or (ii) shall make an
assignment for the benefit of creditors or petition or apply to any tribunal for
the appointment of a custodian, receiver or trustee for it or a substantial part
of its assets, or (iii) shall commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
other similar law or statute of any jurisdiction, whether now or hereafter in
effect, or (iv) shall have had any such petition or application filed or any
such proceeding commenced against it that is not dismissed within sixty (60)
days, or (v) shall indicate, by any act or intentional and purposeful omission,
its consent to, approval of or acquiescence in any such petition, application,
proceeding or order for relief or the appointment of a custodian, receiver,
trustee or other similar official for it or a substantial part of its assets, or
(vi) shall suffer any such custodianship, receivership or trusteeship to
continue undischarged for a period of sixty (60) days or more; or
(iv) A material default by Borrower in the
performance of any of its material obligations under the Purchase Agreement or
any of the other Transaction Documents (other than the payment of the principal
of or interest on the indebtedness evidenced by this Note, which shall be
subject to SUBSECTION 7(a)(i) above and not this SUBSECTION (iv)).
With respect to any material default described above in SUBSECTION
7(a)(iv) that is capable of being cured and that does not already provide its
own cure procedure, the occurrence of such material default shall not constitute
an Event of Default hereunder if such material default is fully cured and/or
corrected within fifteen (15) days of written notice thereof by Holder.
(b) ACCELERATION OF MATURITY; REMEDIES. Upon the
occurrence of any
A-3
Event of Default described in SUBSECTION 7(a)(iii), the indebtedness evidenced
by this Note shall be immediately due and payable in full; and upon the
occurrence of any other Event of Default described above, the Agent at any time
thereafter may at its option accelerate the maturity of the indebtedness
evidenced by this Note without notice of any kind. Upon the occurrence of any
such Event of Default and the acceleration of the maturity of the indebtedness
evidenced by the Note:
(i) The Agent, on behalf of Holder, shall be
immediately entitled to exercise any and all rights and remedies possessed by
Holder pursuant to the terms of this Note and all of the other Transaction
Documents; and
(ii) The Agent, on behalf of Holder, shall have
any and all other rights and remedies that Holder may now or hereafter possess
at law, in equity or by statute.
(c) REMEDIES CUMULATIVE; NO WAIVER. No right, power or
remedy conferred upon or reserved to Holder by this Note or any of the other
Transaction Documents is intended to be exclusive of any other right, power or
remedy, but each and every such right, power and remedy shall be cumulative and
concurrent and shall be in addition to any other right, power and remedy given
hereunder, under any of the other Transaction Documents or now or hereafter
existing at law, in equity or by statute. No delay or omission by the Agent to
exercise any right, power or remedy accruing upon the occurrence of any Event of
Default shall exhaust or impair any such right, power or remedy or shall be
construed to be a waiver of any such Event of Default or an acquiescence
therein, and every right, power and remedy given by this Note and the other
Transaction Documents to the Agent or Holder may be exercised from time to time
and as often as may be deemed expedient by the Agent.
8. SECURITY. Borrower's obligations under this Note are secured
by the collateral set forth in the Security Agreement.
9. NOTICES. Any notice required by the provisions of this Note to
be given to Holder shall be delivered personally, telecopied, or sent by
certified mail or overnight via a nationally recognized courier service (such as
Federal Express), addressed to Holder at the address appearing on the books of
Borrower. The date of personal delivery or telecopy or two (2) business days
after the date of mailing (or the next business day after delivery to such
courier service), as the case may be, shall be the date of such notice.
10. GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF TENNESSEE
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF, EXCEPT THAT CORPORATE
MATTERS SHALL BE GOVERNED BY FLORIDA CORPORATE LAW.
11. WAIVER OF JURY TRIAL. Borrower and Lender each waive all right
to trial by jury in any action or proceeding to enforce or defend any rights or
remedies hereunder or relating hereto.
12. WAIVERS. Borrower waives presentment for payment, demand,
notice of demand, notice of nonpayment or dishonor, protest and notice of
protest of this Note, and all other notices in connection with the delivery,
acceptance, performance, default or enforcement of the payment of this Note, and
Borrower agrees that its liability shall be unconditional, without regard to the
liability of any other party, and shall not be affected in any manner by any
indulgence, extension of time, renewal, waiver or modification granted or
consented to by Holder or Agent.
A-4
13. ATTORNEYS' FEES. Borrower promises to pay all reasonable costs
and expenses, including reasonable attorneys' fees, incurred in the collection
and enforcement of this Note, including, without limitation, enforcement before
any court and including all appellate proceedings and post-judgment collection
proceedings.
14. SEVERABILITY. Wherever possible each provision of this Note
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Note shall be prohibited by or
invalid under such 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 Note and shall be interpreted so
as to be effective and valid.
[SIGNATURE PAGE FOLLOWS]
A-5
IN WITNESS WHEREOF, Borrower has executed and delivered this Note as of
the day and year and at the place first written above.
NATIONAL COAL CORPORATION,
a Tennessee corporation
By:
------------------------------
▇▇▇ ▇▇▇
Title: Chief Executive Officer
A-6
EXHIBIT B
WARRANT
THIS WARRANT AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
OTHER SECURITIES LAWS. NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE
HEREUNDER MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION
THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
------------------------------------------------------------------------------
WARRANT TO PURCHASE COMMON STOCK
OF
NATIONAL COAL CORP.
NO. ______ March 8, 2005
THIS CERTIFIES THAT, for value received, ________________, or its permitted
registered assigns ("HOLDER"), is entitled, subject to the terms and conditions
of this Warrant, at any time or from time to time commencing after the issuance
date of this Warrant (the "EFFECTIVE DATE"), and before 5:00 p.m. Eastern Time
on the fifth anniversary of the Effective Date (the "EXPIRATION DATE"), to
purchase from National Coal Corp., a Florida corporation (the "COMPANY"), up to
___________ shares of Common Stock of the Company at an exercise price per share
of $8.50 (the "PURCHASE PRICE"). Both the number of shares of Common Stock
purchasable upon exercise of this Warrant and the Purchase Price are subject to
adjustment and change as provided herein.
