OS1 = the number of shares of Common Stock that would be outstanding immediately after, and solely as a result of, the completion of such event.
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Any adjustment made pursuant to this clause (1) shall be effective immediately prior to the Open of Business on the Trading Day immediately following the Record Date, in the case of a dividend or distribution, or the effective date in the case of a subdivision, combination or reclassification. If any such event is declared but does not occur, the Conversion Rate shall be readjusted, effective as of the date the Board announces that such event shall not occur, to the Conversion Rate that would then be in effect if such event had not been declared.
(2) the dividend, distribution or other issuance to all or substantially all holders of Common Stock of rights (other than a distribution of rights issued pursuant to a shareholders rights plan, to the extent such rights are attached to shares of Common Stock (in which event the provisions of Section 9(a)(3) shall apply)), options or warrants entitling them to subscribe for or purchase shares of Common Stock for a period expiring 60 days or less from the date of issuance thereof, at a price per share that is less than the Closing Price on the Trading Day immediately preceding the Record Date for such issuance, in which event the Conversion Rate will be increased based on the following formula:
where,
CR0 = the Conversion Rate in effect immediately prior to the Close of Business on the Record Date for such dividend, distribution or issuance;
CR1 = the new Conversion Rate in effect immediately following the Close of Business on the Record Date for such dividend, distribution or issuance;
OS0 = the number of shares of Common Stock outstanding immediately prior to the Close of Business on the Record Date for such dividend, distribution or issuance;
X = the total number of shares of Common Stock issuable pursuant to such rights, options or warrants; and
Y = the number of shares of Common Stock equal to the aggregate price payable to exercise such rights, options or warrants divided by the Closing Price on the Trading Day immediately preceding the Record Date for such dividend, distribution or issuance.
For purposes of this clause (2), in determining whether any rights, options or warrants entitle the holders to purchase the Common Stock at a price per share that is less than the Closing Price on the Trading Day immediately preceding the Record Date for such dividend, distribution or issuance, there shall be taken into account any consideration the Corporation receives for such rights, options or warrants, and any amount payable on exercise thereof, with the value of such consideration, if other than cash, to be the fair market value thereof as determined in good faith by the Board of Directors.
Any adjustment made pursuant to this clause (2) shall become effective immediately prior to the Open of Business on the Trading Day immediately following the Record Date for such dividend, distribution or issuance. In the event that such rights, options or warrants are not so issued, the Conversion Rate shall be readjusted, effective as of the date the Board publicly announces its decision not to issue such rights, options or warrants, to the Conversion Rate that would then be in effect if such dividend, distribution or issuance had not been declared. To the extent that such rights, options or warrants are not exercised prior to their expiration or shares of Common Stock are otherwise not delivered pursuant to such rights, options or warrants upon the exercise of such rights, options or warrants, the Conversion Rate shall be readjusted to the Conversion Rate that would then be in effect had the adjustments made upon the dividend, distribution or issuance of such rights, options or warrants been made on the basis of the delivery of only the number of shares of Common Stock actually delivered.
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(3) If the Corporation has a shareholder rights plan in effect with respect to the Common Stock on the Conversion Date, upon conversion of any shares of the Series A Preferred Stock, holders of such shares will receive, in addition to the shares of Common Stock, the rights under such rights plan relating to such Common Stock, unless, prior to the Conversion Date, the rights have (i) become exercisable or (ii) separated from the shares of Common Stock (the first of such events to occur being the “Trigger Event”), in either of which cases the Conversion Rate will be adjusted, effective automatically at the time of such Trigger Event, as if the Corporation had made a distribution of such rights to all holders of the Common Stock as described in Section 9(a)(2) (without giving effect to the 60-day limit on the exercisability of rights, options and warrants ordinarily subject to such Section 9(a)(2)), subject to appropriate readjustment in the event of the expiration, termination or redemption of such rights prior to the exercise, deemed exercise or exchange thereof. Notwithstanding the foregoing, to the extent any such shareholder rights are exchanged by the Corporation for shares of Common Stock, the Conversion Rate shall be appropriately readjusted as if such shareholder rights had not been issued, but the Corporation had instead issued the shares of Common Stock issued upon such exchange as a dividend or distribution of shares of Common Stock subject to Section 9(a)(1). Notwithstanding the preceding provisions of this paragraph, no adjustment shall be required to be made to the Conversion Rate with respect to any holder of Series A Preferred Stock which is, or is an “affiliate” or “associate” of, an “acquiring person” under such shareholder rights plan or with respect to any direct or indirect transferee of such holder who receives Series A Preferred Stock in such transfer after the time such holder becomes, or its affiliate or associate becomes, an “acquiring person.” The Corporation shall not adopt a shareholder rights plan pursuant to which the holders of the Series A Preferred Stock on the Issue Date or their affiliates could be deemed an “acquiring person” or an “affiliate” or “associate” of an “acquiring person.”
(4) If the Corporation, at any time or from time to time while any of the Series A Preferred Stock is outstanding, shall issue shares of Common Stock or any other security convertible into, exercisable or exchangeable for Common Stock (such Common Stock or other security, “Equity-Linked Securities”) (other than (i) an Excluded Issuance, (ii) Common Stock issued upon conversion of the Series A Preferred Stock and (iii) rights, options, warrants or other distributions referred to in Section 9(a)(2)), the Conversion Rate shall be increased based on the following formula:
where,
CR0 = the Conversion Rate in effect immediately prior to the issuance of such Equity-Linked Securities;
CR1 = the new Conversion Rate in effect immediately after the issuance of such Equity-Linked Securities;
AC = the aggregate consideration paid or payable for such Equity-Linked Securities;
OS0 = the number of shares of Common Stock outstanding immediately before the issuance of Equity-Linked Securities;
OS1 = the number of shares of Common Stock outstanding immediately after the issuance of Equity-Linked Securities and giving effect to any shares of Common Stock issuable upon conversion, exercise or exchange of such Equity-Linked Securities; and
SP = the Closing Price on the date of issuance of such Equity-Linked Securities.
The adjustment shall become effective immediately after such issuance.
(b) Calculation of Adjustments. All adjustments to the Conversion Rate shall be calculated by the Corporation to the nearest 1/10,000th of one share of Common Stock (or if there is not a nearest 1/10,000th of a share, to the next lower 1/10,000th of a share). No adjustment to the Conversion Rate will be required unless such adjustment would require an increase or decrease of at least one percent of the Conversion Rate; provided, however, that any such adjustment that is not required to be made will be carried forward and taken into account in any subsequent adjustment; provided, further that any such adjustment of less than one percent that has not been made will be made upon any Conversion Date.
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(c) When No Adjustment Required. Notwithstanding the foregoing, no adjustment to the Conversion Rate shall be made upon the issuance of any shares of Common Stock pursuant to any option, warrant, right, or exercisable, exchangeable or convertible security outstanding as of the Issue Date.
(d) Successive and Multiple Adjustments. After an adjustment to the Conversion Rate under this Section 9, any subsequent event requiring an adjustment under this Section 9 shall cause an adjustment to each such Conversion Rate as so adjusted. For the avoidance of doubt, if an event occurs that would trigger an adjustment to the Conversion Rate pursuant to this Section 9 under more than one subsection hereof (other than where holders of Series A Preferred Stock are entitled to elect the applicable adjustment, in which case such election shall control), such event, to the extent fully taken into account in a single adjustment, shall not result in multiple adjustments hereunder; provided, however, that if more than one subsection of this Section 9 is applicable to a single event, the subsection shall be applied that produces the largest adjustment.
(e) Other Adjustments.
(1) The Corporation will not, by amendment of its Restated Articles of Incorporation, Bylaws or through any reorganization, recapitalization, transfer of assets, consolidation, merger, share exchange, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Section 9 by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 9 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series A Preferred Stock against impairment; and
(2) The Corporation may, but shall not be required to, make such increases in the Conversion Rate, in addition to those required by this Section 9, as the Board considers to be advisable in order to avoid or diminish any income tax to any holders of shares of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes or for any other reason.
(f) Notice of Adjustments. Whenever the Conversion Rate is adjusted as provided under this Section 9, the Corporation shall as soon as reasonably practicable following the occurrence of an event that requires such adjustment (or if the Corporation is not aware of such occurrence, as soon as reasonably practicable after becoming so aware) or the date the Corporation makes an adjustment pursuant to Section 9(e)(2):
(1) compute the adjusted applicable Conversion Rate in accordance with this Section 9 and prepare and transmit to the conversion agent (if other than the Corporation) an officer’s certificate setting forth the applicable Conversion Rate, the method of calculation thereof in reasonable detail, and the facts requiring such adjustment and upon which such adjustment is based; and
(2) provide a written notice to the holders of the Series A Preferred Stock of the occurrence of such event and a statement in reasonable detail setting forth the method by which the adjustment to the applicable Conversion Rate was determined and setting forth the adjusted applicable Conversion Rate.
(g) Conversion Agent other than the Corporation. A conversion agent other than the Corporation shall not at any time be under any duty or responsibility to any holder of Series A Preferred Stock to determine whether any facts exist that may require any adjustment of the applicable Conversion Rate or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed in making the same. Such conversion agent shall be fully authorized and protected in relying on any officer’s certificate delivered pursuant to Section 9(f) and any adjustment contained therein and such conversion agent shall not be deemed to have knowledge of any adjustment unless and until it has received such certificate. Such conversion agent shall not be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock, or of any securities or property, that may at the time be issued or delivered with respect to any Series A Preferred Stock; and such conversion agent makes no representation with respect thereto. The Conversion Agent, if other than the Corporation, shall not be responsible for any failure of the Corporation to issue, transfer or deliver any shares of Common Stock pursuant to the conversion of Series A Preferred Stock or to comply with any of the duties, responsibilities or covenants of the Corporation contained in this Section 9.
