SETTLEMENT AGREEMENT
THIS
SETTLEMENT AGREEMENT
(the
“Settlement
Agreement”)
is
made as of March ____, 2005, by and between GoldSpring, Inc., a
Florida
corporation, with its principal executive offices at 0000 Xxxx Xxxxxxxx Xxxxx,
Xxxxx 000, Xxxxxxxxxx, XX 00000 (“GoldSpring”),
and
certain investors of GoldSpring as set forth on the signature page hereto
(collectively, “Winfield”).
(GoldSpring and Winfield may hereinafter be referred to singularly as a
“party,”
and
collectively as the “parties.”)
PREAMBLES:
WHEREAS,
as of
March 22, 2004, Winfield, in addition to certain other investors of GoldSpring
(collectively, the “GoldSpring
Investors”),
purchased an aggregate of approximately 21.8 million shares of common stock
of
GoldSpring (the “Original
Shares”),
and
warrants to purchase approximately 21.8 million additional shares of common
stock of GoldSpring (collectively, the “Original
Warrants”),
pursuant to a Subscription Agreement between GoldSpring and the GoldSpring
Investors, and related documents, entered into as of such date (collectively,
the “Original
Transaction Documents”);
and
WHEREAS,
GoldSpring defaulted on certain of its obligations under the Original
Transaction Documents, and, as a result of such default, entered into an
additional Subscription Agreement with the GoldSpring Investors (the
“Additional
Subscription Agreement”),
and
related documents, as of November 30, 2004 (collectively, the “Additional
Transaction Documents”),
pursuant to which the Original Shares and Original Warrants were exchanged
for
8% convertible promissory notes of GoldSpring (the “Convertible
Notes”)
in the
aggregate principal amount of approximately $11.1 million (the “Principal”),
and
warrants to purchase approximately 27.8 million shares of common stock of
GoldSpring, as further set forth in the Additional Transaction Documents;
and
WHEREAS,
as of
December 20, 2004, Winfield delivered a Notice of Conversion to GoldSpring
(the
“Notice
of Conversion”),
electing to convert its portion of the Principal, and accrued and unpaid
interest thereon, into shares of common stock of GoldSpring (the “Winfield
Conversion Shares”),
pursuant to the terms of the Additional Transaction Documents; and
WHEREAS,
GoldSpring failed to timely deliver the Winfield Conversion Shares to Winfield,
and, as a result of such failure, as of Xxxxx 0, 0000, Xxxxxxxx elected to
exercise its right to receive the mandatory redemption payment pursuant to
Section 7.2 of the Additional Subscription Agreement (the “Mandatory
Redemption Payment”);
and
WHEREAS,
GoldSpring is currently unable to pay the Mandatory Redemption Payment to
Winfield, which, as of March 23, 2005, was an aggregate of $6,885,184;
and
WHEREAS,
the
parties are desirous of settling the claims Winfield has against GoldSpring
for
the Mandatory Redemption Payment (the “Winfield
Claim”)
(assuming full and complete performance by GoldSpring of its obligations
hereunder and under the New Transaction Documents) without resorting to
litigation.
NOW,
THEREFORE,
for good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Default.
GoldSpring hereby acknowledges that it is in default of the Convertible Notes,
for, among other things, the failure to timely deliver the Winfield Conversion
Shares to Winfield, upon receipt of the Notice of Conversion. In addition,
GoldSpring hereby acknowledges that it currently owes but is unable to pay
to
Winfield the Mandatory Redemption Payment. GoldSpring further acknowledges
and
agrees that it has no offset, defense or counterclaim of any kind, nature
or
description with respect to any of its defaults and the unpaid monies due
to
Winfield, as set forth herein.
2. Settlement.
In
settlement of the Winfield Claim, GoldSpring and Winfield hereby agree as
follows:
(a) Issuance
of Debenture.
As of
even date herewith (the “Closing
Date”),
GoldSpring will issue to Winfield, one or more of the 12% Secured Convertible
Debentures of GoldSpring, in the aggregate principal amount of $6,855,184,
in
substantially the form attached hereto as Exhibit
A
(collectively the “Debenture”).
