▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
NOTE PURCHASE AGREEMENT
BY AND AMONG
UNITED STATES ANTIMONY CORPORATION,
BEAR RIVER ZEOLITE COMPANY,
AND
DELAWARE ROYALTY COMPANY, INC.
DATED: December 22, 2003
Note Purchase Agreement.doc NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS 4
1.1 Definitions 4
ARTICLE 2 PURCHASE AND SALE OF NOTE AND CONVERSION OF NOTE INTO
PREFERRED STOCK 7
2.1 Authorization of Notes 7
2.2 Sale of Notes 7
ARTICLE 3 CLOSING 8
3.1 Note Closing 8
3.2 Deliveries at Note Closing 8
3.3 Conditions of Note Closing 9
3.3 Conditions of Note Closing 10
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 10
4.1 Corporate Existence and Power 11
4.2 Authorization; No Contravention 11
4.3 No Consent or Approval Required 12
4.4 Binding Effect 12
4.5 Capitalization 12
4.6 Financial Information 13
4.7 Undisclosed Liabilities 13
4.8 No Defaults; Contracts 13
4.9 Litigation 14
4.10 Compliance. 14
4.11 Intellectual Property 15
4.12 Title to Properties 15
4.13 Tax Matters 16
4.14 ERISA Matters. 16
4.15 Labor Matters 17
4.16 Insurance 17
4.17 Related Transactions 17
4.18 Offering 17
4.19 Investment Company 18
4.20 Broker's, Finder's or Similar Fees 18
4.21 Environmental Matters 18
4.22 Disclosure 18
4.23 Absence of Certain Changes 18
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 19
5.1 Existence and Power 19
5.2 Authorization; No Contravention 19
5.3 Governmental Authorization; Third Party Consents 19
5.4 Binding Effect 19
5.5 Purchase for Own Account 20
5.6 Restricted Securities 20
5.7 Accredited Investor. 21
5.8 Broker's, Finder's or Similar Fees 21
Note Purchase Agreement.doc i NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
5.10 Tax Advisor 21
ARTICLE 6 COVENANTS 21
6.1 Notice of Certain Events 21
6.2 Access to Records 21
6.3 Financial Statements 21
6.4 Payment of Obligations 23
6.5 Conduct of Business 23
6.6 Conduct of Business 23
ARTICLE 7 MISCELLANEOUS 23
7.1 Survival of Representations, Warranties and Covenants 23
7.2 Notices 23
7.3 Successors and Assigns; Third Party Beneficiaries 24
7.4 Amendment and Waiver 24
7.5 Counterparts 25
7.6 Headings 25
7.7 Governing Law 25
7.8 Severability 25
7.9 Entire Agreement 25
7.10 Publicity; Confidentiality 25
7.11 Further Assurances 26
7.12 Expenses 26
Note Purchase Agreement.doc ii NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
EXHIBITS & SCHEDULES
EXHIBITS
A Form of Convertible Note
B Security Agreement
C Form of Warrant
SCHEDULE OF PURCHASERS
COMPANY DISCLOSURE SCHEDULES
PURCHASER DISCLOSURE SCHEDULES
Note Purchase Agreement.doc iii NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (the "AGREEMENT") is hereby made on this 22nd
day of December, 2003, by and among United States Antimony Corporation, a
Montana corporation (the "COMPANY"), Bear River Zeolite Company, an Idaho
corporation and wholly-owned subsidiary of the Company ("BEAR RIVER"), and
Delaware Royalty Company, Inc., a DELAWARE corporation (the "PURCHASER"). The
Company, Bear River and the Purchaser are each a "PARTY" and together are
"PARTIES" to this Agreement.
PRELIMINARY STATEMENTS
----------------------
The Company desires to issue and sell to the Purchaser, and the Purchaser
desires to purchase and accept that certain 10% Secured Convertible Note due
December 22, 2007 (the "NOTE") in substantially the form attached hereto as
EXHIBIT A all in accordance with the terms and subject to the conditions set
forth in this Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the Company, Bear River and the
Purchasers hereby agree as follows:
1. DEFINITIONS.
1.1 DEFINITIONS. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"AGREEMENT" means this Agreement as the same may be amended supplemented or
modified in accordance with SECTION 7.4(B) of this Agreement.
"BALANCE SHEET" has the meaning set forth in SECTION 4.6 of this Agreement.
"BEAR RIVER" has the meaning set forth in the Preamble to this Agreement.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on which
commercial banks in the State of Texas are authorized or required by law or
executive order to close.
"BUSINESS PLAN" has the meaning set forth in SECTION 4.11(A) of this Agreement.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
"CLAIMS" means actions, suits, proceedings, claims, complaints, disputes,
arbitrations or investigations.
Note Purchase Agreement.doc 4 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
"CLOSING" has the meaning set forth in SECTION 3.1 of this Agreement.
"CLOSING DATE" has the meaning set forth in SECTION 3.1 of this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended, or any successor
statute thereto.
"COLLATERAL" has the meaning set forth in the Security Agreement.
"COMMON STOCK" means the Company's common stock, par value $0.01 per share, or
any other capital stock of the Company into which such stock is reclassified or
reconstituted.
"COMPANY" has the meaning set forth in the preamble to this Agreement.
"CONDITION OF BEAR RIVER" means the assets, business, properties, prospects,
operations or financial condition of Bear River, taken as a whole.
"CONDITION OF THE COMPANY" means the assets, business, properties, prospects,
operations or financial condition of the Company, taken as a whole.
"CONDITION OF THE PURCHASER" means the assets, business, properties, prospects,
operations or financial condition of the Purchaser, taken as a whole.
"CONTRACT" means any agreement, contract, obligation, promise or undertaking
(whether written or oral and whether express or implied) between the Company
and/or Bear River, as the case may be, and any Person that is legally binding.
"CONTRACTUAL OBLIGATIONS" means as to any Person, any provision of any security
issued by such Person or of any agreement, undertaking, contract, indenture,
mortgage, deed of trust or other instrument to which such Person is a party or
by which it or any of its property is bound.
"EMPLOYEE BENEFIT PLAN" means any deferred compensation, pension, profit
sharing, stock option, stock purchase, savings, group insurance or retirement
plan, and all vacation pay, severance pay, incentive compensation, consulting,
bonus and other employee benefit or fringe benefit plans or arrangements
maintained by the Company or any Person that is included with the Company in a
controlled group or affiliated service group under Sections 414(b), (c), (m), or
(o) of the Code (an "ERISA Affiliate") (including, without limitation, health
insurance, life insurance and other benefit plans maintained for retirees)
within the previous six plan years or with respect to which contributions are or
were (within such six year period) made or required to be made by the Company or
any ERISA Affiliate or with respect to which the Company has any liability.
