Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
August 31, 2010, between Xxxxxxxx Mining Inc., a Nevada corporation (the
"Company"), and each Purchaser identified on Schedule A hereto (each,
including its successors and assigns, a "Purchaser" and collectively, the
"Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act"), and Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, desires to purchase from the Company, securities
of the Company as more fully described in this Agreement; and
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 Purchaser
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have
the meanings given to such terms in the other Transaction Documents (as
applicable), and (b) the following terms have the meanings set forth in this
Section 1.1:
"Affiliate" means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405
under the Securities Act.
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day except any Saturday, any Sunday, any day
which is a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required by
law or other governmental action to close.
"Closing" means the closing of the purchase and sale of the Securities
pursuant to Section 2.1.
"Closing Date" has the meaning set forth in Section 2.1.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means the common stock of the Company, par value
$0.000666 per share, and any other class of securities into which such common
stock may hereafter be reclassified or changed.
"Common Stock Equivalents" means any securities of the Company or the
Subsidiaries which would, directly or indirectly, entitle the holder thereof
to acquire at any time Common Stock, including, without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is at any
time, directly or indirectly, convertible into or exercisable or exchangeable
for, or otherwise entitles the holder thereof to receive, Common Stock.
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"Company Counsel" means Xxxxxx Xxxx & Xxxxxx LLP, with offices located
at 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000.
"Cross-Receipt" means the cross receipts executed by the Purchasers and
the Company, each in the form of Exhibit F hereto.
"Disclosure Schedules" shall have the meaning set forth in Section 3.1.
"Effective Date" means the earlier of the date that (a) all of the
Registrable Securities (as defined in the Registration Rights Agreement) have
been registered for resale by the holders thereof pursuant to a registration
statement(s) declared effective by the Commission or (b) all of the
Registrable Securities have been sold pursuant to Rule 144 or may be sold
pursuant to Rule 144 without volume or manner-of-sale restrictions, so long
as the Company is current with the public information requirements under Rule
144.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exempt Issuance" means the issuance of (a) shares of Common Stock or
options to employees, officers or directors of the Company pursuant to any
stock or option plan (i) duly adopted for such purpose, by a majority of the
non-employee members of the Board of Directors or a majority of the members
of a committee of non-employee directors established for such purpose, and
(ii) approved pursuant to the provisions of Section 8 of the Series A-1
Certificate of Designation and the Series A-2 Certificate of Designation, (b)
securities upon the exercise or exchange of or conversion of any Securities
issued hereunder (including, without limitation, any Underlying Shares)
and/or other securities exercisable or exchangeable for or convertible into
shares of Common Stock issued and outstanding on the date of this Agreement
or as disclosed in the Company's Disclosure Schedules, provided that such
securities have not been amended on or after the date of this Agreement to
increase the number of such securities or to decrease the exercise price,
exchange price or conversion price of such securities (it being understood
that such securities may be adjusted for anti-dilution purposes in connection
with this Agreement), (c) securities issued pursuant to acquisitions or
strategic transactions approved by (i) a majority of the disinterested
directors of the Company, and (ii) pursuant to the provisions of Section 8 of
the Series A-1 Certificate of Designation and the Series A-2 Certificate of
Designation, and (d) securities issued as consideration for (i) dividends to
the Purchasers of the Preferred Stock under the Series A-1 Certificate of
Designation and the Series A-2 Certificates of Designation and to purchasers
of any other Parity Securities (including, solely with respect to the Series
A-2 Preferred Stock and any other Parity Securities, as the case may be, any
and all shares of Common Stock issuable in lieu of cash payments pursuant to
the Make-Whole Payment and including, solely with respect to the Series A-1
Preferred Stock, any and all shares of Common Stock issuable in lieu of cash
payments pursuant to the Additional Dividend payment (as defined in the
Series A-1 Certificate of Designation)); or (ii) capital contributions to
Northern Xxxxxxxx LLC made pursuant to the Limited Liability Company
Operating Agreement.
"Existing Debt Amount" means, with respect to each Purchaser, the
amount owed by the Company to such Purchaser under such Purchaser's Existing
Promissory Note as of the Closing, as set forth on Schedule A hereto.
"Existing Promissory Notes" means the promissory notes listed on
Schedule B hereto.
"GAAP" shall have the meaning ascribed to such term in Section 3.1(h).
"Liens" means a lien, charge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction.
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"Limited Liability Company Operating Agreement" means the Northern
Xxxxxxxx LLC Limited Liability Company Operating Agreement, dated August __,
2010, entered into among DWC Resources Inc., Xxxx Xxxxxxxx and the Company,
in the form of Exhibit G hereto.
"Lost Note Affidavit and Indemnity Agreement" means a Lost Note
Affidavit and Indemnity Agreement in a form reasonably acceptable to the
Company in the form attached hereto as Exhibit E.
"Material Adverse Effect" shall have the meaning assigned to such term
in Section 3.1(b).
"Northern Xxxxxxxx LLC" means the limited liability company formed
under Chapter 86 of the Nevada Revised Statutes Act on August __, 2010.
"Participation Maximum" shall have the meaning ascribed to such term in
Section 4.8(a).
Payoff Letter" means the payoff letters executed by the Purchasers in
favor of the Company, each in the form of Exhibit A hereto, providing for
termination and release of all obligations under the applicable Existing
Promissory Note and related Loan Documents (as defined in such Payoff
Letter).
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
"Preferred Stock" means shares of Series A-1 Preferred Stock and shares
of Series A-2 Preferred Stock issued to the Purchasers hereunder.
"Pre-Notice" shall have the meaning ascribed to such term in Section
4.8(b).
"Pro Rata Portion" shall have the meaning ascribed to such term in
Section 4.8(e).
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Purchaser Party" shall have the meaning ascribed to such term in
Section 4.6.
"Registration Rights Agreement" means the Registration Rights
Agreement, in the form of Exhibit B hereto, by and among the Company and the
Purchasers, providing registration rights with respect to the Underlying
Shares held by the Purchasers on the terms and conditions set forth therein.
