EXHIBIT 4.1
FORM OF SUBSCRIPTION AGREEMENT
FOR
CANYON RESOURCES CORPORATION
Canyon Resources Corporation, a Delaware corporation (the "Company"), and
______________________ ("Investor"), in consideration of the mutual promises
contained in this Subscription Agreement (this "Agreement") and the performance
and payment described in this Agreement, the sufficiency of which is hereby
acknowledged, mutually agree as follows:
1. Subscription. Investor hereby subscribes for and offers to purchase
______ shares (the "Shares") of common stock, $0.01 par value per share (the
"Common Stock"), of the Company at a purchase price of $_______ per share for an
aggregate purchase price of $____________ (the "Purchase Price"). In addition,
as part of the subscription (and for no additional consideration), Investor
shall be issued (A) _____________ [50% of the Shares above] Series A warrants,
at an exercise price of $______ per share and exercisable for three (3) years
from the date of issuance (the "Series A Warrants"); and (B) _____________ [25%
of the Shares above] Series B warrants, at an exercise price of $______ per
share and exercisable for one (1) year from the date of issuance (the "Series B
Warrants" and together with Series A Warrants, the "Warrants"). Each whole
Series A Warrant and Series B Warrant will be exercisable into one (1) share of
Common Stock (the "Warrant Shares" and collectively with the Shares and the
Warrants, the "Securities").
2. Representations and Warranties of Investor. Investor hereby represents
and warrants as follows:
(a) Investor is experienced in evaluating and investing in mining
companies such as the Company. Investor has substantial knowledge regarding, and
experience in, financial and business matters, including knowledge and
experience in investing in and evaluating private placement transactions of
securities in companies similar to the Company. Investor is capable of
evaluating the risks and merits of its investment in the Company and has the
capacity to protect his, her or its own interests. Investor has been furnished
all information necessary to enable it to evaluate the merits and risks of an
investment in the Company.
(b) Investor is acquiring the Securities for investment for his, her or
its own account and not with a view to, or for resale in connection with, any
distribution thereof, except in compliance with applicable securities laws, and
Investor has no present intention of selling or distributing the Securities, and
will not sell or distribute such Securities; provided, however, that by making
the representations herein, Investor does not agree to hold the Securities for
any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with Federal and state securities laws
applicable to such disposition. Investor understands that as of the date of this
Agreement the Securities have not been registered under the Securities Act of
1933, as amended (the "Act"). Investor understands that Investor has neither the
right to require the Company or any underwriter to register the Securities
under the
Act or state securities laws at any time nor the right to join in any future
registration of shares of capital stock by the Company except as set forth
herein.
(c) Investor acknowledges that, because the Securities have not been
registered under the Act, the Securities that Investor receives at the closing
of its investment must be held indefinitely unless subsequently registered under
the Act or an exemption from such registration is available. Investor is aware
of the provisions of Rule 144 promulgated under the Act that permits limited
resale of securities purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold. Investor understands that at the present time Rule 144 is
not applicable with respect to the Securities and may not be applicable in the
future.
(d) Investor has read, understood, and is familiar with the Company's
public filings available at the Securities and Exchange Commission's (the
"Commission") website and has had an opportunity to discuss in detail the
Company's business, management and financial affairs with, and to ask questions
of, the Company's executive officers with regard to the Company, its businesses
and other information relevant to Investor, and has reviewed all documents and
records of the Company which the Company has provided in response to Investor's
request and has had an opportunity to request and review all documents necessary
to fully evaluate the investment decision.
(e) Investor is financially able to bear the economic risk of investment
in the Securities, including a total loss of investment. Investor has adequate
means of providing for its current needs and has no need for liquidity in its
investment in the Securities and has no reason to anticipate any material change
in its financial condition in the foreseeable future. Investor understands that
the acquisition of the Securities is an investment involving a risk of loss and
there is no guarantee that Investor will realize any gain from such investment,
and that he, she or it could lose the total amount of such investment. Investor
understands that neither the Commission nor any other U.S. federal or state
agency has reviewed the proposed offering of Securities or made any finding or
determination of fairness of the offering of Securities or any recommendation or
endorsement of such investment.
(f) No representations or warranties have been made to Investor by the
Company or any of its agents, managers, employees or affiliates, and in entering
into the present transaction Investor is not relying on any information, other
than from the results of independent investigation by Investor. Investor
understands that the Securities are being offered to him, her or it in reliance
on specific exemptions from the registration requirements of U.S. federal and
state securities laws and that the Company is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgements and
understandings of Investor set forth herein in order to determine the
applicability of such exemptions and the suitability of Investor to acquire the
Securities.
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(g) Investor has not been organized for the specific purpose of acquiring
Securities.
(h) Investor has its principal residence in the state or jurisdiction set
forth on the signature page to this Agreement, and the address and social
security number or federal tax identification number, if any, set forth below is
the true and correct address and social security number or federal tax
identification number of Investor. Investor has no present intention of becoming
a resident of another state or jurisdiction.
(i) The information set forth in this Agreement is true, complete and
correct, and Investor is aware that the Company and its counsel will rely on the
information, representations and warranties set forth in this Agreement in
accepting or rejecting Investor's offer to purchase the Securities. Investor has
accurately and fully completed the Accredited Investor Certification attached as
Exhibit A to this Agreement, which is incorporated in this Agreement by this
reference. Investor represents that the information contained in Exhibit A to
this Agreement is complete and accurate and may be relied upon by the Company
and its officers, directors, and control persons. Investor hereby covenants to
notify the Company immediately of any material change in any of the information
contained in Exhibit A prior to the acceptance by the Company of his, her or its
subscription.
(j) Investor acknowledges that no general solicitation or general
advertising (including communications published in any newspaper, magazine or
other broadcast) has been received by him, her or it and that no public
solicitation or advertisement with respect to the offering of the Securities has
been made to him, her or it.
(k) Investor understands that his, her or its subscription for the
Securities is subject to acceptance by the Company, in whole or in part, and
understands that his, her or its subscription offer may not be withdrawn.
(l) Investor has not made an overall commitment to investments that are
not readily marketable that is disproportionate to his, her or its net worth,
and his, her or its investment in the Securities will not cause such overall
commitment to become excessive.
(m) Investor is an "accredited investor," as such term is defined under
Rule 501 of Regulation D promulgated under the Act. Investor is not required to
be registered as a broker-dealer under Section 15 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and Investor is not a broker-dealer.
