SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
April 2, 1997
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(Date of Report)
SOLV-EX CORPORATION
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(Exact Name of Registrant as specified in its charter)
New Mexico
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(State or other jurisdiction of incorporation)
0-9897 85-0283729
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(Commission File Number) (IRS Employer Identification Number)
500 Marquette N.W., Suite 300, Albuquerque, New Mexico 87102
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(Address of principal executive offices including zip code)
(505) 243-7701
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(Registrant's telephone number including area code)
Not Applicable
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(Former name or former address, if changed since last report)
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS.
See Item 9.E, below.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATIONS D AND S
A. The following information is provided pursuant to the requirements of Item
701 of Regulation S-K. From April 2, 1997 through April 11, 1997, Solv-Ex
Corporation (the "Company") sold 5% Convertible Debentures (the "Debentures")
pursuant to Regulations D and S to various investors, all of whom are "non-U.S.
persons" as that term is defined pursuant to Regulation S, except for John S.
Rendall, the Company's Chairman and Chief Executive Officer who purchased
$2,000,000 of the Debentures. The Company has received $12,000,000 from
investors, and anticipates receiving an additional $10,000,000 after a
registration statement relating to the shares becomes effective.
B. The following information describes the transactions and provides the
information required by Rule 701 of Regulation S-K:
(a) SECURITIES SOLD. As described herein, pursuant to subscription agreements
dated as of March 31, 1997 between April 2, 1997 and April 11, 1997, the
Company completed the sale to certain accredited investors of $ 22,000,000
of the Debentures, all of which are in the same general form with the
following terms:
Principal and interest on the Debentures are payable in full on March
31, 1999 unless previously converted by the holders.
The Company may pay principal and interest by issuing shares of the
Company's common stock.
The Debentures are convertible at the holders discretion at a price
equal to the lesser of: (i) 120% of the average market price for the five
days preceding the issuance date; and (ii) 80% of the average market price
for the five days preceding the conversion date.
REGISTRATION OBLIGATION. The Company has committed to file a registration
statement relating to the shares underlying the Debentures (except for the
Debenture purchased by Mr. Rendall not later than April 17 1997, and to
obtain effectiveness of that registration statement not later than June 30,
1997. If the Company is unable to obtain effectiveness by such date, it
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will be liable for penalties equal to 2-1/2% of the principal outstanding
through July 30, 1997; thereafter the penalty accrues at the rate of 3% for
each 30 day period. This penalty must be paid in cash and may not be paid
in stock unless the Debenture holders agree to accept stock, as to which
they have no obligation.
REDEMPTION RIGHTS. The Company has the right to call the Debentures for
redemption at any time. Upon redemption, the Company must pay the holder
120% of the principal amount and all accrued and unpaid interest and
penalties.
The following information specifically describes the three securities
placements:
C. SALES OF $5,000,000 PURSUANT TO REGULATION D
(a) SECURITIES SOLD. Pursuant to a subscription agreement dated as of March
31, 1997, the Company sold $15,000,000 of Debentures to an accredited
investor who represented that it was a "non-U.S. person". The investor
paid $5,000,000 on April 2, 1997, and is obligated to pay an additional
$5,000,000 on each of the 20th and 40th day after the registration
statement becomes effective. The conversion price and the warrant exercise
price for the subsequent tranches will be determined based on the average
market price preceding the additional investments.
(b) UNDERWRITERS AND OTHER PURCHASERS. The principal underwriters of the
Debentures was Wharton Capital Partners, Ltd., New York, New York. The
Debentures were offered only to persons who were accredited investors and
further who were "non-U.S. Persons" as that term is defined in Regulation
S.
(c) CONSIDERATION. The aggregate offering price was $15,000,000; the aggregate
underwriting discounts and commissions were $1,050,000, of which $350,000
has been paid. The balance will be paid as funds are received.
In addition, the Company has agreed to issue as additional consideration to
the underwriter, five-year warrants to purchase 20,000 shares of the
Company's common stock (per $3,000,000 investment) at a per share price
equal to 120% of the closing price on the closing of each tranche. The
initial $5,000,000 investment resulted in the issuance of warrants to
purchase 33,333 shares at 120% of the market price on April 2, 1997.
(d) EXEMPTION FROM REGISTRATION CLAIMED. The transaction was not subject to
the registration requirements of Section 5 of the
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Securities Act of 1933 because of the applicability of Section 4(2) and
Section 4(6), and Regulation D thereunder.
(e) TERMS OF CONVERSION OR EXERCISE. The Debentures are convertible into the
Company's common stock as described above. One-half of the Debentures may
be converted after July 1, 1997; and the balance may be converted after
July 31, 1997.
2. SALES OF $2,500,000 PURSUANT TO REGULATION S
(a) SECURITIES SOLD. Pursuant to a subscription agreement dated March 31,
1997. The Company sold an additional $2,500,000 of Debentures to an
accredited investor who represented that it was a "non-U.S. person". The
investor paid this entire amount on April 4, 1997.
(b) UNDERWRITERS AND OTHER PURCHASERS. The principal underwriters of the
Debentures was Groom Capital, New York, New York. The Debentures were
offered only to persons who were accredited investors and further who were
"non-U.S. Persons" as that term is defined in Regulation S.
(c) CONSIDERATION. The aggregate offering price was $2,500,000; the aggregate
underwriting discounts and commissions were $175,000, which has been paid.
In addition, the Company has agreed to issue as additional consideration to
the underwriter, five-year warrants to purchase 16,667 shares of the
Company's common stock at a per share price equal to (120% of the market
price on April 4, 1997).
(d) EXEMPTION FROM REGISTRATION CLAIMED. The transaction was not subject to
the registration requirements of Section 5 of the Securities Act of 1933
because of the applicability of Regulation S thereunder.
(e) TERMS OF CONVERSION OR EXERCISE. The Debentures are convertible into the
Company's common stock as described above. One-half of the Debentures may
be converted after July 3, 1997; and the balance may be converted after
August 1, 1997.
3. SALES OF ADDITIONAL $2,500,000 PURSUANT TO REGULATION S
(a) SECURITIES SOLD. The Company sold an additional $2,500,000 of Debentures
to an accredited investor who represented that it was a "non-U.S. person"
on April 8, 1997. The investor paid this entire amount on that date.
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(b) UNDERWRITERS AND OTHER PURCHASERS. There was no underwriter of this
Debenture. The Debentures were offered only to persons who were accredited
investors and further who were "non-U.S. Persons" as that term is defined
in Regulation S.
(c) CONSIDERATION. The aggregate offering price was $2,500,000; because there
was no underwriter, the Company granted the investor a 7% discount.
Consequently the investor paid the Company $2,325,000.
In addition, the Company has agreed to issue to the investor five-year
warrants to purchase 16,667 shares of the Company's common stock at a per
share price equal to (120% of the market price on April 8, 1997).
(d) EXEMPTION FROM REGISTRATION CLAIMED. The transaction was not subject to
the registration requirements of Section 5 of the Securities Act of 1933
because of the applicability of Regulation S thereunder.
