LOAN AGREEMENT
EXHIBIT
10.65
This
Loan Agreement (the “Agreement”) is entered into as
of the 14th day of December, 2009, by and among Wits Basin Precious Minerals
Inc., a Minnesota corporation (the “Company”), and Kenglo One Ltd.
(the “Lender”).
INTRODUCTION
A. The
Company is in need of financing and wishes to issue to the Lender, and the
Lender desires to purchase from the Company, a $5,000,000 secured promissory
note in the form attached hereto as Exhibit A (the “Note”).
B. As
additional consideration for Lender’s purchase of the Note, the Company shall
issue to Lender (i) a warrant to purchase 16 million shares of the Company’s
common stock at an exercise price of $0.10 per share, in the form attached
hereto as Exhibit
B (the “Warrant”), and (ii) an option
to purchase from the Company 1.299 million shares of common stock of Standard
Gold, Inc. (f/k/a Princeton Acquisitions, Inc.) at an exercise price of $1.00
per share, in the form attached hereto as Exhibit C (the “Standard Gold
Option”).
C. As
a condition of the Loan (as defined below), the Company is required to (i) grant
Lender a security interest in the assets of the Company, on a pari passu basis with China
Gold, LLC, the Company’s senior lender (“China Gold”) pursuant to the
terms of a Security Agreement attached hereto as Exhibit D (the “Security Agreement”), and (ii)
obtain the consent of London Mining Plc, a joint venture partner of the Company
(“London Mining”), as to
the release of US$4,000,000 from escrow in China with respect to the acquisition
by China Global Mining Resources Limited, a British Virgin Islands corporation
(“CGMR”), or its
subsidiaries, of iron ore properties in China. As of the date hereof,
the Company has obtained the consent of China Gold permitting the pari passu security interest
of Lender, as attached hereto as Exhibit E (the
“China Gold Consent”)
and London Mining has released such funds from escrow.
D. The
parties wish to enter into an agreement in connection with the financing, in the
form of this Agreement.
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing facts and premises hereby made a
part of this Agreement, the mutual promises hereinafter set forth and for other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
Article
1
Sale
and Purchase of Securities
1.1 Sale and
Purchase. On the terms and conditions hereof, the Company
hereby issues and sells to the Lender, and the Lender hereby purchases from the
Company, for an aggregate purchase price of US$4,000,000 (the “Purchase Price”):
(a) the
Note;
(b) the
Warrant; and
(c) the
Standard Gold Option.
1.2 Closing. The
closing of the transactions contemplated and effected hereby (the “Closing”) have taken place on
the date hereof by the Company’s and Lender’s release of closing documents (as
set forth below) to the other, either by facsimile transmission followed by
original documentation delivered by overnight courier, or in such other manner
agreed upon by the parties (referred to herein as the “Closing Date”). At
the Closing, the Company will issue, sell and deliver to the Lender the Note,
the Warrant and the Standard Gold Option against payment of the Purchase Price
by certified check or wire transfer of immediately available funds, in either
case pursuant to instructions delivered by the Company to Lender at or prior to
the Closing.
Article
2
Company
Representations and Warranties
The
Company hereby makes the following representations and warranties to the Lender
as of the Closing Date.
2.1 Organization, Good Standing
and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the Note, the Warrant, the Standard Gold Option and the Security
Agreement (together, the “Transaction Documents”), to
issue and sell the shares of the Company’s common stock issuable upon exercise
of the Warrant (the “Warrant
Shares”), to carry out the provisions of the Transaction Documents, and
to carry on its business as presently conducted and as presently proposed to be
conducted. The Company is duly qualified and is authorized to do
business and is in good standing in each jurisdiction in which the nature of its
activities makes such qualification necessary, except for those jurisdictions in
which failure to be so qualified would not have a materially adverse effect on
the Company or its business, taken as a whole.
2.2 Authorization; Binding
Obligations. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization of the
Transaction Documents, the performance of all obligations of the Company
hereunder, including the authorization, sale, issuance and delivery of the
Warrant Shares upon exercise of the Warrant, has been taken. The
Transaction Documents, when executed and delivered, will be valid and binding
obligations of the Company enforceable in accordance with their respective
terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors’ rights and according to general principles of equity that restrict
the availability of equitable remedies.