(n) During the period from the day Investor was initially contacted by
X.X. Xxxxxxxxxx & Co., Inc. ("X.X. Xxxxxxxxxx") regarding a potential investment
in the Company until the date hereof, neither Investor nor any affiliate of such
Investor that (i) has or had knowledge of the transactions contemplated hereby,
(ii) has or shares discretion relating to such Investor's investments or trading
or information concerning such Investor's investments, including in respect of
the Securities, or (z) is subject to such Investor's review or input concerning
such affiliate's investments or trading (collectively, "Trading Affiliates")
has,
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directly or indirectly, effected or agreed to effect any transactions in the
securities of the Company, including any short sale, whether or not against the
box, established any "put equivalent position" (as defined in Rule 16a-1(h)
under the Exchange Act) with respect to the Common Stock, granted any other
right (including, without limitation, any put or call option) with respect to
the Common Stock or with respect to any security that includes, relates to or
derived any significant part of its value from the Common Stock or otherwise
sought to hedge its position in the Securities (each, a "Prohibited
Transaction"). Such Investor shall not, and shall cause its Trading Affiliates
not to, engage, directly or indirectly, in a Prohibited Transaction during the
period from the date hereof until such time as the transactions contemplated by
this Agreement are closed and publicly announced or this Agreement is
terminated.
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to Investor (except as set forth in the Commission
Documents (as defined in Section 3(f)) or on the Schedule of Exceptions attached
hereto with each numbered Schedule corresponding to the section number herein),
as follows:
(a) Organization, Good Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power to own, lease and
operate its properties and assets and to conduct its business as it is now being
conducted. The Company does not have any Subsidiaries (as defined in Section
3(g)) or own securities of any kind in any other entity. The Company and each
such Subsidiary 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 or property owned by it makes such qualification necessary except for
any jurisdiction(s) (alone or in the aggregate) in which the failure to be so
qualified will not have a Material Adverse Effect. For the purposes of this
Agreement, "Material Adverse Effect" means any effect on the business, results
of operations, assets or financial condition of the Company that is material and
adverse to the Company and its Subsidiaries, taken as a whole and/or any
condition, circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company from entering into and
performing any of its obligations under this Agreement and the Warrants in any
material respect.
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement and the Warrants
and to issue and sell the Securities in accordance with the terms hereof. The
execution, delivery and performance of this Agreement by the Company and the
consummation by it of the transactions contemplated thereby have been duly and
validly authorized by all necessary corporate action, and no further consent or
authorization of the Company, its Board of Directors or stockholders is
required. When executed and delivered by the Company, each of this Agreement and
the Warrants shall constitute a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, reorganization,
moratorium, liquidation, conservatorship, receivership or similar
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laws relating to, or affecting generally the enforcement of, creditor's rights
and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company as of
November 23, 2005 is set forth on Schedule 3(c) hereto. All of the outstanding
shares of the Common Stock and any other outstanding security of the Company
have been duly and validly authorized. Except as set forth in this Agreement, no
shares of Common Stock or any other security of the Company are entitled to
preemptive rights or registration rights and there are no outstanding options,
warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company. Furthermore, except as set forth in this
Agreement, there are no contracts, commitments, understandings, or arrangements
by which the Company is or may become bound to issue additional shares of the
capital stock of the Company or options, securities or rights convertible into
shares of capital stock of the Company. Except for customary transfer
restrictions contained in agreements entered into by the Company in order to
sell restricted securities, the Company is not a party to or bound by any
agreement or understanding granting registration or anti-dilution rights to any
person with respect to any of its equity or debt securities. The Company is not
a party to, and it has no knowledge of, any agreement or understanding
restricting the voting or transfer of any shares of the capital stock of the
Company.
(d) Issuance of Securities. The Shares and the Warrants have been duly
authorized by all necessary corporate action and, when paid for and issued in
accordance with the terms hereof and the Warrants, respectively, the Shares and
the Warrant Shares will be validly issued, fully paid and nonassessable and free
and clear of all liens, encumbrances and rights of refusal of any kind and the
holders shall be entitled to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this
Agreement and the Warrants by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby do not and will not (i) violate
any provision of the Company's Certificate of Incorporation (the "Certificate")
or Bylaws (the "Bylaws"), each as amended to date, or any Subsidiary's
comparable charter documents, (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 Material Agreement (as defined in Section 3(t)) to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries' respective properties or assets are bound, or (iii) result
in a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries are bound
or affected, except, in all cases, other than violations pursuant to clauses (i)
or (iii) (with respect to federal and state securities laws) above, for such
conflicts, defaults, terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries is required
under federal, state, foreign or local law, rule or regulation to
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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 this Agreement or the Warrants
or issue and sell the Securities in accordance with the terms hereof (other than
any filings, consents and approvals which may be required to be made by the
Company under applicable state and federal securities laws, rules or
regulations, the American Stock Exchange prior to or subsequent to the Closing,
or any registration provisions provided in this Agreement).
(f) Commission Documents, Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(b) or 12(g) of the Exchange Act,
and the Company has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the
"Commission Documents"). At the times of their respective filings, the Form 10-Q
for the fiscal quarters ended September 30, 2005, June 30, 2005 and March 31,
2005 (collectively, the "Form 10-Q") and the Form 10-K for the fiscal year ended
December 31, 2004 (the "Form 10-K") complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such documents, and the Form 10-Q and Form 10-K, did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the Commission Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
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 not include footnotes or may be
condensed or summary statements), and fairly present in all material respects
the financial position of the Company and its Subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Subsidiaries. Schedule 3(g) hereto sets forth each Subsidiary of the
Company, showing the jurisdiction of its incorporation or organization and
showing the percentage of each person's ownership of the outstanding stock or
other interests of such Subsidiary. For the purposes of this Agreement,
"Subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries. All of the
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued, and are fully paid and nonassessable. There are no
outstanding
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preemptive, conversion or other rights, options, warrants or agreements granted
or issued by or binding upon any Subsidiary for the purchase or acquisition of
any shares of capital stock of any Subsidiary or any other securities
convertible into, exchangeable for or evidencing the rights to subscribe for any
shares of such capital stock. Neither the Company nor any Subsidiary is subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of the capital stock of any Subsidiary or any convertible
securities, rights, warrants or options of the type described in the preceding
sentence. Neither the Company nor any Subsidiary is party to, nor has any
knowledge of, any agreement restricting the voting or transfer of any shares of
the capital stock of any Subsidiary.
(h) No Material Adverse Change. Since September 30, 2005, the Company has
not experienced or suffered any Material Adverse Effect.
(i) No Undisclosed Liabilities. Since September 30, 2005, neither the
Company nor any of its Subsidiaries has incurred any liabilities, obligations,
claims or losses (whether liquidated or unliquidated, secured or unsecured,
absolute, accrued, contingent or otherwise) other than those incurred in the
ordinary course of the Company's or its Subsidiaries respective businesses or
which, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect.
(j) No Undisclosed Events or Circumstances. Since September 30, 2005, no
event or circumstance has occurred or exists with respect to the Company or its
Subsidiaries or their respective businesses, properties, operations or financial
condition, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed.
(k) Indebtedness. Schedule 3(k) hereto sets forth as of the date hereof
all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments. For the
purposes of this Agreement, "Indebtedness" shall mean (a) any liabilities for
borrowed money or amounts owed in excess of $100,000 (other than trade accounts
payable incurred in the ordinary course of business), (b) all guaranties,
endorsements and other contingent obligations in respect of Indebtedness of
others in excess of $100,000, whether or not the same are or should be reflected
in the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $25,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is
in default with respect to any Indebtedness, except for any such default that
would not have a Material Adverse Effect.