The
Debenture shall provide for, among other things:
(i)
An
interest rate of 12% per annum (the “Interest”),
such
Interest to be payable on a monthly basis, on the first day of each month,
commencing April 1, 2005;
(ii) A
conversion price (the “Conversion
Price”)
equal
to the lesser of: (A) 85% of the average of the five (5) lowest closing bid
prices of the common stock of GoldSpring for the twenty (20) trading days
immediately preceding the date GoldSpring was required to pay the Mandatory
Redemption Payment to Winfield, and (B) 85% of the average of the five (5)
lowest closing bid prices of the common stock of GoldSpring for the twenty
(20)
trading days immediately preceding the date of conversion by Winfield;
provided,
however,
that,
until the effective date of a registration statement (the “Registration
Statement”)
GoldSpring is required to file, to register, among other things, the shares
of
common stock of GoldSpring underlying the Debenture (together with any other
shares issuable pursuant to the Debenture, the “Debenture
Shares”),
in
addition to the Conversion Shares (as defined in Section 2(b) hereof)
(collectively, the “GoldSpring
Shares”),
the
conversion price shall be 50% of the average of the five (5) lowest closing
bid
prices of the common stock of GoldSpring for the twenty (20) trading days
immediately preceding the date of conversion by Winfield. In no event shall
the
conversion price of the Debenture be greater than the lesser of: (A) $0.1131,
and (B) the conversion price of the Convertible Notes (as adjusted from time
to
time);
(iii) Mandatory
registration rights with respect to the GoldSpring Shares;
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(iv) Normal
and customary anti-dilution provisions;
(v) Negative
covenants precluding actions outside of GoldSpring’s ordinary course of business
without the prior written consent of Winfield; and
(vi) Events
of
default, which include, without limitation, (A) failure by GoldSpring to
file
the Registration Statement within thirty (30) days after the Closing Date,
or
(B) the failure of the Registration Statement to be effective within ninety
(90)
days of the Closing Date (the “Required
Effective Date”),
or
(C) any event of default under the Additional Transaction Documents or New
Transaction Documents (as defined in Section 3(c) hereof) (each, an
“Event
of Default”).
(b) Conversion
to Shares.
Contemporaneously with the execution of this Settlement Agreement, Winfield
shall convert $266,416 (the “Conversion
Amount”)
of the
Debenture into shares of common stock of GoldSpring, at a conversion price
of
$0.03 per share (the “Conversion
Shares”),
which
Conversion Amount represents the amount of accrued damages relating to
GoldSpring’s failure to register certain securities held by Winfield pursuant to
the Additional Transaction Documents; provided,
however,
that
since the Conversion Shares, when issued, shall be restricted securities
of
GoldSpring, GoldSpring agrees to transfer to Winfield a total of 200% of
such
amount of Conversion Shares (i.e., a total of 17,761,067 shares of common
stock). In connection with this conversion, GoldSpring and Winfield shall
enter
into a Subscription Agreement, dated as of even date herewith, in substantially
the form attached hereto as Exhibit
B
(the
“New
Subscription Agreement”).
The
New Subscription Agreement shall provide, among other things, that, if
GoldSpring fails to register the GoldSpring Shares on or before the Required
Effective Date, or upon any other Event of Default, Winfield has the right
to
put the Conversion Shares back to GoldSpring for 125% of the Conversion Amount
(the “Put
Purchase Price”),
pursuant to the terms and conditions of a Put Agreement entered into by
GoldSpring and Winfield, dated as of even date herewith, in substantially
the
form attached hereto as Exhibit
C
(the
“Put
Agreement”).
(c) Winfield
Put Option.
As
further set forth in the Put Agreement, if, on the date Winfield exercises
its
right to put the Conversion Shares to GoldSpring, GoldSpring has an amount
of
cash, as defined by GAAP, equal to or greater than the Put Purchase Price,
GoldSpring must purchase the Conversion Shares from Winfield for the Put
Purchase Price. If, on the other hand, at the time Winfield exercises its
right
to put the Conversion Shares to GoldSpring, GoldSpring does not have an amount
of cash, as defined by GAAP, equal to or greater than the Put Purchase Price,
GoldSpring shall cause the Escrow Agent (as defined in Section 2(e) hereof)
to
deliver to Winfield a promissory note in the full amount of the Put Purchase
Price (the “Note”),
in
substantially the form attached hereto as Exhibit
D.
(d) Delivery
of Conversion Shares.
Within
three (3) Business Days (as defined in this Section) after the Closing Date,
GoldSpring shall deliver certificates representing the Conversion Shares
to
Winfield, issued in such names and denominations as specified on Schedule
A
hereto.
For the purposes hereof, a “Business
Day”
shall
mean any day other than a Saturday, Sunday or a day on which commercial banks
in
the city of New York, New York are authorized or required by law or executive
order to remain closed.
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(e) Escrow
of Debenture Shares and Note.
