American Resources Corp 8-K, filed Apr 8, 2020
American Resources Corp (AREC)
8-K
2020-04-08
For: 2020-04-02
View Original
Added on
April 06, 2026
About this 8-K
American Resources Corp filed this 8-K on April 8, 2020, reporting on events of April 2, 2020.
Items reported
- Item 1.01: Entered into a material agreement
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of
Report (Date of Earliest event Reported): April 2,
2020
AMERICAN RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
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Florida
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000-55456
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46-3914127
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(State or other
jurisdiction of
incorporation)
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(Commission
File
Number)
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(I.R.S.
Employer Identification
No.)
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12115
Visionary Way, Suite 174, Fishers Indiana, 46038
(Address
of principal executive offices)
(317)
855-9926
(Registrant’s
telephone number, including area code)
________________________________________________
(Former
name or former address, if changed since last report)
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (See: General Instruction
A.2. below):
[
]
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[
]
Soliciting material
pursuant to Rule 14a-12 under the Exchange Act
(17CFR240.14a-12)
[
]
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17CFR240.14d-2(b))
[
]
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17CFR240.13e-4(c))
Item
1.01 Entry into a Material
Definitive Agreement.
On
April 2, 2020, American Resources Corporation (“ARC” or
the “Company”) closed on an initial $13.39 million of
convertible debt, which is comprised of $12.19 million of existing
term loan and payables which will refinance existing indebtedness
from the balance sheet, plus an additional $1.2 million to be used
for other corporate
purposes described in the agreements (the “Convertible
Debt”). The Company has the ability to raise up to a total of
$25 million over the next 30 days under this Convertible Debt,
unless expanded and or extended by the Company
The
two-year term Convertible Debt bears a 12.5% annual interest and is
convertible into Class A Common Stock at $1.05 per share at the
option of the investor. Additionally, and in connection with the
loan agreement, the Company issued lenders thereunder warrants to
purchase shares of Class A Common Stock in the amount of ten
percent of the number of shares to the principal amount lent to the
Company. Each warrant will carry a two-year term with an exercise
price of $1.50. Attached are the form agreements used pursuant to
Convertible Debt.
Item 9.01
Financial Statements and
Exhibits.
(d)
Exhibits
The
following exhibits are attached hereto and filed
herewith.
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Exhibit No.
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Description
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Convertible
Note Purchase Agreement
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Convertible
Senior Note
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Warrant
C
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
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American Resources Corporation |
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Date: April 8,
2020
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By:
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/s/ Mark C.
Jensen
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Mark C.
Jensen
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Chief Executive
Officer
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Exhibit 99.1
SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “Agreement”) is dated as
of the effective date in the signature page (the “Effective
Date”), between American Resources Corporation, a Florida
corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including
its successors and assigns, a “Purchaser” and
collectively, the “Purchasers”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(a)(2) of the Securities Act of 1933, as
amended (the “Securities Act”), and
Rule 506 promulgated thereunder, the Company desires to issue and
sell to each Purchaser, and each Purchaser, severally and not
jointly, desires to purchase from the Company, securities of the
Company as more fully described in this Agreement.
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company
and each Purchaser agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the
terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to
such terms in the Notes (as defined herein), and (b) the following
terms have the meanings set forth in this Section 1.1:
“Action” shall have the
meaning ascribed to such term in Section 3.1(h).
“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
“Board of Directors” means
the board of directors of the Company.
“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
“Closing” means the
closing of the purchase and sale of the Securities pursuant to
Section 2.1.
“Closing Date” means the
Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to
pay the Subscription Amount and (ii) the Company’s
obligations to deliver the Securities, in each case, have been
satisfied or waived.
“Commission” means the
United States Securities and Exchange Commission.
1
“Common Stock” means the
Class A Common stock of the Company, par value $0.0001 per share,
and any other class of securities into which such securities may
hereafter be reclassified or changed.
“Common Stock Equivalents”
means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock.
“Notes” means the Senior
Convertible Notes due, subject to the terms therein, due
__________, 2022, issued by the Company to the Purchasers
hereunder.
“Disclosure Schedules”
shall have the meaning ascribed to such term in Section
3.1.
“Evaluation Date” shall
have the meaning ascribed to such term in Section
3.1(m).
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“GAAP” shall have the
meaning ascribed to such term in Section 3.1(f).
“Liens” means a lien,
charge, pledge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
“Material Adverse Effect”
shall have the meaning assigned to such term in Section
3.1(b).
“Maximum Rate” shall have
the meaning ascribed to such term in Section 5.17.
“Permitted Indebtedness”
shall mean (a) all existing senior indebtedness of the Company, (b)
the Notes, (c) lease obligations and purchase money indebtedness up
to $10.0 million in aggregate incurred in connection with the
acquisition of capital assets and lease obligations with respect to
newly acquired or leased assets (and secured only by the specific,
respective capital asset or lease obligation), and (d) any future
traditional bank line of credit (an “ABL
Facility”).
“Permitted Lien” Means the
individual and collective reference to the following: (a) Liens for
taxes, assessments and other governmental charges or levies not yet
due or Liens for taxes, assessments and other governmental charges
or levies being contested in good faith and by appropriate
proceedings for which adequate reserves (in the good faith judgment
of the management of the Company) have been established in
accordance with GAAP, (b) Liens imposed by law which were incurred
in the ordinary course of the Company’s business, such as
carriers’, warehousemen’s and mechanics’ Liens,
statutory landlords’ Liens, and other similar Liens arising
in the ordinary course of the Company’s business, and which
(x) do not individually or in the aggregate materially detract from
the value of such property or assets or materially impair the use
thereof in the operation of the business of the Company and its
consolidated Subsidiaries or (y) are being contested in good faith
by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the
property or asset subject to such Lien, (c) Liens incurred in
connection with Permitted Indebtedness under clause (a) thereunder,
(d) Liens incurred in connection with Permitted Indebtedness under
clause (c) thereunder, provided that such Liens are not secured by
assets of the Company or its Subsidiaries other than the assets so
acquired or leased, and (e) Liens to secure an ABL
Facility.
2
“Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Placement Agent” means
any person or entity who is legally authorized to receive a
placement fee for introductions under this Offering.
“Proceeding” means an
action, claim, suit, investigation or proceeding (including,
without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or
threatened.
“Public Information
Failure” shall have the meaning ascribed to such term
in Section 4.3(b).
“Public Information Failure
Payments” shall have the meaning ascribed to such term
in Section 4.3(b).
“Purchaser Party” shall
have the meaning ascribed to such term in Section 4.8.
“Required Minimum” means,
as of any date, the maximum aggregate number of shares of Common
Stock then issued or potentially issuable in the future pursuant to
the Transaction Documents, including any Underlying Shares issuable
upon exercise in full of all Warrants, ignoring any exercise limits
set forth therein.
“Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially
the same effect as such Rule.
“SEC Reports” shall have
the meaning ascribed to such term in Section 3.1(f).
“Securities” means the
Notes, the Warrants, the Warrant Shares and the Underlying
Shares.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Series C Warrants” means,
collectively, the Series C Common Stock purchase warrants delivered
to the Purchasers at the Closing in accordance with Section 2.2
hereof, which Warrants shall be exercisable immediately and have a
term of exercise equal to 2 years.
“Short Sales” means all
“short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the
location and/or reservation of borrowable shares of Common
Stock).
“Subscription Amount”
means, as to each Purchaser, the aggregate amount to be paid for
Notes and Warrants purchased hereunder as specified below such
Purchaser’s name on the signature page of this Agreement and
next to the heading “Subscription Amount,” in United
States dollars and in immediately available funds.
3
“Subsidiary”
means any subsidiary of the Company as set forth in the SEC Reports
and shall, where applicable, also include any direct or indirect
subsidiary of the Company formed or acquired after the date
hereof.
“Trading Day” means a day
on which the principal Trading Market is open for
trading.
“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE MKT,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange, the OTC Bulletin
Board, OTCQX or OTCQB (or any successors to any of the
foregoing).
“Transaction Documents”
means this Agreement, the Notes, the Warrants, all exhibits and
schedules thereto and hereto and any other documents or agreements
executed in connection with the transactions contemplated
hereunder.
“Transfer Agent” means
VStock Transfer, LLC, the current transfer agent of the Company,
with a mailing address of 18 Lafayette Place, Woodmere, New York
11598 and a facsimile number of (646) 536-3179, and any successor
transfer agent of the Company.
“Underlying Shares” means
the shares of Common Stock issued and issuable upon exercise of the
Warrants.
“Warrants” means the
Series C Warrants.
“Warrant Shares” means the
shares of Common Stock issuable upon exercise of the
Warrants.
ARTICLE II
PURCHASE AND SALE
2.
2.1
Closing. On the Closing Date,
upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and
the Purchasers, severally and not jointly, agree to purchase, up to
an aggregate of $25,000,000 in principal amount of the Notes and
Warrants. Each Purchaser shall deliver to the Company, via wire
transfer or a certified check, immediately available funds equal to
such Purchaser’s Subscription Amount as set forth on the
signature page hereto executed by such Purchaser, and the Company
shall deliver to each Purchaser its respective Note and a Warrant,
as determined pursuant to Section 2.2(a), and the Company and each
Purchaser shall deliver the other items set forth in Section 2.2
deliverable at the Closing. Upon satisfaction of the covenants and
conditions set forth in Sections 2.2 and 2.3, the Closing shall
take place remotely by the exchange of electronic mail and/or
facsimile or at such location as the parties shall mutually agree.
Each Purchaser agrees that the Purchaser’s Subscription
Amount shall not be less than Five Hundred Thousand Dollars
($500,000.00), unless otherwise waived by the Company. The Company
may expand or reduce the aggregate principal amount of the Notes at
its sole discretion, and the Company may close the Offering upon
the receipt of any amount of Purchaser’s Subscriptions and/or
extend the Closing Date.
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2.2 Deliveries.
(a) On or prior to the
Closing Date, the Company shall deliver or cause to be delivered to
each Purchaser the following:
i. this Agreement duly
executed by the Company;
ii. a Note representing
in principal amount equal to such Purchaser’s Subscription
Amount, registered in the name of such Purchaser; and
iii. a
Series C Warrant exercisable for that number of shares of Common
Stock equal to Ten Percent (10.0%) of such Purchaser’s
Subscription Amount at an exercise price equal to $1.50 per share,
subject to adjustment therein (such Warrant certificate may be
delivered within three Trading Days of the Closing
Date).
