Exhibit 10.1
STANDBY EQUITY DISTRIBUTION AGREEMENT
          THIS AGREEMENT dated as of January 20, 2011 (this “Agreement”) between
YA GLOBAL MASTER SPV LTD., a Cayman Islands exempt limited partnership (the
“Investor”), and ALON USA ENERGY, INC. a corporation organized and existing
under the laws of the State of Delaware (the “Company”).
          WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase from the
Company up to $25,000,000 of the Company’s common stock, par value $0.01 per
share (the “Common Stock”); and
          WHEREAS, the offer and sale of the shares of Common Stock issuable
hereunder have been registered by the Company in accordance with the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder
(the “Securities Act”), on a registration statement on Form S-3.
          NOW, THEREFORE, the parties hereto agree as follows:
Article I. Certain Definitions
Section 1.01 “Advance” shall mean the portion of the Commitment Amount requested
by the Company in the Advance Notice.
Section 1.02 “Advance Date” shall mean the 1st Trading Day after expiration of
the applicable Pricing Period for each Advance.
Section 1.03 “Advance Notice” shall mean a written notice in the form of Exhibit
A attached hereto to the Investor executed by an officer of the Company and
setting forth the Advance amount that the Company requests from the Investor.
Section 1.04 “Advance Notice Date” shall mean each date the Company delivers (in
accordance with Section 2.01(b) of this Agreement) to the Investor an Advance
Notice requiring the Investor to advance funds to the Company, subject to the
terms of this Agreement.
Section 1.05 “Base Prospectus” shall mean the Company’s prospectus accompanying
the Registration Statement.
Section 1.06 “Affiliate” shall have the meaning set forth in Section 3.07.
Section 1.07 “By-laws” shall have the meaning set forth in Section 4.03.
Section 1.08 “Certificate of Incorporation” shall have the meaning set forth in
Section 4.03.
Section 1.09 “Closing” shall mean one of the closings of a purchase and sale of
Common Stock pursuant to Section 2.02.

 

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Section 1.10 “Closing Price” means, for any Trading Day, the last trade of the
Common Stock for such date on the Principal Market as reported by Bloomberg L.P.
Section 1.11 “Commitment Amount” shall mean the aggregate amount of up to
$23,500,000 (which may be increased to up to $25,000,000 by written notice from
the Company to the Investor, provided that at the time of such notice, the
Company’s Registration Statement allows for the offering of the additional
$1,500,000 of shares of Common Stock) which the Investor has agreed to provide
to the Company in order to purchase the Shares pursuant to the terms and
conditions of this Agreement; provided that, the Company shall not effect any
sales under this Agreement and the Investor shall not have the obligation to
purchase shares of Common Stock under this Agreement to the extent that after
giving effect to such purchase and sale the aggregate number of shares of Common
Stock issued under this Agreement would exceed 19.9% of the outstanding shares
of Common Stock as of the date of this Agreement except that such limitation
shall not apply in the event that the Company (i) obtains the approval of its
stockholders as required by the applicable rules of the New York Stock Exchange
for issuances of Common Stock in excess of such amount or (ii) obtains a written
opinion from outside counsel to the Company that such approval is not required,
which opinion shall be reasonably satisfactory to the Investor.
Section 1.12 “Commitment Fee” shall have the meaning set forth in 12.06(a).
Section 1.13 “Commitment Period” shall mean the period commencing on the
Effective Date, and expiring upon the termination of this Agreement in
accordance with Section 10.02.
Section 1.14 “Commitment Shares” shall have the meaning set forth in
Section 12.04.
Section 1.15 “Common Stock” shall have the meaning set forth in the recitals of
this Agreement.
Section 1.16 “Company Indemnitees” shall have the meaning set forth in
Section 5.02.
Section 1.17 “Condition Satisfaction Date” shall have the meaning set forth in
Section 7.01.
Section 1.18 “Consolidation Event” shall have the meaning set forth in
Section 6.06.
Section 1.19 “Damages” shall mean any loss, claim, damage, liability, costs and
expenses (including, without limitation, reasonable attorney’s fees and
disbursements and costs and expenses of expert witnesses and investigation).
Section 1.20 “Effective Date” shall mean the date hereof.
Section 1.21 “Environmental Laws” shall have the meaning set forth in
Section 4.10.
Section 1.22 “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
Section 1.23 “Indemnified Liabilities” shall have the meaning set forth in
Section 5.01.

 

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Section 1.24 “Investor Indemnitees” shall have the meaning set forth in
Section 5.01.
Section 1.25 “Market Price” shall mean the lowest daily VWAP of the Common Stock
during the relevant Pricing Period which is greater than or equal to the Minimum
Acceptable Price.
Section 1.26 “Material Adverse Effect” shall mean any condition, circumstance,
or situation that has resulted in, or would reasonably be expected to result in
(i) a material adverse effect on the legality, validity or enforceability of
this Agreement or the transactions contemplated herein, (ii) a material adverse
effect on the results of operations, assets, business or condition (financial or
otherwise) of the Company, taken as a whole, or (iii) a material adverse effect
on the Company’s ability to perform in any material respect on a timely basis
its obligations under this Agreement.
Section 1.27 “Maximum Advance Amount” shall be $1,000,000, or such other amount
as may be agreed upon with the mutual consent of the parties.
Section 1.28 “Minimum Acceptable Price” or “MAP” shall have the meaning set
forth in Section 2.01(c).
Section 1.29 “Overallotment Notice” shall have the meaning set forth in Section
2.01(b).
Section 1.30 “Ownership Limitation” shall have the meaning set forth in Section
2.01(a).
Section 1.31 “Person” shall mean an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
Section 1.32 “Plan of Distribution” shall have the meaning set forth in
Section 6.01.
Section 1.33 “Pricing Period” shall mean the 5 consecutive Trading Days after
the Advance Notice Date, subject to the Minimum Acceptable Price limitation.
Section 1.34 “Principal Market” shall mean the New York Stock Exchange, the
Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital
Market, the OTC Bulletin Board, or the NYSE Euronext, whichever is at the time
the principal trading exchange or market for the Common Stock.
Section 1.35 “Prospectus” shall mean the Base Prospectus, as supplemented by any
Prospectus Supplement.
Section 1.36 “Prospectus Supplement” shall mean any prospectus supplement to the
Base Prospectus filed with the SEC pursuant to Rule 424(b) under the Securities
Act.
Section 1.37 “Purchase Price” shall be set at 98.5% of the Market Price during
the Pricing Period.
Section 1.38 “Registration Statement” shall mean the Company’s shelf
registration statement filed with the SEC under the Securities Act on Form S-3
(Registration Number 333-171111) (or

 

