SECURITIES PURCHASE AGREEMENT
-----------------------------
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
January 27, 2006, by and among NEWGOLD, INC., a Delaware corporation (the
"COMPANY"), and the Buyers listed on Schedule I attached hereto (individually, a
"BUYER" or collectively "BUYERS").
WITNESSETH
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WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("REGULATION D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase up to One Million Dollars
($1,000,000) of secured convertible debentures (the "CONVERTIBLE DEBENTURES"),
which shall be convertible into shares of the Company's common stock, par value
$0.001 (the "COMMON STOCK") (as converted, the "CONVERSION SHARES") of which Six
Hundred Thousand Dollars ($600,000) shall be funded on the business day
following the date hereof (the "FIRST CLOSING"), and Two Hundred Thousand
Dollars ($200,000) shall be funded two (2) business days prior to the date the
registration statement (the "REGISTRATION STATEMENT") is filed, pursuant to the
Investor Registration Rights Agreement dated the date hereof, with the United
States Securities and Exchange Commission (the "SEC") (the "SECOND CLOSING") and
Two Hundred Thousand Dollars ($200,000) will be funded on the date the
Registration Statement is declared effective by the SEC (the "THIRD CLOSING")
(individually referred to as a "CLOSING" collectively referred to as the
"CLOSINGS"), for a total purchase price of up to One Million Dollars
($1,000,000), (the "PURCHASE PRICE") in the respective amounts set forth
opposite each Buyer(s) name on Schedule I (the "SUBSCRIPTION AMOUNT"); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement (the "INVESTOR REGISTRATION RIGHTS AGREEMENT") pursuant to which the
Company has agreed to provide certain registration rights under the Securities
Act and the rules and regulations promulgated there under, and applicable state
securities laws; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Security Agreement
(the "SECURITY AGREEMENT") pursuant to which the Company has agreed to provide
the Buyer a security interest in Pledged Collateral (as this term is defined in
the Security Agreement) to secure the Company's obligations under this
Agreement, the Transaction Documents, or any other obligations of the Company to
the Buyer;
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Pledge and Escrow
Agreement (the "PLEDGE AND ESCROW AGREEMENT") pursuant to which the Company has
agreed to provide the Buyer a security
interest in the Pledged Shares (as this term is defined in the Pledge and Escrow
Agreement) to secure the Company's obligations under this Agreement, the
Transaction Documents, or any other obligations of the Company to the Buyer
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, or no later January 30, 2006, the parties hereto are executing and
delivering a Memorandum of Security Interest pursuant to which the Company has
agreed to provide the Buyer a security interest in the Company's mining rights
at the Relief Canyon Mine located at located in Pershing County Nevada, 17 Miles
East of Lovelock, Nevada, in Township 27N, Range 34E Section 16,17,18, 20 and 21
to secure the Company's obligations under this Agreement, the Transaction
Documents, or any other obligations of the Company to the Buyer (the "MEMORANDUM
OF SECURITY INTEREST"); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering Irrevocable Transfer
Agent Instructions (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS")
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s) hereby agree
as follows:
1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
(a) PURCHASE OF CONVERTIBLE DEBENTURES. Subject to
the satisfaction (or waiver) of the terms and conditions of this Agreement, each
Buyer agrees, severally and not jointly, to purchase at each Closing and the
Company agrees to sell and issue to each Buyer, severally and not jointly, at
each Closing, Convertible Debentures in amounts corresponding with the
Subscription Amount set forth opposite each Buyer's name on Schedule I hereto.
(b) CLOSING DATE. The First Closing of the purchase
and sale of the Convertible Debentures shall take place at 10:00 a.m. Eastern
Standard Time on the business day following the date hereof, subject to
notification of satisfaction of the conditions to the First Closing set forth
herein and in Sections 6 and 7 below (or such later date as is mutually agreed
to by the Company and the Buyer(s)) (the "FIRST CLOSING DATE"), the Second
Closing of the purchase and sale of the Convertible Debentures shall take place
at 10:00 a.m. Eastern Standard Time two (2) business days prior to the date the
Registration Statement is filed with the SEC, subject to notification of
satisfaction of the conditions to the Second Closing set forth herein and in
Sections 6 and 7 below (or such later date as is mutually agreed to by the
Company and the Buyer(s)) (the "SECOND CLOSING DATE") and the Third Closing of
the purchase and sale of the Convertible Debentures shall take place at 10:00
a.m. Eastern Standard Time on the date the Registration Statement is declared
effective by the SEC, subject to notification of satisfaction of the conditions
to the Second Closing set forth herein and in Sections 6 and 7 below (or such
later date as is mutually agreed to by the Company and the Buyer(s)) (the "THIRD
CLOSING DATE") (collectively referred to a the "CLOSING DATES"). The Closing
shall occur on the respective Closing Dates at the offices of Yorkville
Advisors, LLC, 0000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxx Xxxxxx 00000 (or
such other place as is mutually agreed to by the Company and the Buyer(s)).