(b) On or prior to the
Closing Date, each Purchaser shall deliver or cause to be delivered
to the Company the following:
i. this Agreement duly
executed by such Purchaser; and
ii. Such
Purchaser’s Subscription Amount by wire transfer to the
account specified by the Company on the Signature Pages of this
Purchase Agreement.
2.3 Closing
Conditions.
(a) The obligations of
the Company hereunder in connection with the Closing are subject to
the following conditions being met:
i. the accuracy in all
material respects on the Closing Date of the representations and
warranties of the Purchasers contained herein (unless as of a
specific date therein in which case they shall be accurate as of
such date);
ii. all obligations,
covenants and agreements of each Purchaser required to be performed
at or prior to the Closing Date shall have been performed;
and
iii. the
delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement.
(a) The respective
obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being
met:
i. the accuracy in all
material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein
(unless as of a specific date therein);
ii. all obligations,
covenants and agreements of the Company required to be performed at
or prior to the Closing Date shall have been performed;
and
iii. the
delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.
3.1 Representations
and Warranties of the Company. Except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a
part hereof and shall qualify any representation or otherwise made
herein to the extent of the disclosure contained in the
corresponding section of the Disclosure Schedules, the Company
hereby makes the following representations and warranties to each
Purchaser:
(a) Subsidiaries. All of the direct
and indirect subsidiaries of the Company are set forth in the SEC
Reports. Other than disclosed in the Company’s SEC Reports,
the Company owns, directly or indirectly, all of the capital stock
or other equity interests of each Subsidiary free and clear of any
Liens, and all of the issued and outstanding shares of capital
stock of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.
(b) Organization and Qualification.
The Company and each of the Subsidiaries is an entity duly
incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use
its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation
nor default of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not have
or reasonably be expected to result in: (i) a material adverse
effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results
of operations, assets, business, prospects or condition (financial
or otherwise) of the Company and the Subsidiaries, taken as a
whole, or (iii) a material adverse effect on the Company’s
ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or
(iii), a “Material Adverse
Effect”).
(c) Authorization; Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and each of the other Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and each of the other
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and
its Board of Directors. This Agreement and each other Transaction
Document to which it is a party has been (or upon delivery will
have been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the
valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except: (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
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(d) Issuance of the Securities. The
Securities are duly authorized and, when issued and paid for in
accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The Underlying
Shares, when issued in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents.
The Company has reserved from its duly authorized capital stock a
number of shares of Common Stock for issuance of the Underlying
Shares at least equal to the Required Minimum on the date
hereof.
(e) Capitalization. The
capitalization of the Company is as set forth in the
Company’s SEC Reports, and the Company has not issued any
material amount of capital stock since its most recently Filing.
Except as set forth in the Company’s SEC Reports, the
issuance and sale of the Securities will not obligate the Company
to issue shares of Common Stock or other securities to any Person
(other than the Purchasers) and will not result in a right of any
holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the
outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws,
and none of such outstanding shares was issued in violation of any
preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any
stockholder, the Board of Directors or others is required for the
issuance and sale of the Securities. There are no stockholders
agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company
is a party or, to the knowledge of the Company, between or among
any of the Company’s stockholders.
(f) SEC Reports; Financial
Statements. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the
Company under the Securities Act and the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the
foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to
herein as the “SEC
Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports
prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act,
as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been
prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the
periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
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(g) Material Changes; Undisclosed Events,
Liabilities or Developments. Other than disclosed in the SEC
Reports there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material
Adverse Effect on the Company.
(h) Litigation. There is no action,
suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. There has not been, and to the knowledge of the Company,
there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director
or officer of the Company. The Commission has not issued any stop
order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under
the Exchange Act or the Securities Act.
(i) Labor Relations. No labor
dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company, which could
reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the
Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the
knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment
of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms
and conditions of employment and wages and hours, except where the
failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(j) Compliance. Neither the Company
nor any Subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or
any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it
is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it
or any of its properties is bound (whether or not such default or
violation has been waived) that would reasonably be expected to
result in a Material Adverse Effect, (ii) is in violation of any
judgment, decree or order of any court, arbitrator or other
governmental authority that would reasonably be expected to result
in a Material Adverse Effect or (iii) is or has been in violation
of any statute, rule, ordinance or regulation of any governmental
authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection,
occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not have
or reasonably be expected to result in a Material Adverse
Effect.
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(k) Title to Assets. The Company
and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for (i) Liens disclosed in the SEC
Reports, (ii) Liens as do not materially affect the value of such
property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the
Subsidiaries and (iii) Liens for the payment of federal, state or
other taxes, for which appropriate reserves have been made therefor
in accordance with GAAP and, the payment of which is neither
delinquent nor subject to penalties. Any real property and
facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases with
which the Company and the Subsidiaries are in
compliance.
(l) Insurance. The Company and the
Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company
and the Subsidiaries are engaged, including, but not limited to,
directors and officers insurance coverage at least equal to the
aggregate Subscription Amount. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant
increase in cost.
(m) Sarbanes-Oxley; Internal Accounting
Controls. The Company and the Subsidiaries are in compliance
with any and all applicable requirements of the Sarbanes-Oxley Act
of 2002 that are effective as of the date hereof, and any and all
applicable rules and regulations promulgated by the Commission
thereunder that are effective as of the date hereof and as of the
Closing Date. The Company and the Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The
Company and the Subsidiaries have established disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and the Subsidiaries and designed such
disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the
Commission’s rules and forms. The Company’s certifying
officers have evaluated the effectiveness of the disclosure
controls and procedures of the Company and the Subsidiaries as of
the end of the period covered by the most recently filed periodic
report under the Exchange Act (such date, the “Evaluation Date”). The
Company presented in its most recently filed periodic report under
the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no changes in the internal control
over financial reporting (as such term is defined in the Exchange
Act) that have materially affected, or is reasonably likely to
materially affect, the internal control over financial reporting of
the Company and its Subsidiaries.
9
(n) Certain Fees. Other than the
Placement Agent, if any, no brokerage or finder’s fees or
commissions are or will be payable by the Company or any
Subsidiaries to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by the Transaction
Documents. The Purchasers shall have no obligation with respect to
any fees or with respect to any claims made by or on behalf of
other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by the
Transaction Documents.
(o) Private Placement. Assuming the
accuracy of the Purchasers’ representations and warranties
set forth in Section 3.2, no registration under the Securities Act
is required for the offer and sale of the Securities by the Company
to the Purchasers as contemplated hereby. The issuance and sale of
the Securities hereunder does not contravene the rules and
regulations of the Trading Market.
(p) Investment Company. The Company
is not, and is not an Affiliate of, and immediately after receipt
of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the
Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become an
“investment company” subject to registration under the
Investment Company Act of 1940, as amended.
(q) Registration Rights. No Person
has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company or any
Subsidiaries.
(r) Listing and Maintenance
Requirements. The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such
registration. The Common Stock is currently eligible for electronic
transfer through the Depository Trust Company or another
established clearing corporation and the Company is current in
payment of the fees to the Depository Trust Company (or such other
established clearing corporation) in connection with such
electronic transfer.
(s) Disclosure. Except with respect
to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms
that neither it nor any other Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any
information that it believes constitutes or might constitute
material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the
Company. All of the disclosure furnished by or on behalf of the
Company to the Purchasers regarding the Company and its
Subsidiaries, their respective businesses and the transactions
contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading. The
press releases disseminated by the Company during the twelve months
preceding the date of this Agreement taken as a whole do 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 and when made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in
Section 3.2 hereof.
10
(t) Foreign Corrupt Practices.
Neither the Company nor any Subsidiary, nor to the knowledge of the
Company or any Subsidiary, any agent or other person acting on
behalf of the Company or any Subsidiary, has: (i) directly or
indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or
domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate
funds, (iii) failed to disclose fully any contribution made by the
Company or any Subsidiary (or made by any person acting on its
behalf of which the Company is aware) which is in violation of law
or (iv) violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended.
(u) Accountants. At the Closing
Date, the Company’s accounting firm is MaloneBailey, LLP with
an address of 9801 Westheimer Road, Suite 1100, Houston, Texas
77042.
(v) Seniority. Except as defined as
the Permitted Indebtedness, no Indebtedness or other claim against
the Company is senior to the Notes in right of payment, whether
with respect to interest or upon liquidation or dissolution, or
otherwise, other than indebtedness secured by purchase money
security interests (which is senior only as to underlying assets
covered thereby) and capital lease obligations (which is senior
only as to the property covered thereby).
(w) No Disagreements with Accountants and
Lawyers. There are no disagreements of any kind presently
existing, or reasonably anticipated by the Company to arise,
between the Company and the accountants and lawyers formerly or
presently employed by the Company and the Company is current with
respect to any fees owed to its accountants and lawyers which could
affect the Company’s ability to perform any of its
obligations under any of the Transaction Documents.
(x) Acknowledgment Regarding
Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm’s length purchaser with
respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and
any advice given by any Purchaser or any of their respective
representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely
incidental to the Purchasers’ purchase of the Securities. The
Company further represents to each Purchaser that the
Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company
and its representatives.
(y) Regulation M Compliance. The
Company has not, and to its knowledge no one acting on its behalf
has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or
resale of any of the Securities, (ii) sold, bid for, purchased, or
paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any Person any
compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii)
and (iii), compensation paid to the Company’s placement agent
in connection with the placement of the Securities.
11
(z) Office of Foreign Assets
Control. Neither the Company nor any Subsidiary nor, to the
Company's knowledge, any director, officer, agent, employee or
affiliate of the Company or any Subsidiary is currently subject to
any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department (“OFAC”).
(aa) U.S.
Real Property Holding Corporation. The Company is not and
has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Company shall so certify upon Purchaser’s
request.
(bb) Bank
Holding Company Act. Neither the Company nor any of its
Subsidiaries or Affiliates is subject to the Bank Holding Company
Act of 1956, as amended (the “BHCA”) and to regulation
by the Board of Governors of the Federal Reserve System (the
“Federal
Reserve”). Neither the Company nor any of its
Subsidiaries or Affiliates owns or controls, directly or
indirectly, five percent (5%) or more of the outstanding shares of
any class of voting securities or twenty-five percent or more of
the total equity of a bank or any entity that is subject to the
BHCA and to regulation by the Federal Reserve. Neither the Company
nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity
that is subject to the BHCA and to regulation by the Federal
Reserve.
(cc) Money
Laundering. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial record-keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, applicable money laundering statutes and applicable rules
and regulations thereunder (collectively, the “Money Laundering Laws”),
and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving
the Company or any Subsidiary with respect to the Money Laundering
Laws is pending or, to the knowledge of the Company or any
Subsidiary, threatened.
