Exhibit 2.1
July 29, 2005
U.S. Gold Corporation 0000 Xxxxxxx Xxxxxx, Xxxxx 000 Xxxxxxxx, Xxxxxxxx
00000-0000 Attention: Xxxxxxx X. Xxxxx,
Chairman of Independent Committee of Board of Directors
Re: Private Placement into U. S. Gold
Dear Xx. Xxxxx:
Subject to the terms and conditions hereof and of the Stock Subscription
Agreement referenced below, Xxxxxx X. XxXxxx, or an affiliate ("XxXxxx") hereby
agrees to acquire 11,100,000 shares of Common Stock (representing at least 33.3%
of the total outstanding Common Stock, on a fully diluted basis, after the
transaction) of U.S. Gold Corporation, a Colorado corporation ("U.S. Gold") for
a price of US$0.36036 per share for an aggregate purchase price of
US$4,000,000.00, as provided in the attached Stock Subscription Agreement (the
"Stock Acquisition ").
This letter agreement ("Agreement"), together with the Stock Subscription
Agreement, supersedes all prior agreements and understandings regarding the
subject matter hereof and forms a binding agreement between XxXxxx and U.S. Gold
regarding the terms and conditions of the proposed Stock Acquisition. Upon
signing this Agreement, the parties will also execute the Stock Subscription
Agreement and close the transaction (the "Closing").
U.S. Gold represents, warrants and agrees that (i) the Shares (as defined
below), when issued hereunder and under the Stock Subscription Agreement, will
be fully paid and non-assessable, (ii) subject to the Required Board Approval
described below, it is authorized to sell the Shares to XxXxxx hereunder and
under the Stock Subscription Agreement, and (iii) the Shares represent at least
33.3% of the total outstanding Common Stock, on a fully diluted basis, after the
transaction.
The following sets forth the Parties' understandings and agreements concerning
the terms and conditions of the Stock Acquisition:
Offering Terms
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Issuance of Stock: Subject to the terms hereof and the Stock Subscription
Agreement, U.S. Gold agrees to issue and sell 11,100,000
shares of its Common Stock (the "Shares") to XxXxxx, and
XxXxxx agrees to purchase the Shares from U.S. Gold. The
Shares shall constitute at least 33.3% of the total Common
Stock outstanding, on a fully diluted basis, immediately
following the consummation of the issuance of the Shares to
XxXxxx (the "Closing") and the other transactions
contemplated hereby.
Consideration: As consideration for the Stock Acquisition , XxXxxx shall
pay the amount of US$4,000,000.00 in immediately available
funds to U.S. Gold at the Closing.
Board Vote The Board of U.S. Gold shall vote to approve or reject this
Agreement on or before August 1, 2005.
Covenants and Conditions to Closing
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XxXxxx'x obligation to close the Stock Acquisition will be conditioned upon
satisfaction of the following conditions:
Required Approvals
and Consents: The Board of Directors of U.S. Gold will have approved the
Stock Acquisition (the "Required Board Approval").
Stock Subscription
Agreement U. S. Gold shall have executed and delivered to XxXxxx the
Stock Subscription Agreement. All of U.S. Gold's
representations and warranties hereunder and thereunder
shall be true and correct, and U.S. Gold shall have
performed and complied with all of its agreements and
obligations hereunder and thereunder (to the extent required
to be performed or complied with at or prior to Closing).
Settlement With
Management: The employment contracts of the current management team of
U.S. Gold and its subsidiaries, consisting of Xxxxxxx X.
Xxxx, Xxxxx X. Xxxx, and Xxxxxxx X. Pass (collectively,
"Management"), shall have been terminated (and Management
shall have resigned all Board positions at U. S. Gold and
its subsidiaries) effective at the Closing (provided, that
Management shall continue to serve (as at-will employees or
consultants) as officers of U. S. Gold and its subsidiaries
for as long as necessary to allow the current CEO and CFO of
U. S. Gold to sign and file the second quarter Report on
Form 10-Q for U. S. Gold and to make the Xxxxxxxx-Xxxxx
certifications required in connection therewith and, if
mutually agreed, such later time as determined by the new
Board of Directors) and shall have released U.S. Gold from
all liabilities to them except those set forth under
"Management Payments" below and except pursuant to the
indemnification provisions of the Articles of Incorporation,
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as amended, and indemnification agreements between U.S. Gold
and members of Management (copies of which have been
provided to XxXxxx). No payments or obligations of U.S. Gold
to Management shall exceed those set forth under "Management
Payments" below.