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(c) FORM OF PAYMENT. Subject to the satisfaction of
the terms and conditions of this Agreement, on the Closing Dates, (i) the Buyers
shall deliver to the Company such aggregate proceeds for the Convertible
Debentures to be issued and sold to such Buyer(s), minus the fees to be paid
directly from the proceeds the Closings as set forth herein, and (ii) the
Company shall deliver to each Buyer, Convertible Debentures which such Buyer(s)
is purchasing in amounts indicated opposite such Buyer's name on Schedule I,
duly executed on behalf of the Company.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, severally and not jointly, that:
(a) INVESTMENT PURPOSE. Each Buyer is acquiring the
Convertible Debentures and, upon conversion of Convertible Debentures, the Buyer
will acquire the Conversion Shares then issuable, 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, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that by making the
representations herein, such Buyer reserves the right to dispose of the
Conversion Shares at any time in accordance with or pursuant to an effective
registration statement covering such Conversion Shares or an available exemption
under the Securities Act.
(b) ACCREDITED INVESTOR STATUS. Each Buyer is an
"ACCREDITED INVESTOR" as that term is defined in Rule 501(a)(3) of Regulation D.
(c) RELIANCE ON EXEMPTIONS. Each Buyer understands
that the Convertible Debentures 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 such Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Buyer to acquire such securities.
(d) INFORMATION. Each Buyer and its advisors (and his
or, its counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information he deemed
material to making an informed investment decision regarding his purchase of the
Convertible Debentures and the Conversion Shares, which have been requested by
such Buyer. Each Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and its management and have received
responses deemed adequate to each Buyer. Neither such inquiries nor any other
due diligence investigations conducted by such Buyer or its advisors, if any, or
its representatives shall modify, amend or affect such Buyer's right to rely on
the Company's representations and warranties contained in Section 3 below. Each
Buyer understands that its investment in the Convertible Debentures and the
Conversion Shares involves a high degree of risk. Each Buyer is in a position
regarding the Company, which, based upon employment, family relationship or
economic bargaining power, enabled and enables such Buyer to obtain information
from the Company in order to evaluate the merits and risks of this investment.
Each Buyer has sought such accounting, legal and tax advice, as it has
considered necessary to make an informed
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investment decision with respect to its acquisition of the Convertible
Debentures and the Conversion Shares.
(e) NO GOVERNMENTAL REVIEW. Each 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 Convertible Debentures or the Conversion Shares, or the fairness or
suitability of the investment in the Convertible Debentures or the Conversion
Shares, nor have such authorities passed upon or endorsed the merits of the
offering of the Convertible Debentures or the Conversion Shares.
(f) TRANSFER OR RESALE. Each Buyer understands that
except as provided in the Investor Registration Rights Agreement: (i) the
Convertible Debentures have not been and are not being registered under the
Securities Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless (A) subsequently registered thereunder, or
(B) such Buyer shall have delivered to the Company an opinion of counsel, in a
generally acceptable form, to the effect that such securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration requirements; (ii) any sale of such securities
made in reliance on Rule 144 under the Securities Act (or a successor rule
thereto) ("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 such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such securities
under the Securities Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder. The Company reserves the right
to place stop transfer instructions against the shares and certificates for the
Conversion Shares.
(g) LEGENDS. Each Buyer understands that the
certificates or other instruments representing the Convertible Debentures and or
the Conversion Shares shall bear a restrictive legend in substantially the
following form (and a stop transfer order may be placed against transfer of such
stock certificates):
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 SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARD RESALE 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 COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS.
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The legend set forth above shall be removed and the Company within two (2)
business days shall issue a certificate without such legend to the holder of the
Conversion Shares upon which it is stamped, if, unless otherwise required by
state securities laws, (i) in connection with a sale transaction, provided the
Conversion Shares are registered under the Securities Act or (ii) in connection
with a sale transaction, after such holder provides the Company with an opinion
of counsel, which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Conversion Shares may be made without
registration under the Securities Act.
(h) AUTHORIZATION, ENFORCEMENT. This Agreement has
been duly and validly authorized, executed and delivered on behalf of such Buyer
and is a valid and binding agreement of such Buyer enforceable in accordance
with its terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.
(i) RECEIPT OF DOCUMENTS. Each Buyer and his or its
counsel has received and read in their entirety: (i) this Agreement and each
representation, warranty and covenant set forth herein and the Transaction
Documents (as defined herein); (ii) all due diligence and other information
necessary to verify the accuracy and completeness of such representations,
warranties and covenants; (iii) the Company's Form 10-KSB for the fiscal year
ended January 31, 2004; (iv) the Company's Form 10-QSB for the fiscal quarters
ended April 30, 2005, July 31, 2005 and October 31, 2005 and (v) answers to all
questions each Buyer submitted to the Company regarding an investment in the
Company; and each Buyer has relied on the information contained therein and has
not been furnished any other documents, literature, memorandum or prospectus.
(j) DUE FORMATION OF CORPORATE AND OTHER BUYERS. If
the Buyer(s) is a corporation, trust, partnership or other entity that is not an
individual person, it has been formed and validly exists and has not been
organized for the specific purpose of purchasing the Convertible Debentures and
is not prohibited from doing so.