1. CERTAIN DEFINITIONS. As used in this Warrant the following terms shall
have the following respective meanings:
1.1 "COMMON STOCK" shall mean the common stock, par value $.0001
per share, of the Company and any other securities at any time
receivable or issuable upon exercise of this Warrant.
1.2 "FAIR MARKET VALUE" of a share of Common Stock as of a
particular date shall mean:
(a) If traded on a securities exchange or the Nasdaq
Stock Market, the Fair Market Value shall be deemed
to be the average of the closing prices of the Common
Stock of the Company on such exchange or market over
the five (5) trading days ending immediately prior to
the applicable date of valuation;
(b) If traded over-the-counter, the Fair Market Value
shall be deemed to be the average of the closing bid
and asked quotations averaged over the
B-1
fifteen (15)-day period ending immediately prior to
the applicable date of valuation; and
(c) If there is no public market, the Fair Market Value
shall be the value thereof, as agreed upon in good
faith by the Company and the Holder; PROVIDED,
HOWEVER, that if the Company and the Holder cannot
agree on such value, such value shall be determined
by an independent valuation firm experienced in
valuing businesses jointly selected in good faith by
the Company and the Holder. Fees and expenses of the
valuation firm shall be paid for by the Company.
1.3 "NOTE" shall mean that certain Senior Secured Promissory Note,
dated as of March 8, 2005, issued by the Company in favor of
Holder.
1.4 "REGISTERED HOLDER" shall mean any Holder in whose name this
Warrant is registered upon the books and records maintained by
the Company.
1.5 "WARRANT" as used herein, shall include this Warrant and any
warrant delivered in substitution or exchange therefor as
provided herein.
2. EXERCISE OF WARRANT
2.1 PAYMENT. Subject to compliance with the terms and conditions
of this Warrant and applicable securities laws, this Warrant
may be exercised, in whole or in part at any time or from time
to time after the Effective Date, and on or before the
Expiration Date by the delivery (including, without
limitation, delivery by facsimile) of the form of Notice of
Exercise attached hereto as EXHIBIT 1 (the "NOTICE OF
EXERCISE"), duly executed by the Holder, to the principal
office of the Company, and as soon as practicable after such
date, surrendering
(a) this Warrant to the principal office of the Company,
and
(b) payment in cash (by check) or by wire transfer of an
amount equal to the product obtained by multiplying
the number of shares of Common Stock being purchased
upon such exercise by the then effective Purchase
Price (the "EXERCISE AMOUNT").
2.2 STOCK CERTIFICATES; FRACTIONAL SHARES. As soon as practicable
on or after the date of any exercise of this Warrant but in
any event within 5 business days after its receipt of the
Exercise Amount, the Company shall issue and deliver to the
person or persons designated by the Holder a certificate or
certificates for the aggregate number of whole shares of
Common Stock issuable upon such exercise, together with cash
in lieu of any fraction of a share equal to such fraction of
the current Fair Market Value of one whole share of Common
Stock as of such date of exercise. No fractional shares or
scrip representing fractional shares shall be issued upon an
exercise of this Warrant.
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2.3 PARTIAL EXERCISE; EFFECTIVE DATE OF EXERCISE. In case of any
partial exercise of this Warrant, the Company shall cancel
this Warrant upon surrender hereof and shall execute and
deliver a new Warrant of like tenor and date for the balance
of the shares of Common Stock purchasable hereunder. This
Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender
for exercise as provided above. The person entitled to receive
the shares of Common Stock issuable upon exercise of this
Warrant shall be treated for all purposes as the holder of
record of such shares as of the close of business on the date
the Company receives the Notice of Exercise, subject to
receipt of the Exercise Amount.
2.4 VESTING. The warrants shall vest fully upon issuance.
2.5 LIMITATIONS ON EXERCISE. The Company shall not effect any
exercise of this Warrant, and the Holder shall not have the
right to exercise any portion of this Warrant, pursuant to
SECTION 2.1 or otherwise, to the extent that after giving
effect to such issuance after exercise, the Holder (together
with the Holder's affiliates and any other person or entity
acting as a group together with Holder or any of Holder's
affiliates) would beneficially own in excess of 9.99% (the
"APPLICABLE PERCENTAGE") of the number of shares of the Common
Stock outstanding immediately after giving effect to such
issuance. For purposes of the foregoing sentence, the number
of shares of Common Stock beneficially owned by the Holder and
its affiliates shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to
which the determination of such sentence is being made, but
shall exclude the number of shares of Common Stock which would
be issuable upon (A) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or
any of its affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any other
warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially
owned by the Holder or any of its affiliates. Except as set
forth in the preceding sentence, for purposes of this SECTION
2.5, beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. In addition, a
determination as to any group status as contemplated above
shall also be determined in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder. For purposes of this SECTION 2.5, in determining
the number of outstanding shares of Common Stock, the Holder
may rely on the number of outstanding shares of Common Stock
as reflected in (x) the Company's most recent Form 10-QSB or
Form 10-KSB, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the
Company or the Company's Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the written
or oral request of the Holder, the Company shall within two
trading days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or
exercise of securities of the Company, including this
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Warrant, by the Holder or its affiliates since the date as of
which such number of outstanding shares of Common Stock was
reported. The provisions of this paragraph shall be
implemented in a manner otherwise than in strict conformity
with the terms this SECTION 2.5 to correct this paragraph (or
any portion hereof) which may be defective or inconsistent
with the intended Applicable Percentage beneficial ownership
limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such
Applicable Percentage limitation. The limitations contained in
this paragraph shall apply to a successor holder of this
Warrant. The holders of Common Stock of the Company shall be
third party beneficiaries of this SECTION 2.5 and the Company
may not waive this SECTION 2.5 without the consent of holders
of a majority of its Common Stock.