(dd) No
Disqualification Events. With respect to the Securities to
be offered and sold hereunder in reliance on Rule 506 under the
Securities Act, none of the Company, any of its predecessors, any
affiliated issuer, any director, executive officer, other officer
of the Company participating in the offering hereunder, any
beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power,
nor any promoter (as that term is defined in Rule 405 under the
Securities Act) connected with the Company in any capacity at the
time of sale (each, an “Issuer Covered Person”
and, together, “Issuer Covered Persons”)
is subject to any of the "Bad Actor" disqualifications described in
Rule 506(d)(1)(i) to (viii) under the Securities Act (a
“Disqualification
Event”), except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a
Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and
has furnished to the Purchasers a copy of any disclosures provided
thereunder.
12
(ee) Other
Covered Persons. Other than the Placement Agent, the Company
is not aware of any person (other than any Issuer Covered Person)
that has been or will be paid (directly or indirectly) remuneration
for solicitation of purchasers in connection with the sale of any
Regulation D Securities.
(ff) Notice
of Disqualification Events. The Company will notify the
Purchasers and the Placement Agent in writing, prior to the Closing
Date of (i) any Disqualification Event relating to any Issuer
Covered Person and (ii) any event that would, with the passage of
time, become a Disqualification Event relating to any Issuer
Covered Person.
3.2 Representations and Warranties of the
Purchasers. Each Purchaser, for itself and for no other
Purchaser, hereby represents and warrants as of the date hereof and
as of the Closing Date to the Company as follows (unless as of a
specific date therein):
(a) Organization; Authority. Such
Purchaser is either an individual or an entity duly incorporated or
formed, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with full right,
corporate, partnership, limited liability company or similar power
and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and
delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction
Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as
applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance
with its terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited
by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by
applicable law.
(b) Own Account. Such Purchaser
understands that the Securities are “restricted
securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the
Securities as principal for its own account and not with a view to
or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any
applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute
or regarding the distribution of such Securities in violation of
the Securities Act or any applicable state securities law (this
representation and warranty not limiting such Purchaser’s
right to sell the Securities pursuant to the Registration Statement
or otherwise in compliance with applicable federal and state
securities laws). Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business.
13
(c) Purchaser Status. At the time
such Purchaser was offered the Securities, it was, and as of the
date hereof it is, and on each date on which it exercises any
Warrants it will be either: (i) an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act or (ii) a
“qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act.
(d) Experience of Such Purchaser.
Such Purchaser, either alone or together with its representatives,
has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser
is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete
loss of such investment.
(e) General Solicitation. Such
Purchaser is not purchasing the Securities as a result of any
advertisement, article, notice or other communication regarding the
Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or
any other general solicitation or general
advertisement.
(f) Access to Information. Such
Purchaser acknowledges that it has had the opportunity to review
the Transaction Documents (including all exhibits and schedules
thereto) and the SEC Reports and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of,
and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Shares
and the merits and risks of investing in the Shares; (ii) access to
information about the Company and its financial condition, results
of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense
that is necessary to make an informed investment decision with
respect to the investment. Such Purchaser acknowledges and agrees
that neither the Placement Agent nor any Affiliate of the Placement
Agent has provided such Purchaser with any information or advice
with respect to the Securities nor is such information or advice
necessary or desired. Neither the Placement Agent nor any Affiliate
has made or makes any representation as to the Company or the
quality of the Securities and the Placement Agent and any Affiliate
may have acquired non-public information with respect to the
Company which such Purchaser agrees need not be provided to it. In
connection with the issuance of the Securities to such Purchaser,
neither the Placement Agent nor any of its Affiliates has acted as
a financial advisor or fiduciary to such Purchaser.
(g) Certain Transactions and
Confidentiality. Other than consummating the transactions
contemplated hereunder, such Purchaser has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with such Purchaser, executed any purchases or
sales, including Short Sales, of the securities of the Company
during the period commencing as of the time that such Purchaser
first received a term sheet (written or oral) from the Company or
any other Person representing the Company setting forth the
material terms of the transactions contemplated hereunder and
ending immediately prior to the execution hereof. Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed
investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of
such Purchaser’s assets, the representation set forth above
shall only apply with respect to the portion of assets managed by
the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement. Other than to other
Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this
transaction). Notwithstanding the foregoing, for avoidance of
doubt, nothing contained herein shall constitute a representation
or warranty, or preclude any actions, with respect to the
identification of the availability of, or securing of, available
shares to borrow in order to effect Short Sales or similar
transactions in the future.
14
The
Company acknowledges and agrees that the representations contained
in Section 3.2 shall not modify, amend or affect such
Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.
4.1 Transfer
Restrictions.
(a) The Securities may
only be disposed of in compliance with state and federal securities
laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, to the
Company or to an Affiliate of a Purchaser or in connection with a
pledge as contemplated in Section 4.1(b), the Company may require
the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer,
any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights and obligations of a
Purchaser under this Agreement.
(b) The Purchasers
agree to the imprinting, so long as is required by this Section
4.1, of a legend on any of the Securities in the following
form:
[NEITHER] THIS
SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
EXERCISABLE [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY [AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THIS SECURITY] MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
“ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER
THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
15
(c) Certificates
evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof): (i)
while a registration statement (including the Registration
Statement) covering the resale of such security is effective under
the Securities Act, (ii) following any sale of such Underlying
Shares pursuant to Rule 144.
(d) Each Purchaser,
severally and not jointly with the other Purchasers, agrees with
the Company that such Purchaser will sell any Securities pursuant
to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an
exemption therefrom, and that if Securities are sold pursuant to a
Registration Statement, they will be sold in compliance with the
plan of distribution set forth therein, and acknowledges that the
removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the
Company’s reliance upon this understanding.
4.2 Acknowledgment of Dilution. The
Company and Purchaser acknowledges that the issuance of the
Securities may result in dilution of the outstanding shares of
Common Stock. The Company further acknowledges that its obligations
under the Transaction Documents, including, without limitation, its
obligation to issue the Underlying Shares pursuant to the
Transaction Documents, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the
Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the
other stockholders of the Company.
4.3 Furnishing of Information; Public
Information.
(a)
The Company agrees
to maintain the registration of the Common Stock under Section
12(b) or 12(g) of the Exchange Act and to timely file (or obtain
extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the
date hereof pursuant to the Exchange Act.
(b)
At any time during
the period commencing from the six (6) month anniversary of the
date hereof and ending at such time that all of the Securities may
be sold without the requirement for the Company to be in compliance
with Rule 144(c)(1) and otherwise without restriction or limitation
pursuant to Rule 144, if the Company shall fail for any reason to
satisfy the current public information requirement under Rule
144(c) (a “Public Information Failure”) then, in
addition to such Purchaser’s other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated
damages and not as a penalty, by reason of any such delay in or
reduction of its ability to sell the Securities, an amount in cash
equal to 0.5% of the aggregate Subscription Amount of such
Purchaser’s Securities on the day of a Public Information
Failure and on every thirtieth (30th) day (pro rated for periods
totaling less than thirty days) thereafter until the earlier of (a)
the date such Public Information Failure is cured and (b) such time
that such public information is no longer required for the
Purchasers to transfer the Underlying Shares pursuant to Rule 144.
The payments to which a Purchaser shall be entitled pursuant to
this Section 4.3(b) are referred to herein as “Public
Information Failure Payments.” Public Information Failure
Payments shall be paid on the earlier of (i) the last day of the
calendar month during which such Public Information Failure
Payments are incurred and (ii) the third (3rd) Business Day after
the event or failure giving rise to the Public Information Failure
Payments is cured. In the event the Company fails to make Public
Information Failure Payments in a timely manner, such Public
Information Failure Payments shall bear interest at the rate of
0.5% per month (prorated for partial months) until paid in full.
Nothing herein shall limit such Purchaser’s right to pursue
actual damages for the Public Information Failure, and such
Purchaser shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.
16
4.4 Exercise Procedures. The form
of Notice of Exercise included in the Warrants set forth the
totality of the procedures required of the Purchasers in order to
exercise the Warrants. Without limiting the preceding sentences, no
ink-original Notice of Exercise shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of
any Notice of Exercise form be required in order to exercise the
Warrants. No additional legal opinion, other information or
instructions shall be required of the Purchasers to exercise their
Warrants. The Company shall honor exercises of the Warrants and
shall deliver Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Transaction
Documents.
4.5 Securities Laws Disclosure;
Publicity. If required to do so, the Company shall file a
Current Report on Form 8-K, including the Transaction Documents as
exhibits thereto, with the Commission within the time required by
the Exchange Act.
4.6 Non-Public Information. Except
with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company
covenants and agrees that neither it, nor any other Person acting
on its behalf, will provide any Purchaser or its agents or counsel
with any information that the Company believes constitutes material
non-public information, unless prior thereto such Purchaser shall
have entered into a written agreement with the Company regarding
the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on
the foregoing covenant in effecting transactions in securities of
the Company
4.7 Use of Proceeds. The Company
shall use the net proceeds from the sale of the Securities
hereunder for acquisitions, equipment purchases, inventory capital,
debt refinancing, repaying the Permitted Indebtedness, working
capital, reducing payables, operating capital and other uses of
capital as identified by management of the Company in its sole
discretion.
4.8 Indemnification of Purchasers.
Subject to the provisions of this Section 4.8, the Company will
indemnify and hold each Purchaser and its directors, officers,
shareholders, members, partners, employees and agents (and any
other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any
other title), each Person who controls such Purchaser (within the
meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, shareholders, agents,
members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such
controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to
any breach of any of the representations, warranties, covenants or
agreements made by the Company in this Agreement or in the other
Transaction Documents. If any action shall be brought against any
Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall promptly
notify the Company in writing, and the Company shall have the right
to assume the defense thereof with counsel of its own choosing
reasonably acceptable to the Purchaser Party. Any Purchaser Party
shall have the right to employ separate counsel in any such action
and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Purchaser Party.
The Company will not be liable to any Purchaser Party under this
Agreement (y) for any settlement by a Purchaser Party effected
without the Company’s prior written consent, which shall not
be unreasonably withheld or delayed; or (z) to the extent, but only
to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by such
Purchaser Party in this Agreement or in the other Transaction
Documents.
17
4.9 Reservation and Listing of
Securities.