(k) NO LEGAL ADVICE FROM THE COMPANY. Each Buyer
acknowledges, that it had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with his or its own legal counsel
and investment and tax advisors. Each Buyer is relying solely on such counsel
and advisors and not on any statements or representations of the Company or any
of its representatives or agents for legal, tax or investment advice with
respect to this investment, the transactions contemplated by this Agreement or
the securities laws of any jurisdiction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants as of the date hereof to each of
the Buyers that, except as set forth in the SEC Documents (as defined herein) or
in the Disclosure Schedule attached hereto (the "DISCLOSURE SCHEDULE"):
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(a) ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized and validly existing in good standing under the laws
of the jurisdiction in which it is incorporated, and has the requisite corporate
power to own their properties and to carry on their business as now being
conducted. The Company is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the 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 would not have
a material adverse effect on the Company and its subsidiaries taken as a whole.
(b) AUTHORIZATION, ENFORCEMENT, COMPLIANCE WITH OTHER
INSTRUMENTS. (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Security Agreement, the Investor
Registration Rights Agreement, the Irrevocable Transfer Agent Agreement, the
Pledge and Escrow Agreement, the Memorandum of Security Interest, and any
related agreements (collectively the "TRANSACTION DOCUMENTS") and to issue the
Convertible Debentures and the Conversion Shares 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
Convertible Debentures the Conversion Shares and the reservation for issuance
and the issuance of the Conversion Shares issuable upon conversion or exercise
thereof, have been duly authorized by the Company's Board of Directors and no
further consent or authorization is required by the Company, its Board of
Directors or its stockholders, (iii) the Transaction Documents have been duly
executed and delivered by the Company, (iv) the Transaction Documents 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
authorized officer of the Company executing the Transaction Documents knows of
no reason why the Company cannot file the registration statement as required
under the Investor Registration Rights Agreement or perform any of the Company's
other obligations under such documents.
(c) CAPITALIZATION. The authorized capital stock of
the Company consists of 250,000,000 shares of Common Stock and no shares of
Preferred Stock, par value $0.001 ("PREFERRED STOCK") of which 63,104,072 shares
of Common Stock are issued and outstanding. All of such outstanding shares have
been validly issued and are fully paid and nonassessable. No shares of Common
Stock are subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company. As of the date of this
Agreement, (i) 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, (ii) there are no outstanding debt securities and (iii) 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
Securities Act (except pursuant
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to the Registration Rights Agreement) and (iv) there are no outstanding
registration statements and there are no outstanding comment letters from the
SEC or any other regulatory agency. There are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Convertible Debentures as described in this 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 in effect on
the date hereof (the "BY-LAWS"), and the terms of all securities convertible
into or exercisable for Common Stock and the material rights of the holders
thereof in respect thereto other than stock options issued to employees and
consultants.
(d) ISSUANCE OF SECURITIES. The Convertible
Debentures are duly authorized and, upon issuance in accordance with the terms
hereof, shall be duly issued, fully paid and nonassessable, are free from all
taxes, liens and charges with respect to the issue thereof. The Conversion
Shares issuable upon conversion of the Convertible Debentures have been duly
authorized and reserved for issuance. Upon conversion or exercise in accordance
with the Convertible Debentures the Conversion Shares will be duly issued, fully
paid and nonassessable.
(e) NO CONFLICTS. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated hereby will not (i) result in a
violation of the Certificate of Incorporation, any certificate of designations
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 National Association of
Securities Dealers Inc.'s OTC Bulletin Board on which the Common Stock is
quoted) 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. Neither the Company nor its subsidiaries is in violation of any term
of or in default under its Certificate of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or 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. The business of the Company is not being conducted, and shall not
be conducted in violation of any material law, ordinance, or regulation of any
governmental entity. Except as specifically contemplated by this Agreement and
as required under the Securities Act and any applicable state securities laws,
the Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under or
contemplated by this Agreement or the Registration Rights Agreement in
accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company is unaware of any facts or circumstance, which
might give rise to any of the foregoing.
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(f) SEC DOCUMENTS: FINANCIAL STATEMENTS. Since
January 9, 2006, the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT") (all of the foregoing
filed prior to the date hereof or amended after 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"). The Company has delivered to the Buyers or their representatives,
or made available through the SEC's website at xxxx://xxx.xxx.xxx., true and
complete copies of the SEC Documents. As of their respective dates, the
financial statements of the Company disclosed in the SEC Documents (the
"FINANCIAL STATEMENTS") 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). No other
information provided by or on behalf of the Company to the Buyer which is not
included in the SEC Documents, including, without limitation, information
referred to in this Agreement, contains any untrue statement of a material fact
or omits 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.
(g) 10(B)-5. The SEC Documents do not include any
untrue statements of material fact, nor do they omit to state any material fact
required to be stated therein necessary to make the statements made, in light of
the circumstances under which they were made, not misleading.
(h) ABSENCE OF LITIGATION. Except as set forth in the
SEC Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory
organization or body pending against or affecting the Company's the Common
Stock, wherein an unfavorable decision, ruling or finding would (i) have a
material adverse effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) have a material adverse effect on the business,
operations, properties, financial condition or results of operations of the
Company taken as a whole.