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another registration statement on a form promulgated by the SEC for which the
Company then qualifies and which form shall be available for the registration of
the offer and sale of the Shares) with respect to Shares to be offered and sold
by the Company, as such Registration Statement may be amended and supplemented
from time to time and including any information deemed to be a part thereof
pursuant to Rule 430B under the Securities Act and any successor registration
statement filed by the Company with the SEC under the Securities Act on a form
promulgated by the SEC for which the Company then qualifies and which form shall
be available for the registration of the sale of Shares to the Investor.
Section 1.39 “SEC” shall have the meaning set forth in the recitals of this
Agreement.
Section 1.40 “SEC Documents” shall have the meaning set forth in Section 4.05.
Section 1.41 “Securities Act” shall have the meaning set forth in the recitals
of this Agreement.
Section 1.42 “Settlement Document” shall have the meaning set forth in
Section 2.02(a).
Section 1.43 “Shares” shall mean the shares of Common Stock to be issued from
time to time hereunder pursuant to Advances and the Commitment Shares.
Section 1.44 “Trading Day” shall mean any day during which the Principal Market
shall be open for business.
Section 1.45 “VWAP” means, for any Trading Day, the daily volume weighted
average price of the Common Stock for such date on the Principal Market as
reported by Bloomberg L.P. (based on a Trading Day from 9:00 a.m. (New York City
time) to 4:02 p.m. (New York City time)).
Article II. Advances
Section 2.01 Advances; Mechanics. Subject to the terms and conditions of this
Agreement (including, without limitation, the provisions of Article VII hereof),
the Company, at its sole and exclusive option, may issue and sell to the
Investor, and the Investor shall purchase from the Company, shares of Common
Stock on the following terms:

  (a)   Advance Notice. At any time during the Commitment Period, the Company
may require the Investor to purchase shares of Common Stock by delivering an
Advance Notice to the Investor, subject to the conditions set forth in
Section 7.01; provided, however, that (i) the amount for each Advance as
designated by the Company in the applicable Advance Notice shall not be more
than the Maximum Advance Amount, (ii) the aggregate amount of the Advances
(including any additional amounts sold pursuant to an Overallotment Notice)
pursuant to this Agreement shall not exceed the Commitment Amount, and (iii) in
no event shall the number of shares of Common Stock issuable to the Investor
pursuant to an Advance (including any additional amounts sold pursuant to an
Overallotment Notice) cause the aggregate number of shares of Common Stock
beneficially owned (as calculated pursuant to Section 13(d) of the Exchange Act)
by the Investor and its affiliates to exceed 4.99% of the then outstanding
Common Stock (the “Ownership

 

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      Limitation”). Notwithstanding any other provision in this Agreement, the
Company and the Investor acknowledge and agree that upon the Investor’s receipt
of a valid Advance Notice, and, if applicable, upon the Investor’s receipt of a
valid Overallotment Notice, the parties shall be deemed to have entered into an
unconditional contract binding on both parties for the purchase and sale of
Shares pursuant to such Advance Notice or Overallotment Notice in accordance
with the terms of this Agreement; provided that the Company shall have the right
to change the Minimum Acceptable Price during the Pricing Period, subject to
Section 2.01(c).

  (b)   Overallotment Notice. If the Closing Price of the Common Stock on the
last day of the Pricing Period is greater than both (i) the arithmetic average
of the daily VWAPs for the each day of the Pricing Period that is not an
Excluded Day and other than the last day in the Pricing Period, and (ii) the
Closing Price for the 4th day of the Pricing Period, and provided that the 4th
day of the Pricing Period is not an Excluded Day, then the Company shall have
the option, exercisable no later than noon Eastern Time on the Business Day
immediately following the last day of such Pricing Period, by providing notice
to the Investor (an “Overallotment Notice”), to elect to sell up to an
additional 50% of the number of shares of Common Stock purchased by the Investor
pursuant to the Advance related to such Pricing Period and set forth in the
Settlement Document at a price per share equal to the Purchase Price.

  (c)   Minimum Acceptable Price.

  (i)   In relation to each Advance, the Company can set a minimum acceptable
price at which it is willing to sell its shares to the Investor by
(x) indicating a minimum acceptable price on the space provided on the Advance
Notice (the “Initial MAP”), and/or (y) changing the Initial MAP, or if no
Initial MAP was set, adding a minimum acceptable price, at any time during a
Pricing Period, by providing notice to the Investor (a “MAP Change Notice”)
setting forth a subsequent minimum acceptable price (the “Subsequent MAP” and
each of the Initial MAP and the Subsequent MAP a “MAP” or “Minimum Acceptable
Price”). Any Subsequent MAP shall take effect beginning on the Trading Day
immediately following the day that the MAP Change Notice was received by the
Investor. With respect to an Advance Notice issued by the Company with a MAP
(including a Subsequent MAP), (A) the amount of the Advance set forth in such
Advance Notice shall automatically be reduced by 20% for each Trading Day during
the Pricing Period that the VWAP of the Common Stock is below the MAP in effect
on such Trading Day (each such day, an “Excluded Day”), and (B) each Excluded
Day shall be excluded from the Pricing Period for purposes of determining the
Market Price.

  (ii)   The number of Shares to be issued and delivered to the Investor at each
Closing (in accordance with Section 2.02 of this Agreement) with respect to an
Advance Notice with a MAP shall be determined based on the Advance Notice amount
as reduced pursuant to Section 2.01(c)(i)(A) above, provided however, with
respect to each Excluded Day the Investor shall purchase and the Company shall
sell Shares (in a total amount for each Excluded Day not to exceed 20% of the
amount of the Advance set forth in such Advance Notice) in an amount equal to
(y) the number of Shares sold by

 

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      the Investor on such Excluded Day, and (z) the number of additional Shares
that the Investor may elect to purchase provided the Investor notifies the
Company of any such election before 4:15 p.m. Eastern Time on the Trading Day
immediately following such Excluded Day, in each case at a price per share equal
to the MAP in effect on such Excluded Day (without any further discount).

  (d)   Date of Delivery of Advance Notice. Advance Notices shall be delivered
in accordance with the instructions set forth on the bottom of Exhibit A. An
Advance Notice shall be deemed delivered on (i) the Trading Day if it is
received by facsimile or otherwise by the Investor prior to 7:00 pm Eastern
Time, or (ii) the immediately succeeding Trading Day if it is received by
facsimile or otherwise after 7:00 pm Eastern Time on a Trading Day or at any
time on a day which is not a Trading Day. No Advance Notice may be deemed
delivered on a day that is not a Trading Day.     (e)   Ownership Limitation;
Commitment Amount. In connection with each Advance Notice delivered by the
Company, any portion of an Advance (including any additional amounts sold
pursuant to an Overallotment Notice) that would (i) cause the Investor to exceed
the Ownership Limitation or (ii) cause the aggregate amount of Advances
(including any additional amounts sold pursuant to an Overallotment Notice)
shall automatically be withdrawn and Investor shall notify the Company within 1
Trading Day after each Advance Notice Date of the amount of such withdrawn
portion of an Advance, if applicable.     (f)   Registration Limitation. In
connection with each Advance Notice, any portion of an Advance (including any
additional amounts sold pursuant to an Overallotment Notice) that would cause
the aggregate offering price or number of Shares, as the case may be, to exceed
the aggregate offering price or number of shares of Common Stock available for
issuance and sale under the Registration Statement shall automatically be deemed
to be withdrawn by the Company with no further action required by the Company.  
  (g)   Sales Notice. The Investor shall (i) provide the Company with a report
attached to each Settlement Document detailing the total number of shares of
Common Stock sold by the Investor on each day during the Pricing Period and
(ii) upon request by the Company (A) provide the Company a report of its sales
on a any particular day during the Pricing Period and (B) provide the Company a
report which shall include the number of shares of the Company’s Common Stock
sold by the Investor between the last such report and the date of the request
and the number of shares of the Company’s common stock held by the Investor at
such time.