GoldSpring has agreed that, contemporaneously with the execution of this
Agreement, it shall deposit with Xxxxx & Xxxxxxx LLP (the “Escrow
Agent”):
(i)
certificates representing 150% of the amount of the Debenture Shares (assuming
the conversion in full of all outstanding amounts due pursuant to the Debenture
as of the Closing Date), which shall be held in such names as Winfield shall
designate, and (ii) the Note, made in the name of Winfield, to collectively
be
held in escrow pursuant to the terms and conditions of an Escrow Agreement,
dated as of even date herewith, by and among XxxxXxxxxx, Xxxxxxxx and the
Escrow
Agent, in substantially the form attached hereto as Exhibit
E
(the
“Escrow
Agreement”).
(f) Security
Interest.
As
further inducement for Winfield to enter into this Settlement Agreement,
and to
secure the complete and timely payment, performance and discharge in full,
as
the case may be, of all of GoldSpring’s obligations hereunder, and under the New
Transaction Documents, GoldSpring shall grant to Winfield a continuing first
priority security interest in and to all of the assets of GoldSpring, pursuant
to a Security Agreement entered into between GoldSpring and Winfield, dated
as
of even date herewith, in substantially the form attached hereto as Exhibit
F
(the
“Security
Agreement”).
(g) GoldSpring
shall return the Convertible Notes to Winfield to be held by Winfield until
such
time as GoldSpring satisfies its obligations under this Settlement Agreement
and
the New Transaction Documents. Winfield hereby agrees to return the Convertible
Notes to GoldSpring upon such satisfaction by GoldSpring of its obligations
under this Settlement Agreement and the New Transaction Documents.
3. Warranties
and Representations of GoldSpring.
In
order to induce Winfield to enter into this Settlement Agreement in settlement
of the Winfield Claim (assuming full and complete performance by GoldSpring
of
its obligations hereunder and under the New Transaction Documents), GoldSpring
hereby represents and warrants to Winfield as follows:
(a) Organization,
Good Standing and Qualification. GoldSpring
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Florida, and has all requisite corporate power and
authority to own and operate its assets and properties and to carry on its
current or contemplated business. GoldSpring is duly qualified to transact
business and is in good standing in each jurisdiction wherein the properties
owned or leased or the business transacted by GoldSpring makes such
qualification to do business as a foreign corporation necessary, except where
the failure to so qualify could not reasonably be expected to have a material
adverse effect on the condition, financial or otherwise, results of operations,
business, prospects or properties of GoldSpring.
(b) Capitalization.
As of
the Closing Date, GoldSpring has (A) __________ outstanding shares of common
stock, (B) __________ outstanding options to purchase shares of its common
stock, (C) __________ outstanding warrants to purchase shares of its common
stock, and (D) convertible securities, or other rights, calling for the issuance
of an aggregate of __________ shares of its common stock (collectively, the
“GoldSpring
Securities”).
The
GoldSpring Securities have, as applicable, been duly authorized and validly
issued and are fully paid and non-assessable, have been issued and sold in
compliance with applicable securities laws of the United States and
jurisdictions thereof and any other applicable securities laws, and were
not
issued in violation of any preemptive rights, rights of first refusal or
other
similar rights granted by GoldSpring. There are no shareholders agreements,
voting agreements or other similar agreements with respect to the outstanding
shares of common stock of GoldSpring to which GoldSpring is a party or, to
the
knowledge of GoldSpring (having undertaken no independent investigation),
between or among any of GoldSpring’s stockholders.
4
(c) Power
and Authority. All
corporate action on the part of GoldSpring and its officers, directors and
stockholders necessary for the authorization, execution and delivery of this
Settlement Agreement, the Debenture, the New Subscription Agreement, the
Put
Agreement, the Note, the Escrow Agreement, the Security Agreement, and any
other
documents related thereto (collectively, the “New
Transaction Documents”),
the
performance of all obligations of GoldSpring hereunder and thereunder, and
the
authorization, issuance and delivery of the Debenture, Debenture Shares,
Conversion Shares and Note being issued hereunder, and under the other New
Transaction Documents, and the shares of common stock of GoldSpring issuable
upon conversion of the Debenture, have been taken or will be taken, as required.
The New Transaction Documents have been duly executed and delivered by
GoldSpring and (assuming due authorization, execution and delivery by Winfield)
constitute the valid and legally binding obligations of GoldSpring, enforceable
in accordance with their terms.
(d) Valid
Issuance of Securities.
