SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of July 12,
2005, by and among Centurion Gold Holdings, Inc., a Florida corporation (the
"Company"), and the Buyers identified on the signature pages hereto (each
purchaser is a "Buyer" and are collectively referred to as the "Buyers").
WHEREAS:
A. The Company and Buyer are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the rules
and regulations as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act");
B. Buyer desires to purchase and the Company desires to issue and sell,
upon the terms and conditions set forth in this Agreement, the following
securities of the Company for proceeds to the Company of a minimum of $500,000
and a maximum of $3,000,000: (i) 7% secured convertible debentures of the
Company, in the form attached hereto as Exhibit A, together with any
debenture(s) issued in replacement thereof or as interest thereon or otherwise
with respect thereto in accordance with the terms thereof (the "Debentures"),
convertible into shares of common stock of the Company (the "Common Stock"),
upon the terms and subject to the limitations and conditions set forth in such
Debentures; and (ii) common stock purchase warrants, in the form attached hereto
as Exhibit B, to purchase such number of shares of the Company's Common Stock
based upon a 35% warrant coverage (defined as the dollar amount of Debentures
purchased divided by the warrant exercise price of $0.30 times the percentage of
warrant coverage) (the "Warrants") (the Common Stock and Warrants are sometimes
referred to as the "Securities");
C. The Company's obligations under this Agreement, the Debentures and
the Warrants, shall be secured by a Security Agreement and an Intellectual
Property Security Agreement, substantially in the forms annexed hereto as
Exhibits C and D; and
D. An officer or director of the Company shall be required to
participate in the private placement and purchase Securities in the amount of at
least $350,000; and, in the absence of such purchase, the Conversion Price for
the Debentures shall be adjusted to $0.18 per share, the interest rate on the
Debentures shall be at 10% per annum, and the number of shares underlying the
Warrant shall be based on a 45% warrant coverage; and
E. Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, such principal amounts of Debentures and number of Warrants as
are set forth immediately below their names on the signature pages hereto.
NOW THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF DEBENTURES AND WARRANTS.
a. Purchase of Debentures and Warrants. On the Closing Date
(as defined below), the Company shall issue and sell to Buyer and Buyer agrees
to purchase from the Company such principal amounts of Debentures and number of
Warrants as are set forth immediately below Buyer's name on the signature page
hereto.
b. Form of Payment. Upon execution of this Agreement, (i)
Buyers shall pay the purchase price for the Debentures and the Warrants to be
issued and sold to them at the Closing (as defined below) (the "Purchase Price")
by check or wire transfer of immediately available funds to the Company. The
Purchase Price shall be held in escrow by the Company pending the Closing.
c. Closing Date. Subject to the satisfaction (or written
waiver) of the conditions thereto set forth in Section 6 and Section 7 below,
the date and time of the issuance and sale of the Securities pursuant to this
Agreement shall be 12:00 noon, Eastern Standard Time no later then July 31, 2005
(the "Closing Date"), or such other mutually agreed upon time. The closing of
the transactions contemplated by this Agreement (the "Closing") may take place
in one or more closings.
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2. BUYER'S REPRESENTATIONS AND WARRANTIES. Each Buyer represents and
warrants to the Company solely as to it that:
a. Investment Purpose. As of the date hereof, Buyer is
purchasing the Debentures and the shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Debentures pursuant to this Agreement
(such shares of Common Stock being collectively referred to herein as the
"Conversion Shares") and the Warrants and the shares of Common Stock issuable
upon exercise thereof (the "Warrant Shares" and, collectively with the
Debentures, Warrants and Conversion Shares, the "Securities") for its own
account and not with a present view towards the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration under
the Securities Act; provided, however, that by making the representations
herein, Buyer does not agree to hold any of the Securities for any minimum or
other specific term and reserves the right to dispose of the Securities at any
time in accordance with or pursuant to a registration statement or an exemption
under the Securities Act.
b. Accredited Investor Status. Buyer is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Buyer has such experience
in business and financial matters that it has the capacity to protect its own
interests in connection with this transaction and is capable of evaluating the
merits and risks of an investment in the Securities pursuant to this Agreement.
Buyer has been represented by counsel and advisors of its choice. Buyer
acknowledges that an investment in the Securities pursuant to this Agreement is
speculative and involves a high degree of risk.
c. Reliance on Exemptions. Buyer understands that the
Securities are being offered and sold to it in reliance upon 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 Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of Buyer to acquire the
Securities.
d. Information. Buyer has received all documents, records,
books and other information pertaining to Buyer's investment in the Company that
has been requested by Buyer.
