LOAN AGREEMENT
This Loan
Agreement (this “Agreement”) is dated as of
November 18, 2009, (the “Effective Date”) by and among
Desert Hawk Gold Corp., a Nevada corporation (the “Company”), and each lender
listed on the Schedule of Lenders attached hereto (each, a “Lender” and collectively, the
“Lenders”).
RECITALS:
A. The
Company is seeking project funding through borrowed funds which in the aggregate
shall not exceed $600,000.
B. The
Company will issue 15% convertible promissory notes (collectively the “Notes” and individually a
“Note”) to each Lender
evidencing such borrowed funds, which Notes are being offered and sold to the
Lenders in reliance upon the exemption from securities registration afforded by
Section 4(6) and Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and
Rule 506 of Regulation D (“Regulation D”) as promulgated
by the United States Securities and Exchange Commission (the “SEC”) under the Securities
Act.
C. Each
Lender wishes to purchase, and the Company wishes to sell, the Notes upon the
terms and conditions stated in this Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and each of the Lenders agree as
follows:
1. LOAN
TRANSACTION.
a. Loan and
Note. Subject to the terms of this Agreement, the Lender shall
loan to the Company, and the Company promises to repay, the funds set forth in
the Schedule of Lenders attached hereto (the “Loan”). Each Loan
shall be evidenced and governed by the terms and conditions of the Note, the
form of which is attached hereto as Exhibit A.
b. Payment of Funds;
Issuance of Note. Upon execution of
this Agreement by a Lender, such Lender shall deliver to the Company immediately
available funds in the principal amount of the Loan to the Company and the
Company shall execute and deliver to the Lender a Note representing such
Loan.
c. Conversion
Rights. Each Lender shall
have the right to convert the principal amount of and unpaid interest on the
Note into shares of common stock of the Company (the “Conversion Shares”) as
provided in the Note.
d. Stock
Issuance. As partial
consideration for loaning the funds to the Company, the Company shall issue to
the Lender one share of the Company’s common stock for each $2.00 loaned to the
Company (the “Bonus
Shares”). The Company shall promptly, but in no event later
than five business days following receipt of the loaned funds from the Lender,
irrevocably instruct the Company’s transfer Agent to issue and deliver to the
Lender a stock certificate representing the Bonus Shares.
e. Penalty
Shares. In the event the Company fails to repay a Loan, or
interest thereon, in full on the maturity date of the Note, the Company will
issue an additional one share of the Company’s common stock for each $2.00 of
the original principal amount of the Note at the maturity date (the “Penalty Shares”) and the
maturity date of the Note shall be extended for one year, as provided in the
Note.
f. Piggyback
Registration Rights. The Company
hereby grants to each Lender the one-time right to include the Conversion
Shares, the Bonus Shares, and any Penalty Shares held by the Lender (the “Registerable Shares”) in an
appropriate registration statement filed by the Company as set forth in Section
4 below.
2. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY. The Company hereby represents
and warrants to each of the Lenders as follows:
a. Organization and
Standing.
The Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Nevada. The Company has all
requisite corporate power and authority to carry on its business as presently
conducted. The Company is qualified to do business as a foreign
corporation in each jurisdiction in which such qualification is required and
where failure to be so qualified would not have a material adverse effect on the
Company’s business as now conducted.
b. Corporate
Power. The
Company has all requisite legal and corporate power to execute and deliver this
Agreement, to issue the Notes, to issue the Bonus, Conversion and Penalty
Shares, and to carry out and perform its obligations under the terms of this
Agreement.
c. Capitalization. The authorized
capital stock of the Company consists of 100,000,000 shares of Common Stock, of
which approximately 6,249,244 shares are issued and outstanding as of the
Effective Date. All issued and outstanding shares of the Company’s
capital stock have been duly authorized and validly issued, are fully paid and
nonassessable. There are no other outstanding shares of capital stock
or other securities, rights, options, warrants, conversion rights (except
potential conversion of amounts owed to Xx. Xxxxxxxxx for past consulting fees
into shares of Common Stock), or other agreements either directly or indirectly
for the purchase of any shares of the Company’s capital stock.