"Required Approvals" shall have the meaning ascribed to such term in
Section 3.1(e).
"Required Minimum" means, as of any date, the maximum aggregate number
of shares of Common Stock then issued or potentially issuable in the future
pursuant to the Transaction Documents, including any Underlying Shares,
ignoring any conversion or exercise limits set forth therein and assuming
that any previously unconverted shares of Preferred Stock are held until the
third anniversary of the Closing Date and all dividends are paid in shares of
Common Stock or Preferred Stock until such third anniversary.
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"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially
the same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in Section
3.1(h).
"Securities" means the Preferred Stock and the Underlying Shares.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Series A-1 Certificate of Designation" means the 71/2% Series A-1
Convertible Preferred Stock Certificate of Designation to be filed prior to
the Closing by the Company with the Secretary of State of Nevada, in the form
of Exhibit C attached hereto.
"Series A-1 Preferred Stock" means the Company's 71/2% Series A-1
Convertible Preferred Stock issued hereunder having the rights, preferences
and privileges set forth in the Series A-1 Certificate of Designation.
"Series A-2 Certificate of Designation" means the 71/2% Series A-2
Convertible Preferred Stock Certificate of Designation to be filed prior to
the Closing by the Company with the Secretary of State of Nevada, in the form
of Exhibit D attached hereto.
"Series A-2 Preferred Stock" means the Company's 71/2% Series A-2
Convertible Preferred Stock issued hereunder having the rights, preferences
and privileges set forth in the Series A-2 Certificate of Designation.
"Short Sales" means all "short sales" as defined in Rule 200 of
Regulation SHO under the Exchange Act (but shall not be deemed to include the
location and/or reservation of borrowable shares of Common Stock).
"Stated Value" means $1,000 per share of Preferred Stock, subject to
adjustment as provided in the Series A-1 Certificate of Designation or the
Series A-2 Certificate of Designation (as applicable).
"Subsequent Financing" shall have the meaning ascribed to such term in
Section 4.8(a).
"Subsequent Financing Notice" shall have the meaning ascribed to such
term in Section 4.8(b).
"Subsidiary" shall have the meaning ascribed to such term in Section
3.1(a) and shall, where applicable, also include any direct or indirect
subsidiary of the Company formed or acquired after the date hereof.
"Trading Day" means a day on which the principal Trading Market is open
for trading.
"Trading Market" means any of the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the New York Stock Exchange, American Stock Exchange, the Toronto
Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin
Board (or any successors to any of the foregoing).
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"Transaction Documents" means this Agreement, the Series A-1
Certificate of Designation, the Series A-2 Certificate of Designation, the
Registration Rights Agreement, all exhibits and schedules thereto and hereto,
and any other documents or agreements executed in connection with the
transactions contemplated hereunder (including, without limitation, the
documents referenced in Section 2.2(c)(ii)(B)).
"Transfer Agent" means Corporate Stock Transfer Inc., the current
transfer agent of the Company, with a mailing address of 0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxx 000, Xxxxxx, XX 00000, and any successor transfer agent of
the Company.
"Underlying Shares" means the shares of Common Stock that are:
(a) issued and issuable upon conversion of the Series A-1 Preferred
Stock or Series A-2 Preferred Stock issued to the Purchasers hereunder; and
(b) issued or issuable in lieu of cash payment of dividends on the
Preferred Stock referenced in clause (a) in accordance with the terms of the
Series A-1 Certificate of Designation and the Series A-2 Certificate of
Designation, as applicable (including, solely with respect to the Series A-2
Preferred Stock, any and all shares of Common Stock issuable in lieu of cash
payments pursuant to the Make-Whole Payment (as defined in the Series A-2
Certificate of Designation) and including, solely with respect to the Series
A-1 Preferred Stock, any and all shares of Common Stock issuable in lieu of
cash payments pursuant to the Additional Dividend payment (as defined in the
Series A-1 Certificate of Designation).
ARTICLE
PURCHASE AND SALE
2.1 Closing.
(a) On the date hereof (the "Closing Date"), upon the terms and
subject to the conditions set forth herein, substantially concurrent with the
execution and delivery of this Agreement by the parties hereto, the Company
agrees to sell, and the Purchasers, severally and not jointly, each agree to
purchase, the number of shares of Series A-1 Preferred Stock or Series A-2
Preferred Stock (as applicable), as set forth on Schedule A hereto,
determined by dividing such Purchaser's Existing Debt Amount, as set forth on
Schedule A hereto, by the Stated Value of one (1) share of Series A-1
Preferred Stock or Series A-2 Preferred Stock (as applicable)
(b) The Company and each Purchaser shall each deliver the items set
forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall
occur at the offices of Company Counsel or such other location as the parties
shall mutually agree.
2.2 Deliveries.
(a) On or prior to the Closing Date, the Company shall deliver or
cause to be delivered to each Purchaser the following:
(i) this Agreement and the Registration Rights Agreement, and
such Purchaser's Payoff Letter and Cross-Receipt, each duly executed by
the Company, and (ii) evidence of the filing and acceptance of the
Series A-1 Certificate of Designation or the Series A-2 Certificate of
Designation (as applicable), from the Secretary of State of Nevada.
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(b) Within five (5) Business Days after the Closing Date, the Company
shall deliver or cause to be delivered to each Purchaser a certificate
evidencing the number of shares of Preferred Stock issued to such Purchaser,
determined as provided herein, registered in the name of such Purchaser.
(c) On or prior to the Closing Date, each Purchaser shall deliver or
cause to be delivered to the Company the following:
(i) this Agreement, the Registration Rights Agreement and such
Purchaser's Payoff Letter, each duly executed by such Purchaser, and
(ii) such Purchaser's original Existing Promissory Note or a Lost
Note Affidavit and Indemnity Agreement, duly executed by such Purchaser.
(d) Upon receipt of the certificate identified in subsection (b)
above, the Purchaser shall deliver or cause to be delivered to the Company
such Purchaser's Cross-Receipt, duly executed by such Purchaser.