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(h) Fractional Shares. No fractional shares of Common Stock will be delivered to the holders of Series A Preferred Stock upon conversion. In lieu of fractional shares otherwise issuable, holders of Series A Preferred Stock will be entitled to receive an amount in cash equal to the fraction of a share of Common Stock, multiplied by the Closing Price of the Common Stock on the Trading Day immediately preceding the applicable Conversion Date. In order to determine whether the number of shares of Common Stock to be delivered to a holder of Series A Preferred Stock upon the conversion of such holder’s shares of Series A Preferred Stock will include a fractional share (in lieu of which cash would be paid hereunder), such determination shall be based on the aggregate number of shares of Series A Preferred Stock of such holder that are being converted on any single Conversion Date.
(i) Reorganization Events. In the event of (each, a “Reorganization Event”):
(1) any recapitalization, reclassification or change of the Common Stock (other than a change in par value or from par value to no par value or from no par value to par value, or as a result of a subdivision or a combination);
(2) consolidation, merger or other similar business combination of the Corporation with or into another Person;
(3) the Corporation’s sale, lease, exchange or other disposition of assets (other than a disposition described in Section 17-16-1201 of the Wyoming Business Corporation Act) if the disposition would leave the Corporation without a significant continuing business activity; or
(4) any statutory share exchange of securities of the Corporation with another Person,
in each case as a result of which holders of Common Stock are entitled to receive stock, other securities, other property or assets (including cash or any combination thereof) with respect to or in exchange for Common Stock, each share of Series A Preferred Stock outstanding immediately prior to such Reorganization Event shall become convertible into the number, kind and amount of stock, securities, other property or assets (including cash or any combination thereof) (the “Exchange Property”) that the holder of such share of Series A Preferred Stock would have received in such Reorganization Event had such holder converted its share of Series A Preferred Stock into the applicable number of shares of Common Stock immediately prior to the effective date of the Reorganization Event.
(j) Exchange Property Election. In the event that the holders of the shares of Common Stock have the opportunity to elect the form of consideration to be received in such transaction, the Exchange Property that the holders of Series A Preferred Stock shall be entitled to receive shall be determined by the holders of a majority of the outstanding shares of Series A Preferred Stock on or before the earlier of (1) the deadline for elections by holders of Common Stock and (2) two Business Days before the anticipated effective date of such Reorganization Event; provided, if no such election is made, they shall receive upon conversion the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make such an election. The number of units of Exchange Property for each share of Series A Preferred Stock converted following the effective date of such Reorganization Event shall be determined from among the choices made available to the holders of the Common Stock and based on the per share amount as of the effective date of the Reorganization Event, determined as if the references to “share of Common Stock” in this Certificate of Designations were to “units of Exchange Property.”
(k) Successive Reorganization Events. The above provisions of Section 9(i) and Section 9(j) shall similarly apply to successive Reorganization Events and the provisions of Section 9 shall apply to any shares of Capital Stock (or capital stock of any other issuer) received by the holders of the Common Stock in any such Reorganization Event.
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(l) Reorganization Event Notice. The Corporation (or any successor) shall, no less than 20 Business Days prior to the occurrence of any Reorganization Event, provide written notice to the holders of Series A Preferred Stock of such occurrence of such event and of the kind and amount of the cash, securities or other property that constitutes the Exchange Property. Failure to deliver such notice shall not affect the operation of this Section 9.
(m) Reorganization Requirements. The Corporation shall not enter into any agreement for a transaction constituting a Reorganization Event unless (1) such agreement provides for or does not interfere with or prevent (as applicable) conversion of the Series A Preferred Stock into the Exchange Property in a manner that is consistent with and gives effect to this Section 9, and (2) to the extent that the Corporation is not the surviving corporation in such Reorganization Event or will be dissolved in connection with such Reorganization Event, proper provision shall be made in the agreements governing such Reorganization Event for the conversion of the Series A Preferred Stock into stock of the Person surviving such Reorganization Event or such other continuing entity in such Reorganization Event, or in the case of a Reorganization Event described in Section 9(i)(3), an exchange of Series A Preferred Stock for the stock of the Person to whom the Corporation’s assets are conveyed or transferred, having voting powers, preferences, and relative, participating, optional or other special rights as nearly equal as possible to those provided in this Certificate of Designations.
Section 10. Reservation of Shares . The Corporation shall at all times when the Series A Preferred Stock shall be outstanding reserve and keep available, free from preemptive rights, for issuance upon the conversion of Series A Preferred Stock, such number of its authorized but unissued Common Stock as will from time to time be sufficient to permit the conversion of all outstanding Series A Preferred Stock. Prior to the delivery of any securities which the Corporation shall be obligated to deliver upon conversion of the Series A Preferred Stock, the Corporation shall comply with all applicable laws and regulations which require action to be taken by the Corporation.
Section 11. Certain Definitions . As used in this Certificate of Designations, the following terms shall have the following meanings, unless the context otherwise requires:
“Accumulated Regular Dividends” shall have the meaning ascribed to it in Section 4(c).
“Adjusted Conversion Value” shall have the meaning ascribed to it in Section 7(c).
“Adjusted Liquidation Preference” shall have the meaning ascribed to it in Section 4(a).
“Beneficially Own” shall mean “beneficially own” as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended, or any successor provision thereto.
“Board” shall have the meaning ascribed to it in the recitals.
“Business Day” shall mean a day that is a Monday, Tuesday, Wednesday, Thursday or Friday and is not a day on which banking institutions in New York, New York generally are authorized or obligated by law, regulation or executive order to close.
“Capital Stock” shall mean any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock issued by the Corporation.
“Certificate of Designations” shall mean this Certificate of Designations relating to the Series A Preferred Stock, as it may be amended from time to time.
“Change of Control” shall mean the occurrence of any of the following:
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(1) any Person acquires after the date hereof Beneficial Ownership, directly or indirectly, through a purchase, merger, share exchange, or other acquisition transaction or series of transactions, of shares of the Corporation’s Capital Stock entitling such Person to exercise more than 50% of the total voting power of all classes of Voting Stock of the Corporation, other than an acquisition by the Corporation, any of the Corporation’s Subsidiaries or any of the Corporation’s employee benefit plans (for purposes of this clause (1), “Person” shall include any syndicate or group that would be deemed to be a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended); or
(2) the Corporation’s consummation of a reorganization, share exchange, merger or consolidation, or of the Corporation’s sale, lease, exchange or other disposition of assets (other than a disposition described in Section 17-16-1201 of the Wyoming Business Corporation Act) if the disposition would leave the Corporation without a significant continuing business activity, unless immediately following such transaction (x) the Voting Stock of the Corporation outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance) or (y) the transaction does not result in a reclassification, conversion, exchange or cancellation of any of the Corporation’s outstanding Common Stock.
“Close of Business” shall mean 5:00 p.m., New York City time, on any Business Day.
“Closing Price” shall mean the price per share of the final trade of the Common Stock on the applicable Trading Day on the principal U.S. national securities exchange on which the Common Stock is listed or admitted to trading. If the Common Stock is not traded on a U.S. national securities exchange, Closing Price shall mean the fair market value per share of the Common Stock on the applicable Business Day, as determined by the Corporation’s Board of Directors in good faith, with written notice of such determination and supporting analysis in reasonable detail to be provided by the Corporation to the holders of Series A Preferred Stock.
“Code” shall have the meaning ascribed to it in Section 7(i).
“Common Stock” shall have the meaning ascribed to it in Section 3.
“Conversion Cap” shall have the meaning ascribed to it in Section 7(d).
“Conversion Date” shall have the meaning ascribed to it in Section 7(e).
“Conversion Rate” shall have the meaning ascribed to it in Section 7(c).
“Corporation” shall have the meaning ascribed to it in the recitals.
“Equity-Linked Securities” shall have the meaning ascribed to it in Section 9(a)(4).
“Exchange Property” shall have the meaning ascribed to it in Section 9(i).
“Excluded Issuance” shall mean, any issuances of (1) Capital Stock or options to purchase shares of Capital Stock to employees, directors, managers, officers or consultants of or to the Corporation or any of its Subsidiaries pursuant to a stock option or incentive compensation or similar plan outstanding as of the Issue Date or, subsequent to the Issue Date, approved by the Board or a duly authorized committee of the Board, (2) securities pursuant to any bona fide merger, joint venture, partnership, consolidation, share exchange, business combination or any other direct or indirect acquisition by the Corporation, whereby the Corporation’s securities comprise, in whole or in part, the consideration paid by the Corporation in such transaction, (3) shares of Common Stock issued at a price equal to or greater than ninety percent (90%) of the Closing Price on the Trading Day immediately preceding the earlier of (x) the date on which the sale or issuance is publicly announced and (y) the date on which the price for such sale or issuance is agreed or fixed, and (4) securities convertible into, exercisable or exchangeable for shares of Common Stock issued with an exercise or conversion price equal to or greater than ninety percent (90%) of the Closing Price on the Trading Day immediately preceding the earlier of (x) the date on which the sale or issuance is publicly announced and (y) the date on which the price for such sale or issuance is agreed or fixed.
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“Initial Conversion Value” shall have the meaning ascribed to it in Section 7(c).
“Issue Date” shall mean February 11, 2016.
“Junior Stock” shall have the meaning ascribed to it in Section 3.
“Liquidation” shall have the meaning ascribed to it in Section 5(a).
“Liquidation Preference” shall have the meaning ascribed to it in Section 5(a).
“Mandatory Conversion” shall have the meaning ascribed to it in Section 7(a).
“Mandatory Conversion Date” shall have the meaning ascribed to it in Section 7(a).
“Open of Business” shall mean 9:00 a.m., New York City time, on any Business Day.
“Participating Dividends” shall have the meaning ascribed to it in Section 4(d).
“Permitted Distributions” shall have the meaning ascribed to it in Section 4(d).
“Person” shall mean any individual, company, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization, government or agency or political subdivision thereof or any other entity.
“Record Date” shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of shareholders entitled to receive such cash, securities or other property (whether such date is fixed by the Board or by statute, contract, this Certificate of Designations or otherwise).
“Regular Dividend” shall have the meaning ascribed to it in Section 4(a).
“Regular Dividend Payment Date” shall have the meaning ascribed to it in Section 4(b).