(e) TERMS OF CONVERSION OR EXERCISE. The Debentures are convertible into the
Company's common stock as described above. All of the Debentures may be
converted after June 23, 1997.
4. SALES OF ADDITIONAL $2,000,000 PURSUANT TO REGULATION D
(a) SECURITIES SOLD. The Company sold an additional $2,000,000 of Debentures
to its Chairman, John S. Rendall, an accredited investor, on April 11,
1997. Mr. Rendall, on that date, CONVERTED A MARCH 1997 LOAN TO THE
COMPANY INTO A DEBENTURE ON THAT DATE.
(b) UNDERWRITERS AND OTHER PURCHASERS. There was no underwriter of this
Debenture.
(c) CONSIDERATION. The aggregate offering price was $2,000,000; because there
was no underwriter, the Company granted Mr. Rendall a 7% discount.
Consequently the investor paid the Company $1,860,000.
In addition, the Company has agreed to issue to the investor five-year
warrants to purchase 13,333 shares of the Company's common stock at a per
share price equal to 120% of the market price on April 11, 1997.
(d) EXEMPTION FROM REGISTRATION CLAIMED. The transaction was not subject to
the registration requirements of Section 5 of the Securities Act of 1933
because of the applicability of Regulation D thereunder.
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(e) TERMS OF CONVERSION OR EXERCISE. The Debentures are convertible into the
Company's common stock as described above. All of the Debentures may be
converted after June 26, 1997.
D. Exhibits
1. Form of Securities Purchase Agreement
2. Form of 5% Convertible Debenture
3. Form of Registration Rights Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 15, 1997 SOLV-EX CORPORATION
(Registrant)
By /s/ Herbert M. Campbell, II
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Herbert M. Campbell, II
Senior Vice President
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EXHIBIT 1
TO FORM 8-K
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of acceptance
set forth below, is entered into by and between SOLV-EX CORPORATION, a New
Mexico corporation, with headquarters located at 500 Marquette NW, Suite 300,
Albuquerque, New Mexico 87102 ("Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded,
INTER ALIA, by Rule 506 under Regulation D ("Regulation D" and/or "Regulation
S") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, 5% Convertible Debentures (the "Debenture"),
of the Company which will be convertible into shares of Common Stock, $.01 par
value per share (the "Common Stock"), of the Company upon the terms and subject
to the conditions of such Debenture (the Common Stock and the Debenture
sometimes referred to herein as the "Securities"), and subject to acceptance of
this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. PURCHASE. The undersigned hereby agrees to initially purchase
from the Company, the Debentures of the Company, in the principal amount set
forth on the signature page of this Agreement, out of a total offering of
$15,000,000 in Debentures as more specifically set forth in PARA4(b), and having
the terms and conditions and being in the form attached hereto as ANNEX I. The
purchase price for the Debenture shall be as set forth on the signature page
hereto and shall be payable in United States Dollars.
b. FORM OF PAYMENT. The Buyer shall pay the purchase price for the
Debenture by delivering immediately available good funds in United States
Dollars to the escrow agent (the "Escrow Agent") identified in the Joint Escrow
Instructions attached hereto as ANNEX
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II (the "Joint Escrow Instructions") as set forth below. Promptly following
payment by the Buyer to the Escrow Agent of the purchase price of the
Debentures, the Company shall deliver the Debenture duly executed on behalf
of the Company to the Escrow Agent. By signing this Agreement, the Buyer and
the Company, and subject to acceptance by the Escrow Agent, each agrees to
all of the terms and conditions of, and becomes a party to, the Joint Escrow
Instructions, all of the provisions of which are incorporated herein by this
reference as if set forth in full.
c. METHOD OF PAYMENT. Payment into escrow of the purchase price for
the Debenture shall be made by wire transfer of funds to:
Bank of New York
350 Fifth Avenue
New York, New York 10001
ABA# ____________
For credit to the account of _____________
Account No. _____________________
Not later than 1:00 p.m., New York time, on the date which is three (3) New York
Stock Exchange trading days after the Company shall have accepted this Agreement
and returned a signed counterpart of this Agreement to the Escrow Agent by
facsimile, the Buyer shall deposit with the Escrow Agent the aggregate purchase
price for the Debenture, in currently available funds. Time is of the essence
with respect to such payment, and failure by the Buyer to make such payment,
shall allow the Company to cancel this Agreement.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock pursuant
to the Registration Statement, the Buyer is purchasing the Debenture and will be
acquiring the shares of Common Stock issuable upon conversion of the Debenture
for its own account for investment only and not with a view towards the public
sale or distribution thereof and not with a view to or for sale in connection
with any distribution thereof;
b. The Buyer is (i) an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), and (ii) experienced in making investments of the kind described
in this Agreement and the related documents, (iii) able, by reason of the
business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the
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Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement,
and the related documents, and (iv) able to afford the entire loss of its
investment in the Securities;
c. All subsequent offers and sales of the Debenture and the shares
of Common Stock issuable upon conversion of, or issued as dividends on, the
Debenture (the "Shares" or "Common Stock" and, together with the Debenture, the
"Securities") by the Buyer shall be made pursuant to registration of the Shares
under the 1933 Act or pursuant to an exemption from registration;
d. The Buyer understands that the Debenture is being offered and
sold, and the Shares are being offered, to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgements and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Debenture and to receive an offer of the Shares;
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Debenture and the offer of the
Shares which have been requested by the Buyer, including ANNEX V hereto. The
Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and have received complete and satisfactory answers to
any such inquiries. Without limiting the generality of the foregoing, the Buyer
has also had the opportunity to obtain and to review the Company's (1) Annual
Report on Form 10-K for the fiscal year ended June 30, 1996, (2) Quarterly
Report on Form 10-Q for the fiscal quarters ended September 30, 1996 and
December 31, 1996, (3) Forms 8-K dated October 4, 1996, November 15, 1996 and
December 4, 1996, and (4) definitive Proxy Statement for the annual meeting of
shareholders held on December 13, 1996 (the "Company's SEC Documents").
f. The Buyer understands that its investment in the Securities
involves a high degree of risk;
g. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities;
h. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
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i. Neither Buyer, nor any affiliate of Buyer, has any present
intention of entering into, any put option, short position, or other similar
position with respect to the Debenture or the Shares.
j. Notwithstanding the provisions hereof or of the Debenture, in no
event (except with respect to an Event of Mandatory Conversion upon the maturity
of the Debenture) shall the holder be entitled to convert any Debenture to the
extent after such conversion, the sum of (1) the number of shares of Common
Stock beneficially owned by the Buyer and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Debenture), and (2) the number of shares of Common
Stock issuable upon the conversion of the Debenture with respect to which the
determination of this proviso is being made, would result in beneficial
ownership by the Buyer and its affiliates of more than 4.9% of the outstanding
shares of Common Stock. For purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13 D-G thereunder, except as otherwise provided in clause (1) of such proviso.
k. Buyer further represents, warrants and covenants to Company as
follows:
(i) Buyer is not a U.S. Person as that term is defined under
Regulation S.
(ii) Buyer is outside the United States as of the date of the
execution and delivery of this Agreement.
