COMMON STOCK PURCHASE AGREEMENT
EXECUTION
COPY
COMMON
STOCK PURCHASE AGREEMENT
(the
“Agreement”), dated as of January 20, 2006, by and between GOLDEN
PHOENIX MINERALS, INC.,
a
Minnesota corporation (the “Company”), and FUSION
CAPITAL FUND II, LLC,
an
Illinois limited liability company (the “Buyer”). Capitalized terms used herein
and not otherwise defined herein are defined in Section 10 hereof.
WHEREAS:
Subject
to the terms and conditions set forth in this Agreement, the Company wishes
to
sell to the Buyer, and the Buyer wishes to buy from the Company, up to Six
Million Dollars ($6,000,000) of the Company's common stock, no par value per
share (the “Common Stock”). The shares of Common Stock to be purchased hereunder
are referred to herein as the "Purchase Shares."
NOW
THEREFORE,
the
Company and the Buyer hereby agree as follows:
1.
PURCHASE
OF COMMON STOCK.
Subject
to the terms and conditions set forth in Sections 6, 7 and 9 below, the Company
hereby agrees to sell to the Buyer, and the Buyer hereby agrees to purchase
from
the Company, Purchase Shares as follows:
(a) Commencement
of Purchases of Common Stock.
The
purchase and sale of Purchase Shares hereunder shall commence (the
"Commencement") within five (5) Trading Days following the date of satisfaction
of the conditions to the Commencement set forth in Sections 6 and 7 below (the
date of such Commencement, the "Commencement Date").
(b) Buyer's
Purchase Rights and Obligations.
Subject
to the Company’s right to suspend purchases under Section 1(d)(ii) hereof, the
Buyer shall buy Purchase Shares (“Daily Purchases”) on each Trading Day during
each Monthly Period equal to the Daily Purchase Amount (as defined in Section
1(c)(i)) at the Purchase Price. From time to time, the Company shall also have
the right but not the obligation, by its delivery to the Buyer of a Block
Purchase Notice (as defined in Section 1(c)(iv)), to require the Buyer to buy
Purchase Shares (a “Block Purchase”) equal to the Block Purchase Amount (as
defined in Section 1(c)(iv)) at the Block Purchase Price (as defined in Section
1(c)(iv)). The
Buyer
shall pay to the Company an amount equal to the Purchase Amount with respect
to
such Purchase Shares as full payment for the purchase of the Purchase Shares
so
received. The Company shall not issue any fraction of a share of Common Stock
upon any purchase. If the issuance would result in the issuance of a fraction
of
a share of Common Stock, the Company shall round such fraction of a share of
Common Stock up or down to the nearest whole share. All payments made under
this
Agreement shall be made in lawful money of the United States of America by
check
or wire transfer of immediately available funds to such account as the Company
may from time to time designate by written notice in accordance with the
provisions of this Agreement. Whenever any amount expressed to be due by the
terms of this Agreement is due on any day that is not a Trading Day, the same
shall instead be due on the next succeeding day which is a Trading
Day.
(c) The
Daily Purchase Amount; Company's Right to Decrease or Increase the Daily
Purchase Amount; the Block Purchase Amount.
(i) The
Daily Purchase Amount.
As used
herein the term “Original Daily Purchase Amount” shall mean Twelve Thousand Five
Hundred Dollars ($12,500) per Trading Day. As used herein, the term “Daily
Purchase Amount” shall mean initially Twelve Thousand Five Hundred Dollars
($12,500) per Trading Day, which amount may be increased or decreased from
time
to time pursuant to this Section 1(c).
(ii) Company’s
Right to Decrease the Daily Purchase Amount.
The
Company shall always have the right at any time to decrease the amount of the
Daily Purchase Amount by delivering written notice (a “Daily Purchase Amount
Decrease Notice”) to the Buyer which notice shall specify the new Daily Purchase
Amount. The decrease in the Daily Purchase Amount shall become effective one
Trading Day after receipt by the Buyer of the Daily Purchase Amount Decrease
Notice. Any purchases by the Buyer which have a Purchase Date on or prior to
the
first (1st) Trading Day after receipt by the Buyer of a Daily Purchase Amount
Decrease Notice must be honored by the Company as otherwise provided herein.
The
decrease in the Daily Purchase Amount shall remain in effect until the Company
delivers to the Buyer a Daily Purchase Amount Increase Notice (as defined
below).
(iii) Company’s
Right to Increase the Daily Purchase Amount.
The
Company shall have the right (but not the obligation) to increase the amount
of
the Daily Purchase Amount in accordance with the terms and conditions set forth
in this Section 1(c)(iii) by delivering written notice to the Buyer stating
the
new amount of the Daily Purchase Amount (a “Daily Purchase Amount Increase
Notice”). A Daily Purchase Amount Increase Notice shall be effective five (5)
Trading Days after receipt by the Buyer. The Company shall always have the
right
at any time to increase the amount of the Daily Purchase Amount up to the
Original Daily Purchase Amount. With respect to increases in the Daily Purchase
Amount above the Original Daily Purchase Amount, as the market price for the
Common Stock increases the Company shall have the right from time to time to
increase the Daily Purchase Amount as follows. For every $0.10 increase in
Threshold Price above $0.20 (subject to equitable adjustment for any
reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction), the Company shall have the right to increase the Daily
Purchase Amount by up to an additional $2,500 in excess of the Original Daily
Purchase Amount. “Threshold Price” for purposes hereof means the lowest Sale
Price of the Common Stock during the five (5) consecutive Trading Days
immediately prior to the submission to the Buyer of a Daily Purchase Amount
Increase Notice (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction).
For example, if the Threshold Price is $0.30, the Company shall have the right
to increase the Daily Purchase Amount to up to $15,000 in the aggregate. If
the
Threshold Price is $0.50, the Company shall have the right to increase the
Daily
Purchase Amount to up to $20,000 in the aggregate. Any increase in the amount
of
the Daily Purchase Amount shall continue in effect until the delivery to the
Buyer of a Daily Purchase Amount Decrease Notice. However, if at any time during
any Trading Day the Sale Price of the Common Stock is below the applicable
Threshold Price, such increase in the Daily Purchase Amount shall be void and
the Buyer’s obligations to buy Purchase Shares hereunder in excess of the
applicable maximum Daily Purchase Amount shall be terminated. Thereafter, the
Company shall again have the right to increase the amount of the Daily Purchase
Amount as set forth herein by delivery of a new Daily Purchase Amount Increase
Notice only if the Sale Price of the Common Stock is above the applicable
Threshold Price on each of five (5) consecutive Trading Days immediately prior
to such new Daily Purchase Amount Increase Notice.
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(iv) The
Block Purchase Amount.
As used
herein the term “Block Purchase Amount” shall mean such Purchase Amount as
specified by the Company in a Block Purchase Notice. As used herein the term
“Block Purchase Notice” shall mean an irrevocable written notice from the
Company to the Buyer directing the Buyer to buy the Purchase Amount in Purchase
Shares as specified by the Company therein at the Block Purchase Price. For
a
Block Purchase Notice to be valid the following conditions must be met: (1)
the
Block Purchase Amount shall not exceed One Hundred Thousand Dollars ($100,000)
per Block Purchase Notice, (2) the Company must deliver the Purchase Shares
on
the same day as the Block Purchase Notice is delivered and (3) the Sale Price
of
the Common Stock must have been above $0.20 (subject to equitable adjustment
for
any reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction) during the ten (10) Trading Days prior to the delivery
of
the Block Purchase Notice. The Block Purchase Amount may be increased to up
to
$250,000 if the Sale Price of the Common Stock is above $0.35 (subject to
equitable adjustment for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction) during the ten (10) Trading
Days prior to the delivery of the Block Purchase Notice. The Block Purchase
Amount may be increased to up to $500,000 if the Sale Price of the Common Stock
is above $0.60 (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction)
during the ten (10) Trading Days prior to the delivery of the Block Purchase
Notice. The Company may deliver multiple Block Purchase Notices as it shall
determine; provided however, at least ten (10) Trading Days must have passed
since the most recent Block Purchase was completed. As used herein, the term
“Block Purchase Price” shall mean the lowest Purchase Price during the previous
fifteen (15) Trading Days prior to the date that the Block Purchase Notice
was
received by the Buyer.
(d) Limitations
on Purchases.
(i) Limitation
on Beneficial Ownership.
The
Buyer shall not have the right or the obligation to purchase shares of Common
Stock under this Agreement to the extent that after giving effect to such
purchase the Buyer together with its affiliates would beneficially own in excess
of 9.9% of the outstanding shares of the Common Stock following such purchase.
For purposes hereof, the number of shares of Common Stock beneficially owned
by
the Buyer and its affiliates or acquired by the Buyer and its affiliates, as
the
case may be, shall include the number of shares of Common Stock issuable in
connection with a purchase under this Agreement with respect to which the
determination is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (1) a purchase of the remaining Available
Amount which has not been submitted for purchase, and (2) exercise or conversion
of the unexercised or unconverted portion of any other securities of the Company
(including, without limitation, any notes or warrants) subject to a limitation
on conversion or exercise analogous to the limitation contained herein
beneficially owned by the Buyer and its affiliates. For purposes of this
Section, in determining the number of outstanding shares of Common Stock the
Buyer may rely on the number of outstanding shares of Common Stock as reflected
in (1) the Company's most recent Form 10-Q or Form 10-K, as the case may be,
(2)
a more recent public announcement by the Company or (3) any other written
communication by the Company or its Transfer Agent setting forth the number
of
shares of Common Stock outstanding. Upon the reasonable written or oral request
of the Buyer, the Company shall promptly confirm orally and in writing to the
Buyer the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to any purchases under this Agreement by the Buyer since the date as
of
which such number of outstanding shares of Common Stock was reported. Except
as
otherwise set forth herein, for purposes of this Section 1(d)(i), beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended.