“Regular Dividend Period” shall have the meaning ascribed to it in Section 4(b).
“Reorganization Event” shall have the meaning ascribed to it in Section 9(i).
“Series A Preferred Stock” shall have the meaning ascribed to it in Section 1.
“Spin-Off Transaction” means any transaction by which a Subsidiary of the Corporation ceases to be a Subsidiary of the Corporation by reason of the distribution of such Subsidiary’s equity securities to holders of Common Stock, whether by means of a spin-off, split-off, redemption, reclassification, exchange, stock dividend, share distribution, rights offering or similar transaction.
“Subsidiary” means any company or corporate entity for which the Corporation owns, directly or indirectly, an amount of the voting securities, other voting rights or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, more than 50% of the equity interests of such company or corporate entity).
“Total Conversion Shares” shall have the meaning ascribed to it in Section 7(c).
“Trading Day” shall mean any Business Day on which the Common Stock is traded, or able to be traded, on the principal national securities exchange on which the Common Stock is listed or admitted to trading. If the Common Stock is not traded on a U.S. national securities exchange, Trading Day shall mean the relevant Business Day.
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“Trigger Event” shall have the meaning ascribed to it in Section 9(a)(3).
“Voting Stock” shall mean Capital Stock of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances (determined without regard to any classification of directors) to elect one or more members of the Board of Directors of the Corporation (without regard to whether or not, at the relevant time, Capital Stock of any other class or classes (other than Common Stock) shall have or might have voting power by reason of the happening of any contingency).
Section 12. Headings . The headings of the paragraphs of this Certificate of Designations are for convenience of reference only and shall not define, limit or affect any of the provisions hereof.
Section 13. Record Holders . To the fullest extent permitted by applicable law, the Corporation may deem and treat the record holder of any share of the Series A Preferred Stock as the true and lawful owner thereof for all purposes, and the Corporation shall not be affected by any notice to the contrary.
Section 14. Notices . All notices or communications in respect of the Series A Preferred Stock shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designations, in the Restated Articles of Incorporation or Bylaws or by applicable law or regulation. Notwithstanding the foregoing, if the Series A Preferred Stock is issued in book-entry form through The Depository Trust Corporation or any similar facility, such notices may be given to the holders of the Series A Preferred Stock in any manner permitted by such facility.
Section 15. Replacement Certificates . The Corporation shall replace any mutilated certificate at the holder’s expense upon surrender of that certificate to the Corporation. The Corporation shall replace certificates that become destroyed, stolen or lost at the holder’s expense upon delivery to the Corporation of reasonably satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Corporation.
Section 16. Transfer Agent, Conversion Agent, Registrar and Paying Agent . The duly appointed transfer agent, conversion agent, registrar and paying agent for the Series A Preferred Stock shall be the Corporation. The Corporation may, in its sole discretion, resign from such positions or remove such agents or registrar in accordance with the agreement between the Corporation and such agent or registrar; provided that the Corporation shall appoint a successor who shall accept such appointment prior to the effectiveness of such resignation or removal. Upon any such resignation, removal or appointment, the Corporation shall send notice thereof by first-class mail, postage prepaid, to the holders of the Series A Preferred Stock.
Section 17. Severability . If any term of the Series A Preferred Stock set forth herein is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other terms set forth herein which can be given effect without the invalid, unlawful or unenforceable term will, nevertheless, remain in full force and effect, and no term herein set forth will be deemed dependent upon any other such term unless so expressed herein.
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Section 18. Information Rights . In addition to reports required by law, regulation, or the rules of any national securities exchange on which the Common Stock is listed or admitted to trading, the Corporation shall furnish to each of the holders of Series A Preferred Stock (1) within 45 days after the end of the first, second and third quarterly accounting periods in each fiscal year of the Corporation, a consolidated balance sheet of the Corporation and its subsidiaries as of the end of each such quarterly period, and consolidated statements of income and cash flows of the Corporation and its subsidiaries for such period and for the current fiscal year to date, prepared in accordance with United States generally accepted accounting principles consistently applied and setting forth in comparative form the figures for the corresponding periods of the prior fiscal year (subject to changes resulting from normal year-end audit adjustments and except that such financial statements need not contain the notes required by generally accepted accounting principles), and (2) within 120 days after the end of each fiscal year of the Corporation, an audited consolidated balance sheet of the Corporation and its subsidiaries as at the end of such fiscal year, and audited consolidated statements of income and cash flows of the Corporation and its subsidiaries for such year, prepared in accordance with United States generally accepted accounting principles consistently applied and setting forth in each case in comparative form the figures for the previous fiscal year and certified by independent public accountants of recognized national or regional standing selected by the Corporation (in each case in clauses (1) and (2), whether or not such financial statements are then required to be filed with or furnished to the United States Securities and Exchange Commission).
[Remainder of Page Left Intentionally Blank.]
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IN WITNESS WHEREOF, U.S. Energy Corp. has caused this Certificate of Designations to be duly executed by its authorized corporate officer this 11th day of February, 2016.
| U.S. ENERGY CORP. | ||
| By: | /s/ David Veltri | |
| Name: | David Veltri | |
| Title: | Chief Executive Officer and President |
Exhibit 10.1
EXECUTION VERSION
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
by and between
U.S. ENERGY CORP.
and
MT. EMMONS MINING COMPANY
Dated as of February 11, 2016
Table of Contents
| Page | ||
| ARTICLE I DEFINITIONS | 2 | |
| Section 1.1 | Definitions | 2 |
| Section 1.2 | Other Defined Terms | 3 |
| Section 1.3 | Interpretative Provisions | 4 |
| ARTICLE II PURCHASE AND SALE | 4 | |
| Section 2.1 | Authorization of Shares | 4 |
| Section 2.2 | Purchase and Sale | 4 |
| Section 2.3 | Closing | 4 |
| Section 2.4 | Deliveries | 5 |
| ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY | 6 | |
| Section 3.1 | Subsidiaries | 6 |
| Section 3.2 | Organization and Qualification | 6 |
| Section 3.3 | Authorization; Enforcement | 6 |
| Section 3.4 | No Conflicts | 7 |
| Section 3.5 | Filings, Consents and Approvals | 7 |
| Section 3.6 | Issuance of the Securities | 7 |
| Section 3.7 | Capitalization | 7 |
| Section 3.8 | SEC Reports; Financial Statements | 8 |
| Section 3.9 | Material Changes; Undisclosed Events, Liabilities or Developments | 9 |
| Section 3.10 | Litigation | 9 |
| Section 3.11 | Labor | 10 |
| Section 3.12 | Compliance with Laws; Permits | 10 |
| Section 3.13 | Title to Assets; Properties | 11 |
| Section 3.14 | Reserve Reports | 11 |
| Section 3.15 | Transactions with Affiliates and Employees | 11 |
| Section 3.16 | Sarbanes-Oxley; Internal Accounting Controls | 12 |
| Section 3.17 | No Brokers | 12 |
| Section 3.18 | Private Placement | 12 |
| Section 3.19 | Investment Company | 12 |
| Section 3.20 | Registration Rights | 13 |
| Section 3.21 | Listing and Maintenance Requirements | 13 |
| Section 3.22 | Application of Takeover Protections | 13 |
| Section 3.23 | Full Disclosure | 13 |
| Section 3.24 | No Integrated Offering | 13 |
| Section 3.25 | Accountants | 14 |
| Section 3.26 | Company Stock Plans | 14 |
| Section 3.27 | Tax Status | 14 |
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| ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER | 14 | |
| Section 4.1 | Organization; Authority | 14 |
| Section 4.2 | Absence of Conflicts | 15 |
| Section 4.3 | Own Account | 15 |
| Section 4.4 | Purchaser Status | 15 |
| Section 4.5 | General Solicitation | 15 |
| ARTICLE V RESTRICTIONS ON TRANSFERS | 15 | |
| Section 5.1 | Resales | 15 |
| Section 5.2 | Rule 144 | 15 |
| Section 5.3 | Legends | 15 |
| Section 5.4 | Legend Removal | 16 |
| ARTICLE VI OTHER AGREEMENTS | 16 | |
| Section 6.1 | Acknowledgement of No Set Off | 16 |
| Section 6.2 | Survival | 16 |
| Section 6.3 | Integration | 17 |
| Section 6.4 | Reservation and Listing of Securities | 17 |
| Section 6.5 | Securities Laws Disclosure; Publicity | 17 |
| Section 6.6 | Integrated Agreements | 17 |
| Section 6.7 | Confidentiality | 18 |
| ARTICLE VII MISCELLANEOUS | 18 | |
| Section 7.1 | Fees and Expenses | 18 |
| Section 7.2 | Entire Agreement | 18 |
| Section 7.3 | Notices | 18 |
| Section 7.4 | Amendments; Waivers | 19 |
| Section 7.5 | Headings; Gender | 19 |
| Section 7.6 | Successors and Assigns | 19 |
| Section 7.7 | No Third-Party Beneficiaries | 20 |
| Section 7.8 | Governing Law | 20 |
| Section 7.9 | Severability | 20 |
| Section 7.10 | Remedies Cumulative | 20 |
| Section 7.11 | Mutual Drafting | 20 |
| Section 7.12 | Legal Fees and Costs | 20 |
| Section 7.13 | Enforcement of Agreement | 20 |
| Section 7.14 | Execution; Counterparts | 20 |
Disclosure Schedules
Exhibit A – Certificate of Designations of Series A Convertible Preferred Stock
Exhibit B – Form of Investor Rights Agreement
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SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this “Agreement”), dated and effective as of February 11, 2016 (the “Effective Date”), is entered into by and between U.S. Energy Corp., a Wyoming corporation (the “Company”), and Mt. Emmons Mining Company, a Delaware corporation (“Purchaser”). The Company and Purchaser are hereinafter at times referred to individually as a “Party” and collectively as the “Parties.”
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”), the Company desires to issue and sell to Purchaser, and Purchaser desires to purchase from the Company, 50,000 shares (the “Shares”) of the Series A Convertible Preferred Stock, par value $0.01 per share, of the Company (the “Preferred Stock”).