d. Common
Stock. The holders of
the Company’s common stock are entitled to equal dividends and distributions,
per share, with respect to the common stock when, as and if declared by the
Board of Directors from funds legally available therefore. No holder
of any shares of common stock has a pre-emptive right to subscribe for any
securities of the Company nor are any common shares subject to redemption or
convertible into other securities of the Company. Upon liquidation,
dissolution or winding up of our company, and after payment of creditors, the
assets will be divided pro-rata on a share-for-share basis among the holders of
the shares of common stock. Each share of common stock is entitled to
one vote with respect to the election of any director or any other matter upon
which shareholders are required or permitted to vote. Holders of the
Company’s common stock do not have cumulative voting rights.
e. Authorization. All corporate
action on the part of the Company, its officers and directors necessary for the
authorization, execution, delivery and performance by the Company of this
Agreement, the authorization, issuance, sale and delivery of the Notes, the
Bonus, Conversion, and Penalty Shares, and the performance of all of the
Company’s obligations hereunder has been taken. This Agreement, when
executed and delivered by the Company, shall constitute a valid and legally
binding obligation of the Company enforceable in accordance with its respective
terms, subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies. The Bonus, Conversion,
and Penalty Shares, when issued in compliance with the provisions of this
Agreement, will be validly issued, fully paid and nonassessable, and the Bonus,
Conversion, and Penalty Shares and will be free of any liens or encumbrances
created by the Company; provided, however, that the Bonus, Conversion, and
Penalty Shares will be subject to restrictions on transfer under applicable
securities laws as set forth herein.
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f. Litigation. There is no
action, proceeding or investigation pending, or to Company’s knowledge
threatened, against the Company or its officers, directors or stockholders, or,
to the Company’s knowledge, against employees or consultants of the Company
which might result, either individually or in the aggregate, in any material
adverse change in the business, prospects, conditions, affairs or operations of
the Company. The Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company currently intends to initiate.
g. Brokers or
Finders. The Company has
not incurred, and will not incur, directly or indirectly, as a result of any
action taken by or on behalf of the Company, any liability for brokerage or
finders’ fees or agents’ commissions or any similar charges in connection with
this Agreement.
h. Current
Non-Public Offering. The Company is currently engaged in a
non-public offering of up to 400,000 shares of common stock at $0.70 per share
solely to accredited investors. As of the Effective Date the Company
has sold 246,000 shares in this offering and received gross proceeds of
$172,200.
3. REPRESENTATIONS
AND WARRANTIES OF THE LENDERS. Each Lender hereby, as to
itself only and for no other Lender, represents and warrants to the Company as
follows:
a. Authorization. This Agreement,
when executed and delivered by the Lender, will constitute a valid and legally
binding obligation of the Lender, enforceable in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws of general application relating to or affecting
enforcement of creditors’ rights.
b. Accredited
Investor. The Lender is an
“accredited investor” as defined in Rule 501 of Regulation D.
c. Restricted
Securities. The Lender
understands that the Note and the Bonus, Conversion, and Penalty Shares have not
been registered pursuant to the Securities Act, or any state securities act, and
thus are “restricted securities” as defined in Rule 144 promulgated by the SEC
and are subject to Paragraph (i) of Rule 144 which prohibits reliance on Rule
144 by persons holding shares of non-reporting former shell companies until the
issuer files a registration statement with the SEC and has filed all periodic
reports for a period of at least one year from the filing date of the
registration statement. Therefore, the Lender is prepared to hold the
Note and the Bonus, Conversion, and Penalty Shares for an indefinite
period.
d. Investment
Purpose. The Lender
acknowledges that the Note and the Bonus, Conversion, and Penalty Shares are
being purchased for his, her, or its own account, for investment, and not with
the present view towards the distribution, assignment, or resale to others or
fractionalization in whole or in part. The Lender further
acknowledges that no other person has or will have a direct or indirect
beneficial or pecuniary interest in the Note or the Bonus, Conversion, or
Penalty Shares.