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(ii) Company's
Right to Suspend Purchases.
The
Company may, at any time, give written notice (a " Daily Purchase Suspension
Notice") to the Buyer suspending Daily Purchases of Purchase Shares by the
Buyer
under this Agreement. The Daily Purchase Suspension Notice shall be effective
only for Daily Purchases that have a Purchase Date later than one (1) Trading
Day after receipt of the Daily Purchase Suspension Notice by the Buyer. Any
Daily Purchase by the Buyer that has a Purchase Date on or prior to the first
(1st) Trading Day after receipt by the Buyer of a Daily Purchase Suspension
Notice from the Company must be honored by the Company as otherwise provided
herein. Such Daily Purchase suspension shall continue in effect until a
revocation in writing by the Company, at its sole discretion.
(iii) Purchase
Price Floor.
The
Company shall not affect any sales under this Agreement and the Buyer shall
not
have the right nor the obligation to purchase any Purchase Shares under this
Agreement on any Trading Day where the Purchase Price for any purchases of
Purchase Shares would be less than the Floor Price. “Floor Price” means $0.10,
which shall
be
appropriately adjusted for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction.
(e) Records
of Purchases.
The
Buyer and the Company shall each maintain records showing the remaining
Available Amount at any give time and the dates and Purchase Amounts for each
purchase or shall use such other method, reasonably satisfactory to the Buyer
and the Company.
(f) Taxes.
The
Company shall pay any and all transfer, stamp or similar taxes that may be
payable with respect to the issuance and delivery of any shares of Common Stock
to the Buyer made under this Agreement.
2. BUYER'S
REPRESENTATIONS AND WARRANTIES.
The
Buyer
represents and warrants to the Company that as of the date hereof and as of
the
Commencement Date:
(a) Investment
Purpose.
The
Buyer is entering into this Agreement and acquiring the Commitment Shares,
(as
defined in Section 4(f) hereof) (this Agreement and the Commitment Shares
are
collectively referred to herein as the "Securities"), for its own account for
investment only and not with a view towards, or for resale in connection with,
the public sale or distribution thereof; provided however, by making the
representations herein, the Buyer does not agree to hold any of the Securities
for any minimum or other specific term.
(b) Accredited
Investor Status.
The
Buyer is an "accredited investor" as that term is defined in Rule 501(a)(3)
of
Regulation D.
(c) Reliance
on Exemptions.
The
Buyer understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in
part
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the
Securities.
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(d) Information.
The
Buyer has been furnished with all materials relating to the business, finances
and operations of the Company and materials relating to the offer and sale
of
the Securities that have been reasonably requested by the Buyer, including,
without limitation, the SEC Documents (as defined in Section 3(f) hereof).
The
Buyer understands that its investment in the Securities involves a high degree
of risk. The Buyer (i) is able to bear the economic risk of an investment in
the
Securities including a total loss, (ii) has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and
risks of the proposed investment in the Securities and (iii) has had an
opportunity to ask questions of and receive answers from the officers of the
Company concerning the financial condition and business of the Company and
others matters related to an investment in the Securities. Neither such
inquiries nor any other due diligence investigations conducted by the Buyer
or
its representatives shall modify, amend or affect the Buyer's right to rely
on
the Company's representations and warranties contained in Section 3 below.
The
Buyer has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Securities.
(e) No
Governmental Review.
The
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
(f) Transfer
or Resale.
The
Buyer understands that except as provided in the Registration Rights Agreement
(as defined in Section 4(a) hereof): (i) the Securities have not been and are
not being registered under the 1933 Act or any state securities laws, and may
not be offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder or (B) an exemption exists permitting such Securities
to
be sold, assigned or transferred without such registration; (ii) any sale of
the
Securities made in reliance on Rule 144 may be made only in accordance with
the
terms of Rule 144 and further, if Rule 144 is not applicable, any resale of
the
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined
in
the 0000 Xxx) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register the Securities
under the 1933 Act or any state securities laws or to comply with the terms
and
conditions of any exemption thereunder.
(g) Validity;
Enforcement.
This
Agreement has been duly and validly authorized, executed and delivered on behalf
of the Buyer and is a valid and binding agreement of the Buyer enforceable
against the Buyer in accordance with its terms, subject as to enforceability
to
general principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to,
or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
(h) Residency.
The
Buyer is a resident of the State of Illinois.
(i) No
Prior Short Selling.
The
Buyer represents and warrants to the Company that at no time prior to the date
of this Agreement has any of the Buyer, its agents, representatives or
affiliates engaged in or effected, in any manner whatsoever, directly or
indirectly, any (i) "short sale" (as such term is defined in Rule 3b-3 of the
Securities Exchange Act of 1934, as amended (the "1934 Act")) of the Common
Stock or (ii) hedging transaction, which establishes a net short position with
respect to the Common Stock.
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3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to the Buyer that as of the date hereof and
as
of the Commencement Date:
(a) Organization
and Qualification.
The
Company and its "Subsidiaries" (which for purposes of this Agreement means
any
entity in which the Company, directly or indirectly, owns 50% or more of the
voting stock or capital stock or other similar equity interests) are
corporations duly organized and validly existing in good standing under the
laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authority to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property 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 be in good standing could not
reasonably be expected to have a Material Adverse Effect. As used in this
Agreement, "Material Adverse Effect" means any material adverse effect on any
of: (i) the business, properties, assets, operations, results of operations
or
financial condition of the Company and its Subsidiaries, if any, taken as a
whole, or (ii) the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined in Section 3(b) hereof).
The Company has no Subsidiaries except as set forth on Schedule
3(a).
(b) Authorization;
Enforcement; Validity.
(i) The
Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement, the Registration Rights Agreement
and each of the other agreements entered into by the parties on the Commencement
Date and attached hereto as exhibits to this Agreement (collectively, the
"Transaction Documents"), and to issue the Securities in accordance with the
terms hereof and thereof, (ii) the execution and delivery of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation, the issuance
of
the Commitment Shares and the reservation for issuance and the issuance of
the
Purchase Shares issuable under this Agreement, 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 shareholders, (iii) this Agreement
has been, and each other Transaction Document shall be on the Commencement
Date,
duly executed and delivered by the Company and (iv) this Agreement constitutes,
and each other Transaction Document upon its execution on behalf of the Company,
shall constitute, the valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies. The Board of Directors of the Company has approved the resolutions
(the “Signing Resolutions”) substantially in the form as set forth as
Exhibit
C-1
attached
hereto to authorize this Agreement and the transactions contemplated hereby.
The
Signing Resolutions are valid, in full force and effect and have not been
modified or supplemented in any respect other than by the resolutions set forth
in Exhibit
C-2
attached
hereto regarding the registration statement referred to in Section 4 hereof.
The
Company has delivered to the Buyer a true and correct copy of a unanimous
written consent adopting the Signing Resolutions executed by all of the members
of the Board of Directors of the Company. No other approvals or consents of
the
Company’s Board of Directors and/or shareholders is necessary under applicable
laws and the Company’s Certificate of Incorporation and/or Bylaws to authorize
the execution and delivery of this Agreement or any of the transactions
contemplated hereby, including, but not limited to, the issuance of the
Commitment Shares and the issuance of the Purchase Shares.
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(c) Capitalization.
As of
the date hereof, the authorized capital stock of the Company consists of (i)
200,000,000 shares of Common Stock, of which as of the date hereof, 136,030,087
shares are issued and outstanding, 0 are held as treasury shares, 12,574,313
are
reserved for the X.X. Xxxxx Obligation, 5,987,676 shares are reserved for
issuance pursuant to the Company's stock option plans of which no shares remain
available for future grants and 3,123,467 shares are issuable and reserved
for
issuance pursuant to securities (other than stock options issued pursuant to
the
Company's stock option plans) exercisable or exchangeable for, or convertible
into, shares of Common Stock and (ii) no shares of Preferred Stock. All of
such
outstanding shares have been, or upon issuance will be, validly issued and
are
fully paid and nonassessable. Except as disclosed in Schedule 3(c), (i) no
shares of the Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by
the
Company, (ii) there are no outstanding debt securities, (iii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by
which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries
or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
any
shares of capital stock of the Company or any of its Subsidiaries, (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement), (v) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of
its
Subsidiaries is or may become bound to redeem a security of the Company or
any
of its Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance
of
the Securities as described in this Agreement and (vii) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements or
any
similar plan or agreement. The Company has furnished to the Buyer 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 amended and as in effect on the date hereof (the
"By-laws"), and summaries of the terms of all securities convertible into or
exercisable for Common Stock, if any, and copies of any documents containing
the
material rights of the holders thereof in respect thereto.
(d) Issuance
of Securities.
The
Commitment Shares have been duly authorized and, upon issuance in accordance
with the terms hereof, the Commitment Shares shall be (i) validly issued, fully
paid and non-assessable and (ii) free from all taxes, liens and charges with
respect to the issue thereof. 20,000,000 shares of Common Stock have been duly
authorized and reserved for issuance upon purchase under this Agreement. Upon
issuance and payment therefor in accordance with the terms and conditions of
this Agreement, the Purchase Shares shall be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock.
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(e) No
Conflicts.