2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met:
(i) the accuracy in all material respects on the Closing Date
of the representations and warranties of the Purchasers contained herein
(unless as of a specific date therein);
(ii) all obligations, covenants and agreements of each Purchaser
required to be performed at or prior to the Closing Date shall have been
performed; and
(iii) the delivery by each Purchaser of the items set forth in
Sections 2.2(c) and (d) of this Agreement.
(b) The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following conditions being
met:
(i) the accuracy in all material respects when made and on the
Closing Date of the representations and warranties of the Company
contained herein (unless as of a specific date therein);
(ii) all obligations, covenants and agreements of the Company
required to be performed at or prior to the Closing Date shall have been
performed; and
(iii) the delivery by the Company of the items set forth in
Sections 2.2(a) and (b) of this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as
set forth in the Disclosure Schedules, which Disclosure Schedules shall be
deemed a part hereof and shall qualify any representation otherwise made
herein to the extent of the disclosure contained in the corresponding section
of the
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Disclosure Schedules, the Company hereby makes the following representations
and warranties to each Purchaser:
(a) Subsidiaries. GoldSpring, LLC, The Plum Mining Company, LLC, and
the Plum Mine Special Purpose Company LLC (collectively, the "Subsidiaries,"
and each a "Subsidiary") are the only direct or indirect subsidiaries of the
Company. The Company owns, directly or indirectly, all of the capital stock
or other equity interests of each Subsidiary free and clear of any Liens,
other than Liens incurred in connection with the Existing Promissory Notes
and which shall be discharged at the Closing of the transactions contemplated
hereunder, and all of the issued and outstanding shares of capital stock of
each Subsidiary are validly issued and are fully paid, non-assessable and
free of preemptive and similar rights to subscribe for or purchase
securities.
(b) Organization and Qualification. The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, with the requisite power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation or default
of any of the material provisions of its respective certificate or articles
of incorporation, bylaws or other organizational or charter documents. Each
of the Company and the Subsidiaries is duly qualified to conduct business and
is in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property owned
by it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not have or
reasonably be expected to result in: (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company's ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
"Material Adverse Effect") and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action on the part of the Company and
no further action is required by the Company, the Board of Directors or the
Company's stockholders in connection therewith. Each Transaction Document to
which it is a party has been (or upon delivery will have been) duly executed
by the Company and, when delivered in accordance with the terms hereof and
thereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except: (i) as
limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
(d) No Conflicts. The execution, delivery and performance by the
Company of the Transaction Documents, the issuance and sale of the Securities
and the consummation by it of the transactions contemplated hereby and
thereby to which it is a party do not and will not: (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter
documents, (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, result in the
creation of any Lien upon any
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of the properties or assets of the Company or any Subsidiary, or give to
others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary debt
or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary
is bound or affected, or (iii) subject to the Required Approvals, conflict
with or result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal
and state securities laws and regulations), or by which any property or asset
of the Company or a Subsidiary is bound or affected; except in the case of
each of clauses (ii) and (iii), such as could not have or reasonably be
expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state,
local or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction
Documents, other than: (i) the filings required pursuant to Section 4.5 of
this Agreement, (ii) the filings with the Commission pursuant to the
Registration Rights Agreement, (iii) the notice and/or application(s) to each
applicable Trading Market for the issuance and sale of the Preferred Stock
and the listing of the Underlying Shares for trading thereon in the time and
manner required thereby, and (iv) the filing of Form D with the Commission
and such filings as are required to be made under applicable state securities
laws (collectively, the "Required Approvals").
(f) Issuance of the Securities. The Securities are duly authorized
and, when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The Underlying Shares,
when issued in accordance with the terms of the Transaction Documents, will
be validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company other than restrictions on transfer provided for in
the Transaction Documents. The Company has reserved from its duly authorized
capital stock a number of shares of Common Stock for issuance of the
Underlying Shares at least equal to 100% of the shares of Common Stock
initially issuable upon conversion of the Preferred Stock issuable hereunder.
(g) Capitalization. The capitalization of the Company is as set
forth on Schedule 3.1(g), which Schedule 3.1(g) also includes the number of
shares of Common Stock owned beneficially, and of record, by Affiliates of
the Company as of the date hereof. No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate
in the transactions contemplated by the Transaction Documents. Except as a
result of the purchase and sale of the Securities or as set forth in Schedule
3.1(g) or in the SEC Reports, there are no outstanding options, warrants,
scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into
or exercisable or exchangeable for, or giving any Person any right to
subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock
or Common Stock Equivalents. The issuance and sale of the Securities will
not obligate the Company to issue shares of Common Stock or other securities
to any Person (other than the Purchasers) and will not result in a right of
any holder of Company securities to adjust the exercise, conversion, exchange
or reset price under any of such securities. All of the outstanding shares
of capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in violation
of any preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any stockholder, the
Board of Directors or others is required for the issuance and sale of the
Securities. There are no stockholders agreements, voting agreements or other
similar agreements with respect to the
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Company's capital stock to which the Company is a party or, to the knowledge
of the Company, between or among any of the Company's stockholders.
(h) SEC Reports; Financial Statements. The Company has filed all
quarterly and annual reports required to be filed by the Company under the
Exchange Act for the three (3) years preceding the date hereof (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the "SEC
Reports") on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have
been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements
or the notes thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP, and fairly present in all material
respects the financial position of the Company and its consolidated
Subsidiaries as of and for 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, immaterial, year-end audit adjustments.
(i) Material Changes; Undisclosed Events, Liabilities or
Developments. Except as set forth on Schedule 3.1(i) or the SEC Reports,
since the date of the latest audited financial statements included within the
SEC Reports: (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (a) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (b) liabilities
not required to be reflected in the Company's financial statements pursuant
to GAAP or disclosed in filings made with the Commission, (iii) the Company
has not altered its method of accounting, (iv) the Company has not declared
or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock and (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except pursuant to
existing Company stock option plans. The Company does not have pending
before the Commission any request for confidential treatment of information.