Section 2.02 Closings. Each Closing shall take place as soon as practicable
after each Advance Date in accordance with the procedures set forth below. In
connection with each Closing the Company and the Investor shall fulfill each of
its obligations as set forth below:

  (a)   On each Advance Date, the Investor shall deliver to the Company a
written document (each a “Settlement Document”) setting forth the amount of the
Advance (taking into account any adjustments pursuant to Section 2.01), the
Purchase Price, the number of shares of Common Stock to be issued and subscribed
for (which in no event will be

 

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      greater than the Ownership Limitation), and a report by Bloomberg, LP
indicating the VWAP for each of the Trading Days during the Pricing Period, in
each case taking into account the terms and conditions of this Agreement. The
Settlement Document shall be in the form attached hereto as Exhibit B.

  (b)   Promptly after receipt of the Settlement Document with respect to each
Advance (and, in any event, not later than three Trading Days after receipt
thereof), the Company will instruct its transfer agent to electronically
transfer and register in the name of the Investor the total number of shares
issuable to the Investor pursuant to the Advance as specified in the Settlement
Document by crediting the Investor’s account or its designee’s account at the
Depository Trust Company through its Deposit Withdrawal Agent Commission System
or by such other means of delivery as may be mutually agreed upon by the parties
hereto (which in all cases will be covered by an effective Registration
Statement) and upon doing so shall promptly deliver to the Investor confirmation
(a “Confirmation”) that it has authorized and instructed its transfer agent to
process such issuance. Promptly upon the Investor’s receipt of such Confirmation
(and, in any event, not later than one Trading Day after receipt thereof) the
Investor shall pay the total aggregate Purchase Price due to the Company as set
forth in the Settlement Document in same day funds to an account designated by
the Company. No fractional shares shall be issued, and any fractional amounts
shall be rounded to the next higher whole number of shares.     (c)   On or
prior to the Advance Date, each of the Company and the Investor shall deliver to
the other all documents, instruments and writings required to be delivered by
either of them pursuant to this Agreement in order to implement and effect the
transactions contemplated herein.     (d)   The parties hereto agree in good
faith to (i) adjust any errors in the Settlement Document and (ii) make or
return such payments and deliver or return such Shares to the extent required by
any such adjustment to the Settlement Document, in each case as soon as
reasonably practicable.

Section 2.03 Hardship. In the event the Investor sells shares of the Company’s
Common Stock after receipt of an Advance Notice and the Company fails to perform
its obligations as mandated in Section 2.02, the Company agrees that in addition
to and in no way limiting the rights and obligations set forth in Article V
hereto and in addition to any other remedy to which the Investor is entitled at
law or in equity, including, without limitation, specific performance, the
Investor shall be entitled to an injunction or injunctions to prevent such
breaches of this Agreement and to specifically enforce, without the posting of a
bond or other security, the terms and provisions of this Agreement.
Article III. Representations and Warranties of Investor
               Investor hereby represents and warrants to, and agrees with, the
Company that the following are true and correct as of the date hereof and as of
each Advance Date:
Section 3.01 Organization and Authorization. The Investor is duly organized,
validly existing and in good standing under the laws of the Cayman Islands and
has all requisite power and

 

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authority to purchase and hold the Shares. The decision to invest and the
execution and delivery of this Agreement by such Investor, the performance by
such Investor of its obligations hereunder and the consummation by such Investor
of the transactions contemplated hereby have been duly authorized and requires
no other proceedings on the part of the Investor. The undersigned has the right,
power and authority to execute and deliver this Agreement and all other
instruments on behalf of the Investor. This Agreement has been duly executed and
delivered by the Investor and, assuming the execution and delivery hereof and
acceptance thereof by the Company, will constitute the legal, valid and binding
obligations of the Investor, enforceable against the Investor in accordance with
its terms.
Section 3.02 Evaluation of Risks. The Investor has such knowledge and experience
in financial, tax and business matters as to be capable of evaluating the merits
and risks of, and bearing the economic risks entailed by, an investment in the
Company and of protecting its interests in connection with this transaction. It
recognizes that its investment in the Company involves a high degree of risk.
Section 3.03 No Legal Advice From the Company. The Investor acknowledges that it
had the opportunity to review this Agreement and the transactions contemplated
by this Agreement with its own legal counsel and investment and tax advisors.
The Investor is relying solely on such counsel and advisors and not on any
statements or representations of the Company or any of the Company’s
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
Section 3.04 Investment Purpose. The securities are being purchased by the
Investor for its own account, and for investment purposes. The Investor agrees
not to assign or in any way transfer the Investor’s rights to the securities or
any interest therein and acknowledges that the Company will not recognize any
purported assignment or transfer except in accordance with applicable Federal
and state securities laws. No other person has or will have a direct or indirect
beneficial interest in the securities. The Investor agrees not to sell,
hypothecate or otherwise transfer the Investor’s securities unless the
securities are registered under Federal and applicable state securities laws or
unless, in the opinion of counsel satisfactory to the Company, an exemption from
such laws is available.
Section 3.05 Investor Status. The Investor is an “Accredited Investor” as that
term is defined in Rule 501(a)(3) of Regulation D of the Securities Act and a
“Qualified Institutional Buyer” as that term is defined in Rule 144A under the
Securities Act.
Section 3.06 Information. The Investor and its advisors (and its counsel), if
any, have been furnished with all materials relating to the business, finances
and operations of the Company and information it deemed material to making an
informed investment decision. The Investor and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and its management. The
Investor understands that its investment involves a high degree of risk. The
Investor is in a position regarding the Company, which, based upon employment,
family relationship or economic bargaining power, enabled and enables such
Investor to obtain information from the Company in order to evaluate the merits
and risks of this investment. The

 