"ENVIRONMENTAL EVENT" has the meaning set forth in SECTION 4.21 of this
Agreement.
"ERISA" means the Employment Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" has the meaning set forth above under "Employee Benefit Plan."
Note Purchase Agreement.doc 5 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 4.6 of this
Agreement.
"GAAP" means generally accepted accounting principles in the United States in
effect from time to time.
"GOVERNMENTAL AUTHORITY" means the government of any nation, state, city,
locality or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in SECTION 4.11 of this
Agreement.
"IRS" means the Internal Revenue Service.
"LEGAL EXPENSES" means the legal expenses of Purchaser payable to its counsel
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, which is payable by Purchaser out of the Purchase Price
at closing.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other) or preference, priority, right or other
security interest or preferential arrangement of any kind or nature whatsoever
(excluding preferred stock and equity related preferences), including, without
limitation, those created by, arising under or evidenced by any conditional sale
or other title retention agreement, the interest of a lessor under any capital
lease, or any financing lease having substantially the same economic effect as
any of the foregoing.
"NOTE" has the meaning set forth in the preamble to this Agreement.
"ORDER" means, as to any Person, any judgment, injunction, writ, award, decree
or order of any nature of any Governmental Authority against or binding upon
such Person.
"PERSON" means any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company, Governmental Authority or other entity of any kind,
and shall include any successor (by merger or otherwise) of such entity.
"PROPRIETARY TECHNOLOGY" has the meaning set forth in SECTION 4.11 of this
Agreement.
"PURCHASER" has the meaning set forth in the preamble to this Agreement.
"PURCHASE PRICE" has the meaning set forth in SECTION 2.2 of this Agreement.
"REQUIREMENTS OF LAW" means, as to any Person, any law, statute, treaty, rule,
regulation, right, privilege, qualification, license or franchise or
determination of an arbitrator or a court or other Governmental Authority or
stock exchange, in each case applicable or binding upon such Person or any of
its property or to which such Person or any of its property is subject or
pertaining to any or all of the transactions contemplated or referred to in this
Agreement.
Note Purchase Agreement.doc 6 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
"REQUISITE RIGHTS" has the meaning set forth in SECTION 4.11(A) of this
Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"SECURITY AGREEMENT" means that certain Security Agreement of an even date
herewith by and among the Company and the Purchaser, attached hereto as EXHIBIT
B, granting the Purchaser a security interest in the Collateral.
"STOCK EQUIVALENTS" means any security or obligation which is by its terms
convertible into or exchangeable for shares of Common Stock or any other Capital
Stock or securities of the Company, and any option, warrant or other
subscription or purchase right with respect to Common Stock or such other
Capital Stock or securities.
"SUBSIDIARIES" of a corporation means each Person as to which such corporation
directly or indirectly owns or has the power to vote, or to exercise a
controlling influence with respect to, fifty percent (50%) or more of the
securities of any class of such Person, the holders of which are ordinarily, in
the absence of contingencies, entitled to vote for the election of directors (or
Persons performing similar functions) of such Person.
"TAX" or "TAXES" means any federal, state, county, local, foreign and other
taxes, including, without limitation, income taxes, estimated taxes, excise
taxes, sales taxes, use taxes, gross receipts taxes, franchise taxes, employment
and payroll related taxes, property taxes and import duties, whether or not
measured in whole or in part by net income.
"TRANSACTION DOCUMENTS" means collectively, this Agreement, the Note, the
Warrant and the Security Agreement.
"WARRANT" means that certain warrant in the name of Purchaser to purchase
2,000,000 shares of Common Stock at $0.20 per share expiring December 22, 2007.
2. PURCHASE AND SALE OF THE NOTES.
2.1 AUTHORIZATION OF THE NOTE. The Company has authorized the issuance
and sale of the Note in the principal amount of $250,000.
2.2 SALE OF THE NOTE. Subject to the terms and conditions hereof, the
Purchaser agrees to purchase from the Company and the Company agrees to sell and
issue to the Purchaser the Note, which shall be in the original aggregate
principal amount of $250,000. The purchase price (the "PURCHASE PRICE") for the
note shall be $250,000, consisting of $25,000 previously advanced to the Company
and $225,000 less the Legal Expenses payable in cash at Closing.
3. CLOSING.
3.1 CLOSING. The consummation of the initial sale and purchase of the
Note and the delivery of all documentation in connection therewith (the
"CLOSING") shall be held at the offices of ▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, counsel to the
Purchaser, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
Note Purchase Agreement.doc 7 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
Texas 77002 on December 22, 2003
(the "CLOSING DATE") or at such other time and place as shall be mutually agreed
upon by the Company, Bear River and the Purchaser.
3.2 DELIVERIES AT CLOSING. The Company, Bear River and the Purchaser
are executing and delivering the following documents and items at the Closing:
(A) NOTE. The Company shall deliver the Note to the Purchaser.
(B) FUNDING. The Purchaser has previously paid $25,000 of the Purchase
Price, and at Closing, the Purchaser shall pay $225,000 (the unpaid portion of
the Purchase Price) less the Legal Expenses by cashier's check.
(C) SECURITY AGREEMENT. The Company and the Purchaser shall deliver the
Security Agreement together with the stock pledged accompanied by a stock power
executed in blank.
(D) OPINION OF COUNSEL. The Company shall deliver to the Purchaser an
opinion of the Company's counsel in a form reasonably acceptable to the
Purchaser.
(E) COMPANY SECRETARY'S CERTIFICATE. The Company shall deliver to the
Purchaser a certificate, dated the Closing Date, of the Company's Secretary (the
"COMPANY SECRETARY'S CERTIFICATE") to the effect that: (i) attached to the
Company Secretary's Certificate is a true and complete copy of (x) the Company's
Articles of Incorporation, as amended, and in effect as of the Closing Date, (y)
the Company's bylaws, as amended and in effect on the Closing Date; (ii)
attached to the Company Secretary's Certificate is a true and complete copy of
resolutions adopted by the Company's board of directors authorizing the
execution, delivery and performance of this Agreement and consummation of the
transactions contemplated hereby; (iii) the signatures of the incumbent officers
of the Company as identified on the Company Secretary's Certificate are the
genuine signatures of such officers; (iv) the representations and warranties of
the Company set forth in ARTICLE 4 are true and correct as of the Closing Date;
and (v) attached to the Company Secretary's Certificate is a true and complete
copy of a certificate of good standing (including tax good standing) from the
Secretary of State of the State of Montana, dated as of a date not more than ten
(10) days prior to the Closing Date.