(iii) Buyer is purchasing the Debenture for its own account
and not on behalf of any U.S. Person, and Buyer is the
sole beneficial owner of the Debenture, and has not
pre-arranged any sale with any purchaser or purchasers
in the United States.
(iv) Buyer represents and warrants and hereby agrees that all
offers and sales of the Debenture prior to the expiration
of a period commencing on the date of the receipt of funds
by the Company and ending 40 days thereafter (the
"Restricted Period") shall only be made in compliance
with the safe harbor contained in Regulation S, pursuant
to the registration provisions under the 1933 Act or
pursuant to an exemption from registration, and all
offers and sales after the expiration of the 40-day
period shall be made only pursuant to such registration
or to an exemption from registration.
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(v) Buyer understands that the Debenture is being offered and
sold to it in reliance on specific exemptions from the
registration requirements of U.S. securities laws and that
the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and
understandings of Buyer set forth herein in order to
determine the applicability of such exemptions and the
suitability of Buyer to acquire the Debenture, and the
Shares issuable upon conversion thereof. Buyer represents
and warrants that the information contained herein is
complete and accurate. Buyer further represents and
warrants that it will notify the Company immediately upon
the occurrence of any material change therein occurring
prior to the issuance of Shares upon conversion of the
Debenture.
(vi) Buyer understands that in the view of the SEC the statutory
basis for the exemption claimed for this transaction would
not be present if the offering of Debenture, and the Shares
issuable upon conversion thereof, although in technical
compliance with Regulation S, is part of a plan or scheme to
evade the registration provisions of the 1933 Act. Buyer is
acquiring the Debenture for investment purposes and has no
present intention to sell the Debenture, or the Shares
issuable upon conversion thereof, in the United States or to
a U.S. Person or for the account or benefit of a U.S. Person
either now or after the expiration of the Restricted Period.
(vii) Buyer is not an underwriter of, or dealer in, the
Securities, and Buyer is not participating, pursuant to
a contractual agreement, in the distribution of the
Securities.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a. CONCERNING THE SHARES. There are no preemptive rights of any
stockholder of the Company, as such, to acquire the Common Shares.
b. REPORTING COMPANY STATUS. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Mexico. The Company has registered its Common Stock pursuant to Section 12
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Common Stock is listed and traded on the NASDAQ/Small Cap. The Company has
received no notice, either oral or written, with respect to the continued
eligibility of the Common Stock for such listing.
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c. AUTHORIZED SHARES. The Company has sufficient authorized and
unissued Shares as may be reasonably necessary to effect the conversion of the
Debenture. The Common Shares have been duly authorized and, when issued upon
conversion of, or as interest on, the Debenture, will be duly and validly
issued, fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder.
d. SECURITIES PURCHASE AGREEMENT; REGISTRATION RIGHTS AGREEMENT AND
STOCK. This Agreement and the Registration Rights Agreement, the form of which
is attached hereto as ANNEX IV (the "Registration Rights Agreement"), and the
transactions contemplated thereby, have been duly and validly authorized by the
Company, this Agreement has been duly executed and delivered by the Company and
this Agreement is, and the Registration Rights Agreement, when executed and
delivered by the Company, will be, valid and binding agreements of the Company
enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally; and the Debenture will be duly and validly authorized and,
when executed and delivered on behalf of the Company in accordance with this
Agreement, will be a valid and binding obligation of the Company in accordance
with its terms, subject to general principles of equity and to bankruptcy,
insolvency, moratorium, or other similar laws affecting the enforcement of
creditors' rights generally.
e. NON-CONTRAVENTION. The execution and delivery of this Agreement
and the Registration Rights Agreement by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Registration Rights Agreement, and the
Debenture do not and will not conflict with or result in a breach by the Company
of any of the terms or provisions of, or constitute a default under (i) the
articles of incorporation or by-laws of the Company, (ii) any indenture,
mortgage, deed of trust, or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound,
including any listing agreement for the Common Stock except as herein set forth,
(iii) any existing applicable law, rule, or regulation or any applicable decree,
judgment, or (iv) order of any court, United States federal or state regulatory
body, administrative agency, or other governmental body having jurisdiction over
the Company or any of its properties or assets, except such conflict, breach or
default which would not have a material adverse effect on the transactions
contemplated herein. Provided, however, that the Company has advised Buyer that
in the opinion of the Company the Debenture constitutes "contingent
indebtedness" and should not be taken into account for purposes of determining
the ratio set forth in Section 7.8(b) of a Convertible Loan Agreement entered
into in April 1996 between the Company and Phemex Establishment ("Phemex"). In
the event that Phemex should issue or threaten a notice of default based upon
the covenant set forth in the aforesaid Section 7.8(b) and the issue is not
resolved between Phemex and the Company during the thirty (30) day period
provided for curing an event of default, the provisions of 4C of the Debenture
shall apply. Similarly, the provisions of 4C of the Debenture shall apply if
the Debenture or Debentures become a current liability on the Balance Sheet of
the Company and as a result thereof, Phemex alleges an event of default because
the ratio of current assets to current liabilities falls below 1.2 as
contemplated by Section 7.8(a) of the Convertible Loan Agreement.
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f. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the Stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC FILINGS. None of the SEC Filings with the Securities and
Exchange Commission since the filing of the 10-K on June 30, 1996 contained, at
the time they were filed, any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading. Except as set forth on ANNEX V hereto, the Company has
since January 1, 1996 timely filed all requisite forms, reports and exhibits
thereto with the Securities and Exchange Commission.
h. ABSENCE OF CERTAIN CHANGES. Since January 1, 1997, there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, or results of operations
of the Company, except as disclosed in ANNEX V or in the documents referred to
in Section 2(e) hereof.
i. FULL DISCLOSURE. There is no fact known to the Company (other
than general economic conditions known to the public generally) or as disclosed
in the documents referred to in Section 2(e), that has not been disclosed in
writing to the Buyer that (i) could reasonably be expected to have a material
adverse effect on the condition (financial or otherwise) or in the earnings,
business affairs, properties or assets of the Company or (ii) could reasonably
be expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement.
j. ABSENCE OF LITIGATION. Except as set forth in ANNEX V hereto,
and in the documents referred to in Section 2(e), which the Buyer has reviewed,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board or body pending or, to the knowledge of the Company or any
of its subsidiaries, threatened against or affecting the Company or any of its
subsidiaries, wherein an unfavorable decision, ruling or finding would have a
material adverse effect on the properties, business, condition (financial or
other), results of operations or prospects of the Company and its subsidiaries
taken as a whole or the transactions contemplated by this Agreement or any of
the documents contemplated hereby or which would adversely affect the validity
or enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of such other documents.
k. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in ANNEX V
hereto and Section 3(e), no Event of Default, as defined in the respective
agreement to which the Company is a party, and no event which, with the giving
of notice or the passage of time or both, would become an Event of Default (as
so defined), has occurred and is continuing, which would have a material adverse
effect on the Company's financial condition or results of operations.