(i) The
Debenture, Debenture Shares, Conversion Shares and Note, when issued, sold
and
delivered in accordance with the terms hereof, and of the other New Transaction
Documents, for the consideration expressed herein, and therein, will be duly
and
validly issued, fully paid and non-assessable and free of any liens or
encumbrances created by GoldSpring.
(ii) The
Conversion Shares and the Debenture Shares issuable upon conversion of the
Debenture, have been duly and validly reserved for issuance upon such
conversion, and upon issuance in accordance with the terms of the Debenture,
will be fully paid and non-assessable and will be free of restrictions on
transfer other than restrictions on transfer under applicable state and federal
securities laws. No preemptive right, right of first refusal granted by
GoldSpring, or other similar right exists with respect to the Debenture,
Debenture Shares, Conversion Shares, or the Note, or the issuance and sale
thereof.
(iii) GoldSpring
understands and acknowledges the potentially dilutive effect to its common
stock
upon the issuance of the Debenture Shares and Conversion Shares. GoldSpring
further acknowledges that its obligation to issue the Debenture Shares and
Conversion Shares in accordance with this Settlement Agreement, is absolute
and
unconditional regardless of the dilutive effect that such issuance may have
on
the ownership interests of other stockholders of GoldSpring.
5
(e) Governmental
Consents. No
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, regional, state or
local
governmental authority on the part of GoldSpring is required in connection
with
the GoldSpring’s authorization, issuance and sale of the Debenture, Debenture
Shares, Conversion Shares and Note, and the transactions contemplated by
the New
Transaction Documents, except for filings, if any, required pursuant to
applicable state securities or Blue Sky laws, which filings will be made
within
the required statutory or regulatory periods, and any filing pursuant to
Regulation D of the Securities and Exchange Commission, which filing, if
made,
will be made within fifteen (15) days of the Closing.
(f) Litigation. There
is
no action, suit, claim, proceeding or investigation pending or, to GoldSpring’s
knowledge, threatened against GoldSpring, which could reasonably be expected
to
have a material adverse effect on the condition, financial or otherwise,
results
of operations, business, prospects or properties of GoldSpring. GoldSpring
is
not, and to GoldSpring’s knowledge (having undertaken no independent
investigation), no founder, director, officer or key employee is, a party
or
subject to the provisions of any order, writ, injunction, judgment or decree
of
any court or government agency or instrumentality that could reasonably be
expected to have a material adverse effect on the condition, financial or
otherwise, results of operations, business, prospects or properties of
GoldSpring. There is no action, proceeding or investigation by GoldSpring
currently pending or which GoldSpring intends to initiate.
4. Covenants
of the GoldSpring.
GoldSpring covenants and agrees with Winfield as follows:
(a) Stop
Orders.
GoldSpring will advise Winfield, promptly after it receives notice of issuance
by the Securities and Exchange Commission (the “Commission”),
any
state securities commission or any other regulatory authority of any stop
order
or of any order preventing or suspending any offering of any securities of
GoldSpring, or of the suspension of the qualification of the common stock
of
GoldSpring for offering or sale in any jurisdiction, or the initiation of
any
proceeding for any such purpose.
(b) Listing.
GoldSpring will maintain the listing or quotation of its common stock on
the
American Stock Exchange, Nasdaq SmallCap Market, Nasdaq National Market System,
Bulletin Board, or New York Stock Exchange (whichever of the foregoing is
at the
time the principal trading exchange or market for the shares of common stock
of
GoldSpring (the “Principal
Market”)),
and
will comply in all respects with its reporting, filing and other obligations
under the bylaws or rules of the Principal Market, as applicable. GoldSpring
will provide Winfield with copies of all notices it receives notifying
GoldSpring of the threatened and actual delisting of its common stock from
any
Principal Market. As of the date of this Settlement Agreement, the Bulletin
Board is and will be the Principal Market.
(c) Market
Regulations.
GoldSpring shall notify the Commission, the Principal Market and applicable
state authorities, in accordance with their requirements, of the transactions
contemplated by this Settlement Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law,
rule
and regulation, for the legal and valid issuance of the GoldSpring Shares
to
Winfield and promptly provide copies thereof to Winfield.
6
(d) Reporting
Requirements.