(i) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF THE
CONVERTIBLE DEBENTURES. The Company acknowledges and agrees that the Buyer(s) is
acting solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that the Buyer(s) is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by the Buyer(s) or any
of their respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is merely incidental to such Buyer's
purchase of the
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Convertible Debentures or the Conversion Shares. The Company further represents
to the Buyer that the Company's decision to enter into this Agreement has been
based solely on the independent evaluation by the Company and its
representatives.
(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 Securities Act) in connection with the offer or sale
of the Convertible Debentures or the Conversion Shares.
(k) NO INTEGRATED OFFERING. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of the Convertible Debentures or the Conversion Shares under the
Securities Act or cause this offering of the Convertible Debentures or the
Conversion Shares to be integrated with prior offerings by the Company for
purposes of the Securities Act.
(l) EMPLOYEE RELATIONS. The Company is not involved
in any labor dispute nor, to the knowledge of the Company, is any such dispute
threatened. None of the Company's employees is a member of a union and the
Company believes that its relations with its employees are good.
(m) INTELLECTUAL PROPERTY RIGHTS. The Company own or
possess adequate rights or licenses to use all 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. The Company does not have any knowledge of any infringement by the
Company or its subsidiaries of 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, and, to the
knowledge of the Company there is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened against, the
Company regarding trademark, trade name, patents, patent rights, invention,
copyright, license, service names, service marks, service xxxx registrations,
trade secret or other infringement; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing.
(n) ENVIRONMENTAL LAWS. The Company is (i) 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.
(o) TITLE. Any real property and facilities held
under lease by the Company and 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.
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(p) INSURANCE. The Company is currently not insured
against such losses and risks customary in the businesses in which the Company
is engaged. The Company has not 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 taken as a whole.
(q) REGULATORY PERMITS. The Company 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.
(r) INTERNAL ACCOUNTING CONTROLS. The Company
maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
and (iii) the recorded amounts for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
(s) NO MATERIAL ADVERSE BREACHES, ETC. The Company is
not subject to any charter, corporate or other legal restriction, or any
judgment, decree, order, rule or regulation which in the judgment of the
Company's officers has or is expected in the future to have a material adverse
effect on the business, properties, operations, financial condition, results of
operations or prospects of the Company. The Company is not in breach of any
contract or agreement which breach, in the judgment of the Company's officers,
has or is expected to have a material adverse effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company.
(t) TAX STATUS. The Company has made and filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and (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) 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.
(u) CERTAIN TRANSACTIONS. Except for arm's length
transactions pursuant to which the Company makes payments in the ordinary course
of business upon terms no less favorable than the Company could obtain from
third parties and other than the grant of
10
stock options disclosed in the SEC Documents, none of the officers, directors,
or employees of the Company is presently a party to any transaction with the
Company (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 a substantial interest or is an officer, director, trustee or
partner.
(v) FEES AND RIGHTS OF FIRST REFUSAL. The Company is
not obligated to offer the securities offered hereunder on a right of first
refusal basis or otherwise to any third parties including, but not limited to,
current or former shareholders of the Company, underwriters, brokers, agents or
other third parties.
4. COVENANTS.
(a) BEST EFFORTS. Each party shall use its best
efforts to timely satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
(b) FORM D. The Company agrees to file a Form D with
respect to the Conversion Shares as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Conversion Shares, or obtain an exemption
for the Conversion Shares for sale to the Buyers at the Closing pursuant to this
Agreement under applicable securities or "Blue Sky" laws of the states of the
United States, and shall provide evidence of any such action so taken to the
Buyers on or prior to the Closing Date.
(c) REPORTING STATUS. Until the earlier of (i) the
date as of which the Buyer(s) may sell all of the Conversion Shares without
restriction pursuant to Rule 144(k) promulgated under the Securities Act (or
successor thereto), or (ii) the date on which (A) the Buyer(s) shall have sold
all the Conversion Shares and (B) none of the Convertible Debentures are
outstanding (the "REGISTRATION PERIOD"), the Company shall file in a timely
manner all reports required to be filed with the SEC pursuant to the Exchange
Act and the regulations of the SEC thereunder, and the Company shall not
terminate its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
otherwise permit such termination.
(d) USE OF PROCEEDS. The Company will use the
proceeds from the sale of the Convertible Debentures for general corporate and
working capital purposes.
(e) RESERVATION OF SHARES. The Company shall take all
action reasonably necessary to at all times have authorized, and reserved for
the purpose of issuance, such number of shares of Common Stock as shall be
necessary to effect the issuance of the Conversion Shares. If at any time the
Company does not have available such shares of Common Stock as shall from time
to time be sufficient to effect the conversion of all of the Conversion Shares,
the Company shall call and hold a special meeting of the shareholders within
thirty (30)
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days of such occurrence, for the sole purpose of increasing the number of shares
authorized. The Company's management shall recommend to the shareholders to vote
in favor of increasing the number of shares of Common Stock authorized.