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Investor has sought such accounting, legal and tax advice, as it has considered
necessary to make an informed investment decision with respect to this
transaction.
Section 3.07 Not an Affiliate. The Investor is not an officer, director or a
person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with the Company or any
“Affiliate” of the Company (as that term is defined in Rule 405 of the
Securities Act).
Section 3.08 Trading Activities. The Investor’s trading activities with respect
to the Company’s Common Stock shall be in compliance with all applicable federal
and state securities laws, rules and regulations and the rules and regulations
of the Principal Market on which the Common Stock is listed or traded. Neither
the Investor nor its affiliates has an open short position in the Common Stock,
the Investor agrees that it shall not, and that it will cause its affiliates not
to, (i) engage in any short sales of or any other hedging transactions with
respect to the Common Stock or (ii) purchase any shares of Common Stock except
for Common Stock purchased in connection with this Agreement, provided that the
Company acknowledges and agrees that upon receipt of an Advance Notice the
Investor has the right to sell the shares to be issued to the Investor pursuant
to the Advance Notice prior to receiving such shares.
Article IV. Representations and Warranties of the Company
     Except as stated below, on the disclosure schedules attached hereto or in
the SEC Documents, the Company hereby represents and warrants to, the Investor
that the following are true and correct as of the date hereof:
Section 4.01 Organization and Qualification. The Company is duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power to own its properties and to carry on its
business as now being conducted. Each of the Company and its subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect.
Section 4.02 Authorization, Enforcement, Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement and any related agreements, in accordance with the
terms hereof and thereof, (ii) the execution and delivery of this Agreement and
any related agreements by the Company and the consummation by it of the
transactions contemplated hereby and thereby, have been duly authorized by the
Company’s Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its stockholders, (iii) this Agreement
and any related agreements have been duly executed and delivered by the Company,
(iv) this Agreement and assuming the execution and delivery thereof and
acceptance by the Investor, any related agreements, constitute the valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
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liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors’ rights and remedies.
Section 4.03 Capitalization. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock and 10,000,000 shares of
preferred stock (“Preferred Stock”), of which as of September 30, 2010,
54,181,329 shares of Common Stock are issued and outstanding and 4,000,000
shares of Preferred Stock are issued and outstanding. All of such outstanding
shares have been validly issued and are fully paid and nonassessable. Except as
disclosed in the SEC Documents, no shares of Common Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company. Except as disclosed in the SEC Documents,
as of the date hereof, (i) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company, or contracts, commitments, understandings or arrangements
by which the Company is or may become bound to issue additional shares of
capital stock of the Company or options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, any shares of capital stock of the Company and
(ii) there are no agreements or arrangements under which the Company is
obligated to register the sale of any of their securities under the Securities
Act (except pursuant to this Agreement). Except as set forth in the SEC
Documents, there are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by this Agreement or any related
agreement or the consummation of the transactions described herein or therein.
The Company has furnished or made available to the Investor true and correct
copies of the Company’s Certificate of Incorporation, as amended and as in
effect on the date hereof (the “Certificate of Incorporation”), and the
Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the
terms of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
Section 4.04 No Conflict. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Certificate of
Incorporation, any certificate of designations of any outstanding series of
preferred stock of the Company or By-laws or (ii) conflict with or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Principal Market on which the Common Stock is quoted) applicable to the Company
or any of its subsidiaries or by which any material property or asset of the
Company is bound or affected and which would cause a Material Adverse Effect.
Except as disclosed in the SEC Documents, neither the Company nor its
subsidiaries is in violation of any term of or in default under its Articles of
Incorporation or By-laws or their organizational charter or by-laws,
respectively, or any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries that would cause a
Material Adverse Effect. The business of the Company and its subsidiaries is not
being conducted in violation of any material law, ordinance or regulation of any
governmental entity. Except as specifically contemplated by this Agreement and
as required

 

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under the Securities Act and any applicable state securities laws, the Company
is not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under or contemplated by this
Agreement in accordance with the terms hereof or thereof except as such consent,
authorization or order has been obtained as of the date hereof. All consents,
authorization, orders, filings and registrations which the Company is required
to make or obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company and its subsidiaries are
not aware of any fact or circumstance which is reasonably expected to give rise
to any of the foregoing.
Section 4.05 SEC Documents; Financial Statements. Except as set forth in
Schedule 4.05, the Common Stock is registered pursuant to Section 12(g) of the
Exchange Act and the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC under the Exchange
Act for the two years preceding the date hereof (or such shorter period as the
Company was required by law or regulation to file such material) (all of the
foregoing filed prior to the date hereof or amended after the date hereof and
all exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein, being hereinafter referred to as
the “SEC Documents”) on timely basis or has received a valid extension of such
time of filing and has filed any such SEC Document prior to the expiration of
any such extension. The Company has delivered to the Investors or their
representatives, or made available through the SEC’s website at
http://www.sec.gov, true and complete copies of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Investor which is not
included in the SEC Documents contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstance under which they are or were made, not
misleading.
Section 4.06 No Default. Except as disclosed in the SEC Documents, 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 is or its property is bound and neither the execution, nor the delivery
by the Company, nor the performance by the Company of its

 

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obligations under this Agreement or any of the exhibits or attachments hereto
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 its
Certificate of Incorporation, By-Laws, 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 any
decree, judgment, order, rules or regulation of any court or governmental agency
or body having jurisdiction over the Company or its properties, in each case
which default, lien or charge is reasonably likely to cause a Material Adverse
Effect.
Section 4.07 Absence of Events of Default. Except for matters described in the
SEC Documents and/or this Agreement, 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.
Section 4.08 Intellectual Property Rights. The Company and its subsidiaries own
or possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company, there is no
claim, action or proceeding being made or brought against, or to the Company’s
knowledge, being threatened against the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service mark registrations, trade secret or other
infringement; and the Company is not aware of any facts or circumstances which
might give rise to any of the foregoing.
Section 4.09 Employee Relations. Neither the Company nor any of its subsidiaries
is involved in any labor dispute nor, to the knowledge of the Company or any of
its subsidiaries, is any such dispute threatened, in each case which is
reasonably likely to cause a Material Adverse Effect.
Section 4.10 Environmental Laws. Except as would not have a Material Adverse
Effect, the Company and its subsidiaries are (i) in compliance with any and all
applicable material foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
(“Environmental Laws”), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval.
Section 4.11 Title. Except as set forth in the SEC Documents, the Company has
good and marketable title to its properties and material assets owned by it,
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest other than such as are not material to the business of the
Company. Any real property and facilities held under lease by the Company and
its subsidiaries are held by them under valid, subsisting and enforceable leases

 

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with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
Section 4.12 Insurance. The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary for similarly situated companies in the businesses in which the
Company and its subsidiaries are engaged. The Company has not been refused any
insurance coverage sought or applied for and the Company does not have any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.
Section 4.13 Regulatory Permits. Except as set forth in the SEC Documents, the
Company and its subsidiaries possess all material certificates, authorizations
and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and neither the
Company nor any such subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
Section 4.14 Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management’s general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
Section 4.15 No Material Adverse Breaches, etc. Except as set forth in the SEC
Documents, the Company is not subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company’s officers has or is reasonably expected in the future
to have a Material Adverse Effect.
Section 4.16 Absence of Litigation. Except as set forth in the SEC Documents,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending against or affecting the Company, the Common Stock or any of the
Company’s subsidiaries, wherein an unfavorable decision, ruling or finding would
have a Material Adverse Effect.
Section 4.17 Subsidiaries. Except as disclosed in the SEC Documents, the Company
does not presently own or control, directly or indirectly, any material interest
in any other corporation, partnership, association or other business entity.
Section 4.18 Tax Status. Except as disclosed in the SEC Documents, the Company
and each of its subsidiaries has made or filed all federal and state income and
all other material tax returns, reports and declarations required by any
jurisdiction to which it is subject and (unless and only to