From
the date of this Settlement Agreement and until the sooner of (i) two (2)
years
after the Closing Date, or (ii) until all the GoldSpring Shares have been
resold
or transferred by Winfield pursuant to the Registration Statement (as defined
in
Section 2(a)(ii) hereof) or pursuant to Rule 144, without regard to volume
limitation, GoldSpring will (A) cause its common stock to continue to be
registered under Section 12(b) or 12(g) of the 1934 Act, (B) comply in all
material respects with its reporting and filing obligations under the 1934
Act,
(C) comply with all reporting requirements that are applicable to an issuer
with
a class of shares registered pursuant to Section 12(b) or 12(g) of the 1934
Act,
as applicable, and (D) comply with all requirements related to any registration
statement filed pursuant to this Agreement. GoldSpring will use its best
efforts
not to take any action or file any document (whether or not permitted by
the
1933 Act or the 1934 Act or the rules thereunder) to terminate or suspend
such
registration or to terminate or suspend its reporting and filing obligations
under said acts until three (3) years after the Closing Date. Until the resale
of the GoldSpring Shares by Winfield, GoldSpring will use its best efforts
to
continue the listing or quotation of its common stock on a Principal Market
and
will comply in all respects with its reporting, filing and other obligations
under the bylaws or rules of the Principal Market. GoldSpring agrees to timely
file a Form D with respect to the GoldSpring Shares if required under Regulation
D and to provide a copy thereof to Winfield promptly after such
filing.
(e) Taxes.
From
the date of this Settlement Agreement and until the sooner of (i) three (3)
years after the Closing Date, or (ii) until all the GoldSpring Shares have
been
resold or transferred by Winfield pursuant to the Registration Statement
(as
defined in Section 2(a)(ii) hereof) or pursuant to Rule 144, without
regard
to volume limitations, GoldSpring will promptly pay and discharge, or cause
to
be paid and discharged, when due and payable, all lawful taxes, assessments
and
governmental charges or levies imposed upon the income, profits, property
or
business of GoldSpring; provided,
however,
that
any such tax, assessment, charge or levy need not be paid if the validity
thereof shall currently be contested in good faith by appropriate proceedings
and if GoldSpring shall have set aside on its books adequate reserves with
respect thereto, and provided, further, that GoldSpring will pay all such
taxes,
assessments, charges or levies forthwith upon the commencement of proceedings
to
foreclose any lien which may have attached as security therefore.
(f) Insurance.
From
the date of this Settlement Agreement and until the sooner of (i) three (3)
years after the Closing Date, or (ii) until all the GoldSpring Shares have
been
resold or transferred by Winfield pursuant to the Registration Statement
(as
defined in Section 2(a)(ii) hereof) or pursuant to Rule 144, without regard
to
volume limitations, GoldSpring will keep its assets which are of an insurable
character insured by financially sound and reputable insurers against loss
or
damage by fire, explosion and other risks customarily insured against by
companies in GoldSpring’s line of business, in amounts sufficient to prevent
GoldSpring from becoming a co-insurer and not in any event less than one
hundred
percent (100%) of the insurable value of the property insured; and GoldSpring
will maintain, with financially sound and reputable insurers, insurance against
other hazards and risks and liability to persons and property to the extent
and
in the manner customary for companies in similar businesses similarly situated
and to the extent available on commercially reasonable terms.
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(g) Books
and Records.
From
the date of this Settlement Agreement and until the sooner of (i) three (3)
years after the Closing Date, or (ii) until all the GoldSpring Shares have
been
resold or transferred by Winfield pursuant to the Registration Statement
(as
defined in Section 2(a)(ii) hereof) or pursuant to Rule 144, without regard
to
volume limitations, GoldSpring will keep true records and books of account
in
which full, true and correct entries will be made of all dealings or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent
basis.
(h) Governmental
Authorities.
From
the date of this Settlement Agreement and until the sooner of (i) three (3)
years after the Closing Date, or (ii) until all the GoldSpring Shares have
been
resold or transferred by Winfield pursuant to the Registration Statement
(as
defined in Section 2(a)(ii) hereof) or pursuant to Rule 144, without regard
to
volume limitations, GoldSpring shall duly observe and conform in all material
respects to all valid requirements of governmental authorities relating to
the
conduct of its business or to its properties or assets.
(i) Intellectual
Property.
From
the date of this Settlement Agreement and until the sooner of (i) three (3)
years after the Closing Date, or (ii) until all the GoldSpring Shares have
been
resold or transferred by Winfield pursuant to the Registration Statement
(as
defined in Section 2(a)(ii) hereof) or pursuant to Rule 144, without regard
to
volume limitations, GoldSpring shall maintain in full force and effect its
corporate existence, rights and franchises and all licenses and other rights
to
use intellectual property owned or possessed by it and reasonably deemed
to be
necessary to the conduct of its business.