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e. Limitations on
Resale; Restrictive Legend. The Lender
acknowledges that he, she, or it will not sell, assign, hypothecate, or
otherwise transfer any rights to, or any interest in, the Note or the Bonus,
Conversion, or Penalty Shares except (i) pursuant to an effective registration
statement under the Securities Act, or (ii) in any other transaction which, in
the opinion of counsel acceptable to the Company, is exempt from registration
under the Securities Act, or the rules and regulations of the SEC
thereunder. The Lender also acknowledges that an appropriate legend
will be placed upon each of the certificates representing the Notes and the
Bonus, Conversion, and Penalty Shares stating that the securities have not been
registered under the Securities Act and setting forth or referring to the
restrictions on transferability and sale of the securities.
f.
Information. The Lender, or if the Lender
is any entity, its undersigned representative, has been furnished (i) with all
requested materials relating to the business, finances, management, and
operations of the Company; (ii) with information deemed material to making an
informed investment decision; and (iii) with additional requested information
necessary to verify the accuracy of any documents furnished to the Lender by the
Company. Such person has been afforded the opportunity to ask
questions of the Company and its management and to receive answers concerning
the terms and conditions of the loan transaction.
g. Knowledge and
Experience in Business and Financial Matters. The Lender,
either individually or together with his, her, or its purchaser representative,
has such knowledge and experience in business and financial matters that he,
she, or it is capable of evaluating the risks of the prospective investment, and
that the financial capacity of such party is of such proportion that the total
cost of such person’s commitment in the loaned funds would not be material when
compared with his, her, or its total financial capacity.
h. No
Advertisements. The Lender is not
entering into this Agreement as a result of or subsequent to any advertisement,
article, notice, or other communication published in any newspaper, magazine, or
similar media or broadcast on television or radio, or presented at any seminar
or meeting.
i. Relationship to
Company. The
Lender, either individually or, if an entity, through its representative, has a
preexisting personal or business relationship with the Company or one of its
officers, directors, or controlling persons, or, by reason of his or her
business or financial experience (or the business or financial experience of his
professional advisors who are unaffiliated with and who are not compensated by
the Company), the Lender has the capacity to protect his, her, or its own
interests in connection with the loan.
j.
No Public
Market. The Lender
understands that no public market now exists for the common stock of the Company
and that the Company has made no assurances that a public market will ever exist
for the Company’s securities.
k. Brokers or
Finders. The Lender has
not engaged any brokers, finders, or agents and has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finder’s fee or
agents’ commissions or any similar charges in connection with this Agreement and
the transactions contemplated hereby.
4. PIGGYBACK
REGISTRATION RIGHTS. The Company hereby grants to the Lenders
the following piggyback registration rights:
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a. Registration
Statement.
i. Right to
Piggyback. If the Company proposes to undertake an offering of
shares of its common stock for its account or for the account of other
stockholders and the registration form to be used for such offering may be used
for the registration of the Registerable Shares held by the Lender (a
“Piggyback
Registration”), the Company will give prompt written notice to each
Lender holding Registerable Shares of its intention to effect such a
registration (each, a “Piggyback Notice”) and,
subject to Sections 4(a)(ii) and (iii) below, the Company will use its best
efforts to cause to be included in such registration all Registerable Shares
held by the Lenders with respect to which the Company has received written
requests for inclusion therein within 20 days after the date of sending the
Piggyback Notice.
ii. Priority on Primary
Registrations. If a Piggyback Registration is an underwritten
primary registration on behalf of the Company, and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number that can be
sold in an orderly manner within a price range acceptable to the Company, the
Company will include in such registration (a) first, the securities the Company
proposes to sell and (b) second, the Registerable Shares requested to be
included in such registration and any other securities requested to be included
in such registration that are held by persons other than the Lenders pursuant to
registration rights, pro rata among the Lenders holding Registerable Shares and
the holders of such other securities requesting such registration on the basis
of the number of shares of such securities owned by each such
holder.