Board
Representation: Effective at Closing, Xxxxxxx X. Xxxx and Xxxxx X. Xxxx
shall have resigned as members of the Board of Directors of
U.S. Gold, as shall two (2) of the remaining four (4)
independent directors. All directors (including those
resigning and those remaining on the board) shall have
agreed to cancel their respective stock option agreements;
and the four (4) independent directors shall be entitled to
receive an aggregate of 450,000 shares of U.S. Gold Common
Stock issued as stock grants under U.S. Gold's Non-Qualified
Stock Option and Stock Grant Plan and those directors shall
have cancelled for no other consideration all stock option
agreements with U.S. Gold. The Board of Directors of U. S.
Gold shall have (i) irrevocably appointed four new members
to the Board of Directors, as nominated by XxXxxx (or more,
to the extent an increase in the size of the Board is
required (which shall also be effected by resolution of the
Board) because any or all of the four incumbent directors
referenced above do not choose to resign; provided, that, in
any case, XxXxxx'x nominees shall comprise two-thirds of the
Board), effective at Closing or as soon as allowed under
requirements of Rule 14f-1 of the Securities Exchange Act of
1934, as amended.
U.S. Gold's obligation to Close the Stock Acquisition will be conditioned upon:
Required Approvals
and Consents: The Required Board Approval will have been obtained.
Stock Subscription
Agreement XxXxxx shall have executed and delivered to XxXxxx the Stock
Subscription Agreement. All of XxXxxx'x representations and
warranties hereunder and thereunder shall be true and
correct, and XxXxxx shall have performed and complied with
all of his or its agreements and obligations hereunder and
thereunder (to the extent required to be performed or
complied with at or prior to Closing).
Management
Payments Management shall have received (or have the right to
receive) no more than the following in full satisfaction of
all existing employment, severance and other agreements with
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U.S. Gold (including without limitation cancellation of all
existing options and other rights of Management to shares of
U.S. Gold):
(1) U.S. Gold shall have transferred (or be obligated to
transfer) to Management all shares of Gold Resource
Corporation owned by U.S. Gold, at a valuation
determined to be fair to U.S. Gold by Xxxxx Dohlbear,
an independent valuation expert.
(2) U.S. Gold shall pay (or be obligated to pay) to
Management in cash at the Closing $1,000,000.
(3) U.S. Gold shall have transferred (or be obligated to
transfer) to Management the following automobile by
individual, and those persons will assume the remaining
installment purchase obligations with respect to such
vehicle and shall obtain the release of U.S. Gold's
guaranty of such installment purchase obligations.
Xxxxxxx X. Xxxx: 2005 Ford Explorer (purchased 12/04),
Vin # 0XXXX00X00XX00000;
Xxxxx X. Xxxx: 2005 Ford Explorer (purchased 12/04),
Vin # 0XXXX00X00XX00000, and
Xxxxxxx X. Pass: 2005 Volkswagon Passat (purchased
12/04), VIN # XXXXX00X00X000000
(4) Management will have received (or have the right to
receive), in aggregate, 1,025,000 shares of Common
Stock of U.S. Gold under the existing U.S. Gold
Non-Qualified Stock Option and Stock Grant Plan and
Management shall have terminated for no other
consideration all stock option agreements with U.S.
Gold.
In aggregate, the payments and obligations of
Management and U.S. Gold referenced in this Management
Payments section shall be termed the "Management
Transaction".
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Other Terms
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U.S. Gold and XxXxxx further agree as follows:
Indemnification: U.S. Gold will indemnify, defend and hold harmless XxXxxx
and his respective representatives and agents, from and
against any liabilities, losses, or claims resulting from
the breach of any representation, warranty, covenant, or
agreement of U.S. Gold contained in this Agreement or in the
Stock Subscription Agreement, and advance to such persons,
as incurred, all expenses and costs relating thereto and to
the defense therefrom. At his or its option, XxXxxx shall
have the option of being indemnified in cash or in shares of
Common Stock, or any combination thereof (in each case,
adjusted to take into account XxXxxx'x stock ownership
percentage). These indemnities will survive for 18 months
after the Closing. XxXxxx will indemnify U.S. Gold against a
breach of any representation or warranty of XxXxxx contained
in this Agreement or the Stock Subscription Agreement, and
advance to U.S. Gold, as incurred, all expenses and costs
relating thereto and to the defense therefrom, in this
Agreement. These indemnities will survive for 18 months
after the Closing.