2.6 NET ISSUE EXERCISE. If at any time after one year from the
date of issuance of this Warrant there is no effective
registration statement registering the resale of the Warrant
Shares by the Holder, this Warrant may also be exercised at
such time by means of a "cashless exercise" in which the
Holder shall be entitled to receive a certificate for the
number of Warrant Shares equal to the quotient obtained by
dividing [A-B) (X)] by (A), where:
(A) = the Closing Price on the trading day immediately
preceding the date of such election;
(B) = the Purchase Price, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise
of this Warrant in accordance with the terms of this
Warrant by means of a cash exercise rather than a
cashless exercise.
3. VALID ISSUANCE: TAXES. All shares of Common Stock issued upon the
exercise of this Warrant shall be duly authorized, validly issued,
fully paid and non-assessable. The Company shall not be required to pay
any tax or other charge imposed in connection with any transfer
involved in the issuance of any certificate for shares of Common Stock
in any name other than that of the Registered Holder of this Warrant,
and in such case the Company shall not be required to issue or deliver
any stock certificate or security until such tax or other charge has
been paid, or it has been established to the Company's reasonable
satisfaction that no tax or other charge is due.
4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number of shares
of Common Stock issuable upon exercise of this Warrant (or any shares
of stock or other securities or property receivable or issuable upon
exercise of this Warrant) and the Purchase Price are subject to
adjustment upon occurrence of the following events:
4.1 ADJUSTMENT FOR STOCK SPLITS, STOCK SUBDIVISIONS OR
COMBINATIONS OF SHARES. The Purchase Price shall be
proportionally decreased and the number of shares of Common
Stock issuable upon exercise of this Warrant (or any shares of
stock or
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other securities at the time issuable upon exercise of this
Warrant) shall be proportionally increased to reflect any
stock split or other subdivision of the Company's Common
Stock. The Purchase Price shall be proportionally increased
and the number of shares of Common Stock issuable upon
exercise of this Warrant (or any shares of stock or other
securities at the time issuable upon exercise of this Warrant)
shall be proportionally decreased to reflect any reverse stock
split, consolidation or combination of the Company's Common
Stock.
4.2 ADJUSTMENT FOR DIVIDENDS OR DISTRIBUTIONS OF STOCK OR OTHER
SECURITIES OR PROPERTY. In case the Company shall make or
issue, or shall fix a record date for the determination of
eligible holders entitled to receive, a dividend or other
distribution with respect to the Common Stock (or any shares
of stock or other securities at the time issuable upon
exercise of the Warrant) payable in (a) securities of the
Company (including debt instruments) or (b) assets (excluding
cash dividends paid or payable solely out of retained
earnings), then, in each such case, the Holder of this Warrant
on exercise hereof at any time after the consummation,
effective date or record date of such dividend or other
distribution, shall receive, in addition to the shares of
Common Stock (or such other stock or securities) issuable on
such exercise prior to such date, and without the payment of
additional consideration therefor, the securities or such
other assets of the Company to which such Holder would have
been entitled upon such date if such Holder had exercised this
Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such
exercise, retained such shares and all such additional
securities or other assets distributed with respect to such
shares as aforesaid during such period giving effect to all
adjustments called for by this SECTION 4.
4.3 RECLASSIFICATION. If the Company, by reclassification of
securities or otherwise, shall change any of the securities as
to which purchase rights under this Warrant exist into the
same or a different number of securities of any other class or
classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been
issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this
Warrant immediately prior to such reclassification or other
change, and the Purchase Price therefore shall be
appropriately adjusted, all subject to further adjustment as
provided in this SECTION 4. No adjustment shall be made
pursuant to this SECTION 4.3 upon any conversion or redemption
of the Common Stock which is the subject of SECTION 4.5.
4.4 ADJUSTMENT FOR CAPITAL REORGANIZATION, MERGER OR
CONSOLIDATION. In case of any capital reorganization of the
capital stock of the Company (other than a combination,
reclassification, exchange or subdivision of shares otherwise
provided for herein), or any merger or consolidation of the
Company with or into another corporation, or the sale of all
or substantially all the assets of the Company then, and in
each such case, as a part of such reorganization, merger,
consolidation, sale or transfer, lawful provision shall be
made so that the Holder of this Warrant shall thereafter be
entitled to receive upon exercise of this
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Warrant, during the period specified herein and upon payment
of the Purchase Price then in effect, the number of shares of
stock or other securities or property (including cash) to
which the holder of the shares deliverable upon exercise of
this Warrant would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if
this Warrant had been exercised immediately before such
reorganization, merger, consolidation, sale or transfer, all
subject to further adjustment as provided in this SECTION 4.
The foregoing provisions of this SECTION 4.4 shall similarly
apply to successive reorganizations, consolidations, mergers,
sales and transfers and to the stock or securities of any
other corporation that are at the time receivable upon the
exercise of this Warrant. If the per-share consideration
payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable
securities, then the value of such consideration shall be the
value as agreed upon in good faith by the Company and the
Holder; provided, however, that if the Company and the Holder
cannot agree on such value, such value shall be determined by
an independent valuation firm experienced in valuing such
property jointly selected in good faith by the Company and the
Holder. All fees and expenses of the valuation firm shall be
paid for by the Company. In all events, appropriate adjustment
(as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions
of this Warrant with respect to the rights and interests of
the Holder after the transaction, to the end that the
provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares
or other property deliverable after that event upon exercise
of this Warrant.
4.5 CONVERSION OF COMMON STOCK. In case all or any portion of the
authorized and outstanding shares of Common Stock of the
Company are redeemed or converted or reclassified into other
securities or property pursuant to the Company's Articles of
Incorporation or otherwise, or the Common Stock otherwise
ceases to exist, then, in such case, the Holder of this
Warrant, upon exercise hereof at any time after the date on
which the Common Stock is so redeemed or converted,
reclassified or ceases to exist (the "TERMINATION DATE"),
shall receive, in lieu of the number of shares of Common Stock
that would have been issuable upon such exercise immediately
prior to the Termination Date, the securities or property that
would have been received if this Warrant had been exercised in
full and the Common Stock received thereupon had been
simultaneously converted immediately prior to the Termination
Date, all subject to further adjustment as provided in this
Warrant. Additionally, the Purchase Price shall be immediately
adjusted such that the aggregate Purchase Price of the maximum
number of securities or other property for which this Warrant
is exercisable immediately after the Termination Date is equal
to the aggregate Purchase Price of the maximum number of
shares of Common Stock for which this Warrant was exercisable
immediately prior to the Termination Date, all subject to
further adjustment as provided herein.