(j) Properties.
From
the date of this Settlement Agreement and until the sooner of (i) three (3)
years after the Closing Date, or (ii) until all the GoldSpring Shares have
been
resold or transferred by Winfield pursuant to the Registration Statement
(as
defined in Section 2(a)(ii) hereof) or pursuant to Rule 144, without regard
to
volume limitations, GoldSpring will keep its properties in good repair, working
order and condition, reasonable wear and tear excepted, and from time to
time
make all necessary and proper repairs, renewals, replacements, additions
and
improvements thereto; and GoldSpring will at all times comply with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such provision could reasonably be expected to
have a
material adverse effect on GoldSpring’s operations.
(k) Confidentiality/Public
Announcement.
From
the date of this Settlement Agreement and until the sooner of (i) three (3)
years after the Closing Date, or (ii) until all the GoldSpring Shares have
been
resold or transferred by Winfield pursuant to the Registration Statement
(as
defined in Section 2(a)(ii) hereof) or pursuant to Rule 144, without regard
to
volume limitations, GoldSpring agrees that except in connection with a Form
8-K
or the Registration Statement, it will not disclose publicly or privately
the
identity of Winfield, unless expressly agreed to in writing by Winfield or
only
to the extent required by law and then only upon five (5) days prior notice
to
Winfield. In any event and subject to the foregoing, GoldSpring undertakes
to
file a Form 8-K or make a public announcement describing the New Transaction
Documents not later than is required by applicable law. In the Form 8-K or
public announcement, GoldSpring will specifically disclose the amount of
common
stock outstanding immediately after the Closing Date.
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(l) Further
Registration Statements.
Except
for a registration statement filed on behalf of the Winfield pursuant to
Section
2(a)(ii) of this Settlement Agreement, GoldSpring will not file any registration
statements or amend any already filed registration statement, including but
not
limited to Form S-8, with the Commission or with state regulatory authorities
without the consent of Winfield until the sooner of (i) the Registration
Statement (as defined in Section 2(a)(ii) hereof) shall have been current
and
available for use in connection with the public resale of the Shares for
180
days, or (ii) until all the GoldSpring Shares have been resold or transferred
by
Winfield pursuant to the Registration Statement or Rule 144 (the “Exclusion
Period”).
The
Exclusion Period shall be tolled during the pendency of an Event of
Default.
(m) Blackout.
GoldSpring undertakes and covenants that until the end of the Exclusion Period
it will not enter into any acquisition, merger, exchange or sale or other
transaction that could have the effect of delaying the effectiveness of any
pending registration statement or causing an already effective registration
statement to no longer be effective or current for a period of fifteen (15)
or
more days.
(n) Non-Public
Information.
GoldSpring covenants and agrees that neither it nor any other person acting
on
its behalf will provide Winfield or its agents or counsel with any information
that GoldSpring believes constitutes material non-public information, unless
prior thereto Winfield shall have agreed in writing to receive such information.
GoldSpring understands and confirms that Winfield shall be relying on the
foregoing representations in effecting transactions in securities of the
GoldSpring.
(o) Right
of First Refusal. Until
one
year after the Required Effective Date, Winfield shall be given not less
than
ten (10) business days prior written notice of any proposed sale by GoldSpring
of its common stock or other securities or debt obligations, except
(i) securities issued or issuable to officers, directors, or full-time
employees of GoldSpring pursuant to stock grants, stock purchases, and/or
stock
option plans or any other stock incentive program, agreement, or arrangement
approved by all of the disinterested members of GoldSpring’s board of directors,
(ii) securities issued as full or partial consideration in connection with
a
strategic merger, consolidation, or purchase of substantially all of the
securities or assets of another corporation or entity, (iii) securities issued
in connection with bank financing or equipment leasing transactions, (iv)
shares
of common stock issued upon conversion of other securities of GoldSpring
held by
Winfield, and (v) as has been described in the reports or other written
information filed with the Commission or delivered to Winfield prior to the
Closing Date (collectively the foregoing are “Excepted
Issuances”).
If
Winfield exercises its rights pursuant to this Section 4(o) shall have the
right
during the ten (10) business days following receipt of the notice to purchase
all or any portion of such offered common stock, debt or other securities
in
accordance with the terms and conditions set forth in the notice of sale.
In the
event such terms and conditions are modified during the notice period, Winfield
shall be given prompt notice of such modification and shall have the right
during the ten (10) business days following the notice of modification,
whichever is longer, to exercise such right.
9
(p) Offering
Restrictions.