e. Governmental Review. Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Resale. Buyer understands that: (i) the sale or
re-sale of the Securities has not been and is not being registered under the
Securities Act or any applicable state securities laws, and the Securities may
not be transferred unless (a) the Securities are sold pursuant to an effective
registration statement under the Securities Act, (b) Buyer shall have delivered
to the Company an opinion of counsel that shall be in form, substance and scope
customary for opinions of counsel in comparable transactions to the effect that
the Securities to be sold or transferred may be sold or transferred pursuant to
an exemption from such registration to the reasonable satisfaction of the
Company, (c) the Securities are sold or transferred to an "affiliate" (as
defined in Rule 144 promulgated under the Securities Act (or a successor rule)
("Rule 144")) of Buyer who agrees to sell or otherwise transfer the Securities
only in accordance with this Section 2(f) and who is an Accredited Investor, or
(d) the Securities are sold pursuant to Rule 144, and Buyer shall have delivered
to the Company an opinion of counsel that shall be in form, substance and scope
customary for opinions of counsel in corporate transactions to the reasonable
satisfaction of the Company; (ii) any sale of such Securities made in reliance
on Rule 144 may be made only in accordance with the terms of said Rule and
further, if said Rule is not applicable, any re-sale 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 is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such Securities
under the Securities Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder. Notwithstanding the foregoing
or anything else contained herein to the contrary, the Securities may be pledged
as collateral in connection with a bona fide margin account or other lending
arrangement.
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g. Legends. Buyer understands that the Debentures and the
Warrants and, until such time as the Conversion Shares and Warrant Shares have
been registered under the Securities Act or otherwise may be sold pursuant to
Rule 144 without any restriction as to the number of securities as of a
particular date that can then be immediately sold, the Conversion Shares and
Warrant Shares shall bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the
certificates for such Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The securities
may not be sold, transferred or assigned in the absence of an effective
registration statement for the securities under said Act, or an opinion
of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, that registration is not required
under said Act or unless sold pursuant to Rule 144 under said Act."
h. Authorization; Enforcement. This Agreement and each
agreement attached as an Exhibit hereto which is required to be executed by
Buyer has been duly authorized and validly executed and delivered by Buyer and
is a valid and binding agreement of Buyer enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
i. Residency. Buyer, if an individual, is a resident of the
jurisdiction set forth immediately below Buyer's name on the signature page
hereto. Buyer, if a corporation, partnership, trust, or other legal entity, is
duly organized, formed or incorporated in the jurisdiction set forth immediately
below Buyer's name on the signature page hereto.
j. Absence of Conflicts. The execution and delivery of this
Agreement and each agreement which is attached as an Exhibit hereto and executed
by Buyer in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, and compliance with the requirements hereof and
thereof by Buyer, will not violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on Buyer or (a) violate any
provision of any indenture, instrument or agreement to which Buyer is a party or
is subject, or by which Buyer or any of its assets is bound; (b) conflict with
or constitute a material default thereunder; (c) result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by Buyer to any
third party; or (d) require the approval of any non-governmental agency
third-party (which has not been obtained) pursuant to any material contract,
agreement, instrument, relationship or legal obligation to which Buyer is
subject or to which any of its assets, operations or management may be subject.
k. Manner of Sale. At no time was Buyer presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Buyer that:
a. Organization and Qualification. The Company and each of its
subsidiaries, if any, is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated,
with full power and authority (corporate and other) to own, lease, use and
operate its properties and to carry on its business as and where now owned,
leased, used, operated and conducted. The Company and each of its subsidiaries
is duly qualified or intends to apply for qualification as a foreign corporation
to do business and is in good standing in every jurisdiction in which its
ownership or use of property or the nature of the business conducted by it makes
such qualification necessary, except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect. "Material Adverse
Effect" means any material adverse effect on the business, operations, assets,
financial condition or prospects of the Company or its subsidiaries, if any,
taken as a whole, or on the transactions contemplated hereby or by the
agreements or instruments to be entered into in connection herewith.
"Subsidiaries" means any corporation or other organization, whether incorporated
or unincorporated, in which the Company owns, directly or indirectly, any equity
or other ownership interest.
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The Company and the Subsidiaries have good and
marketable title in fee simple to all real
property owned by them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property owned by
them that is material to the business of the Company and the Subsidiaries, in
each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries. Any real property and facilities held under lease by the Company
and the Subsidiaries are held under valid, subsisting and enforceable leases of
which the Company and the Subsidiaries are in compliance.
b. Authorization; Enforcement. The Company has all requisite
corporate power and authority to enter into and perform this Agreement, the
Debentures, the Warrants, the Security Agreement and the Intellectual Property
Security Agreement,(collectively the "Transaction Agreements") and to consummate
the transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, subject to release from escrow.