Except for the issuance of the Securities contemplated by this Agreement or
as set forth on Schedule 3.1(i), no event, liability, fact, circumstance,
occurrence or development has occurred or exists or is reasonably expected to
occur or exist with respect to the Company or its Subsidiaries or their
respective business, properties, operations, assets or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws at the time this representation is made or deemed made that
has not been publicly disclosed at least one (1) Trading Day prior to the
date that this representation is made.
(j) Private Placement. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the Securities
by the Company to the Purchasers as contemplated hereby. The issuance and
sale of the Securities hereunder does not contravene the rules and
regulations of the Trading Market.
(k) No Integrated Offering. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2, neither the Company,
nor any of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
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any offers to buy any security, under circumstances that would cause this
offering of the Securities to be integrated with prior offerings by the
Company for purposes of (i) the Securities Act which would require the
registration of any such securities under the Securities Act, or (ii) any
applicable stockholder approval provisions of any Trading Market on which any
of the securities of the Company are listed or designated.
(l) No General Solicitation. Neither the Company nor any person
acting on behalf of the Company has offered or sold any of the Securities by
any form of general solicitation or general advertising. The Company has
offered the Securities for sale only to the Purchasers and certain other
"accredited investors" within the meaning of Rule 501 under the Securities
Act.
(m) Litigation. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) (collectively, an "Action") which (i)
adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Securities or (ii) could, if there
were an unfavorable decision, have or reasonably be expected to result in a
Material Adverse Effect. There has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer
of the Company. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act.
(n) Compliance. Neither the Company nor any Subsidiary: (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default
by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it
is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been
waived), except as described in the SEC Reports or as set forth in Schedule
3.1(n) hereto, (ii) is in violation of any judgment, decree or order of any
court, arbitrator or governmental body or (iii) is or has been in violation
of any statute, rule, ordinance or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws
relating to taxes, environmental protection, occupational health and safety,
product quality and safety and employment and labor matters, except in each
case as could not have or reasonably be expected to result in a Material
Adverse Effect.
(o) Title to Assets. Except as set forth in the SEC Reports, the
Company and the Subsidiaries have good and marketable title in fee simple to
all real property owned by them and good and marketable title in all personal
property owned by them that is material to the business of the Company and
the Subsidiaries, in each case free and clear of all Liens, except for Liens
as do not materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Company and the Subsidiaries and Liens for the payment of federal, state or
other taxes, the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by the Company
and the Subsidiaries are held by them under valid, subsisting and enforceable
leases with which the Company and the Subsidiaries are in compliance.
(p) Xxxxxxxx-Xxxxx; Internal Accounting Controls. The Company is in
compliance with any and all requirements of the Xxxxxxxx-Xxxxx Act of 2002
applicable to smaller reporting companies that are effective as of the date
hereof, and any and all applicable rules and regulations promulgated by the
Commission thereunder that are effective as of the date hereof and as of the
Closing Date. The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that: (i)
transactions are executed in accordance with management's general or specific
10
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP 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
balances of assets are compared with the actual assets of the Company at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company
and designed such disclosure controls and procedures to ensure that
information required to be disclosed by the Company in the reports it files
or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Commission's rules and
forms. The Company's certifying officers have evaluated the effectiveness of
the Company's disclosure controls and procedures as of the end of the period
covered by the Company's most recently filed periodic report under the
Exchange Act (such date, the "Evaluation Date"). The Company presented in its
most recently filed periodic report under the Exchange Act the conclusions of
the certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date. Since
the Evaluation Date, there have been no changes in the Company's internal
control over financial reporting (as such term is defined in the Exchange
Act) that has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.
(q) Tax Status. Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a Material
Adverse Effect, the Company and each Subsidiary (i) has made or filed all
required United States federal and state income and all foreign income and
franchise tax returns (or extension requests related thereto), reports and
declarations required by any jurisdiction to which it is subject, (ii) has
paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports
and declarations and (iii) has set aside on its books provision reasonably
adequate for the payment of all material taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority
of any jurisdiction, and the officers of the Company or of any Subsidiary
know of no basis for any such claim.
3.2 Representations and Warranties of the Purchasers. Each
Purchaser, for itself and for no other Purchaser, severally and not jointly,
hereby represents and warrants as of the date hereof and as of the Closing
Date to the Company as follows (unless as of a specific date therein):
(a) Organization; Authority. Such Purchaser is either an individual
or an entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization with full right, corporate or
other power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of the
Transaction Documents and performance by such Purchaser of the transactions
contemplated by the Transaction Documents have been duly authorized by all
necessary corporate, partnership, limited liability company or similar
action, as applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and
when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except: (i) as limited
by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies, and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law. If the Purchaser(s) is a
corporation, trust, partnership or other entity that is not an individual
person, it has not been organized for the specific purpose of purchasing the
Securities and is not prohibited from doing so.
11
(b) Own Account. Such Purchaser understands that the Securities are
"restricted securities" and have not been registered under the Securities Act
or any applicable state securities law and is acquiring the Securities as
principal for its own account and not with a view to or for distributing or
reselling such Securities or any part thereof in violation of the Securities
Act or any applicable state securities law, has no present intention of
distributing any of such Securities in violation of the Securities Act or any
applicable state securities law and has no direct or indirect arrangement or
understandings with any other persons to distribute or regarding the
distribution of such Securities in violation of the Securities Act or any
applicable state securities law (this representation and warranty not
limiting such Purchaser's right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable federal and
state securities laws). Such Purchaser is acquiring the Securities hereunder
in the ordinary course of its business.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and as of the date hereof it is, and on each date on
which it converts any shares of Preferred Stock, it will be either: (i) an
"accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
(a)(8) under the Securities Act or (ii) a "qualified institutional buyer" as
defined in Rule 144A(a) under the Securities Act. Such Purchaser is not
required to be registered as a broker-dealer under Section 15 of the Exchange
Act.
(d) Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.
