SECURITIES PURCHASE AGREEMENT
EXHIBIT
10.1
This
Securities Purchase Agreement (this “Agreement”) is made as of April 4, 2008
between Tao Minerals, Ltd., a Nevada corporation (the “Company”), and the
investor listed on Exhibit A hereto (the
“Investor”).
RECITALS:
WHEREAS,
the Investor desires to purchase and the Company desires to issue and sell, upon
the terms and conditions set forth in this Agreement 10% convertible notes (the
“Notes”) of the Company, in the form attached hereto as Exhibit B in the
aggregate principal amount of One Million ($1,000,000) Dollars (the “Purchase
Price”) convertible into shares of common stock, par value $0.001 per share of
the Company (the “Conversion Shares”), upon the terms and subject to the
limitations set forth in the Notes;
WHEREAS,
the parties contemplate that $125,000 of the Purchase Price will be advanced
within five (5) days of the execution of this Agreement and the remainder of the
Purchase Price will be advanced within five (5) days of the effectiveness of the
Registration Statement (as defined below);
NOW,
THEREFORE, in consideration of the premises and mutual covenants contained
herein, the parties hereto agree as follows:
1. PURCHASE
AND SALE OF NOTES.
1.1 Purchase and Sale of
Notes. Upon the terms and subject to the conditions of this
Agreement, the Company agrees to issue and sell to the Investor, and the
Investor agrees to purchase from the Company, the Notes set forth in the amounts
set forth on Exhibit A
hereto, at an aggregate purchase price of $1,000,000 (“Purchase
Price”).
1.2 Closing. The
Initial closing of the purchase and sale of the Notes (the “Initial Closing”)
shall take place at the offices of the Company within five (5) days of the
execution of this Agreement at 12:00 noon, Eastern time or such other location,
time or date as the parties shall mutually agree, but only after the
satisfaction or waiver of each of the conditions set forth in Sections 6 and 7.
The final closing (the “Final Closing” and together with the Initial Closing,
the “Closing”) shall take place within five (5) days of the effectiveness of the
Registration Statement (as defined below) at the offices of the Company at 12:00
noon, Eastern time or such other location, time or date as the parties shall
mutually agree, but only after the satisfaction or waiver of each of the
conditions set forth in Sections 6 and 7. At each Closing, the
Company shall deliver to the Investor at the address set forth on Exhibit A
hereto, a Note in the name of the Investor, representing the Note purchased, and
the Investor shall deliver to the Company the applicable portion of the Purchase
Price, by wire transfer of immediately available funds to the following
account:
______________________
______________________
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2. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
For
purposes of this Section, all references to “Company” in Sections 2.1, 2.4 (with
the exception of subsection (a) thereof), 2.7, 2.9 through 2.12, and 2.14
through 2.17 shall be deemed to be a reference to the Company and all of its
direct and indirect subsidiaries. The Company hereby represents and
warrants to each Investor that, except as set forth on a Schedule of Exceptions
(the “Company Schedule of Exceptions”) attached hereto as Schedule A, which
exceptions shall be deemed to be representations and warranties as if made
hereunder:
2.1 Corporate
Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation, and has the requisite corporate power and authority to own or
lease its properties and to carry on its business as now being
conducted. The Company is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which the property
owned or leased by it or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or in good standing would not have, individually or in the aggregate,
a Material Adverse Effect. For purposes of this Agreement, “Material
Adverse Effect” shall mean, as to any entity, any material adverse effect on the
business, operations, conditions (financial or otherwise), assets, results of
operations or prospects of that entity individually or of the Company and its
subsidiaries as a whole.
2.2 Capitalization;
Organizational Documents.
(a) The
authorized capital stock of the Company consist of 552,000,000 shares of Common
Stock, of which as of the date hereof, 57,106,909 shares are issued and
outstanding, and 1,000,000 shares of preferred stock of the Company, of which,
as of the date hereof, no shares are issued or outstanding. All of
the issued and outstanding shares have been duly and validly issued and are
fully paid and nonassessable and have been issued in accordance with all
applicable federal and state securities laws. No shares of Common
Stock are subject to preemptive rights or any other similar rights or any liens
suffered or permitted by the Company. There are no preemptive rights
or rights of first refusal or similar rights which are binding on the Company
permitting any person to subscribe for or purchase from the Company shares of
its capital stock pursuant to any provision of applicable law, the Certificate
of Incorporation (as defined below) or the Company’s By-laws. There
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Notes and the Conversion
Shares. The Company has made available to each Investor true and
correct copies of the Company’s Certificate of Incorporation, as amended and as
in effect on the date hereof (the “Certificate of Incorporation”), and the
Company’s By-laws, as in effect on the date hereof (the “By-laws”).