Except
as disclosed in Schedule 3(e), the execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of
the
transactions contemplated hereby and thereby (including, without limitation,
the
reservation for issuance and issuance of the Purchase Shares) will not (i)
result in a violation of the Certificate of Incorporation, any Certificate
of
Designations, Preferences and Rights of any outstanding series of preferred
stock of the Company or the By-laws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become
a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to
which
the Company or any of its Subsidiaries is a party, or result in a violation
of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Principal Market applicable to the Company or any of its Subsidiaries) or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected, except in the case of conflicts, defaults and violations under
clause (ii), which could not reasonably be expected to result in a Material
Adverse Effect. Except as disclosed in Schedule 3(e), neither the Company nor
its Subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation, any Certificate of Designation, Preferences and
Rights of any outstanding series of preferred stock of the Company or By-laws
or
their organizational charter or by-laws, respectively. Except as disclosed
in
Schedule 3(e), neither the Company nor any of its Subsidiaries is in violation
of any term of or is in default under any material contract, agreement,
mortgage, indebtedness, indenture, instrument, judgment, decree or order or
any
statute, rule or regulation applicable to the Company or its Subsidiaries,
except for possible conflicts, defaults, terminations or amendments which could
not reasonably be expected to have a Material Adverse Effect. The business
of
the Company and its Subsidiaries is not being conducted, and shall not be
conducted, in violation of any law, ordinance, regulation of any governmental
entity, except for possible violations, the sanctions for which either
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the 1933 Act or applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under or contemplated by the Transaction
Documents in accordance with the terms hereof or thereof. Except as disclosed
in
Schedule 3(e), all consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence
shall
be obtained or effected on or prior to the Commencement Date. Except as listed
in Schedule 3(e), since January 1, 2004 the Company has not received nor
delivered any notices or correspondence from or to the Principal Market. The
Principal Market has not commenced any delisting proceedings against the
Company.
(f) SEC
Documents; Financial Statements.
Except
as disclosed in Schedule 3(f), since January 1, 2004, the Company has timely
filed all reports, schedules, forms, statements and other documents required
to
be filed by it with the SEC pursuant to the reporting requirements of the 1934
Act (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). As of their respective dates (except as they have been correctly
amended), the SEC Documents complied in all material respects with the
requirements of the 1934 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 as they may have
been properly 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 (except as they
have been properly amended), the financial statements of the Company included
in
the SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with
respect thereto. Such financial statements have been prepared in accordance
with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments). Except as listed
in
Schedule 3(f), the Company has received no notices or correspondence from the
SEC since January 1, 2004. The SEC has not commenced any enforcement proceedings
against the Company or any of its subsidiaries.
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(g) Absence
of Certain Changes.
Except
as disclosed in Schedule 3(g), since March 31, 2004, there has been no material
adverse change in the business, properties, operations, financial condition
or
results of operations of the Company or its Subsidiaries. The Company has not
taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any Bankruptcy Law nor does the Company or any of its
Subsidiaries have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy or
insolvency proceedings. The Company is financially solvent and is generally
able
to pay its debts as they become due.
(h) Absence
of Litigation.
There
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the Company or any of its Subsidiaries, threatened
against or affecting the Company, the Common Stock or any of the Company's
Subsidiaries or any of the Company's or the Company's Subsidiaries' officers
or
directors in their capacities as such, which could reasonably be expected to
have a Material Adverse Effect. A description of each action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body which, as of the date of this
Agreement, is pending or threatened in writing against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's
or
the Company's Subsidiaries' officers or directors in their capacities as such,
is set forth in Schedule 3(h).
(i) Acknowledgment
Regarding Buyer's Status.
The
Company acknowledges and agrees that the Buyer is acting solely in the capacity
of arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges
that the Buyer is not acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Transaction Documents and
the
transactions contemplated hereby and thereby and any advice given by the Buyer
or any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to the Buyer's purchase of the Securities. The Company further
represents to the Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by
the
Company and its representatives and advisors.
(j) No
General Solicitation.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 0000 Xxx) in connection with
the
offer or sale of the Securities.
(k) Intellectual
Property Rights.
The
Company and its Subsidiaries own or possess adequate rights or licenses to
use
all material trademarks, trade names, service marks, service xxxx registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights necessary
to
conduct their respective businesses as now conducted. Except as set forth on
Schedule 3(k), none of the Company's material trademarks, trade names, service
marks, service xxxx registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, government authorizations, trade
secrets or other intellectual property rights have expired or terminated, or,
by
the terms and conditions thereof, could expire or terminate within two years
from the date of this Agreement. The Company and its Subsidiaries do not have
any knowledge of any infringement by the Company or its Subsidiaries of any
material trademark, trade name rights, patents, patent rights, copyrights,
inventions, licenses, service names, service marks, service xxxx registrations,
trade secret or other similar rights of others, or of any such development
of
similar or identical trade secrets or technical information by others and,
except as set forth on Schedule 3(k), there is no claim, action or proceeding
being made or brought against, or to the Company's knowledge, being threatened
against, the Company or its Subsidiaries regarding trademark, trade name,
patents, patent rights, invention, copyright, license, service names, service
marks, service xxxx registrations, trade secret or other infringement, which
could reasonably be expected to have a Material Adverse Effect.
-9-
(l) Environmental
Laws.
The
Company and its Subsidiaries (i) are in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license
or
approval, except where, in each of the three foregoing clauses, the failure
to
so comply could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(m) Title.
The
Company and its Subsidiaries have good and marketable title in fee simple to
all
real property and good and marketable title to all personal property owned
by
them which is material to the business of the Company and its Subsidiaries,
in
each case free and clear of all liens, encumbrances and defects except such
as
are described in Schedule 3(m) or such as do not materially affect the value
of
such property and do not interfere with the use made and proposed to be made
of
such property by the Company and any of its Subsidiaries. Any real property
and
facilities held under lease by the Company and any of its Subsidiaries are
held
by them under valid, subsisting and enforceable leases with such exceptions
as
are not material and do not interfere with the use made and proposed to be
made
of such property and buildings by the Company and its Subsidiaries.
(n) Insurance.
The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company
nor
any such Subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries, taken as a
whole.
(o) Regulatory
Permits.
The
Company and its Subsidiaries possess all material certificates, authorizations
and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
(p) Tax
Status.
The
Company and each of its Subsidiaries has made or filed all federal and state
income and all other material tax returns, reports and declarations required
by
any jurisdiction to which it is subject (unless and only to the extent that
the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and
has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside
on
its books provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
-10-
(q) Transactions
With Affiliates.
Except
as set forth on Schedule 3(q) and other than the grant or exercise of stock
options disclosed on Schedule 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of
real
or personal property to or from, or otherwise requiring payments to or from
any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has an interest or is an officer, director, trustee or
partner.
(r) Application
of Takeover Protections.
The
Company and its board of directors have taken or will take prior to the
Commencement Date all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill (including
any
distribution under a rights agreement) or other similar anti-takeover provision
under the Certificate of Incorporation or the laws of the state of its
incorporation which is or could become applicable to the Buyer as a result
of
the transactions contemplated by this Agreement, including, without limitation,
the Company's issuance of the Securities and the Buyer's ownership of the
Securities.
(s) Foreign
Corrupt Practices.
Neither
the Company, nor any of its Subsidiaries, nor any director, officer, agent,
employee or other person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the
Company, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or
made
any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.
4. COVENANTS.
(a) Filing
of Form 8-K and Registration Statement.
The
Company shall also file within ten (10) Trading Days from the date hereof a
new
registration statement covering only the sale of the Commitment Shares and
at
least 20,000,000 Purchase Shares in accordance with the terms of the
Registration Rights Agreement between the Company and the Buyer, dated as of
the
date hereof (“Registration Rights Agreement”). After such registration statement
is declared effective by the SEC, the Company agrees and acknowledges that
any
sales by the Company to the Buyer pursuant to this Agreement are
sales
of the Company's equity securities in a transaction that is registered under
the
1933 Act.
(b) Blue
Sky.
The
Company shall take such action, if any, as is reasonably necessary in order
to
obtain an exemption for or to qualify (i) the initial sale of the Commitment
Shares and any Purchase Shares to the Buyer under this Agreement and (ii) any
subsequent resale of the Commitment Shares and any Purchase Shares by the Buyer,
in each case, under applicable securities or "Blue Sky" laws of the states
of
the United States in such states as is reasonably requested by the Buyer from
time to time, and shall provide evidence of any such action so taken to the
Buyer.
(c) No
Variable Priced Financing.
Other
than pursuant to this Agreement, the Company agrees that beginning on the date
of this Agreement and ending on the date of termination of this Agreement (as
provided in Section 11(k) hereof), neither the Company nor any of its
Subsidiaries shall, without the prior written consent of the Buyer, contract
for
any equity financing (including any debt financing with an equity component)
or
issue any equity securities of the Company or any Subsidiary or securities
convertible or exchangeable into or for equity securities of the Company or
any
Subsidiary (including debt securities with an equity component) which, in any
case (i) are convertible into or exchangeable for an indeterminate number of
shares of common stock, (ii) are convertible into or exchangeable for Common
Stock at a price which varies with the market price of the Common Stock, (iii)
directly or indirectly provide for any "re-set" or adjustment of the purchase
price, conversion rate or exercise price after the issuance of the security,
or
(iv) contain any "make-whole" provision based upon, directly or indirectly,
the
market price of the Common Stock after the issuance of the security, in each
case, other than reasonable and customary anti-dilution adjustments for issuance
of shares of Common Stock at a price which is below the market price of the
Common Stock.
-11-
(d) Listing.
The
Company shall promptly secure the listing of all of the Purchase Shares and
Commitment Shares upon each national securities exchange and automated quotation
system, if any, upon which shares of Common Stock are then listed (subject
to
official notice of issuance) and shall maintain, so long as any other shares
of
Common Stock shall be so listed, such listing of all such securities from time
to time issuable under the terms of the Transaction Documents. The Company
shall
maintain the Common Stock's authorization for quotation on the Principal Market.