(e) Reliance on Exemptions. Each Purchaser understands that the
Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and
state securities laws and that the Company is relying in part upon the truth
and accuracy of, and such Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Purchaser
set forth herein in order to determine the availability of such exemptions
and the eligibility of such Purchaser to acquire the Securities. Each
Purchaser understands that no United States federal or state agency or any
other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities, or the fairness or
suitability of the investment in the Securities, nor have such authorities
passed upon or endorsed the merits of the offering of the Securities.
(f) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine
or similar media or broadcast over television or radio or presented at any
seminar or any other general solicitation or general advertisement.
(g) Representations of Purchasers. Each Purchaser solely owns all
right, title and interest in and to its respective Existing Promissory
Note(s) and has not conveyed any interest or other right in any such Existing
Promissory Note to any other Person or otherwise subjected, or allowed to be
subjected, such Existing Promissory Note to any lien or other encumbrance.
The transactions contemplated by this Agreement will result in the full and
complete release and satisfaction of any and all obligations of the Company
with respect to each Purchaser's Existing Promissory Note(s). The Existing
Promissory Note(s) being tendered by each Purchaser to the Company pursuant
to this Agreement are the only promissory notes or other debt obligations of
the Company to such Purchaser.
12
(h) No Legal Advice From the Company; Sole Representations in
Agreement. Each Purchaser acknowledges that it had the opportunity to review
this Agreement and the transactions contemplated by this Agreement with his
or its own legal counsel and investment and tax advisors. Each Purchaser is
relying solely on such counsel and advisors and not on any statements or
representations of the Company or any of its representatives or agents for
legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any
jurisdiction. Each Purchaser acknowledges that the only representations
being made by the Company in connection with the transactions contemplated by
this Agreement are set forth in this Article III and that in connection with
its decision to enter into the transactions contemplated by this Agreement,
it is relying only on such representations in this Article III and the SEC
Reports, and not on any other statements or representations of the Company or
any of its representatives or agents.
(i) Each Purchaser acknowledges, by its execution of this Agreement,
that its obligations hereunder are irrevocable.
The Company acknowledges and agrees that the representations contained in
Section 3.2 shall not modify, amend or affect such Purchaser's right to rely
on the Company's representations and warranties contained in this Agreement
or any representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or delivered in
connection with this Agreement or the consummation of the transaction
contemplated hereby.
ARTICLE 4
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule 144, to
the Company or to an Affiliate of a Purchaser or in connection with a pledge
as contemplated in Section 4.1(b), the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor and reasonably acceptable to the Company, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the
effect that such transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer, any such
transferee shall agree in writing to be bound by the terms of this Agreement
and shall have the rights and obligations of a Purchaser under this
Agreement.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 4.1, of a legend on any of the Securities in the following form:
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
CONVERTIBLE HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON
CONVERSION OF THIS
13
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS
AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT
OR OTHER LOAN SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Securities
to a financial institution that is an "accredited investor" as defined in
Rule 501(a) under the Securities Act and who agrees to be bound by the
provisions of this Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject
to approval of the Company and no legal opinion of legal counsel of the
pledgee, secured party or pledgor shall be required in connection
therewith. Further, no notice shall be required of such pledge.
(c) Certificates evidencing the Underlying Shares shall not contain
any legend (including the legend set forth in Section 4.1(b) hereof): (i)
while a registration statement covering the resale of such security is
effective under the Securities Act, (ii) following any sale of such
Underlying Shares pursuant to Rule 144, (iii) if such Underlying Shares are
eligible for sale under Rule 144, without the requirement for the Company to
be in compliance with the current public information required under Rule 144
as to such Underlying Shares and without volume or manner-of-sale
restrictions or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company shall
cause its counsel to issue a legal opinion to the Transfer Agent promptly
after the Effective Date if required by the Transfer Agent to effect the
removal of the legend hereunder. If all or any shares of Preferred Stock are
converted at a time when there is an effective registration statement to
cover the resale of the Underlying Shares, or if such Underlying Shares may
be sold under Rule 144 and the Company is then in compliance with the current
public information required under Rule 144, or if the Underlying Shares may
be sold under Rule 144 without the requirement for the Company to be in
compliance with the current public information required under Rule 144 as to
such Underlying Shares and without volume or manner-of-sale restrictions or
if such legend is not otherwise required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued
by the staff of the Commission), then such Underlying Shares shall be issued
free of all legends. The Company agrees that following the Effective Date or
at such time as such legend is no longer required under this Section 4.1(c),
it will, no later than three Trading Days following the delivery by a
Purchaser to the Company or the Transfer Agent of a certificate representing
Underlying Shares, as applicable, issued with a restrictive legend, deliver
or cause to be delivered to such Purchaser a certificate representing such
shares that is free from all restrictive and other legends. The Company may
not make any notation on its records or give instructions to the Transfer
Agent that enlarge the restrictions on transfer set forth in this Section
4.1(c). Certificates for Underlying Shares subject to legend removal
hereunder shall be transmitted by the Transfer Agent to the Purchaser by
crediting the account of the Purchaser's prime broker with the Depository
Trust Company System as directed by such Purchaser.
(d) Each Purchaser, severally and not jointly with the other
Purchasers, agrees with the Company that such Purchaser will only sell any
Securities pursuant to either the registration requirements of the Securities
Act, including any applicable prospectus delivery requirements, or an
exemption therefrom, and acknowledges that the removal of the restrictive
legend from certificates representing Securities as set forth in this Section
4.1 is predicated upon the Company's reliance upon this understanding.
4.2 Furnishing of Information. Until the time that no Purchaser owns
any Securities, the Company covenants to maintain the registration of the
Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely
14
file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act even if the Company is not then subject
to the reporting requirements of the Exchange Act. As long as any Purchaser
owns any Securities, if the Company is not required to file reports pursuant
to the Exchange Act, it will prepare and furnish to the Purchasers and make
publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities, including without
limitation, under Rule 144. The Company further covenants that it will take
such further action as any holder of Securities may reasonably request, to
the extent required from time to time to enable such Person to sell such
Securities without registration under the Securities Act, including without
limitation, within the requirements of the exemption provided by Rule 144.