(l) Title to Assets. Each of the Company and the Subsidiaries has good and
valid title to all of its real and personal property reflected in the Commission
Documents, free and clear of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for the paramount title of the United
States with respect to unpatented mining claims and those
7
that, individually or in the aggregate, do not cause a Material Adverse Effect.
All such leases of the Company and each of its Subsidiaries, to the knowledge of
the Company, are valid and subsisting and in full force and effect.
(m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or the Warrants or any
of the transactions contemplated hereby or thereby or any action taken or to be
taken pursuant hereto or thereto. There is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding or other
proceeding pending or, to the knowledge of the Company, threatened against or
involving the Company, any Subsidiary or any of their respective properties or
assets, which individually or in the aggregate, would have a Material Adverse
Effect. There are no outstanding orders, judgments, injunctions, awards or
decrees of any court, arbitrator or governmental or regulatory body against the
Company or any Subsidiary or any officers or directors of the Company or
Subsidiary in their capacities as such, which individually or in the aggregate,
would have a Material Adverse Effect.
(n) Compliance with Law. The business of the Company and the Subsidiaries
has been and is presently being conducted in accordance with all applicable
federal, state and local governmental laws, rules, regulations and ordinances,
except for such noncompliance that, individually or in the aggregate, would have
a Material Adverse Effect. The Company and each of its Subsidiaries have all
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of its business as now
being conducted by it unless the failure to possess such franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals, individually or in the aggregate, would not have a Material Adverse
Effect.
(o) Taxes. The Company and each of the Subsidiaries has accurately
prepared and filed all federal, state and other tax returns required by law to
be filed by it, has paid or made provisions for the payment of all taxes shown
to be due and all additional assessments, and adequate provisions have been and
are reflected in the financial statements of the Company and the Subsidiaries
for all current taxes and other charges to which the Company or any Subsidiary
is subject and which are not currently due and payable, except to the extent
being disputed in good faith or would not have a Material Adverse Effect. None
of the federal income tax returns of the Company or any Subsidiary have been
audited by the Internal Revenue Service. The Company has no knowledge of any
additional assessments, adjustments or contingent tax liability (whether federal
or state) of any nature whatsoever, whether pending or threatened against the
Company or any Subsidiary for any period, nor of any basis for any such
assessment, adjustment or contingency.
(p) Certain Fees. Except for placement agent fees to be paid to X.X.
Xxxxxxxxxx to the terms of that letter agreement, effective November 1, 2005, by
and between the Company and X.X. Xxxxxxxxxx, the Company has not employed any
broker or finder or incurred any
8
liability for any brokerage or investment banking fees, commissions, finders'
structuring fees, financial advisory fees or other similar fees in connection
with this Agreement.
(q) Disclosure. Neither this Agreement or the Schedules hereto nor any
other documents, certificates or instruments furnished to Investor by or on
behalf of the Company or any Subsidiary in connection with the transactions
contemplated by this Agreement contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements made
herein or therein, in the light of the circumstances under which they were made
herein or therein, not misleading.
(r) Operation of Business. The Company and each of the Subsidiaries owns
or possesses the rights to all patents, trademarks, domain names (whether or not
registered) and any patentable improvements or copyrightable derivative works
thereof, websites and intellectual property rights relating thereto, service
marks, trade names, copyrights, licenses and authorizations which are necessary
for the conduct of its business as now conducted without any conflict with the
rights of others, the failure of which will not have a Material Adverse Effect.
(s) Books and Records; Internal Accounting Controls. The records and
documents of the Company and its Subsidiaries accurately reflect in all material
respects the information relating to the business of the Company and the
Subsidiaries, the location and collection of their assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of the
Company or any Subsidiary. The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment of the
Company's management, 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, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate actions are taken with respect to any
differences.
(t) Material Agreements. Except for this Agreement and the Warrants (with
respect to clause (i) only), or as would not have a Material Adverse Effect, (i)
the Company and each of its Subsidiaries have performed all obligations required
to be performed by them to date under any written or oral contract, instrument,
agreement, commitment, obligation, plan or arrangement, filed or required to be
filed with the Commission (the "Material Agreements"), (ii) neither the Company
nor any of its Subsidiaries has received any notice of default under any
Material Agreement and, (iii) to the Company's knowledge, neither the Company
nor any of its Subsidiaries is in default under any Material Agreement now in
effect.
(u) Transactions with Affiliates. There are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions between (a) the Company, any Subsidiary or any of their
respective customers or suppliers on the
9
one hand, and (b) on the other hand, any officer, employee, consultant or
director of the Company, or any of its Subsidiaries, or any person owning any
capital stock of the Company or any Subsidiary or any member of the immediate
family of such officer, employee, consultant, director or stockholder or any
corporation or other entity controlled by such officer, employee, consultant,
director or stockholder, or a member of the immediate family of such officer,
employee, consultant, director or stockholder which, in each case, is required
to be disclosed in the Commission Documents, that is not so disclosed in the
Commission Documents.
(v) Securities Act of 1933. Based in material part upon the
representations herein of Investor, the Company has complied with all applicable
federal and state securities laws in connection with the offer, issuance and
sale of the Securities hereunder. Neither the Company nor, to the Company's
knowledge, anyone acting on its behalf, directly or indirectly, has sold,
offered to sell or solicited offers to buy any of the Securities or similar
securities to, or solicited offers with respect thereto from, or entered into
any negotiations relating thereto with, any person, or has taken any action so
as to bring the issuance and sale of any of the Securities under the
registration provisions of the Act and applicable state securities laws, and
neither the Company nor any of its affiliates, nor, to the Company's knowledge,
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 Act) in connection with the offer or sale of any of the Securities.
(w) Employees. Neither the Company nor any Subsidiary has any collective
bargaining arrangements or agreements covering any of its employees. Neither the
Company nor any Subsidiary has any employment contract, non-competition
agreement an/or non-solicitation agreement, confidentiality agreement, or any
other similar contract or restrictive covenant, relating to the right of any
officer, employee or consultant to be employed or engaged by the Company or such
Subsidiary required to be disclosed in the Commission Documents that is not so
disclosed. Since September 30, 2005, no officer, consultant or key employee of
the Company or any Subsidiary, to the knowledge of the Company, has any present
intention of terminating his or her employment or engagement with the Company or
any Subsidiary, whose termination, either individually or in the aggregate,
would have a Material Adverse Effect.
(x) Public Utility Holding Company Act and Investment Company Act Status.
The Company is not a "holding company" or a "public utility company" as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended.
The Company is not, and as a result of and immediately upon the closing will not
be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(y) Delisting Notification. The Company has not received notice (written
or oral) from the American Stock Exchange to the effect that the Company is not
in compliance with the listing or maintenance requirements of such market.