 

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the extent that the Company and each of its subsidiaries has set aside on its
books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction except those being
contested in good faith, and the officers of the Company know of no basis for
any such claim.
Section 4.19 Certain Transactions. Except as set forth in the SEC Documents, as
set forth in Schedule 4.19 and to the extent not required to be disclosed
pursuant to Item 404 of Regulation S-K, none of the officers or directors of the
Company is presently a party to any material transaction with the Company (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer or director or, to the knowledge of
the Company, any corporation, partnership, trust or other entity in which any
officer or director has a substantial interest or is an officer, director,
trustee or partner.
Section 4.20 Fees and Rights of First Refusal. The Company is not obligated to
offer the securities offered hereunder on a right of first refusal basis or
otherwise to any third parties including, but not limited to, current or former
shareholders of the Company, underwriters, brokers, agents or other third
parties.
Section 4.21 Use of Proceeds. The Company shall use the net proceeds from this
offering for general corporate purposes and for such other purposes as set forth
in the Registration Statement.
Section 4.22 Dilution. The Company is aware and acknowledges that issuance of
shares of the Common Stock could cause dilution to existing shareholders and
could significantly increase the outstanding number of shares of Common Stock.
Section 4.23 Acknowledgment Regarding Investor’s Purchase of Shares. The Company
acknowledges and agrees that the Investor is acting solely in the capacity of an
arm’s length investor with respect to this Agreement and the transactions
contemplated hereunder. The Company further acknowledges that the Investor is
not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereunder and any advice given by the Investor or any of its representatives or
agents in connection with this Agreement and the transactions contemplated
hereunder is merely incidental to the Investor’s purchase of the Shares
hereunder. The Company is aware and acknowledges that it may not be able to
request Advances under this Agreement if there is not an effective Registration
Statement or if any issuances of Common Stock pursuant to any Advances would
violate any rules of the Principal Market. The Company further is aware and
acknowledges that any fees paid or shares issued pursuant to Section 12.04
hereunder shall be earned on the date hereof and are not refundable or
returnable under any circumstances.

 

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Article V. Indemnification
     The Investor and the Company represent to the other the following with
respect to itself:
Section 5.01 In consideration of the Investor’s execution and delivery of this
Agreement, and in addition to all of the Company’s other obligations under this
Agreement, the Company shall defend, protect, indemnify and hold harmless the
Investor, and all of its officers, directors, partners, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Investor
Indemnitees”) from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and reasonable
expenses in connection therewith (irrespective of whether any such Investor
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the
“Indemnified Liabilities”), incurred by the Investor Indemnitees or any of them
as a result of, or arising out of, or relating to (a) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement for the registration of the Shares as originally filed or in any
amendment thereof, or in any related prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon 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; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Investor specifically for inclusion therein;
(b) any misrepresentation or breach of any representation or warranty made by
the Company in this Agreement or any other certificate, instrument or document
contemplated hereby or thereby; (c) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement or any other certificate,
instrument or document contemplated hereby or thereby; and (d) any cause of
action, suit or claim brought or made against such Investor Indemnitee not
arising out of any action or inaction of an Investor Indemnitee, and arising out
of or resulting from the execution, delivery, performance or enforcement of this
Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Investor Indemnitees. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities, which is permissible under applicable law.
Section 5.02 In consideration of the Company’s execution and delivery of this
Agreement, and in addition to all of the Investor’s other obligations under this
Agreement, the Investor shall defend, protect, indemnify and hold harmless the
Company and all of its officers, directors, shareholders, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Company
Indemnitees”) from and against any and all Indemnified Liabilities incurred by
the Company Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement for the registration of the Shares
as originally filed or in any amendment thereof, or in any related prospectus,
or in any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or

 

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necessary to make the statements therein not misleading; provided, however, that
the Investor will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Investor by or on behalf of the Company specifically for inclusion therein;
(b) any misrepresentation or breach of any representation or warranty made by
the Investor in this Agreement or any instrument or document contemplated hereby
or thereby executed by the Investor; (c) any breach of any covenant, agreement
or obligation of the Investor(s) contained in this Agreement or any other
certificate, instrument or document contemplated hereby or thereby executed by
the Investor; or (d) any cause of action, suit or claim brought or made against
such Company Indemnitee not arising out of any action or inaction of a Company
Indemnitee and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other instrument, document
or agreement executed pursuant hereto by any of the Company Indemnitees. To the
extent that the foregoing undertaking by the Investor may be unenforceable for
any reason, the Investor shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
Section 5.03 Promptly after receipt by an Investor Indemnitee or Company
Indemnitee under this Article V of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving an
Indemnified Liability, such Investor Indemnitee or Company Indemnitee shall, if
an Indemnified Liability in respect thereof is to be made against any
indemnifying party under this Article V deliver to the indemnifying party a
written notice of the commencement thereof; but the failure to so notify the
indemnifying party will not relieve it of liability under this Article V unless
and to the extent the indemnifying party did not otherwise learn of such action
and such failure result in the forfeiture by the indemnifying party of
substantial rights and defenses and will not, in any event, relieve the
indemnifying party from any obligations provided in this Article V. 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 Investor Indemnitee or
Company Indemnitee, as the case may be; provided, however, that an Investor
Indemnitee or Company Indemnitee shall have the right to retain its own counsel
with the reasonable fees and expenses of not more than one counsel for such
Investor Indemnitee or Company Indemnitee 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 Investor Indemnitee or Company Indemnitee
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Investor Indemnitee or Company Indemnitee and
any other party represented by such counsel in such proceeding. The Investor
Indemnitee or Company Indemnitee shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Investor Indemnitee or Company
Indemnitee which relates to such action or claim. The indemnifying party shall
keep the Investor Indemnitee or Company Indemnitee fully apprised at all times
as to the status of the defense or any settlement negotiations with respect
thereto. No indemnifying party shall be liable for any settlement of any action,
claim or proceeding effected without its prior written consent, provided,
however, that the indemnifying party shall not unreasonably withhold, delay or
condition its consent. No indemnifying party shall, without the prior written
consent of the Investor

 

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Indemnitee or Company Indemnitee, consent to entry of any judgment or enter into
any settlement or other compromise which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Investor Indemnitee
or Company Indemnitee of a release from all liability in respect to such claim
or litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Investor Indemnitee
or Company Indemnitee with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made.
Section 5.04 The indemnification required by this Article V shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received.
Section 5.05 The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Investor Indemnitee or Company
Indemnitee against the indemnifying party or others, and (ii) any liabilities
the indemnifying party may be subject to pursuant to the law.
Section 5.06 The obligations of the parties to indemnify or make contribution
under this Article V shall survive termination.
Article VI.
Covenants of the Company
Section 6.01 Registration Statement and Prospectus.