(F) BEAR RIVER SECRETARY'S CERTIFICATE. Bear River shall deliver to the
Purchaser a certificate, dated the Closing Date, of Bear River's Secretary (the
"BEAR RIVER SECRETARY'S CERTIFICATE") to the effect that: (i) attached to the
Bear River Secretary's Certificate is a true and complete copy of (x) Bear
River's Articles of Incorporation, as amended, and in effect as of the Closing
Date, (y) Bear River's bylaws, as amended and in effect on the Closing Date;
(ii) attached to the Bear River Secretary's Certificate is a true and complete
copy of resolutions adopted by Bear River's board of directors authorizing the
execution, delivery and performance of this Agreement and consummation of the
transactions contemplated hereby; (iii) the signatures of the incumbent officers
of Bear River as identified on the Bear River Secretary's Certificate are the
genuine signatures of such officers; (iv) the representations and warranties of
Bear
Note Purchase Agreement.doc 8 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
River set forth in ARTICLE 4 are true and correct as of the Closing Date;
and (v) attached to the Bear River Secretary's Certificate is a true and
complete copy of a certificate of good standing (including tax good standing)
from the Secretary of State of the State of Idaho, dated as of a date not more
than ten (10) days prior to the Closing Date.
(G) FINANCING STATEMENTS. The Company shall deliver all Uniform Commercial
Code financing statements and other documents deemed necessary or appropriate by
the Purchaser to perfect the security interest in favor of the Purchaser arising
under the Security Agreement, duly executed and delivered by the appropriate
parties, to be recorded with the appropriate filing offices.
(H) WARRANT. The Company shall deliver the Warrant to Purchaser.
3.3 COMPANY'S CONDITIONS OF CLOSING. The obligations of the Company
under SECTION 2.2 of this Agreement are subject to the fulfillment on or before
the Closing of each of the following conditions, the waiver of which shall not
be effective against the Company unless it consents in writing thereto:
(A) CLOSING DELIVERIES. The Purchaser shall have made the deliveries
required of them by SECTION 3.2 (B).
(B) NO INJUNCTION. No preliminary or permanent injunction or other binding
order, decree or ruling issued by a court or government agency shall be in
effect which shall have the effect or preventing the consummation of the
transaction contemplated by this Agreement.
(C) REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of the Purchaser contained in SECTION 5 shall be true and correct on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of the date of such Closing Date.
(D) PERFORMANCE. The Purchaser shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by them on or before the Closing.
(E) CORPORATE PROCEEDINGS. All corporate and other proceedings required to
be taken by the Purchaser to carry out the transactions contemplated by this
Agreement, and all instruments and other documents relating to such
transactions, shall be reasonably satisfactory in form and substance to the
Company, and the Company shall have been furnished with such instruments and
documents as it shall have reasonably requested.
3.4 PURCHASER'S CONDITIONS OF CLOSING. The obligations of the
Purchaser under SECTION 2.2 of this Agreement are subject to the fulfillment on
or before the Closing of each of the following conditions, the waiver of which
shall not be effective against the Purchaser unless it consents in writing
thereto:
Note Purchase Agreement.doc 9 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
(A) CLOSING DELIVERIES. The Company and Bear River shall have made the
deliveries required of each by SECTIONS 3.2 (A) and (C)-(H).
(B) NO INJUNCTION. No preliminary or permanent injunction or other binding
order, decree or ruling issued by a court or government agency shall be in
effect which shall have the effect or preventing the consummation of the
transaction contemplated by this Agreement.
(C) REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of the Company and Bear River contained in SECTION 4 shall be true
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the date of such
Closing Date.
(D) PERFORMANCE. The Company and Bear River shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
(E) BLUE SKY. The Company and Bear River shall have obtained all necessary
permits and qualifications, if any, or secured an exemption therefrom, required
by any state or country prior to the offer and sale of the Note, if required
under the applicable state or country law.
(F) CORPORATE PROCEEDINGS. All corporate and other proceedings required to
be taken by the Company and Bear River to carry out the transactions
contemplated by this Agreement, and all instruments and other documents relating
to such transactions, shall be reasonably satisfactory in form and substance to
the Purchaser, and the Purchaser shall have been furnished with such instruments
and documents as it shall have reasonably requested.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND BEAR RIVER.
Except as disclosed in a document referring specifically to this Agreement
with appropriate section references (with each such exception specifically
identifying or cross-referencing the provision of this SECTION 4 to which such
exception relates) which has been delivered to the Purchaser on or before the
date hereof (the "Company Disclosure Schedules"), and in order to induce the
Purchaser to enter into and perform this Agreement and the documents and
agreements contemplated hereby, the Company and Bear River, jointly and
severally, represent and warrant to the Purchaser as of the date of this
Agreement as follows:
4.1 CORPORATE EXISTENCE AND POWER.
(A) The Company: (a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation;
(b) has all requisite power and authority to own and operate its property, to
lease the property it operates as lessee and to conduct the business in which it
is currently, or is currently proposed to be, engaged; and (c) is duly qualified
as a foreign corporation, licensed and in good standing under the laws of each
jurisdiction in which its ownership, lease or operation of property
Note Purchase Agreement.doc 10 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
or the
conduct of its business requires such qualification, except to the extent that
the failure to so qualify would not have a material adverse effect on the
Condition of the Company. The Company has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement and each of
the other Transaction Documents. No jurisdiction, other than those referred to
in clause (c) above, has claimed, in writing or otherwise, that the Company is
required to qualify as a foreign corporation therein, and the Company does not
file any franchise, income or other tax returns in any other jurisdiction based
upon the ownership or use of property therein or the derivation of income
therefrom. Except as set forth on SCHEDULE 4.1(A) attached to this Agreement,
the Company has no Subsidiaries. The Company is not a participant in or partner
to any joint ventures or partnerships.
(B) Bear River: (a) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation; (b) has
all requisite power and authority to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently, or is currently proposed to be, engaged; and (c) is duly qualified as
a foreign corporation, licensed and in good standing under the laws of each
jurisdiction in which its ownership, lease or operation of property or the
conduct of its business requires such qualification, except to the extent that
the failure to so qualify would not have a material adverse effect on the
Condition of Bear River. No jurisdiction, other than those referred to in
clause (c) above, has claimed, in writing or otherwise, that Bear River is
required to qualify as a foreign corporation therein, and Bear River does not
file any franchise, income or other tax returns in any other jurisdiction based
upon the ownership or use of property therein or the derivation of income
therefrom. Bear River has no Subsidiaries. Bear River is not a participant in
or partner to any joint ventures or partnerships.
4.2 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and
performance by the Company of this Agreement and each of the Transaction
Documents and the transactions contemplated hereby and thereby: (a) have been
duly authorized by all necessary corporate and shareholder action of the
Company; (b) do not contravene the terms of the Company's Articles of
Incorporation or bylaws, or any amendment of any thereof; (c) do not violate,
conflict with or result in any breach or contravention of, or the creation of
any Lien under, any Contractual Obligation or Contract of the Company, or any
Requirement of Law applicable to the Company; and (d) do not violate any Order
against or binding upon the Company. The Company has not previously entered
into any Contractual Obligation or Contract that is currently in effect or by
which the Company is currently bound, granting any rights to any Person that are
inconsistent with the rights to be granted by the Company to the Purchasers in
this Agreement and each of the other Transaction Documents.