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l. NO DEFAULT. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it or its property is bound, and
neither the execution, nor the delivery by the Company, nor the performance by
the Company of its obligations under this Agreement or the Debenture, other than
the conversion provision thereof, will conflict with or result in the breach or
violation of any of the terms or provisions of, or constitute a default or
result in the creation or imposition of any lien or charge on any assets or
properties of the Company under, any material indenture, mortgage, deed of trust
or other material agreement applicable to the Company or instrument to which the
Company is a party or by which it is bound or any statute or the Certificate of
Incorporation or By-Laws of the Company, or any decree, judgment, order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or its properties, or the Company's listing agreement for its Common
Stock.
m. PRIOR ISSUES. During the twelve (12) months preceding
the date hereof, the Company has not issued any securities except as set forth
in Exhibit 3(m). The presently outstanding unconverted principal amount of each
such issuance as at __________________ are set forth in Exhibit 3(m).
n. OFFSHORE TRANSACTION. The Company has not offered or sold the
Debenture to any person in the United States, or, to the best knowledge of the
Company, any identifiable groups of U.S. citizens abroad, or any U.S. person as
that term is defined in Regulation S. At the time the buy order for the
Debenture was originated, the Company and/or its agents reasonably believed
Buyer was outside the United States and was not a U.S. Person.
o. NO DIRECTED SELLING EFFORTS. In regard to this transaction, the
Company has not conducted any "direct selling efforts" as that term is defined
in Rule 902 of Regulation S, nor has the Company conducted any general
solicitation relating to the offer and sale of the within securities to persons
resident within the United States or elsewhere.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the
Debenture has not been and is not being registered under the provisions of the
1933 Act and, except as provided in the Registration Rights Agreement, the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term
8
is used in the 1933 Act, may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and
(3) neither the Company nor any other person is under any obligation to
register the Securities (other than pursuant to the Registration Rights
Agreement) under the 1933 Act or to comply with the terms and conditions of
any exemption thereunder.
b. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that the
Debentures, and, until such time as the Common Stock has been registered under
the 1933 Act as contemplated by the Registration Rights Agreement and sold in
accordance with such Registration Statement, the shares of Common Stock issued
to the Holder upon conversion of the Debentures shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of the Debenture and such shares of Common Stock):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED.
c. REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter
into the Registration Rights Agreement, in substantially the form attached
hereto as ANNEX IV, on or before the Closing Date.
d. FILINGS. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Debenture to the Buyer under any
United States laws and regulations, or by any domestic securities exchange or
trading market, and to provide a copy thereof to the Buyer promptly after such
filing.
e. REPORTING STATUS. So long as the Buyer beneficially owns any of
the Debentures, the Company shall file all reports required to be filed with the
SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination.
f. USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Debenture (excluding amounts paid by the Company for legal fees and
finder's fees in connection with the sale of the Debenture) for internal working
capital purposes of Solv-Ex and the Solv-Ex/United Tri-Star Limited Partnership,
and shall not, directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership enterprise or other person.
9
g. CERTAIN AGREEMENTS. The Company covenants and agrees that it
will not, without the prior written consent of the Buyer, (i) enter into any
subsequent or further offer or sale of common stock or securities convertible
into common stock with any third party until the expiration of ninety (90) days
after the effective date of the Registration Statement. . However, clauses
4(g)(i) will not apply to (x) the issuance of securities (other than for cash)
in connection with a merger, consolidation, sale of assets, disposition of a
business, product or license by the Company, strategic alliance, bank loan or
agreement, public offering, securities issued at the then current market price
(as determined in good faith by the Board of Directors), or the exercise of
options, (y) the exchange of the capital stock for assets, stock or other joint
venture interests, or (z) the sale of capital stock, at a sales price in excess
of $20 per share and further provided, that any registration rights in
connection therewith, shall not require the filing of a Registration Statement
in respect of such stock prior to the effective date of the Registration
Statement under the Registration Rights Agreement between the Buyer and Seller.
However, nothing contained herein shall be deemed to preclude the Company from
taking such action as may be reasonably required to cure any alleged default
under agreements to which the Company is or may become a party.
h. OPTION. Notwithstanding Section 4(g), the Buyer agrees to
purchase up to an additional $10,000,000 principal amount of Debentures (the
"Additional Debentures") in two tranches of $5,000,000 each, occurring not later
than the 20th and 40th business day after the Effective Date respectively, upon
the same terms and conditions as those applicable to the Debentures issued
pursuant to this Agreement, (the "Additional Closing Date"). Buyer's obligation
to purchase the Additional Debentures on the Additional Closing Date shall be
contingent upon the satisfaction of the following conditions: On each the
Additional Closing Date (i) the Registration Statement required to be filed
under the Registration Rights Agreement is effective (the "Effective Date"), and
(ii) the representations and warranties of the Company contained in Section 3
are true and correct in all material respects. Each such Debenture shall mature
on the last day of the twenty-fourth month following its issuance, and (iii) the
Market Price (as defined in the Debenture) exceeds $7.00 per share.
i. AVAILABLE SHARES. The Company shall have at all times authorized
and reserved for issuance, free from preemptive rights, shares of Common Stock
sufficient to yield the number of Common Stock issuable at conversion as may be
required to satisfy the conversion rights of the Buyer pursuant to the terms and
conditions of the Debentures.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the aggregate
purchase price for the Debenture in accordance with Section 1(c) hereof, the
Company will irrevocably instruct its transfer agent to issue Common Stock from
time to time upon conversion of the Debenture in such amounts as specified from
time to time by the Company to the transfer agent, bearing the restrictive
legend specified in Section 4(b) of this Agreement prior to registration of the
Shares under the 1933 Act, registered in the name of the Buyer or its nominee
and in such
10
denominations to be specified by the Buyer in connection with each conversion
of the Debenture. The Company warrants that no instruction other than such
instructions referred to in this Section 5 and stop transfer instructions to
give effect to Section 4(a) hereof prior to registration and sale of the
Shares under the 1933 Act will be given by the Company to the transfer agent
and that the Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement, the
Registration Rights Agreement, and applicable law. Nothing in this Section
shall affect in any way the Buyer's obligations and agreement to comply with
all applicable securities laws upon resale of the Securities. If the Buyer
provides the Company with an opinion of counsel reasonably satisfactory to
the Company that registration of a resale by the Buyer of any of the
Securities in accordance with clause (1)(B) of Section 4(a) of this Agreement
is not required under the 1933 Act, the Company shall (except as provided in
clause (2) of Section 4(a) of this Agreement) permit the transfer of the
Securities and, in the case of the Shares, promptly instruct the Company's
transfer agent to issue one or more certificates for Common Stock without
legend in such name and in such denominations as specified by the Buyer.
b. Subject to the completeness and accuracy of the Buyer's
representations and warranties herein, upon the conversion of any Debenture by a
person who is a non-U.S. Person, and following the expiration of any applicable
Restricted Period, the Company, shall, at its expense, take all necessary action
(including the issuance of an opinion of counsel) to assure that the Company's
transfer agent shall issue stock certificates without restrictive legend or stop
orders in the name of Buyer (or its nominee (being a non-U.S. Person) or such
non-U.S. Persons as may be designated by Buyer) and in such denominations to be
specified at conversion representing the number of shares of Common Stock
issuable upon such conversion, as applicable. Nothing in this Section 4,
however, shall affect in any way Buyer's or such nominee's obligations and
agreement to comply with all applicable securities laws upon resale of the
Securities.
c. The Company will permit the Buyer to exercise its right to
convert the Debenture by telecopying an executed and completed Notice of
Conversion to the Company and delivering within three business days thereafter,
the original Notice of Conversion and the Debenture representing the Shares to
the Company by express courier to the Transfer Agent. Each date on which a
Notice of Conversion is telecopied to and received by the Company in accordance
with the provisions hereof shall be deemed a Conversion Date. The Company will
transmit the certificates representing the Shares of Common Stock issuable upon
conversion of any Debenture (together with the Debenture representing the Shares
not so converted) to the Buyer via express courier, by electronic transfer or
otherwise, within three business days after receipt by the Company of the
original Notice of Conversion and the Debenture representing the Shares to be
converted (the "Delivery Date").