The execution and delivery of this Agreement, and the other Transaction
Agreements, by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation, the issuance of
the Debentures and the Warrants and the issuance and reservation for issuance of
the Conversion Shares and Warrant Shares issuable upon conversion or exercise
thereof), have been duly authorized by the Company's Board of Directors. This
Agreement has been duly executed and delivered by the Company by its authorized
representative, and such authorized representative is the true and official
representative with authority to sign this Agreement and the other documents
executed in connection herewith and bind the Company accordingly. This Agreement
constitutes, and upon execution and delivery by the Company of the other
Transaction Agreement, each of such instruments will constitute, a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms.
c. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 300,000,000 shares of Common Stock, par
value $0.0001 per share, of which 148,136,321 shares are issued and outstanding,
and, 20,000,000 shares of Preferred Stock, par value $0.001 per share, and,
except as set forth in Schedule 3(c), no shares are currently reserved for
issuance pursuant to the Company's stock option plans, no shares are currently
reserved for issuance pursuant to securities exercisable for, or convertible
into or exchangeable for shares of Common Stock, and no shares of preferred
stock are issued and outstanding. All of such outstanding shares of capital
stock are, or upon issuance will be, duly authorized, validly issued, fully paid
and nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the shareholders of the Company
or any liens or encumbrances imposed through the actions or failure to act of
the Company. Except as disclosed in Schedule 3(c), as of the effective date of
this Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for any shares of
capital stock of the Company or any of its Subsidiaries, or arrangements by
which the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries,
(ii) there are no agreements or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of its or their
securities under the Securities Act, and (iii) there are no anti-dilution or
price adjustment provisions contained in any security issued by the Company (or
in any agreement providing rights to security holders) that will be triggered by
the issuance of the Debentures, the Warrants, the Conversion Shares or Warrant
Shares.
d. Issuance of Shares. The Conversion Shares and Warrant
Shares are duly authorized and reserved for issuance and, upon conversion of the
Debentures and exercise of the Warrants in accordance with their respective
terms, will be validly issued, fully paid and non-assessable, and free from all
taxes, liens, claims and encumbrances with respect to the issue thereof and
shall not be subject to preemptive rights or other similar rights of
shareholders of the Company.
e. Acknowledgment of Dilution. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares and Warrant Shares upon conversion of the
Debenture or exercise of the Warrants. The Company further acknowledges that its
obligation to issue Conversion Shares and Warrant Shares upon conversion of the
Debentures or exercise of the Warrants in accordance with this Agreement, the
Debentures and the Warrants is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
shareholders of the Company.
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f. No Conflicts. The execution, delivery and performance of
this Agreement, and the other Transaction Agreements, by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for issuance of the
Conversion Shares and Warrant Shares), will not (i) conflict with or result in a
violation of any provision of the Articles of Incorporation or By-laws, (ii)
violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture, patent,
patent license or instrument to which the Company or any of its Subsidiaries is
a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and regulations of any self-regulatory organizations to which the Company or its
securities are subject) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect). Neither the
Company nor any of its Subsidiaries is in violation of its Articles of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of its Subsidiaries
in default) under, and neither the Company nor any of its Subsidiaries has taken
any action or failed to take any action that would 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 by which any property or assets of the Company or any of its
Subsidiaries is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Company and its Subsidiaries, if any, are not being conducted, and shall
not be conducted so long as a Buyer owns any of the Securities, in violation of
any law, ordinance or regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required 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, governmental agency, regulatory agency, self
regulatory organization or stock market in order for it to execute, deliver or
perform any of its obligations under this Agreement, and the other Transaction
Agreements, in accordance with the terms hereof or thereof or to issue and sell
the Debentures and Warrants in accordance with the terms hereof and to issue the
Conversion Shares upon conversion of the Debentures and the Warrant Shares upon
exercise of the Warrants.
Neither the Company nor any Subsidiary: (i) is in default
under or in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any Subsidiary received
notice of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority,
except in each case as could not, individually or in the aggregate, have or
result in a Material Adverse Effect.
g. SEC Documents; Financial Statements. The Company has filed
all reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials, and the Company's
Registration Statement, File No. 333-123481, as amended (the "Recent
Registration Statement"), being collectively referred to herein as the "SEC
Documents") on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Documents prior to the expiration of any such
extension. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Documents, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
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h. Absence of Certain Changes. Since December 31, 2004, except
as specifically disclosed in the SEC Documents: (i) there has been no event,
occurrence or development that has had or that could result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company's financial statements pursuant to
GAAP or required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting or the identity of its
auditors, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock, and (v) the
Company has not issued any equity securities to any officer, director or
affiliate, except pursuant to existing Company stock option or similar plans.
i. Absence of Litigation. There is no action, suit, inquiry,
notice of violation, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator, governmental
or administrative agency or regulatory authority (federal, state, county, local
or foreign) (collectively, an "Action") which: (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Agreements or the Securities or (ii) could, if there were an unfavorable
decision, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor
any director or officer thereof, is or has been the subject of any Action
involving a claim of violation of or liability under federal or state securities
laws or a claim of breach of fiduciary duty. The Company does not have pending
before the Commission any request for confidential treatment of information.