4.3 NO CONSENT OR APPROVAL REQUIRED. No consent, approval or authorization
of, or declaration to, or filing with, any Governmental Authority or any other
Person is required for the valid authorization, execution, delivery and
performance by the Company of this Agreement, except for the filing of any
notice in connection with the Closing that may be required under applicable
federal or state securities laws (which, if required, shall be filed on a
Note Purchase Agreement.doc 11 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
timely
basis as may be so required) and for consents, approvals, authorizations, and
declarations that have already been obtained or made.
4.4 BINDING EFFECT. This Agreement and each of the other Transaction
Documents have been or will be duly executed and delivered by the Company, and
each constitutes the legal, valid and binding obligations of the Company
enforceable against it in accordance with its respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity relating to enforceability (regardless of whether
considered in a proceeding at law or in equity).
4.5 CAPITALIZATION.
(A) The Company's authorized capital stock consists of: (i)
______________ shares of Common Stock, of which _______________ shares are
issued and outstanding; and (ii) ____________ shares of preferred stock, par
value $___ per share, of which _____________ shares are issued and outstanding
as of the date of this Agreement. Except as set forth on SCHEDULE 4.5(A)
attached to this Agreement, there are no options, warrants, conversion
privileges, subscription or purchase rights or other rights presently
outstanding to purchase or otherwise acquire or rights to cause the Company to
repurchase or redeem (x) any shares of the Company's Capital Stock, (y) any
Stock Equivalents of the Company or (z) other securities of the Company. The
issued and outstanding shares of Common Stock and Preferred Stock are all duly
authorized, validly issued, fully paid and nonassessable, and were issued in
compliance with the registration and qualification requirements of all
applicable federal and state securities laws. The shares of Common Stock
issuable upon conversion of the Notes are duly authorized and, when issued in
compliance with the conversion provisions of the Notes, will be validly issued,
fully paid and nonassessable. Except as set forth on SCHEDULE 4.5(A) attached
to this Agreement, the Company is not a party to any stockholder agreements,
registration rights agreements or voting agreements.
(B) Bear River's authorized capital stock consists of ______________ shares
of common stock, par value $____ per share, of which 7500 shares are issued and
outstanding as of the date of this Agreement. Except as set forth on SCHEDULE
4.5(B) attached to this Agreement, there are no options, warrants, conversion
privileges, subscription or purchase rights or other rights presently
outstanding to purchase or otherwise acquire or rights to cause Bear River to
repurchase or redeem (x) any shares of the Bear River's Capital Stock, (y) any
Stock Equivalents of Bear River or (z) other securities of Bear River. The
issued and outstanding shares of Bear River's common stock and preferred stock
are all duly authorized, validly issued, fully paid and nonassessable, and were
issued in compliance with the registration and qualification requirements of all
applicable federal and state securities laws. Except as set forth on SCHEDULE
4.5(B) attached to this Agreement, Bear River is not a party to any stockholder
agreements, registration rights agreements or voting agreements.
4.6 FINANCIAL INFORMATION. The Company has previously delivered to the
Purchaser the audited balance sheet of the Company dated December 31, 2002 and
related
Note Purchase Agreement.doc 12 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
unaudited statements of operations for the fiscal year then ended and
the unaudited balance sheets of the Company dated September 30, 2003
(collectively, the "Balance Sheet") and related unaudited statements of
operations for the fiscal quarter then ended, prepared by the Company
(collectively, the "Financial Statements"). The Financial Statements (i) fairly
present in all material respects the financial position of the Company as of the
respective dates indicated and the results of operations of the Company for the
respective periods indicated and (ii) unless otherwise stated therein, have been
prepared in accordance with GAAP consistently applied, subject to routine
year-end adjustments that in the aggregate would not have a material adverse
effect on the Condition of the Company.
4.7 UNDISCLOSED LIABILITIES. Except as and to the extent reflected on, or
fully reserved against in, the Balance Sheet and except for liabilities or
obligations that were incurred consistently with past business practice in or as
a result of the normal and ordinary course of business since the date of
incorporation of the Company or Bear River, as the case may be, the Company and
Bear River do not have any liabilities or obligations, whether direct or
indirect, matured or unmatured, contingent or otherwise.
4.8 NO DEFAULTS; CONTRACTS.
(A) SCHEDULE 4.8(A) attached to this Agreement sets forth a true and
complete list of all Contracts of the Company. The Company is not in default:
(a) under (i) the Company's Articles of Incorporation or bylaws, in each case,
as amended, or (ii) any Contractual Obligation or Contract to which the Company
is a party and, to the knowledge of the Company, the other party to such
Contractual Obligation or Contract is not in default thereunder; or (b) under
any Order against or binding upon the Company, which defaults, in the aggregate,
could reasonably be expected to have a material adverse effect on the Condition
of the Company. Except as set forth on SCHEDULE 4.8(A) attached to this
Agreement, (i) each Contract of the Company is in full force and effect and is
valid and enforceable against the Company in accordance with its terms and (ii)
no event has occurred or circumstance exists that (with or without notice or
lapse of time) may contravene, conflict with, or result in a violation or breach
of, or give the Company or any Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify any Contract.
(B) SCHEDULE 4.8(B) attached to this Agreement sets forth a true and
complete list of all Contracts of Bear River. Bear River is not in default: (a)
under (i) Bear River's Articles of Incorporation or bylaws, in each case, as
amended, or (ii) any Contractual Obligation or Contract to which Bear River is a
party and, to the knowledge of Bear River, the other party to such Contractual
Obligation or Contract is not in default thereunder; or (b) under any Order
against or binding upon Bear River, which defaults, in the aggregate, could
reasonably be expected to have a material adverse effect on the Condition of
Bear River. Except as set forth on SCHEDULE 4.8(A) attached to this Agreement,
(i) each Contract of Bear River is in full force and effect and is valid and
enforceable against Bear River in accordance with its terms and (ii) no event
has occurred or circumstance exists that (with or without notice or lapse of
time) may contravene, conflict with, or result in a violation or breach of, or
give Bear River or any Person the
Note Purchase Agreement.doc 13 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify any Contract.
4.9 LITIGATION. There are no: (a) Claims or legal or administrative
proceedings pending or to the knowledge of the Company, threatened against the
Company or Bear River, whether at law or in equity, or before or by any
Governmental Authority that, if adversely determined against the Company or Bear
River, as the case may be, (i) could reasonably be expected to have a material
adverse effect on the Condition of the Company or the Condition of Bear River or
(ii) would restrict the Company's ability to consummate the transactions
contemplated by this Agreement and the other Transaction Documents or draw into
question the validity of this Agreement or any of the other Transaction
Documents; or (b) Orders against or binding upon the Company or Bear River.