2.3 Securities. Assuming
the accuracy of the representations and warranties of the Lender contained in
Article 3 hereof, the offer, issue, sale and transfer (as applicable) of the
Note, the Standard Gold Option, the shares of common stock of Standard Gold
transferred upon exercise of the Standard Gold Option (the “Option Shares”), the Warrant
and the Warrant Shares (collectively, the “Securities”) is and will be
exempt from registration and prospectus delivery requirements of the Securities
Act of 1933, as amended (the “Securities Act”), and are
exempt from registration and qualification under the requirements of all
applicable state securities laws. The Company and its representatives
have complied and will comply with all applicable federal and state securities
laws in connection with the offer, issuance and sale of the
Securities.
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2.4 Outstanding
Indebtedness. Except for the Note and the indebtedness set
forth on Schedule 2.4 hereof, the Company does not have secured indebtedness
with any lender incurred as the result of a direct borrowing of money in an
amount exceeding $100,000. Except as set forth on Schedule 2.4, the
Company is not in default in the payment of the principal of or interest or
premium on any such secured indebtedness (including, without limitation, any
indebtedness owed to China Gold), and no event has occurred or is continuing
under the provisions of any instrument, document or agreement evidencing or
relating to any such secured indebtedness which with the lapse of time or the
giving of notice, or both, would constitute an event of default
thereunder. The Company is not committed or obligated to make any
loan or advance to any person or entity.
2.5 Capitalization.
Immediately prior to the Closing, the authorized capital stock of the Company
consists of 300,000,000 shares of common stock, par value $0.01 per share, of
which 172,527,710 shares are issued and outstanding. All such issued
and outstanding shares have been duly authorized and validly issued, are fully
paid and nonassessable. Additionally, the Company has reserved
for issuance an aggregate of 103,145,385 shares of its common stock pursuant to
the valid exercise of outstanding rights, options, warrants, conversion rights
or other agreements to acquire Company common stock.
2.6 Consents. No
consent, approval, order, or authorization of, or registration, qualification,
designation, declaration, or filing with, any corporation, person or firm or any
public, governmental or judicial authority (“Consents”), is required on the
part of the Company in connection with the valid execution and delivery of this
Agreement or any other of the Transaction Documents, or the consummation of any
other transaction contemplated hereby or thereby, except as such as have been
duly obtained or made, as the case may be, and any such Consents are in full
force and effect except for notices required or permitted to be filed with
certain state and federal securities commissions after the execution hereof,
which notices, if any, will be filed on a timely basis. Without
limiting the foregoing, the issuance of the Warrant and any Warrant Shares
issuable upon exercise thereof is not subject to preemptive or other similar
statutory or contractual rights that have not been duly and effectively
waived.
2.7 Compliance with Other
Instruments. The Company is not, and will not by virtue of
entering into and performing under this Agreement, the other Transaction
Documents or the transactions contemplated hereby and thereby, be in violation
of or conflict with any term of its Articles of Incorporation or Bylaws or any
term or provision of any material mortgage, indenture, lease, license, contract,
agreement, instrument, judgment or decree to which it is a party or by which it
is bound, and is not, and will not by virtue of entering into and performing
under this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby, be in violation of any order addressed
specifically to the Company nor any material statute, rule or regulation
applicable to the Company.
2.8 Disclosure. Neither
this Agreement nor any other document, certificate or written statement
furnished to the Lender by or on behalf of the Company required by this
Agreement or any other Transaction Documents contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading.
Article
3
Lender’s
Representations and Warranties
The
Lender hereby represents and warrants to the Company, as of the Closing Date, as
follows:
3.1 Investment
Representations. The Lender understands that neither the offer
or the sale of the Securities have been registered under the Securities
Act. The Lender also understands that the Securities are being
offered and sold pursuant to an exemption from registration contained in the
Securities Act based in material part upon the Lender’s representations
contained in the Agreement. In this regard, the Lender additionally
represents and warrants as follows:
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(a) The
Lender has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the Company so that
it is capable of evaluating the merits and risks of its investment in the
Company. The Lender must bear the economic risk of this investment
indefinitely unless the Securities are registered for resale pursuant to the
Securities Act, or an exemption from registration is available. The
Lender has no present intention of selling or otherwise transferring the
Securities, or any interest therein. The Lender also understands that
there is no assurance that any exemption from registration under the Securities
Act will be available and that, even if available, such exemption may not allow
the Lender to transfer all or any portion of the Securities under the
circumstances, in the amounts or at the times the Lender might
wish. Lender represents and agrees that if, contrary to the foregoing
representations and warranties, Lender should later desire to dispose of or
transfer all or any portion of the Securities in any manner, Lender shall not do
so without complying with applicable securities laws.