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(z) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor, to the Company's knowledge, 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 cause
the offering of the Securities pursuant to this Agreement to be integrated with
prior offerings by the Company for purposes of the Act that would prevent the
Company from selling the Securities pursuant to Regulation D and Rule 506
thereof under the Act, or any applicable exchange-related stockholder approval
provisions, nor will the Company or any of its affiliates or subsidiaries take
any action or steps that would cause the offering of the Securities to be
integrated with other offerings that would violate Regulation D and Rule 506
thereof under the Act. The Company does not have any registration statement
pending before the Commission or currently under the Commission's review, and
since May 1, 2005, the Company has not offered or sold any of its equity
securities or debt securities convertible into shares of Common Stock.
(aa) Xxxxxxxx-Xxxxx Act. The Company is in material compliance with the
applicable provisions of the Xxxxxxxx-Xxxxx Act of 2002 (the "Xxxxxxxx-Xxxxx
Act"), and the rules and regulations promulgated thereunder, that are effective
and intends to comply with other applicable provisions of the Xxxxxxxx-Xxxxx
Act, and the rules and regulations promulgated thereunder, upon the
effectiveness of such provisions.
4. Covenants of the Company. The Company covenants with Investor as
follows, which covenants are for the benefit of Investor and its permitted
assignees.
(a) Securities Compliance. The Company shall notify the Commission in
accordance with its rules and regulations, of the transactions contemplated by
this Agreement and shall take all other necessary action and proceedings as may
be required and permitted by applicable law, rule and regulation, for the legal
and valid issuance of the Securities to Investor, or its subsequent holders.
(b) Registration and Listing. The Company shall use its commercially
reasonable efforts (i) to cause its Common Stock to continue to be registered
under Sections 12(b) or 12(g) of the Exchange Act, (ii) to comply in all
respects with its reporting and filing obligations under the Exchange Act, (iii)
to comply with all requirements related to any registration statement filed
pursuant to this Agreement, and (iv) to not take any action or file any document
(whether or not permitted by the Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Act, except as permitted
herein. The Company shall use its commercially reasonable efforts to continue
the listing or trading of its Common Stock on the American Stock Exchange or any
successor market. The Company shall promptly file an "Additional Listing
Application" for, or in connection with, the issuance and delivery of the Shares
and the Warrant Shares with the American Stock Exchange.
11
(c) Inspection Rights. The Company shall permit, during normal business
hours and upon reasonable request and reasonable notice, Investor or any
employees, agents or representatives thereof, so long as Investor shall be
obligated hereunder to purchase the Shares or shall beneficially own any Shares
or Warrant Shares and any requested information is not publicly available on
XXXXX or the Company's website, for purposes reasonably related to Investor's
interests as a stockholder to examine and make reasonable copies of the records
and books of account of, and visit and inspect the properties, assets,
operations and business of the Company and any Subsidiary, and to discuss the
affairs, finances and accounts of the Company and any Subsidiary with any of its
officers, consultants, directors, and key employees. Notwithstanding any of the
foregoing, nothing herein shall obligate the Company to provide to Investor, or
any advisors or representatives or underwriters, any material nonpublic
information. The Company shall not disclose material nonpublic information to
Investor, or to advisors to or representatives of Investor, unless prior to
disclosure of such information the Company identifies such information as being
material nonpublic information and provides Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review and if Investor wishes to obtain such
information it shall enter into an appropriate confidentiality agreement with
the Company with respect thereto.
(d) Compliance with Laws. The Company shall use its commercially
reasonable efforts to comply, and cause each Subsidiary to comply, with all
applicable laws, rules, regulations and orders, except where such noncompliance
would not have a Material Adverse Effect.
(e) Keeping of Records and Books of Account. The Company shall keep and
cause each Subsidiary to keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP consistently applied,
reflecting all financial transactions of the Company and its Subsidiaries, and
in which, for each fiscal year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in connection
with its business shall be made.
(f) Reporting Requirements. If the Company ceases to file its periodic
reports with the Commission, or if the Commission ceases making these periodic
reports available via the Internet without charge, or if the Company ceases
making these periodic reports available via its website without charge, then the
Company shall furnish the following to Investor so long as Investor shall be
obligated hereunder to purchase the Securities or shall beneficially own
Securities:
(i) Quarterly Reports filed with the Commission on Form 10-Q as soon
as practical after the document is filed with the Commission, and in any event
within five (5) days after the document is filed with the Commission;
12
(ii) Annual Reports filed with the Commission on Form 10-K as soon
as practical after the document is filed with the Commission, and in any event
within five (5) days after the document is filed with the Commission; and
(iii) Copies of all notices, information and proxy statements in
connection with any meetings, that are, in each case, provided to holders of
shares of Common Stock, contemporaneously with the delivery of such notices or
information to such holders of Common Stock.
(g) Other Agreements. The Company shall not enter into any agreement in
which the terms of such agreement would restrict or impair the right or ability
of the Company or any Subsidiary to perform under this Agreement or the
Warrants.
(h) Use of Proceeds. The proceeds from the sale of the Shares will be used
by the Company for working capital and general corporate purposes.
(i) Reporting Status. So long as Investor beneficially owns any of the
Securities, 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 permit such termination.
(j) Disclosure of Transaction. The Company shall issue a press release
describing the material terms of the transactions contemplated hereby (the
"Press Release") on the day of the initial closing hereunder but in no event
later than 9:00 A.M. Eastern Time on the first Trading Day (as defined below)
following the Closing Date (as defined in Section 5(a)(i)). The Company shall
also file with the Commission a Current Report on Form 8-K (the "Form 8-K")
describing the material terms of the transactions contemplated hereby (and
attaching as exhibits thereto this Agreement, the form of each series of Warrant
and the Press Release) as soon as practicable following the Closing Date under
this Agreement but in no event more than two (2) Trading Days following the
Closing Date, which Press Release shall be subject to prior review and comment
by counsel to Investor. "Trading Day" means any day during which the principal
exchange on which the Common Stock is traded shall be open for trading.
(k) Disclosure of Material Information. The Company covenants and agrees
that neither it nor, to the Company's knowledge, any other person acting on its
behalf has provided or will provide Investor or its agents or counsel with any
information that the Company believes constitutes material nonpublic
information, unless prior thereto Investor shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that Investor shall be relying on the foregoing
representations in effecting transactions in securities of the Company.
(l) Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by Investor in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the Common
Stock. The pledge of Common Stock
13
shall not be deemed to be a transfer, sale or assignment of the Common Stock
hereunder, and no Investor effecting a pledge of Common Stock shall be required
to provide the Company with any notice thereof or otherwise make any delivery to
the Company pursuant to this Agreement; provided that Investor and its pledgee
shall be required to comply all applicable securities laws in order to effect a
sale, transfer or assignment of Common Stock to such pledgee. At Investor's
expense, the Company hereby agrees to execute and deliver such documentation as
a pledgee of the Common Stock may reasonably request in connection with a pledge
of the Common Stock to such pledgee by Investor.