There has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or any
current or former director or officer of the Company. The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.
j. Intellectual Property. The Company and the Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
other similar rights necessary or material for use in connection with their
respective businesses as described in the SEC Documents and which the failure to
so have could have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any person. To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another person of any of the Intellectual
Property Rights.
The obligations of the Company under this Agreement,
the Debentures and the Warrants shall be secured by that certain Security
Agreement and Intellectual Property Security Agreement by and between the
Company and the Buyer; the security interest rights granted to the Buyer shall
be on equal level to the security interest rights granted to other third party
Buyers in the private placement of which this Agreement is a part. The Security
Interest rights shall be first priority, subordinate only to preexisting
security interest rights to the extent the Company's assets and collateral are
not already encumbered, granted to third parties. The Company shall not grant
security interest rights to any other persons as long as a majority of the
principal amount of the Debentures sold pursuant to the Purchase Agreement
remain outstanding, except upon the written consent of holders of a principal
amount of 66% of the Debentures then outstanding.
k. No Materially Adverse Contracts, Etc. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company has or is expected in the future to have a Material
Adverse Effect, except as disclosed in this Agreement. Neither the Company nor
any of its Subsidiaries is a party to any contract or agreement which in the
judgment of the Company's officers has or is expected to have a Material Adverse
Effect, except as disclosed in this Agreement.
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l. Tax Status. The Company and each of its Subsidiaries has
made or filed all federal, state and foreign income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to 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) and 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 provisions 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,
and the officers of the Company know of no basis for any such claim. The Company
has not executed a waiver with respect to the statute of limitations relating to
the assessment or collection of any foreign, federal, state or local tax. None
of the Company's tax returns is presently being audited by any taxing authority.
m. Absence of Certain Company Control Person Actions or
Events. None of the following has occurred during the past ten (10) years with
respect to a Company Control Person:
(1) A petition under the federal bankruptcy laws or
any state insolvency law was filed by or against, or a receiver, fiscal agent or
similar officer was appointed by a court for the business or property of such
Company Control Person, or any partnership in which he was a general partner at
or within two years before the time of such filing, or any corporation or
business association of which he was an executive officer at or within two years
before the time of such filing;
(2) Such Company Control Person was convicted in a
criminal proceeding or is a named subject of a pending
criminal proceeding (excluding traffic violations and other
minor offenses);
(3) Such Company Control Person was the subject of
any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from, or otherwise
limiting, the following activities:
(i) acting, as an investment advisor,
underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any
investment company, bank, savings and loan
association or insurance company, as a futures
commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor
broker, any other person regulated by the Commodity
Futures Trading Commission ("CFTC") or engaging in or
continuing any conduct or practice in connection with
such activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in connection
with the purchase or sale of any security or
commodity or in connection with any violation of
federal or state securities laws or federal
commodities laws;
(4) Such Company Control Person was the subject of
any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any federal or state authority
barring, suspending or otherwise limiting for more than 60
days the right of such Company Control Person to engage in any
activity described in paragraph (3) of this item, or to be
associated with persons engaged in any such activity; or
(5) Such Company Control Person was found by a court
of competent jurisdiction in a civil action or by the CFTC or
SEC to have violated any federal or state securities law, and
the judgment in such civil action or finding by the CFTC or
SEC has not been subsequently reversed, suspended, or vacated.
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n. No Integrated Offering. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since December 31, 2003, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
o. Dilution. The number of Shares issuable upon conversion of
the Debentures may have a dilutive effect on the ownership interests of the
other shareholders (and persons having the right to become shareholders) of the
Company. The Company's executive officers and directors have studied and fully
understand the nature of the Securities being sold hereby and recognize that
they have such a potential dilutive effect. The board of directors of the
Company has concluded, in its good faith business judgment, that such issuance
is in the best interests of the Company. The Company specifically acknowledges
that its obligation to issue the Shares upon conversion of the Debentures and
upon exercise of the Warrants is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests of
other shareholders of the Company, and the Company will honor every Notice of
Conversion (as defined in the Debentures) relating to the conversion of the
Debentures, and every Notice of Exercise (as contemplated by the Warrants),
unless the Company is subject to an injunction (which injunction was not sought
by the Company) prohibiting the Company from doing so.
p. Trading in Securities. The Company specifically
acknowledges that, except to the extent specifically provided herein or in any
of the other Transaction Agreements (but limited in each instance to the extent
so specified), Buyers retain the right (but are not otherwise obligated) to buy,
sell, engage in hedging transactions or otherwise trade in the securities of the
Company, including, but not necessarily limited to, the Securities, at any time
before, contemporaneous with or after the execution of this Agreement or from
time to time, but only, in each case, in any manner whatsoever permitted by
applicable federal and state securities laws.
q. Labor Relations. No material labor dispute exists or, to
the knowledge of the Company, is imminent with respect to any of the employees
of the Company.
r. Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Documents, except where the
failure to possess such permits could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect ("Material
Permits"), and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.
s. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged. To the best of Company's knowledge, such insurance
contracts and policies are accurate and complete. Neither the Company nor any
Subsidiary has any reason to believe it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
without a significant increase in cost.
t. Transactions With Affiliates and Employees. Except as
required to be set forth in the SEC Documents, none of the officers or directors
of the Company and, to the knowledge of the Company, none of the employees of
the Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
8
u. Internal Accounting Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company
and designed such disclosures controls and procedures to ensure that material
information relating to the Company, including its subsidiaries, is made known
to the certifying officers by others within those entities, particularly during
the period in which the Company's Form 10-K or 10-Q, as the case may be, is
being prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures as of a date within 90
days prior to the filing date of the Form 10-Q for the quarter ended December
31, 2004 (such date, the "Evaluation Date"). The Company presented in the Form
10-Q for the quarter ended December 31, 2004 the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in the Company's internal controls (as such
term is defined in Item 307(b) of Regulation S-K under the Exchange Act) or, the
Company's knowledge, in other factors that could significantly affect the
Company's internal controls.
v. Solvency/Indebtedness. Based on the financial condition of
the Company as of each Closing Date: (i) the fair saleable value of the
Company's assets exceeds the amount that will be required to be paid on or in
respect of the Company's existing debts and other liabilities (including known
contingent liabilities) as they mature; (ii) the Company's assets do not
constitute unreasonably small capital to carry on its business for the current
fiscal year as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its debt when such amounts
are required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt). The Company has no
knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date. The SEC
Documents set forth as of the dates thereof all outstanding secured and
unsecured Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this Agreement,
"Indebtedness" shall mean (a) any liabilities for borrowed money or amounts owed
in excess of $50,000 (other than trade accounts payable incurred in the ordinary
course of business), (b) all guaranties, endorsements and other contingent
obligations, whether or not the same are or should be reflected in the Company's
balance sheet or the notes thereto, except guaranties by endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business, and (c) the present value of any lease payments in excess of $50,000
due under leases required to be capitalized in accordance with GAAP. Neither the
Company nor any Subsidiary is in default with respect to any Indebtedness.
w. Listing and Maintenance Requirements. The Company has not,
in the 12 months preceding the date hereof, received notice from any principal
market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such principal market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
x. Registration Rights. Other than pursuant to the
transactions contemplated by this Agreement, and those securities included in
the Recent Registration Statement, the Company has not granted or agreed to
grant to any person any rights (including "piggy-back" registration rights) to
have any securities of the Company registered with the Commission or any other
governmental authority that have not been satisfied.
y. Application of Takeover Protections. The Company and its
Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's Certificate of Incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Buyers as a result of the Buyers and the Company
fulfilling their obligations or exercising their rights under the Transaction
Agreements, including without limitation as a result of the Company's issuance
of the Securities and the Buyer's ownership of the Securities.
9
z. Seniority. As of each Closing Date, no indebtedness of the
Company is senior to the Debentures in right of payment, whether with respect to
interest or upon liquidation or dissolution, or otherwise, other than
indebtedness secured by purchase money security interests (which is senior only
as to underlying assets covered thereby) and capital lease obligations (which is
senior only as to the property covered thereby).
aa. Disclosure. The Company confirms that neither it nor any
other person acting on its behalf has provided any of the Buyers or their agents
or counsel with any information that constitutes or might constitute material,
nonpublic information. The Company understands and confirms that the Buyers will
rely on the foregoing representations in effecting transactions in securities of
the Company. All disclosure provided to the Buyers regarding the Company, its
business and the transactions contemplated hereby, including the Schedules to
this Agreement, furnished by or on behalf of the Company with respect to the
representations and warranties made herein are true and correct with respect to
such representations and warranties and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 3.2 hereof.
bb. Acknowledgment Regarding Buyer's Purchase of Securities.
The Company acknowledges and agrees that the Buyers are acting solely in the
capacity of arm's length Buyers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Buyer's purchase of the Securities. The Company further
represents to each Purchaser that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.
cc. No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor, to the knowledge of the Company, any of
its directors or officers (i) has conducted or will conduct any general
solicitation (as that term is used in Rule 502(c) of Regulation D) or general
advertising with respect to the sale of the Debentures or the Warrants, or (ii)
made any offers or sales of any security or solicited any offers to buy any
security under any circumstances that would require registration of the
Debentures, the Warrants, or the shares underlying the Debentures or the
Warrants under the Securities Act or made any "directed selling efforts" as
defined in Rule 902 of Regulation S.
dd. No Disagreements with Accountants and Lawyers. There are
no disagreements of any kind presently existing, or reasonably anticipated by
the Company to arise, between the accountants and lawyers formerly or presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers.
ee. Certain Fees. No brokerage or finder's fees or
commissions are or will be payable by the Company to
any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other
person, with respect to the transactions contemplated
by this Agreement, and the Company has not taken any
action that would cause any Purchaser to be liable
for any such fees or commissions. The Company agrees
that the Buyers shall have no obligation with respect
to any fees or with respect to any claims made by or
on behalf of any person for fees of the type
contemplated by this Section with the transactions
contemplated by this Agreement.