With regard to the Securities purchased relating to the Purchasers' Existing
Debt Amount owed by the Plum Mine Special Purpose Company LLC, as evidenced
by the Existing Promissory Notes issued by the Plum Mine Special Purpose
Company, the Company represents that it has been advised by counsel that, if
the Purchasers sought to transfer such Securities immediately after the
Closing, such Securities would be eligible for tacking under Rule 144.
4.3 Integration. The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities or that
would be integrated with the offer or sale of the Securities for purposes of
the rules and regulations of any Trading Market such that it would require
stockholder approval prior to the closing of such other transaction unless
stockholder approval is obtained before the closing of such subsequent
transaction.
4.4 Conversion Procedure. The form of Notice of Conversion included
in the Series A-1 Certificate of Designation or the Series A-2 Certificate of
Designation (as applicable) sets forth the totality of the procedures
required of the Purchasers in order to convert the Preferred Stock. No
additional legal opinion, other information or instructions shall be required
of the Purchasers to convert their Preferred Stock. The Company shall honor
conversions of the Preferred Stock and shall deliver Underlying Shares in
accordance with the terms, conditions and time periods set forth in the
Transaction Documents.
4.5 Securities Laws Disclosure; Publicity. The Company shall, in
accordance with applicable federal securities law, issue a Current Report on
Form 8-K and press release disclosing the material terms of the transactions
contemplated hereby, and including the Transaction Documents as exhibits
thereto. From and after the issuance of such press release, the Company
shall have publicly disclosed all material, non-public information delivered
to any of the Purchasers by the Company or any of its subsidiaries, or any of
their respective officers, directors, employees or agents in connection with
the transactions contemplated by the Transaction Documents. The Company and
each Purchaser shall consult with each other in issuing any other press
releases with respect to the transactions contemplated hereby, and neither
the Company nor any Purchaser shall issue any such press release nor
otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of any Purchaser, or without the
prior consent of each Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld or delayed, except
if such disclosure is required by law, in which case the disclosing party
shall promptly provide the other party with prior notice of such public
statement or communication. Notwithstanding the foregoing, the Company shall
not publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or
Trading Market, without the prior written consent of such Purchaser, except:
(a) as required by federal securities law in connection with (i) any
registration statement contemplated by the Registration Rights Agreement and
(ii) the filing of final Transaction
15
Documents (including signature pages thereto) with the Commission; and (b) to
the extent such disclosure is required by law or Trading Market regulations,
in which case the Company shall provide the Purchasers with prior notice of
such disclosure permitted under this Section 4.5.
4.6 Indemnification of Purchasers. Subject to the provisions of this
Section 4.6, the Company will indemnify and hold each Purchaser and its
directors, officers, shareholders, members, partners, employees and agents
(and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title),
each Person who controls such Purchaser (within the meaning of Section 15 of
the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, shareholders, agents, members, partners or employees (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling
persons (each, a "Purchaser Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to any breach of any of
the representations, warranties, covenants or agreements made by the Company
in this Agreement or in the other Transaction Documents. The indemnification
required by this Section 4.6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills
are received or are incurred.
4.7 Reservation and Listing of Securities.
(a) The Company shall maintain a reserve from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction Documents in
such amount as may then be required to fulfill its obligations in full under
the Transaction Documents.
(b) If, on any date, the number of authorized but unissued (and
otherwise unreserved) shares of Common Stock and/or Preferred Stock is less
than 130% of (i) the Required Minimum on such date, minus (ii) the number of
shares of Common Stock or Preferred Stock (as applicable) previously issued
pursuant to the Transaction Documents, then the Board of Directors shall use
commercially reasonable efforts to amend the Company's certificate or
articles of incorporation to increase the number of authorized but unissued
shares of Common Stock and/or Preferred Stock (as applicable) to at least the
Required Minimum at such time (minus the number of shares of Common Stock
and/or Preferred Stock (as applicable) previously issued pursuant to the
Transaction Documents), as soon as possible and in any event not later than
the 120th day after such date; provided that the Company will not be required
at any time to authorize a number of shares of Common Stock and/or Preferred
Stock (as applicable) greater than the maximum remaining number of shares of
Common Stock or Preferred Stock (as applicable) that could possibly be issued
after such time pursuant to the Transaction Documents.
(c) The Company shall, if applicable: (i) in the time and manner
required by the principal Trading Market, prepare and file with such Trading
Market an additional shares listing application covering a number of shares
of Common Stock at least equal to the Required Minimum on the date of such
application, (ii) take all steps necessary to cause such shares of Common
Stock to be approved for listing or quotation on such Trading Market as soon
as possible thereafter, (iii) provide to the Purchasers evidence of such
listing or quotation and (iv) maintain the listing or quotation of such
Common Stock on any date at least equal to the Required Minimum on such date
on such Trading Market or another Trading Market.
4.8 Participation in Future Financing.
(a) From the date hereof until such time as the Purchasers no longer
hold any shares of Preferred Stock, upon any issuance by the Company or any
of its Subsidiaries of Common Stock, Common Stock Equivalents for cash
16
consideration, or a combination of units hereof (a "Subsequent Financing"),
each Purchaser shall have the right to participate in up to an amount of the
Subsequent Financing equal to 100% of the Subsequent Financing (the
"Participation Maximum") on the same terms, conditions and price provided for
in the Subsequent Financing.
(b) At least five (5) Trading Days prior to the closing of the
Subsequent Financing, the Company shall deliver to each Purchaser a written
notice of its intention to effect a Subsequent Financing ("Pre-Notice"),
which Pre-Notice shall ask such Purchaser if it wants to review the details
of such financing (such additional notice, a "Subsequent Financing
Notice"). Upon the request of a Purchaser, and only upon a request by such
Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but
no later than one (1) Trading Day after such request, deliver a Subsequent
Financing Notice to such Purchaser. The Subsequent Financing Notice shall
describe in reasonable detail the proposed terms of such Subsequent
Financing, the amount of proceeds intended to be raised thereunder and the
Person or Persons through or with whom such Subsequent Financing is proposed
to be effected and shall include a term sheet or similar document relating
thereto as an attachment.