WHEREAS, contemporaneous with the execution of this Agreement, the Parties have entered into an Acquisition Agreement (the “Acquisition Agreement”) pursuant to which, among other things and subject to the terms and conditions therein and herein, Purchaser has agreed (at the Company’s request) to accept the transfer of the property and rights specified therein, including the Project (as defined therein), and to replace the Company as the permittee and operator of the WTP (as defined therein).
WHEREAS, the Company has offered the Preferred Stock to Purchaser in order to induce Purchaser to enter into the Acquisition Agreement and, subject to the terms and conditions set forth therein and herein, accept the transfer from the Company of the property and rights specified therein, including the Project, and replace the Company as the permittee and operator of the WTP.
WHEREAS, subject to the terms and conditions set forth in this Agreement and in the Acquisition Agreement, the sale of the Shares by the Company to Purchaser shall be made in exchange for Purchaser’s payment of $500 to the Company and Purchaser’s acceptance of the transfer of the property and rights specified in the Acquisition Agreement, including the Mine, and Purchaser’s replacement of the Company as the permittee and operator of the WTP.
WHEREAS, the board of directors of the Company (the “Board of Directors”) has determined that the transactions contemplated by this Agreement and the other Transaction Documents (defined below) are in the best interests of the Company and its shareholders and creditors and that the consideration to be received for the Shares is adequate, has approved the transactions contemplated by this Agreement and the other Transaction Documents, and has approved the issuance of the Shares and Conversion Shares (defined below) for purposes of Section 17-18-104 of the Wyoming Management Stability Act.
WHEREAS, the sole director of Purchaser has determined that the transactions contemplated by this Agreement and the other Transaction Documents are in the best interests of Purchaser and its shareholder and has approved the transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Purchaser agree as follows:
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ARTICLE
I
DEFINITIONS
Section 1.1 Definitions. Initially capitalized terms used in this Agreement shall have the meanings assigned to them in this Section 1.1 or the applicable Section referenced in Section 1.2, unless the context otherwise indicates:
“Affiliate” shall have the meaning set forth in the Acquisition Agreement.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the common stock of the Company, par value $0.01 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Confidentiality Agreement” means that certain Confidentiality Agreement, dated June 24, 2015, by and among the Company, Purchaser, Freeport Minerals Corporation and Cyprus Amax Minerals Company.
“Contracts” shall have the meaning set forth in the Acquisition Agreement.
“Disclosure Schedules” means the Disclosure Schedules attached hereto.
“Environmental Laws” shall have the meaning set forth in the Acquisition Agreement.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Governmental Entity” shall have the meaning set forth in the Acquisition Agreement.
“Hazardous Materials” shall have the meaning set forth in the Acquisition Agreement.
“Investor Rights Agreement” means the Investor Rights Agreement by and between the Company and Purchaser, a form of which is attached as Exhibit B hereto.
“Knowledge of the Company” shall have the meaning set forth in the Acquisition Agreement.
“Laws” shall have the meaning set forth in the Acquisition Agreement.
“Lien” shall have the meaning set forth in the Acquisition Agreement.
“NASDAQ” means the NASDAQ Capital Market.
“Order” shall have the meaning set forth in the Acquisition Agreement.
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“Permits” shall have the meaning set forth in the Acquisition Agreement.
“Permitted Lien” shall have the meaning set forth in the Acquisition Agreement.
“Person” shall have the meaning set forth in the Acquisition Agreement.
“Proceeding” shall have the meaning set forth in the Acquisition Agreement.
“Purchased Assets” shall have the meaning set forth in the Acquisition Agreement.
“Securities” means the Shares and the Conversion Shares.
“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1 and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.
“Transaction Documents” means this Agreement, the Investor Rights Agreement, the Certificate of Designations, the Acquisition Agreement, all exhibits and schedules to such documents and any other documents or agreements executed in connection with the transactions contemplated by such documents.
“Transfer Agent” means Computershare Trust Company, Inc., the current transfer agent of the Company, with a mailing address 350 Indiana Street, Suite 800, Golden, Colorado 80401, and any successor transfer agent of the Company.
Section 1.2 Other Defined Terms. In addition, each of the following terms is defined in the Section set forth opposite such term:
| Term | Section | |
| Acquisition Agreement | Preamble | |
| Agreement | Preamble | |
| Action | 3.10 | |
| Board of Directors | Preamble | |
| Certificate of Designations | 2.1 | |
| Company | Preamble | |
| Company Reserve Reports | 3.14 | |
| Company Stock Plan | 3.26 | |
| Conversion Shares | 2.1 | |
| Closing | 2.3 | |
| Effective Date | Preamble | |
| Evaluation Date | 3.16 | |
| GAAP | 3.8 | |
| Material Adverse Effect | 3.2 | |
| Parties | Preamble | |
| Party | Preamble | |
| Preferred Stock | Preamble | |
| Purchaser | Preamble | |
| Report Preparer | 3.14 | |
| Required Approvals | 3.5 | |
| Rule 144 | 5.2 | |
| SEC Reports | 3.8 | |
| Securities Act | Preamble | |
| Shares | Preamble | |
| Stock Award | 3.26 |
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Section 1.3 Interpretative Provisions. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Any initially capitalized terms used in any exhibit, annex or schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person.
ARTICLE
II
PURCHASE AND SALE
Section 2.1 Authorization of Shares. The Company has authorized (a) the sale and issuance to Purchaser of the Shares, and (b) the issuance of shares of Common Stock to be issued upon conversion of the Shares (the “Conversion Shares”). Upon issuance of the Preferred Stock, the Preferred Stock and the Common Stock shall have the rights, preferences, privileges and restrictions set forth in the Restated Articles of Incorporation of the Company, as amended by the Certificate of Designations in the form attached hereto as Exhibit A (the “Certificate of Designations”), which the Company shall file with the Secretary of State of Wyoming prior to the Closing.
Section 2.2 Purchase and Sale. Upon the terms and subject to the conditions set forth herein, at the Closing, the Company hereby agrees to issue and sell to Purchaser, and Purchaser agrees to purchase from the Company, the Shares in exchange for $500 and Purchaser’s performance of its obligations under the Acquisition Agreement, including accepting the Purchased Assets and replacing the Company as the permittee and operator of the WTP.
Section 2.3 Closing. The closing of the sale and purchase of the Shares (the “Closing”) shall occur at the offices of Hogan Lovells US LLP in Denver, Colorado on the date hereof contemporaneously with the execution and delivery of this Agreement and the Acquisition Agreement.
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Section 2.4 Deliveries.
(a) At the Closing, the Company shall deliver or cause to be delivered to Purchaser the following:
(i) the Investor Rights Agreement duly executed by the Company;
(ii) a certificate representing the Shares (in the form approved by the Board of Directors and prepared and executed in compliance with the Wyoming Business Corporation Act and the Corporation’s Restated Articles of Incorporation and Bylaws), registered in the name of Purchaser;
(iii) a certified copy of evidence of filing of the Certificate of Designations with the Secretary of State of Wyoming;
(iv) written evidence of the approval by NASDAQ of the Listing of Additional Shares Notification Form related to the Conversion Shares; and
(v) a certificate of the Secretary of the Company certifying as complete and accurate as of the Closing and having attached thereto (A) the Company’s Restated Articles of Incorporation (including the Certificate of Designations) as in effect on the Effective Date, (B) the Company’s bylaws as in effect on the Effective Date, (C) resolutions approved by the Board of Directors authorizing the transactions contemplated hereby and the other Transaction Documents and duly authorizing and reserving for issuance the Conversion Shares, and (D) good standing certificates with respect to the Company from the applicable authority(ies) in Wyoming and any other jurisdiction in which the Company is qualified to do business, dated as of the Effective Date or a recent date before the Effective Date, and certifying to the incumbency and signatures of the Company’s officers executing the Transaction Documents.
(b) At the Closing, Purchaser shall deliver or cause to be delivered to the Company, as applicable, the following:
(i) the Investor Rights Agreement duly executed by Purchaser;
(ii) $500 in immediately available funds; and
(iii) a certificate of the Secretary of Purchaser certifying all requisite resolutions or actions of Purchaser’s board of directors approving the execution and delivery of this Agreement and the Acquisition Agreement and the transactions contemplated hereby and thereby, and certifying to the incumbency and signatures of the officers of Purchaser executing this Agreement and the Acquisition Agreement and any other document relating to the transactions contemplated hereby and thereby.
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ARTICLE
III
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 made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company represents and warrants as of the date hereof and as of the Closing to Purchaser as follows (unless as of a specific date therein):
Section 3.1 Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1. 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.
Section 3.2 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, has not resulted in and could not 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, cash flow, 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”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
Section 3.3 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 no further action is required by the Company, the Board of Directors or the Company’s shareholders in connection herewith or therewith other than the Required Approvals. 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; and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.
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Section 3.4 No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents; (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected; or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as has not resulted in and could not reasonably be expected to result in a Material Adverse Effect.
Section 3.5 Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other Governmental Entity or other Person in connection with the execution, delivery and performance by the Company of this Agreement, the Investor Rights Agreement and the Certificate of Designations, other than: (i) the listing application to be filed with NASDAQ pursuant to Section 2.4(a)(iv), (ii) disclosures required to be made under the Exchange Act as contemplated by Section 6.5, and (iii) the filing of the Certificate of Designations with the Secretary of State of Wyoming (collectively, the “Required Approvals”).
Section 3.6 Issuance of the Securities. The Shares 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 other than any restrictions on transfer under federal or state securities laws and as set forth in Article V. The Conversion Shares, when issued in accordance with the terms of the Certificate of Designations, will be validly issued, fully paid and nonassessable, free and clear of all Liens other than any restrictions on transfer under federal or state securities laws and as set forth in Article V.
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Section 3.7 Capitalization.