(b) Upon
issuance of the Notes and payment of the Purchase Price therefor in accordance
with the terms of this Agreement, the Conversion Shares will be duly authorized,
validly issued, fully paid and nonassessable, and free and clear of any
restrictions on transfer and any taxes, claims, liens, pledges, options,
security interests, purchase rights, preemptive rights, trusts, encumbrances or
other rights or interests of any other person (other than any restrictions under
the Securities Act of 1933, as amended (the “Securities Act”).
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2.3 Authorization;
Enforcement. (a) The Company has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement and
to issue, sell and perform its obligations with respect to the Notes in
accordance with the terms hereof, (b) the execution and delivery of this
Agreement by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by the Company’s Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders, and (c) this Agreement has been duly
executed and delivered by the Company. This Agreement, when executed
and delivered by the Company, constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors’ rights and
remedies.
2.4 No
Conflicts. The execution, delivery and performance of this
Agreement by the Company, and the consummation by the Company of the
transactions contemplated hereby, will not (a) result in a violation of the
Certificate of Incorporation or By-laws of the Company, or (b) 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 would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any lien on or
against any of the properties of the Company, any note, bond, mortgage,
agreement, license, indenture or instrument to which the Company is a party, or
result in a violation of any statute, law, rule, regulation, writ, injunction,
order, judgment or decree applicable to the Company or by which any property or
asset of the Company is bound or affected, except where such violation,
conflict, breach or other consequence would not have a Material Adverse
Effect. Except as specifically contemplated by this Agreement,
the Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental or regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement in accordance with the terms
hereof. All consents, authorizations, orders, filings and
registrations that the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date
hereof.
2.5 SEC Documents; Financial
Statements. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Securities and Exchange Commission (the “SEC”) pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) (all of the foregoing, and all other documents and registration statements
heretofore filed by the Company with the SEC being hereinafter referred to as
the “SEC Documents”). The Company has delivered or made available to
the Investor true and complete copies of the SEC Documents. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act, and the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC (except
those SEC Documents that were subsequently amended), 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. As of
their respective dates, the financial statements of the Company and its
subsidiaries included (or incorporated by reference) in the SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except (a)
as may be otherwise indicated in such financial statements or the notes thereto,
or (b) in the case of unaudited interim statements, to the extent they may
exclude footnotes or may be condensed or summary statements) and fairly present
the financial position of the Company and its subsidiaries as of the dates
thereof and the results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
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2.6 Securities Law
Exemption. Assuming the truth and accuracy of each Investor’s
representations set forth in this Agreement, the offer, sale and issuance of the
Shares as contemplated by this Agreement are exempt from the registration
requirements of the Securities Act and applicable state securities laws, and
neither the Company nor any authorized agent acting on its behalf has taken or
will take any action hereafter that would cause the loss of such
exemption.
2.7 Litigation. All
actions, suits, arbitrations or other proceedings or, to the Company’s
knowledge, investigations pending or threatened against the Company that would
have a Material Adverse Effect on the Company, are disclosed in the SEC
Documents. There is no action, suit, proceeding or, to the Company’s
knowledge, investigation that questions this Agreement or the right of the
Company to execute, deliver and perform under same.
2.8 Use of
Proceeds. The net proceeds from the sale of the Notes shall be
used solely for general corporate and working capital purposes; provided
however, the Company shall utilize $25,000 for investor relations program
reasonably acceptable to the Investor.
2.9 Intellectual
Property. The Company owns, or has the contractual right to
use, sell or license all intellectual property necessary or required for the
conduct of its business as presently conducted and as proposed to be conducted,
including, without limitation, all trade secrets, processes, source code,
licenses, trademarks, service marks, trade names, logos, brands, copyrights,
patents, franchises, domain names and permits. The Company has not
received any communications alleging that the Company has violated or, by
conducting its business presently conducted or as proposed to be conducted,
violates or will violate any intellectual property rights of any other person or
entity.