4.6 SUBSEQUENT EQUITY SALES. If the Company or any Subsidiary
thereof, as applicable, at any time while this Warrant is
outstanding, shall offer, sell, grant any option to
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purchase or offer, sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any
offer, sale, grant or any option to purchase or other
disposition) any Common Stock or common stock equivalents
entitling any person to acquire shares of Common Stock, at an
effective price per share less than $6.65 (adjusted for any
stock splits and the like after the date of this Warrant)
(such lower price, the "BASE SHARE PRICE" and such issuances
collectively, a "DILUTIVE ISSUANCE"), as adjusted hereunder
(if the holder of the Common Stock or common stock equivalents
so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants,
options or rights per share which is issued in connection with
such issuance, be entitled to receive shares of Common Stock
at an effective price per share which is less than the
Purchase Price, such issuance shall be deemed to have occurred
for less than the Purchase Price), then, the Purchase Price
shall be multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock issued and
outstanding prior to such Dilutive Issuance plus the number of
shares of Common Stock which the aggregate consideration
received for the Dilutive Issuance would have purchased at the
Exercise Price, and the denominator of which shall be the
numbers of shares of Common Stock issued and outstanding after
such Dilutive Issuance, and the number of Warrant Shares
issuable hereunder shall be increased such that the aggregate
Purchase Price payable hereunder, after taking into account
the decrease in the Purchase Price, shall be equal to the
aggregate Purchase Price prior to such adjustment. Such
adjustment shall be made whenever such Common Stock or common
stock equivalents are issued. In addition to the foregoing, if
the Dilutive Issuance consists of options or warrants to
purchase Common Stock or a common stock equivalent at an
exercise price of less than $8.50 (as adjusted for any stock
splits and the like after the date of this Warrant), then the
Purchase Price shall be adjusted to equal the Base Share
Price, and shall not be adjusted by the weighted-average
formula set forth above, and the number of Warrant Shares
issuable hereunder shall be increased such that the aggregate
Purchase Price payable hereunder, after taking into account
the decrease in the Purchase Price, shall be equal to the
aggregate Purchase Price prior to such adjustment. The Company
shall not be required to make any adjustment of the Exercise
Price pursuant to this Section 4.6 in the case of the issuance
from and after the date of this Warrant of shares of Common
Stock or common stock equivalents (A) in connection with a
bona-fide strategic transaction (B) in connection with any
stock-based compensation plans of the Corporation approved by
the Board of Directors including all (which shall be at least
three) independent directors and the value assigned upon grant
not to be less than 85% of the then-current market price or
(C) pursuant to the conversion or exercise of convertible or
exercisable securities outstanding on the date of this Warrant
(provided that the conversion or exercise price of such
security has not been amended since the date of this Warrant).
The Company shall notify the Holder in writing, no later than
the business day following the issuance of any Common Stock or
common stock equivalents subject to this section, indicating
therein the applicable issuance price, or of applicable reset
price, exchange price, conversion price and other pricing
terms (such notice the "DILUTIVE ISSUANCE NOTICE"). For
purposes of clarification, whether or not the Company provides
a Dilutive Issuance Notice pursuant to this Section 4.6, upon
the occurrence of any Dilutive Issuance, after the date of
such Dilutive Issuance the
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Holder is entitled to receive a number of Warrant Shares based
upon the Base Share Price regardless of whether the Holder
accurately refers to the Base Share Price in the Notice of
Exercise.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the
Purchase Price, or number or type of shares issuable upon exercise of
this Warrant, the Chief Financial Officer or Controller of the Company
shall compute such adjustment in accordance with the terms of this
Warrant and prepare a certificate setting forth such adjustment and
showing in detail the facts upon which such adjustment is based,
including a statement of the adjusted Purchase Price. The Company shall
promptly send (by facsimile and by either first class mail, postage
prepaid or overnight delivery) a copy of each such certificate to the
Holder. In addition, if at any time prior to the Expiration Date:
5.1 the Company shall declare any dividend payable in any
securities or make any distribution to its stockholders;
5.2 the Company shall offer to its stockholders as a class any
additional shares of Common Stock or securities convertible
into Common Stock or any right to subscribe for Common Stock
or securities convertible or exchangeable into Common Stock;
or
5.3 a dissolution or winding up of the Company (other than in
connection with a consolidation, merger or sale of all or
substantially all of its property, assets and business as an
entirety) shall be proposed;
then in any one or more of such events, the Company shall give notice
in writing of such event to the Holder at least 10 days prior to the
date fixed as a record date or the date of closing the transfer books
for the determination of the stockholders entitled to such dividend,
distribution or subscription rights, or for the determination of
stockholders entitled to vote on such proposed dissolution, liquidation
or winding up. Such notice shall specify such record date or date of
the closing of the transfer books, as the case may be.
6. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory to
the Company of the ownership of and the loss, theft, destruction or
mutilation of this Warrant, and of indemnity reasonably satisfactory to
it (and in the case of mutilation, upon surrender and cancellation of
this Warrant), the Company will execute and deliver in lieu thereof a
new Warrant of like tenor as the lost, stolen, destroyed or mutilated
Warrant.