4.10 COMPLIANCE. The Company and Bear River have complied with all
Requirements of Law applicable to their respective businesses, operations,
properties, assets, products and services, and the Company and Bear River have
obtained all necessary permits, licenses and other authorizations required to
conduct their respective businesses with such exceptions that do not have an
adverse effect on the Condition of the Company or the Condition of Bear River.
Such licenses and permits are in full force and effect, and no violations have
been recorded in respect of any such licenses or permits, no proceeding is
pending or, to the knowledge of the Company, threatened to revoke or limit any
thereof, and no written notice of non-compliance, assessment or charge has been
received by the Company or Bear River.
4.11 INTELLECTUAL PROPERTY.
(A) The Company and Bear River own or have the right to use all
Intellectual Property Rights material to and necessary for the conduct of each
of their businesses as proposed to be conducted in the business plans of each,
previously delivered to Purchaser and as amended and supplemented with the
approval of the Purchaser as of the date of this Agreement (the "BUSINESS
PLAN"), (collectively, the "REQUISITE RIGHTS"), free and clear of all Liens.
SCHEDULE 4.11(A) attached to this Agreement sets forth a true and complete list
of (i) all such Requisite Rights and (ii) all agreements (including licenses)
relating to such Requisite Rights.
(B) The Company and Bear River have all governmental approvals,
authorizations, consents, licenses and permits necessary to conduct their
respective businesses as proposed to be conducted under the terms of the
Business Plan.
(C) To the knowledge of the Company, no product or service proposed to be
licensed, marketed or sold by the Company or Bear in accordance with the terms
of the Company's Business Plan violates any license or infringes any
Intellectual Property Rights of others.
(D) There is no pending or, to the knowledge of the Company, threatened
claim or litigation against the Company or Bear River contesting the validity of
or right to use the Requisite Rights, nor has the Company or Bear River received
any written notice that any of the Requisite Rights or the proposed operation of
its business in
Note Purchase Agreement.doc 14 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
accordance with the terms of the Business Plan conflicts with
the asserted rights of others, in any case, which if adversely determined
against the Company or Bear River could reasonably be expected to have a
material adverse effect on the Condition of the Company or the Condition of Bear
River
As used herein, the term "Intellectual Property Rights" means all intellectual
property rights, including, without limitation, Proprietary Technology, patents,
patent applications, patent rights, trademarks, trademark applications, trade
names, service marks, service ▇▇▇▇ applications and registrations, copyrights,
copyright applications and registrations, know-how, licenses, trade secrets,
proprietary processes and formulae. As used herein, "Proprietary Technology"
means all source and object code, processes, inventions, trade secrets, know-how
and other proprietary rights owned by the Company or Bear River pertaining to
any product or service licensed, marketed or sold by the Company or Bear River
or used, employed or exploited in the development, license, sale, marketing,
distribution or maintenance thereof, and all documentation describing or
relating to the foregoing, including, without limitation, manuals, memoranda,
know-how, notebooks, patents and patent applications, trademarks and trademark
applications and registrations, copyrights and copyright applications and
registrations, records and disclosures.
4.12 TITLE TO PROPERTIES.
(A) The Company and Bear River enjoy peaceful and undisturbed
possession under all leases under which each is operating, and, to the best of
the Company's knowledge, no claim has been asserted against the Company or Bear
River that is adverse to any of their respective rights in such leasehold
interests.
(B) The Company and Bear River have good, valid and indefeasible title
to their respective properties and assets reflected as owned on the Balance
Sheet or acquired by either since the date of the Balance Sheet (other than
properties and assets disposed of in the ordinary course of business since the
date of the Balance Sheet), and all such properties and assets are free and
clear of all Liens, except for Liens disclosed in the Financial Statements and
Liens for current Taxes not yet due and payable and minor imperfections of
title, if any, not material in nature or amount and not materially detracting
from the value or impairing the use of the property subject thereto or impairing
the operations of the Company or Bear River as presently conducted, taken as a
whole.
(C) The Purchaser acknowledges that this SECTION 4.12 relates to assets and
properties of the Company and Bear River other than Intellectual Property
Rights, as to which separate representations and warranties are made in SECTION
4.11 of this Agreement.
4.13 TAX MATTERS. All tax returns and tax reports required to be filed
by the Company or Bear River have been filed with the appropriate Governmental
Authorities in all jurisdictions in which such returns and reports are required
to be filed and all of the foregoing are true, correct and complete in all
material respects. All Taxes required to have been paid or accrued by the
Company or Bear River have been fully paid or are adequately provided for on the
Balance Sheet, except for Tax liabilities arising since the date of the Balance
Sheet and
Note Purchase Agreement.doc 15 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
liabilities being challenged in good faith by the Company or Bear
River by appropriate proceedings diligently conducted. No issues are currently
pending before the IRS or any other taxing authority in connection with any of
the returns and reports referred to above, and no waivers of statutes of
limitations have been given or requested by the Company or Bear River with
respect to Taxes. All deficiencies asserted or assessments (including interest
and penalties) made as a result of any examination by the IRS or by appropriate
other taxing authorities of the tax returns of or with respect to the Company or
Bear River have been fully paid or are adequately provided for on the Balance
Sheet, and no proposed but unassessed additional Taxes, interest or penalties
have been asserted. To the Company's knowledge, upon due investigation, the
provisions for Taxes on the Balance Sheet are sufficient for the payment of all
accrued and unpaid Taxes as of such date, except for Taxes being challenged in
good faith by the Company or Bear River by appropriate proceedings diligently
conducted.
4.14 ERISA MATTERS.
(A) Seller is not a party to any pension, profit sharing, savings,
retirement or other deferred compensation plan, or any bonus (whether payable in
cash or stock) or incentive program, or any group health plan (whether insured
or self-funded), or any disability or group life insurance plan or other
employee welfare benefit plan, or to any collective bargaining agreement or
other agreement, written or oral, with any trade or labor union, employees
association or similar organization. Seller is not a party to, nor has made any
contribution to or otherwise incurred any obligation under, a "multiemployer
plan" as defined in Section 3(37) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
(B) To the knowledge of Seller, Seller has not violated any of the health
care continuation coverage requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") prior to the Closing.
(C) No payment or benefit which will or may be made by Seller or an
affiliate of Seller with respect to any employee of Seller in connection with
the transactions contemplated hereby will be characterized as a "parachute
payment" within the meaning of Section 280G(b)(2) of the Code.