iii. Priority on Secondary
Registrations. If a Piggyback Registration is an underwritten
secondary registration on behalf of holders of the Company’s securities other
than the Lenders holding the Registerable Shares (the “Other Holders”), and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number that can be sold in a orderly manner in such offering within a price
range acceptable to the Other Holders requesting such registration, the Company
will include in such registration (a) first, the securities requested to be
included therein by the Other Holders requesting such registration and (b)
second, the Registerable Shares requested be include in such resignation
hereunder, pro rata amount the Lenders holding the Registerable Shares
requesting such registration on the basis of the number of shares of such
securities owned by each such holder.
iv. Selection of
Underwriters. In the case of an underwritten Piggyback
Registration, the Company will have the right to select the investment banker(s)
and managers(s) to administer the offering.
b. Registration
Procedures.
i.
Registration. The
Company will use its reasonable best efforts to effect the registration of such
Registerable Shares in accordance with the intended method of disposition
thereof, and pursuant thereto the Company will as expeditiously as
possible:
(a) Registration
Statement. Prepare and file with the SEC a registration
statement with respect to such Registerable Shares and use its reasonable best
efforts to cause such registration statement to become effective.
(b) Amendments and
Supplements. Promptly prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for the period required by the intended method of
disposition and the terms of this Agreement and comply with the provisions of
the Securities Act with respect to the disposition of all securities covered by
such registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement.
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(c) Provisions of
Copies. Promptly furnished to each seller of Registerable
Shares the number of copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as such seller
may reasonably request in order to facilitate the disposition of the
Registerable Shares owned by such seller.
(d) Prospectus
Updating. Promptly notify each seller of such Registerable
Shares when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any of the following events (i)
the occurrence of one or more event which, individually or together, represents
a fundamental change in the information contained in the prospectus included
with such registration statement; (ii) any material addition or change on the
plan of distribution; or (iii) any event which would cause the information in
the prospectus included in such registration statement to contain an untrue
statement of a material fact or omit any material fact necessary to make the
statements therein not misleading. In such event, at the request of
any such seller, the Company will promptly prepare a supplement or amendment to
such prospectus.
(e) Due
Diligence. Make available for inspection by any underwriter
participating in any disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by any such underwriter, all
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company’s officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
underwriter, attorney, accountant or agent in connection with such registration
statement.
(f) Deemed Underwriters or
Controlling Persons. Permit any Lender holding the
Registerable Shares which person, in such person’s reasonable judgment, might be
deemed to be an underwriter or a controlling person of the Company, to
participate in the preparation of such registration or comparable statement and
to require the insertion therein of material in form and substance satisfactory
to such person and to the Company and furnished to the Company in writing, which
in the reasonable judgment of such person and its counsel should be
included.
(g) Management
Availability. In connection with underwritten offerings, make
available appropriate management personnel for participation in the preparation
and drafting of such registration or comparable statement, for due diligence
meetings and for “road show” meetings.
(h) Stop
Orders. Promptly notify the holders of the Registerable Shares
of the threat of issuance by the SEC of any stop order suspending the
effectiveness of the registration statement or the initiation of any proceeding
for that purpose, and make every reasonable effort to prevent the entry of any
order suspending the effectiveness of the registration statement. In
the event of the issuance of any stop order suspending the effectiveness of a
registration statement, or of any order suspending or preventing the use of any
related prospectus or suspending the qualification of any Registerable Shares
included in such registration statement for sale in any jurisdiction, the
Company will use its reasonable best efforts promptly to obtain the withdrawal
of such order.
ii. Further Information. The
Company may require each Lender holding Registerable Shares to furnish to the
Company in writing such information regarding the proposed distribution by such
person of such Registerable Shares as the Company may from time to time
reasonably request.