7. RESERVATION OF COMMON STOCK. The Company hereby covenants that at all
times there shall be reserved for issuance and delivery upon exercise
of this Warrant such number of shares of Common Stock or other shares
of capital stock of the Company as are from time to time issuable upon
exercise of this Warrant and, from time to time, will take all steps
necessary to amend its Articles of Incorporation to provide sufficient
reserves of shares of Common Stock issuable upon exercise of this
Warrant. All such
B-8
shares shall be duly authorized, and when issued upon such exercise,
shall be validly issued, fully paid and non-assessable, free and clear
of all liens, security interests, charges and other encumbrances or
restrictions on sale and free and clear of all preemptive rights,
except encumbrances or restrictions arising under federal or state
securities laws. Issuance of this Warrant shall constitute full
authority to the Company's Officers who are charged with the duty of
executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the exercise of this
Warrant.
8. TRANSFER AND EXCHANGE. Subject to the terms and conditions of this
Warrant and compliance with all applicable securities laws, this
Warrant and all rights hereunder may be transferred only to any
Registered Holder's parent, subsidiary or affiliate or to any officer,
director, partner, investment advisor, member or manager of any such
parent, subsidiary or affiliate, in whole or in part, on the books of
the Company maintained for such purpose at the principal office of the
Company referred to above, by the Registered Holder hereof in person,
or by duly authorized attorney, upon surrender of this Warrant properly
endorsed and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. Notwithstanding the
foregoing, the registration rights provided for in EXHIBIT 3 attached
hereto shall not be transferable unless the transferee receives a
portion of this Warrant to purchase at least 25,000 shares of Common
Stock (subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions of
the Common Stock that occur after the date of this Warrant). Upon any
permitted partial transfer, the Company will issue and deliver to the
Registered Holder a new Warrant or Warrants with respect to the shares
of Common Stock not so transferred. Each taker and holder of this
Warrant, by taking or holding the same, consents and agrees that when
this Warrant shall have been so endorsed, the person in possession of
this Warrant may be treated by the Company, and all other persons
dealing with this Warrant, as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented hereby,
any notice to the contrary notwithstanding; provided, however that
until a transfer of this Warrant is duly registered on the books of the
Company, the Company may treat the Registered Holder hereof as the
owner for all purposes.
9. RESTRICTIONS ON TRANSFER. By acceptance hereof, the Holder acknowledges
that this Warrant and the capital stock of the Company that may be
issued upon its exercise have not been registered under the Securities
Act, and Holder agrees not to sell, pledge, distribute, offer for sale,
transfer or otherwise dispose of this Warrant or any capital stock
issued upon its exercise in the absence of (i) an effective
registration statement under the Securities Act as to this Warrant or
such securities and registration or qualification of this Warrant or
such securities under any applicable Blue Sky or state securities laws
then in effect, or (ii) an opinion of counsel, reasonably satisfactory
to the Company, that such registration and qualification are not
required. In the reasonable discretion of the Company, the Company may
condition any transfer of all or any portion of this Warrant or the
capital stock of the Company that may be issued upon its exercise
(other than a disposition satisfying the conditions set forth in clause
(i) of SECTION 9(i) above) upon the transferee's delivery to the
Company of a written agreement, in form and substance reasonably
satisfactory to the Company, whereby the transferee makes such
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representations and warranties to and for the benefit of the Company as
are comparable to the representations and warranties of the Holder set
forth in SECTION 10 below.
10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant, upon
each exercise hereof, the Holder represents, warrants and covenants
that any shares of stock purchased upon exercise of this Warrant shall
be acquired for the account of the Holder and not with a view to, or
for sale in connection with, any distribution thereof; that the Holder
has had such opportunity as such Holder has deemed adequate to obtain
from representatives of the Company such information as is necessary to
permit the Holder to evaluate the merits and risks of its investment in
the Company; that the Holder is an "accredited investor" as such term
is defined in Rule 501 of Regulation D under the Securities Act; that
the Holder is able to bear the economic risk of holding such shares as
may be acquired pursuant to the exercise of this Warrant for an
indefinite period; that the Holder understands that the shares of stock
acquired pursuant to the exercise of this Warrant will not be
registered under the Securities Act (unless otherwise registered
pursuant to exercise by the Holder of the registration rights, if any,
granted to the Registered Holder) and will be "restricted securities"
within the meaning of Rule 144 under the Securities Act and will not be
available unless a public market then exists for the stock, adequate
information concerning the Company is then available to the public, and
other terms and conditions of Rule 144 are complied with; and that all
stock certificates representing shares of stock issued to the Holder
upon exercise of this Warrant or upon conversion of such shares may
have affixed thereto a legend substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES
LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A
TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION.
11. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not
entitle the Holder to any voting rights or other rights as a
stockholder of the Company. In the absence of affirmative action by
such Holder to purchase Common Stock by exercise of this Warrant or
Common Stock upon conversion thereof, no provisions of this Warrant,
and no enumeration herein of the rights or privileges of the Holder
hereof shall cause such Holder hereof to be a stockholder of the
Company for any purpose.
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12. NOTICES. Except as may be otherwise provided herein, all notices,
requests, waivers and other communications made pursuant to this
Agreement shall be in writing and shall be conclusively deemed to have
been duly given (a) when hand delivered to the other party; (b) when
received when sent by facsimile at the address and number set forth
below; (c) three business days after deposit in the U.S. mail with
first class or certified mail receipt requested postage prepaid and
addressed to the other party as set forth below; or (d) the next
business day after deposit with a national overnight delivery service,
postage prepaid, addressed to the parties as set forth below with
next-business-day delivery guaranteed, provided that the sending party
receives a confirmation of delivery from the delivery service provider.
To Holder: To the Company:
NATIONAL COAL CORP.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Attn: Chief Executive Officer
Fax Number: Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Each person making a communication hereunder by facsimile shall
promptly confirm by telephone to the person to whom such communication
was addressed each communication made by it by facsimile pursuant
hereto. A party may change or supplement the addresses given above, or
designate additional addresses, for purposes of this SECTION 12 by
giving the other party written notice of the new address in the manner
set forth above.
13. Intentionally Omitted.
14. HEADINGS. The headings in this Warrant are for purposes of convenience
in reference only, and shall not be deemed to constitute a part hereof.