(a) The authorized capital stock of the Company consists of an unlimited number of shares of Common Stock and 100,000 shares of preferred stock, par value $0.01 per share, of which 50,000 have been designated as Series P Preferred Stock. As of the date of this Agreement, there were 28,233,068 shares of Common Stock issued and outstanding, and no shares of preferred stock issued and outstanding. Since the date of this Agreement until the Closing, no additional shares of Common Stock or other securities will have been issued other than the issuance of shares of Common Stock upon the exercise or settlement of Stock Awards under a Company Stock Plan as disclosed herein. All of the outstanding shares of capital stock of the Company are, and all Securities which may be issued as contemplated or permitted by the Transaction Documents will be, when issued, duly authorized and validly issued, fully paid and non-assessable and not subject to any pre-emptive rights. No Subsidiary of the Company owns any shares of capital stock of the Company.
(b) As of the date of this Agreement, 66,667 shares of restricted stock had been granted to an officer of the Company and such shares are excluded from issued and outstanding shares of Common Stock, and 2,343,022 shares of Common Stock were authorized for and subject to issuance upon exercise of outstanding stock options (of which 2,227,355 were exercisable). There are no Contracts to which the Company is a party obligating the Company to accelerate the vesting of any Stock Award as a result of the transactions contemplated by the Transaction Documents. Other than the Stock Awards, there are no outstanding (i) securities of the Company or any Subsidiary convertible into or exchangeable for shares of capital stock of the Company or any Subsidiary, (ii) options, warrants or other agreements or commitments to acquire from the Company or any of its Subsidiaries, or obligations of the Company or any of its Subsidiaries to issue, any shares of capital stock of (or securities convertible into or exchangeable for shares of capital stock of) the Company or any Subsidiary or (iii) restricted shares, restricted stock units, stock appreciation rights, performance shares, profit participation rights, contingent value rights, "phantom" stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any shares of capital stock of the Company or any Subsidiary, in each case that have been issued by the Company or any Subsidiary. All outstanding shares of Common Stock, all outstanding Stock Awards, and all outstanding shares of capital stock, voting securities or other ownership interests in any Subsidiary of the Company, have been issued or granted, as applicable, in compliance in all material respects with all applicable securities Laws.
(c) There are no outstanding Contracts requiring the Company or any Subsidiary to repurchase, redeem or otherwise acquire any capital stock of the Company or any Subsidiary. Neither the Company nor any Subsidiary is a party to any voting agreement or shareholders agreement with respect to any capital stock of the Company or any Subsidiary and to the Knowledge of the Company there are no such agreements between or among any of the Company’s shareholders.
(d) No bonds, debentures, notes or other indebtedness issued by the Company or any Subsidiary (i) having the right to vote on any matters on which shareholders, members or equityholders of the Company or any Subsidiary may vote (or which is convertible into, or exchangeable for, securities having such right), or (ii) the value of which is directly based upon or derived from the capital stock, voting securities or other ownership interests of the Company or any Subsidiary, are issued or outstanding.
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Section 3.8 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 for the two years preceding the date of this Agreement, and will file such documents through the Closing (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 or will receive a valid extension of such time of filing and has filed or will file any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied or will comply 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 or will contain any untrue statement of a material fact or omitted or omit 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 (except to the extent superseded by subsequently filed SEC Reports filed prior to January 1, 2016). The financial statements of the Company included in the SEC Reports comply or will 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 or will be prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved, 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 or will 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.
Section 3.9 Material Changes; Undisclosed Events, Liabilities or Developments. Since December 31, 2014, except as specifically disclosed in an SEC Report filed after December 31, 2014 and prior to January 1, 2016: (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect; and (ii) the Company and its Subsidiaries have not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s consolidated financial statements pursuant to GAAP or disclosed in filings made with the Commission.
Section 3.10 Litigation. Except as disclosed in Schedule 3.10, there is no Proceeding pending or, to the Knowledge of the Company, threatened against, related to or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, or Governmental Entity (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. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. 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. Neither the Company nor any of its Subsidiaries is subject to any proceeding or action under any applicable Law relating to bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or preferential transfers, or similar Law relating to or affecting creditors’ rights generally. There is no Proceeding pending or, to the Knowledge of the Company, threatened against or affecting the Company or any of their Affiliates, directors, officers or employees, involving any challenge to or seeking damages or other relief in connection with any of the transactions contemplated by this Agreement, the Acquisition Agreement or the other Transaction Documents or that may, to the Knowledge of the Company, have the effect of preventing, delaying, making illegal or otherwise interfering with the transactions contemplated by this Agreement, the Acquisition Agreement or the other Transaction Documents.
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Section 3.11 Labor. Schedule 3.11 sets forth the names and titles of all of the Company’s executive officers as of the Effective Date. To the Knowledge of the Company, no current or former 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 currently employed 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 Laws relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance has not had and could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.12 Compliance with Laws; Permits. Except as set forth in the SEC Reports filed prior to January 1, 2016, or in each case as has not resulted in and could not reasonably be expected to result in a Material Adverse Effect, since December 31, 2014:
(a) To the Knowledge of the Company, the operations and activities of the Company comply and have complied, in all material respects, with all applicable Laws and Permits;
(b) To the Knowledge of the Company, the Company possesses all Permits that are required by Law to permit the operations and activities of the Company as currently conducted or operated; all such Permits are valid and are in full force and effect; all applications or notices required to have been filed for the renewal or extensions of such Permits have been duly filed on a timely basis with the appropriate Governmental Entity, and the Company has not been notified in writing that such renewals or extensions will be withheld or delayed.
(c) To the Knowledge of the Company, except as set forth on Schedule 3.12(c), the Company has not received any written notice from any Governmental Entity or Third Party regarding (i) any violation of or failure to comply with, in any material respect, any Law or Permit, (ii) any withdrawal, suspension, cancellation, termination of, or modification to any Permit held by the Company or any employee of the Company, or (iii) any obligation on the part of the Company to undertake, or to bear all or any portion of the cost of, any remedial action; and
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(d) To the Knowledge of the Company, no event has occurred that, with or without notice or lapse of time or both, could reasonably be expected to result in the revocation, suspension, lapse or limitation of any Permit.
Section 3.13 Title to Assets; Properties. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them except for unpatented mining claims 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 Permitted Liens. 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, and to the Knowledge of the Company the lessor(s), are in compliance.
Section 3.14 Reserve Reports. The Company has delivered or otherwise made available to Purchaser true and correct copies of all material written reports requested or commissioned by the Company or any Subsidiary and delivered to the Company or any Subsidiary in writing on or before the date of this Agreement estimating the Company’s and such Subsidiaries’ proved oil and gas reserves prepared by any unaffiliated person (each, a “Report Preparer”) concerning the oil and gas interests of the Company and such Subsidiaries as of December 31, 2014 (the “Company Reserve Reports”). The factual, non-interpretive data provided by the Company and the Subsidiaries to each Report Preparer in connection with the preparation of the Company Reserve Reports that was material to such Report Preparer’s estimates of the proved oil and gas reserves set forth in the Company Reserve Reports was, to the Knowledge of the Company, as of the time provided (or as modified or amended prior to the issuance of the Company Reserve Reports) accurate, and to the Knowledge of the Company there were no material errors in the assumptions and estimates provided by the Company and its Subsidiaries to any Report Preparer in connection with their preparation of the Company Reserve Reports. The Company’s internal proved reserve estimates prepared by management prior to the date of this Agreement and prior to the Closing, copies of which have been provided to Purchaser were not, taken as a whole, materially lower than the conclusions in such Company Reserve Reports. Except for changes generally affecting the oil and gas exploration, development and production industry (including changes in commodity prices) and normal depletion by production, there has been no change in respect of the matters addressed in the Company Reserve Reports that has resulted in and could reasonably be expected to result in a Material Adverse Effect.
Section 3.15 Transactions with Affiliates and Employees. Except as set forth in the SEC Reports filed prior to January 1, 2016, none of the officers or directors of the Company or any Subsidiary and, to the Knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or providing for the borrowing of money from or lending of money to, or otherwise requiring payments to or from any officer, director or such employee or, to the Knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, shareholder, member or partner, in each case involving an amount in excess of $120,000 other than for: (i) payment of salary for services rendered; (ii) reimbursement for expenses incurred on behalf of the Company; and (iii) other employee benefits, including Stock Awards under a Company Stock Plan.
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Section 3.16 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 applicable to the Company and are effective as of the date of this Agreement and as of the Effective Date, 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 Effective 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 Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) for the Company and the Subsidiaries and designed such disclosure controls and procedures to provide reasonable assurance 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 are reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.
Section 3.17 No Brokers. No broker, finder, investment banker, financial advisor or other person is entitled to any brokerage, finder’s, or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company.
Section 3.18 Private Placement. Assuming the accuracy of Purchaser’s representations and warranties set forth in Article IV of this Agreement, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to Purchaser as contemplated hereby. The issuance and sale of the Securities does not contravene the rules and regulations of NASDAQ.
Section 3.19 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.
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Section 3.20 Registration Rights. Except for any rights granted to Purchaser in the Transaction Documents, 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.
Section 3.21 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. Except as disclosed in the Company’s Current Report on Form 8-K filed with the Commission on July 14, 2015, the Company has not, in the twelve (12) months preceding the date hereof, received notice from NASDAQ to the effect that the Company is not in compliance with NASDAQ’s listing or maintenance requirements.
Section 3.22 Application of Takeover Protections. No poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision or arrangement is in effect, and no shares of the Company’s Series P Preferred Stock are issued and outstanding. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other anti-takeover provision under the Company’s Restated Articles of Incorporation, Bylaws, and the laws of the State of Wyoming including but not limited to the Wyoming Management Stability Act, that is or could become applicable to Purchaser as a result of Purchaser and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and Purchaser’s ownership of the Securities.
Section 3.23 Full Disclosure. No representation or warranty by the Company in this Agreement and no statement contained in the Disclosure Schedules to this Agreement or any certificate or other document furnished or to be furnished to Purchaser pursuant to this Agreement contains any untrue statement of a material fact or omits 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 Company has disclosed to Purchaser, in the SEC Reports filed prior to filed prior to January 1, 2016, and in this Agreement and the Acquisition Agreement (including the Disclosure Schedules), all information regarding the Company and its Subsidiaries material to Purchaser’s decision to purchase the Shares.