Until
the earlier of (i) payment of the Debenture (including any amounts
due
thereunder) by GoldSpring to Winfield, or (ii) until all the GoldSpring
Shares have been resold or transferred by Winfield pursuant to the Registration
Statement or pursuant to Rule 144, without regard to volume limitations,
except for the Excepted Issuances, without the prior written consent of
Winfield, GoldSpring will not issue any equity, convertible debt or other
securities convertible into common stock or equity of GoldSpring, which consent
may be withheld for any reason.
(q) Favored
Nations Provision.
Other
than the Excepted Issuances, if at any time the Debenture is outstanding
GoldSpring shall offer, issue or agree to issue any common stock or securities
convertible into or exercisable for shares of common stock (or modify any
of the
foregoing which may be outstanding) to any person or entity at a price per
share
or conversion or exercise price per share which shall be less than the
Conversion Price in respect of the GoldSpring Shares, without the consent
of
Winfield, then GoldSpring shall issue, for each such occasion, additional
shares
of its common stock to Winfield so that the average per share purchase price
of
the shares of common stock issued to Winfield shall automatically be reduced
to
such other lower price per share. The delivery to Winfield of the additional
shares of common stock shall be not later than the closing date of the
transaction giving rise to the requirement for GoldSpring to issue additional
shares of common stock. Winfield is granted the registration rights described
in
Section 9 of the Subscription Agreement in relation to such additional shares
of
common stock except that the Filing Date and Effective Date vis-à-vis such
additional common shares shall be, respectively, the sixtieth (60th)
and one
hundred and twentieth (120th)
date
after the closing date giving rise to the requirement to issue the additional
shares of common stock. For purposes of the issuance and adjustment described
in
this paragraph, the issuance of any security of GoldSpring carrying the right
to
convert such security into shares of common stock or of any warrant, right
or
option to purchase common stock shall result in the issuance of the additional
shares of common stock upon the issuance of such convertible security, warrant,
right or option and again at any time upon any subsequent issuances of shares
of
common stock upon exercise of such conversion or purchase rights if such
issuance is at a price lower than the Conversion Price in effect upon such
issuance. Winfield’s rights set forth in this section are in addition to any
other rights Winfield has pursuant to this Settlement Agreement and any New
Transaction Document.
5. Further
Assurances.
GoldSpring hereby agrees, at its own cost and expense, to execute and to
deliver
such additional documents, agreements and instruments and take or cause to
be
taken such additional action as Winfield may request in order to more fully
give
effect to the settlement reflected in this Settlement Agreement. GoldSpring
hereby appoints Winfield and its representatives, with full power of
substitution, as GoldSpring’s attorney-in-fact to sign any document, agreement
or instrument, or take any action, which GoldSpring would take pursuant to
the
provisions hereof if GoldSpring fails to perform its obligations
hereunder.
6. Specific
Performance.
GoldSpring hereby acknowledges that irreparable damage would occur in the
event
that any of the provisions of this Settlement Agreement, and the other New
Transaction Documents, are not performed in accordance with their specific
terms, or are otherwise breached. Accordingly, the parties agree that Winfield
is entitled to an injunction to prevent breaches of this Settlement Agreement,
and the other New Transaction Documents, and to enforce specifically the
terms
and provisions hereof and thereof in addition to any other remedy to which
it is
entitled in law or in equity.
10
7. Miscellaneous.
(a) Entire
Agreement.
This
Settlement Agreement, together with the other New Transaction Documents,
constitute the entire agreement among the parties, and supersede all prior
agreements, understandings and arrangements, oral or written, among the par-ties
with respect to the subject matter hereof.
(b) Amendments
and Waivers.
This
Settlement Agreement may not be modified or amended except by an instrument
or
instruments in writing signed by the party against whom enforcement of any
such
modification or amendment is sought. Any party may, by an instrument in writing,
waive performance or compliance by any other party with respect to any term
or
provision of this Settlement Agreement on the part of such other party to
be
performed or complied with. The waiver by any party of a breach of any term
or
provision of this Settlement Agreement shall not be construed as a waiver
of any
subsequent breach.
(c) Notices.
Any
notice or other communication required or permitted hereunder shall be in
writing and delivered at the addresses designated below, or mailed by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows, or to such other address or addresses as may hereafter be furnished
by
one party to the other party in compliance with the terms hereof:
If
to
Winfield to:
The
InterGroup Corporation
000
Xxxxxx Xxxxx
Xxx
Xxxxxxx, XX 00000
Attn.:
Xxxx X. Xxxxxxxx
with
a
copy to:
Xxxxx
& Schloss LLP
00
Xxxx
00xx
Xx.,
00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Attn:
Xxxxxxx X. Xxxxx, Esq.