15. LAW GOVERNING. This Warrant shall be construed and enforced in
accordance with, and governed by, the laws of the State of Florida.
16. WAIVER OF JURY TRIAL. The Company and, by acceptance of this Warrant,
the Holder each waive all right to trial by jury in any action or
proceeding to enforce or defend any rights or remedies hereunder or
relating hereto.
17. NO IMPAIRMENT. The Company will not, by amendment of its Articles of
Incorporation or bylaws, or through reorganization, consolidation,
merger, dissolution, issue or sale of securities, sale of assets or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times
in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order
to protect the rights of the Registered Holder of this Warrant against
impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any shares of stock
issuable upon the exercise of this Warrant above the amount payable
therefore upon such exercise, and (b) will take all such action as may
be necessary or appropriate in order that the
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Company may validly and legally issue fully paid and non-assessable
shares of Common Stock upon exercise of this Warrant.
18. SEVERABILITY. If any term, provision, covenant or restriction of this
Warrant is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Warrant shall remain in full force
and effect and shall in no way be affected, impaired or invalidated.
19. COUNTERPARTS. For the convenience of the parties, any number of
counterparts of this Warrant may be executed by the parties hereto and
each such executed counterpart shall be, and shall be deemed to be, an
original instrument.
20. REGISTRATION RIGHTS. All shares of Common Stock issuable upon exercise
of this Warrant shall be "Registrable Securities" or such other
definition of securities entitled to registration rights pursuant to
EXHIBIT 3 to this Warrant.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
the date first set forth above.
National Coal Corp.
---------------------------------- ------------------------------------
By By
▇▇▇ ▇▇▇
---------------------------------- ------------------------------------
Printed Name Printed Name
Chief Executive Officer
---------------------------------- ------------------------------------
Title Title
SIGNATURE PAGE TO
WARRANT TO PURCHASE COMMON STOCK
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EXHIBIT 1
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
TO: NATIONAL COAL CORP.
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities of National Coal Corp., as provided for therein, and (check the
applicable box):
|_| tenders herewith payment of the exercise price in full in the form of
cash or a certified or official bank check or wire transfer in same-day
funds in the amount of $____________ for _________ such securities.
|_| Elects the Net Issue Exercise option pursuant to Section 2.6 of the
Warrant, and accordingly requests delivery of a net of ______________
of such securities.
Please issue a certificate or certificates for such securities in the name of,
and pay any cash for any fractional share to (please print name, address and
social security number):
Name:
-----------------------------------------------------------------
Address:
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Signature:
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Note: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate.
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher whole number of shares.
B-14
EXHIBIT 2
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, the undersigned hereby sells, assigns and transfers unto the
parties set forth below all or such portion of the Warrants represented by the
within Warrant Certificate set forth below, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
____________________________ attorney, to transfer said Warrant Certificate on
the books of the within-named Company with respect to the number of Warrants set
forth below, with full power of substitution in the premises:
--------------------------- ---------------------------- -----------------------
NAME(S) OF ASSIGNEE(S) ADDRESS # OF WARRANTS
--------------------------- ---------------------------- -----------------------
--------------------------- ---------------------------- -----------------------
--------------------------- ---------------------------- -----------------------
--------------------------- ---------------------------- -----------------------
--------------------------- ---------------------------- -----------------------
--------------------------- ---------------------------- -----------------------
And if said number of Warrants shall not be all the Warrants represented by the
Warrant Certificate, a new Warrant Certificate is to be issued in the name of
said undersigned for the balance remaining of the Warrants registered by said
Warrant Certificate.
Dated:
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Signature:
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Notice: The signature to the foregoing Assignment must correspond to the name as
written upon the face of this security in every particular, without alteration
or any change whatsoever.
B-15
EXHIBIT 3
REGISTRATION RIGHTS
1. REGISTRATION RIGHTS.
1.1 DEFINITIONS. For purposes of this Section 1:
(a) REGISTRATION. The terms "REGISTER," "REGISTERED," and
"REGISTRATION" refer to a registration effected by
preparing and filing a registration statement in
compliance with the Securities Act of 1933, as
amended, (the "SECURITIES ACT"), and the declaration
or ordering of effectiveness of such registration
statement
(b) REGISTRABLE SECURITIES. The term "REGISTRABLE
SECURITIES" means: (1) any Common Stock of the
Company issued or to be issued upon exercise of the
Warrant and (2) any shares of Common Stock of the
Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security
which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement
of, any shares of Common Stock described in clause
(1) of this subsection (b). Notwithstanding the
foregoing, "Registrable Securities" shall exclude any
Registrable Securities sold by a person in a
transaction in which rights under this Section 1 are
not assigned in accordance with this Agreement or any
Registrable Securities sold in a public offering,
whether sold pursuant to Rule 144 promulgated under
the Securities Act, or in a registered offering, or
otherwise.
(c) REGISTRABLE SECURITIES THEN OUTSTANDING. The number
of shares of "REGISTRABLE SECURITIES THEN
OUTSTANDING" shall mean the number of shares of
Common Stock of the Company that are Registrable
Securities and (l) are then issued and outstanding or
(2) are then issuable pursuant to an exercise of the
Warrant or pursuant to a conversion of securities
issuable pursuant to an exercise of the Warrant.
(d) HOLDER. For purposes of this Section 1, the term
"HOLDER" means any person owning of record
Registrable Securities that have not been sold to the
public or pursuant to Rule 144 promulgated under the
Securities Act or any permitted assignee of record of
such Registrable Securities to whom rights under this
Section 1 have been duly assigned in accordance with
this Agreement.
(e) FORM S-3. The term "FORM S-3" means such form under
the Securities Act as is in effect on the date hereof
or any successor registration form under the
Securities Act subsequently adopted by the SEC which
permits inclusion or incorporation of substantial
information by reference to other documents filed by
the Company with the SEC.
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(f) SEC. The term "SEC" or "COMMISSION" means the U.S.
Securities and Exchange Commission.