11
d. The Company understands that a delay in the issuance of the
Shares of Common Stock beyond the Delivery Date could result in economic loss to
the Buyer. As compensation to the Buyer for such loss, the Company agrees to
pay late payments to the Buyer for late issuance of Shares upon Conversion in
accordance with the following schedule (where "No. Business Days Late" is
defined as the number of business days beyond five (5) business days from
Delivery Date:
Late Payment For Each
$10,000 of Debenture
No. Business Days Late Principal Amount Being Converted
---------------------- --------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit Buyer's right to pursue
actual damages for the Company's failure to issue and deliver Common Stock to
the Buyer. Furthermore, in addition to any other remedies which may be
available to the Buyer, in the event that the Company fails for any reason to
effect delivery of such shares of Common Stock within five business days after
the Delivery Date, the Buyer will be entitled to revoke the relevant Notice of
Conversion by delivering a notice to such effect to the Company whereupon the
Company and the Buyer shall each be restored to their respective positions
immediately prior to delivery of such Notice of Conversion.
6. DELIVERY INSTRUCTIONS.
The Debenture shall be delivered by the Company to the Escrow Agent
pursuant to Section 1(b) hereof, or a delivery against payment basis at the
closing and on each Additional Closing Date.
12
7. CLOSING DATE.
The date and time of the issuance and sale of the Debenture (the
"Closing Date" and "Additional Closing Date") shall occur no later than 12:00
Noon, New York time on the second NYSE trading day after the fulfillment or
waiver of all Closing conditions pursuant to Sections 8 and 9, or such other
mutually agreed to time. The closing shall occur on such date at the offices of
the Escrow Agent. Notwithstanding anything to the contrary contained herein,
the Escrow Agent will be authorized to release the fund representing the
Purchase Price for the Debenture, and the Debenture only upon satisfaction of
the conditions set forth in Section 8 hereof.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the
Debentures on the Closing Date and Additional Closing Date to the Buyer pursuant
to this Agreement is conditioned upon:
a. The receipt and acceptance by the Company of such Agreement as
evidenced by execution of this Agreement by the Company for at least Five
Million ($5,000,000.00) Dollars in Debenture (or such lesser amount as the
Company, in its sole discretion, shall determine);
b. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the purchase price for the Debenture in
accordance with Section 1(c) hereof;
c. The accuracy on the Closing Date and Additional Closing Date of
the representations and warranties of the Buyer contained in this Agreement as
if made on the Closing Date and the performance by the Buyer on or before the
Closing Date and Additional Closing Date of all covenants and agreements of the
Buyer required to be performed on or before the Closing Date and Additional
Closing Date;
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Debentures on the Closing Date and Additional Closing Date is conditioned upon:
a. Acceptance by Buyer of an Agreement for the sale of Debenture, as
indicated by execution of this Agreement;
13
b. Delivery by the Company to the Escrow Agent of the Debenture in
accordance with this Agreement;
c. The accuracy in all material respects on the Closing Date and
Additional Closing Date of the representations and warranties of the Company
contained in this Agreement as if made on the Closing Date and Additional
Closing Date and the performance by the Company on or before the Closing Date
and Additional Closing Date of all covenants and agreements of the Company
required to be performed on or before the Closing Date and Additional Closing
Date; and
d. On the Closing Date and Additional Closing Date, the Buyer having
received an opinion of counsel for the Company, dated the Closing Date and
Additional Closing Date, in form, scope and substance reasonably satisfactory to
the Buyer, to the effect set forth in ANNEX III attached hereto, and the
Registration Rights Agreement annexed hereto as ANNEX IV.
10. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on FORUM NON CONVENIENS, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto. This Agreement may
be signed in one or more counterparts, each of which shall be deemed an
original. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
11. NOTICES. Any notice required or permitted hereunder shall be
given in writing (unless otherwise specified herein) and shall be deemed
effectively given upon, (a) by personal delivery, or (b) if advance copy is
given by fax, upon (i) seven business days after deposit in the United States
Postal Service by regular or certified mail, or (ii) three business days mailing
by international express courier, with postage and fees prepaid, addressed to
each of the other parties thereunto entitled at the following addresses, or at
such other addresses as a party may designate by ten days advance written notice
to each of the other parties hereto.
14
COMPANY: Solv-Ex Corporation
Suite 300
500 Marquette NW
Albuquerque, New Mexico 87102
Telecopier No. (505) 243-7705
with a copy to:
Herrick K. Lidstone, Esq.
Friedlob Sanderson Raskin Paulson & Tourtillott
1400 Glenarm Place, Suite 300
Denver, Colorado 80202
Telecopier No. (303) 595-3159
PURCHASER: At the address set forth on the signature page of this Agreement.
ESCROW AGENT: Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
Telecopier No. (212) 213-2077
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Company's
representations and warranties shall survive the execution and delivery hereof
of this Agreement and the delivery of the Debenture.
15
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer
or one of its officers thereunto duly authorized as of the date set forth below.
AGGREGATE INITIAL PURCHASE PRICE OF SUCH DEBENTURE: $ 5,000,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this ___ day of ____________, 1997.
- ------------------------------ --------------------------------
Address Printed Name of Subscriber
- ------------------------------
By:
--------------------------------
Telecopier No. (Signature of Authorized Person)
----------------
--------------------------------
- ------------------------------ Printed Name and Title
Jurisdiction of Incorporation
or Organization
This Agreement has been accepted as of the date set forth below.
SOLV-EX CORPORATION
By:
------------------------------
Title:
Date:
16
ANNEX I FORM OF DEBENTURE
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III OPINION OF COUNSEL
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V COMPANY DISCLOSURE MATERIALS
Annexes Omitted
EXHIBIT 2
TO FORM 8-K
FORM OF DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE RESTRICTED
AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT IN
ACCORDANCE WITH REGULATION S UNDER THE ACT, OR AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION OR SAFE HARBOR THEREFROM.
No. US $
----------- -----------------
SOLV-EX CORPORATION
5% CONVERTIBLE DEBENTURE DUE March 31, 1999
THIS DEBENTURE is one of a duly authorized issue of $ ___________ in
Debentures of SOLV-EX CORPORATION, a corporation duly organized and existing
under the laws of the State of New Mexico (the "Company") designated as its 5%
Convertible Debenture Due March 31, 1999.