(b) The
Lender is acquiring the Securities for the Lender’s own account, for investment
only, and not with a view towards their public distribution. Lender
is not aware of any occurrence, event or circumstance upon the happening of
which Lender intends to transfer or sell the Securities. Lender has
been informed that, in the view of the certain state securities commissions, a
purchase of Securities with a current intent to resell, by reason of any
foreseeable specific contingency or anticipated change in market values, any
change in the condition of the Company or the investment market as a whole, or
in connection with a contemplated liquidation or settlement of any loan obtained
for the acquisition of the Securities, would represent a purchase with an intent
inconsistent with the representations set forth above, and that certain state
securities commissions might regard such sale or disposition as a deferred sale
with regard to which an exemption from registration is not
available.
(c) The
Lender represents that by reason of its (or its management’s or advisor’s)
business or financial experience, the Lender has the capacity to protect its own
interests in connection with the transactions contemplated in this Agreement and
the Securities. Further, the Lender is aware of no publication of any
advertisement in connection with the transactions contemplated in the
Agreement.
(d) The
Lender represents that it is an accredited investor within the meaning of
Regulation D under the Securities Act.
3.2 High
Risk. The Securities offered hereby are highly speculative in
nature and an investment therein involves a high degree of risk, including but
not limited to the risk of losing the entire investment in such
Securities.
3.3 No Governmental
Approval. No federal or state agency, including the Securities
and Exchange Commission under the Securities Act or the securities commission or
authority of any state, has approved or disapproved the Securities, passed upon
or endorsed the merits of the issuance of Securities or the accuracy or adequacy
of any information provided by the Company, or made any finding or determination
as to the fairness or fitness of the Securities for sale.
3.4 No
Reliance. Lender has been encouraged to rely upon the advice
of its legal counsel, accountants or other financial advisors with respect to
tax and other considerations relating to the purchase of the Securities and
Shares pursuant hereto. Lender is not relying upon the Company with
respect to the economic considerations involved in determining to make an
investment in the Securities.
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3.5 Access to
Information. Lender has been given access to full and complete
information regarding the Company and has utilized such access to Lender’s
satisfaction for the purpose of obtaining information respecting the
Company. Particularly, Lender has been given reasonable opportunity
to meet with and/or contact Company representatives for the purpose of asking
questions of, and receiving answers from, such representatives concerning the
terms and conditions of the issuance of the Securities and to obtain any
additional information, to the extent reasonably available, necessary to verify
the accuracy of information about the Company already obtained.
Article
4
Security
To secure
the full and timely payment and performance of the Company’s obligations under
this Agreement and the Note, as a condition to the Closing, the Company shall
grant the Lender a security interest (the “Security Interest”) in the
assets of the Company, whether now owned or later acquired or created, and
including all proceeds therefrom, whether cash or non-cash (collectively, the
“Collateral”) pursuant
to the terms of the Security Agreement. Pursuant to the terms of the
China Gold Consent, the Security Interest is pari passu with the security
interests held by China Gold with respect to the Collateral. Lender
hereby agrees prior to December 31, 2009 to negotiate in good faith with China
Gold the terms of an intercreditor agreement between Lender and China Gold
pertaining to the pari
passu security interests held by each party in the assets of the Company,
which intercreditor agreement shall be consistent with agreements of China Gold
under the China Gold Consent. The Company agrees to use its best
efforts to (i) cause Section 4 of that certain Promissory Note of CGMR issued in
favor of the Company in the principal amount of $4,800,000 to be amended to
provide that the Lender receive its pro rata share of any payments made under
such note in the same respect as China Gold and (ii) cause that certain
Shareholders' Agreement dated March 17, 2009 related to CGMR to be amended to
allow transfers of shares held by the Company under such agreement to the Lender
in the same manner that transfers from the Company to China Gold are
allowed.
Article
5
General
Provisions
5.1 Entire
Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein and
therein.
5.2 Governing
Law. This Agreement shall be governed by the laws of the State
of Minnesota without regard to its conflicts-of-law principles.
5.3 Payment of Fees and Expenses
of the Lender. The Company will promptly reimburse the Lender
for reasonable legal expenses payable to Xxxxxxxxxxx Xxxxx & Xxxxxxxx LLP,
counsel to the Lender, incurred in connection with the transactions contemplated
by this Agreement, including, without limitation, reasonable legal expenses
related to the proposed intercreditor agreement between Lender and China Gold;
provided that, in no event shall the Company’s obligation to provide
reimbursement to Lender exceed US$10,000. The Company will be solely
responsible for its own legal costs incurred in performing its obligations in
this transaction.