5. Registration Rights.
(a) Definitions. As used in this Section 5, the following terms shall have
the following meanings:
(i) "Closing Date" means as soon as practicable and as agreed by the
parties hereto within three business days following the execution of this
Agreement, or such later time and date as may be agreed by the parties,
but in no event prior to the date the Company's Additional Listing
Application related to this offering is approved by the American Stock
Exchange.
(ii) "Person" means any individual, partnership, corporation,
limited liability company, joint stock company, association, trust,
unincorporated organization, or governmental agency or political
subdivision thereof.
(iii) "Registrable Shares" means (A) the Shares, (B) the Warrant
Shares, and (C) any other securities issued or issuable with respect to or
in exchange for Registrable Securities; provided, however, that a Share or
Warrant Share shall cease to be a Registrable Share for purposes of this
Section 5 when it no longer is a Restricted Share.
(iv) "Restricted Share" means any Share or Warrant Share except any
that (A) have been registered pursuant to an effective registration
statement under the Act and sold in a manner contemplated by the
prospectus included in such registration statement, (B) have been
transferred in compliance with the resale provisions of Rule 144 under the
Act (or any successor provision thereto) or is transferable pursuant to
paragraph (k) of Rule 144 under the Act (or any successor provision
thereto), or (C) otherwise have been transferred and a new share of Common
Stock not subject to transfer restrictions under the Act has been
delivered by or on behalf of the Company.
(b) Registration Statement; Expenses. The Company shall:
(i) file in a timely manner a Form D relating to the sale of the
Shares and the Warrants under this Agreement, pursuant to Regulation D as
promulgated by the Commission;
14
(ii) as soon as practicable after the Closing Date, but in no event
later than the 30th day following the Closing Date (subject to receipt of
necessary information from Investors), prepare and file with the
Commission a Registration Statement on Form S-1 (or, if the Company is
eligible to use Form S-3, then on Form S-3) relating to the sale of the
Registrable Shares by Investor from time to time on the American Stock
Exchange (or the facilities of any national securities exchange or
automated quotation system on which the Company's Common Stock are then
traded or quoted) or in privately negotiated transactions (the
"Registration Statement");
(iii) provide to Investors any information required to permit the
sale of the Company's Common Stock under Rule 144 of the Act;
(iv) subject to receipt of necessary information from Investors, use
its commercially reasonable efforts to cause the Registration Statement to
be declared effective under the Act as promptly as possible after the
filing thereof, but in any event prior to the 90th day following the
Closing Date;
(v) notify Investors promptly upon the Registration Statement, and
any post-effective amendment thereto, being declared effective by the
Commission;
(vi) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus and take such
other action, if any, as may be necessary to keep the Registration
Statement effective until the earlier of (i) the date on which the
Registrable Shares may be resold without registration and without regard
to any volume limitations by reason of Rule 144(k) under the Act or any
other rule of similar effect or (ii) all of the Registrable Shares have
been sold pursuant to the Registration Statement or Rule 144 under the Act
or any other rule of similar effect (the "Effectiveness Period");
(vii) promptly furnish to Investor with respect to the shares of
Common Stock registered under the Registration Statement such reasonable
number of copies of the prospectus, including any supplements to or
amendments of the prospectus, in order to facilitate the public sale or
other disposition of all or any of the shares of Common Stock by
Investors;
(viii) during the period when copies of the prospectus are required
to be delivered under the Act or the Exchange Act, will file all documents
required to be filed with the Commission pursuant to Section 13, 14 or 15
of the Exchange Act within the time periods required by the Exchange Act
and the rules and regulations promulgated thereunder; and
(ix) bear all expenses in connection with the procedures in
paragraphs (i) through (viii) of this Section 5(b) and the registration of
the Registrable Shares pursuant to the Registration Statement.
15
(c) Failure to File Registration Statement and Other Events. The Company
and Investor agree that Investor will suffer damages if the Registration
Statement is not filed on or prior to the 30th day following the Closing Date
and not declared effective by the Commission on or prior to the 120th day
following the Closing Date and maintained in the manner contemplated herein
during the Effectiveness Period or if certain other events occur. The Company
and Investor further agree that it would not be feasible to ascertain the extent
of such damages with precision. Accordingly, if (A) the Registration Statement
is not filed on or prior to the 30th day following the Closing Date, or (B) the
Registration Statement is not declared effective by the Commission on or prior
to the 120th day following the Closing Date, or (C) the Company fails to file
with the Commission a request for acceleration in accordance with Rule 461
promulgated under the Securities Act within three (3) Business Days of the date
that the Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or not subject
to further review, or (D) the Registration Statement is filed with and declared
effective by the Commission but thereafter ceases to be effective as to all
Registrable Shares at any time prior to the expiration of the Effectiveness
Period, without being succeeded immediately by a subsequent Registration
Statement filed with and declared effective by the Commission, or (E) trading in
the Common Stock shall be suspended or if the Common Stock is delisted from the
American Stock Exchange (or other principal exchange on which the Common Stock
is traded) for any reason for more than three (3) business days in the aggregate
(any such failure or breach being referred to as an "Event," and for purposes of
clauses (A) and (B) the date on which such Event occurs, or for purposes of
clause (C) the date on which such three (3) business day period is exceeded, or
for purposes of clause (D) after more than twenty (20) consecutive days or for a
total of not more than forty-five (45) days in any twelve (12) month period, or
for purposes of clause (E) the date on which such three (3) business day period
is exceeded, being referred to as "Event Date"), the Company shall pay an amount
as liquidated damages to Investor equal to 2.0% of the Purchase Price for the
first 30-day period or portion thereof and shall pay to Investor liquidated
damages equal to 1.0% of the Purchase Price for each subsequent 30-day period or
portion thereof from the Event Date (provided that, with respect to the Event
described in clause (B), the "30-day period" shall be deemed to commence on the
30th day prior to the applicable Event Date) until the applicable Event is
cured. The penalties shall not be imposed for a violation of the terms of clause
(B) provided that the Company responds to any comments by the Commission within
ten (10) days upon receipt, and will communicate any above stated comments with
Investor within the same ten (10) day period.
6. Stock Certificate Restrictions. All certificates representing
Securities subject to this Agreement shall bear a legend in substantially the
following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR STATE SECURITIES LAWS AND CANNOT BE OFFERED, SOLD, ASSIGNED, OR
OTHERWISE TRANSFERRED AT
16
ANY TIME WHATSOEVER, EXCEPT UPON DELIVERY TO THE COMPANY OF EVIDENCE
SATISFACTORY TO THE COMPANY AND ITS COUNSEL (INCLUDING, AT THE
COMPANY'S OPTION, AN OPINION OF COUNSEL) THAT REGISTRATION IS NOT
REQUIRED FOR SUCH OFFER OR TRANSFER AND THAT SUCH OFFER OR TRANSFER
IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS AND REGULATIONS PROMULGATED THEREUNDER. THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE
REGISTERED OWNER HEREOF FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR
SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF IN VIOLATION OF THE
SECURITIES ACT. THE SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE PROVISIONS OF THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT OR IN A TRANSACTION OTHERWISE
IN COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS."