Section 3.24 No Integrated Offering. Assuming the accuracy of Purchaser’s representations and warranties set forth in Article IV of this Agreement, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with other offerings by the Company for purposes of the exemption of the offer and sale of the Securities to Purchaser from registration under the Securities Act and state securities laws, and any applicable shareholder approval provisions of NASDAQ.
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Section 3.25 Accountants. Hein & Associates LLP, who have audited certain consolidated financial statements of the Company and its Subsidiaries are independent public accountants with respect to the Company and its Subsidiaries within the applicable rules and regulations adopted by the Commission and the Public Company Accounting Oversight Board (United States) and as required by the Securities Act.
Section 3.26 Company Stock Plans. All benefit, compensation and award plans administered by the Company that provide for the award of rights of any kind to receive shares of Common Stock or benefits measured in whole or in part by reference to shares of Common Stock (each a “Company Stock Plan”) are listed on Schedule 3.26 of the Disclosure Schedules. Each award granted by the Company under a Company Stock Plan (each a “Stock Award”) was granted (i) in accordance with the terms of the applicable Company Stock Plan and (ii) if applicable, with an exercise price at least equal to the fair market value of the Common Stock on the date such Stock Award would be considered granted under GAAP and applicable law. No Stock Award granted under a Company Stock Plan has been backdated. The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, Stock Awards prior to, or otherwise knowingly coordinate the grant or vesting of Stock Awards with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.
Section 3.27 Tax Status. Except for matters that could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and to the Knowledge of the Company no basis for any such claim exists.
ARTICLE
IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants as of the date hereof and as of the Closing to the Company as follows:
Section 4.1 Organization; Authority. Purchaser is an entity duly incorporated, validly existing and in good standing under the laws of the State of Delaware with full right, corporate 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 Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate action, as applicable, on the part of Purchaser, and no further action is required by Purchaser, its board of directors or its stockholder in connection herewith or therewith. Each Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by Purchaser, and when delivered by Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of 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; and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.
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Section 4.2 Absence of Conflicts. The execution and delivery of this Agreement by Purchaser does not, and the consummation of the transactions contemplated hereby will not, (i) conflict with or violate the articles of incorporation or bylaws of Purchaser or (ii) conflict with or violate in any material respect any Law or Governmental Order applicable to Purchaser.
Section 4.3 Own Account. Purchaser understands that the Shares are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Shares as principal for its own account and not with a view to or for distributing or reselling the 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 Purchaser’s right to sell the Securities in compliance with applicable federal and state securities laws).
Section 4.4 Purchaser Status. At the time Purchaser was offered the Shares, it was, and as of the date hereof it is an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) promulgated under the Securities Act.
Section 4.5 General Solicitation. Purchaser is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares 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.
ARTICLE
V
RESTRICTIONS ON TRANSFERS
Section 5.1 Resales. Purchaser agrees that the Securities may only be sold or transferred (i) pursuant to an effective registration statement under the Securities Act (including the Registration Statement (as defined in the Investor Rights Agreement)); (ii) pursuant to an exemption from registration under the Securities Act; or (iii) in a transaction not subject to the registration requirements of the Securities Act.
Section 5.2 Rule 144. Purchaser is aware of Rule 144 promulgated under the Securities Act (as such rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such rule, “Rule 144”) and the restrictions imposed thereby.
Section 5.3 Legends. Purchaser agrees to the imprinting, so long as is required by this Article V, of a legend on any of the certificates representing the Securities in substantially the following form:
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“THIS SECURITY 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.”
Section 5.4 Legend Removal. The Company shall instruct the Transfer Agent, and shall cause its counsel to promptly issue a legal opinion to the Transfer Agent, to remove the legend set forth in Section 5.3, (i) following any sale of such Securities pursuant to an effective registration statement; (ii) following any sale of such Securities pursuant to Rule 144; and (iii) upon request by the holder of such Securities and upon delivery to the Company of appropriate representations as to the non-affiliate status of holder under Rule 144 when such Securities may be sold under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Securities and without volume or manner-of-sale restrictions.
ARTICLE
VI
OTHER AGREEMENTS
Section 6.1 Acknowledgement of No Set Off. The Company acknowledges that its obligations under the Transaction Documents to issue the Conversion Shares pursuant to the Certificate of Designations are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of or any claim the Company may have against Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other shareholders of the Company.
Section 6.2 Survival.
(a) All representations, warranties, covenants and obligations in this Agreement, the Disclosure Schedules, and any other document, certificate or instrument delivered pursuant to this Agreement shall survive the Closing and the consummation of the transactions contemplated by this Agreement, subject to Section 6.2(b).
(b) The Company will have liability pursuant to this Agreement with respect to any breach of a representation or warranty in this Agreement only if Purchaser notifies the Company of a claim in writing, specifying the factual basis of the claim in reasonable detail to the extent then known by Purchaser, on or before August 10, 2017, except for claims of breaches of the representations and warranties set forth in Sections 3.2, 3.3, 3.4, and 3.7, which shall survive indefinitely and as to which Purchaser may notify the Company at any time after the Effective Date.
Section 6.3 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of NASDAQ such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.
Section 6.4 Reservation and Listing of Securities.
(a) The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance upon conversion of the Shares pursuant to the Certificate of Designations in such amount as may then be required to fulfill its obligations in full under the Certificate of Designations.
(b) The Company shall take all steps necessary to (i) cause the Conversion Shares to be approved for listing or quotation on NASDAQ; (ii) provide to Purchaser at the Closing evidence of such approval for listing or quotation; and (iii) use its reasonable best efforts to maintain the listing or quotation of such Conversion Shares on NASDAQ or another national securities exchange.
Section 6.5 Securities Laws Disclosure; Publicity. The Company shall file all required Current Reports on Form 8-K relating to the transactions contemplated by the Transaction Documents, including all required exhibits thereto, with the Commission within the time required by the Exchange Act; provided that the Company shall submit a draft of such Form 8-K(s) to Purchaser and provide Purchaser with reasonable time to review and comment on such Form 8-K(s). The Parties shall consult with each other prior to issuing any press releases with respect to the transactions contemplated by the Transaction Documents, and neither Party shall issue any press release nor otherwise make any public statement with respect to the transactions contemplated by the Transaction Documents without the prior consent of the other Party, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by Law or NASDAQ, in which case the disclosing Party shall provide the other Party with notice of such press release or public statement as promptly as possible. Notwithstanding anything else contained in this Section 6.5, except for any press releases or public statements regarding the transactions contemplated by the Transaction Documents made in connection with and immediately following the Closing, Purchaser shall not be required to consult with the Company regarding any press release or other public statement after the Closing.
Section 6.6 Integrated Agreements. The Parties acknowledge and agree that although this Agreement, the Acquisition Agreement and the other Transaction Documents are separate documents, they form an integrated contract and the closing of one is contingent upon and subject to the closing of all others. The Company will not issue, and Purchaser will not accept, the Shares if the Company is subject to any proceeding or action under any applicable Law relating to bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or preferential transfers, or similar Law relating to or affecting creditors’ rights generally, and if Purchaser does not accept the Shares, Purchaser shall not be obligated to close the Acquisition Agreement or the other Transaction Documents.
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Section 6.7 Confidentiality The Parties acknowledge and agree that the Confidentiality Agreement shall terminate at the Closing. From and after the Closing, the Company shall, and shall cause its Affiliates to, hold, and shall use its reasonable best efforts to cause its or their respective representatives to hold, in confidence any and all information, whether written or oral, related to the Project and the Transaction Documents, except to the extent that the Company can show that such information (a) is generally available to and known by the public through no fault of the Company, any of its Affiliates or their respective representatives; or (b) is lawfully acquired by the Company, any of its Affiliates or their respective representatives from and after the Closing from sources which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation. If the Company or any of its Affiliates or their respective representatives are compelled to disclose any such information by judicial or administrative process or by other requirements of Law, the Company shall promptly notify Purchaser in writing and shall disclose only that portion of such information which the Company is advised by its counsel in writing is legally required to be disclosed; provided, that the Company shall use reasonable best efforts to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information.
ARTICLE
VII
MISCELLANEOUS
Section 7.1 Fees and Expenses. Each Party shall pay the fees and expenses of its own 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. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of the Shares to Purchaser.
Section 7.2 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, and the Confidentiality Agreement, taken together, are expressly intended by the Parties to be, shall be and constitute the Parties’ single, entire, non-severable, indivisible and integrated agreement, and none of the Parties would have entered into any of the Transaction Documents but for the totality of terms and provisions of the Transaction Documents and the Confidentiality Agreement. The Transaction Documents, together with the exhibits and schedules thereto, and the Confidentiality Agreement 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.
Section 7.3 Notices. All notices, demands, and other communications hereunder shall be in writing, and shall be deemed to have been duly given if delivered personally, or if mailed by certified mail, return receipt requested, postage prepaid, or sent by nationally recognized overnight carrier, as follows:
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| If to Purchaser: | Mt. Emmons Mining Company |
| Attention: Scott Statham, Deputy General Counsel | |
| 333 North Central Avenue | |
| Phoenix, Arizona 85004-2189 | |
| with a copy to: | Jones Walker, L.L.P. |
| Attention: Dionne Rousseau | |
| 8555 United Plaza Boulevard, Suite 500 | |
| Baton Rouge, Louisiana 70809 | |
| If to the Company: | U.S. Energy Corp. |
| Attention: David Veltri | |
| 4643 S. Ulster Street, Suite 970 | |
| Denver, Colorado 80237 | |
| with a copy to: | Davis Graham & Stubbs LLP |
| Attention: John Elofson | |
| 1550 Seventeenth Street, Suite 500 | |
| Denver, Colorado 80202 |
or to such other address and with such other copies as such Party may hereafter reasonably specify for the purpose by notice to the other Party. Each such notice, demand or other communication shall be effective upon delivery or refusal of delivery at the address specified in this Section 7.3.