5.4 Successors and
Assigns. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of the Securities from time to time.
5
5.5 Severability. In
case any provision of the Agreement shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
5.6 Amendment and
Waiver. This Agreement may be amended or modified, and any
provision hereunder may be waived, only upon the written consent of the Company
and the Lender.
5.7 Notices. All notices,
requests, consents, and other communications hereunder shall be in writing and
shall be deemed effectively given and received when delivered in person or by
national overnight courier service or by certified or registered mail,
return-receipt requested, or by telecopier, addressed as follows:
(a) if
to the Company, at
00 Xxxxx
Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx,
Xxxxxxxxx 00000
Attention: Xxxx
Xxxxx, Chief Financial Officer
Facsimile: (000)
000-0000
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(b)
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if
to the Lender, in care of:
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Kenglo
One Ltd.
c/o
Baccata Trustees Limited
Third
Floor, Xxxxxx Xxxxx
Xxxxxx
Xxxxxx
Xx.
Xxxxxx, Xxxxxx XX0 0XX
Channel
Islands
Attention: Xxx.
Xxx Xxxxxxxx
Facsimile: 44
1534 870 671
with a
copy of such notice (which shall not constitute notice to the Lender)
to:
Xxxxxxxxxxx
Xxxxx & Xxxxxxxx LLP
00 Xxxxx
Xxxxxxx Xxxxxx
Xxxxx
XXX, Xxxxx 0000
Xxxxxxxxxxx,
XX 00000
Attn: Xxxxxxx
X. Xxxxx
Facsimile: (000)
000-0000
5.8 Counterparts. This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one agreement binding on the
parties. Facsimile and electronically transmitted signatures shall be
valid and binding to the same extent as original signatures.
5.9 Further
Assurances. Each party hereby agrees to execute and deliver
such additional documents and instruments and to perform such additional acts as
may be necessary or appropriate to effectuate, carry out and perform all of the
terms, provisions and conditions of this Agreement and the transactions
contemplated hereby.
Signature
Page Follows
6
IN
WITNESS WHEREOF, the parties hereto have set their hands to this Loan Agreement
to be effective as of the date first set forth above.
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COMPANY:
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LENDER:
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KENGLO
ONE, LTD.
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By:
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/s/ Xxxxxxx X. Xxxx
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By:
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/s/ Xxx Xxxxxxxx
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Its:
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CEO
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Its:
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Director
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Signature
Page
Loan
and Security Agreement
SCHEDULE
2.4
Secured Indebtedness in
excess of $100,000
1. Wits
Basin has outstanding obligations to China Gold, LLC in the principal amounts of
(i) $5,487,066 and (ii) $227,391. The obligations set forth in
subsection (ii) had a maturity date of February 15, 2009, and Wits Basin has
been in constant discussions with China Gold since such time. The
parties are currently negotiating an extension of the note obligations set forth
in subsection (ii).
2. Wits
Basin has outstanding obligations to Cabo Drilling (America) Inc. in the
principal amount of $511,589.59.
3. Xxxxxx
Xxxxx has an outstanding obligation to Xxxxxx X. Xxxxx (on behalf of the sellers
of the Xxxxx-Xxxxxx property) in the principal amount of
$6,428,500. Xxxxxx Xxxxx is now a wholly owned subsidiary of Standard
Gold, Inc., of which Wits Basin currently holds a majority
interest.