4. COVENANTS.
a. Reporting Status. The Company's Common Stock is registered
under Section 12(g) of the Exchange Act. So long as Buyers beneficially own any
of the Securities, the Company shall use best efforts to timely file all reports
required to be filed with the SEC pursuant to the Exchange Act, and the Company
shall use best efforts to maintain its status as an issuer required to file
reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would permit such termination.
10
b. Use of Proceeds. The Company shall use substantially all of
the proceeds from the sale of the Debentures and the Warrants for: refurbishment
of the second mill; opening of new stopes; laying of tracks; relining of current
mill; resetting labor contracts; purchase of, and financing of, a specified gold
mine; and for expenses in connection with listing on AMEX, NASDAW and/or AIM.
c. Authorization. The Company shall use its best efforts to at
all times have authorized, and reserved for the purpose of issuance, a
sufficient number of shares of Common Stock to provide for the full conversion
or exercise of the outstanding Debentures and Warrants and issuance of the
Conversion Shares and Warrant Shares in connection therewith (based on the
Conversion Price of the Debentures or Exercise Price of the Warrants in effect
from time to time) and as otherwise required by the Debentures. The Company
shall use its best efforts to at all times maintain the number of shares of
Common Stock so reserved for issuance at an amount ("Reserved Amount") equal to
no less than 100% the number that is then actually issuable upon full conversion
of the Debentures and Additional Debentures and upon exercise of the Warrants
and the Additional Warrants (based on the Conversion Price of the Debentures or
the Exercise Price of the Warrants in effect from time to time). If at any time
the number of shares of Common Stock authorized and reserved for issuance
("Authorized and Reserved Shares") is below the Reserved Amount, the Company
will use its best efforts to promptly take all corporate action necessary to
authorize and reserve a sufficient number of shares, including, without
limitation, calling a special meeting of shareholders to authorize additional
shares to meet the Company's obligations under this Section, in the case of an
insufficient number of authorized shares, obtain shareholder approval of an
increase in such authorized number of shares, and voting the management shares
of the Company in favor of an increase in the authorized shares of the Company
to ensure that the number of authorized shares is sufficient to meet the
Reserved Amount.
d. Listing. The Company will use best efforts, so long as
Buyers own at least one-third of the Securities, to maintain the quoting/listing
and trading of its Common Stock on the OTCBB or any equivalent or replacement
quotation service or exchange, including, but not limited to, the Nasdaq
National Market ("Nasdaq"), the Nasdaq SmallCap Market ("Nasdaq SmallCap"), the
New York Stock Exchange ("NYSE"), or the American Stock Exchange ("AMEX") and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company will promptly
notify Buyer regarding the continued eligibility of the Common Stock for listing
or quotation should there be a material change.
e. Corporate Existence. So long as Buyers beneficially own any
Debentures or Warrants, the Company shall maintain its corporate existence and
shall not sell all or substantially all of the Company's assets, except in the
event of a merger or consolidation or sale of all or substantially all of the
Company's assets, where the surviving or successor entity in such transaction
(i) assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the OTCBB, Nasdaq,
Nasdaq SmallCap, NYSE or AMEX, or any other equivalent or replacement quotation
service or exchange.
f. The Company covenants that, with respect to the Securities,
other than the stop transfer instructions to give effect to Section 2(g) hereof,
it will give its transfer agent no instructions inconsistent with instructions
to issue Common Stock from time to time upon conversion of the Debentures in
such amounts as specified from time to time by the Company to the transfer
agent, bearing the restrictive legend specified in Section 2(g) of this
Agreement prior to registration of the Shares under the Securities Act,
registered in the name of the Buyers or their nominees and in such denominations
to be specified by the Buyer in connection with each conversion of the
Debentures. Except as so provided, the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section shall affect in any way the Buyers' obligations and agreement to
comply with all applicable securities laws upon resale of the Securities. If the
Buyers provide the Company with an opinion of counsel reasonably satisfactory to
the Company that registration of a resale by the Buyers of any of the Securities
is not required under the Securities 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 Conversion 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.