4.15 LABOR MATTERS. Neither the Company nor Bear River is a party to
nor is either bound by (i) any collective bargaining agreement or (ii)
employment agreement. No collective bargaining agreement covering any of the
Company's or Bear River's employees is currently being negotiated. There are no
threatened attempts by employees of the Company or Bear River to organize for
collective bargaining purposes.
4.16 INSURANCE. The Company and Bear River have such policies of liability
and workmen's compensation as are adequate against risks usually insured against
by comparable persons, businesses and properties. Such policies are in full
force and effect and all premiums with respect to such policies are currently
paid.
4.17 RELATED TRANSACTIONS. No Company or Bear River director, executive
officer or "affiliate" (as defined in the Securities Act of 1933, as amended) of
any such Person, is
Note Purchase Agreement.doc 16 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
presently, directly or indirectly, through his, her or its
affiliation with any other Person, a party to any transaction with the Company
or Bear River, as the case may be, providing for the furnishing of services by
or to, or rental or sale of real or personal property from or to, or otherwise
requiring cash payments to or by any such person, except for normal employment
arrangements in the ordinary course of the Company's or Bear River's respective
businesses.
4.18 OFFERING.
(A) Subject in part to the accuracy of the Purchaser's representation
set forth in ARTICLE 5 hereof, the offer, sale and issuance of the Notes as
contemplated by this Agreement is exempt from the registration requirements of
the 1933 Act and any applicable state securities laws, and neither the Company,
Bear River nor any authorized agent acting on either's behalf will take any
action hereafter that would cause the loss of such exemption.
(B) The Business Plan previously provided to the Purchaser was prepared in
good faith by the Company and does not contain any untrue statement of material
fact, nor does it omit to state a material fact necessary to make the statements
therein not misleading.
4.19 INVESTMENT COMPANY. Neither the Company nor Bear River is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
4.20 BROKER'S, FINDER'S OR SIMILAR FEES. There are no brokerage
commissions, finder's fees or similar fees or commissions payable by the Company
or Bear River in connection with the transactions contemplated hereby based on
any agreement, arrangement or understanding with the Company or Bear River or
any action taken by or on behalf of the Company or Bear River.
4.21 ENVIRONMENTAL MATTERS. The Company and Bear River conduct their
respective businesses and operations in compliance with all applicable
environmental laws, ordinances and regulations. The Company and Bear River have
not received any written notice of any claim, action, suit, proceeding, hearing
or investigation based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, handling, emission,
discharge, release or threatened release into the environment of any pollutant,
contaminant or hazardous or toxic material or waste (each, an "ENVIRONMENTAL
EVENT") by the Company or Bear River. To the Company's knowledge, no notice of
any Environmental Event by any Person that occupied any of the premises occupied
by or used by the Company or Bear River prior to the date such premises were so
occupied or used was given to such Person. Without limiting the generality of
the foregoing, neither the Company nor Bear River has disposed of or placed on
or in any property or facility used in their respective businesses any waste
materials, hazardous materials or hazardous substances in violation of any
Requirement of Law.
4.22 DISCLOSURE. This Agreement, the Schedules and the documents and items
listed on SCHEDULE 5.6(D) attached to this Agreement, taken as a whole, do not,
as of the respective dates thereof, contain any untrue statement of a material
fact or omit to state a material fact
Note Purchase Agreement.doc 17 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
4.23 ABSENCE OF CERTAIN CHANGES. Since September 30, 2003 there has
not been any:
(A) change in the Company's or Bear River's authorized or issued
capital stock; grant of any stock option or right to purchase shares of capital
stock of the Company or Bear River; issuance of any security convertible into
such capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by the Company or Bear River of any shares of
any such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
(B) amendment to the organizational documents of the Company or Bear
River;
(C) sale, lease, or other disposition of any asset or property of the
Company or Bear River or mortgage, pledge, or imposition of any Lien on any
material asset or property of the Company or Bear River, including the sale,
lease, or other disposition of any of the Requisite Rights;
(D) creation of any indebtedness of the Company or Bear River not set forth
on the Financial Statements; or
(E) material adverse change in the Condition of the Company or Bear River.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
Except as disclosed in a document referring specifically to this Agreement
with appropriate section references (with each such exception specifically
identifying or cross-referencing the provision of this SECTION 5 to which such
exception relates) which has been delivered to the Company on or before the date
hereof (the "Purchaser's Disclosure Schedule"), and in order to induce the
Company to enter into and perform this Agreement and the documents and
agreements contemplated hereby, the Purchaser represents and warrants to the
Company as of the date of this Agreement as follows:
5.1 EXISTENCE AND POWER. The Purchaser hereby represents and warrants that
it is an entity duly organized, validly existing and in good standing under the
laws of the state of its formation. The Purchaser has the power and authority
to execute, deliver and perform its obligations under this Agreement and each of
the other Transaction Documents.
5.2 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and
performance by the Purchaser of this Agreement and each of the other Transaction
Documents and the transactions contemplated hereby and thereby, including,
without limitation, the purchase of the Notes (a) have been duly authorized by
all necessary corporate action, (b) do not contravene the terms of the
Purchaser's constating documents, if applicable, or any amendment
Note Purchase Agreement.doc 18 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
thereof, (c)
do not violate, conflict with or result in any breach or contravention of or the
creation of any Lien under, any Contractual Obligation of the Purchasers, or any
Requirement of Law applicable to the Purchasers, and (d) do not violate any
Order of any Governmental Authority against or binding upon the Purchasers.
5.3 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS. No consent, approval
or authorization of, or declaration to, or filing with, any Governmental
Authority or any other Person, and no lapse of a waiting period under any
Requirement of Law, is required for the valid authorization, execution, delivery
or performance (including, without limitation, the purchase of the Notes) by the
Purchaser of this Agreement or the transactions contemplated hereby, except for
consents, approvals, authorizations, declarations and filings that have already
been obtained or made.
5.4 BINDING EFFECT. This Agreement and each of the other Transaction
Documents to which the Purchaser is a party have been or will be duly executed
and delivered by the Purchaser and, when executed and delivered, will constitute
the legal, valid and binding obligation of the Purchaser, enforceable against
the Purchaser in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).
5.5 PURCHASE FOR OWN ACCOUNT. The Notes to be acquired by the Purchaser
pursuant to this Agreement are being acquired for the Purchaser's own account
and with no intention of distributing or reselling the Notes or any part thereof
in any transaction that would be in violation of the securities laws of the
United States of America, or any state. The Purchaser represents and warrants
to the Company that it will not transfer the Notes, except in compliance with
the Securities Act and applicable state securities laws.
5.6 RESTRICTED SECURITIES.
(A) The Purchaser understands that the Notes will not be registered at
the time of their issuance under the Securities Act for the reason that the sale
provided for in this Agreement is exempt pursuant to Section 4(2) of the
Securities Act and that the reliance of the Company on such exemption is
predicated in part on the Purchaser's representations set forth in this ARTICLE
5.