2.10 Title to Property and
Assets. The Company has good and marketable title to or, in
the case of leases and licenses, has valid and subsisting leasehold interests or
licenses in, all of its properties and assets (whether real or personal,
tangible or intangible) free and clear of any liens or other encumbrances,
except for liens or other encumbrances that do not, individually or in the
aggregate, have a Material Adverse Effect. With respect to property
leased by the Company, the Company has a valid leasehold interest in such
property pursuant to leases which are in full force and effect, and the Company
is in compliance in all material respects with the provisions of such
leases.
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2.11 Compliance with
Laws. The Company is and has been in compliance with all laws,
rules, regulations, orders, judgments or decrees that are applicable to the
Company, the conduct of its business as presently conducted and as proposed to
be conducted, and the ownership of its property and assets (including, without
limitation, all Environmental Laws (as defined below) and laws related to
occupational safety, health, wage and hour, and employment
discrimination). All required reports and filings with governmental
authorities have been properly made as and when required, except where the
failure to report or file would not, individually or in the aggregate, have a
Material Adverse Effect. “Environmental Laws” means all federal,
state, local and foreign laws, ordinances, treaties, rules, regulations,
guidelines and permit conditions relating to contamination or pollution of the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata) or the protection of human health and worker safety,
including, without limitation, laws and regulations relating to transportation,
storage, use, manufacture, disposal or release of, or exposure of employees or
others to, Hazardous Materials (as defined below) or emissions, discharges,
releases or threatened releases of Hazardous Materials. “Hazardous
Materials” means any substance that has been designated by any governmental
entity or by applicable Environmental Laws to be radioactive, toxic, hazardous
or otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, urea formaldehyde and all substances
listed as hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or defined as a
hazardous waste pursuant to the Resource Conservation and Recovery Act of 1976,
as amended, and the regulations promulgated pursuant to Environmental Laws, but
excluding office and janitorial supplies maintained in accordance with
Environmental Laws.
2.12 Licenses and
Permits. The Company has obtained and maintains all material
federal, state, local and foreign licenses, permits, consents, approvals,
registrations, memberships, authorizations and qualifications required to be
maintained in connection with the operations of the Company as presently
conducted and as proposed to be conducted, the lack of which could have a
Material Adverse Effect. The Company is not in default in any
material respect under any of such licenses, permits, consents, approvals,
registrations, memberships, authorizations and qualifications.
2.13 Related
Entities. Except as disclosed on the Company Schedule of
Exceptions, the Company does not presently own or control, directly or
indirectly, any interest in any other subsidiary, corporation, association or
other business entity. The Company is not a party to any joint
venture, partnership or similar arrangement.
2.14 Taxes. The
Company has timely filed all tax returns and reports (federal, state and local)
required to be filed and these returns and reports are true and correct in all
material respects. The Company has paid all taxes and other
assessments shown to be due on such returns or reports. Neither the
Internal Revenue Service nor any state or local taxing authority has, during the
past three (3) years, examined or informed the Company it is in the process of
examining any such tax returns and reports. The provision for taxes
of the Company as shown on the financial statements included in the most recent
SEC Filing, is adequate for taxes due or accrued as of the date thereof and
since that date the Company has provided adequate accruals in accordance with
generally accepted accounting principals in its financial statements for any
taxes incurred that have not been paid, whether or not shown as being due on any
tax returns. The Company has not elected, pursuant to the Code, to be
treated as a collapsible corporation pursuant to Section 341(f) of the Code, nor
has it made any other elections pursuant to the Code (other than elections that
relate solely to methods of accounting, depreciation or amortization) that would
have a Material Adverse Effect.
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2.15 Employees. The
Company does not have any collective bargaining agreements with any of its
employees. There is no labor union organizing activity pending or, to
the Company’s knowledge, threatened with respect to the Company.
2.16 Material
Contracts. All contracts, agreements, instruments, leases,
licenses, arrangements, understandings or other documents filed with or required
to be filed as exhibits to the SEC Documents to which the Company therein is a
party or by which it may be bound have been so filed (the “Material
Contracts”). The Material Contracts that have been filed as exhibits
are complete and correct copies of the contracts, agreements, instruments,
leases, licenses, arrangement, understanding or other documents of which they
purport to be copies. The Material Contracts are valid and in full
force and effect as to the Company, and, to the Company’s knowledge, to the
other parties thereto. Except as otherwise disclosed herein, the
Company is not in violation of, or default under (and there does not exist any
event or condition which, after notice or lapse of time or both, would
constitute such a default under), the Material Contracts, except to the extent
that such violations or defaults, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. The Company
has not received any notice of cancellation or any written communication
threatening cancellation of any Material Contract by any other party
thereto. The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under the
Certificate of Incorporation, its bylaws or other governing documents that would
have a Material Adverse Effect.