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iii. Notice to Suspend Offers and
Sales. Each Lender participating in the registration of the
Registerable Shares severally agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Sections
4(b)(i)(d) or 4(b)(i)(h) hereof, such person will forthwith discontinue
disposition of the Registerable Shares pursuant to a registration hereunder
until receipt of the copies of an appropriate supplement or amendment to the
prospectus under Section 4(b)(i)(d) or until the withdrawal of such order under
Section 4(b)(i)(h).
iv. Reference to
Lenders. If any such registration or comparable statement
refers to any Lender by name or otherwise as the holder of any securities of the
Company and if, in the Lender’s reasonable judgment, such Lender is or might be
deemed to be a controlling person of the Company, such Lender shall have the
right to require (a) the insertion therein of language in form and substance
satisfactory to such Lender and the Company and presented to the Company in
writing, to the effect that the holding by such Lender of such securities is not
to be construed as a recommendation by such Lender of the investment quality of
the Company’s securities covered thereby and that such holdings do not imply
that such Lender will assist in meeting any future financial requirements of the
Company, or (b) in the event that such reference to such Lender by name or
otherwise is not required by the Securities Act or any similar Federal statute
then in force, the deletion of the reference to such Lender, provided that with
respect to this clause (b) such Lender shall furnish to the Company an opinion
of counsel to such effect, which opinion and counsel shall be reasonably
satisfactory to the Company.
c. Registration
Expenses.
i. Expense Borne by
Company. Except as specifically otherwise provided in Section
4(c)(ii) below, the Company will be responsible for payment of all expenses
incident to any registration hereunder, including, without limitation, all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, road show
expenses, advertising expenses and fees and disbursements of counsel for the
Company and all independent certified public accountants and other Persons
retained by the Company in connection with such registration (all such expenses
borne by the Company being herein called the “Registration
Expenses”).
ii. Expense Borne by Selling
Security Holders. Each Lender will be responsible for payment
of his, her, or its own legal fees (if such Lender retains legal counsel
separate from that of the Company), underwriting fees and brokerage discounts,
commissions and other sales expenses incident to any registration hereunder,
with any such expenses which are common to the selling security holders divided
among such security holders (including the Company and holders of the Company’s
securities other than Registerable Shares, to the extent that securities are
being registered on behalf of such persons) pro rata on the basis of the number
of shares being registered on behalf of each such security holder, or as such
security holders may otherwise agree.
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d. Indemnification
Section.
i. Indemnification by
Company. The Company agrees to indemnify, to the fullest
extent permitted by law, each Lender holding Registerable Shares and each person
who controls (within the meaning of the Securities Act) such holder against all
loses, claims, damages, liabilities and expenses in connection with defending
against any such losses, claims, damages and liabilities or in connection with
any investigation or inquiry, in each case caused by or based on any untrue or
alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading or arise out of any violation by the Company of any rules or
regulation promulgated under the Securities Act applicable to the Company and
relating to action or inaction required of the Company in connection with such
registration, except insofar as the same are (i) contained in any information
furnished in writing to the Company by such person expressly for use therein;
(ii) caused by such person’s failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto; or (iii)
caused by such person’s failure to discontinue disposition of shares after
receiving notice from the Company pursuant to Section 4(b)(iii)
hereof. In connection with an underwritten offering, the Company will
indemnify such underwriters, their officers and directors and each person who
controls (within the meaning of the Securities Act) such underwriters at least
to the same extent as provided above with respect to the indemnification of the
Lenders holding the Registerable Shares.
ii. Indemnification by
Holder. In connection with any registration statement in which
a Lender holding Registerable Shares is participating, each such Lender will
furnish to the Company in writing such information as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify the Company, its
directors and officers and each Person who controls (within the meaning of the
Securities Act) the Company against any losses, claims, damages, liabilities and
expenses resulting from any untrue or alleged untrue statement of material fact
contained in the registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in any information so furnished in writing by
such Lender expressly for use in connection with such registration; provided
that the obligation to indemnify will be individual to each Lender and will be
limited to the net amount of proceeds received by such Lender from the sale of
Registerable Shares pursuant to such registration statement. In connection with
an underwritten offering, each such Lender will indemnify such underwriters,
their officers and directors and each person who controls (within the meaning of
the Securities Act) such underwriters at least to the same extent as provided
above with respect to the indemnification of the Company.