Expenses: Each party will pay its own legal, accounting, and other
expenses, and all other costs incurred by such party or its
advisors or consultants in connection with the negotiation,
preparation, execution and delivery of this Agreement and
the Stock Subscription Agreement, whether or not the Stock
Acquisition is consummated.
Registration
Rights: Demand Right: U.S. Gold will use its commercially reasonable
efforts to cause the Shares to be registered for resale by
XxXxxx as promptly as practicable after Closing.
Company Registration. XxXxxx shall be entitled to
"piggy-back" registration rights on all registrations of
U.S. Gold (other than an initial public offering or any S-4
and S-8 registrations) or on any demand registrations of any
other investor subject to the right, however, of U.S. Gold
and its underwriters to reduce the number of shares proposed
to be registered by XxXxxx (proportionately to other
investors) in view of market conditions.
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Expenses. U.S. Gold shall bear registration expenses
(exclusive of underwriting discounts and commissions) of any
such demand and piggy-back registrations (including the
expense of one special counsel to XxXxxx not to exceed
$50,000).
Transfer of Rights: The registration rights may be
transferred to (i) any family member or trust for the
benefit of any individual initial holder, or (ii) any
transferee who acquires at least 200,000 of the Shares from
XxXxxx.
Non-Competition
Agreements: U.S. Gold will cause each of the departing Management
employees of U.S. Gold to sign agreements with U.S. Gold
which will provide, among other things that, for a period of
one (1) year from the Closing Date, he or she will not
directly or indirectly (i) engage or have ownership in or
otherwise participate in the financing, operation,
management or control of any entity engaged in, or
contemplated to be engaged in, any business owning or
seeking properties in Eureka County, Nevada, or (ii) solicit
any of the employees of U.S. Gold for the purpose of
obtaining their employment services.
Other Agreements of the Parties
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Conduct of
Business: From and after the date hereof, U.S. Gold will (i) preserve
and protect its assets, including without limitation the
Tonkin Springs property, to the extent of its available
working capital, (ii) preserve its existing relations with
employees, suppliers and others with whom it has a business
relationship, (iii) not sell, abandon, release or otherwise
dispose of or encumber any of its assets, including without
limitation any mining claim or lease of property and (iv)
conduct its business in compliance with all applicable laws
and regulations and orders or requirements of governmental
agencies.
Securities
Filings U.S. Gold shall make in a timely manner all filings required
by applicable securities laws and rules, and such filings
shall be accurate in all material respects.
Confidentiality: This Agreement and any related correspondence is to be held
in strict confidence and not disclosed to any party other
than the legal counsel and financial advisors of parties
hereto without prior approval of the non-disclosing party or
unless required by applicable law.
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All information furnished by any party or its
representatives will be held in strict confidence by the
party receiving such information and will not be disclosed
to any third party except representatives who need access to
the information in order to work on the Stock Acquisition.
All information furnished by either party to the other will
be deemed to be proprietary in nature and shall be kept
confidential unless (i) the party providing the information
consents to disclosure to third persons, (ii) the
information is already in the public domain, (iii)
disclosure of the information is compelled by process of
law, or (iv) the party receiving the information already had
such information in its possession prior to disclosure to
such party as evidenced by its files. If the Stock
Acquisition is not consummated each party and its
representatives will not use to its commercial advantage any
information (whether or not contained in hard copy, database
or other physical form) concerning products, customers,
proprietary technology or otherwise provided by the other
party. Without consent of XxXxxx, U.S. Gold agrees not to
issue a press release or otherwise publicize the Stock
Acquisition or the existence of this Agreement or the Stock
Subscription Agreement, except as required by law.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Colorado without giving effect to the conflict of
laws provisions thereof. This Agreement may be executed by facsimile signature
and in one or more counterparts, each of which shall be deemed to be an
original, and all of which, when taken together, shall constitute one and the
same instrument.
/s/ Xxxxxx X. XxXxxx
Xxxxxx X. XxXxxx
ACCEPTED
U.S. GOLD CORPORATION XXXXXX X. XXXXXX
By: /s/ Xxxx X. Goth /s/ Xxxxxx X. XxXxxx
Name: Xxxx X. Goth
Title: Director
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