2.21 Brokers and
Finders. The Company has not employed any broker, finder,
consultant or intermediary in connection with the transactions contemplated by
this Agreement that would be entitled to a broker’s, finder’s or similar fee or
commission in connection herewith and therewith.
2.22 Disclosure. This
Agreement, Schedules and Exhibits hereto and all other documents delivered to
the Investor in connection herewith or therewith at the Closing, do not contain
any untrue statement of a material fact, or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. There are no facts that,
individually or in the aggregate, would have a Material Adverse Effect that have
not been disclosed to each Investor in this Agreement (including the Schedules
and Exhibits hereto), the SEC Documents or any other documents delivered to the
Investor in connection herewith or therewith at the Closing.
3. REPRESENTATIONS
AND WARRANTIES OF INVESTOR.
The
Investor, hereby represents and warrants to the Company, that:
3.1 Organization. The
Investor is a corporation, limited liability company or limited partnership, as
the case may be, duly organized, validly existing and in good standing in the
jurisdiction of its formation. The Investor has all requisite power
and authority to execute, deliver and perform all of its obligations of this
Agreement.
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3.2 Authorization;
Enforcement. (a) The Investor has the requisite power and
authority to enter into and perform its obligations under this Agreement, (b)
the execution and delivery of this Agreement by the Investor and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Investor, and
(c) this Agreement has been duly executed and delivered by the
Investor. To the knowledge of the Investor, no other proceedings on
the part of the Investor are necessary to approve and authorize the execution
and delivery of this Agreement. This Agreement, when executed and
delivered, constitutes a valid and binding obligation of the Investor,
enforceable against the Investor in accordance with its terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors’ rights and
remedies.
3.3 No
Conflicts. The execution, delivery and performance of this
Agreement by the Investor, and the consummation by the Investor of the
transactions contemplated hereby will not (a) result in a violation of the
organizational documents of the Investor, or (b) result in a violation of
any statute, law, rule, regulation, writ, injunction, order, judgment or decree
applicable to the Investor, except where such violation, conflict, breach or
other consequence would not have a Material Adverse Effect. The
Investor is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental or regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement in accordance with the terms
hereof.
3.4 Investment
Representations.
(a) The
Investor is an “accredited investor”, as defined in Regulation D promulgated
under the Securities Act, and has such knowledge, sophistication and experience
in financial and business matters that the Investor is capable of evaluating the
merits and risks of the investment in the Shares.
(b) The
Investor (i) has adequate means of providing for its current financial needs and
possible contingencies, and has no need for liquidity of investment in the
Company, (ii) can afford to hold unregistered Shares for an indefinite period of
time and sustain a complete loss of the entire amount of the subscription, and
(iii) has not made an overall commitment to investments which are not readily
marketable that is so disproportionate as to cause such overall commitment to
become excessive.
(c) The
Investor agrees and understands that the Notes are being offered and sold to the
Investor in reliance upon specific exemptions from the registration requirements
of the Securities Act and the rules and regulations promulgated thereunder and
that, in order to determine the availability of such exemptions and the
eligibility of the Investor to acquire the Notes and the Conversion Shares, the
Company is relying upon the truth and accuracy of the Investor’s representations
and warranties, and compliance with the Investor’s covenants and agreements, set
forth in this Agreement. The Investor further agrees with the Company
that (i) the Notes are not being offered or sold to the Investor by means of any
form of general solicitation or general advertising, and in connection
therewith, the Investor did not (1) receive or review any advertisement,
article, notice or other communication published in a newspaper or magazine or
similar media or broadcast over television or radio, whether closed circuit or
generally available; or (2) attend any seminar meeting or industry investor
conference whose attendees were invited by any general solicitation or general
advertising. The Investor hereby acknowledges that the offering of
the Notes have not been reviewed by the SEC or any state regulatory authority
since the offering of the Notes is intended to be exempt from the registration
requirements of Section 5 of the Securities Act pursuant to Regulation D
promulgated thereunder. The Investor understands that the Notes and
the Conversion Shares have not been registered under the Securities Act and
agrees not to sell or otherwise transfer the Conversion Shares unless they are
registered under the Securities Act or unless an exemption from such
registration is available.