iii. Assumption of Defense by
Indemnifying Party. Any person entitled to indemnification
hereunder will (a) give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification and (b) unless in such
indemnified party’s reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party will not be subject to any liability for any
settlement made by the indemnified party without its consent (but such consent
will not be unreasonably withheld). An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim. unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim.
iv. Binding
Effect. The indemnification provided for under this Agreement
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and will survive the transfer of
securities. The Company also agrees to make such provisions, as are
reasonably requested by any indemnified party, for contribution to such party in
the event the Company’s indemnification is unavailable for any
reason. Each Lender holding Registerable Shares also agrees to make
such provisions, as are reasonably requested by any indemnified party, for
contribution to such party in the event such person’s indemnification is
unavailable for any reason.
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5. ADDITIONAL
COVENANTS.
a. Financial and
Business Information. Until the
Maturity Date (as defined in the Note), the Company shall deliver to each of the
Lenders so long as such Lender holds a Note:
i. Quarterly Statements
- as soon as practicable, and in any event within 45 days after the close of
each of the first three fiscal quarters of each fiscal year of the Company in
the case of quarterly statements, a consolidated balance sheet, statement of
income and statement of cash flows of the Company and any Subsidiaries as at the
close of such month or quarter and covering operations for such month or
quarter, as the case may be, and the portion of the Company’s fiscal year ending
on the last day of such month or quarter, all in reasonable detail and prepared
in accordance with GAAP, subject to audit and year-end adjustments, setting
forth in each case in comparative form the figures for the comparable period of
the previous fiscal year.
ii. Annual Statements -
as soon as practicable after the end of each fiscal year of the Company, and in
any event within 90 days thereafter, duplicate copies of:
(a) consolidated
and consolidating balance sheets of the Company and any subsidiaries at the end
of such year; and
(b) consolidated
and consolidating statements of income, stockholders’ equity and cash flows of
the Company and any subsidiaries for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and accompanied by an opinion thereon of independent certified public
accountants of recognized national standing selected by the Company, which
opinion shall state that such financial statements fairly present the financial
position of the Company and any subsidiaries on a consolidated basis and have
been prepared in accordance with GAAP (except for changes in application in
which such accountants concur) and that the examination of such accountants in
connection with such financial statements has been made in accordance with
generally accepted auditing standards.
b. Reservation of Common
Stock. The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance of the Conversion and Penalty
Shares in such amount as may be required to fulfill its obligations in full
under the Notes. In the event that at any time the then authorized
shares of Common Stock are insufficient for the Company to satisfy its
obligations in full under the Notes, the Company shall promptly take such
actions as may be required to increase the number of authorized
shares.
c. Use of
Proceeds. The loaned funds will be used to develop, mine,
truck and process ores of the Yellow Hammer Pit as well as the B Zone and C
Zone; to haul and process ores at either or both the Cactus Mill Site
and/or the Marysville Mill site; for overhead costs of the Company directly
associated with this project; for the purchase of mining equipment specific to
this project; and to pay the legal costs for the preparation of the documents
for this transaction.
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6. MISCELLANEOUS.
a. Notices. All
communications provided for herein shall be in writing and shall be deemed to be
given or made on (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service, or (b) three business days after mailing
if mailed from within the continental United States by registered or certified
mail, return receipt requested, to the party entitled to receive the same, if to
the Company at 0000 X. Xxxxxx Xxxxx Xxxx, #000, Xxxxxxx, XX 00000, Attention:
Xxxxxx X. Xxxxxxxxx, CEO, or if to the Lender, at the address set forth on the
Signature Page of this Agreement, or at such other address as shall be
designated by any party hereto in written notice to the other party hereto
delivered pursuant to this paragraph.