1.2 [INTENTIONALLY OMITTED].
1.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders
of Registrable Securities in writing at least twenty (20) days
prior to filing any registration statement under the
Securities Act for purposes of effecting a public offering of
securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of
securities of the Company, but EXCLUDING registration
statements relating to any employee benefit plan or a
corporate reorganization) and will afford each such Holder an
opportunity to include in such registration statement all or
any part of the Registrable Securities then held by such
Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable
Securities held by such Holder shall within ten (10) days
after receipt of the above-described notice from the Company,
so notify the Company in writing, and in such notice shall
inform the Company of the number of Registrable Securities
such Holder wishes to include in such registration statement.
If a Holder decides not to include all of its Registrable
Securities in any registration statement thereafter filed by
the Company, such Holder shall nevertheless continue to have
the right to include any Registrable Securities in any
subsequent registration statement or registration statements
as may be filed by the Company with respect to offerings of
its securities, all upon the terms and conditions set forth
herein.
(a) UNDERWRITING. If a registration statement under which
the Company gives notice under this SECTION 1.3 is
for an underwritten offering, then the Company shall
so advise the Holders of Registrable Securities. In
such event, the right of any such Holder's
Registrable Securities to be included in a
registration pursuant to this SECTION 1.3 shall be
conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to
distribute their Registrable Securities through such
underwriting shall enter into an underwriting
agreement in customary form with the managing
underwriter or underwriters selected for such
underwriting (including a market stand-off agreement
of up to 180 days if required by such underwriters).
Notwithstanding any other provision of this
Agreement, if the managing underwriter(s)
determine(s) in good faith that marketing factors
require a limitation of the number of shares to be
underwritten, then the Company shall include in such
offering (i) first, all the securities the Company
proposes to register for its own account, and (ii)
second, Holder's Registrable Securities and other
shares of Common Stock of the Company requested to be
included by other investors having written
registration rights agreements with the Company
respecting such shares (or such other shares, the
"OTHER REGISTRABLE SECURITIES"), with Holder and each
such investor proposing to sell such shares
participating in such registration on a pro rata
basis, such
B-17
participation to be based upon the number of shares
of Registrable Securities and Other Registrable
Securities then held by the Holder and each such
investor, respectively. If any Holder disapproves of
the terms of any such underwriting, such Holder may
elect to withdraw therefrom by written notice to the
Company and the underwriter(s), delivered at five (5)
business days prior to the effective date of the
registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration. For any
Holder that is a partnership, the Holder and the
partners and retired partners of such Holder, or the
estates and family members of any such partners and
retired partners and any trusts for the benefit of
any of the foregoing persons, and for any Holder that
is a corporation, the Holder and all corporations
that are affiliates of such Holder, shall be deemed
to be a single "Holder," and any pro rata reduction
with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration
rights owned by all entities and individuals included
in such "Holder," as defined in this sentence.
(b) EXPENSES. All expenses incurred in connection with a
registration pursuant to this SECTION 1.3 (excluding
underwriters' and brokers' discounts and commissions
relating to shares sold by the Holders and legal fees
of counsel for the Holders), including, without
limitation, all federal and "blue sky" registration,
filing and qualification fees, printers' and
accounting fees, and fees and disbursements of
counsel for the Company, shall be borne by the
Company.
(c) NO LIMIT ON REGISTRATIONS. Except as otherwise
provided herein, there shall be no limit on the
number of times the Holders may request registration
of Registrable Securities under this SECTION 1.3.
1.4 [INTENTIONALLY OMITTED]
1.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities under this
Agreement the Company shall, as expeditiously as reasonably
possible:
(a) REGISTRATION STATEMENT. Prepare and file with the SEC
a registration statement with respect to such
Registrable Securities and use its best efforts to
cause such registration statement to become
effective, PROVIDED, HOWEVER, that the Company shall
not be required to keep any such registration
statement effective after March 8, 2007.
(b) AMENDMENTS AND SUPPLEMENTS. Prepare and file with the
SEC such amendments and supplements to such
registration statement and the prospectus used in
connection with such registration statement as may be
necessary to comply with the provisions of the
Securities Act with respect to the disposition of all
securities covered by such registration statement.
B-18
(c) PROSPECTUSES. Furnish to the Holders such number of
copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of
the Securities Act, and such other documents as they
may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by
them that are included in such registration.
(d) BLUE SKY. Use its best efforts to register and
qualify the securities covered by such registration
statement under such other securities or "blue sky"
laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company
shall not be required in connection therewith or as a
condition thereto to qualify to do business or to
file a general consent to service of process in any
such states or jurisdictions.
(e) UNDERWRITING. In the event of any underwritten public
offering, enter into and perform its obligations
under an underwriting agreement in usual and
customary form, with the managing underwriter(s) of
such offering. Each Holder participating in such
underwriting shall also enter into and perform its
obligations under such an agreement.
(f) NOTIFICATION. Notify each Holder of Registrable
Securities covered by such registration statement at
any time when a prospectus relating thereto is
required to be delivered under the Securities Act of
the happening of any event as a result of which the
prospectus included in such registration statement,
as then in effect, includes an untrue statement of a
material fact or omits to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading in the light of
the circumstances then existing.
1.6 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to
SECTION 1.3 that the selling Holders shall furnish to the
Company such information regarding themselves, the Registrable
Securities held by them, and the intended method of
disposition of such securities as shall be reasonably required
to timely effect the registration of their Registrable
Securities.