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(d) The Notes
are being purchased by the Investor for its own account, for investment purposes
only, not for the account of any other person, or corporation and not with a
view to distribution, assignment or resale to others in whole or in
part. The Investor has no present intention of selling, granting any
participation in, or otherwise distributing the Notes and the Conversion
Shares. The Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer, pledge, hypothecate,
grant any option to purchase or otherwise dispose of any of the Conversion
Shares. Nothing herein shall prevent the distribution of any
Conversion Shares to any subsidiary, member, partner, stockholder, affiliate or
former member, partner, stockholder or affiliate of the Investor in compliance
with the Securities Act and applicable state “blue sky” laws.
(e) The
Investor has had access to the Company’s SEC Documents and other public
filings.
(f) With
respect to corporate tax and other economic considerations involved in an
investment in the Notes, the Investor is not relying on the
Company. The Investor has carefully considered and has, to the extent
the Investor believes such discussion necessary, discussed with its professional
legal, tax, accounting and financial advisors the suitability of an investment
in the Notes for its particular tax and financial situation and has determined
that the Notes are a suitable investment for the Investor.
(g) The
Company has made available to the Investor all documents and information that
the Investor has requested relating to an investment in the Notes.
(h) Subject
to the Company’s disclosures in this Agreement and the SEC Documents, the
Investor recognizes that that investment in the Company involves substantial
risks, including loss of the entire amount of such investment and has taken full
cognizance of and understands all of the risk factors relating to the purchase
of the Shares.
(i) The
Investor has not been formed for the specific purpose of acquiring the
Shares.
4. COVENANTS.
4.1 Confidentiality. The
Investor hereby acknowledges that unauthorized disclosure of information
regarding the offering of the Shares pursuant to this Agreement may cause the
Company to violate Regulation FD and the Investor agrees to keep such
information confidential. The Company shall not publicly disclose the name of
the Investor, or include the name of the Investor in any filing with the
Commission or any regulatory agency or trading market, without the prior written
consent of such Investor, except (i) as required by the federal securities laws
and in connection with the registration statement contemplated by this Agreement
and (ii) to the extent such disclosure is required by law or trading market
regulations.
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4.2 Restrictions on
Transfer. The Investor acknowledge that (a) the Notes and the Conversion
Shares have not been registered under the provisions of the 1933 Act, and may
not be transferred unless (i) subsequently registered thereunder or (ii) the
Investor shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Conversion Shares to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration; and (b) any sale of the Conversion
Shares made in reliance on Rule 144 promulgated under the 1933 Act may be made
only in accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder.
4.3 Restrictive
Legend. The
Investor acknowledges and agrees that the Notes and the Conversion Shares shall
bear a restrictive legend and a stop-transfer order may be placed against
transfer of any such Securities except that the requirement for a restrictive
legend shall not apply to Conversion Shares sold pursuant to a current and
effective registration statement or a sale pursuant Rule 144 or any successor
rule.
4.4 Securities
Compliance. The Company shall take all action necessary to
comply with any federal or state securities laws applicable to the transactions
contemplated hereunder.
5. REGISTRATION
RIGHTS.
5.1 Registrable
Shares. As used herein the term “Registrable Shares” means the
shares of common stock into which the Notes are convertible.
5.2 Mandatory
Registration.
(a) On or
before forty-five (45) days of the date hereof, the Company shall prepare and
file with the Commission a Registration Statement covering the resale of all of
the Registrable Shares for an offering to be made on a continuous basis pursuant
to Rule 415 (the “Required Filing Date”). The Registration Statement
required hereunder shall be on Form S-1 (except if the Company is not
then eligible to register for resale the Registrable Shares on Form S-1, in
which case the Registration Statement shall be on another appropriate form in
accordance herewith). The Company shall use its commercially
reasonable efforts to cause the Registration Statement to be declared effective
under the Securities Act as promptly as possible after the filing thereof, but
in any event not later than the 120th day after filing thereof (the
“Effectiveness Date”), and shall use its commercially reasonable efforts to keep
the Registration Statement continuously effective under the Securities Act until
the earlier of the date when all Registrable Shares covered by the Registration
Statement (a) have been sold pursuant to the Registration Statement or an
exemption from the registration requirements of the Securities Act or (b) may be
sold without restrictions pursuant to Rule 144 counsel to the Company pursuant
to a written opinion letter to such effect, addressed and acceptable to the
Company’s transfer agent and the affected Investors or (c) the second
anniversary of the date on which the Registration Statement is declared
effective (the “Effectiveness
Period”) or such longer time as the Company may determine.