Neither the Company nor any of its Subsidiaries shall take any action that
would
be reasonably expected to result in the delisting or suspension of the Common
Stock on the Principal Market. The Company shall promptly, and in no event
later
than the following Trading Day, provide to the Buyer copies of any notices
it
receives from the Principal Market regarding the continued eligibility of the
Common Stock for listing on such automated quotation system or securities
exchange. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section.
(e) Limitation
on Short Sales and Hedging Transactions.
The
Buyer agrees that beginning on the date of this Agreement and ending on the
date
of termination of this Agreement as provided in Section 11(k), the Buyer and
its
agents, representatives and affiliates shall not in any manner whatsoever enter
into or effect, directly or indirectly, any (i) "short sale" (as such term
is
defined in Rule 3b-3 of the 0000 Xxx) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common
Stock.
(f) Issuance
of Commitment Shares; Limitation on Sales of Commitment Shares.
The
Company has issued to the Buyer 2,191,919 shares of Common Stock (the
"Commitment Shares"). The Commitment
Shares and Purchase Shares shall be issued in certificated form and (subject
to
Section 5 hereof) shall bear the following restrictive legend:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF HOLDER’S COUNSEL, IN A
CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.
(g) Due
Diligence.
The
Buyer shall have the right, from time to time as the Buyer may reasonably deem
appropriate, to perform reasonable due diligence on the Company during normal
business hours. The Company and its officers and employees shall provide
information and reasonably cooperate with the Buyer in connection with any
reasonable request by the Buyer related to the Buyer's due diligence of the
Company, including, but not limited to, any such request made by the Buyer
in
connection with (i) the filing of the registration statement described in
Section 4(a) hereof and (ii) the Commencement. Each party hereto agrees not
to
disclose any Confidential Information of the other party to any third party
and
shall not use the Confidential Information for any purpose other than in
connection with, or in furtherance of, the transactions contemplated hereby.
Each party hereto acknowledges that the Confidential Information shall remain
the property of the disclosing party and agrees that it shall take all
reasonable measures to protect the secrecy of any Confidential Information
disclosed by the other party.
-12-
5. TRANSFER
AGENT INSTRUCTIONS.
On
the
Commencement Date, the Company shall cause any restrictive legend on the
Commitment Shares to be removed and all of the Purchase Shares to be issued
under this Agreement shall be issued without any restrictive legend unless
the
Buyer expressly consents otherwise. The Company shall issue irrevocable
instructions to the Transfer Agent, and any subsequent transfer agent, to issue
Purchase Shares in the name of the Buyer for the Purchase Shares (the
"Irrevocable Transfer Agent Instructions"). The Company warrants to the Buyer
that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5, will be given by the Company to the Transfer
Agent with respect to the Purchase Shares and that the Commitment Shares and
the
Purchase Shares shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement subject to the provisions of Section 4(f) in
the
case of the Commitment Shares.
|
6.
|
CONDITIONS
TO THE COMPANY'S OBLIGATION TO
COMMENCE
|
SALES
OF SHARES OF COMMON STOCK.
The
obligation of the Company hereunder to commence sales of the Purchase Shares
is
subject to the satisfaction of each of the following conditions on or before
the
Commencement Date (the date that sales begin) and once such conditions have
been
initially satisfied, there shall not be any ongoing obligation to satisfy such
conditions after the Commencement has occurred; provided that these conditions
are for the Company's sole benefit and may be waived by the Company at any
time
in its sole discretion by providing the Buyer with prior written notice
thereof:
(a) The
Buyer
shall have executed each of the Transaction Documents and delivered the same
to
the Company.
(b) Subject
to the Company's compliance with Section 4(a), a registration statement covering
the sale of all of the Commitment Shares and at least 20,000,000 Purchase Shares
shall have been declared effective under the 1933 Act by the SEC and no stop
order with respect to the Registration Statement shall be pending or threatened
by the SEC.
(c) The
representations and warranties of the Buyer shall be true and correct in all
material respects as of the date when made and as of the Commencement Date
as
though made at that time (except for representations and warranties that speak
as of a specific date), and the Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Commencement Date.
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7.
|
CONDITIONS
TO THE BUYER'S OBLIGATION TO
COMMENCE
|
PURCHASES
OF SHARES OF COMMON STOCK.
The
obligation of the Buyer to commence purchases of Purchase Shares under this
Agreement is subject to the satisfaction of each of the following conditions
on
or before the Commencement Date (the date that sales begin) and once such
conditions have been initially satisfied, there shall not be any ongoing
obligation to satisfy such conditions after the Commencement has
occurred:
-13-
(a) The
Company shall have executed each of the Transaction Documents and delivered
the
same to the Buyer.
(b) The
Company shall have issued to the Buyer the Commitment Shares and shall have
removed the restrictive transfer legend from the certificate representing the
Commitment Shares.
(c) The
Common Stock shall be authorized for quotation on the Principal Market, trading
in the Common Stock shall not have been within the last 365 days suspended
by
the SEC or the Principal Market and the Purchase Shares and the Commitment
Shares shall be approved for listing upon the Principal Market.
(d) The
Buyer
shall have received the opinions of the Company's legal counsel dated as of
the
Commencement Date substantially in the form of Exhibit
A
attached
hereto.
(e) The
representations and warranties of the Company shall be true and correct in
all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Commencement
Date
as though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied
and
complied with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Commencement Date. The Buyer shall have received a
certificate, executed by the CEO, President or CFO of the Company, dated as
of
the Commencement Date, to the foregoing effect in the form attached hereto
as
Exhibit
B.
(f) The
Board
of Directors of the Company shall have adopted resolutions in the form attached
hereto as Exhibit
C
which
shall be in full force and effect without any amendment or supplement thereto
as
of the Commencement Date.
(g) As
of the
Commencement Date, the Company shall have reserved out of its authorized and
unissued Common Stock, solely for the purpose of effecting purchases of Purchase
Shares hereunder, at least 20,000,000 shares of Common Stock.
(h) The
Irrevocable Transfer Agent Instructions, in form acceptable to the Buyer shall
have been delivered to and acknowledged in writing by the Company and the
Company's Transfer Agent.
(i) The
Company shall have delivered to the Buyer a certificate evidencing the
incorporation and good standing of the Company in the State of Minnesota issued
by the Secretary of State of the State of Minnesota as of a date within ten
(10)
Trading Days of the Commencement Date.
(j) The
Company shall have delivered to the Buyer a certified copy of the Certificate
of
Incorporation as certified by the Secretary of State of the State of Minnesota
within ten (10) Trading Days of the Commencement Date.
(k) The
Company shall have delivered to the Buyer a secretary's certificate executed
by
the Secretary of the Company, dated as of the Commencement Date, in the form
attached hereto as Exhibit
D.
-14-
(l) A
registration statement covering the sale of all of the Commitment Shares and
at
least 20,000,000 Purchase Shares shall have been declared effective under the
1933 Act by the SEC and no stop order with respect to the registration statement
shall be pending or threatened by the SEC. The Company shall have prepared
and
delivered to the Buyer a final form of prospectus to be used by the Buyer in
connection with any sales of any Commitment Shares or any Purchase Shares.
The
Company shall have made all filings under all applicable federal and state
securities laws necessary to consummate the issuance of the Commitment Shares
and the Purchase Shares pursuant to this Agreement in compliance with such
laws.
(m) No
Event
of Default has occurred, or any event which, after notice and/or lapse of time,
would become an Event of Default has occurred.
(n) On
or
prior to the Commencement Date, the Company shall take all necessary action,
if
any, and such actions as reasonably requested by the Buyer, in order to render
inapplicable any control share acquisition, business combination, shareholder
rights plan or poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Certificate of Incorporation
or the laws of the state of its incorporation which is or could become
applicable to the Buyer as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company's issuance of the
Securities and the Buyer's ownership of the Securities.
(o) The
Company shall have provided the Buyer with the information requested by the
Buyer in connection with its due diligence requests made prior to, or in
connection with, the Commencement, in accordance with the terms of Section
4(g)
hereof.
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8.
|
INDEMNIFICATION.
|
In
consideration of the Buyer's execution and delivery of the Transaction Documents
and acquiring the Securities hereunder and in addition to all of the Company's
other obligations under the Transaction Documents, the Company shall defend,
protect, indemnify and hold harmless the Buyer and all of its affiliates,
shareholders, officers, directors, employees and direct or indirect investors
and any of the foregoing person's agents or other representatives (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Indemnitees") from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "Indemnified Liabilities"), incurred by any Indemnitee
as
a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation of the
Company contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of
action, suit or claim brought or made against such Indemnitee and arising out
of
or resulting from the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, other than with respect to Indemnified
Liabilities which directly and primarily result from the gross negligence or
willful misconduct of the Indemnitee. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each
of
the Indemnified Liabilities which is permissible under applicable
law.
-15-
9. EVENTS
OF DEFAULT.