Section 7.4 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed by the Company and Purchaser. 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.
Section 7.5 Headings; Gender. When a reference is made in this Agreement to a section, exhibit or schedule, such reference shall be to a section, exhibit or schedule of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All personal pronouns used in this Agreement shall include the other genders, whether used in the masculine, feminine or neuter gender, and the singular shall include the plural and vice versa, whenever and as often as may be appropriate.
Section 7.6 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 Purchaser. Purchaser may assign any or all of its rights under this Agreement to any Person to whom 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 “Purchaser.”
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Section 7.7 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 or entity.
Section 7.8 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Wyoming, United States of America, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Wyoming or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Wyoming.
Section 7.9 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 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.
Section 7.10 Remedies Cumulative. The rights and remedies of the Parties are cumulative and not alternative.
Section 7.11 Mutual Drafting. This Agreement is the mutual product of the Parties and each provision hereof has been subject to the mutual consultation, negotiation and agreement of each of the Parties, and shall not be construed for or against any Party hereto.
Section 7.12 Legal Fees and Costs. In the event a Party elects to incur legal expenses to enforce or interpret any provision of this Agreement by judicial proceedings, the prevailing Party shall be entitled to recover such legal expenses, including reasonable attorneys’ fees, costs, and necessary disbursements at all court levels, in addition to any other relief to which such Party shall be entitled.
Section 7.13 Enforcement of Agreement. The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement was not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.
Section 7.14 Execution; Counterparts. 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 the other Party, it being understood that the Parties need not sign the same counterpart. In the event that any signature is delivered 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 “.pdf” signature page were an original thereof.
* * * * * * * * * *
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IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the day and year first written above.
| COMPANY: | ||
| U.S. ENERGY CORP. | ||
| By: | /s/ David Veltri | |
| Name: | David Veltri | |
| Title: | Chief Executive Officer and President | |
| PURCHASER: | ||
| MT. EMMONS MINING COMPANY | ||
| By: | /s/ William E. Cobb | |
| Name: | William E. Cobb | |
| Title: | Vice President |
[Signature Page to Series A Convertible Preferred Stock Purchase Agreement]
Exhibit 10.2
EXECUTION VERSION
INVESTOR RIGHTS AGREEMENT
by and between
U.S. ENERGY CORP.
and
MT. EMMONS MINING COMPANY
Dated as of February 11, 2016
Table of Contents
| Page | |||
| ARTICLE I DEFINITIONS | 1 | ||
| Section 1.1 | Definitions | 1 | |
| Section 1.2 | Other Defined Terms | 3 | |
| Section 1.3 | Interpretative Provisions | 3 | |
| ARTICLE II COVENANTS | 4 | ||
| Section 2.1 | Information Access Rights | 4 | |
| Section 2.2 | Observer Rights | 4 | |
| Section 2.3 | Standstill | 4 | |
| Section 2.4 | Termination and Non-transferability of Covenants | 5 | |
| ARTICLE III REGISTRATION RIGHTS | 5 | ||
| Section 3.1 | Demand Registration | 5 | |
| Section 3.2 | Registration Procedures | 8 | |
| Section 3.3 | Expenses | 12 | |
| Section 3.4 | Indemnification | 13 | |
| Section 3.5 | Participation in Underwritten Registrations | 15 | |
| Section 3.6 | Rule 144 Compliance | 15 | |
| Section 3.7 | Preservation of Rights | 16 | |
| ARTICLE IV MISCELLANEOUS | 16 | ||
| Section 4.1 | Entire Agreement | 16 | |
| Section 4.2 | Notices | 16 | |
| Section 4.3 | Amendments; Waivers | 17 | |
| Section 4.4 | Headings; Gender | 17 | |
| Section 4.5 | Successors and Assigns; Transfer of Registration Rights | 17 | |
| Section 4.6 | No Third-Party Beneficiaries | 17 | |
| Section 4.7 | Governing Law | 18 | |
| Section 4.8 | Severability | 18 | |
| Section 4.9 | Remedies Cumulative | 18 | |
| Section 4.10 | Mutual Drafting | 18 | |
| Section 4.11 | Legal Fees and Costs | 18 | |
| Section 4.12 | Enforcement of Agreement | 18 | |
| Section 4.13 | Execution; Counterparts | 18 | |
| Section 4.14 | Further Assurances | 18 |
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INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (this “Agreement”) is entered into by and between U.S. Energy Corp., a Wyoming corporation (the “Company”), and Mt. Emmons Mining Company, a Delaware corporation (“Investor”), to be effective as of the Closing of the Purchase Agreement defined below. The Company and Investor are hereinafter at times referred to individually as a “Party” and collectively as the “Parties”.
WHEREAS, the Company and Investor are parties to the Series A Convertible Preferred Stock Purchase Agreement, dated as of February 11, 2016 (the “Purchase Agreement”), pursuant to which the Company has agreed to sell, and Investor has agreed to purchase, 50,000 shares of Series A Convertible Preferred Stock of the Company, par value $0.01 per shares (the “Preferred Stock”), subject to certain conditions, including the execution and delivery of this Agreement.
WHEREAS, the Company and Investor desire, for their mutual benefit and protection, to set forth in this Agreement certain of their respective rights and obligations with respect to the capital stock of the Company (whether the Preferred Stock or the Company’s common stock, $.01 par value (the “Common Stock,” into which the Preferred Stock is convertible), whether outstanding or issued or acquired hereafter).
NOW, THEREFORE, in consideration of the mutual agreements and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Investor agree as follows:
ARTICLE
I
DEFINITIONS
Section 1.1 Definitions. Initially capitalized terms used in this Agreement shall have the meanings assigned to them in this Section 1.1 or the applicable Section referenced in Section 1.2, unless the context otherwise indicates:
“Affiliate” of a Person means any other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlling”, “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.
“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.
“Commission” means the United States Securities and Exchange Commission.
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“Confidentiality Agreement” means that certain Confidentiality Agreement, dated June 24, 2015, by and among the Company, Investor, Freeport Minerals Corporation and Cyprus Amax Minerals Company.
“Conversion Shares” means the shares of Common Stock and any other securities issued or issuable upon conversion of the shares of Preferred Stock, and any other shares of Common Stock and other securities issued in respect of such shares (because of stock splits, stock dividends, reclassifications, recapitalizations or similar events).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Person” means any individual, company, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization, government or agency or political subdivision thereof or any other entity.
“Prospectus” means the prospectus included in any Registration Statement, all amendments and supplements to such prospectus, including pre- and post-effective amendments to such Registration Statement, and all other material incorporated by reference in such prospectus.
“Registrable Securities” means the Conversion Shares; provided, that such Registrable Securities shall cease to be Registrable Securities (i) upon any sale of such Registrable Shares pursuant to a Registration Statement or Rule 144 under the Securities Act,(ii) upon any sale of such Registrable Shares in any manner to a person or entity which is not entitled, pursuant to Section 4.5, to the registration rights under Article III of this Agreement or (iii) when such Registrable Securities become eligible for resale without restriction and without the need for current public information pursuant to Rule 144 under the Securities Act, provided, that if counsel to the holder of Conversion Shares opines that such securities may not be so eligible for resale, whether because such holder may be deemed an Affiliate of the Company or otherwise, such Registrable Securities shall remain Registrable Securities. A Person shall be deemed a holder of Registrable Securities whenever such Person has the right to then acquire or obtain from the Company any Registrable Securities, whether or not such acquisition has actually been effected. Wherever reference is made in this Agreement to a request or consent of holders of a certain percentage of Registrable Securities, the determination of such percentage shall include the Conversion Shares issuable upon conversion of the shares of Preferred Stock even if such conversion has not been effected.
“Registration Statement” means any registration statement of the Company that covers Registrable Securities pursuant to the provisions of this Agreement filed with, or to be filed with, the Commission under the rules and regulations promulgated under the Securities Act, including the related Prospectus, amendments and supplements to such registration statement, including pre- and post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement.
“Rule 144” means Rule 144 under the Securities Act or any successor rule thereto.
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“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Selling Expenses” means all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any holder of Registrable Securities, except for the fees and disbursements of counsel for the holders of Registrable Securities required to be paid by the Company pursuant to Section 3.3.
“Transaction Documents” shall have the meaning set forth in the Purchase Agreement.
Section 1.2 Other Defined Terms. In addition, each of the following terms is defined in the Section set forth opposite such term:
| Term | Section | |
| Agreement | Preamble | |
| Common Stock | Preamble | |
| Company | Preamble | |
| Controlling Person | 3.2(p) | |
| Demand Registration | 3.1(b) | |
| DTCDRS | 3.2(q) | |
| Initial Registrable Securities | 3.2 | |
| Initial Registration Statement | 3.2 | |
| Inspectors | 3.2(h) | |
| Investor | Preamble | |
| Long-Form Registration | 3.1(a) | |
| New Registration Statement | 3.2 | |
| Observer | 2.2 | |
| Preferred Stock | Preamble | |
| Purchase Agreement | Preamble | |
| Records | 3.2(h) | |
| Shelf Registration | 3.1(c) | |
| Shelf Registration Statement | 3.1(c) | |
| Shelf Supplement | 3.1(d) | |
| Shelf Takedown | 3.1(d) | |
| Shelf Takedown Notice | 3.1(d) | |
| Short-Form Registration | 3.1(b) | |
| Suspension Period | 3.1(i) |
Section 1.3 Interpretative Provisions. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Any initially capitalized terms used in any exhibit, annex or schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person.
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ARTICLE
II
COVENANTS
Section 2.1 Information Access Rights. Investor and any of its Affiliates holding Preferred Stock or Conversion Shares, along with their agents, attorneys and representatives, shall have the right to access, inspect and copy, at their own expense, the books and records, including shareholder’s lists or record of shareholders, of the Company and its subsidiaries at any time during normal business hours and for any reason with seven (7) Business Days’ written notice to the Company. This provision shall not be in limitation of any other rights that any holder of Preferred Stock or Conversion Shares may have to inspect and copy the books and records, including shareholder’s lists or record of shareholders, of the Company and its subsidiaries pursuant to applicable law.