(a)
The Company shall
maintain a reserve from its duly authorized shares of Common Stock
for issuance pursuant to the Transaction Documents in such amount
as may then be required to fulfill its obligations in full under
the Transaction Documents.
(b)
If, on any date,
the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the Required Minimum on such
date, then the Board of Directors shall use commercially reasonable
efforts to amend the Company’s certificate or articles of
incorporation to increase the number of authorized but unissued
shares of Common Stock to at least the Required Minimum at such
time, as soon as possible.
(c)
The Company shall,
if applicable: (i) in the time and manner required by the principal
Trading Market, prepare and file with such Trading Market an
additional shares listing application covering a number of shares
of Common Stock at least equal to the Required Minimum on the date
of such application, (ii) take all steps necessary to cause such
shares of Common Stock to be approved for listing or quotation on
such Trading Market as soon as possible thereafter.
4.10 Certain
Transactions and Confidentiality. Each Purchaser, severally
and not jointly with the other Purchasers, covenants that neither
it, nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any purchases or sales,
including Short Sales, of any of the Company’s securities
during the period commencing with the execution of this Agreement
and ending at such time that the transactions contemplated by this
Agreement are first publicly announced and such disclosure has been
filed with the Securities and Exchange Commission. Each Purchaser,
severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement
are publicly disclosed by the Company and such disclosure has been
filed with the Securities and Exchange Commission, such Purchaser
will maintain the confidentiality of the existence and terms of
this transaction and the information included in the Transaction
Documents and the Disclosure Schedules.
4.11
Form D; Blue Sky Filings. If
required, the Company agrees to timely file a Form D with respect
to the Securities as required under Regulation D and to provide a
copy thereof, promptly upon request of any Purchaser. The Company
shall take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for, or to qualify the
Securities for, sale to the Purchasers at the Closing under
applicable securities or “Blue Sky” laws of the states
of the United States, and shall provide evidence of such actions
promptly upon request of any Purchaser.
4.12
Prepayments. The Company shall
have the ability to prepay, in whole or in part, the Note(s)
without penalty and apply different prepayment amounts to different
holders of the Notes(s), at the Company’s
discretion.
18
ARTICLE V
MISCELLANEOUS
5.1
Termination. This Agreement may
be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the
obligations between the Company and the other Purchasers, by
written notice to the other parties, if the Closing has not been
consummated on or before January
31, 2020 (unless extended at the discretion of the Company);
provided,
however, that such
termination will not affect the right of any party to sue for any
breach by any other party (or parties).
5.2
Fees and Expenses. Except as
expressly set forth in the Transaction Documents to the contrary,
each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this
Agreement.
5.3
Entire Agreement. The
Transaction Documents, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
5.4
Notices. Any and all notices or
other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given
and effective on the earliest of: (a) the date of transmission, if
such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto
at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b)
the next Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto on a day that is
not a Trading Day or later than 5:30 p.m. (New York City time) on
any Trading Day, (c) the second (2nd) Trading Day
following the date of mailing, if sent by U.S. nationally
recognized overnight courier service or (d) upon actual receipt by
the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the
signature pages attached hereto.
5.5
Amendments; Waivers. No
provision of this Agreement, or any provision of any ancillary
agreement related to this Agreement, may be waived, modified,
supplemented or amended except in a written instrument signed, in
the case of an amendment, by the Company and the Purchasers holding
at least 50% in interest of the Securities then outstanding or, in
the case of a waiver, by the party against whom enforcement of any
such waived provision is sought. No waiver of any default with
respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right.
5.6
Headings. The headings herein
are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the
provisions hereof.
19
5.7
Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company may
not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser (other than by
merger). Only upon written consent of the Company, may any
Purchaser assign any or all of its rights under this Agreement to
any Person to whom such Purchaser assigns or transfers any
Securities, provided that such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the
provisions of the Transaction Documents that apply to the
“Purchasers.”
5.8
No Third-Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto
and their respective successors and permitted assigns and is not
for the benefit of, nor may any provision hereof be enforced by,
any other Person, except as otherwise set forth in this Section
5.8.
5.9
Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of
the State of Indiana, without regard to the principles of conflicts
of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or
its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
Indianapolis. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in
the City of Indianapolis, Marion County for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or
proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law. If either party shall
commence an action, suit or proceeding to enforce any provisions of
the Transaction Documents, then, in addition to the obligations of
the Company under Section 4.10, the prevailing party in such
action, suit or proceeding shall be reimbursed by the other party
for its reasonable attorneys’ fees and other costs and
expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.10
Waiver of Class Action Claims.
The Parties agree that they may bring claims against the other only
in their respective individual capacities, and not as a plaintiff
or class member in any purported class, representative, or
collective action.
5.11
Survival. The representations
and warranties contained herein shall survive the Closing and the
delivery of the Securities.
20
5.12
Execution. This Agreement may
be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party
and delivered to each other party, it being understood that the
parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or “.pdf” signature
page were an original thereof.
5.13
Severability. If any term,
provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
5.14
Rescission and Withdrawal
Right. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) any of the other
Transaction Documents, whenever any Purchaser exercises a right,
election, demand or option under a Transaction Document and the
Company does not timely perform its related obligations within the
periods therein provided, then such Purchaser may rescind or
withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in
whole or in part without prejudice to its future actions and
rights; provided,
however, that in
the case of a rescission of a exercise of a Warrant, the applicable
Purchaser shall be required to return any shares of Common Stock
subject to any such rescinded exercise notice concurrently with the
return to such Purchaser of the aggregate exercise price paid to
the Company for such shares and the restoration of such
Purchaser’s right to acquire such shares pursuant to such
Purchaser’s Warrant (including, issuance of a replacement
warrant certificate evidencing such restored right).
5.15
Replacement of Securities. If
any certificate or instrument evidencing any Securities is
mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon
cancellation thereof (in the case of mutilation), or in lieu of and
substitution therefor, a new certificate or instrument, but only
upon receipt of evidence reasonably satisfactory to the Company of
such loss, theft or destruction. The applicant for a new
certificate or instrument under such circumstances shall also pay
any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement
Securities.
5.16
Payment Set Aside. To the
extent that the Company makes a payment or payments to any
Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by
or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
21
5.17
Usury. To the extent it may
lawfully do so, the Company hereby agrees not to insist upon or
plead or in any manner whatsoever claim, and will resist any and
all efforts to be compelled to take the benefit or advantage of,
usury laws wherever enacted, now or at any time hereafter in force,
in connection with any claim, action or proceeding that may be
brought by any Purchaser in order to enforce any right or remedy
under any Transaction Document. Notwithstanding any provision to
the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under
the Transaction Documents for payments in the nature of interest
shall not exceed the maximum lawful rate authorized under
applicable law (the “Maximum Rate”), and,
without limiting the foregoing, in no event shall any rate of
interest or default interest, or both of them, when aggregated with
any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such
Maximum Rate. It is agreed that if the maximum contract rate of
interest allowed by law and applicable to the Transaction Documents
is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate
of interest allowed by law will be the Maximum Rate applicable to
the Transaction Documents from the effective date thereof forward,
unless such application is precluded by applicable law. If under
any circumstances whatsoever, interest in excess of the Maximum
Rate is paid by the Company to any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner
of handling such excess to be at such Purchaser’s
election.
5.18
Independent Nature of
Purchasers’ Obligations and Rights. The obligations of
each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser
shall be responsible in any way for the performance or
non-performance of the obligations of any other Purchaser under any
Transaction Document. Nothing contained herein or in any other
Transaction Document, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as
a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out
of this Agreement or out of the other Transaction Documents, and it
shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. Each Purchaser
has been represented by its own separate legal counsel in its
review and negotiation of the Transaction Documents. The Company
has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by any of the
Purchasers.
5.19
Saturdays, Sundays, Holidays,
etc. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein
shall not be a Business Day, then such action may be taken or such
right may be exercised on the next succeeding Business
Day.
5.20
Construction. The parties agree
that each of them and/or their respective counsel have reviewed and
had an opportunity to revise the Transaction Documents and,
therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not
be employed in the interpretation of the Transaction Documents or
any amendments thereto. In addition, each and every reference to
share prices and shares of Common Stock in any Transaction Document
shall be 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
Agreement.
5.21
No Rights as Stockholder Until
Conversion. The Notes do not entitle the holder to any
voting rights, dividends or other rights as a stockholder of the
Company prior to the conversion of the Notes as provided in the
Note.
(Signature Pages Follow)
22
IN
WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
Effective
Date:
________________
|
AMERICAN RESOURCES CORPORATION
|
|
Address for
Notice:
|
|
|
|
PO Box
606, Fishers Indiana 46038
|
|
By:
__________________________________
|
|
Fax:
(606) 391-1403
|
|
Name:
Thomas Sauve
|
|
|
|
Title:
President
|
|
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
23
PURCHASER
SIGNATURE PAGES TO
AMERICAN
RESOURCES CORPORATION SECURITIES PURCHASE AGREEMENT
IN WITNESS WHEREOF, the undersigned
have caused this Securities Purchase Agreement to be duly executed
by their respective authorized signatories as of the date first
indicated above.
Name of
Purchaser:
_____________________________________________________________
Signature of Authorized Signatory of Purchaser:
______________________________________
Name of
Authorized Signatory:
____________________________________________________
Title
of Authorized Signatory:
_____________________________________________________
Email
Address of Authorized Signatory:
_____________________________________________
Facsimile Number of
Authorized Signatory:
__________________________________________
Address
for Notice to Purchaser:
____________________________________
___________________________________
Address
for Delivery of Securities to Purchaser (if not same as address for
notice):
____________________________________
____________________________________
Subscription
Amount: ___________________
Series C Warrant
Shares: ___________________
EIN or SSN Number:
___________________
Payment
Instructions for Subscriber to the Company for the purchase of
Units:
If via certified check: Made payable to the order of
“American Resources Corporation”
If via wire:
Domestic
wire instructions:
|
Beneficiary
Bank Name:
|
Merchants
Bank of Indiana
|
|
Beneficiary
Account Name:
|
American
Resources Corporation
|
|
Beneficiary
Account Number:
|
4154311
|
|
ABA
Routing Number:
|
0794909153
|
|
Beneficiary
Bank Address:
|
3737
East 96th
Street
|
|
|
Indianapolis,
IN 46240
|
24
Exhibit
99.2
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY
IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”).
IN ADDITION, A SECURITIES PURCHASE AGREEMENT DATED AS OF
________________ _____, 2020 CONTAINS CERTAIN ADDITIONAL TERMS AND
AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO THIS SENIOR
NOTE.