An
"Event
of Default" shall be deemed to have occurred at any time as any of the following
events occurs:
(a) while
any
registration statement is required to be maintained effective pursuant to the
terms of the Registration Rights Agreement, the effectiveness of such
registration statement lapses for any reason (including, without limitation,
the
issuance of a stop order) or is unavailable to the Buyer for sale of all of
the
Registrable Securities (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, and such lapse
or unavailability continues for a period of five (5) consecutive Trading Days
or
for more than an aggregate of twenty (20) Trading Days in any 365-day
period;
(b) the
suspension from trading or failure of the Common Stock to be listed on the
Principal Market for a period of three (3) consecutive Trading
Days;
(c) the
delisting of the Company’s Common Stock from the Principal Market, provided,
however, that the Common Stock is not immediately thereafter trading on the
New
York Stock Exchange, the Nasdaq National Market, the Nasdaq SmallCap Market,
or
the American Stock Exchange;
(d) the
failure for any reason by the Transfer Agent to issue Purchase Shares to the
Buyer within five (5) Trading Days after the applicable Purchase Date which
the
Buyer is entitled to receive;
(e) the
Company breaches any representation, warranty, covenant or other term or
condition under any Transaction Document if such breach could have a Material
Adverse Effect and except, in the case of a breach of a covenant which is
reasonably curable, only if such breach continues for a period of at least
five
(5) Trading Days;
(f) if
any
Person commences a proceeding against the Company pursuant to or within the
meaning of any Bankruptcy Law ;
(g) if
the
Company pursuant to or within the meaning of any Bankruptcy Law; (A) commences
a
voluntary case, (B) consents to the entry of an order for relief against it
in
an involuntary case, (C) consents to the appointment of a Custodian of it or
for
all or substantially all of its property, (D) makes a general assignment for
the
benefit of its creditors, (E) becomes insolvent, or (F) is generally unable
to
pay its debts as the same become due;
(h) a
court
of competent jurisdiction enters an order or decree under any Bankruptcy Law
that (A) is for relief against the Company in an involuntary case, (B) appoints
a Custodian of the Company or for all or substantially all of its property,
or
(C) orders the liquidation of the Company or any Subsidiary; or
(i) a
material adverse change in the business, properties, operations, financial
condition or results of operations of the Company or its
Subsidiaries;
-16-
In
addition to any other rights and remedies under applicable law and this
Agreement, including the Buyer termination rights under Section 11(k) hereof,
so
long as an Event of Default has occurred and is continuing, or if any event
which, after notice and/or lapse of time, would become an Event of Default,
has
occurred and is continuing, or so long as the Purchase Price is below the
Purchase Price Floor, the Buyer shall not be obligated to purchase any shares
of
Common Stock under this Agreement. If pursuant to or within the meaning of
any
Bankruptcy Law, the Company commences a voluntary case or any Person commences
a
proceeding against the Company, a Custodian is appointed for the Company or
for
all or substantially all of its property, or the Company makes a general
assignment for the benefit of its creditors, (any of which would be an Event
of
Default as described in Sections 9(f), 9(g) and 9(h) hereof)
this Agreement shall automatically terminate without any liability or payment
to
the Company without further action or notice by any Person. No such termination
of this Agreement under Section 11(k)(i) shall affect the Company's or the
Buyer's obligations under this Agreement with respect to pending purchases
and
the Company and the Buyer shall complete their respective obligations with
respect to any pending purchases under this Agreement.
10. CERTAIN
DEFINED TERMS.
For
purposes of this Agreement, the following terms shall have the following
meanings:
(a) “1933
Act” means the Securities Act of 1933, as amended.
(b) “Available
Amount” means initially Six Million Dollars ($6,000,000) in the aggregate which
amount shall be reduced by the Purchase Amount each time the Buyer purchases
shares of Common Stock pursuant to Section 1 hereof.
(c) “Bankruptcy
Law” means Title 11, U.S. Code, or any similar federal or state law for the
relief of debtors.
(d) “Closing
Sale Price” means, for any security as of any date, the last closing trade price
for such security on the Principal Market as reported by the Principal Market,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing trade price of such security on
the
principal securities exchange or trading market where such security is listed
or
traded as reported by the Principal Market.
(e) “Confidential
Information” means any information disclosed by either party to the other party,
either directly or indirectly, in writing, orally or by inspection of tangible
objects (including, without limitation, documents, prototypes, samples, plant
and equipment), which is designated as "Confidential," "Proprietary" or some
similar designation. Information communicated orally shall be considered
Confidential Information if such information is confirmed in writing as being
Confidential Information within ten (10) business days after the initial
disclosure. Confidential Information may also include information disclosed
to a
disclosing party by third parties. Confidential Information shall not, however,
include any information which (i) was publicly known and made generally
available in the public domain prior to the time of disclosure by the disclosing
party; (ii) becomes publicly known and made generally available after disclosure
by the disclosing party to the receiving party through no action or inaction
of
the receiving party; (iii) is already in the possession of the receiving party
at the time of disclosure by the disclosing party as shown by the receiving
party’s files and records immediately prior to the time of disclosure; (iv) is
obtained by the receiving party from a third party without a breach of such
third party’s obligations of confidentiality; (v) is independently developed by
the receiving party without use of or reference to the disclosing party’s
Confidential Information, as shown by documents and other competent evidence
in
the receiving party’s possession; or (vi) is required by law to be disclosed by
the receiving party, provided that the receiving party gives the disclosing
party prompt written notice of such requirement prior to such disclosure and
assistance in obtaining an order protecting the information from public
disclosure.
-17-
(f) “Custodian”
means any receiver, trustee, assignee, liquidator or similar official under
any
Bankruptcy Law.
(g) “Maturity
Date” means the date that is 480 Trading Days (24 Monthly Periods) from the
Commencement Date which such date may be extended by up to an additional six
(6)
Monthly Periods by the Company, in its sole discretion, by written notice to
the
Buyer.
(h) “Monthly
Period” means each successive 20 Trading Day period commencing with the
Commencement Date.
(i) “Person”
means an individual or entity including any limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(j) “Principal
Market” means the Nasdaq OTC Bulletin Board; provided however, that in the event
the Company’s Common Stock is ever listed or traded on the Nasdaq National
Market, the Nasdaq SmallCap Market, the New York Stock Exchange or the American
Stock Exchange, than the “Principal Market” shall mean such other market or
exchange on which the Company’s Common Stock is then listed or
traded.
(k) “Purchase
Amount” means the portion of the Available Amount to be purchased by the Buyer
pursuant to Section 1 hereof.
(l) “Purchase
Date” means the actual date that the Buyer is to buy Purchase Shares pursuant to
Section 1 hereof.
(m) “Purchase
Price” means, as of any Trading Day the lower of the (A) the lowest Sale Price
of the Common Stock on such Trading Day and (B) the arithmetic average of the
three (3) lowest Closing Sale Prices for the Common Stock during the twelve
(12)
consecutive Trading Days ending on the Trading Day immediately preceding such
date of determination (to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar
transaction).
(n) “Sale
Price” means, for any security as of any date, any trade price for such security
on the Principal Market as reported by the Principal Market, or, if the
Principal Market is not the principal securities exchange or trading market
for
such security, the trade price of such security on the principal securities
exchange or trading market where such security is listed or traded as reported
by the Principal Market.
(o) “SEC”
means the United States Securities and Exchange Commission.
(q) “Transfer
Agent” means the transfer agent of the Company as set forth in Section 11(f)
hereof or such other person who is then serving as the transfer agent for the
Company in respect of the Common Stock.
(r) “Trading
Day” means any day on which the Principal Market is open for trading including
any day on which the Principal Market is open for trading for a period of time
less than the customary time.
-18-
11. MISCELLANEOUS.
(a) Governing
Law; Jurisdiction; Jury Trial.
The
corporate laws of the State of Minnesota shall govern all issues concerning
the
relative rights of the Company and its shareholders. All other questions
concerning the construction, validity, enforcement and interpretation of this
Agreement and the other Transaction Documents shall be governed by the internal
laws of the State of Illinois, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Illinois or any
other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of Illinois. Each party hereby irrevocably submits to
the
exclusive jurisdiction of the state and federal courts sitting in the City
of
Chicago, for the adjudication of any dispute hereunder or under the other
Transaction Documents or in connection herewith or therewith, or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that
the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to
such
party at the address for such notices to it under this Agreement and agrees
that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
(b) Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if
the
signature were an original, not a facsimile signature.
(c) Headings.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
(d) Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement.
With
the exception of the Mutual Nondisclosure Agreement between the parties dated
as
of November 1, 2001, this Agreement supersedes all other prior oral or written
agreements between the Buyer, the Company, their affiliates and persons acting
on their behalf with respect to the matters discussed herein, and this
Agreement, the other Transaction Documents and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. The Company acknowledges
and agrees that is has not relied on, in any manner whatsoever, any
representations or statements, written or oral, other than as expressly set
forth in this Agreement.
-19-
(f) Notices.
Any
notices, consents or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be deemed to
have
been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
when sent by facsimile (provided confirmation of transmission is mechanically
or
electronically generated and kept on file by the sending party); or (iii) one
Trading Day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same.
The
addresses and facsimile numbers for such communications shall be:
If
to the
Company:
Golden
Phoenix Minerals, Inc.
0000
X.
Xxxxxx Xxx, Xxxxx 000
Xxxxxx,
Xxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention:
Chief
Executive Officer
With
a
copy to:
Xxxxxxxxxxx
& Xxxxxxxx LLP
000
Xxxxx
Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx,
XX
00000
Telephone: 000-000-0000
Facsimile:
305-358-7095
Attention: Xxxxxxx
X. Xxxxxx, Esq
If
to the
Buyer:
Fusion
Capital Fund II, LLC
000
Xxxxxxxxxxx Xxxx Xxxxx, Xxxxx 0-000
Xxxxxxx,
XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx
X.
Xxxxxx
If
to the
Transfer Agent:
Nevada
Agency & Trust
00
X.
Xxxxxxx, Xxxxx 000
Xxxx,
Xxxxxx 00000
Telephone:
000-000-0000
Facsimile: 000-000-0000
Attention:
Xxxxxx
Xxxxxxxxxx
or
at
such other address and/or facsimile number and/or to the attention of such
other
person as the recipient party has specified by written notice given to each
other party three (3) Trading Days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, or other communication, (B) mechanically or electronically generated
by
the sender's facsimile machine containing the time, date, and recipient
facsimile number or (C) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
-20-
(g) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Buyer, including by merger or consolidation. The Buyer may not
assign its rights or obligations under this Agreement.
(h) No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
(i) Publicity.