7. Indemnification. (a) Investor acknowledges that he, she or it
understands the meaning and legal consequences of the representations and
warranties of this Agreement and that the Company has relied upon such
representations and warranties, and he, she or it hereby agrees to indemnify and
hold harmless the Company and its officers, directors, affiliates, shareholders,
controlling persons, agents and employees from and against any and all loss,
damage or liability due to or arising out of a breach or the inaccuracy of any
such representation, warranty or covenant. All representations, warranties and
covenants contained in this Agreement, and the indemnification contained in this
Section 7(a), shall survive the acceptance of this subscription and will
continue in full force without limitation and effect. Investor's indemnification
obligations pursuant to this Section 7 shall not exceed the Purchase Price.
(b) Company acknowledges that it understands the meaning and legal
consequences of the representations and warranties of this Agreement and that
Investor has relied upon such representations and warranties, and it hereby
agrees to indemnify and hold harmless Investor and its officers, directors,
affiliates, shareholders, controlling persons, agents and employees from and
against any and all loss, damage or liability due to or arising out of a breach
or the inaccuracy of any such representation, warranty or covenant. All
representations, warranties and covenants contained in this Agreement, and the
indemnification contained in this Section 7(b), shall survive the acceptance of
this subscription and will continue in full force without limitation and effect.
17
8. Further Agreement of Investor. Investor recognizes and agrees that the
Company shall have the right to accept or reject Investor's subscription, in
whole or in part, for any reason whatsoever.
9. Escrow Account. The Company has entered into an Escrow Agreement with a
Computershare Trust Company, Inc. ("Escrow Agent"). The terms of the Escrow
Agreement, which the Company hereby agrees to make its commercially reasonable
efforts to enforce, are as follows:
(a) All funds received by the Company from Investor ("Investor Funds" and
together with all other funds received by the Company for the Securities,
"Investors Funds") pursuant to subscription agreements will be deposited with or
wired to Escrow Agent within ten (10) days following the day upon which proceeds
are received by the Company.
(b) From time to time upon the Company's request, and at the end of the
third business day following the Termination Date (as defined below), Escrow
Agent shall notify the Company of the amount of Investors Funds received
hereunder. If the following requirements are met: (i) Investors Funds totaling
$1,500,000 (the "Minimum Amount") or more are received by Escrow Agent at any
time prior to the Termination Date and (ii) the Company has delivered to the
Escrow Agent a written notice ("Notice") signed by an authorized officer of the
Company stating that the Company has received and accepted subscription
agreements for the Securities totaling or exceeding the Minimum Amount (i and ii
together are the "Requirements"), then Escrow Agent shall pay out the escrowed
funds and all earnings thereon when and as directed by such written Notice.
(c) If the Requirements are not met prior to the Termination Date, Escrow
Agent shall refund to each of Investors at such person's address stated on the
list of Investors provided by the Company, or at such other address as shall be
furnished to Escrow Agent by the Company in writing, all Investor Funds received
by the Escrow Agent for such Investor as stated on the list of Investors.
(d) If the Company does not accept an investor subscription, the Company
will send a written notice to Escrow Agent to return such person's funds without
interest. Such notice shall include the name and address of the payee and the
amount to be paid to the payee.
(e) The "Termination Date" shall be the earlier of January 1, 2006 or the
date Escrow Agent receives written notice from the Company that it is abandoning
or closing the sale of the Securities and that Escrow Agent is instructed to pay
Investor Funds to Investors.
10. Headings. Paragraph headings are not to be considered as part of this
Agreement, are included solely for convenience, and are not intended to be full
or accurate descriptions of the contents thereof.
18
11. Construction. Unless the context requires otherwise, words denoting
the singular may be construed as denoting the plural, and words of one gender
may be construed as denoting such other gender as is appropriate. The word
including (and variations thereof) is used in an illustrative sense rather than
a limiting sense.
12. Succession and Assignment. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Neither party may assign
this Agreement or any of their rights, interests or obligations in this
Agreement without the prior written consent of the other party.
13. Notices. Any notices to be sent to the Company, including, without
limitation those required by Section 2(i) of this Agreement shall be sent to the
following address:
Canyon Resources Corporation
Attn: Xxxxx K. B. Hesketh
14142 Denver Xxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxx & Xxxxxxx L.L.P.
One Xxxxx Center, Suite 1500
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Investor:
to the address set forth on the Signature Page hereto.
14. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Colorado, without regard to the
principles of conflicts of laws.
15. Severability. Wherever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law.
However, if for any reason any one or more of the provisions of this Agreement
are held to be invalid, illegal or unenforceable in any respect, such action
will not affect any other provision of this Agreement.
19
In such event, this Agreement will be construed as if such invalid, illegal or
unenforceable provision had never been contained in it.
16. Amendments and Waivers. No amendment of any provision of this
Agreement will be valid unless it is in writing and is signed by the parties. No
waiver by any party of any default, misrepresentation or breach of warranty or
covenant under this Agreement, whether intentional or not, will be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant under this Agreement or will affect in any way any rights
arising by virtue of any prior or subsequent such occurrence, and no waiver will
be effective unless set forth in writing and signed by the party against whom
such waiver is asserted.
17. Fees and Expenses. Each party shall pay the fees and expenses of its
advisors, counsel, accountants and other experts, if any, and all other
expenses, incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement; provided, however, that
the Company shall pay all actual attorneys' fees and expenses (including
disbursements and out-of-pocket expenses) incurred by Investor in connection
with (i) the negotiation, execution and delivery of this Agreement and the
transactions contemplated thereunder, and (ii) any amendments, modifications or
waivers of this Agreement, which payment shall be made at the initial closing
hereunder and shall not exceed an aggregate of $20,000, of which $7,500 has been
previously paid, for all investors who participate in this offering and execute
a subscription agreement similar to this Agreement on or about the date hereof.
In the event that legal proceedings are commenced by any party to this Agreement
against another party to this Agreement in connection with this Agreement or the
Warrants, the party or parties which do not prevail in such proceedings shall
severally, but not jointly, pay their pro rata share of the reasonable
attorneys' fees and other reasonable out-of-pocket costs and expenses incurred
by the prevailing party in such proceedings.
18. Entire Agreement. This Agreement including Exhibit A which is
incorporated in and constitutes a part of this Agreement, contains the entire
agreement of the parties and supersedes all prior oral or written agreements and
understandings with respect to the subject matter.
19. Termination. All representations, warranties, covenants and agreements
contained in this Agreement shall terminate and be of no further force and
effect upon the first anniversary of the Closing Date; provided, however, that
the provisions contained in Sections 4 and 5 hereof shall terminate and be of no
further force and effect upon the expiration of the Effectiveness Period.
[SIGNATURE PAGE FOLLOWS]
20
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
1. Date: __________________________, 2005
2. Consideration: $__________________ in cash.
Investor represents that:
(a) the information contained in this Subscription Agreement is complete
and accurate and may be relied upon by the Company, and
(b) Investor will notify the Company immediately of any change in any of
such information occurring prior to acceptance of Investor's
subscription.