Original
Issue Date: __________ _____, 2020 Note No. ________
Original
Conversion Price (subject to adjustment herein): $1.05 per
share
Original
Principal Amount: $_______________
SENIOR CONVERTIBLE NOTE
DUE __________ __, 2022
THIS
SENIOR CONVERTIBLE NOTE is one of a series of duly authorized and
validly issued Senior Convertible Notes of AMERICAN RESOURCES
CORPORATION, a Florida corporation and its wholly owned
subsidiaries (the “Company”), having its principal
place of business at 12115 Visionary Way, Suite 174, Fishers,
Indiana 46038, designated as its Senior Convertible Note due
____________ _____, 2022, which twenty-Four (24) months post the
Original Issue Date (this note, the “Note” and,
collectively with the other notes of such series, the
“Notes”).
FOR
VALUE RECEIVED, the Company promises to pay to
_____________________ or its registered assigns (the
“Holder”), or shall have paid pursuant to the terms
hereunder, the principal sum of $______________ on _________ ____,
2022 (the “Maturity Date”) or such earlier date as this
Note is required or permitted to be repaid as provided hereunder.
This Note is subject to the following additional
provisions:
Section
1. Definitions.
For the purposes hereof, in addition to the terms defined elsewhere
in this Note, (a) capitalized terms not otherwise defined herein
shall have the meanings set forth in the Purchase Agreement and (b)
the following terms shall have the following meanings:
“Business
Day” means any day except any Saturday, any Sunday, any day
which is a federal legal holiday in the United States or any day on
which banking institutions in the State of New York are authorized
or required by law or other governmental action to
close.
“Common
Stock” shall have the meaning the Company’s Class A
Common stock, par value $0.0001 per share.
“Conversion”
shall have the meaning ascribed to such term in Section
4.
“Conversion
Date” shall have the meaning set forth in Section
4(a).
“Conversion
Price” shall have the meaning set forth in Section
4(b).
“Conversion
Schedule” means the Conversion Schedule in the form of
Schedule 1 attached hereto.
“Conversion
Shares” means, collectively, the shares of Common Stock
issuable upon conversion of this Note in accordance with the terms
hereof.
“Event of
Default” shall have the meaning set forth in Section
7(a).
“Note
Register” means the formal record maintained by the Company
with respect to the recording of the issuances of Notes, the
amounts thereof, and the Holders thereof.
“Notice of
Conversion” shall have the meaning set forth in Section
4(a).
“Optional
Redemption” shall have the meaning set forth in Section
6(a).
1
“Optional
Redemption Amount” means an amount equal to One and
Twenty-Five One Thousandths (1.025) of the sum of the then
outstanding principal hereof to the date of
redemption.
“Optional
Redemption Date” shall have the meaning set forth in Section
6(a).
“Optional
Redemption Notice” shall have the meaning set forth in
Section 6(a).
“Optional
Redemption Notice Date” shall have the meaning set forth in
Section 6(a).
“Optional
Redemption Period” shall have the meaning set forth in
Section 6(a).
“Original
Issue Date” means the date of the first issuance of the
Notes, regardless of any transfers of any Note and regardless of
the number of instruments which may be issued to evidence such
Notes.
Section
2.
Interest and
Repayment.
a) Interest Rate. The Note shall
bear an 12.5% effective annual interest rate, compounded monthly.
For the first Six (6) calendar months post the Original Issue Date,
all interest payable under this Note shall accrue to the Principal.
Starting on calendar month Seven (7), through to the Maturity Date,
the interest shall be paid in cash along with, and included within,
the monthly amount of the Principal Repayment amounts described in
Section 2(b) below to the Holder by on the last day of the calendar
month. Any Notes issued after the first day of the month shall have
the first month of accrued interest pro-rated for the number of
days of the month outstanding.
b) Principal Payments. Payments of
Principal and interest shall be made in cash starting on calendar
month Seven (7) post the Original Issue Date in the sum of
Twenty-Eight Thousand ($28,000) for every Five Hundred Thousand
($500,000) of Principal investment (the “Principal
Repayment”) and shall continue monthly until the Maturity
Date. The monthly Principal Repayment shall be made on the last day
of each calendar month.
c) Payment at Maturity Date. At
the Maturity Date the sum of any outstanding interest and principal
shall be due and payable in cash.
d) Prepayment of Note. The Company
shall have the ability to prepay, in whole or in part, the Note
without penalty and apply different prepayment amounts to different
holders of the Notes, at the Company’s
discretion.
Section
3.
Registration of
Transfers and Exchanges.
a) Different Denominations. This
Note is exchangeable for an equal aggregate principal amount of
Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be payable for
such registration of transfer or exchange.
b) Investment Representations.
This Note has been issued subject to certain investment
representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance
with the Purchase Agreement and applicable federal and state
securities laws and regulations.
c) Reliance on Note Register.
Prior to due presentment for transfer to the Company of this Note,
the Company and any agent of the Company may treat the Person in
whose name this Note is duly registered on the Note Register as the
owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this Note is
overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
Section
4.
Conversion.
a) Voluntary
Conversion. At any time after the Original Issue Date until
this Note is no longer outstanding, this Note shall be convertible,
in whole or in part, into shares of Common Stock at the option of
the Holder, at any time and from time to time (subject to the
conversion limitations set forth in Section 4(d) hereof). The
Holder shall effect conversions by delivering to the Company a
Notice of Conversion, the form of which is attached hereto as Annex
A (each, a “Notice of Conversion”), specifying therein
the principal amount of this Note to be converted and the date on
which such conversion shall be effected (such date, the
“Conversion Date”). If no Conversion Date is specified
in a Notice of Conversion, the Conversion Date shall be the date
that such Notice of Conversion is deemed delivered hereunder. No
ink-original Notice of Conversion shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of
any Notice of Conversion form be required. To effect conversions
hereunder, the Holder shall not be required to physically surrender
this Note to the Company unless the entire principal amount of this
Note has been so converted. Conversions hereunder shall have the
effect of lowering the outstanding principal amount of this Note in
an amount equal to the applicable conversion. The Company may
deliver an objection to any Notice of Conversion within 3 Business
Day of delivery of such Notice of Conversion. In the event of any
dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest
error.
b) Conversion
Price. The conversion price in effect on any Conversion Date
shall be equal to $1.05 per share of Common Stock, subject to
adjustment herein (the “Conversion
Price”).
2
c) Mechanics
of Conversion.
i.
Conversion Shares Issuable Upon
Conversion of Principal Amount.
ii.
The number of
Conversion Shares issuable upon a conversion at Holders option
pursuant to Section 4(a) shall be determined by the quotient
obtained by dividing (x) the applicable dollar amount being
converted in either case by (y) the Conversion Price.
iii.
Delivery of Conversion Shares Upon
Conversion. Not later than 5 Trading Day after each
Conversion Date (the “Share Delivery Date”), the
Company shall deliver, or cause to be delivered, to the Holder the
number of Conversion Shares being acquired upon the conversion of
this Note which, on or after the 6 month anniversary of the
Original Issue Date under Rule 144 shall be free of restrictive
legends and trading restrictions (other than those which may then
be required by the Purchase Agreement) and shall be delivered by
the Company under this Section 4(c) electronically through the
Depository Trust Company or another established clearing
corporation performing similar functions.
iv.
Failure to Deliver Conversion
Shares. If, in the case of any Notice of Conversion, such
Conversion Shares are not delivered to or as directed by the
applicable Holder by the Share Delivery Date, the Holder shall be
entitled to elect by written notice to the Company at any time on
or before its receipt of the Conversion Shares, to rescind such
Conversion, in which event the Company shall promptly return to the
Holder any original Note delivered to the Company and the Holder
shall promptly return to the Company the Conversion Shares issued
to such Holder pursuant to the rescinded Conversion
Notice.
v.
Obligation Absolute; Partial
Liquidated Damages. The Company’s obligations to issue
and deliver the Conversion Shares upon conversion of this Note in
accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the
same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to
enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other
Person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in
connection with the issuance of such Conversion Shares; provided,
however, that such delivery shall not operate as a waiver by the
Company of any such action the Company may have against the Holder.
If the Company fails for any reason to deliver to the Holder the
Conversion Shares pursuant to Section 4(c)(iii) by the Share
Delivery Date, the Company shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $500 of principal
amount being converted, $5 per Trading Day for each Trading Day
after such Share Delivery Date until such Conversion Shares are
delivered or Holder rescinds such conversion. Nothing herein shall
limit a Holder’s right to pursue actual damages for the
Company’s failure to deliver Conversion Shares within the
period specified herein and the Holder shall have the right to
pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance
and/or injunctive relief. Nothing herein shall limit a
Holder’s right to pursue actual damages or declare an Event
of Default pursuant to Section 8 hereof for the Company’s
failure to deliver Conversion Shares within the period specified
herein and the Holder shall have the right to pursue all remedies
available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief. The exercise of any such rights shall not prohibit the
Holder from seeking to enforce damages pursuant to any other
Section hereof or under applicable law.
vi.
Compensation for Buy-In on Failure to
Timely Deliver Conversion Shares Upon Conversion. In
addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to the Holder such
Conversion Shares by the Share Delivery Date pursuant to Section
4(c)(iii), and if after such Share Delivery Date the Holder is
required by its brokerage firm to purchase (in an open market
transaction or otherwise), or the Holder’s brokerage firm
otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Conversion Shares which
the Holder was entitled to receive upon the conversion relating to
such Share Delivery Date (a “Buy-In”), then the Company
shall (A) pay in cash to the Holder (in addition to any other
remedies available to or elected by the Holder) the amount, if any,
by which (x) the Holder’s total purchase price (including any
brokerage commissions) for the Common Stock so purchased exceeds
(y) the product of (1) the aggregate number of shares of Common
Stock that the Holder was entitled to receive from the conversion
at issue multiplied by (2) the actual sale price at which the sell
order giving rise to such purchase obligation was executed
(including any brokerage commissions) and (B) at the option of the
Holder, either reissue (if surrendered) this Note in a principal
amount equal to the principal amount of the attempted conversion
(in which case such conversion shall be deemed rescinded) or
deliver to the Holder the number of shares of Common Stock that
would have been issued if the Company had timely complied with its
delivery requirements under Section 4(c)(ii). For example, if the
Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion
of this Note with respect to which the actual sale price of the
Conversion Shares (including any brokerage commissions) giving rise
to such purchase obligation was a total of $10,000 under clause (A)
of the immediately preceding sentence, the Company shall be
required to pay the Holder $1,000. The Holder shall provide the
Company written notice indicating the amounts payable to the Holder
in respect of the Buy-In and, upon request of the Company, evidence
of the amount of such loss. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver Conversion
Shares upon conversion of this Note as required pursuant to the
terms hereof. Such amounts shall be not owed for Buy-In if the
delay is not a result of the Company’s doing.