(c) Any Purchaser desiring to participate in such Subsequent
Financing must provide written notice to the Company by not later than 5:30
p.m. (New York City time) on the fourth (4th) Trading Day after all of the
Purchasers have received the Pre-Notice that the Purchaser is willing to
participate in the Subsequent Financing, the amount of the Purchaser's
participation, and representing and warranting that the Purchaser has such
funds ready, willing, and available for investment on the terms set forth in
the Subsequent Financing Notice. If the Company receives no such notice from
a Purchaser as of such fourth (4th) Trading Day, such Purchaser shall be
deemed to have notified the Company that it does not elect to participate.
(d) If by 5:30 p.m. (New York City time) on the fourth (4th) Trading
Day after all of the Purchasers have received the Pre-Notice, notifications
by the Purchasers of their willingness to participate in the Subsequent
Financing (or to cause their designees to participate) is, in the aggregate,
less than the total amount of the Subsequent Financing, then the Company may
effect the remaining portion of such Subsequent Financing on the terms and
with the Persons set forth in the Subsequent Financing Notice.
(e) If by 5:30 p.m. (New York City time) on the fourth (4th) Trading
Day after all of the Purchasers have received the Pre-Notice, the Company
receives responses to a Subsequent Financing Notice from Purchasers seeking
to purchase more than the aggregate amount of the Participation Maximum, each
such Purchaser shall have the right to purchase its Pro Rata Portion (as
defined below) of the Participation Maximum. "Pro Rata Portion" of a
Purchaser means the ratio of: (x) the aggregate Stated Value of the Preferred
Stock issued to such Purchaser on the Closing Date; and (y) the aggregate
Stated Value of the Preferred Stock issued to all Purchasers participating in
such Subsequent Financing under this Section 4.8.
(f) The Company must provide the Purchasers with a second Subsequent
Financing Notice, and the Purchasers will again have the right of
participation set forth above in this Section 4.8, if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not
consummated for any reason on the terms set forth in such Subsequent
Financing Notice within thirty (30) Trading Days after the date of the
initial Subsequent Financing Notice.
(g) Notwithstanding the foregoing, this Section 4.8 shall not apply
in respect of (i) an Exempt Issuance or (ii) an underwritten public offering
of Common Stock.
4.9 Equal Treatment of Purchasers. No consideration (including any
modification of any Transaction Document) shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of
any
17
of the Transaction Documents unless the same consideration is also offered to
all of the parties to the Transaction Documents. For clarification purposes,
this provision constitutes a separate right granted to each Purchaser by the
Company and negotiated separately by each Purchaser, and is intended for the
Company to treat the Purchasers as a class and shall not in any way be
construed as the Purchasers acting in concert or as a group with respect to
the purchase, disposition or voting of Securities or otherwise.
4.10 Certain Transactions and Confidentiality. Each Purchaser,
severally and not jointly with the other Purchasers, covenants that neither
it, nor any Affiliate acting on its behalf or pursuant to any understanding
with it will execute any purchases or sales, including Short Sales, of any of
the Company's securities during the period commencing with the execution of
this Agreement and ending at such time that the transactions contemplated by
this Agreement are first publicly announced pursuant to the initial press
release as described in Section 4.5. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company pursuant to the initial press release as described in Section 4.5,
such Purchaser will maintain the confidentiality of the existence and terms
of this transaction and the information included in the Transaction Documents
and the Disclosure Schedules. Notwithstanding the foregoing, and
notwithstanding anything contained in this Agreement to the contrary, the
Company expressly acknowledges and agrees that (i) no Purchaser makes any
representation, warranty or covenant hereby that it will not engage in
effecting transactions in any securities of the Company after the time that
the transactions contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.5, (ii) no
Purchaser shall be restricted or prohibited from effecting any transactions
in any securities of the Company in accordance with applicable securities
laws from and after the time that the transactions contemplated by this
Agreement are first publicly announced pursuant to the initial press release
as described in Section 4.5; and (iii) no Purchaser shall have any duty of
confidentiality to the Company or its Subsidiaries after the issuance of the
initial press release as described in Section 4.5. Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such
Purchaser's assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions
of such Purchaser's assets, the covenant set forth above shall only apply
with respect to the portion of assets managed by the portfolio manager that
made the investment decision to purchase the Securities covered by this
Agreement.
4.11 Form D; Blue Sky Filings. The Company agrees to timely file a
Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof, promptly upon request of any Purchaser. The Company
shall take such action as the Company shall reasonably determine is necessary
in order to obtain an exemption for, or to qualify the Securities for, sale
to the Purchasers at the Closing under applicable securities or "Blue Sky"
laws of the states of the United States, and shall provide evidence of such
actions promptly upon request of any Purchaser.
ARTICLE 5
MISCELLANEOUS
5.1 Fees and Expenses. Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, 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. The
Company shall pay all Transfer Agent fees, stamp taxes and other taxes and
duties levied in connection with the delivery of any Securities to the
Purchasers.
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5.2 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits
and schedules.
5.3 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of: (a) the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile number set forth on the signature pages attached hereto prior
to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day
after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number set forth on the signature pages
attached hereto on a day that is not a Trading Day or later than 5:30 p.m.
(New York City time) on any Trading Day, (c) the second (2nd) Trading Day
following the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (d) upon actual receipt by the party to whom
such notice is required to be given. The address for such notices and
communications shall be as set forth on the signature pages attached hereto.