IN WITNESS WHEREOF, the undersigned has executed this Agreement and
executed the Accredited Investor Certification attached hereto as Exhibit A on
this _______ day of _______________, 2005.
____________________________________ ____________________________________
Signature of Investor Taxpayer Identification or
Social Security Number
____________________________________ ____________________________________
____________________________________ ____________________________________
____________________________________ ____________________________________
Name and Residence Address Mailing Address if Different
(Post Office Address Not Acceptable) from Residence Address
(Post Office Address is Acceptable)
Type of Ownership (check one):
________________ Individual Ownership
________________ Community Property (each spouse must sign)
________________ Joint Tenants with Right of Survivorship (all sign)
________________ Tenants in Common (all sign)
________________ Trust
________________ Corporation
________________ S Corporation
________________ C Corporation
________________ Company
________________ Other (please specify type of entity ________________)
ACCEPTANCE
This Subscription Agreement between _____________________ and Canyon
Resources Corporation is hereby accepted as of __________________, 2005.
CANYON RESOURCES CORPORATION
a Delaware corporation
By:____________________________________
Name:__________________________________
Title:_________________________________
EXHIBIT A
ACCREDITED INVESTOR CERTIFICATION
The undersigned prospective investor ("Investor") hereby represents and
warrants to Canyon Resources Corporation, a Delaware corporation (the
"Company"), in connection with Investor's proposed equity investment in the
Company pursuant to the Subscription Agreement to which this Certification is
Exhibit A (the "Agreement"), that one or more of the conditions below, as marked
applies to Investor (please initial the appropriate space):
_______ Net Worth. The undersigned natural person's present individual net
worth,(1) or joint net worth with the undersigned's spouse, exceeds $1,000,000.
_______ Individual Income. The undersigned natural person had individual
income(2) in excess of $200,000 in each of the last two years and reasonably
expects such income to be in excess of $200,000 in the current year.
_______ Joint Income. The undersigned natural person, together with the
undersigned's spouse, had joint income in excess of $300,000 for each of the
last two years and reasonably expects to have joint income in excess of $300,000
in the current year.
_______ Trust. The undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the securities of
the Company, whose purchase is directed by a person with such knowledge and
experience in financial and business matters that he or she is capable of
evaluating the merits and risks of an investment in the securities of the
Company.
_______ Institutional Investors. The undersigned is (i) a bank (as defined in
Section 3(a)(2) of the Securities Act of 1933, as amended (the "Securities
Act")) or any savings and loan association or other institution (as defined in
Section 3(a)(5)(A) of the Securities Act) whether acting in its individual or
fiduciary capacity; (ii) an insurance Partnership (as defined in Section 2(13)
of the Securities Act); (iii) an investment Partnership registered under the
Investment Partnership Act of 1940, as amended (the "Investment Partnership
Act"), or a business development Partnership as defined in Section 2(a)(48) of
the Investment Partnership Act; (iv) a
----------------
(1) For purposes of this Accredited Investor Certification, "net worth" means
the excess of total assets at fair market value, including home and personal
property, over total liabilities, including mortgages and income taxes on
unrealized appreciation of assets.
(2) For purposes of this Accredited Investor Certification, "individual income"
means "adjusted gross income" as reported for Federal income tax purposes, less
any income attributable to a spouse or to property owned by a spouse and
increased by the following amounts (but not including any amount attributable to
a spouse or to property owned by spouse): (i) the amount of any interest income
received which is tax-exempt under Section 103 of the Internal Revenue Code of
1986, as amended (the "Code"); (ii) the amount of losses claimed as a limited
partner in a limited partnership (as reported on Schedule E of Form 1040); and
(iii) any deduction claimed for depletion under Section 611 et seq. of the Code.
A-1
Small Business Investment Partnership licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958, as amended; (v) a plan established and maintained by a state, its
political subdivision, or any agency or instrumentality of a state or its
political subdivisions of and for the benefit of its employees, if such plan has
total assets in excess of $5,000,000; (vi) an employee benefit plan within the
meaning of the Employee Retirement Income Security Act of 1974, as amended, if
the investment decision is made by a plan fiduciary, as defined in Section 3(21)
of such Act, which is either a bank, savings and loan association, insurance
Partnership, or registered investment adviser, or if such employee benefit plan
has total assets in excess of $5,000,000, or if a self-directed plan, with
investment decisions made solely by Accredited Investors; or (vii) any
broker-dealer registered pursuant to Section 15 of the Securities Exchange Act
of 1934.
_______ Private Business Development Company. The undersigned is a private
business development company as defined in Section 202(a)(22) of the Investment
Advisers Act of 1940.
_______ Entity With Assets in Excess of $5,000,000. The undersigned is an
organization described in Section 501(c)(3) of the Internal Revenue Code, as
amended (tax exempt organization), corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific purpose of acquiring
the securities of the Company, with total assets in excess of $5,000,000.
_______ Principal of Canyon Resources Corporation The undersigned is a director
or executive officer of the Company.
_______ Entity in Which All Owners Are Accredited Investors. Investor is an
entity in which all of the equity owners are accredited investors pursuant to
one of the preceding paragraphs or pursuant to some other provision of
Regulation D promulgated by the Securities and Exchange Commission pursuant to
the Securities Act.
[SIGNATURE PAGE FOLLOWS]
A-2
THE UNDERSIGNED ACKNOWLEDGES AND UNDERSTANDS THAT THE COMPANY IS
RELYING ON HIS, HER OR ITS REPRESENTATIONS AND WARRANTIES SET FORTH ABOVE IN
DETERMINING WHETHER INVESTOR WILL BE PERMITTED TO INVEST IN THE COMPANY PURSUANT
TO THE AGREEMENT.
IN WITNESS WHEREOF, the undersigned has/have executed and made
effective this Accredited Investor Certification on this ________ day of
______________________, 2005.
ACCREDITED INVESTOR:
IF AN ENTITY:
By:_________________________________
Name:_______________________________
Title:______________________________
IF AN INDIVIDUAL OR INDIVIDUALS:
____________________________________
(Signature)
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(Print Name)
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(Signature)
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(Print Name)
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SCHEDULE OF EXCEPTIONS
The section numbers in this Schedule correspond to the section numbers in
the Subscription Agreement; provided, however, that any information disclosed
herein under any section number shall be deemed to be disclosed and incorporated
in any other section of the Agreement where such disclosure would be appropriate
and reasonably apparent. Disclosure of any information or document herein is not
a statement or admission that it is material or required to be disclosed herein.
References to any document do not purport to be complete and are qualified in
their entirety by the document itself. Capitalized terms used but not defined
herein shall have the same meanings given them in the Subscription Agreement.