3
vii.
Reservation of Shares Issuable Upon
Conversion. The Company covenants that it will at all times
reserve and keep available out of its authorized and unissued
shares of Common Stock for the sole purpose of issuance upon
conversion of this Note, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of
Persons other than the Holder (and the other holders of the Note),
not less than such aggregate number of shares of the Common Stock
as shall (subject to the terms and conditions set forth in the
Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 5) upon the conversion of
the then outstanding principal amount of this Note. The Company
covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly authorized, validly issued, fully paid
and nonassessable.
viii.
Fractional Shares. No
fractional shares or scrip representing fractional shares shall be
issued upon the conversion of this Note. As to any fraction of a
share which the Holder would otherwise be entitled to purchase upon
such conversion, the Company shall round down if less than 50% of a
share and round up if 50% or greater to the next whole
share.
ix.
Transfer Taxes and Expenses.
All expenses associated with the issuance of Conversion Shares on
conversion of this Note shall be the sole responsibility of the
Holder.
d) Holder’s
Conversion Limitations. The Company shall not effect any
conversion of this Note, and a Holder shall not have the right to
convert any portion of this Note, to the extent that after giving
effect to the conversion set forth on the applicable Notice of
Conversion, the Holder (together with the Holder’s
Affiliates, and any Persons acting as a group together with the
Holder or any of the Holder’s Affiliates) would beneficially
own in excess of the Beneficial Ownership Limitation (as defined
below). 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 conversion of this Note with respect to which such
determination is being made, but shall exclude the number of shares
of Common Stock which are issuable upon (i) conversion of the
remaining, unconverted principal amount of this Note beneficially
owned by the Holder or any of its Affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other
securities of the Company subject to a limitation on conversion or
exercise analogous to the limitation contained herein (including,
without limitation, any other Notes or the Warrants) beneficially
owned by the Holder or any of its Affiliates. Except as set forth
in the preceding sentence, for purposes of this Section 4(d),
beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this
Section 4(d) applies, the determination of whether this Note is
convertible (in relation to other securities owned by the Holder
together with any Affiliates) and of which principal amount of this
Note is convertible shall be in the sole discretion of the Holder,
and the submission of a Notice of Conversion shall be deemed to be
the Holder’s determination of whether this Note may be
converted (in relation to other securities owned by the Holder
together with any Affiliates) and which principal amount of this
Note is convertible, in each case subject to the Beneficial
Ownership Limitation. To ensure compliance with this restriction,
the Holder will be deemed to represent to the Company each time it
delivers a Notice of Conversion that such Notice of Conversion has
not violated the restrictions set forth in this paragraph and the
Company shall have no obligation to verify or confirm the accuracy
of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. For purposes of this Section 4(d), in
determining the number of outstanding shares of Common Stock, the
Holder may rely on the number of outstanding shares of Common Stock
as stated in the most recent of the following: (i) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (ii) a more recent public
announcement by the Company, or (iii) a more recent written 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 a Holder, the Company shall within one Trading
Day 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 Note, by the Holder or its Affiliates since the date
as of which such number of outstanding shares of Common Stock was
reported. The “
Beneficial Ownership Limitation” shall be
4.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of this Note held by the Holder. The
Beneficial Ownership Limitation provisions of this paragraph shall
be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 4(d) to correct this
paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation
contained herein or to make changes or supplements necessary or
desirable to properly give effect to such limitation.
The
limitations contained in this Section 4(d) shall apply to a
successor holder of this Note.
Section
5.
Certain
Adjustments.
a) Stock Dividends and Stock
Splits. If the Company, at any time while this Note is
outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on
shares of Common Stock or any Common Stock Equivalents (which, for
avoidance of doubt, shall not include any shares of Common Stock
issued by the Company upon conversion of the Notes), (ii)
subdivides outstanding shares of Common Stock into a larger number
of shares, (iii) combines (including by way of a reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares, then the Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common
Stock (excluding any treasury shares of the Company) outstanding
immediately before such event, and of which the denominator shall
be the number of shares of Common Stock outstanding immediately
after such event. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.
4
b) Subsequent Rights Offerings. In
addition to any adjustments pursuant to Section 5(a) above, if at
any time the Company grants, issues or sells any Common Stock
Equivalents or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of
shares of Common Stock (the “Purchase Rights”), then
the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the
Holder could have acquired if the Holder had held the number of
shares of Common Stock acquirable upon complete conversion of this
Note (without regard to any limitations on exercise hereof,
including without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights (provided, however, to the extent that the
Holder’s right to participate in any such Purchase Right
would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such
shares of Common Stock as a result of such Purchase Right to such
extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).
c) Pro Rata Distributions. During
such time as this Note is outstanding, if the Company shall declare
or make any dividend or other distribution of its assets (or rights
to acquire its assets) to holders of shares of Common Stock, by way
of return of capital or otherwise (including, without limitation,
any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction)
(a "Distribution"), at any time after the issuance of this Note,
then, in each such case, the Holder shall be notified five days
prior to such Distribution to exercise its right to convert such
Note into Common Stock to benefit from such Distribution subject to
the Beneficial Ownership Limitation.
d) Fundamental Transaction. If, at
any time while this Note is outstanding, (i) the Company, directly
or indirectly, in one or more related transactions effects any
merger or consolidation of the Company with or into another Person,
(ii) the Company, directly or indirectly, effects any sale, lease,
license, assignment, transfer, conveyance or other disposition of
all or substantially all of its assets in one or a series of
related transactions, (iii) any, direct or indirect, purchase
offer, tender offer or exchange offer (whether by the Company or
another Person) is completed pursuant to which holders of Common
Stock are permitted to sell, tender or exchange their shares for
other securities, cash or property and has been accepted by the
holders of 50% or more of the outstanding Common Stock, (iv) the
Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires
more than 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the other Person or
other Persons making or party to, or associated or affiliated with
the other Persons making or party to, such stock or share purchase
agreement or other business combination where the Company is not
the surviving entity) (each, a “Fundamental
Transaction”), then, upon any subsequent conversion of this
Note, the Holder shall have the right to receive, for each
Conversion Share that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental Transaction
(without regard to any limitation in Section 4(d) on the conversion
of this Note), the number of shares of Common Stock of the
successor or acquiring corporation or of the Company, if it is the
surviving corporation, and any additional consideration (the
“Alternate Consideration”) receivable as a result of
such Fundamental Transaction by a holder of the number of shares of
Common Stock for which this Note is convertible immediately prior
to such Fundamental Transaction (without regard to any limitation
in Section 5(d) on the conversion of this Note).
e) Calculations. All calculations
under this Section 5 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 5, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding any treasury shares of
the Company) issued and outstanding.
f) Notice to the
Holder.
i.
Adjustment to Conversion Price.
Whenever the Conversion Price is adjusted pursuant to any provision
of this Section 5, the Company shall promptly deliver to each
Holder a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment.
5
ii.
Notice to Allow Conversion by
Holder. If (A) the Company shall declare a dividend on the
Common Stock, (B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of the Common Stock, (C) the
Company shall authorize the granting to all holders of the Common
Stock of rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights, (D) the approval of
any stockholders of the Company shall be required in connection
with any reclassification of the Common Stock, any consolidation or
merger to which the Company is a party, any sale or transfer of all
or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company, then, in each case, the
Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of this Note, and shall cause to be
delivered to the Holder at its last address as it shall appear upon
the Note Register, at least 10 calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K. The Holder shall remain entitled to
convert this Note during the 10 calendar day period commencing on
the date of such notice through the effective date of the event
triggering such notice except as may otherwise be expressly set
forth herein.
Section
6.
Redemption.
a) Optional Redemption at Election of
Company. Subject to the provisions of this Section 6(a), at
any time after Six (6) months after the Original Issue Date, the
Company may deliver to the Holder (an “Optional Redemption
Notice” and the date such notice is deemed delivered
hereunder, the “Optional Redemption Notice Date”) of
its irrevocable election to redeem some or all of the then
outstanding principal amount and/or accrued interest of this Note
for cash in an amount equal to the Optional Redemption Amount on
the 10th Business Day following the Optional Redemption Notice Date
(such date, the “Optional Redemption Date”, such 10th
Business Day period, the “Optional Redemption Period”
and such redemption, the “Optional Redemption”). The
Optional Redemption Amount is payable in full on the Optional
Redemption Date.
b) Redemption Procedure. Upon
Delivery of the Optional Redemption Notice at the Optional
Redemption Notice Date, the Holder shall have the right to convert,
in part or in whole, the outstanding principal amount and/or
accrued interest of this Note into Common Stock pursuant to Section
4 prior to the Optional Redemption Date. Furthermore, upon Delivery
of the Optional Redemption Notice at the Optional Redemption Notice
Date to the Holder, and if the Holder elects to convert, in part or
in whole, the outstanding principal amount and/or accrued interest
of this Note into Common Stock pursuant to Section 4 prior to the
Optional Redemption Date, and if that conversion to Common Stock
will result in the Holder exceeding the Beneficial Ownership
Limitation, as defined in Section 4(d), then the Company shall be
limited in the redemption under Section 6 to be only that principal
amount and/or accrued interest that, when converted to Common
Stock, is less than the Beneficial Ownership Limitation of 4.99%,
unless otherwise waived by mutual agreement between the Company and
the Holder. To put in other words, the Company cannot redeem any
part of the principal amount and/or interest of the Notes that,
when potentially converted to Common Shares by the Holder pursuant
to Section 4, would result in the Holder exceeding the Beneficial
Ownership Limitation of 4.99%. The payment of cash, as applicable,
pursuant to an Optional Redemption shall be payable on the Optional
Redemption Date. Notwithstanding anything to the contrary in this
Section 6, the Company’s determination to redeem is not
required to be applied ratably among the Holders of
Notes.
Section
7.