If
to
GoldSpring to:
GoldSpring,
Inc.
0000
Xxxx
Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx,
XX 00000
Attn.:
Xxxxxx X. Xxxxx
11
with
a
copy to:
____________________
____________________
____________________
Attn.:_________________
All
such
notices and communications shall be effective when delivered at the designated
addresses or five days after deposited in the mails in conformity with the
provisions hereof.
(d) Assignment.
Neither
this Settlement Agreement nor any right, remedy, obligation or liability
arising
hereunder or by reason hereof shall be assignable by either party without
the
prior written consent of the other party.
(e) Section
and Other Headings.
The
section and other headings contained in this Settlement Agreement are for
reference purposes only and shall not be deemed to be a part of this Settlement
Agreement or to affect the meaning or interpretation of this Settlement
Agreement.
(f) Execution
in Counterparts.
This
Settlement Agreement may be executed in counterparts, each of which shall
be
deemed to be an original and all of which together shall be deemed to be
one and
the same instrument.
(g) Governing
Law.
This
Settlement Agreement shall be governed by and construed in accordance with
the
laws of the City of New York, State of New York, without giving effect to
the
conflicts of law provisions thereof.
(h) Consent
to Jurisdiction.
Each of
the parties hereto: (i) consents and submits to the jurisdiction of the Courts
of the State of New York and of the Courts of the United States for a judicial
district within the territorial limits of the State of New York for all purposes
of this Settlement Agreement, including, without limitation, any action or
proceeding instituted for the enforcement of any right, remedy, obligation
and
liability arising under or by reason of this Settlement Agreement; and (ii)
consents and submits to the venue of such action or proceeding in the City
and
County of New York (or such judicial district of a Court of the United States
as
shall include the same).
[THE
REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY]
12
COUNTERPART
SIGNATURE PAGE TO SETTLEMENT AGREEMENT, DATED MARCH ___,
2005
IN
WITNESS WHEREOF,
the
parties have executed and delivered this Settlement Agreement as of the date
first above written.
GOLDSPRING,
INC.
By:____________________________
Name:
Its:
XXXX
X.
XXXXXXXX
XXXX
X. XXXXXXXX XXX-1
By:____________________________
Name:
Its:
XXXX
X. XXXXXXXX XXX-2
By:____________________________
Name:
Its:
SANTA
FE FINANCIAL CORP.
By:____________________________
Name:
Its:
PORTSMOUTH
SQUARE, INC.
By:____________________________
Name:
Its:
THE
INTERGROUP CORPORATION
By:____________________________
Name:
Its:
13
SCHEDULE
A
(List
of Certificates)
|
Name
and Address
|
Number
of Conversion Shares (#)
|
|
Xxxx
X. Xxxxxxxx
000
Xxxxxx Xxxxx
Xxx
Xxxxxxx, XX 00000
|
__________
|
|
Xxxx
X. Xxxxxxxx XXX-1
000
Xxxxxx Xxxxx
Xxx
Xxxxxxx, XX 00000
Attn.:
Xxxx X. Xxxxxxxx
|
__________
|
|
Xxxx
X. Xxxxxxxx XXX-2
000
Xxxxxx Xxxxx
Xxx
Xxxxxxx, XX 00000
Attn.:
Xxxx X. Xxxxxxxx
|
__________
|
|
Santa
Fe Financial Corp.
000
Xxxxxx Xxxxx
Xxx
Xxxxxxx, XX 00000
Attn.:
Xxxx X. Xxxxxxxx
|
__________
|
|
Portsmouth
Square, Inc.
000
Xxxxxx Xxxxx
Xxx
Xxxxxxx, XX 00000
Attn.:
Xxxx X. Xxxxxxxx
|
__________
|
|
The
InterGroup Corporation
000
Xxxxxx Xxxxx
Xxx
Xxxxxxx, XX 00000
Attn.:
Xxxx X. Xxxxxxxx
|
__________
|
14
EXHIBIT
A
(Form
of Debenture)
15
EXHIBIT
B
(Form
of Subscription Agreement)
16
EXHIBIT
C
(Form
of Put Agreement)
17
EXHIBIT
D
(Form
of Promissory Note)
18
EXHIBIT
E
(Form
of Escrow Agreement)
19
EXHIBIT
F
(Form
of Security Agreement)
20