FOR VALUE RECEIVED, the Company promises to pay to ___________________
____, the registered holder hereof (the "Holder"), the principal sum of ____
Million and 00/100 (US $_________) Dollars on March 31, 1999 (the "Maturity
Date") and to pay interest on the principal sum outstanding from time to time in
arrears upon conversion as provided herein on March 31, 1999 at the rate of 5%
per annum accruing from the date of initial issuance (the "Issuance Date"). The
Issuance Date shall be April ___, 1997. Accrual of interest shall commence on
the first such business day to occur after the date hereof until payment in full
of the principal sum has been made or duly provided for. Subject to the
provisions of PARA4 below, the principal of, and interest on, this Debenture are
payable at the option of the Holder, in shares of Common Stock of the Company,
$.001 par value ("Common Stock"), or in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts, at the address last appearing on the Debenture
Register of the Company as designated in writing by the Holder from time to
time. The Company will pay the principal of and interest upon this
Debenture on the Maturity Date, less any amounts required by law to be
deducted, to the registered holder of this Debenture as of the tenth day
prior to the Maturity Date and addressed to such holder as the last address
appearing on the Debenture Register. The forwarding of such check shall
constitute a payment of principal and interest hereunder and shall satisfy
and discharge the liability for principal and interest on this Debenture to
the extent of the sum represented by such check plus any amounts so deducted.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of One Hundred Thousand
Dollars (US$100,000) and integral multiples thereof. The Debentures are
exchangeable for an equal aggregate principal amount of Debentures of different
authorized denominations, as requested by the Holders surrendering the same. No
service charge will be made for such registration or transfer or exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment representations
of the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws. In the event of any proposed
transfer of this Debenture, the Company may require, prior to issuance of a new
Debenture in the name of such other person, that it receive reasonable transfer
documentation including opinions that the issuance of the Debenture in such
other name does not and will not cause a violation of the Act or any applicable
state or foreign securities laws. Prior to due presentment for transfer of
this Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture be overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.
4. A. Subject to Section 4B, the Holder of this Debenture is entitled,
at its option, to convert at any time commencing the earlier of (a) (i) ninety
(90) days after the Issuance Date of the Debenture with respect to one-half of
the principal amount of this Debenture, and (ii) one hundred twenty (120) days
after the Issuance Date of the Debentures with respect to the balance of the
principal amount of this Debenture, or (b) the effective date of the
Registration Statement filed pursuant to the Registration Rights Agreement
between the Company and the Holder, or the Holder's predecessor in interest, the
principal amount of this Debenture, provided that the principal amount is at
least US
$10,000 (unless if at the time of such election to convert the aggregate
principal amount of all Debentures registered to the Holder is less that Ten
Thousand Dollars (US $10,000), then the whole amount thereof) into shares of
Common Stock of the Company at a conversion price for each share of Common
Stock equal to the lesser of (a) 120% of the Market Price on the Issuance
Date, or (b) 80% of the Market Price on the Conversion Date. For purposes of
this Section 4, the Market Price shall be the average closing bid price of
the Common Stock on the five (5) trading days immediately preceding the
Issuance Date or Conversion Date, as may be applicable, as reported by the
National Association of Securities Dealers, or the closing bid price on the
over-the-counter market on such date or, in the event the Common Stock is
listed on a stock exchange, the Market Price shall be the closing price on
the exchange on such date, as reported in the Wall Street Journal.
Conversion shall be effectuated by surrendering the Debentures to be
converted to the Company with the form of conversion notice attached hereto
as Exhibit A, executed by the Holder of the Debenture evidencing such
Holder's intention to convert this Debenture or a specified portion (as above
provided) hereof, and accompanied, if required by the Company, by proper
assignment hereof in blank. Interest accrued or accruing from the date of
issuance to the date of conversion shall, at the option of the Holder, be
paid in cash or Common Stock upon conversion at the Conversion Rate. No
fraction of Shares or scrip representing fractions of shares will be issued
on conversion, but the number of shares issuable shall be rounded to the
nearest whole share. The date on which notice of conversion is given (the
"Conversion Date") shall be deemed to be the date on which the Holder has
delivered this Debenture, with the conversion notice duly executed, to the
Company or, the date set forth in such facsimile delivery of the notice of
conversion if the Debenture is received by the Company within three (3)
business days therefrom. Facsimile delivery of the conversion notice shall
be accepted by the Company at telephone number (505-243-7701); ATT: H. M.
Campbell). Certificates representing Common Stock upon conversion will be
delivered within three (3) business days from the date the notice of
conversion with the original Debenture is delivered to the Company.
B. (i) The Company shall have the right to redeem any Debentures for
which a Notice of Conversion has not theretofore been submitted
by delivering a Notice of Redemption to the Holder of the
Debenture.
(ii) The redemption price shall be calculated at 125% of the principal
amount of the Debenture, plus accrued and unpaid interest, and
shall be paid to the Holder within ten (10) days from the date of
the Notice of Redemption, except with respect to any Debentures
for which a Notice of Conversion is submitted to the Company,
within five (5) business days of the Holder's receipt of the
Company's Notice of Redemption. Furthermore, in the event such
payment is not timely made, any rights of the Company to redeem
the Debenture shall terminate, and the Notice of Redemption shall
be null and void.
C. The Company shall have the right to require, by written notice to the
Holder of this Debenture, that the Holder of this Debenture exercise its right
of conversion with respect to all or that portion of the principal amount to the
extent required to remedy any alleged default under Section 7.8 of its
Convertible Loan Agreement with Phemex Establishment which requires the Company
to maintain the following ratios:
"(a) Current assets divided by current liabilities (as reflected in
the financial statements contained in any report filed with the
Securities and Exchange Commission) shall be not less than 1.2
"(b) Net Worth (shareholders equity) divided by total indebtedness
(not including contingent indebtedness) (as reflected in the
financial statements contained in any report filed with the
Securities and Exchange Commission) shall not be less than 1."
Any such notice from the Company shall include a copy of any such notice of
alleged default. In such event, the following provision shall apply:
In the event a registration statement under the Securities Act of
1933 (the "Act") for the underlying shares has not become
effective or resale of the underlying shares is not otherwise
exempt from the registration requirements of the Act, the number
of shares issued to the Holder (and subject to the registration
statement) shall be increased, if necessary, to reflect any
decline in the Market Price from the date of forced conversion
until the registration statement becomes effective plus any
Interest which would have otherwise accrued during such period on
the principal amount subject to such forced conversion.
5. No provision of this Debenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of, and
interest on, this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture and all other Debentures now or
hereafter issued of similar terms are direct obligations of the Company.
6. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
7. If the Company merges or consolidates with another corporation or
sells or transfers all or substantially all of its assets to another person and
the holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any proposed
merger, consolidation or sale or transfer of all or substantially all of the
assets of the Company (a "Sale"), the Holder hereof shall have the right to
convert by delivering a Notice of Conversion to the Company within fifteen (15)
days of receipt of notice of such Sale from the Company. In the event the
Holder hereof shall elect not to convert, the Company may prepay all outstanding
principal and accrued interest on this Debenture, less all amounts required by
law to be deducted, upon which tender of payment following such notice, the
right of conversion shall terminate.
8. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
9. This Debenture shall be governed by and construed in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
10. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or interest
on this Debenture; or
b. Any of the representations or warranties made by the Company
herein, in the Subscription Agreement, or in any certificate or
financial or other written statements heretofore or hereafter
furnished by the Company in connection with the execution and
delivery of this Debenture or the Subscription Agreement shall be
false or misleading in any material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the Holder
or to cause its Transfer Agent to issue shares of Common Stock
upon exercise by the Holder of the conversion rights of the
Holder in accordance with the terms of this Debenture, fails to
transfer or to cause its Transfer Agent to transfer any
certificate for shares of Common Stock issued to the Holder upon
conversion of this Debenture and when required by this Debenture
or the Registration Rights Agreement, or fails to remove any
restrictive legend or to cause its Transfer Agent to transfer on
any certificate or any shares of Common Stock issued to the
Holder upon conversion of this Debenture as and when required by
this Debenture, the Agreement or the Registration Rights
Agreement and any such failure shall continue uncured for five
(5) business days.
d. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition,
agreement or obligation of the Company under this Debenture and
such failure shall continue uncured for a period of thirty (30)
days after written notice from the Holder of such failure; or
e. The Company shall (1) admit in writing its inability to pay its
debts generally as they mature; (2) make an assignment for the
benefit of creditors or commence proceedings for its dissolution;
or (3) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its
property or business; or
f. A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business
without its consent and shall not be discharged within sixty (60)
days after such appointment; or
g. Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties
or assets of the Company and shall not be dismissed within sixty
(60) days thereafter; or
h. Any money judgment, writ or warrant of attachment, or similar
process in excess of Two Hundred Thousand ($200,000) Dollars in
the aggregate shall be entered or filed against the Company or
any
of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of sixty(60) days or
in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
i. Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against
the Company and, if instituted against the Company, shall not be
dismissed within sixty (60) days after such institution or the
Company shall by any action or answer approve of, consent to, or
acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any
such proceeding; or
j. The Company shall have its Common Stock suspended or delisted
from an exchange or over-the-counter market from trading for in
excess of two trading days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kinds, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
11. Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: __________________, 1997
SOLV-EX CORPORATION
By:
------------------------------------
------------------------------------
(Print Name)
------------------------------------
(Title)
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ ________________ of
the principal amount of the above Debenture No. ___ into Shares of Common Stock
of SOLV-EX CORPORATION (the "Company") according to the conditions hereof, as of
the date written below.
Date of Conversion*
- -------------------------------------------------------------------------
Applicable Conversion Price
- -------------------------------------------------------------------------
Signature
- -------------------------------------------------------------------------
[Name]
Address:
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
* This original Debenture and Notice of Conversion must be received by the
Company by the third business date following the Date of Conversion.
EXHIBIT 3
TO FORM 8-K
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of _______________ (this
"Agreement"), is made by and between SOLV-EX CORPORATION, a New Mexico
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of ____________________, between the
Initial Investor and the Company (the "Securities Purchase Agreement"), the
Company has agreed to issue and sell to the Initial Investor 5% Convertible
Debentures of the Company and a commitment to acquire an additional $10,000,000
in two tranches of $5,000,000 each in Debentures (said principal amount of
$15,000,000 collectively the "Debentures") which will be convertible into shares
of the common stock, $.01 par value (the "Common Stock"), of the Company (the
"Conversion Shares") upon the terms and subject to the conditions of such
Debentures; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agrees as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investor" means the Initial Investor and any transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for
offering securities on a continuous basis ("Rule 415"), and the declaration
or ordering of effectiveness of such Registration Statement by the United
States Securities and Exchange Commission (the "SEC").
(iii) "Registrable Securities" means the Conversion Shares.
(iv) "Registration Statement" means a registration statement of the
Company under the Securities Act.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted transferee
or assignee of the Registrable Securities pursuant to Section 9 of this
Agreement.
(c) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company shall prepare and file with
the SEC, no later than fifteen (15) days after the Closing Date, either a
Registration Statement on Form S-3 covering a sufficient number of shares of
Common Stock for the Initial Investors (or such lesser number as may be required
by the SEC, but in no event less than the number of shares into which the
Debenture would be convertible at the time of filing of the Form S-3, or an
amendment to any pending Company Registration Statement on Form S-3, and such
Registration Statement or amended Registration Statement shall state that, in
accordance with Rule 416 and 457 under the Securities Act, it also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Debenture resulting from adjustment in the Conversion
Price, or to prevent dilution resulting from stock splits, or stock dividends).
If at any time the number of shares of Common Stock into which the Debenture may
be converted exceeds the aggregate number of shares of Common Stock then
registered, the Company shall, within ten (10) business days after receipt of a
written notice from any Investor, either (i) amend the Registration Statement
filed by the Company pursuant to the preceding sentence, if such Registration
Statement has not been declared effective by the SEC at that time, to register
all shares of Common Stock into which the Debenture may be converted, or (ii) if
such Registration Statement has been declared effective by the SEC at that time,
file with the SEC an additional Registration Statement on Form S-3 to register
the shares of Common Stock into which the Debenture may be converted that exceed
the aggregate number of shares of Common Stock already registered.
(b) UNDERWRITTEN OFFERING. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors acting by majority in interest of the Registrable
aSecurities subject to such underwritten offering shall have the right to select
one legal counsel to represent their interests, and an investment banker or
bankers and manager or managers to administer the offering, which investment
banker or
2
bankers or manager or managers shall be reasonably satisfactory to the
Company. The Investors who hold the Registrable Securities to be included in
such underwriting shall pay all underwriting discounts and commissions and other
fees and expenses of such investment banker or bankers and manager or managers
so selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Securities under federal or state
securities laws, which are payable by the Company pursuant to Section 5 hereof)
with respect to their Registrable Securities and the fees and expenses of such
legal counsel so selected by the Investors.
(c) PAYMENTS BY THE COMPANY. If the Registration Statement covering
the Registrable Securities required to be filed by the Company pursuant to
Section 2(a) hereof is not effective within seventy-five (75) days after the
Closing Date (the "Initial Date"), then the Company will make payments to the
Initial Investor in such amounts and at such times as shall be determined
pursuant to this Section 2(c). The amount to be paid by the Company to the
Initial Investor shall be determined as of each Computation Date, and such
amount shall be equal to two and one-half (2-1/2%) percent of the purchase price
paid by the Initial Investor for the Debenture pursuant to the Securities
Purchase Agreement for any period from the Initial Date to the first Computation
Date, and three (3%) percent of the purchase price for any period to each
Computation Date thereafter, to the date the Registration Statement is declared
effective by the SEC (the "Periodic Amount"). The full Periodic Amount shall be
paid by the Company in immediately available funds within three business days
after each Computation Date. Notwithstanding the foregoing, the amounts payable
by the Company pursuant to this provision shall not be payable to the extent any
delay in the effectiveness of the Registration Statement occurs because of an
act of, or a failure to act or to act timely by the Initial Investor or its
counsel, or in the event all of the Registrable Securities may be sold pursuant
to Rule 144 or another available exemption under the Act.