The
Buyer shall have the right to approve before issuance any press release, SEC
filing or any other public disclosure made by or on behalf of the Company
whatsoever with respect to, in any manner, the Buyer, its purchases hereunder
or
any aspect of this Agreement or the transactions contemplated hereby. The
Company agrees and acknowledges that its failure to fully comply with this
provision constitutes a material adverse effect on its ability to perform its
obligations under this Agreement.
(j) Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(k) Termination.
This
Agreement may be terminated only as follows:
(i) By
the
Buyer any time an Event of Default exists without any liability or payment
to
the Company. However, if pursuant to or within the meaning of any Bankruptcy
Law, the Company commences a voluntary case or any Person commences a proceeding
against the Company, a Custodian is appointed for the Company or for all or
substantially all of its property, or the Company makes a general assignment
for
the benefit of its creditors, (any of which would be an Event of Default as
described in Sections 9(f), 9(g) and 9(h) hereof) this Agreement shall
automatically terminate without any liability or payment to the Company without
further action or notice by any Person. No such termination of this Agreement
under this Section 11(k)(i) shall affect the Company's or the Buyer's
obligations under this Agreement with respect to pending purchases and the
Company and the Buyer shall complete their respective obligations with respect
to any pending purchases under this Agreement.
(ii) In
the
event that the Commencement shall not have occurred, the Company shall have
the
option to terminate this Agreement for any reason or for no reason without
liability of any party to any other party.
(iii) In
the
event that the Commencement shall not have occurred on or before February 14,
2006, due to the failure to satisfy the conditions set forth in Sections 6
and 7
above with respect to the Commencement, the nonbreaching party shall have the
option to terminate this Agreement at the close of business on such date or
thereafter without liability of any party to any other party.
(iv) If
by the
Maturity Date (including any extension thereof by the Company pursuant to
Section 10(g) hereof), for any reason or for no reason the full Available Amount
under this Agreement has not been purchased as provided for in Section 1 of
this
Agreement, by the Buyer without any liability or payment to the Company.
-21-
(v)
At any
time after the Commencement Date, the Company shall have the option to terminate
this Agreement for any reason or for no reason by delivering notice (a “Company
Termination Notice”) to the Buyer electing to terminate this Agreement without
any liability or payment to the Buyer. The Company Termination Notice shall
not
be effective until one (1) Trading Day after it has been received by the Buyer.
(vi) This
Agreement shall automatically terminate on the date that the Company sells
and
the Buyer purchases the full Available Amount as provided herein, without any
action or notice on the part of any party.
Except
as
set forth in Sections 11(k)(i) (in respect of an Event of Default under Sections
9(f), 9(g) and 9(h)) and 11(k)(vi), any termination of this Agreement pursuant
to this Section 11(k) shall be effected by written notice from the Company
to
the Buyer, or the Buyer to the Company, as the case may be, setting forth the
basis for the termination hereof. The representations and warranties of the
Company and the Buyer contained in Sections 2 and 3 hereof, the indemnification
provisions set forth in Section 8 hereof and the agreements and covenants set
forth in Section 11,
shall
survive the Commencement and any termination of this Agreement. No termination
of this Agreement shall affect the Company's or the Buyer's rights or
obligations (i) under the Registration Rights Agreement which shall survive
any
such termination or (ii) under this Agreement with respect to pending purchases
and the Company and the Buyer shall complete their respective obligations with
respect to any pending purchases under this Agreement.
(l) No
Financial Advisor, Placement Agent, Broker or Finder.
The
Company represents and warrants to the Buyer that it has not engaged any
financial advisor, placement agent, broker or finder in connection with the
transactions contemplated hereby. The Buyer represents and warrants to the
Company that it has not engaged any financial advisor, placement agent, broker
or finder in connection with the transactions contemplated hereby. The Company
shall be responsible for the payment of any fees or commissions, if any, of
any
financial advisor, placement agent, broker or finder relating to or arising
out
of the transactions contemplated hereby. The Company shall pay, and hold the
Buyer harmless against, any liability, loss or expense (including, without
limitation, attorneys' fees and out of pocket expenses) arising in connection
with any such claim.
(m) 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.
(n) Remedies,
Other Obligations, Breaches and Injunctive Relief.
The
Buyer’s remedies provided in this Agreement shall be cumulative and in addition
to all other remedies available to the Buyer under this Agreement, at law or
in
equity (including a decree of specific performance and/or other injunctive
relief), no remedy of the Buyer contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit the Buyer's right to pursue actual damages for any failure by the
Company to comply with the terms of this Agreement. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm
to
the Buyer and that the remedy at law for any such breach may be inadequate.
The
Company therefore agrees that, in the event of any such breach or threatened
breach, the Buyer shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being
required.
-22-
(o) Enforcement
Costs.
If: (i)
this Agreement is placed by the Buyer in the hands of an attorney for
enforcement or is enforced by the Buyer through any legal proceeding; or (ii)
an
attorney is retained to represent the Buyer in any bankruptcy, reorganization,
receivership or other proceedings affecting creditors' rights and involving
a
claim under this Agreement; or (iii) an attorney is retained to represent the
Buyer in any other proceedings whatsoever in connection with this Agreement,
then the Company shall pay to the Buyer, as incurred by the Buyer, all
reasonable costs and expenses including attorneys' fees incurred in connection
therewith, in addition to all other amounts due hereunder.
(p) Failure
or Indulgence Not Waiver.
No
failure or delay in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
of
any such power, right or privilege preclude other or further exercise thereof
or
of any other right, power or privilege.
*
* * * *
-23-
IN
WITNESS WHEREOF,
the
Buyer and the Company have caused this Common Stock Purchase Agreement to be
duly executed as of the date first written above.
THE
COMPANY:
GOLDEN
PHOENIX MINERALS, INC.
By:
/s/ Xxxxxxx X. Xxxxxx
Name:
Xxxxxxx X. Xxxxxx
Title:
Interim Chief Executive Officer
BUYER:
FUSION
CAPITAL FUND II, LLC
BY:
FUSION CAPITAL PARTNERS, LLC
BY:
ROCKLEDGE CAPITAL CORPORATION
By:
/s/ Xxxx Xxxxxxxxxx
Name:
Xxxx Xxxxxxxxxx
Title:
President
-24-
SCHEDULES
Schedule
3(a) Subsidiaries
Schedule
3(c) Capitalization
Schedule
3(e) Conflicts
Schedule
3(f) 1934
Act
Filings
Schedule
3(g) Material
Changes
Schedule
3(h) Litigation
Schedule
3(k) Intellectual
Property
Schedule
3(m) Liens
Schedule
3(q) Certain
Transactions
EXHIBITS
Exhibit
A Form
of
Company Counsel Opinion
Exhibit
B Form
of
Officer’s Certificate
Exhibit
C Form
of
Resolutions of Board of Directors of the Company
Exhibit
D Form
of
Secretary’s Certificate
Exhibit
E Form
of
Letter to Transfer Agent
DISCLOSURE
SCHEDULES
Schedule
3(a) - Subsidiaries
Schedule
3(c) - Capitalization
Schedule
3(e) - No Conflicts
Schedule
3(f) - 1934 Act Filings
Schedule
3(g) - Absence of Certain Changes
Schedule
3(h) - Litigation
Schedule
3(k) - Intellectual Property Rights
Schedule
3(m) - Title
Schedule
3(q) - Transactions with Affiliates
EXHIBIT
A
FORM
OF COMPANY COUNSEL OPINION
Capitalized
terms used herein but not defined herein, have the meaning set forth in the
Common Stock Purchase Agreement. Based on the foregoing, and subject to the
assumptions and qualifications set forth herein, we are of the opinion
that:
1. The
Company is a corporation existing and in good standing under the laws of the
State of Minnesota. The Company is qualified to do business as a foreign
corporation and is in good standing in the States of Minnesota,
Nevada.
2. The
Company has the corporate power to execute and deliver, and perform its
obligations under, each Transaction Document to which it is a party. The Company
has the corporate power to conduct its business as, to the best of our
knowledge, it is now conducted, and to own and use the properties owned and
used
by it.
3. The
execution, delivery and performance by the Company of the Transaction Documents
to which it is a party have been duly authorized by all necessary corporate
action on the part of the Company. The execution and delivery of the Transaction
Documents by the Company, the performance of the obligations of the Company
thereunder and the consummation by it of the transactions contemplated therein
have been duly authorized and approved by the Company's Board of Directors
and
no further consent, approval or authorization of the Company, its Board of
Directors or its stockholders is required. The Transaction Documents to which
the Company is a party have been duly executed and delivered by the Company
and
are the valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
liquidation or similar laws relating to, or affecting creditor’s rights and
remedies.
4. The
execution, delivery and performance by the Company of the Transaction Documents,
the consummation by the Company of the transactions contemplated thereby
including the offering, sale and issuance of the Commitment Shares, and the
Purchase Shares in accordance with the terms and conditions of the Common Stock
Purchase Agreement, and fulfillment and compliance with terms of the Transaction
Documents, does not and shall not: (i) conflict with, constitute a breach
of or default (or an event which, with the giving of notice or lapse of time
or
both, constitutes or could constitute a breach or a default), under (a) the
Certificate of Incorporation or the Bylaws of the Company, (b) any material
agreement, note, lease, mortgage, deed or other material instrument to which
to
our knowledge the Company is a party or by which the Company or any of its
assets are bound, (ii) result in any violation of any statute, law, rule or
regulation applicable to the Company, or (iii) to our knowledge, violate any
order, writ, injunction or decree applicable to the Company or any of its
subsidiaries.