  (a)   The Company meets the requirements for use of Form S-3 under the
Securities Act for the offering of the Shares, including but not limited to the
transaction requirements for an offering made by the issuer set forth in
Instruction I.B.6 to Form S-3.     (b)   The Registration Statement, including
the Base Prospectus contained therein, was prepared by the Company in conformity
with the requirements of the Securities Act and all applicable U.S. federal
securities laws rules and regulations. Any amendment or supplement to the
Registration Statement or Prospectus required by this Agreement will be so
prepared and filed by the Company and, as applicable, the Company will use its
commercially reasonable efforts to cause it to become effective as soon as
reasonably practicable. No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceeding for that purpose has
been instituted or, to the knowledge of the Company, threatened by the SEC. Any
reference herein to the Registration Statement, the Prospectus, or any amendment
or supplement thereto shall be deemed to refer to and include the documents
incorporated (or deemed to be incorporated) by reference therein pursuant to
Item 12 of Form S-3 under the Securities Act, and any reference herein to the
terms “amend,” “amendment” or “supplement” with respect to the Registration
Statement or Prospectus shall be deemed to refer to and include the filing after
the execution hereof of any document with the SEC deemed to be incorporated by
reference therein.

 

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  (c)   The Company has not distributed and, prior to the completion of the
distribution of the Shares, shall not distribute any offering material in
connection with the offering and sale of the Shares other than the Registration
Statement, the Base Prospectus as supplemented by any Prospectus Supplement or
such other materials, if any, permitted by the Securities Act.     (d)   During
the Commitment Period, the Company shall notify the Investor promptly if (i) the
Registration Statement shall cease to be effective under the Securities Act,
(ii) the Common Stock ceases to be registered under Section 12(g) of the
Exchange Act or (iii) the Company fails to file in a timely manner all reports
and other documents required of it as a reporting company under the Exchange
Act.     (e)   No Misstatement or Omission. Each part of the Registration
Statement, when such part became or becomes effective, and the Prospectus, on
the date of filing thereof with the SEC and at each date during the Pricing
Period and as of each Closing conformed or will conform in all material respects
with the requirements of the Securities Act and the rules and regulations
promulgated thereunder; each part of the Registration Statement, when such part
became or becomes effective, did not or will not contain an 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 not misleading; and the Prospectus,
on the date of filing thereof with the SEC and at each date during the Pricing
Period and as of each Closing did not or will not include an untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; except that the foregoing shall not apply to statements or
omissions in any such document made in reliance on information furnished in
writing to the Company by the Investor that is intended for use in the
Registration Statement, the Prospectus, or any amendment or supplement thereto.

Section 6.02 Listing of Common Stock. The Company shall use its commercially
reasonable efforts to maintain the Common Stock’s authorization for quotation on
the Principal Market and shall notify the Investor promptly if the Common Stock
shall cease to be authorized for listing on the Principal Market.
Section 6.03 Certificate of Counsel. The Company shall cause the Investor to
have received a certificate from counsel to the Company substantially in the
form of Exhibit C attached hereto to the Investor prior to the first Advance
Notice.
Section 6.04 Exchange Act Registration. The Company will use its best efforts to
cause its Common Stock to continue to be registered under Section 12(g) of the
Exchange Act, will file in a timely manner all reports and other documents
required of it as a reporting company under the Exchange Act and will not take
any action or file any document (whether or not permitted by Exchange Act or the
rules thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said Exchange Act.
Section 6.05 Corporate Existence. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.

 

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Section 6.06 Notice of Certain Events Affecting Registration; Suspension of
Right to Make an Advance. The Company will immediately notify the Investor, and
confirm in writing, upon its becoming aware of the occurrence of any of the
following events: (i) receipt of any request for additional information by the
SEC or any other Federal or state governmental authority for amendments or
supplements to the Registration Statement or the Prospectus; (ii) the issuance
by the SEC or any other Federal or state governmental authority of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Common Stock for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose; (iv) the
happening of any event that makes any statement made in the Registration
Statement or Prospectus of any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain 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 therein
not misleading, and that in the case of the Prospectus, it will not contain 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 therein, in the light
of the circumstances under which they were made, not misleading, or of the
necessity to amend the Registration Statement or supplement the Prospectus to
comply with the Securities Act or any other law; and (v) the Company’s
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Advance Notice, and the Investor
shall not sell any Shares pursuant to a Registration Statement, during the
continuation of any of the foregoing events.
Section 6.07 Prospectus Supplements. The Company agrees that on such dates as
the Securities Act shall require, the Company will file a Prospectus Supplement
or other appropriate form as determined by counsel with the SEC under the
applicable paragraph of Rule 424(b) under the Securities Act, which Prospectus
Supplement will set forth, within the relevant period, the amount of Shares sold
to the Investor, the net proceeds to the Company and the discount paid by the
Investor with respect to such Shares. The Company shall provide the Investor at
least 24 hours to comment on a draft of each such Prospectus Supplement (and
shall give due consideration to all such comments) and shall deliver or make
available to the Investor, without charge, an electronic copy of each form of
Prospectus Supplement, together with the Base Prospectus. The Company consents
to the use of the Prospectus (and of any Prospectus Supplement thereto) in
accordance with the provisions of the Securities Act and with the securities or
“blue sky” laws of the jurisdictions in which the Shares may be sold by the
Investor, in connection with the offering and sale of the Shares and for such
period of time thereafter as the Prospectus is required by the Securities Act to
be delivered in connection with sales of the Shares. If during such period of
time any event shall occur that in the judgment of the Company and its counsel
is required to be set forth in the Prospectus or should be set forth therein in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading, or if it is necessary to supplement or
amend the Prospectus to comply with the Securities Act or any other applicable
law or regulation, the Company shall forthwith prepare and file with the SEC an
appropriate Prospectus Supplement to the Prospectus and shall expeditiously
furnish or make available to the Investor an electronic copy thereof.

 