Events of
Default.
a) “Event of
Default” means, wherever used herein, any of the following
events (whatever the reason for such event and whether such event
shall be voluntary or involuntary or effected by operation of law
or pursuant to any judgment, decree or order of any court, or any
order, rule or regulation of any administrative or governmental
body):
i.
any default in the
payment of the interest or the principal amount of any Note as and
when the same shall become due and payable;
ii.
the Company shall
materially fail to observe or perform any other covenant or
agreement contained in the Notes which failure is not cured, if
possible to cure, within the earlier to occur of (A) 15 Trading
Days after notice of such failure sent by the Holder or by any
other Holder to the Company and (B) 15 Trading Days after the
Company has become or should have become aware of such
failure;
iii.
any representation
or warranty made in this Note, any other Transaction Documents, any
written statement pursuant hereto or thereto or any other report,
financial statement or certificate made or delivered to the Holder
or any other Holder shall be materially untrue or incorrect in any
material respect as of the date when made or deemed
made;
6
b) Remedies Upon Event of Default.
If any Event of Default occurs, and the Company fails to cure the
Event of Default within Fifteen (15) days post notice being
provided by the Holder to the Company of the occurrence of an Event
of Default pursuant to Section 5.4 of the Purchase Agreement, the
outstanding principal amount of this Note, plus accrued but unpaid
interest and other amounts owing in respect thereof through the
date of acceleration, shall become, at the Holder’s election,
immediately due and payable in cash at the Mandatory Default
Amount. Commencing 30 days after the occurrence of any Event of
Default that results in the eventual acceleration of this Note, the
interest rate on this Note shall accrue at an interest rate equal
to the lesser of 16% per annum or the maximum rate permitted under
applicable law if lower. Upon the payment in full of the Mandatory
Default Amount, the Holder shall promptly surrender this Note to or
as directed by the Company. In connection with such acceleration
described herein, the Holder need not provide, and the Company
hereby waives, any presentment, demand, protest or other notice of
any kind, and the Holder may immediately and without expiration of
any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable
law. Such acceleration may be rescinded and annulled by Holder at
any time prior to payment hereunder and the Holder shall have all
rights as a holder of the Note until such time, if any, as the
Holder receives full payment pursuant to this Section. No such
rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon.
Section
8.
Miscellaneous.
a) Notices.
Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation,
shall be in writing and delivered personally, by facsimile or email
(if by email, with an acknowledged response returned by an officer
of the Company), or sent by a nationally recognized overnight
courier service, addressed to the Company, at the address set forth
above, or such other facsimile number or address as the Company may
specify for such purposes by notice to the Holder delivered in
accordance with this Section 8(a). Any and all notices or other
communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by
facsimile, by electronic mail if a confirmation of receipt is
received from the Holder to the Company or sent by a nationally
recognized overnight courier service addressed to each Holder at
the facsimile number or address of the Holder appearing on the
books of the Company, or if no such facsimile number or address
appears on the books of the Company, at the principal place of
business of such Holder, as set forth in the Purchase Agreement.
Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number or electronic mail set forth on
the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on any date or (ii) upon actual receipt by the party to
whom such notice is required to be given.
b) Absolute
Obligation. Except as expressly provided herein, no
provision of this Note shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal,
as applicable, on this Note at the time, place, and rate, and in
the coin or currency, herein prescribed. This Note is a direct debt
obligation of the Company.
c) Lost
or Mutilated Note. If this Note shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in
exchange and substitution for and upon cancellation of a mutilated
Note, or in lieu of or in substitution for a lost, stolen or
destroyed Note, a new Note for the principal amount of this Note so
mutilated, lost, stolen or destroyed, but only upon receipt of
evidence of such loss, theft or destruction of such Note, and of
the ownership hereof, reasonably satisfactory to the
Company.
d) Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be
determined in accordance with the provisions of the Purchase
Agreement.
e) Waiver.
Any waiver by the Company or the Holder of a breach of any
provision of this Note shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of
any other provision of this Note. The failure of the Company or the
Holder to insist upon strict adherence to any term of this Note on
one or more occasions shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence
to that term or any other term of this Note on any other occasion.
Any waiver by the Company or the Holder must be in
writing.
f) Severability.
If any provision of this Note is invalid, illegal or unenforceable,
the balance of this Note shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall
nevertheless remain applicable to all other Persons and
circumstances. If it shall be found that any interest or other
amount deemed interest due hereunder violates the applicable law
governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum rate of
interest permitted under applicable law.
7
g) Remedies,
Characterizations, Other Obligations, Breaches and Injunctive
Relief. The remedies provided in this Note shall be
cumulative and in addition to all other remedies available under
this Note and any of the other Transaction Documents at law or in
equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the
Holder’s right to pursue actual and consequential damages for
any failure by the Company to comply with the terms of this Note.
The Company covenants to the Holder that there shall be no
characterization concerning this instrument other than as expressly
provided herein. Amounts set forth or provided for herein with
respect to payments and the like (and the computation thereof)
shall be the amounts to be received by the Holder and shall not,
except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Holder and that the remedy at law for
any such breach may be inadequate. The Company therefore agrees
that, in the event of any such breach or threatened breach, the
Holder shall be entitled, in addition to all other available
remedies, to an injunction restraining any such breach or any such
threatened breach. The Company shall provide all information and
documentation to the Holder that is requested by the Holder to
enable the Holder to confirm the Company’s compliance with
the terms and conditions of this Note.
h) Next
Business Day. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business
Day.
i) Headings.
The headings contained herein are for convenience only, do not
constitute a part of this Note and shall not be deemed to limit or
affect any of the provisions hereof.
j) No
Rights as Stockholder Until Conversion. The Note does not
entitle the Holder to any voting rights, dividends or other rights
as a stockholder of the Company prior to the conversion of the
Notes as provided herein.
IN
WITNESS WHEREOF, the Company has caused this Note to be duly
executed by a duly authorized officer as of the date first above
indicated.
AMERICAN RESOURCES
CORPORATION
By:__________________________________________
Name:
Title:
Facsimile No. for
delivery of Notices: (606) 393-0190
8
20200325
ANNEX A
NOTICE OF CONVERSION
The
undersigned hereby elects to convert principal under the Senior
Convertible Debenture No. ____ due _________________ of American
Resources Corporation, a Florida corporation (the
“Company”), into shares of class A common stock (the
“Common Stock”), of the Company according to the
conditions hereof, as of the date written below. If shares of
Common Stock are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in
accordance therewith.
By the
delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Common Stock
does not exceed the amounts specified under Section 4 of this
Debenture, as determined in accordance with Section 13(d) of the
Exchange Act.
The
undersigned agrees to comply with the applicable securities laws in
connection with any transfer of the aforesaid shares of Common
Stock.
Conversion
calculations:
Date to
Effect Conversion: _______________________
Principal Amount of
Debenture to be Converted:
_________________
Number
of shares of Common Stock to be issued:
_________________
Signature:
_______________________________
Name: _______________________________
Address
for Delivery of Conversion Shares:
_________________________
_________________________
Or
DWAC
Instructions:
Broker
No: _______________________________
Account
No:
_______________________________
Deliver notice to Company via email:
accounting@americanresourcescorp.com
9
Exhibit
99.3
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
ANY STATE SECURITIES LAWS AND NEITHER SUCH SHARES NOR ANY INTEREST
THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT
THERETO IS EFFECTIVE UNDER THE 1933 ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE 1933 ACT.
IN
ADDITION, A SECURITIES PURCHASE AGREEMENT DATED AS OF
________________ _____, 2020 CONTAINS CERTAIN ADDITIONAL TERMS AND
AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO THIS
WARRANT.
___________________________________________
COMMON STOCK PURCHASE WARRANT “C-___”
|
Name of
Holder:
|
_______________________
|
|
|
|
|
Number
of Shares:
|
______________
|
|
|
|
|
Original
Issue Date:
|
______________,
2020
|
|
|
|
|
Expiration
Date:
|
______________,
2022 (Two Years Post Original Issue Date)
|
|
|
|
|
Exercise
Price per Share:
|
$1.50
|
|
|
|
American Resources Corporation, a
company organized and existing under the laws of the State of
Florida (the “Company”),
hereby certifies that, for value received, ______________________, or its
registered assigns (the “Warrant
Holder”), is entitled, subject to the terms set forth
below, to purchase from the Company up to _________________
(___________) shares (as adjusted from time to time as provided in
Section 7, the “Warrant
Shares”) of Class A Common stock, $.0001 par value, of
the Company (the “Common
Stock”) at a price of One Dollars and Fifty Cents
($1.50) per Warrant Share (as adjusted from time to time as
provided in Section 7, the “Exercise
Price”), at any time and from time to time from and
after the date thereof and through and including 5:00 p.m.
Indianapolis, Indiana time on _____________, 2022 (the
“Expiration Date”), and subject to the following terms
and conditions:
1. Registration of
Warrant. The Company
shall register this Warrant upon records to be maintained by the
Company for that purpose (the “Warrant
Register”), in the name of the record Warrant Holder
hereof from time to time. The Company may deem and treat the
registered Warrant Holder of this Warrant as the absolute owner
hereof for the purpose of any exercise hereof or any distribution
to the Warrant Holder, and for all other purposes, and the Company
shall not be affected by notice to the contrary.
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2. Investment
Representation. The
Warrant Holder by accepting this Warrant represents that the
Warrant Holder is acquiring this Warrant for its own account or the
account of an affiliate for investment purposes and not with the
view to any offering or distribution and that the Warrant Holder
will not sell or otherwise dispose of this Warrant or the
underlying Warrant Shares in violation of applicable securities
laws. The Warrant Holder acknowledges that the certificates
representing any Warrant Shares will bear a legend indicating that
they have not been registered under the United States Securities
Act of 1933, as amended (the “1933
Act”) and may not be sold by the Warrant Holder except
pursuant to an effective registration statement or pursuant to an
exemption from registration requirements of the 1933 Act and in
accordance with federal and state securities laws. If this Warrant
was acquired by the Warrant Holder pursuant to the exemption from
the registration requirements of the 1933 Act afforded by
Regulation S thereunder, the Warrant Holder acknowledges and
covenants that this Warrant may not be exercised by or on behalf of
a Person during the one-year distribution compliance period (as
defined in Regulation S) following the date hereof. “Person”
means an individual, partnership, firm, limited liability company,
trust, joint venture, association, corporation, or any other legal
entity.
3. Validity of Warrant
and Issue of Shares.
The Company represents and warrants that this Warrant has been duly
authorized and validly issued and warrants and agrees that all of
Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, when issued upon such exercise,
be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges with respect to the
issue thereof. The Company further warrants and agrees that during
the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and
reserved a sufficient number of Common Stock to provide for the
exercise of the rights represented by this Warrant.