b. Attorneys’
Fees. Should either
party hereto default in any of the covenants, conditions, or promises contained
herein, the defaulting party shall pay all costs and expenses, including a
reasonable attorney’s fee, which may arise or accrue therefrom, or in pursuing
any remedy provided hereunder or by the statutes of any state.
c. Governing Law and
Venue. This Agreement
and the rights and duties of the parties hereto shall be construed and
determined in accordance with the laws of the State of Washington (without
giving effect to any choice or conflict of law provisions), and any and all
actions to enforce the provisions of this Agreement shall be brought in a court
of competent jurisdiction in the County of Spokane, State of Washington and in
no other place.
d. Rights Are
Cumulative. The rights and remedies granted to the parties
hereunder shall be in addition to and cumulative of any other rights or remedies
either may have under any document or documents executed in connection herewith
or available under applicable law. No delay or failure on the part of
a party in the exercise of any power or right shall operate as a waiver thereof
nor as an acquiescence in any default nor shall any single or partial exercise
of any power or right preclude any other or further exercise thereof or the
exercise of any other power or right.
e. Waiver and
Amendment. None of the provisions hereof may be changed,
waived, terminated or discharged orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, termination
or discharge is sought.
f. Severability. If
any provision of this Agreement is held invalid or unenforceable by any court of
final jurisdiction, it is the intent of the parties that all other provisions of
this Agreement be construed to remain fully valid, enforceable, and binding on
the parties.
g. Headings. The
descriptive headings of the various paragraphs or parts of this Agreement are
for convenience only and shall not affect the meaning or construction of any of
the provisions hereof.
h. Exhibits. Each
of the exhibits referenced in this Agreement is annexed hereto and is
incorporated herein by this reference and expressly made a part
hereof.
i. Counterparts.
This Agreement may be executed in any number of counterparts and all such
counterparts taken together shall be deemed to constitute one
instrument. Delivery of an executed counterpart of this Agreement by
facsimile shall be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any party delivering an executed
counterpart of this Agreement by facsimile also shall deliver a manually
executed counterpart of this Agreement, but the failure to deliver a manually
executed counterpart shall not affect the validity, enforceability, or binding
effect of this Agreement.
[SIGNATURE
PAGE TO FOLLOW]
10
IN
WITNESS WHEREOF, each of the parties hereto has caused their respective
signature page to this Loan Agreement to be duly executed by their respective
authorized signatories as of the day and year set forth below
|
COMPANY:
|
||
|
Date: November
27, 2009
|
By:
|
/s/ Xxxxxx X. Xxxxxxxxx
|
|
Xxxxxx
X. Xxxxxxxxx, Chief Executive Officer
|
||
|
LENDERS:
|
West
C. Street LLC
|
|
|
Date: November
20, 2009
|
By:
|
/s/s Xxxxxxx Xxxxxxx
|
|
Xxxxxxx
Xxxxxxx, Manager
|
||
|
00000
XX 000xx
Xxxxxx
|
||
|
Xxxxxxx,
XX 00000
|
||
| IBEARHOUSE LLC | ||
|
Date: November
30, 2009
|
By:
|
/s/ Xxxxxx Xxxxx
|
|
Xxxxxx
Xxxxx, Manager
|
||
|
0000
XX 00xx
Xxxxxx
|
||
|
Xxxxxx,
XX 00000
|
||
11
SCHEDULE
OF LENDERS
|
Name of Lender
|
Amount of Loan
|
Number of
Bonus Shares
|
Number of
Conversion Shares
(excluding interest)
|
Number of
Penalty Shares
|
||||||||||||
|
West
C. Street LLC
|
$ | 300,000 | 150,000 | 200,000 | 150,000 | |||||||||||
|
IBEARHOUSE
LLC
|
$ | 300,000 | 150,000 | 200,000 | 150,000 | |||||||||||
|
TOTAL
|
$ | 600,000 | 300,000 | 400,000 | 300,000 | |||||||||||
12