3(a) Organization, Good Standing and Power
Date of Place of Ownership
Incorporation Incorporation %
------------- ---------------- ---------
XX Xxxxxxx Xxxxxxxxxxx 00-00-00 Xxxxxxxx, X.X.X. 000
XX Xxxxxxx Xxxxxxxxxxx 00-00-00 Xxxxxxxx, X.X.X. 000
XX Xxxxxx Xxxxxxxxxxx 00-00-00 Xxxxxxxx, X.X.X. 000
XX Xxxxxxxxxxxxx Xxxxxxxxxxx 00-00-00 Xxxxxxxx, X.X.X. 000
Xxxxxx Xx Xxxxxx S.A. 04-15-94 Panama 100
Canyon Resources Venezuela C.A. 08-19-94 Venezuela 90
Canyon Resources Tanzania Limited 09-06-94 Tanzania 00
Xxxxxx Xxxx Xxxxxxxxxxx 00-00-00 Xxxxxxx, X.X.X. 000
Xxxxxx Xxxx Xxxxxxx 00-00-00 Xxxxxxxx, X.X.X. 51
Industrial Minerals Inc. 08-17-05 Colorado, U.S.A. 100
3(c) Capitalization as of 11/23/2005
Authorized capital stock 100,000,000 shares of common stock
Shares outstanding 35,020,529 shares of common stock
Options outstanding
ISO options 1,117,925
Non-qualified options 591,601
Warrants outstanding
$2.19 exercise, expiring 06/01/06 2,199,836
$1.03 exercise, expiring 03/14/08 2,651,466
Convertible debentures
$1.38 conversion, principal of
$825,000 otherwise due on
03/01/11 597,820
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In connection with warrants issued as part of a unit offering in March 2005, the
warrant holders have registration rights for the underlying shares (2,651,466)
when the Company becomes eligible to register such shares on Form S-3. The
Company is obligated to file a registration statement on Form S-3 within sixty
days of becoming eligible to use such form.
In connection with the September 2005 issuance of 500,000 shares as partial
consideration for reacquiring the Xxxxxx Mine crushing equipment, the Company is
obligated to use its commercially reasonable best efforts to register the shares
on Form S-3 if and when available. The shares also have piggyback registration
rights on any registration statement filed by the Company other than on Forms
S-4 and S-8.
3(f) Commission Documents, Financial Statements
The Company did not timely file a Form 8-K with respect to the 500,000 share
issuance in September 2005 as partial consideration for reacquiring the Xxxxxx
Mine crushing equipment. This was subsequently disclosed in Item 2 of Part II of
the Company's quarterly report on Form 10-Q for the quarterly period ended
September 30, 2005 and filed with the Securities and Exchange Commission on
November 7, 2005.
3(g) Subsidiaries
See List of Subsidiaries in 3(a) above.
3(k) Indebtedness
PAYMENTS DUE BY PERIOD
---------------------------------------------------------------
LESS THAN MORE THAN 5
TOTAL 1 YEAR 1 - 3 YEARS 3 - 5 YEARS YEARS
---------- ----------- ----------- ----------- -----------
Long-term debt obligations $ 825,000 $ - $ - $ - $ 825,000
Capital lease obligations 20,700 20,700 - - -
Operating lease obligations 152,100 82,100 70,000 - -
Asset retirement obligations 4,662,600 1,712,400 2,950,200 - -
Total $5,660,400 $ 1,815,200 $ 3,020,200 $ - $ 825,000
3(m) Actions Pending
Anti-Cyanide Initiative I-137
In November 1998, the Montana electorate passed an anti-cyanide initiative
(I-137) by a vote of 52% to 48%. I-137, as modified by the Montana State
Legislature in April 1999, bans development of new gold and silver mines that
use open-pit mining methods and cyanide in the treatment and recovery process.
In April 2000, the Seven-Up Xxxx Venture (SPV) filed lawsuits in Montana State
District Court and in the United States District Court seeking to have I-137
declared unconstitutional, or alternatively, to obtain a "takings" or damage
award for the lost value of the SPV's mineral properties. The SPV's federal
takings
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claims were stayed pending exhaustion of remedies available to it at the state
level. Through a series of court decisions, most recently with a Montana State
Supreme Court decision on June 8, 2005, the provisions of I-137 were upheld and
the SPV was denied its takings compensation claim. On July 19, 2005, the SPV,
along with private plaintiffs, filed a motion in the United States District
Court to reopen its reserved federal takings claim. As of November 4, 2005, the
US District Court had not made a decision to hear the case. Accordingly, the
Company has filed a Petition of Writ of Certiorari with the US Supreme Court to
meet its November 4, 2005 deadline for such filing.
Xxxxxxx Mine Lawsuits
In October 2001, a plaintiff group filed suit in Montana State District Court
against the Company and its wholly-owned subsidiary, XX Xxxxxxx Corporation,
alleging violation of water rights and other torts in connection with the
operation of the Xxxxxxx Mine. The Complaint seeks unspecified damages and
punitive damages. The Company has vigorously defended this lawsuit and intends
to continue to do so. In view of the inherent uncertainties of lawsuits of this
nature, the Company is unable to make a judgment concerning the likelihood of
success in, or the outcome of, this matter.
In August 2002, a Preliminary Injunction was issued in Montana State District
Court on behalf of the plaintiff group in connection with the Company's auction
of certain mineral rights and fee lands in western Montana. In October 2002, the
Court issued a Supplemental Order which will sequester any proceeds realized
from the auction until such time as the lawsuit is concluded. As of September
30, 2005, $267,800 had been remitted to the Court as required by the Order.
Including interest earned on the funds remitted, the Court held $274,800 as of
September 30, 2005.
In March 2004, a claim was filed in Montana State District Court by the Montana
Environmental Information Center, Inc. and Earthworks/Mineral Policy Center,
Inc. (Plaintiffs) against the Company, XX Xxxxxxx Corporation, and the Xxxxxxx
Mine alleging violations of the Federal Pollution Control Act. The Plaintiffs
sought declaratory judgment, injunctive relief, remediation and the imposition
of civil penalties for violations dating back to September 1988. On July 14,
2005, the Plaintiffs filed a Motion to Dismiss the complaint without prejudice.
On July 21, 2005, the Company filed a brief in response to the Motion to Dismiss
asking the Court to order the claim be dismissed with prejudice, or
alternatively, that the Company be entitled to its reasonable attorney's fees
with respect to the initial claim or any subsequent lawsuit alleging similar
claims.
3(y) Delisting Notification
On November 21, 2005, the Company received notice from the American Stock
Exchange ("Amex") that it was not in compliance with Section 301 of the Amex
Company Guide pertaining to the issuance of securities prior to filing an
application for the listing of such additional securities and receiving
notification from Amex that the securities have been approved for listing.
Specifically, on September 16, 2005, the Company issued 500,000 shares of its
common stock in connection with the repurchase of crushing equipment at the
Company's Xxxxxx Mine and inadvertently
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failed to submit an Additional Listing Application and receive Amex approval of
such application prior to such issuance.
The Company submitted an Additional Listing Application with respect to the
newly issued shares to Amex on November 16, 2005. Upon approval of such
application, the Company will regain compliance with all applicable continued
listing standards of Amex.
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