4. Registration
of Transfers and Exchange of Warrants.
a. Subject to
compliance with the legend set forth on the face of this Warrant,
the Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant
with the Form of Assignment attached hereto duly completed and
signed, to the Company at the office specified in or pursuant to
Section 13. Upon any such registration or transfer, a new warrant
to purchase Common Stock, in substantially the form of this Warrant
(any such new warrant, a “New
Warrant”), evidencing the portion of this Warrant so
transferred shall be issued to the transferee and a New Warrant
evidencing the remaining portion of this Warrant not so
transferred, if any, shall be issued to the transferring Warrant
Holder. The acceptance of the New Warrant by the transferee thereof
shall be deemed the acceptance of such transferee of all of the
rights and obligations of a Warrant Holder of a
Warrant.
b. This Warrant is
exchangeable, upon the surrender hereof by the Warrant Holder to
the office of the Company specified in or pursuant to Section 13
for one or more New Warrants, evidencing in the aggregate the right
to purchase the number of Warrant Shares which may then be
purchased hereunder. Any such New Warrant will be dated the date of
such exchange.
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5.
Exercise of Warrants.
a. Upon
surrender of this Warrant with the Form of Election to Purchase
attached hereto duly completed and signed to the Company, at its
address set forth in Section 13, and upon payment and delivery of
the Exercise Price per Warrant Share multiplied by the number of
Warrant Shares that the Warrant Holder intends to purchase
hereunder, in lawful money of the United States of America, in cash
or by certified or official bank check or checks, to the Company,
all as specified by the Warrant Holder in the Form of Election to
Purchase, the Company shall promptly (but in no event later than 7
business days after the Date of Exercise (as defined herein)) issue
or cause to be issued and cause to be delivered to or upon the
written order of the Warrant Holder and in such name or names as
the Warrant Holder may designate (subject to the restrictions on
transfer described in the legend set forth on the face of this
Warrant), a certificate for the Warrant Shares issuable upon such
exercise, with such restrictive legend as required by the 1933 Act.
Any person so designated by the Warrant Holder to receive Warrant
Shares shall be deemed to have become holder of record of such
Warrant Shares as of the Date of Exercise of this
Warrant.
b. A
“Date of Exercise” means the date on which the Company
shall have received (i) this Warrant (or any New Warrant, as
applicable), with the Form of Election to Purchase attached hereto
(or attached to such New Warrant) appropriately completed and duly
signed, and (ii) payment of the Exercise Price for the number of
Warrant Shares so indicated by the Warrant Holder to be
purchased.
c. This Warrant shall
be exercisable at any time and from time to time for such number of
Warrant Shares as is indicated in the attached Form of Election to
Purchase. If less than all of the Warrant Shares which may be
purchased under this Warrant are exercised at any time, the Company
shall issue or cause to be issued, at its expense, a New Warrant
evidencing the right to purchase the remaining number of Warrant
Shares for which no exercise has been evidenced by this
Warrant.
6. Maximum
Exercise. The Warrant
Holder shall not be entitled to exercise this Warrant on a Date of Exercise in
connection with that number of shares of Common Stock which would
be in excess of the sum of (i) the number of shares of Common Stock
beneficially owned by the Warrant Holder and its affiliates on an
exercise date, and (ii) the number of shares of Common Stock
issuable upon the exercise of this Warrant with respect to which
the determination of this limitation is being made on an exercise
date, which would result in beneficial ownership by the Warrant
Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock on such date, unless otherwise mutually
agreed to in writing between the Company and the Warrant
Holder.
7. Piggy Back
Registration. So long as there are no existing securities
registration limitations affecting the total registerable
securities of the Company, in the event the Company files a
registration statement, the shares underlying the Warrant will
carry “piggyback rights” and be included in that
registration statement.
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8. Adjustment
of Exercise Price and Number of Shares. The character of the
shares of stock or other securities at the time issuable upon
exercise of this Warrant and the Exercise Price therefore, are
subject to adjustment upon the occurrence of the following events,
and all such adjustments shall be cumulative:
a. Adjustment for Stock Splits, Stock Dividends,
Recapitalizations, Etc. The Exercise Price of this Warrant
and the number of shares of Common Stock or other securities at the
time issuable upon exercise of this Warrant shall be appropriately
adjusted to reflect any stock dividend, stock split, combination of
shares, reclassification, recapitalization or other similar event
affecting the number of outstanding shares of stock or
securities.
b. Adjustment for Reorganization, Consolidation,
Merger, Etc. In case of any consolidation or merger of the
Company with or into any other corporation, entity or person, or
any other corporate reorganization, in which the Company shall not
be the continuing or surviving entity of such consolidation, merger
or reorganization (any such transaction being hereinafter referred
to as a "Reorganization"),
then, in each case, the holder of this Warrant, on exercise hereof
at any time after the consummation or effective date of such
Reorganization (the "Effective
Date"), shall receive, in lieu of the shares of stock or
other securities at any time issuable upon the exercise of the
Warrant issuable on such exercise prior to the Effective Date, the
stock and other securities and property (including cash) to which
such holder would have been entitled upon the Effective Date if
such holder had exercised this Warrant immediately prior thereto
(all subject to further adjustment as provided in this
Warrant).
c. Certificate as to Adjustments. In case
of any adjustment or readjustment in the price or kind of
securities issuable on the exercise of this Warrant, the Company
will promptly give written notice thereof to the holder of this
Warrant in the form of a certificate, certified and confirmed by
the Board of Directors of the Company, setting forth such
adjustment or readjustment and showing in reasonable detail the
facts upon which such adjustment or readjustment is
based.
9. Fractional
Shares. The Company
shall not be required to issue or cause to be issued fractional
Warrant Shares on the exercise of this Warrant. The number of full
Warrant Shares that shall be issuable upon the exercise of this
Warrant shall be computed on the basis of the aggregate number of
Warrants Shares purchasable on exercise of this Warrant so
presented. If any fraction of a Warrant Share would, except for the
provisions of this Section 8, be issuable on the exercise of this
Warrant, the Company shall, at its option, (i) pay an amount in
cash equal to the Exercise Price multiplied by such fraction or
(ii) round the number of Warrant Shares issuable, up to the next
whole number.
10. Sale or Merger of
the Company. Upon a
Change in Control, the restriction contained in Section 6 shall
immediately be released and the Warrant Holder will have the right
to exercise this Warrant concurrently with such Change in Control
event. For purposes of this Warrant, the term “Change in
Control” shall mean a consolidation or merger of the Company
with or into another company or entity in which the Company is not
the surviving entity or the sale of all or substantially all of the
assets of the Company to another company or entity not controlled
by the then existing stockholders of the Company in a transaction
or series of transactions.
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11. Notice of Intent to
Sell or Merge the Company. The Company will give Warrant Holder
Five (5) business days’ notice before the event of a sale of
all or substantially all of the assets of the Company or the merger
or consolidation of the Company in a transaction in which the
Company is not the surviving entity.
12. Issuance of
Substitute Warrant.
In the event of a merger, consolidation, recapitalization or
reorganization of the Company or a reclassification of Company
shares of stock, which results in an adjustment to the number of
shares subject to this Warrant and/or the Exercise Price hereunder,
the Company agrees to issue to the Warrant Holder a substitute
Warrant reflecting the adjusted number of shares and/or Exercise
Price upon the surrender of this Warrant to the
Company.
13. Notice.
All notices and other communications hereunder shall be in writing
and shall be deemed to have been given (i) on the date they are
delivered if delivered in person; (ii) on the date initially
received if delivered by facsimile transmission followed by
registered or certified mail confirmation; (iii) on the date
delivered by an overnight courier service; or (iv) on the third
business day after it is mailed by registered or certified mail,
return receipt requested with postage and other fees prepaid as
follows:
If to the Company:
American Resources
Corporation
PO Box:
606
Fishers, IN
46038
Attention: Kirk
Taylor
Email:
kpt@americanresourcescorp.com
If to the Warrant Holder:
________________________
________________________
________________________
________________________
Attention:
_______________
Email:
__________________
14.
Miscellaneous.
a. This Warrant shall
be binding on and inure to the benefit of the parties hereto and
their respective successors and permitted assigns. This Warrant may
be amended only by a writing signed by the Company and the Warrant
Holder.
b. Nothing in this
Warrant shall be construed to give to any person or corporation
other than the Company and the Warrant Holder any legal or
equitable right, remedy or cause of action under this Warrant; this
Warrant shall be for the sole and exclusive benefit of the Company
and the Warrant Holder.
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c. This Warrant shall
be governed by, construed and enforced in accordance with the
internal laws of the State of Indiana without regard to the
principles of conflicts of law thereof.
d. The headings herein
are for convenience only, do not constitute a part of this Warrant
and shall not be deemed to limit or affect any of the provisions
hereof.
e. In case any one or
more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceablilty of
the remaining terms and provisions of this Warrant shall not in any
way be affected or impaired thereby and the parties will attempt in
good faith to agree upon a valid and enforceable provision which
shall be a commercially reasonably substitute therefore, and upon
so agreeing, shall incorporate such substitute provision in this
Warrant.
f. The Warrant Holder
shall not, by virtue hereof, be entitled to any voting or other
rights of a shareholder of the Company, either at law or equity,
and the rights of the Warrant Holder are limited to those expressed
in this Warrant.
IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by the authorized officer as of the date first above
stated.
American Resources Corporation
By:
Name: Thomas M.
Sauve
Its:
President
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FORM OF ELECTION TO PURCHASE
(To be
executed by the Warrant Holder to exercise the right to purchase
shares of Common Stock under the foregoing Warrant)
To:
American Resources
Corporation:
In
accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase
______________ shares of Class A Common stock (“Common
Stock”), $.0001 par value, of American Resources Corporation
and encloses the warrant and $1.50 for each Warrant Share being
purchased or an aggregate of $________________ in cash or certified
or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the Warrant) together with
any applicable taxes payable by the undersigned pursuant to the
Warrant.
The
undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name
of:
_____________________________________________
_____________________________________________
_____________________________________________
(Please
print name and address)
_____________________________________________
(Please
insert Social Security or Tax Identification Number)
If the
number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is
entitled to purchase in accordance with the enclosed Warrant, the
undersigned requests that a New Warrant (as defined in the Warrant)
evidencing the right to purchase the shares of Common Stock not
issuable pursuant to the exercise evidenced hereby be issued in the
name of and delivered to:
_____________________________________________
_____________________________________________
_____________________________________________
(Please
print name and address)
Dated:
__________
Name of
Warrant Holder:
(Print)
______________________________
(By:)
(Name:)
_____________________________
(Title:)
______________________________
Signature
must conform in all respects to name of Warrant Holder as specified
on the face of the Warrant
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