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Section 6.08 Consolidation; Merger. If an Advance Notice has been delivered to
the Investor and the transaction contemplated in such Advance Notice has not yet
been closed in accordance with its terms, then the Company shall not effect any
merger or consolidation of the Company with or into, or a transfer of all or
substantially all the assets of the Company to another entity (a “Consolidation
Event”) unless the resulting successor or acquiring entity (if not the Company)
assumes by written instrument the obligation to deliver to the Investor such
shares of stock and/or securities as the Investor is entitled to receive
pursuant to this Agreement.
Section 6.09 Issuance of the Company’s Common Stock. The sale of the shares of
Common Stock by the Company to the Investor hereunder shall be made in
accordance with the provisions and requirements of the Securities Act and any
applicable state securities law.
Section 6.10 Market Activities. The Company will not, directly or indirectly,
take any action designed to cause or result in, or that constitutes or would
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Common Stock.
Section 6.11 Opinion of Counsel Concerning Resales. Provided that the Investor’s
resale of Common Stock received pursuant to this Agreement may be freely sold by
the Investor either pursuant to an effective Registration Statement, in
accordance with Rule 144, or otherwise, the Company shall obtain for the
Investor, at the Company’s expense, any and all opinions of counsel which may be
required by the Company’s transfer agent to issue such shares free of
restrictive legends, or to remove legends from such shares.
Section 6.12 Expenses. The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is terminated, will pay all expenses
incident to the performance of its obligations hereunder, including but not
limited to (i) the preparation, printing and filing of the Registration
Statement and each amendment and supplement thereto, of each prospectus and of
each amendment and supplement thereto; (ii) the preparation, issuance and
delivery of any Shares issued pursuant to this Agreement, (iii) all fees and
disbursements of the Company’s counsel, accountants and other advisors, (iv) the
qualification of the Shares under securities laws in accordance with the
provisions of this Agreement, including filing fees in connection therewith,
(v) the printing and delivery of copies of any prospectus and any amendments or
supplements thereto, (vi) the fees and expenses incurred in connection with the
listing or qualification of the Shares for trading on the Principal Market, or
(vii) filing fees of the SEC and the Principal Market; provided, however that
the Investor shall pay all of its expenses, including but not limited to all
fees and disbursements of the Investor’s counsel, accountants and other
advisors.
Section 6.13 Initial Disclosure. Promptly after the date hereof (and prior to
the Company delivering an Advance Notice to the Investor hereunder), the Company
shall file with the SEC a Prospectus Supplement pursuant to Rule 424(b) of the
Securities Act disclosing all information required to be disclosed therein (the
“Initial Disclosure”) and shall provide the Investor with 24 hours to review the
Initial Disclosure prior to its filing.
Section 6.14 Compliance With Laws. The Company will not, directly or indirectly,
take any action designed to cause or result in, or that constitutes or might
reasonably be expected to

 

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constitute, the stabilization or manipulation of the price of any security of
the Company or which caused or resulted in, or which would in the future
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any security of the Company.
Section 6.15 Comfort Letters. At the request of the Investor and within a
reasonable period of time (a) prior to the first Advance contemplated hereby,
and (b) after the date of filing of each Annual Report on Form 10-K which was
incorporated by reference in the Registration Statement for a period in which
Advances totaling at least $2 million were received, the Company will request
that its independent accountants furnish to the Investor a letter, in form and
substance reasonably satisfactory to the Investor, containing statements and
information of the type ordinarily included in accountants’ “comfort letters” to
underwriters with respect to the financial statements of the Company.
Article VII.
Conditions for Advance and Conditions to Closing
Section 7.01 Conditions Precedent to the Right of the Company to Deliver an
Advance Notice. The right of the Company to deliver an Advance Notice and the
obligations of the Investor hereunder with respect to an Advance Notice is
subject to the satisfaction by the Company, on each Advance Notice Date (a
“Condition Satisfaction Date”), of each of the following conditions:

  (a)   Accuracy of the Company’s Representations and Warranties. The
representations and warranties of the Company shall be true and correct in all
material respects.     (b)   Registration of the Common Stock with the SEC. The
Registration Statement is effective and the Company is not aware of any of the
events set forth in Section 6.06 hereof. The Initial Disclosure shall have been
filed with the SEC, all other Prospectus Supplements shall have been filed with
the SEC, as required pursuant to Section 6.07 hereof and an electronic copy of
such Prospectus Supplement together with the Base Prospectus shall have been
delivered or made available to the Investor. The Company shall have filed with
the SEC in a timely manner all reports, notices and other documents required of
a “reporting company” under the Exchange Act and applicable SEC regulations that
are necessary to maintain the effectiveness of the Registration Statement.    
(c)   Authority. The Company shall have obtained all permits and qualifications
required by any applicable state securities laws for the offer and sale of the
shares of Common Stock, or shall have the availability of exemptions therefrom.
The sale and issuance of the shares of Common Stock shall be legally permitted
by all applicable securities laws and regulations to which the Company is
subject.     (d)   No Material Notices. None of the following events shall have
occurred and be continuing: (i) receipt by the Company of any request for
additional information from the SEC or any other federal or state governmental,
administrative or self regulatory authority during the period of effectiveness
of the Registration Statement, the response to which would require any
amendments or supplements to the Registration Statement or Prospectus; (ii) the
issuance by the SEC or any other federal or state governmental

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      authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Shares for
sale in any applicable jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) the occurrence of any event that makes any
statement made in the Registration Statement or the Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in the Registration
Statement, Prospectus or documents so that, in the case of the Registration
Statement, it will not contain 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 therein not misleading, and that in the case of the Prospectus,
it will not contain 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
therein, in the light of the circumstances under and as of the date which they
were made, not misleading; and (v) the Company’s reasonable determination that a
post-effective amendment to the Registration Statement would be required.    
(e)   Performance by the Company. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to each Condition Satisfaction Date.     (f)  
No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered or promulgated by any court or
governmental authority of competent jurisdiction that prohibits or directly and
materially adversely affects any of the transactions contemplated by this
Agreement, and no proceeding shall have been commenced that is reasonably likely
to have a Material Adverse Effect.     (g)   No Suspension of Trading in or
Delisting of Common Stock. The Common Stock is trading on a Principal Market and
all of the shares issuable pursuant to such Advance Notice will be listed or
quoted for trading on such Principal Market and the Company believes, in good
faith, that trading of the Common Stock on a Principal Market will continue
uninterrupted for the foreseeable future. The issuance of shares of Common Stock
with respect to the applicable Advance Notice will not violate the shareholder
approval requirements of the Principal Market. The Company shall not have
received any notice threatening the continued listing of the Common Stock on the
Principal Market.     (h)   Maximum Advance Amount. The amount of an Advance
requested by the Company shall not exceed the Maximum Advance Amount.     (i)  
Authorized. There shall be a sufficient number of authorized but unissued and
otherwise unreserved shares of Common Stock for the issuance of all of the
shares issuable pursuant to such Advance Notice.

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  (j)   Executed Advance Notice. The Investor shall have received the Advance
Notice executed by an officer of the Company and the representations contained
in such Advance Notice shall be true and correct as of each Condition
Satisfaction Date.     (k)   Consecutive Advance Notices. Except with respect to
the first Advance Notice, the Company shall have delivered all Shares relating
to all prior Advances.

Article VIII.
Non-Disclosure; Non-Public Information; Public Announcement
     Nothing herein shall require the Company to disclose any material
non-public information to the Investor without also disseminating such
information to the public.
     Neither party shall make any press release or public announcement
concerning the transactions contemplated by this Agreement without the prior
written approval of the other party, unless a press release or public
announcement is required by law. If any such announcement or other disclosure is
required by law, the disclosing party shall give the non disclosing Party prior
notice of, and an opportunity to comment on, the proposed disclosure. The
parties acknowledge that the Company will file the Initial Disclosure in
accordance with Section 6.13.
Article IX.
Choice of Law/Jurisdiction
     This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York without regard to the principles of conflict of
laws.
Article X. Assignment; Termination
Section 10.01 Assignment. Neither this Agreement nor any rights of the parties
hereto may be assigned to any other Person.
Section 10.02 Termination.