5. The
issuance of the Purchase Shares and Commitment Shares pursuant to the terms
and
conditions of the Transaction Documents has been duly authorized and the
Commitment Shares are validly issued, fully paid and non-assessable, to our
knowledge, free of all taxes, liens, charges, restrictions, rights of first
refusal and preemptive rights. 20,000,000 shares of Common Stock have been
properly reserved for issuance under the Common Stock Purchase Agreement. When
issued and paid for in accordance with the Common Stock Purchase Agreement,
the
Purchase Shares shall be validly issued, fully paid and non-assessable, to
our
knowledge, free of all taxes, liens, charges, restrictions, rights of first
refusal and preemptive rights. To
our
knowledge, the execution and delivery of the Registration Rights Agreement
do
not, and the performance by the Company of its obligations thereunder shall
not,
give rise to any rights of any other person for the registration under the
1933
Act of any shares of Common Stock or other securities of the Company which
have
not been waived.
6. As
of the
date hereof, the authorized capital stock of the Company consists of _______
shares of common stock, par value $______ per share, of which to our knowledge
__________ shares are issued and outstanding. Except as set forth on Schedule
3(c) of the Common Stock Purchase Agreement, to our knowledge, there are no
outstanding shares of capital stock or other securities convertible into or
exchangeable or exercisable for shares of the capital stock of the
Company.
7. Assuming
the accuracy of the representations and your compliance with the covenants
made
by you in the Transaction Documents, the offering, sale and issuance of the
Commitment Shares to you pursuant to the Transaction Documents is exempt from
registration under the 1933 Act and the securities laws and regulations of
the
State of Illinois, Nevada, Minnesota.
8. Other
than that which has been obtained and completed prior to the date hereof, no
authorization, approval, consent, filing or other order of any federal or state
governmental body, regulatory agency, or stock exchange or market, or any court,
or, to our knowledge, any third party is required to be obtained by the Company
to enter into and perform its obligations under the Transaction Documents or
for
the Company to issue and sell the Purchase Shares as contemplated by the
Transaction Documents.
9.
The
Common Stock is registered pursuant to Section 12(g) of the 1934 Act. To our
knowledge, since January 1, 2004, the Company has been in compliance with the
reporting requirements of the 1934 Act applicable to it. To our knowledge,
since
January 1, 2004, the Company has not received any written notice from the
Principal Market stating that the Company has not been in compliance with any
of
the rules and regulations (including the requirements for continued listing)
of
the Principal Market.
We
further advise you that to our knowledge, except as disclosed on Schedule 3(h)
in the Common Stock Purchase Agreement, there is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body, any
governmental agency, any stock exchange or market, or self-regulatory
organization, which has been threatened in writing or which is currently pending
against the Company, any of its subsidiaries, any officers or directors of
the
Company or any of its subsidiaries or any of the properties of the Company
or
any of its subsidiaries.
In
addition, we have participated in the preparation of the Registration Statement
(SEC File #________) covering the sale of the Purchase Shares, the Commitment
Shares including the prospectus dated ____________, contained therein and in
conferences with officers and other representatives of the Company (including
the Company’s independent auditors) during which the contents of the
Registration Statement and related matters were discussed and reviewed and,
although we are not passing upon and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement, on the basis of the information that was developed
in
the course of the performance of the services referred to above, considered
in
the light of our understanding of the applicable law, nothing came to our
attention that caused us to believe that the Registration Statement (other
than
the financial statements and schedules and the other financial and statistical
data included therein, as to which we express no belief), as of their dates,
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in the light
of
the circumstances under which they were made, not misleading.
EXHIBIT
B
FORM
OF OFFICER’S CERTIFICATE
This
Officer’s Certificate (“Certificate”)
is
being delivered pursuant to Section 7(e) of that certain Common Stock Purchase
Agreement dated as of _________, (“Common
Stock Purchase Agreement”),
by
and between GOLDEN
PHOENIX MINERALS, INC.,
a
Minnesota corporation (the “Company”),
and
FUSION
CAPITAL FUND II, LLC (the
“Buyer”).
Terms
used herein and not otherwise defined shall have the meanings ascribed to them
in the Common Stock Purchase Agreement.
The
undersigned, ___________, ______________ of the Company, hereby certifies as
follows:
1. I
am the
_____________ of the Company and make the statements contained in this
Certificate;
2. The
representations and warranties of the Company are true and correct in all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 of the Common
Stock Purchase Agreement, in which case, such representations and warranties
are
true and correct without further qualification) as of the date when made and
as
of the Commencement Date as though made at that time (except for representations
and warranties that speak as of a specific date);
3. The
Company has performed, satisfied and complied in all material respects with
covenants, agreements and conditions required by the Transaction Documents
to be
performed, satisfied or complied with by the Company at or prior to the
Commencement Date.
4.
The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any Bankruptcy Law nor does the Company
or
any of its Subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy or insolvency proceedings.
The Company is financially solvent and is generally able to pay its debts as
they become due.
IN
WITNESS WHEREOF, I have hereunder signed my name on this ___ day of
___________.
______________________
Name:
Title:
The
undersigned as Secretary of ________, a ________ corporation, hereby certifies
that ___________ is the duly elected, appointed, qualified and acting ________
of _________ and that the signature appearing above is his genuine
signature.
___________________________________
Secretary
EXHIBIT
C-1
FORM
OF COMPANY RESOLUTIONS
FOR
SIGNING PURCHASE AGREEMENT
UNANIMOUS
WRITTEN CONSENT OF
GOLDEN
PHOENIX MINERALS, INC.
Pursuant
to Section ______ of the _________, the undersigned, being all of the directors
of GOLDEN
PHOENIX MINERALS, INC.,
a
Minnesota corporation (the “Corporation”) do hereby consent to and adopt the
following resolutions as the action of the Board of Directors for and on behalf
of the Corporation and hereby direct that this Consent be filed with the minutes
of the proceedings of the Board of Directors:
WHEREAS,
there has been presented to the Board of Directors of the Corporation a draft
of
the Common Stock Purchase Agreement (the “Purchase Agreement”) by and between
the Corporation and Fusion Capital Fund II, LLC (“Fusion”), providing for the
purchase by Fusion of up to Six Million Dollars ($6,000,000) of the
Corporation’s common stock, no par value (the “Common Stock”); and
WHEREAS,
after careful consideration of the Purchase Agreement, the documents incident
thereto and other factors deemed relevant by the Board of Directors, the Board
of Directors has determined that it is advisable and in the best interests
of
the Corporation to engage in the transactions contemplated by the Purchase
Agreement, including, but not limited to, the issuance of 2,191,919 shares
of
Common Stock to Fusion as a commitment fee (the “Commitment Shares”) and the
sale of shares of Common Stock to Fusion up to the available amount under the
Purchase Agreement (the "Purchase Shares").
Transaction
Documents
NOW,
THEREFORE, BE IT RESOLVED, that the transactions described in the Purchase
Agreement are hereby approved and ________________________________________
(the
“Authorized Officers”) are severally authorized to execute and deliver the
Purchase Agreement, and any other agreements or documents contemplated thereby
including, without limitation, a registration rights agreement (the
“Registration Rights Agreement”) providing for the registration of the shares of
the Company’s Common Stock issuable in respect of the Purchase Agreement on
behalf of the Corporation, with such amendments, changes, additions and
deletions as the Authorized Officers may deem to be appropriate and approve
on
behalf of, the Corporation, such approval to be conclusively evidenced by the
signature of an Authorized Officer thereon; and
FURTHER
RESOLVED, that the terms and provisions of the Registration Rights Agreement
by
and among the Corporation and Fusion are hereby approved and the Authorized
Officers are authorized to execute and deliver the Registration Rights Agreement
(pursuant to the terms of the Purchase Agreement), with such amendments,
changes, additions and deletions as the Authorized Officer may deem appropriate
and approve on behalf of, the Corporation, such approval to be conclusively
evidenced by the signature of an Authorized Officer thereon; and
FURTHER
RESOLVED, that the terms and provisions of the Form of Transfer Agent
Instructions (the “Instructions”) are hereby approved and the Authorized
Officers are authorized to execute and deliver the Instructions (pursuant to
the
terms of the Purchase Agreement), with such amendments, changes, additions
and
deletions as the Authorized Officers may deem appropriate and approve on behalf
of, the Corporation, such approval to be conclusively evidenced by the signature
of an Authorized Officer thereon; and
Execution
of Purchase Agreement
FURTHER
RESOLVED, that the Corporation be and it hereby is authorized to execute the
Purchase Agreement providing for the purchase of common stock of the Corporation
having an aggregate value of up to $6,000,000; and
Issuance
of Common Stock
FURTHER
RESOLVED, that the Corporation is hereby authorized to issue 2,191,919 shares
of
Common Stock to Fusion Capital Fund II, LLC as Commitment Shares and that upon
issuance of the Commitment Shares pursuant to the Purchase Agreement, the
Commitment Shares shall be duly authorized, validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership thereof;
and
FURTHER
RESOLVED, that the Corporation is hereby authorized to issue shares of Common
Stock upon the purchase of Purchase Shares up to the available amount under
the
Purchase Agreement in accordance with the terms of the Purchase Agreement and
that, upon issuance of the Purchase Shares pursuant to the Purchase Agreement,
the Purchase Shares will be duly authorized, validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership thereof;
and
FURTHER
RESOLVED, that the Corporation shall initially reserve 20,000,000 shares of
Common Stock for issuance as Purchase Shares under the Purchase Agreement.
Approval
of Actions
FURTHER
RESOLVED, that, without limiting the foregoing, the Authorized Officers are,
and
each of them hereby is, authorized and directed to proceed on behalf of the
Corporation and to take all such steps as deemed necessary or appropriate,
with
the advice and assistance of counsel, to cause the Corporation to consummate
the
agreements referred to herein and to perform its obligations under such
agreements; and
FURTHER
RESOLVED, that the Authorized Officers be, and each of them hereby is,
authorized, empowered and directed on behalf of and in the name of the
Corporation, to take or cause to be taken all such further actions and to
execute and deliver or cause to be executed and delivered all such further
agreements, amendments, documents, certificates, reports, schedules,
applications, notices, letters and undertakings and to incur and pay all such
fees and expenses as in their judgment shall be necessary, proper or desirable
to carry into effect the purpose and intent of any and all of the foregoing
resolutions, and that all actions heretofore taken by any officer or director
of
the Corporation in connection with the transactions contemplated by the
agreements described herein are hereby approved, ratified and confirmed in
all
respects.