As used in this Section 2(c), the following terms shall have the
following meanings:
"Computation Date" means the date which is the earlier of (a) 35 days
after the Company is notified by the SEC that the Registration Statement may be
declared effective or (b) one hundred five (105) days after the Closing Date
and, if the Registration Statement required to be filed by the Company pursuant
to Section 2(a) has not theretofore been declared effective by the SEC, each
date which is thirty (30) days after the previous Computation Date until such
Registration Statement is so declared effective.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration
of the Registrable Securities, the Company shall do each of the following.
(a) Prepare promptly, and file with the SEC within fifteen (15) days
of the Closing Date, a Registration Statement with respect to not less than the
number of Registrable Securities provided in Section 2(a), above, and thereafter
use its best efforts to cause each Registration Statement relating to
Registrable Securities to become effective on the earlier of (i)
3
five days afternotice from the Securities and Exchange Commission that the
Registration Statement may be declared effective, or (b) seventy-five (75)
days after the Closing Date, and keep the Registration Statement effective at
all times until the earliest (the "Registration Period") of (i) the date that
is two years after the Closing Date (ii) the date when the Investors may sell
all Registrable Securities under Rule 144 or (iii) the date the Investors no
longer own any of the Registrable Securities, which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading;
(b) Prepare and file with the SEC such amendments (including post-
effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel identified to the
Company, (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one (1) copy of the Registration
Statement, each preliminary prospectus and prospectus, and each amendment or
supplement thereto, and (ii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) Use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or blue sky laws of such jurisdictions as the Investors who hold a
majority in interest of the Registrable Securities being offered reasonably
request and in which significant volumes of shares of Common Stock are traded,
(ii) prepare and file in those jurisdictions such amendments (including post-
effective amendments) and supplements to such registrations and qualifications
as may be necessary to maintain the effectiveness thereof at all times during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
PROVIDED, HOWEVER, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction,
(C) file a general consent to service of process in any such jurisdiction, (D)
provide any undertakings that cause more than nominal expense or burden to the
Company or (E) make any change in its articles of
4
incorporation or by-laws, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and
its stockholders;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of a Notice of Effectiveness or any notice of effectiveness or any stop
order or other suspension of the effectiveness of the Registration Statement at
the earliest possible time;
(g) Use its commercially reasonable efforts, if eligible, either to
(i) cause all the Registrable Securities covered by the Registration Statement
to be listed on a national securities exchange and on each additional national
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation of all the Registrable Securities covered by the Registration
Statement as a National Association of Securities Dealers Automated Quotations
System ("NASDAQ") "Small Capitalization" within the meaning of Rule 11Aa2-1 of
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the quotation of the Registrable Securities on the NASDAQ Small Cap
Market; or if, despite the Company's commercially reasonable efforts to satisfy
the preceding clause (i) or (ii), the Company is unsuccessful in doing so, to
secure NASDAQ authorization and quotation for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. ("NASD") as such with respect to such Registrable Securities;
(h) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities
being offered to facilitate the timely preparation and delivery of certificates
for the Registrable Securities to be offered pursuant to the Registration
Statement and enable such certificates for the Registrable Securities to be in
such denominations or amounts as the case may be, as the Investors may
reasonably request and registered in such names as the Investors may request;
and, within three (3) business days after a Registration Statement which
includes Registrable Securities is ordered
5
effective by the SEC, the Company shall deliver, and shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an appropriate
instruction and opinion of such counsel; and
(j) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant
to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. At
least five (5) days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than
underwriting discounts and commissions incurred in connection with
registrations, filings or
6
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printers and accounting fees,
the fees and disbursements of counsel for the Company and a fee for a single
counsel for the Investor not exceeding $3,500, shall be borne by the Company.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person"), against any
losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus if
used prior to the effective date of such Registration Statement, or contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). The Company shall reimburse the Investors,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a) shall not (I) apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(b)
hereof; (II) with respect to any preliminary prospectus, inure to the benefit of
any such person from whom the person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus, as
then amended or supplemented, if such prospectus was timely made available by
the Company pursuant to Section 3(b) hereof; (III) be available
7
to the extent such Claim is based on a failure of the Investor to deliver or
cause to be delivered the prospectus made available by the Company; or (IV)
apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent
shall not be unreasonably withheld. Each Investor will indemnify the Company
and its officers, directors and agents against any claims arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company, by or on behalf of such
Investor, expressly for use in connection with the preparation of the
Registration Statement, subject to such limitations and conditions as are
applicable to the Indemnification provided by the Company to this Section 6.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors pursuant
to Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; PROVIDED, HOWEVER, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the reasonable fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; PROVIDED, HOWEVER, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of Registrable
Securities guilty of fraudulent
8
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of such fraudulent misrepresentation; and (c) contribution
by any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to
the Investors the benefits of Rule 144 promulgated under the Securities Act or
any other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities (or all or any portion of any Debenture of the Company which is
convertible into such securities) only if: (a) the Investor agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (b) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (i) the name and address of such
transferee or assignee and (ii) the securities with respect to which such
registration rights are being transferred or assigned, (c) immediately following
such transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, and (d) at or before the time the Company received the
written notice contemplated by clause (b) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein. In the event of any delay in filing or effectiveness of the
Registration Statement as a result of such assignment, the Company shall not be
liable for any damages arising from such delay, or the payments set forth in
Section 2(c) hereof.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company
9
and Investors who hold a majority in interest of the Registrable Securities.
Any amendment or waiver effected in accordance with this Section 10 shall be
binding upon each Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission, receipt
confirmed, or other means) or sent by certified mail, return receipt requested,
properly addressed and with proper postage pre-paid (i) if to the Company, at
Suite 300, 500 Marquette N.W., Albuquerque, New Mexico 87102, ATT:
__________________, with a copy to Herrick K. Lidstone, Jr., Esq., Friedlob
Sanderson Raskin Paulson & Tourtillott, LLC, 1400 Glenarm Place, Suite 300,
Denver, Colorado 80202 (ii) if to the Initial Investor, at the address set
forth under its name in the Securities Purchase Agreement, with a copy to Samuel
Krieger, Esq., Krieger & Prager, 319 Fifth Avenue, Third Floor, New York, NY
10016 and (iii) if to any other Investor, at such address as such Investor shall
have provided in writing to the Company, or at such other address as each such
party furnishes by notice given in accordance with this Section 11(b), and shall
be effective, when personally delivered, upon receipt and, when so sent by
certified mail, four (4) calendar days after deposit with the United states
Postal Service.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on FORUM NON COVENIENS, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto. This Agreement may
be signed in one or more counterparts, each of which shall be deemed an
original. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This
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Agreement may be amended only by an instrument in writing signed by the party
to be charged with enforcement. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof.
(e) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
SOLV-EX CORPORATION
By:
---------------------------------------
Name:
Title:
[INITIAL INVESTOR]
By:
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Name:
Title:
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