11
h. Reimbursement. If (i) any Buyer, other than by reason of
its gross negligence or willful misconduct, becomes involved in any capacity in
any action, proceeding or investigation brought by any shareholder of the
Company, in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Agreements, or if the Buyer is
impleaded in any such action, proceeding or investigation by any person, or (ii)
the Buyer, other than by reason of its gross negligence or willful misconduct or
by reason of its trading of the Common Stock in a manner that is illegal under
the federal securities laws, becomes involved in any capacity in any action,
proceeding or investigation brought by the SEC against or involving the Company
or in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Agreements, or if the Buyer is impleaded in any
such action, proceeding or investigation by any person, then in any such case,
the Company will reimburse the Buyer for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as such expenses are incurred. In addition, other than with respect
to any matter in which Buyer is a named party, the Company will pay to the Buyer
the charges, as reasonably determined by Buyer, for the time of any officers or
employees of the Buyer devoted to appearing and preparing to appear as
witnesses, assisting in preparation for hearings, trials or pretrial matters, or
otherwise with respect to inquiries, hearing, trials, and other proceedings
relating to the subject matter of this Agreement. The reimbursement obligations
of the Company under this section shall be in addition to any liability which
the Company may otherwise have, shall extend upon the same terms and conditions
to any Affiliates of the Buyer who or which are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of Buyer and any such
affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, Buyer and any such
affiliate and any such person. The Company also agrees that neither the Buyer
nor any such affiliate, partner, director, agent, employee or controlling person
shall have any liability to the Company or any person asserting claims on behalf
of or in right of the Company in connection with or as a result of the
consummation of any of the Transaction Agreements, except as may be expressly
and specifically provided in or contemplated by this Agreement.
i. Available Shares. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, a number of
shares (the "Minimum Available Shares") at least equal to the sum of (x) one
hundred percent (100%) of the number of shares of Common Stock issuable as may
be required to satisfy the conversion rights of the Holders of all outstanding
Convertible Debentures, plus (y) the number of shares issuable upon exercise of
all outstanding Warrants held by all Holders (in each case, whether such
Convertible Debentures or Warrants were originally issued to the Holder, the
Buyers or to any other Holder or Buyer). For the purposes of such calculations,
the Company should assume that all such Debentures were then convertible and all
Warrants were then exercisable without regard to any restrictions which might
limit any Buyer's right to convert any of the Convertible Debentures or exercise
any of the Warrants held by any Holder.
5. [omitted]
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
the Company hereunder to issue and sell the Debentures and Warrants to Buyers at
the Closing is subject to the satisfaction, at or before the Closing Date of
each of the following conditions thereto, provided that these conditions are for
the Company's sole benefit and may be waived by the Company at any time in its
sole discretion:
a. Buyers shall have executed this Agreement, the Security
Agreement and the Intellectual Property Security Agreement, and delivered the
same to the Company.
b. Buyers shall have delivered the Purchase Price in
accordance with Section 1.
c. The representations and warranties of Buyers shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and Buyers shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by Buyers at or prior to the Closing Date.
d. No undisclosed litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
12
7. CONDITIONS TO BUYERS' OBLIGATION TO PURCHASE. The obligation of
Buyers to purchase the Debentures and Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the following conditions,
provided that these conditions are for Buyers' sole benefit and may be waived by
Buyers at any time in their sole discretion:
a. The Company shall have executed this Agreement, the
Security Agreement and the Intellectual Property Security Agreement, and
delivered the same to Buyers in escrow.
b. The Company shall have delivered to Buyers in escrow duly
executed Debentures (in such denominations as Buyers shall request) and Warrants
in accordance with Section 1 above.
c. The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date.
d. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
e. No material undisclosed event shall have occurred which
could reasonably be expected to have a Material Adverse Effect on the Company.
f. The Company shall deliver a legal opinion from the
Company's counsel, addressed to the Buyer(s) and the placement agent, covering
such matters as reasonably requested by the placement agent.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT
TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS AND THE NEW
YORK STATE COURTS LOCATED IN NEW YORK COUNTY IN THE STATE OF NEW YORK WITH
RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO
IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH
PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE
OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. The Company and the Buyers hereby waive a trial by jury in any
action, proceeding or counterclaim brought by either of the Parties hereto
against the other in respect of any matter arising out or in connection with the
Transaction Agreements.
b. Counterparts; Signatures by Facsimile. This Agreement may
be executed in one or more counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered
to the other party. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
13
c. Headings. The headings of this Agreement are for
convenience of reference only and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
e. Entire Agreement; Amendments. 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 Buyer makes
any representation, warranty, covenant or undertaking with respect to such
matters. Except as provided herein, 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.
f. Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
If to the Company:
Attn.: Xxxx Xxxx, President
Centurion Gold Holdings, Inc.
0xx Xxxxx, Xxxx Xxxxx, Xxxxxxx Xxxxxx
XXX Xxxxx & 0xx Xxxxxxx
Xxxxxxx, Xxxxx Xxxxxx
Tel: 000 000 000 00000
Fax: 000 00 0 00 000 0000
If to a Buyer:
Xxxxxxx, Savage, Kaplowitz, Wolf & Marcus, LLP
000 Xxxxxxxxx Xxxxxx - 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Tel.: (000) 000-0000
Fax: (000) 000-0000
At the address and facsimile number listed
on the signature page hereof.