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(b) If: (i) the Registration
Statement is not filed on or prior to its Required Filing Date, or (ii) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act, within five
business days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not
be “reviewed”, or not subject to further review, or (iii) a Registration
Statement filed or required to be filed hereunder is not declared effective by
the Commission on or before the required Effectiveness Date, or (iv) after a
Registration Statement is first declared effective by the Commission, it ceases
for any reason to remain continuously effective as to all Registrable Securities
for which it is required to be effective, or the Investor is not permitted to
utilize the Prospectus therein to resell such Registrable Securities, for in any
such cases 30 business days (which need not be consecutive days) in the
aggregate during any 12-month period (any such failure or breach being referred
to as an “Event”) and for
purposes of clause (i) or (iii) the date on which such Event occurs, or for
purposes of clause (ii) the date on which such five business day period is
exceeded, or for purposes of clause (iv) the date on which such 30 business day
period is exceeded, being referred to as “Event Date”, then in
addition to any other rights the Investors may have hereunder or under
applicable law, the Company shall pay to the Investor liquidated damages, in
cash or shares of Common Stock at the option of the Company, at a rate equal to
one (1%) percent per month (pro rata on a 30-day basis) of the total
Purchase Price, up to a maximum of ten (10%) percent of the total principal
amount of the Notes. Such liquidated damages shall be payable within
ten (10) days of the end of each one-month anniversary of the filing deadline
set forth in this section 5(c).
5.3 Covenants of the Company
With Respect to Registration.
The
Company covenants and agrees as follows:
(a)
Not less than one (1) business day prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto, furnish to the Investors copies of all such documents proposed to be
filed (including documents incorporated or deemed incorporated by reference to
the extent requested by such person), which documents will be subject to the
review of such Investors within such five business days. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Investor shall reasonably object in good faith
based on the advice of counsel and the Company shall make reasonable efforts to
address the objections raised.
(b) The Company shall prepare and file with the
SEC such amendments and supplements to such Registration Statement and the
prospectus used in connection with such Registration Statement as may be
necessary to comply with the Securities Act with respect to the disposition of
all Shares covered by such Registration Statement during the period of time such
Registration Statement remains effective;
(c) The Company shall use its commercially
reasonable efforts to register and qualify the Shares covered by such
Registration Statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Investors; provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions;
(d) During the period of time such
Registration Statement remains effective, the Company shall notify each Investor
of Registrable Shares covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
or the happening of any event as a result of which the prospectus included in
such Registration Statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing;
5.4 Expenses. All
expenses incurred in effecting a registration pursuant to this Agreement
(including, without limitation, all registration, qualification and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses) shall be borne by the Company. All transfer taxes,
underwriting discounts and selling commissions applicable to the sale of the
Registrable Shares shall be borne by the Investors thereof.
5.5 Indemnification. In
the event any Registrable Shares are included in a Registration Statement under
this Section 5:
10
(a) To the
extent permitted by law, the Company will indemnify and hold harmless each
Investor, the partners, officers, directors, stockholders, members and managers
of such Investor, each person, if any, who controls such Investor within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (each, a “Violation”): (i) any untrue statement or
alleged untrue statement of a material fact contained in such Registration
Statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; and the Company will pay to
each such Investor, underwriter or controlling person, as incurred, any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 5.5(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld or delayed), nor shall the Company be liable to any
Investor, underwriter or controlling person for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Investor, underwriter or controlling person.
(b) To the
extent permitted by law, each selling Investor will indemnify and hold harmless
the Company, each of its directors, each of its officers who has signed the
Registration Statement, each person, if any, who controls the Company within the
meaning of the Securities Act, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such violation occurs in reliance upon
and in conformity with written information furnished by such Investor expressly
for use in connection with such registration; and each such Investor will pay,
as incurred, any legal or other expenses reasonably incurred by any person
indemnified pursuant to this Section 5.5(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 5.5(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Investor (which consent shall
not be unreasonably withheld or delayed); provided further that in no
event shall any indemnity under this Section 5.5(b) exceed the net proceeds from
the offering received by such Investor.