5.4 Amendments; Waivers. No provision of this Agreement may be
waived, modified, supplemented or amended except in a written instrument
signed, in the case of an amendment, by the Company and Purchaser(s) holding
Existing Promissory Note(s) representing at least a majority of the aggregate
Existing Debt Amount for all Existing Promissory Notes or, in the case of a
waiver, by the party against whom enforcement of any such waived provision is
sought. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission
of any party to exercise any right hereunder in any manner impair the
exercise of any such right. The parties agree and acknowledge that this
Section 5.4 relates solely to waivers, modifications, supplements and
amendments to this Agreement, and not to any other Transaction Document.
5.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each Purchaser
(other than by merger). Any Purchaser may assign any or all of its rights
under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided that such transferee agrees in writing to
be bound, with respect to the transferred Securities, by the provisions of
the Transaction Documents that apply to the "Purchasers."
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person, except as otherwise set forth in Section 4.9.
5.8 Governing Law. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THE TRANSACTION DOCUMENTS SHALL
BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS
OF LAW THEREOF. EACH PARTY AGREES THAT ALL LEGAL PROCEEDINGS CONCERNING THE
INTERPRETATIONS, ENFORCEMENT AND DEFENSE OF THE TRANSACTIONS CONTEMPLATED BY
19
THIS AGREEMENT AND ANY OTHER TRANSACTION DOCUMENTS (WHETHER BROUGHT AGAINST A
PARTY HERETO OR ITS RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, SHAREHOLDERS,
EMPLOYEES OR AGENTS) SHALL BE COMMENCED EXCLUSIVELY IN THE STATE AND FEDERAL
COURTS SITTING IN THE CITY OF NEW YORK. EACH PARTY HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING
IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION
CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE
ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY
WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM
THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT
SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER OR IS AN INCONVENIENT VENUE FOR
SUCH PROCEEDING. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS
IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE
SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. IF EITHER PARTY
SHALL COMMENCE AN ACTION OR PROCEEDING TO ENFORCE ANY PROVISIONS OF THE
TRANSACTION DOCUMENTS, THEN, IN ADDITION TO THE OBLIGATIONS OF THE COMPANY
UNDER SECTION 4.6, THE PREVAILING PARTY IN SUCH ACTION OR PROCEEDING SHALL BE
REIMBURSED BY THE OTHER PARTY FOR ITS REASONABLE ATTORNEYS' FEES AND OTHER
COSTS AND EXPENSES INCURRED WITH THE INVESTIGATION, PREPARATION AND
PROSECUTION OF SUCH ACTION OR PROCEEDING.
5.9 Survival. The representations and warranties contained herein
shall survive the Closing and the delivery of the Securities.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission or by e-mail delivery of a
".pdf" format data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or ".pdf"
signature page were an original thereof.
5.11 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or restriction.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
20
5.12 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof (in the case of mutilation), or in lieu of and
substitution therefor, a new certificate or instrument, but only upon receipt
of evidence reasonably satisfactory to the Company of such loss, theft or
destruction. The applicant for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs (including
customary indemnity) associated with the issuance of such replacement
Securities.
5.13 Remedies. (a) In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each
of the Purchasers and the Company will be entitled to specific performance
under the Transaction Documents. The parties agree that monetary damages may
not be adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agree to waive
and not to assert in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
(b) If the Company defaults in complying with the covenants set out
in Section 4.2 hereof and the Company fails to remedy such default within 30
days after notice by Purchasers specifying the nature of the default, the
Company shall, at its cost and in the manner described in the Registration
Rights Agreement, as promptly as practicable file with the Commission and
thereafter cause to be declared effective (unless it becomes effective
automatically upon filing) on or prior to the 90th day after the expiration of
such 30 day cure period, a registration statement on an appropriate form
under the Securities Act relating to the offer and sale of the Underlying
Shares; provided, that if the Commission comments on such registration
statement, then the Company shall cause such registration statement to be
declared effective on or prior to the 120th day after the expiration of such
30 day cure period.
5.14 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall
be responsible in any way for the performance or non-performance of the
obligations of any other Purchaser under any Transaction Document. Nothing
contained herein or in any other Transaction Document, and no action taken by
any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers
as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Purchasers are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Purchaser shall be entitled
to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser
to be joined as an additional party in any proceeding for such purpose. The
Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by any of the Purchasers.
5.15 Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then such action may be taken or
such right may be exercised on the next succeeding Business Day.
5.16 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the
Transaction Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of the Transaction Documents or
any amendments hereto. In addition, each and every reference to share prices
and shares of Common Stock in any Transaction Document shall be subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur
after the date of this Agreement.
21
5.17 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE
LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES
FOREVER TRIAL BY JURY.
(Signature Pages Follow)
22
XXXXXXXX MINING, INC. Address for Notice:
X.X. Xxx 0000
0000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxx Xxxx, XX 00000
By: /s/ Xxxxxxx Xx Xxxxxxxx Fax: 000-000-0000
--------------------------------------
Name: Xxxxxxx Xx Xxxxxxxx
Title: President & Chief Executive Officer
With a copy to (which shall not constitute notice)
X. Xxxxxxx Xxxxxx, Esq.
Xxxxxx Xxxx & Xxxxxx LLP
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Telephone: 000-000-0000
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
23
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Purchaser: Portsmouth Square, Inc.
---------------------------
Signature of Authorized Signatory of Purchaser: /s/ Xxxx X. Xxxxxxxx
------------------------
Name of Authorized Signatory: Xxxx X. Xxxxxxxx
-------------------------
Title of Authorized Signatory: Chairman & President
----------------------------------
Email Address of Authorized Signatory: xxxxxxxxx@xxxxxx.xxx
--------------------------
Facsimile Number of Authorized Signatory: 000-000-0000
-----------------------
Address for Notice of Purchaser:
00000 Xxxxxxxx Xxxx., Xxxxx 0000
-------------------------------------
Xxx Xxxxxxx, XX 00000
-------------------------------------
Address for Delivery of Securities for Purchaser (if not same as address for
notice):
Address for Notice of Purchaser:
00000 Xxxxxxxx Xxxx., Xxxxx 0000
-------------------------------------
Xxx Xxxxxxx, XX 00000
-------------------------------------
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
24
[EXHIBITS OMITTED]