(B) The Purchaser acknowledges and agrees that the Notes must be held
indefinitely unless a subsequent disposition thereof is registered or qualified
under the Securities Act and applicable state securities laws or is exempt from
registration. The Purchaser acknowledges that (i) there may be no public market
for such security, (ii) there can be no assurance that any such market will ever
develop and (iii) there can be no assurance that it will be able to liquidate
its investment in the Company.
(C) The Purchaser represents and warrants to the Company that (i) it
acknowledges that an investment in the Company involves a high degree of risk,
(ii) it has such knowledge and experience in financial and business matters as
is necessary to
Note Purchase Agreement.doc 19 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
enable it to evaluate the merits and risks of an investment in
the Company and is not utilizing any other person to be its purchaser
representative in connection with evaluating such merits and risks; and (iii) it
has no present need for liquidity in its investment in the Company and is able
to bear the risk of that investment for an indefinite period and to afford a
complete loss thereof.
(D) The Purchaser acknowledges that it has received a copy of the documents
and items listed on SCHEDULE 5.6(D) attached to this Agreement. The Purchaser
represents and warrants that the Purchaser has had the opportunity to ask
questions of and to receive answers from the Company concerning, and to review
the books and records of the Company and to obtain additional information
regarding, the Company and such documents and items to the Purchaser's
satisfaction.
5.7 ACCREDITED INVESTOR. The Purchaser is an "accredited investor" as
that term is defined by Rule 501(a) of Regulation D promulgated under the
Securities Act.
5.8 BROKER'S, FINDER'S OR SIMILAR FEES. There are no brokerage commissions,
finder's fees or similar fees or commissions payable by the Purchaser, in
connection with the transactions contemplated hereby based on any agreement,
arrangement or understanding with the Purchaser or any action taken by the
Purchaser.
5.9 TAX ADVISOR. The Purchaser has reviewed with the Purchaser's own tax
advisors the federal, state and local tax consequences of the purchase of the
Notes and the transactions contemplated by this Agreement. The Purchaser is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents and understands that the Purchaser, and not the
Company, shall be responsible for the Purchaser's own tax liability that may
arise as a result of the purchase of the Notes or the transactions contemplated
by this Agreement.
6. COVENANTS.
6.1 NOTICE OF CERTAIN EVENTS. So long as the Notes shall remain
outstanding, the Company and Bear River shall give the Purchaser prompt notice
of (a) any event of default under any material agreement with respect to
indebtedness for borrowed money or any material purchase money obligation, and
any event which, upon the notice or lapse of time or both, would constitute such
an event of default or would be likely to result in an Event of Default, that
would permit the holder of such indebtedness or obligation to accelerate the
maturity thereof, and (b) any action, suit or proceeding at law or in equity
which, if adversely determined, could reasonably be expected to have a material
adverse effect upon the Condition of the Company or the Condition of Bear River.
6.2 ACCESS TO RECORDS. So long as the Notes shall remain outstanding, the
Company and Bear River shall afford to the Purchaser and its authorized
employees, counsel, accountants and other representatives, upon reasonable
notice and during ordinary business hours, (i) full access to all books, records
and properties of the Company or Bear River and (ii) the opportunity to
interview any officer of the Company or Bear River regarding its affairs;
Note Purchase Agreement.doc 20 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
provided the foregoing does not unreasonably interfere with the business of the
Company or Bear River.
6.3 FINANCIAL STATEMENTS. So long as the Notes shall remain outstanding,
the Company and Bear River shall deliver to the Purchaser:
(A) as soon as practicable and in any event within 45 days after the
end of each quarterly period (other than the last quarterly period) in each
fiscal year, consolidated statements of income, stockholders' equity and cash
flows of the Company for the period from the beginning of the current fiscal
year to the end of such quarterly period, and a consolidated balance sheet of
the Company as at the end of such quarterly period, setting forth in each case
in comparative form figures for the corresponding period in the preceding fiscal
year, all in reasonable details and satisfactory in form to the Purchaser and
certified by an authorized financial officer of the Company subject to changes
resulting from year-end adjustment;
(B) as soon as practicable and in any event within 90 days after the end of
each fiscal year, consolidated statements of income and cash flows and a
consolidated statement of stockholders' equity of the Company for such year, and
a consolidated balance sheet of the Company as at the end of such year, setting
forth in each case in comparative form corresponding figures from the preceding
annual audit, all in reasonable detail and satisfactory in form to the Purchaser
and, as to the statements, reported on by independent public accountants of
recognized national standing selected by the Company whose report shall be
without limitation as to the scope of the audit and satisfactory in substance to
the Purchaser and, as to the consolidating statements, certified by an
authorized financial officer of the Company;
(C) promptly upon receipt thereof, a copy of each other report submitted to
the Company by independent accountants in connection with any annual, interim or
special audit made by them of the books of the Company;
(D) as soon as practicable and in any event within five (5) Business Days
after obtaining knowledge (a) of any condition or event which, in the opinion of
management of the Company, would have a material adverse effect on the Condition
of the Company or the Condition of Bear River, (b) that any Person has given any
notice to the Company or Bear River or taken any other action with respect to a
claimed default, (c) of the institution of any litigation involving claims
against the Company equal to or greater than $25,000 with respect to any single
cause of action or of any adverse determination in any court proceeding in any
litigation involving a potential liability to the Company or Bear River equal to
or greater than $25,000 with respect to any single cause of action which makes
the likelihood of an adverse determination in such litigation against the
Company or Bear River substantially more probable or (d) of any regulatory
proceeding which may have a material adverse effect on the Condition of the
Company or the Condition of Bear River, an officer's certificate specifying the
nature and period of existence of any such condition or event, or specifying the
notice given or action taken by such Person and the nature of any such claimed
default, event or condition, or specifying the details of such
Note Purchase Agreement.doc 21 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
proceeding,
litigation or dispute and what action the Company or Bear River has taken, is
taking or proposes to take with respect thereto;
(E) promptly upon completion thereof on an annual basis within 60 days
following each fiscal year end, a copy of each operating budget and projection
of financial performance prepared by or for the Company or Bear River;
(G) within (5) five Business Days after the removal or resignation of, or
the death or disability of any executive officer of the Company or Bear River,
written notice thereof, together with information in reasonable detail with
respect thereto; and
(H) with reasonable promptness, such other information respecting the
condition or operations, financial or otherwise, of the Company or Bear River as
the Purchaser may reasonably request.
6.4 PAYMENT OF OBLIGATIONS. The Company and Bear River shall pay or
discharge or cause to be paid or discharged all material obligations,
liabilities, claims or demands, and all Taxes levied or imposed upon the Company
or Bear River or upon the income, profits or property of the Company or Bear
River; provided, however, that the Company and Bear River shall not be required
to pay or discharge or cause to be paid or discharged any such obligation,
liability, claim, demand, or Tax the amount, applicability or validity of which
is being contested in good faith by appropriate proceedings and for which
adequate provision has been made.