(c) Promptly
after receipt by an indemnified party under this Section 5.5 of notice of the
commencement of any action (including any governmental action), such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 5.5, deliver to the indemnifying party a written notice
of the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain one
separate counsel, with the reasonable fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time after receipt of
notice of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 5.5, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
5.5.
11
(d) If the
indemnification provided for in this Section 5.5 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any loss,
liability, claim, damage or expense referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party hereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such loss, liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with the statements
or omissions that resulted in such loss, liability, claim, damage or expense as
well as any other relevant equitable considerations; provided that in no event
shall any contribution by an Investor under this Section 5.5(d) exceed the net
proceeds from the offering received by such Investor. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties’ relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
(e) Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall
control.
(f) The
obligations of the Company and Investors under this Section 5.5 shall survive
the completion of any offering of Registrable Shares in a registration statement
and the termination of this Agreement.
5.6 Reports Under Exchange
Act. With a view to making available to the Investors the
benefits of Rule 144 promulgated under the Securities Act and any other rule or
regulation of the SEC that may at any time permit an Investor to sell Shares of
the Company to the public without registration, the Company agrees
to:
(a) Make and
keep public information available, as those terms are used in SEC Rule 144, at
all times;
(b) File with
the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act;
(c) Furnish
to any Investor, so long as the Investor owns any Registrable Shares, forthwith
on request, (i) a written statement by the Company that it has complied with the
reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any Investor of any rule
or regulation of the SEC that permits the selling of any such securities without
registration; and
12
(iv) Undertake
any additional actions reasonably necessary to maintain the availability of the
use of Rule 144.
6. CONDITIONS
TO INVESTOR OBLIGATIONS AT CLOSING.
The
obligations of the Investor to purchase the Notes at the Closing are subject to
the fulfillment on or prior to the Closing of each of the following
conditions:
6.1 Representations and
Warranties. The representations and warranties of the Company
contained in Section 2 shall be true in all material respects on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date, except that any representations and
warranties stated as being true and correct as of a date other than the date
hereof shall be true and correct as of such other date.
6.2 Performance. The
Company shall have performed and complied with all agreements, obligations and
conditions contained in this Agreement that are required to be performed or
complied with by it on or before the Closing.
6.3 Qualifications. All
authorizations, approvals, or permits, if any, of any governmental authority or
regulatory body of the United States or of any state of the United States that
are required in connection with the lawful issuance and sale of the Shares to
the Investors pursuant to this Agreement shall have been duly obtained and shall
be effective on and as of the Closing.
6.4 Proceedings and
Documents. All corporate and other proceedings undertaken in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to each
Investor, and they shall have received all such counterpart original and
certified or other copies of such documents as they may reasonably
request.
6.5 Absence of
Litigation. No proceeding challenging this Agreement or the
transactions contemplated hereby or thereby, or seeking to prohibit, alter,
prevent or delay the Closing, shall have been instituted against the Company
before any court, arbitrator or governmental body, agency or official and shall
be pending.
6.6 Registration
Statement. With respect to the Final Closing, the Registration Statement
shall have been declared effective by the SEC.
6.7 Legal
Prohibition. The purchase of the Notes by the Investors shall
not be prohibited by any law or governmental order or regulation.
6.8 Investor Relations.
The Company shall have retained an investor relations firm to perform investor
relations services, reasonably acceptable to the Company.
6.9 DWAC. The Company
shall take all action to add its shares of common stock to the list of DWAC
eligible issues.
13
7. CONDITIONS
TO THE COMPANY’S OBLIGATIONS AT CLOSING.
The
obligations of the Company under Section 1 of this Agreement are subject to the
fulfillment on or before the Closing of each of the following
conditions:
7.1 Representations and
Warranties. The representations and warranties of each
Investor contained in Section 3 shall be true in all respects on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date, except that any representations and
warranties stated as being true and correct as of a date other than the date
hereof shall be true and correct as of such other date.
7.2 Performance. Each
Investor shall have performed and complied with all agreements, obligations and
conditions contained in this Agreement that are required to be performed or
complied with by it on or before the Closing.
7.3 Qualifications. All
authorizations, approvals, or permits, if any, of any governmental authority or
regulatory body of the United States or of any state of the United States that
are required in connection with the lawful issuance and sale of the Shares to
the Investors pursuant to this Agreement shall have been duly obtained and shall
be effective on and as of the Closing.