Section 2.2 Observer Rights. Investor and any of its Affiliates holding Preferred Stock or Conversion Shares collectively shall have the right to appoint, and to remove and replace, at any time with written notice to the Company, one individual as an observer of the Board of Directors (the “Observer”). The Company shall invite the Observer to attend all meetings, regular and special, of the Board of Directors (including all meetings of any committee thereof) in a nonvoting observer capacity and shall give the Observer copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, that the Observer, Investor and its Affiliates holding Preferred Stock or Conversion Shares shall agree to hold in confidence all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude the Observer from any meeting or portion thereof to the extent the Observer’s access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets or a conflict of interest; and provided further, that the audit, nominating and compensation committees may exclude the Observer from the proceedings of such committees at the discretion of the respective committee. For avoidance of doubt, no Observer shall have voting rights or any fiduciary obligations to the Company or its shareholders.
Section 2.3 Standstill.
(a) Unless approved by the Board of Directors, neither Investor nor any of its Affiliates shall purchase or acquire any additional shares of Common Stock, if, after such purchase, the aggregate beneficial ownership (as determined in accordance with Rule 13d-3 under the Exchange Act) of Common Stock of Investor and its Affiliates would exceed 16.86% of the then-issued and outstanding shares of Common Stock.
(b) Nothing in this Section 2.3 shall affect the conversion privileges or prevent the application of the anti-dilution protections afforded the Preferred Stock as set forth in the Company’s Restated Articles of Incorporation, as amended.
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Section 2.4 Termination and Non-transferability of Covenants.
(a) The covenants contained in this Article II shall terminate at such time as Investor and its Affiliates (i) no longer own any shares of Preferred Stock; and (ii) no longer own Common Stock representing at least five percent (5%) of the then-issued and outstanding shares of Common Stock as a result of the sale of shares of the Common Stock by Investor and/or its Affiliates and not as a result of dilution from the issuance of shares by the Company; provided, that the covenants in Section 2.3 shall terminate no later than the tenth anniversary of the issuance of the Preferred Stock.
(b) Except for transfers between or among Investor and its Affiliates, the covenants in this Article II are not transferable by Investor or its Affiliates and do not transfer with the Preferred Stock or Conversion Shares.
ARTICLE
III
REGISTRATION RIGHTS
Section 3.1 Demand Registration.
(a) At any time after the effective date of this Agreement, holders of a majority of the Registrable Securities (whether or not then outstanding) may request registration under the Securities Act of all or any portion of their Registrable Securities pursuant to a Registration Statement on Form S-1 or any successor form thereto (each, a “Long-Form Registration”). Each request for a Long-Form Registration shall specify the number of Registrable Securities requested to be included in the Long-Form Registration. Upon receipt of any such request, the Company shall promptly (but in no event later than five (5) days following receipt thereof) deliver notice of such request to all other holders of Registrable Securities who shall then have ten (10) days from the date such notice is given to notify the Company in writing of their desire to be included in such registration. The Company shall prepare and file with the Commission a Registration Statement on Form S-1 or any successor form thereto covering all of the Registrable Securities that the holders thereof have requested to be included in such Long-Form Registration within sixty (60) days after the date on which the initial request is given and shall use its reasonable best efforts to cause such Registration Statement to be declared effective by the Commission as soon as practicable thereafter.
(b) If the Company is qualified for the use of a Registration Statement on Form S-3 or any successor form thereto, the holders of Registrable Securities shall have the right to request registration under the Securities Act of all or any portion of their Registrable Securities pursuant to a Registration Statement on Form S-3 or any similar short-form Registration Statement (each, a “Short-Form Registration” and, collectively with each Long-Form Registration and Shelf Registration (as defined below), a “Demand Registration”). Each request for a Short-Form Registration shall specify the number of Registrable Securities requested to be included in the Short-Form Registration. Upon receipt of any such request, the Company shall promptly (but in no event later than five (5) days following receipt thereof) deliver notice of such request to all other holders of Registrable Securities who shall then have ten (10) days from the date such notice is given to notify the Company in writing of their desire to be included in such registration. The Company shall prepare and file with the Commission a Registration Statement on Form S-3 or any successor form thereto covering all of the Registrable Securities that the holders thereof have requested to be included in such Short-Form Registration within sixty (60) days after the date on which the initial request is given and shall use its reasonable best efforts to cause such Registration Statement to be declared effective by the Commission as soon as practicable thereafter.
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(c) If the Company is qualified for the use of a Registration Statement on Form S-3 or the then appropriate form for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act or any successor rule thereto (a “Shelf Registration Statement”), the holders of Registrable Securities shall have the right to request registration under the Securities Act of all or any portion of their Registrable Securities for an offering on a delayed or continuous basis pursuant to Rule 415 under the Securities Act or any successor rule thereto (a “Shelf Registration”). Each request for a Shelf Registration shall specify the number of Registrable Securities requested to be included in the Shelf Registration. Upon receipt of any such request, the Company shall promptly (but in no event later than five (5) days following receipt thereof) deliver notice of such request to all other holders of Registrable Securities who shall then have ten (10) days from the date such notice is given to notify the Company in writing of their desire to be included in such registration. The Company shall prepare and file with the Commission a Shelf Registration Statement covering all of the Registrable Securities that the holders thereof have requested to be included in such Shelf Registration within sixty (60) days after the date on which the initial request is given and shall use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective by the Commission as soon as practicable thereafter.
(d) At any time that a Shelf Registration Statement is effective, if a holder of Registrable Securities covered by such Shelf Registration Statement delivers a notice to the Company (a “Shelf Takedown Notice”) stating that the holder intends to effect an offering of all or part of its Registrable Securities included in such Shelf Registration Statement (a “Shelf Takedown”) and the Company is eligible to use such Shelf Registration Statement for such Shelf Takedown, then the Company shall take all actions reasonably required, including amending or supplementing (a “Shelf Supplement”) such Shelf Registration Statement, to enable such Registrable Securities to be offered and sold as contemplated by such Shelf Takedown Notice. Each Shelf Takedown Notice shall specify the number of Registrable Securities to be offered and sold under the Shelf Takedown.
(e) The Company shall not be obligated to effect any Long-Form Registration within one hundred twenty (120) days after the effective date of a previous Long-Form Registration or Shelf Takedown. The Company may postpone for up to forty-five (45) days the filing or effectiveness of a Registration Statement for a Demand Registration or the filing of a Shelf Supplement for a Shelf Takedown if the Board of Directors determines in its reasonable good faith judgment that such Demand Registration or Shelf Takedown would (i) materially interfere with a significant acquisition, corporate organization, financing, securities offering or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, provided that, in no event shall any such period exceed an aggregate of ninety (90) days in any period of twelve (12) consecutive months.
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(f) If the holders of the Registrable Securities initially requesting a Demand Registration or Shelf Takedown elect to distribute the Registrable Securities covered by their request in an underwritten offering, they shall so advise the Company as a part of their request, and the Company shall include such information in its notice to the other holders of Registrable Securities. The holders of a majority of the Registrable Securities initially requesting the Demand Registration or Shelf Takedown shall select the investment banking firm or firms to act as the managing underwriter or underwriters in connection with such offering.
(g) The Company shall not include in any Demand Registration or Shelf Takedown any securities which are not Registrable Securities without the prior written consent of the holders of a majority of the Registrable Securities initially requesting such Demand Registration or Shelf Takedown, which consent shall not be unreasonably withheld or delayed. If a Demand Registration or Shelf Takedown involves an underwritten offering and the managing underwriter of the requested Demand Registration or Shelf Takedown advises the Company and the holders of Registrable Securities in writing that in its reasonable and good faith opinion the number of shares of Registrable Securities proposed to be included in the Demand Registration or Shelf Takedown, including all Registrable Securities and all other securities proposed to be included in such underwritten offering, exceeds the number of Registrable Securities which can be sold in such underwritten offering and/or the number of shares of Registrable Securities proposed to be included in such Demand Registration or Shelf Takedown would adversely affect the price per share of the Registrable Securities proposed to be sold in such underwritten offering, the Company shall include in such Demand Registration or Shelf Takedown (i) first, the shares of Registrable Securities that the holders of Registrable Securities propose to sell, and (ii) second, the securities proposed to be included therein by any other Persons (including shares of securities to be sold for the account of the Company and/or other holders) allocated among such Persons in such manner as they may agree. If the managing underwriter determines that less than all of the Registrable Securities proposed to be sold can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated pro rata among the respective holders thereof on the basis of the number of Registrable Securities owned by each such holder.
(h) The Company shall not effect any sale registered under the Securities Act or distribution of its equity securities, or any securities convertible into, exercisable for or exchangeable for shares of such securities, during the sixty (60) days prior to and during the 90-day period beginning on the effective date of any underwritten Demand Registration (other than a registration (i) pursuant to a Registration Statement on Form S-8 (or other registration solely relating to an offering or sale to employees or directors of the Company pursuant to any employee stock plan or other employee benefit arrangement), (ii) pursuant to a Registration Statement on Form S-4 (or similar form that relates to a transaction subject to Rule 145 under the Securities Act or any successor rule thereto), or (iii) in connection with any dividend or distribution reinvestment or similar plan), unless the managing underwriter of any such underwritten registration otherwise agrees.
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(i) The holders of Registrable Securities agree that the Company may impose a Suspension Period due to, and each holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section Section 3.2(g), such Holder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such holder’s receipt of the copies of the supplemental prospectus or amended Registration Statement as contemplated by Section 3.2(g) or until it is advised in writing by the Company that the use of the applicable prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such prospectus or Registration Statement (a “Suspension Period”); provided, that the Company shall use its reasonable best efforts to eliminate or cure the cause of the Suspension Period. The Company may provide appropriate stop orders to enforce the provisions of this Section 3.1(i).
(j) At any time prior to the effective date of a Registration Statement, the holders of a majority of the Registrable Securities participating in the registration may withdraw such request by written notice of such withdrawal to the Company.