6.5 CONDUCT OF BUSINESS. The Company and Bear River shall (i) take all
actions required to assure that the Company and Bear River remain duly
organized, validly existing and in good standing under the laws of the
jurisdiction of their incorporation and duly qualified as a foreign corporation
in any applicable jurisdiction, (ii) take all actions required to assure that
the Company and Bear River maintain all permits to conduct its business and
(iii) conduct their businesses in compliance with all Requirements of Law.
6.6 MAINTENANCE OF INSURANCE. The Company and Bear River will carry and
maintain insurance (subject to customary deductibles and retentions) in at least
such amounts and against such liabilities and hazards and by such methods as
customarily maintained by other companies operating similar businesses.
6.7 ADDITIONAL RESTRICTIONS. For so long as the Notes remain outstanding,
Bear River shall not, and the Company shall cause Bear River to not,:
(A) issue any capital stock of Bear River; and
(B) after the date of the Closing, pledge any of the assets of Bear River as
security for any indebtedness.
7. MISCELLANEOUS.
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties made in this Agreement shall survive the Closing
until the earlier
Note Purchase Agreement.doc 22 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
of the date that is the third anniversary of the Closing Date
except for the representations and warranties set forth in SECTIONS 4.1, 4.2,
4.3 and 4.5 that will survive indefinitely.
7.2 NOTICES. All notices, demands and other communications provided for or
permitted hereunder shall be made in writing and shall be by registered or
certified first-class mail, return receipt requested, telecopier, overnight
delivery service or personal delivery:
if to the Company or Bear River:
United States Antimony, Inc.
P. ▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
if to the Purchaser:
Delaware Royalty Company, Inc.
c/o Nortex Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇. ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; one (1) Business Day after
being deposited with an overnight courier; and three (3) Business Days after
being deposited in the mail, postage prepaid, if mailed.
7.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement
shall be freely assignable by the Purchaser. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. No Person other than the Company, Bear River and the Purchaser
and its successors and permitted assigns is intended to be a beneficiary of this
Agreement.
Note Purchase Agreement.doc 23 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
7.4 AMENDMENT AND WAIVER.
(A) No failure or delay on the part of the Company, Bear River or the
Purchaser in exercising any right, power or remedy under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. The remedies provided for
herein are cumulative and are not exclusive of any remedies that may be
available to the Company, Bear River or the Purchaser at law, in equity or
otherwise.
(B) Any amendment, supplement or modification of or to any provision of
this Agreement, any waiver of any provision of this Agreement, and any consent
to any departure by the Company, Bear River or the Purchaser from the terms of
any provision of this Agreement, shall be effective (i) only if it is made or
given in writing and signed by the Company, Bear River and the Purchaser, and
(ii) only in the specific instance and for the specific purpose for which made
or given. Except where notice is specifically required by this Agreement, no
notice to or demand on the Company in any case shall entitle the Company to any
other or further notice or demand in similar or other circumstances.
7.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
7.6 HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning of this
Agreement.
7.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
--------------
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICTS OF LAW OF ANY JURISDICTION.
7.8 SEVERABILITY. If any one or more of the provisions contained in this
Agreement, or the application thereof in any circumstance, is held invalid,
illegal or unenforceable in any respect for any reason, then the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions of this Agreement shall not be in any way impaired,
unless the provisions held invalid, illegal or unenforceable shall substantially
impair the benefits of the remaining provisions hereof.
7.9 ENTIRE AGREEMENT. This Agreement, together with the Schedules
attached to this Agreement (all of which are incorporated into, and made a part
of, this Agreement) and the other Transaction Documents, is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties to
this Agreement in respect of the subject matter contained herein and therein.
There are no restrictions, promises, representations, warranties or
undertakings, other than those set forth or referred to herein or therein. This
Agreement, together with the Schedules hereto, and the
Note Purchase Agreement.doc 24 NOTE PURCHASE AGREEMENT
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
other Transaction
Documents supersede all prior agreements and understandings between the parties
with respect to such subject matter.
7.10 PUBLICITY; CONFIDENTIALITY. Except as may be required by an applicable
Requirement of Law, (i) none of the parties to this Agreement shall issue a
publicity release or public announcement or otherwise make any disclosure
concerning this Agreement or the transactions contemplated hereby, without prior
approval by the other parties hereto (which approval shall not be unreasonably
withheld) and (ii) the Company, Bear River and the Purchaser agree that all
information received from each other will be held strictly confidential and each
party will take reasonable steps to maintain the confidentiality of such
information; provided, however, that nothing in this Agreement shall restrict
any of the Company, Bear River or the Purchaser from disclosing information: (a)
that is already publicly available; and (b) to their respective (i)
shareholders, principals, and employees and (ii) attorneys, accountants,
consultants and other advisors to the extent necessary to obtain their services
in connection with the transactions contemplated by this Agreement. If any
announcement is required by law to be made by any party hereto, prior to making
such announcement such party will deliver a draft of such announcement to the
other parties and shall give the other parties an opportunity to comment
thereon.
7.11 FURTHER ASSURANCES. Each of the parties shall execute such documents
and perform such further acts (including, without limitation, obtaining any
consents, exemptions, authorizations or other actions by, or giving any notices
to, or making any filings with, any Governmental Authority or any other Person),
as may be reasonably required or desirable to carry out or to perform the
provisions of this Agreement and to consummate and make effective as promptly as
possible the transactions contemplated by this Agreement.
7.12 EXPENSES. The Company shall pay all expenses incident to the
preparation, negotiation and execution of this Agreement, including without
limitation, all fees, costs and expenses of legal counsel, up to an aggregate
$50,000.
[SIGNATURE PAGES FOLLOW]
Note Purchase Agreement.doc 25 NOTE PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties to this Agreement have caused their
respective duly authorized representatives to execute and deliver this Agreement
on the date first above written.
COMPANY:
UNITED STATES ANTIMONY CORPORATION
----------------------------------------
Name: ----------------------------------
Title:----------------------------------
BEAR RIVER:
BEAR RIVER ZEOLITE COMPANY
----------------------------------------
Name:-----------------------------------
Title:----------------------------------
PURCHASER:
DELAWARE ROYALTY COMPANY, INC.
----------------------------------------
Name:-----------------------------------
Title:----------------------------------
SIGNATURE PAGE
NOTE PURCHASE AGREEMENT
EXHIBIT A
FORM OF NOTE
▇▇▇▇▇▇ AND ▇▇▇▇▇ DRAFT
DECEMBER 20, 2003
EXHIBIT B
SECURITY AGREEMENT