7.4 Proceedings and
Documents. All corporate and other proceedings undertaken in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Company and its counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
8. MISCELLANEOUS.
8.1 Survival of
Warranties. The warranties, representations, agreements,
covenants and undertakings of the Company or the Investor contained in or made
pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing and shall in no way be affected by any investigation
of the subject matter thereof made by or on behalf of the Investors or the
Company.
8.2 Incorporation by
Reference. All Exhibits and Schedules appended to this
Agreement are herein incorporated by reference and made a part
hereof.
8.3 Successor and
Assignees. All terms, covenants, agreements, representations,
warranties and undertakings in this Agreement made by and on behalf of any of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto (including transferees of any
Shares) whether so expressed or not, subject to Section 5.7.
8.4 Amendments and
Waivers. Neither this Agreement nor any provision hereof shall
be waived, modified, changed, discharged, terminated, revoked or canceled except
by an instrument in writing signed by the party against whom any change,
discharge or termination is sought. Failure of either party to
exercise any right or remedy under this Agreement or any other agreement between
the Company and the Investors, or otherwise, or delay by the Company or the
Investors in exercising such right or remedy, will not operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by
law.
14
8.5 Governing
Law. This Agreement shall be deemed a contract made under the
laws of the State of New York, without giving effect to the conflicts of law
principles thereof.
8.6 Notices. All
notices, requests, consents, demands, notice or other communication required or
permitted under this Agreement shall be in writing and shall be deemed duly
given and received when delivered personally or transmitted by facsimile, or one
business day after being deposited for next-day delivery with a nationally
recognized overnight delivery service, or three days after being deposited as
first class mail with the United States Postal Services, all charges or postage
prepaid, and properly addressed:
to the
Company at:
Tao
Minerals, Ltd.
Officina
624, Empresarial Mall Ventura, Xxx.00#0X
Xxx 00,
Xxxxxxxx, Xxxxxxxx
Tel: (___)
_____________
Fax: (___)
______________
Attention: Chief
Executive Officer
with a
copy (which shall not constitute notice) to:
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
00
Xxxxxxxx, 00xx
Xxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Fax:
(000) 000-0000
Attention:
Xxxxxxx Xxxxxxx
or to the
Investors at the address set forth opposite the Investor’s name on Exhibit A
hereto
or such
other address as may be furnished in writing by a party hereto.
8.7 Counterparts. This
Agreement may be executed in counterparts, all of which together shall
constitute one and the same instrument.
8.8 Effect of
Headings. The section and paragraph headings herein are
included for convenience only and shall not affect the construction
hereof.
8.9 Entire
Agreement. This Agreement and the Exhibits and Schedules
hereto and thereto constitute the entire agreement among the Company and the
Investors with respect to the subject matter hereof. There are no
representations, warranties, covenants or undertakings with respect to the
subject matter hereof other than those expressly set forth
herein. This Agreement supersedes all prior agreements between the
parties with respect to the Shares purchased hereunder and the subject matter
hereof.
8.10 Severability. If
any provision of this Agreement is held by a court of competent jurisdiction to
be unenforceable under applicable law, such provision shall be replaced with a
provision that accomplishes, to the extent possible, the original business
purpose of such provision in a valid and enforceable manner, and the balance of
the Agreement shall be interpreted as if such provision were so modified and
shall be enforceable in accordance with its terms.
8.11 Interpretation. This
Agreement shall be construed according to its fair language. The rule
of construction to the effect that any ambiguities are to be resolved against
the drafting party shall not be employed in the interpretation of this
Agreement.
8.12 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.
[Signature
page follows]
15
IN
WITNESS WHEREOF, this Agreement has been executed as of the date first above
written, by the duly authorized representatives of the parties
hereto.
| TAO MINERALS, LTD. | |||
|
|
By:
|
/s/ Xxxxx Xxxxxx | |
| Name: Xxxxx Xxxxxx | |||
| Title: President | |||
| OUTBOARD INVESTMENTS LTD. | |||
|
|
By:
|
/s/ Xxxx X. X’Xxxx | |
| Name: Xxxx X. X’Xxxxx | |||
| Title: Director | |||
16
Schedule
A
COMPANY
SCHEDULE OF EXCEPTIONS
None
17
Exhibit
A
|
Investor
Name and
Notice Address
|
Cash
Investment Amount
|
|
Outboard
Investments, Ltd.
BCM
Cape Building
Leeward
Highway Providenciales
Turks
and Caicos, BWI
|
$1,000,000
|
18