1.7 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under SECTION 1.3:
(a) BY THE COMPANY. To the extent permitted by law; the
Company will indemnify and hold harmless each Holder,
the partners, officers, directors, employees,
managers, members, and stockholders of each Holder,
any underwriter (as determined in the Securities Act)
for such Holder and each person, if any, who controls
such Holder or underwriter within the meaning of the
Securities Act or the Securities Exchange Act of
1934, as amended, (the "1934 ACT"), against any
losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the
Securities Act, the 1934 Act or other federal or
state law, insofar as such
B-19
losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon
any of the following statements, omissions or
violations (collectively a "VIOLATION"):
(i) any untrue statement or alleged untrue
statement of a material fact contained in
such registration statement, including any
preliminary prospectus or final prospectus
contained therein or any amendments or
supplements thereto;
(ii) the omission or alleged omission to state
therein a material fact required to be
stated therein, or necessary to make the
statements therein not misleading, or
(iii) any violation or alleged violation by the
Company of the Securities Act, the 1934 Act,
any federal or state securities law or any
rule or regulation promulgated under the
Securities Act, the 1934 Act or any federal
or state securities law in connection with
the offering covered by such registration
statement;
and the Company will reimburse each such Holder,
partner, officer or director, underwriter or
controlling person for any legal or other expenses
reasonably incurred by them, as incurred, in
connection with investigating or defending any such
loss, claim, damage, liability or action; PROVIDED,
HOWEVER, that the indemnity agreement contained in
this subsection 1.7(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected
without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that
it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with
written information furnished expressly for use in
connection with such registration by such Holder,
partner, officer, director, employee, manager,
member, stockholder, underwriter or controlling
person of such Holder.
(b) BY SELLING HOLDERS. To the extent permitted by law,
each selling Holder will indemnify and hold harmless
the Company, each of its directors, each of its
officers who have signed the registration statement,
each person, if any, who controls the Company within
the meaning of the Securities Act, any underwriter
and any other Holder selling securities under such
registration statement or any of such other Holder's
partners, officers, directors, employees, managers,
members, stockholders or any person who controls such
Holder within the meaning of the Securities Act or
the 1934 Act, against any losses, claims, damages or
liabilities (joint or several) to which the Company
or any such director, officer, controlling person,
underwriter or other such Holder, partner, officer,
director, employee, manager, member, stockholder or
controlling person of such other Holder
B-20
may become subject under the Securities Act, the 1934
Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance
upon and in conformity with written information
furnished by such Holder expressly for use in
connection with such registration; and each such
Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such
director, officer, controlling person, underwriter or
other Holder, partner, officer, director, employee,
manager, member, stockholder or controlling person of
such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or
action: PROVIDED, HOWEVER, that the indemnity
agreement contained in this subsection 1.7(b) shall
not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such
settlement is effected without the consent of the
Holder, which consent shall not be unreasonably
withheld; and PROVIDED, FURTHER, that the total
amounts payable in indemnity by a Holder under this
Section 1.7(b) in respect of any Violation shall not
exceed the net proceeds received by such Holder in
the registered offering out of which such Violation
arises.
(c) NOTICE. Promptly after receipt by an indemnified
party under this SECTION 1.7 of notice of the
commencement of any action (including any
governmental action), such indemnified party will, if
a claim in respect thereof is to be made against any
indemnifying party under this SECTION 1.7, 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
the indemnifying party so desires, jointly with any
other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that
an indemnified party shall have the right to retain
its own counsel, with the fees and expenses to be
paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to
actual or potential conflict of interests between
such indemnified party and any other party
represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of
any such action shall relieve such indemnifying party
of liability to the indemnified party under this
SECTION 1.7 to the extent the indemnifying party is
prejudiced as a result thereof, but the omission so
to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have
to any indemnified party otherwise than under this
SECTION 1.7.
(d) DEFECT ELIMINATED IN FINAL PROSPECTUS. The foregoing
indemnity agreements of the Company and Holders are
subject to the condition that, insofar as they relate
to any Violation made in a preliminary prospectus
B-21
but eliminated or remedied in the amended prospectus
on file with the SEC at the time the registration
statement in question becomes effective or the
amended prospectus filed with the SEC pursuant to SEC
Rule 424(b) (the "FINAL PROSPECTUS"), such indemnity
agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was timely
furnished to the indemnified party and was not
furnished to the person asserting the loss,
liability, claim or damage at or prior to the time
such action is required by the Securities Act.
(e) CONTRIBUTION. In order to provide for just and
equitable contribution to joint liability under the
Securities Act in any case in which either (i) any
Holder exercising rights under this Agreement, or any
controlling person of any such Holder, makes a claim
for indemnification pursuant to this SECTION 1.7 but
it is judicially determined (by the entry of a final
judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such
indemnification may not be enforced in such case
notwithstanding the fact that this SECTION 1.7
provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required
on the part of any such selling Holder or any such
controlling person in circumstances for which
indemnification is provided under this SECTION 1.7;
then, and in each such case, the Company and such
Holder will contribute to the aggregate losses,
claims, damages or liabilities to which they may be
subject (after contribution from others) in such
proportion so that such Holder is responsible for the
portion represented by the percentage that the public
offering price of its Registrable Securities offered
by and sold under the registration statement bears to
the public offering price of all securities offered
by and sold under such registration statement, and
the Company and other selling Holders are responsible
for the remaining portion; PROVIDED, HOWEVER, that,
in any such case: (A) no such Holder will be required
to contribute any amount in excess of the public
offering price of all such Registrable Securities
offered and sold by such Holder pursuant to such
registration statement; and (B) no person or entity
guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will
be entitled to contribution from any person or entity
who was not guilty of such fraudulent
misrepresentation.
(f) SURVIVAL. The obligations of the Company and Holders
under this SECTION 1.7 shall survive until the fifth
anniversary of the completion of any offering of
Registrable Securities in a registration statement,
regardless of the expiration of any statutes of
limitation or extensions of such statutes.
1.8 TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall
have no obligations pursuant to SECTION 1.3 with respect to
any Registrable Securities proposed to be sold by a Holder in
a registration pursuant to SECTION 1.3 more than two years (2)
years after the date of this Warrant, or, if, in the opinion
of
B-22
counsel to the Company, all such Registrable Securities
proposed to be sold by a Holder may then be sold under Rule
144 in one transaction without exceeding the volume
limitations thereunder.
B-23
EXHIBIT C
SECURITY AGREEMENT
EXHIBIT D
GUARANTY