EXHIBIT
E
CONSENT OF CHINA GOLD,
LLC
WHEREAS, China Gold, LLC, a Kansas
limited liability company (“Lender”), is a party to that certain Convertible
Notes Purchase Agreement dated as of April 10, 2007 (as amended the
“Purchase Agreement”) with Wits Basin Precious Minerals Inc., a Minnesota
corporation (“Wits Basin”), pursuant to which Wits Basin has (i) issued Lender
that certain Promissory Note dated December 22, 2008 in the aggregate principal
amount of $10,241,000 (as amended, the “Note”), (ii) entered into with Lender
that certain Amended and Restated Security Agreement dated December 22, 2009
(the “Security Agreement”), (iii) entered into with Lender that certain Second
Amended and Restated Pledge Agreement dated December 22, 2008 (as amended, the
“Pledge Agreement”; collectively, the Purchase Agreement, the Note, the Security
Agreement the Pledge Agreement and all such related documents entered into
pursuant to the Purchase Agreement are herein referred to as the “CG
Documents”); and
WHEREAS, Lender, as a
successor-in-interest, is a party to that certain Note and Warrant Purchase
Agreement dated on or around February 11, 2008 (the “Platinum Agreement”) with
Wits Basin, pursuant to which Wits Basin has (i) issued to Lender that certain
10% Senior Secured Convertible Promissory Note, in the original principal amount
of $1,020,000 on or about February 11, 2008 and that certain 10% Senior Secured
Promissory Note, in the original principal amount of $110,000 issued by Wits
Basin to Lender on or about July 10, 2008 (collectively, the “Platinum Notes”),
and (ii) entered into with Lender that certain Security Agreement dated February
11, 2008 by and between Lender and Wits Basin (the “Platinum Security Agreement;
collectively, the Platinum Agreement, the Platinum Notes, the Platinum Security
Agreement and all such related documents entered into pursuant to the Platinum
Agreement are herein referred to as the “Platinum Documents”); and
WHEREAS, pursuant to the CG Documents
and the Platinum Documents, China Gold holds a security interest in (i) all of
Wits Basin's assets, including in Wits Basin's equity interest in its wholly and
majority-owned subsidiaries and (ii) assets of certain of Wits Basin's
subsidiaries pursuant to security agreements with such subsidiaries
(collectively, the “Assets’); and
WHEREAS, Wits Basin has been in
negotiations with Kenglo One Ltd. (“Kenglo”) with respect to a proposed loan of
$4,000,000 to Wits Basin (the “Loan”) in consideration of a promissory note of
Wits Basin in the principal face amount of $5,000,000 (the “Kenglo Note”) and
certain other considerations of Wits Basin; and
WHEREAS, as a condition of Kenglo in
making the Loan, Kenglo requires that Wits Basin secure the payment and
performance of the Kenglo Note (and the other applicable Loan documents) with a
security interests in the Assets on a pari passu basis with Lender
(provided that the proceeds of any collateral shall be allocated ratably in
accordance with the then outstanding balance of payment obligations of Wits
Basin to the respective lenders).
NOW THEREFORE,
Lender hereby acknowledges that the
terms of the aforementioned transactions as referenced herein are as currently
contemplated by Wits Basin and Kenglo, but may be amended through negotiation
through negotiation or otherwise by the parties involved prior to completion. In
consideration of the Loan and other good consideration, the sufficiency of which
is acknowledged by Lender, Lender hereby: (i) to the extent required pursuant to
the CG Documents and Platinum Documents, provides any necessary consents to the
Loan and the issuance of the Kenglo Note; (ii) permits Wits Basin's grant to
Kenglo of a security interest against the Assets that is pari passu to that of
Lender's security interest and equal in all respects to Lender's security
interest in the Assets (provided that the proceeds of any collateral shall be
allocated ratably in accordance with the then outstanding balance of payment
obligations of Wits Basin to the respective lenders), (iii) agrees that,
regardless of any priority otherwise available to either of Lender or Kenglo
pursuant to law or by agreement, Lender and Kenglo shall each hold equal first
priority liens in the Assets, including, without limitation, in any securities
or stock that are subject to the Pledge Agreement and the Security Agreement;
(iv) agrees with respect to any Investment Property (as such term is defined in
the Uniform Commercial Code adopted in the State of Minnesota) which Lender
holds possession of pursuant to the Pledge Agreement or the Security Agreement
(the “Pledged Property”), to hold and possess such Pledged Property for the
equal benefit of Kenglo; and (v) agrees that Kenglo, along with Lender, has
“control” (as such term is defined in the Uniform Commercial Code adopted in the
State of Minnesota) of the Pledged Property. Lender further agrees prior to
December 31, 2009, to negotiate in good faith with Kenglo the terms of an
intercreditor agreement between Lender and Kenglo pertaining to the pari passu security interests
held by each party in the Assets, including, without limitation, the Pledged
Property, which intercreditor agreement shall be consistent with the foregoing
agreements by Lender.
IN WITNESS WHEREOF, this Consent has
been duly executed effective this 10 day of December, 2009.
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LENDER:
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China
Gold, LLC,
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a
Kansas limited liability company
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By:
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/s/ C. Xxxxxx Xxxxxx
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Name:
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C.
Xxxxxx Xxxxxx
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Title:
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Manager
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ACKNOWLEDGED
AND AGREED as of
the 14
day of December, 2009:
KENGLO
ONE LTD.
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By:
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/s/ Xxx Xxxxxxxx
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Its:
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Director
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