Each party shall provide notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to any person that purchases Securities in a private
transaction from a Buyer or to any of its "affiliates," as that term is defined
under the Exchange Act.
h. Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
14
i. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
j. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
k. Remedies. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to Buyers by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that
Buyers shall be entitled, in addition to all other available remedies at law or
in equity.
l. Survival. The representations, warranties and covenants
made by each of the Company and Buyers in this Agreement, the annexes, schedules
and exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the Closing
and the consummation of the transactions contemplated hereby. In the event of a
breach or violation of any of such representations, warranties or covenants, the
party to whom such representations, warranties or covenants have been made shall
have all rights and remedies for such breach or violation available to it under
the provisions of this Agreement, irrespective of any investigation made by or
on behalf of such party on or prior to the Closing Date.
m. Indemnification.
(a) The Company hereby agrees to indemnify and hold
harmless Buyers and their respective
officers, directors, partners and members (collectively, the "Buyer
Indemnitees"), from and against any and all damages, and agrees to reimburse
Buyer Indemnitees for all reasonable out-of-pocket expenses (including the
reasonable fees and expenses of legal counsel), in each case promptly as
incurred by Buyer Indemnitees and to the extent arising out of or in connection
with:
(i) any material misrepresentation, omission
of fact or breach of any of the Company's representations or warranties
contained in this Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by the Company
pursuant to this Agreement; or
(ii) any material failure by the Company to
perform in any material respect any of its covenants, agreements, undertakings
or obligations set forth in this Agreement, the annexes, schedules or exhibits
hereto or any instrument, agreement or certificate entered into or delivered by
the Company pursuant to this Agreement; or
(iii) any action instituted against any
Buyer, or any of its affiliates, by any stockholder of the Company who is not an
affiliate of Buyer, with respect to any of the transactions contemplated by this
Agreement.
(b) Buyers hereby agree to indemnify and hold
harmless the Company, its affiliates and its respective officers, directors,
partners and members (collectively, the "Company Indemnitees"), from and against
any and all damages, and agrees to reimburse the Company Indemnitees for
reasonable all out-of-pocket expenses (including the reasonable fees and
expenses of legal counsel), in each case promptly as incurred by the Company
Indemnitees and to the extent arising out of or in connection with:
(i) any material misrepresentation, omission
of fact, or breach of any ofany Buyer's representations or warranties contained
in this Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by Buyers pursuant to this
Agreement; or
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(ii) any material failure by Buyers to
perform in any material respect any of its covenants, agreements, undertakings
or obligations set forth in this Agreement or any instrument, certificate or
agreement entered into or delivered by Buyers pursuant to this Agreement.
(c) Promptly after receipt by either party hereto
seeking indemnification pursuant to this Section 8(m) (an "Indemnified Party")
of written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "Claim"), the
Indemnified Party promptly shall notify the party from whom indemnification
pursuant to this Section 8(m) is being sought (the "Indemnifying Party") of the
commencement thereof; but the omission to so notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is actually prejudiced
by such omission or delay. In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the Indemnifying Party
shall be entitled to assume the defense thereof. Notwithstanding the assumption
of the defense of any Claim by the Indemnifying Party, the Indemnified Party
shall have the right to employ separate legal counsel and to participate in the
defense of such Claim, and the Indemnifying Party shall bear the reasonable
fees, out-of-pocket costs and expenses of such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have agreed
to pay such fees, out-of-pocket costs and expenses, (y) the Indemnified Party
reasonably shall have concluded that representation of the Indemnified Party and
the Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
[signature page follows]
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SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Securities Purchase Agreement to be duly executed as of the date first
above written.
THE COMPANY: CENTURION GOLD HOLDINGS, INC.
By:
-----------------------------------------
Name:
----------------------
Title:
---------------------
BUYER: Name of Person/Entity:
--------------------------------
Address of Person/Entity:
---------------------
Telephone:
------------------------------------
Facsimile:
------------------------------------
Name of Authorized Signatory:
-----------------
Title of Authorized Signatory:
----------------
Signature:
------------------------------------
SUBSCRIPTION AMOUNT: $______________
(Each $100,000 subscription entitles
the Buyer to $100,000 Debentures and
a Warrant to purchase 116,667 shares
of common stock)
[Signature Page(s) of additional Buyer(s), if any, to be appended hereto]
-------------------------------------------------------------------------
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SCHEDULE 3(c)
The company has reserved for issuance shares of common stock pursuant to the
following arrangements:
1. The Laurus Financing dated September 23, 2004;
2 The Laurus Financing dated February 28, 2005:
3. The Dutchess Equity Line dated February 28,2005; and
4. The Avalon Warrants.
Other than pursuant to the above arrangements, there are no shares reserved for
issuance, no securities issuable upon the exercise or conversion of any security
and no arrangements pursuant to which any shareholder has any registration
rights.
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