Management shall also vote all of its shares in favor of increasing the number
of authorized shares of Common Stock.
(f) LISTINGS OR QUOTATION. The Company shall promptly
secure the listing or quotation of the Conversion Shares upon each national
securities exchange, automated quotation system or The National Association of
Securities Dealers Inc.'s Over-The-Counter Bulletin Board ("OTCBB") or other
market, if any, upon which shares of Common Stock are then listed or quoted
(subject to official notice of issuance) and shall use its best efforts to
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all Conversion Shares from time to time issuable under the terms of
this Agreement. The Company shall maintain the Common Stock's authorization for
quotation on the OTCBB.
(g) FEES AND EXPENSES.
(i) Each of the Company and the Buyer(s)
shall pay all costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution and delivery of the
Transaction Documents. The Company shall pay Yorkville Advisors LLC a fee equal
to ten percent (10%) of the Purchase Price.
(ii) The Company shall pay a structuring fee
to Yorkville Advisors LLC of Twelve Thousand Five Hundred Dollars ($12,500), of
which Two Thousand Five Hundred Dollars has previously been paid, and Ten
Thousand Dollars ($10,000) shall be paid directly from the proceeds of the First
Closing.
(iii) The Company shall pay the Buyers a
non-refundable due diligence fee of Five Thousand Dollars ($5,000) which shall
be paid directly from the proceeds of the First Closing.
(iv) The Company shall issue to the Buyer a
warrant to purchase one million two hundred fifty thousand (1,250,000) shares of
the Company's Common Stock for a period of four (4) years at an exercise price
of $0.20 per share and a warrant to purchase one million two hundred fifty
thousand (1,250,000) shares of the Company's Common Stock for a period of four
(4) years at an exercise price of $0.30 per share (collectively referred to as
the "WARRANTS"). The shares of Common Stock issuable under the Warrants shall
collectively be referred to as the "WARRANT SHARES".
(v) The Warrant Shares shall have
"piggy-back" and demand registration rights.
(h) CORPORATE EXISTENCE. So long as the aggregate
principal amount on the Convertible Debentures remains unpaid and unconverted in
an aggregate amount over Two Hundred Thousand Dollars ($200,000), the Company
shall not directly or indirectly consummate any merger, reorganization,
restructuring, reverse stock split consolidation, sale of all or substantially
all of the Company's assets or any similar transaction or related transactions
(each such transaction, an "ORGANIZATIONAL CHANGE") unless, prior to the
consummation an Organizational Change, the Company obtains the written consent
of each Buyer, so long as the
12
aggregate principal amount on the Convertible Debentures remains unpaid and
unconverted in an aggregate amount less than Two Hundred Thousand Dollars
($200,000), the Company shall be entitled to directly or indirectly consummate
any Organizational Change without, prior to the consummation an Organizational
Change, obtaining the written consent of each Buyer. In each such case, the
Company will make appropriate provision with respect to such holders' rights and
interests to insure that the provisions of this Section 4(h) will thereafter be
applicable to the Convertible Debentures.
(i) TRANSACTIONS WITH RELATED PARTIES AND AFFILIATES.
So long as any Convertible Debentures are outstanding, the Company shall not,
and shall cause each of its subsidiaries not to, enter into, amend, modify or
supplement, or permit any subsidiary to enter into, amend, modify or supplement
any agreement, transaction, commitment, or arrangement with any of its or any
subsidiary's officers, directors, person who were officers or directors at any
time during the previous two (2) years, stockholders who beneficially own five
percent (5%) or more of the Common Stock, or Affiliates (as defined below) or
with any individual related by blood, marriage, or adoption to any such
individual or with any entity in which any such entity or individual owns a five
percent (5%) or more beneficial interest (each a "RELATED PARTY"), except for
(a) customary employment arrangements and benefit programs on reasonable terms,
(b) any investment in an Affiliate of the Company, (c) any agreement,
transaction, commitment, or arrangement on an arms-length basis on terms no less
favorable than terms which would have been obtainable from a person other than
such Related Party, (d) any agreement, transaction, commitment, or arrangement
which is approved by a majority of the disinterested directors of the Company;
for purposes hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction, commitment, or arrangement. "AFFILIATE" for
purposes hereof means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. "CONTROL" or "CONTROLS"
for purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity.
(j) TRANSFER AGENT. The Company covenants and agrees
that, in the event that the Company's agency relationship with the transfer
agent should be terminated for any reason prior to a date which is two (2) years
after the Closing Date, the Company shall immediately appoint a new transfer
agent and shall require that the new transfer agent execute and agree to be
bound by the terms of the Irrevocable Transfer Agent Instructions (as defined
herein).