IN
WITNESS WHEREOF, the Board of Directors has executed and delivered this Consent
effective as of __________, 2006.
______________________
______________________
______________________
being
all
of the directors of GOLDEN
PHOENIX MINERALS, INC.
EXHIBIT
C-2
FORM
OF COMPANY RESOLUTIONS APPROVING REGISTRATION STATEMENT
UNANIMOUS
WRITTEN CONSENT OF
GOLDEN
PHOENIX MINERALS, INC.
Pursuant
to Section ______ of the _________, the undersigned, being all of the directors
of GOLDEN
PHOENIX MINERALS, INC.,
a
Minnesota corporation (the “Corporation”) do hereby consent to and adopt the
following resolutions as the action of the Board of Directors for and on behalf
of the Corporation and hereby direct that this Consent be filed with the minutes
of the proceedings of the Board of Directors.
WHEREAS,
there has been presented to the Board of Directors of the Corporation a Common
Stock Purchase Agreement (the “Purchase Agreement”) by and among the Corporation
and Fusion Capital Fund II, LLC (“Fusion”), providing for the purchase by Fusion
of up to Six Million Two Hundred Thousand Dollars ($6,000,000) of the
Corporation’s common stock, no par value (the “Common Stock”); and
WHEREAS,
after careful consideration of the Purchase Agreement, the documents incident
thereto and other factors deemed relevant by the Board of Directors, the Board
of Directors has approved the Purchase Agreement and the transactions
contemplated thereby and the Company has executed and delivered the Purchase
Agreement to Fusion; and
WHEREAS,
in connection with the transactions contemplated pursuant to the Purchase
Agreement, the Company has agreed to file a registration statement with the
Securities and Exchange Commission (the “Commission”) registering the Commitment
Shares (as defined in the Purchase Agreement) and the Purchase Shares (as herein
defined in the Purchase Agreement) and to list the Commitment Shares and
Purchase Shares as may be required;
WHEREAS,
the management of the Corporation has prepared an initial draft of a
Registration Statement on Form ___ (the “Registration Statement”) in order to
register the sale of the Purchase Shares, and the Commitment Shares
(collectively, the “Shares”); and
WHEREAS,
the Board of Directors has determined to approve the Registration Statement
and
to authorize the appropriate officers of the Corporation to take all such
actions as they may deem appropriate to effect the offering.
NOW,
THEREFORE, BE IT RESOLVED, that the officers and directors of the Corporation
be, and each of them hereby is, authorized and directed, with the assistance
of
counsel and accountants for the Corporation, to prepare, execute and file with
the Commission the Registration Statement, which Registration Statement shall
be
filed substantially in the form presented to the Board of Directors, with such
changes therein as the Chief Executive Officer of the Corporation or any Vice
President of the Corporation shall deem desirable and in the best interest
of
the Corporation and its shareholders (such officer’s execution thereof including
such changes shall be deemed to evidence conclusively such determination);
and
FURTHER
RESOLVED, that the officers of the Corporation be, and each of them hereby
is,
authorized and directed, with the assistance of counsel and accountants for
the
Corporation, to prepare, execute and file with the Commission all amendments,
including post-effective amendments, and supplements to the Registration
Statement, and all certificates, exhibits, schedules, documents and other
instruments relating to the Registration Statement, as such officers shall
deem
necessary or appropriate (such officer’s execution and filing thereof shall be
deemed to evidence conclusively such determination); and
FURTHER
RESOLVED, that the execution of the Registration Statement and of any amendments
and supplements thereto by the officers and directors of the Corporation be,
and
the same hereby is, specifically authorized either personally or by the
Authorized Officers as such officer’s or director’s true and lawful
attorneys-in-fact and agents; and
FURTHER
RESOLVED, that the Authorized Officers are hereby designated as “Agent for
Service” of the Corporation in connection with the Registration Statement and
the filing thereof with the Commission, and the Authorized Officers hereby
are
authorized to receive communications and notices from the Commission with
respect to the Registration Statement; and
FURTHER
RESOLVED, that the officers of the Corporation be, and each of them hereby
is,
authorized and directed to pay all fees, costs and expenses that may be incurred
by the Corporation in connection with the Registration Statement;
and
FURTHER
RESOLVED, that it is desirable and in the best interest of the Corporation
that
the Shares be qualified or registered for sale in various states; that the
officers of the Corporation be, and each of them hereby is, authorized to
determine the states in which appropriate action shall be taken to qualify
or
register for sale all or such part of the Shares as they may deem advisable;
that said officers be, and each of them hereby is, authorized to perform on
behalf of the Corporation any and all such acts as they may deem necessary
or
advisable in order to comply with the applicable laws of any such states, and
in
connection therewith to execute and file all requisite papers and documents,
including, but not limited to, applications, reports, surety bonds, irrevocable
consents, appointments of attorneys for service of process and resolutions;
and
the execution by such officers of any such paper or document or the doing by
them of any act in connection with the foregoing matters shall conclusively
establish their authority therefor from the Corporation and the approval and
ratification by the Corporation of the papers and documents so executed and
the
actions so taken; and
FURTHER
RESOLVED, that if, in any state where the securities to be registered or
qualified for sale to the public, or where the Corporation is to be registered
in connection with the public offering of the Shares, a prescribed form of
resolution or resolutions is required to be adopted by the Board of Directors,
each such resolution shall be deemed to have been and hereby is adopted, and
the
Secretary is hereby authorized to certify the adoption of all such resolutions
as though such resolutions were now presented to and adopted by the Board of
Directors; and
FURTHER
RESOLVED, that the officers of the Corporation with the assistance of counsel
be, and each of them hereby is, authorized and directed to take all necessary
steps and do all other things necessary and appropriate to effect the listing
of
the Shares as may be required.
Approval
of Actions
FURTHER
RESOLVED, that, without limiting the foregoing, the Authorized Officers are,
and
each of them hereby is, authorized and directed to proceed on behalf of the
Corporation and to take all such steps as are deemed necessary or appropriate,
with the advice and assistance of counsel, to cause the Corporation to take
all
such action referred to herein and to perform its obligations incident to the
registration, listing and sale of the Shares; and
FURTHER
RESOLVED, that the Authorized Officers be, and each of them hereby is,
authorized, empowered and directed on behalf of and in the name of the
Corporation, to take or cause to be taken all such further actions and to
execute and deliver or cause to be executed and delivered all such further
agreements, amendments, documents, certificates, reports, schedules,
applications, notices, letters and undertakings and to incur and pay all such
fees and expenses as in their judgment shall be necessary, proper or desirable
to carry into effect the purpose and intent of any and all of the foregoing
resolutions, and that all actions heretofore taken by any officer or director
of
the Corporation in connection with the transactions contemplated by the
agreements described herein are hereby approved, ratified and confirmed in
all
respects.
IN
WITNESS WHEREOF, the Board of Directors has executed and delivered this Consent
effective as of __________, 200_.
______________________
______________________
______________________
being
all
of the directors of GOLDEN
PHOENIX MINERALS, INC.
EXHIBIT
D
FORM
OF SECRETARY’S CERTIFICATE
This
Secretary’s Certificate (“Certificate”) is being delivered pursuant to Section
7(k) of that certain Common Stock Purchase Agreement dated as of __________,
(“Common Stock Purchase Agreement”), by and between GOLDEN
PHOENIX MINERALS, INC.,
a
Minnesota corporation (the “Company”) and FUSION
CAPITAL FUND II, LLC
(the
“Buyer”), pursuant to which the Company may sell to the Buyer up to Six Million
Two Hundred Thousand Dollars ($6,000,000) of the Company's Common Stock, no
par
value (the "Common Stock"). Terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Common Stock Purchase
Agreement.
The
undersigned, ____________, Secretary of the Company, hereby certifies as
follows:
1. I
am the
Secretary of the Company and make the statements contained in this Secretary’s
Certificate.
2. Attached
hereto as Exhibit
A
and
Exhibit
B
are
true, correct and complete copies of the Company’s bylaws (“Bylaws”) and
Certificate of Incorporation (“Articles”), in each case, as amended through the
date hereof, and no action has been taken by the Company, its directors,
officers or shareholders, in contemplation of the filing of any further
amendment relating to or affecting the Bylaws or Articles.
3. Attached
hereto as Exhibit
C
are
true, correct and complete copies of the resolutions duly adopted by the Board
of Directors of the Company on _____________, at which a quorum was present
and
acting throughout. Such resolutions have not been amended, modified or rescinded
and remain in full force and effect and such resolutions are the only
resolutions adopted by the Company’s Board of Directors, or any committee
thereof, or the shareholders of the Company relating to or affecting (i) the
entering into and performance of the Common Stock Purchase Agreement, or the
issuance, offering and sale of the Purchase Shares and the Commitment Shares
and
(ii) and the performance of the Company of its obligation under the Transaction
Documents as contemplated therein.
4. As
of the
date hereof, the authorized, issued and reserved capital stock of the Company
is
as set forth on Exhibit
D
hereto.
IN
WITNESS WHEREOF,
I have
hereunder signed my name on this ___ day of ____________.
_________________________
Secretary
The
undersigned as ___________ of __________, a ________ corporation, hereby
certifies that ____________ is the duly elected, appointed, qualified and acting
Secretary of _________, and that the signature appearing above is his genuine
signature.
___________________________________