  (a)   Unless earlier terminated as provided hereunder, this Agreement shall
terminate automatically on the earliest of (i) the first day of the month next
following the 24-month anniversary of the Effective Date, or (ii) the date on
which the Investor shall have made payment of Advances pursuant to this
Agreement in the aggregate amount of the Commitment Amount.     (b)   The
Company may terminate this Agreement effective upon fifteen Trading Days’ prior
written notice to the Investor; provided that (i) there are no Advances
outstanding, and (ii) the Company has paid all amounts owed to the Investor
pursuant to this Agreement. This Agreement may be terminated at any time by the
mutual written consent of the parties, effective as of the date of such mutual
written consent unless otherwise provided

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      in such written consent. In the event of any termination of this Agreement
by the Company hereunder, so long as the Investor owns any shares of Common
Stock issued hereunder, unless all of such shares of Common Stock may be resold
by the Investor without registration and without any time, volume or manner
limitations pursuant to Rule 144, the Company shall not suspend or withdraw the
Registration Statement or otherwise cause the Registration Statement to become
ineffective, or voluntarily delist the Common Stock from the Principal Markets.
    (c)   The obligation of the Investor to make an Advance to the Company
pursuant to this Agreement shall terminate permanently (including with respect
to an Advance Date that has not yet occurred) in the event that (i) there shall
occur any stop order or suspension of the effectiveness of the Registration
Statement for an aggregate of 50 Trading Days, other than due to the acts of the
Investor, during the Commitment Period, or (ii) the Company shall at any time
fail materially to comply with the requirements of Article VI and such failure
is not cured within 30 days after receipt of written notice from the Investor,
provided, however, that this termination provision shall not apply to any period
commencing upon the filing of a post-effective amendment to such Registration
Statement and ending upon the date on which such post effective amendment is
declared effective by the SEC.     (d)   Nothing in this Section 10.02 shall be
deemed to release the Company or the Investor from any liability for any breach
under this Agreement or to impair the rights of the Company and the Investor to
compel specific performance by the other party of its obligations under this
Agreement. The indemnification provisions contained in Article V shall survive
termination hereunder.

Article XI. Notices
     Any notices, consents, waivers, or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile, provided a copy is mailed
by U.S. certified mail, return receipt requested; (iii) 3 days after being sent
by U.S. certified mail, return receipt requested, or (iv) 1 day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications, except for Advance Notices which shall be delivered in
accordance with hereof, shall be:

     
If to the Company, to:
  Alon USA Energy, Inc.
 
  7616 LBJ Freeway, Suite 300
 
  Dallas, TX 75251
 
  Attention:   Shai Even, CFO
 
  Telephone: 972 367 3669
 
  Facsimile:   972 367 3726

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With a copy to:
  Alon USA Energy, Inc.
 
  7616 LBJ Freeway, Suite 300
 
  Dallas, TX 75251
 
  Attention: Michael Oster
 
  Telephone: 972 367 3707
 
  Facsimile: 972 367 3724
 
   
If to the Investor(s):
  YA Global Master SPV Ltd.
 
  101 Hudson Street —Suite 3700
 
  Jersey City, NJ 07302
 
  Attention:  Mark Angelo
 
                       Portfolio Manager
 
  Telephone: (201) 985-8300
 
  Facsimile: (201) 985-8266
 
   
With a Copy to:
  David Gonzalez, Esq.
 
  101 Hudson Street — Suite 3700
 
  Jersey City, NJ 07302
 
  Telephone: (201) 985-8300
 
  Facsimile: (201) 985-8266

Each party shall provide 5 days’ prior written notice to the other party of any
change in address or facsimile number.
Article XII. Miscellaneous
Section 12.01 Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause 4 additional original executed signature pages to be physically
delivered to the other party within 5 days of the execution and delivery hereof,
though failure to deliver such copies shall not affect the validity of this
Agreement.
Section 12.02 Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Investor, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement, and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
Section 12.03 Reporting Entity for the Common Stock. The reporting entity relied
upon for the determination of the trading price or trading volume of the Common
Stock on any given Trading

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Day for the purposes of this Agreement shall be Bloomberg, L.P. or any successor
thereto. The written mutual consent of the Investor and the Company shall be
required to employ any other reporting entity.
Section 12.04 Fees. The Company shall compensate the Investor and pay certain
fees and expenses of the Investor, or its designee, as set forth on
Schedule 12.04 attached hereto.
Section 12.05 Brokerage. Each of the parties hereto represents that it has had
no dealings in connection with this transaction with any finder or broker who
will demand payment of any fee or commission from the other party. The Company
on the one hand, and the Investor, on the other hand, agree to indemnify the
other against and hold the other harmless from any and all liabilities to any
person claiming brokerage commissions or finder’s fees on account of services
purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.
Section 12.06 Confidentiality. Except as otherwise set forth herein, each of the
parties hereto shall keep confidential any information obtained from any other
party (except information publicly available or in such party’s domain prior to
the date hereof, and except as required by court order) and shall promptly
return to the other parties all schedules, documents, instruments, work papers
or other written information without retaining copies thereof, previously
furnished by it as a result of this Agreement or in connection herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF, the parties hereto have caused this Standby Equity
Distribution Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.

            COMPANY:

Alon USA Energy, Inc.
      By:   /s/ David Wiessman         Name:   David Wiessman        Title:  
Chairman        INVESTOR:

YA Global Master SPV Ltd.
      By:   Yorkville Advisors, LLC         Its: Investment Manager           
By:   /s/ Gerald Eicke         Name:   Gerald Eicke        Title:   Managing
Member     

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Schedule 4.05
The Company’s Annual Report on Form 10-K for the year ended December 31, 2008
(the “2008 Annual Report”) was not filed with the SEC within the time prescribed
by the rules of the SEC. The Company filed its 2008 Annual report on April 10,
2009.

 

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Schedule 4.19
None

 

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Schedule 12.04

(a)   Structuring and Due Diligence Fee. Each of the parties shall pay its own
fees and expenses (including the fees of any attorneys, accountants, appraisers
or others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby, except that the Company has paid a structuring
and due diligence fee of $30,000 to Yorkville Advisors, LLC.

(b)   Commitment Fee; Commitment Shares. The Company shall pay to the Investor a
commitment fee (the “Commitment Fee”) of $500,000, of which (i) $250,000 shall
be paid within 3 days of the Effective Date, and (ii) $250,000 shall be paid on
the 3 month anniversary of the Effective Date. The Company shall pay the
Commitment Fee either in cash, or by issuing to the Investor shares of Common
Stock (such shares, the “Commitment Shares”), or a combination of cash and
Commitment Shares. The number of Commitment Shares to be issued by the Company
to the Investor shall be equal to the amount of the Commitment Fee the Company
chooses to pay in Commitment Shares divided by (y) the average of the VWAPs for
the 5 consecutive Trading Days immediately prior to the Effective Date with
respect to the first tranche of the Commitment Fee, and (z) the average of the
VWAPs for the 5 consecutive Trading Days immediately prior to the 3 month
anniversary of the Effective Date with respect to the second tranche of the
Commitment Fee. The issuance of any Commitment Shares shall registered on the
Registration Statement.