(k) RESTRICTION ON ISSUANCE OF THE CAPITAL STOCK. So
long as the aggregate principal amount on the Convertible Debentures remains
unpaid and unconverted in an aggregate amount over Two Hundred Thousand Dollars
($200,000), the Company shall not, without the prior written consent of the
Buyer(s), (i) issue or sell shares of Common Stock or Preferred Stock without
consideration or for a consideration per share less than the bid price of the
Common Stock determined immediately prior to its issuance, (ii) issue any
preferred stock, warrant, option, right, contract, call, or other security or
instrument granting the holder thereof the right to acquire Common Stock without
consideration or for a consideration less than such
13
Common Stock's Bid Price determined immediately prior to it's issuance, (iii)
enter into any security instrument granting the holder a security interest in
any of the Pledged Property as defined in the Security Agreement, or (iv) file
any registration statement on Form S-8.
(l) Neither the Buyer(s) nor any of its affiliates
have an open short position in the Common Stock of the Company, and the Buyer(s)
agrees that it shall not, and that it will cause its affiliates not to, engage
in any short sales of or hedging transactions with respect to the Common Stock
as long as any Convertible Debentures or Warrants shall remain outstanding.
(m) RIGHTS OF FIRST REFUSAL. For a period of eighteen
(18) months from each Closing Date, excluding a raise of Two Million Dollars
($2,000,000) within thirty days from January 27, 2006 on terms less favorable
than this Debenture, so long as any portion of Convertible Debentures are
outstanding, if the Company intends to raise additional capital by the issuance
or sale of capital stock of the Company, including without limitation shares of
any class of common stock, any class of preferred stock, options, warrants or
any other securities convertible or exercisable into shares of common stock
(whether the offering is conducted by the Company, underwriter, placement agent
or any third party) the Company shall be obligated to offer to the Buyers such
issuance or sale of capital stock, by providing in writing the principal amount
of capital it intends to raise and outline of the material terms of such capital
raise, prior to offering such issuance or sale of capital stock to any third
parties including, but not limited to, current or former officers or directors,
current or former shareholders and/or investors of the obligor, underwriters,
brokers, agents or other third parties. The Buyers shall have five (5) business
days from receipt of such notice of the sale or issuance of capital stock to
accept or reject all or a portion of such capital raising offer.
5. TRANSFER AGENT INSTRUCTIONS.
(a) The Company shall issue the Irrevocable Transfer
Agent Instructions to its transfer agent irrevocably appointing Xxxxx Xxxxxxxx,
Esq. as the Company's agent for purpose of having certificates issued,
registered in the name of the Buyer(s) or its respective nominee(s), for the
Conversion Shares representing such amounts of Convertible Debentures as
specified from time to time by the Buyer(s) to the Company upon conversion of
the Convertible Debentures, for interest owed pursuant to the Convertible
Debenture, and for any and all Liquidated Damages (as this term is defined in
the Investor Registration Rights Agreement). Xxxxx Xxxxxxxx, Esq. shall be paid
a cash fee of Fifty Dollars ($50) for every occasion they act pursuant to the
Irrevocable Transfer Agent Instructions. The Company shall not change its
transfer agent without the express written consent of the Buyer(s), which may
not be unreasonably withheld by the Buyer(s) in its sole discretion. Prior to
registration of the Conversion Shares under the Securities Act, all such
certificates shall bear the restrictive legend specified in Section 2(g) of this
Agreement. The Company warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 5, and stop transfer
instructions to give effect to Section 2(g) hereof (in the case of the
Conversion Shares prior to registration of such shares under the Securities Act)
will be given by the Company to its transfer agent and that the Conversion
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 Investor
Registration Rights Agreement. Nothing in this Section 5 shall affect in any way
the Buyer's
14
obligations and agreement to comply with all applicable securities laws upon
resale of Conversion Shares. If the Buyer(s) provides the Company with an
opinion of counsel, in form, scope and substance customary for opinions of
counsel in comparable transactions to the effect that registration of a resale
by the Buyer(s) of any of the Conversion Shares is not required under the
Securities Act, the Company shall within two (2) business days instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by the Buyer. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Buyer by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Section
5, that the Buyer(s) shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Convertible Debentures to the Buyer(s) at the Closings is subject to the
satisfaction, at or before the Closing Dates, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:
(a) Each Buyer shall have executed the Transaction
Documents and delivered them to the Company.
(b) The Buyer(s) shall have delivered to the Company
the Purchase Price for Convertible Debentures in respective amounts as set forth
next to each Buyer as outlined on Schedule I attached hereto, minus any fees to
be paid directly from the proceeds the Closings as set forth herein, by wire
transfer of immediately available U.S. funds pursuant to the wire instructions
provided by the Company.
(c) The representations and warranties of the
Buyer(s) shall be true and correct in all material respects as of the date when
made and as of the Closing Dates as though made at that time (except for
representations and warranties that speak as of a specific date), and the
Buyer(s) 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(s) at or prior to the Closing
Dates.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
(a) The obligation of the Buyer(s) hereunder to
purchase the Convertible Debentures at the First Closing is subject to the
satisfaction, at or before the First Closing Date, of each of the following
conditions:
(i) The Company shall have executed the
Transaction Documents and delivered the same to the Buyer(s).
15
(ii) The Common Stock shall be authorized
for quotation on the OTCBB, trading in the Common Stock shall not have been
suspended for any reason, and all the Conversion Shares issuable upon the
conversion of the Convertible Debentures shall be approved by the OTCBB.
(iii) 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 First Closing 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 in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the First Closing Date. If requested by the Buyer, the Buyer shall have
received a certificate, executed by the President of the Company, dated as of
the First Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by the Buyer including, without limitation an update
as of the First Closing Date regarding the representation contained in Section
3(c) above.
(iv) The Company shall have executed and
delivered to the Buyer(s) the Convertible Debentures in the respective amounts
set forth opposite each Buyer(s) name on Schedule I attached hereto.
(v) The Buyer(s) shall have received an
opinion of counsel from counsel to the Company in a form satisfactory to the
Buyer(s).
(vi) The Company shall have provided to the
Buyer(s) a certificate of good standing from the secretary of state from the
state in which the company is incorporated.
(vii) The Company shall have filed a form
UCC-1 or such other forms as may be required to perfect the Buyer's interest in
the Pledged Property as detailed in the Security Agreement dated the date hereof
and provided proof of such filing to the Buyer(s).
(viii) The Company shall have delivered the
Pledged Shares as well as executed and medallion guaranteed stock powers as
required pursuant to the Pledge and Escrow Agreement.
(ix) The Company shall have filed, or will
file no later than January 30, 2006, with the Pershing County Recorder, or such
other agency as may be required, the Memorandum of Security Interest or such
other forms as may be required to perfect the Buyer's interest in the mining
rights as at Relief Canyon Mine as detailed in the Memorandum of Security
Interest dated the date hereof and provided proof of such filing to the Buyer(s)
(x) The Company shall have provided to the
Buyer an acknowledgement, to the satisfaction of the Buyer, from the Company's
independent certified
16
public accountants as to its ability to provide all consents required in order
to file a registration statement in connection with this transaction.
(xi) The Company shall have reserved out of
its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Convertible Debentures, shares of Common Stock to effect
the conversion of all of the Conversion Shares then outstanding.
(xii) The Irrevocable Transfer Agent
Instructions, in form and substance satisfactory to the Buyer, shall have been
delivered to and acknowledged in writing by the Company's transfer agent.
(b) The obligation of the Buyer(s) hereunder to
accept the Convertible Debentures at the Second Closing is subject to the
satisfaction, at or before the Second Closing Date, of each of the following
conditions:
(i) The Common Stock shall be authorized for quotation on the OTCBB, trading in
the Common Stock shall not have been suspended for any reason, and all the
Conversion Shares issuable upon the conversion of the Convertible Debentures
shall be approved by the OTCBB.
(ii) 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 Second Closing 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 in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Second Closing Date. If requested by the Buyer, the Buyer shall have
received a certificate, executed by two officers of the Company, dated as of the
Second Closing Date, to the foregoing effect and as to such other matters as may
be reasonably requested by the Buyer including, without limitation an update as
of the Second Closing Date regarding the representation contained in Section
3(c) above.
(iii) The Company shall have executed and
delivered to the Buyer(s) the Convertible Debentures in the respective amounts
set forth opposite each Buyer(s) name on Schedule I attached hereto.
(iv) The Company shall have certified that
all conditions to the Second Closing have been satisfied and that the Company
will file the Registration Statement with the SEC in compliance with the rules
and regulations promulgated by the SEC for filing thereof two (2) business days
after the Second Closing. If requested by the Buyer, the Buyer shall have
received a certificate, executed by the two officers of the Company, dated as of
the Second Closing Date, to the foregoing effect. The Buyers have no obligation
to fund at the Second Closing if the Company has filed the Registration
Statement.
17
(c) The obligation of the Buyer(s) hereunder to
accept the Convertible Debentures at the Third Closing is subject to the
satisfaction, at or before the Third Closing Date, of each of the following
conditions:
(i) The Common Stock shall be authorized for
quotation on the OTCBB, trading in the Common Stock shall not have been
suspended for any reason, and all the Conversion Shares issuable upon the
conversion of the Convertible Debentures shall be approved by the OTCBB.
(ii) 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 Third Closing 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 in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Third Closing Date. If requested by the Buyer, the Buyer shall have
received a certificate, executed by two officers of the Company, dated as of the
Third Closing Date, to the foregoing effect and as to such other matters as may
be reasonably requested by the Buyer including, without limitation an update as
of the Third Closing Date regarding the representation contained in Section 3(c)
above.
(iii) The Company shall have executed and
delivered to the Buyer(s) the Convertible Debentures in the respective amounts
set forth opposite each Buyer(s) name on Schedule I attached hereto.
(iv) The Company shall have certified that
all conditions to the Third Closing have been satisfied and that the SEC has
declared the Registration Statement effective. The Buyer shall have received a
notice of effectiveness, executed by counsel to the Company dated as of the
Third Closing Date.
8. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and
delivery of this Agreement and acquiring the Convertible Debentures and the
Conversion Shares hereunder, and in addition to all of the Company's other
obligations under this Agreement, the Company shall defend, protect, indemnify
and hold harmless the Buyer(s) and each other holder of the Convertible
Debentures and the Conversion Shares, and all of their officers, directors,
employees and agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the "BUYER 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 Buyer
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 the
18
Buyer Indemnitees or any of them 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 this Agreement, the Convertible Debentures or the Investor
Registration Rights Agreement 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 this Agreement, or the Investor
Registration Rights Agreement 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 this Agreement or any other
instrument, document or agreement executed pursuant hereto by any of the parties
hereto, any transaction financed or to be financed in whole or in part, directly
or indirectly, with the proceeds of the issuance of the Convertible Debentures
or the status of the Buyer. 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.
(b) In consideration of the Company's execution and
delivery of this Agreement, and in addition to all of the Buyer's other
obligations under this Agreement, the Buyer shall defend, protect, indemnify and
hold harmless the Company and all of its officers, directors, employees and
agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "COMPANY
INDEMNITEES") from and against any and all Indemnified Liabilities incurred by
the Company Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Buyer(s) in this Agreement, instrument or document
contemplated hereby or thereby executed by the Buyer, (b) any breach of any
covenant, agreement or obligation of the Buyer(s) contained in this Agreement,
the Investor Registration Rights Agreement or any other certificate, instrument
or document contemplated hereby or thereby executed by the Buyer, or (c) any
cause of action, suit or claim brought or made against such Company Indemnitee
based on material misrepresentations or due to a material breach and arising out
of or resulting from the execution, delivery, performance or enforcement of this
Agreement, the Investor Registration Rights Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the parties hereto. To
the extent that the foregoing undertaking by each Buyer may be unenforceable for
any reason, each Buyer shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
9. GOVERNING LAW: MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of New Jersey
without regard to the principles of conflict of laws. The parties further agree
that any action between them shall be heard in Xxxxxx County, New Jersey, and
expressly consent to the jurisdiction and venue of the Superior Court of New
Jersey, sitting in Xxxxxx County and the United States District Court for the
District of New Jersey sitting in Newark, New Jersey for the adjudication of any
civil action asserted pursuant to this Paragraph.
19
(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. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
(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, AMENDMENTS. This Agreement
supersedes all other prior oral or written agreements between the Buyer(s), the
Company, their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
(f) NOTICES. Any notices, consents, waivers, 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 confirmation of receipt, when sent
by facsimile; (iii) three (3) days after being sent by U.S. certified mail,
return receipt requested, or (iv) one (1) 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, to: Newgold, Inc.
000 Xxxxxxx Xxxx - Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxx X. Xxxxxx
000 Xxxxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
20
Weintraub Genshlea Chediak
000 Xxxxxxx Xxxx - 00xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Buyer(s), to its address and facsimile number on Schedule I,
with copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns. Neither the Company nor any Buyer shall assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other party hereto.
(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) SURVIVAL. Unless this Agreement is terminated
under Section 9(l), the representations and warranties of the Company and the
Buyer(s) contained in Sections 2 and 3, the agreements and covenants set forth
in Sections 4, 5 and 9, and the indemnification provisions set forth in Section
8, shall survive the Closing for a period of two (2) years following the date on
which the Convertible Debentures are converted in full. The Buyer(s) and the
Company shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.
(j) PUBLICITY. The Company and the Buyer(s) shall
have the right to approve, before issuance any press release or any other public
statement with respect to the transactions contemplated hereby made by any
party; provided, however, that the Company shall be entitled, without the prior
approval of the Buyer(s), to issue any press release or other public disclosure
with respect to such transactions required under applicable securities or other
laws or regulations (the Company shall use its best efforts to consult the
Buyer(s) in connection with any such press release or other public disclosure
prior to its release and Buyer(s) shall be provided with a copy thereof upon
release thereof).
(k) 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.
(l) TERMINATION. In the event that the Closing shall
not have occurred with respect to the Buyers on or before five (5) business days
from the date hereof due to the Company's or the Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the non-breaching party's
failure to waive such unsatisfied condition(s)), the non-breaching party shall
have the option to terminate this Agreement with respect to such breaching party
at
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the close of business on such date without liability of any party to any other
party; provided, however, that if this Agreement is terminated due to a material
breach by the Company pursuant to this Section 9(l), the Company shall remain
obligated to reimburse the Buyer(s) for the fees and expenses of Yorkville
Advisors LLC described in Section 4(g) (ii) and (iii) above.
(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.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY:
NEWGOLD, INC.
By: /s/ XXXXX XXXXXXX
------------------------------------
Name: Xxxxx Xxxxxxx
Title: Chief Executive Officer
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SCHEDULE I
----------
SCHEDULE OF BUYERS
------------------
Address/Facsimile Amount of
Name Signature Number of Buyer Subscription
------------------------------------- -------------------------------- --------------------------------- -----------------
Cornell Capital Partners, LP By: Yorkville Advisors, LLC 000 Xxxxxx Xxxxxx - Xxxxx 0000 $1,000,000
Its: General Partner Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
By: /s/ XXXX XXXXXX
--------------------------
Name: Xxxx Xxxxxx
Its: Portfolio Manager
With a copy to: Xxxxx Xxxxxxxx, Esq. 000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
-----------------------------------------------------------------------------------------------------------------------------
DISCLOSURE SCHEDULE
-------------------
