SUBSCRIPTION AGREEMENT AND INVESTMENT REPRESENTATION UNITS OF COMMON STOCK AND WARRANTS
EXHIBIT
10.36
SUBSCRIPTION
AGREEMENT AND INVESTMENT REPRESENTATION
UNITS
OF COMMON STOCK AND WARRANTS
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Ladies
and Gentlemen:
The
undersigned represents that, if an individual, he/she is of legal age, and
hereby subscribes for _________________ “Units,” each Unit consisting of One (1)
share of common stock, par value $.01 per share (the “Common Stock”) of
Wits
Basin Precious Minerals Inc., a Minnesota corporation (the “Company”), and
one-half of a (1) one-year warrant to purchase one share of common stock at
a
price of $0.75 per share (the “Warrants” and together with the Units, the
“Securities”). The aggregate purchase price of the Securities shall be
$_________ (the “Purchase Price”). The shares of Common Stock underlying the
Units shall be referred to herein as the “Shares.” Details of this Offering are
in the Term Sheet, attached herewith as Exhibit A. The undersigned acknowledges
that this Subscription Agreement and Letter of Investment Representations is
contingent upon the acceptance in whole or in part by the Company.
THE
UNDERSIGNED ACKNOWLEDGES THAT AN INVESTMENT IN THE COMPANY IS HIGHLY
SPECULATIVE, INVOLVES A HIGH DEGREE OF RISK AND IMMEDIATE DILUTION AND IS
SUITABLE ONLY FOR PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE
INVESTMENT.
This
subscription is made in connection with the Company’s offering (the “Offering”)
of a minimum of 5,000,000 Units (the “Minimum”) and a maximum of 7,000,000 Units
(the “Maximum”) and is subject to the following terms and
conditions:
1. Right
of Rejection.
This
subscription is made subject to the right of the Company to reject any
subscription in whole or in part.
2. Purchase
Price.
In
payment for the Units, the undersigned hereby delivers the sum equal to the
number of Units purchased multiplied by $0.25 (the “Purchase Price”).
3.
Payment
Instructions:
Method
of Payment for Canadian Purchasers:
Payment
for the Units shall be made by bank wire transfer, certified cheque, or bank
draft (without deduction of bank service charges or otherwise)
payable to “IBK
Capital Corp., US Trust Account #1”.
The
entire subscription price for all Units must be paid at the time of
subscription. In the case of a bank wire transfer, funds should be wired
to:
1
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ACCOUNT
NAME:
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IBK
CAPITAL CORP, US TRUST ACCOUNT #1
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Bank:
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TD
Canada Trust
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Toronto
Dominion Centre Branch
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▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
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TD’s
Swift Code:
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▇▇▇▇▇▇▇▇
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Transit
#:
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10202-004
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Account
Name Beneficiary:
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IBK
Capital Corp., US Trust Account #1
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US
Trust Account #:
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XXXXXXXXXXXXX
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Method
of Payment for Non-Canadian Purchasers:
Payment
for the Units shall be made by bank wire transfer, certified cheque, or
bank
draft (without deduction of bank service charges or otherwise)
payable to “▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Brand”.
The
entire subscription price for all Units must be paid at the time of
subscription. In the case of a bank wire transfer, funds should be wired
to:
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Bank
Name:
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▇▇
▇▇▇▇, ▇.▇., ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Routing
#:
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▇▇▇▇▇▇▇▇▇
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Account
#:
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XXXXXXXXXXXXX
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Account
Name:
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▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Brand Trust Account
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Attention:
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WITS
BASIN
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4. Registration
Instructions:
The
undersigned hereby directs that the certificates representing the Units
shall be
delivered as indicated above at the time of the closing and shall be registered
as follows:
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(Name)
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(Address,
City, Postal Code,
Country)
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2
5. Delivery
Instructions. The
Company is authorized to deliver the Units to:
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(Name)
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(Address,
City, Postal Code,
Country)
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| Attention: | |
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(Contact
and Phone
Number)
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6. Representations
and Warranties of Subscriber.
The
undersigned acknowledges, warrants, and represents as follows:
| (a) |
I
have, either alone or with the assistance of my professional advisor,
sufficient knowledge and experience in financial and business matters
that
I believe myself capable of evaluating the merits and risks of the
prospective investment in the
Units.
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(c)
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I
have obtained, to the extent I deem necessary, professional advice
with
respect to the risks inherent in investment in the Units, the suitability
of the investment in light of my financial condition and investment
needs,
and legal, tax and accounting
matters.
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(d)
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I
have been given access to full and complete information regarding
the
Company, including without limitation, , (i) the Company’s Annual Report
on Form 10-K for the year ended December 31, 2002 filed with the
Securities and Exchange Commission (the “SEC”) on ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2003 (the “First Quarter 10-Q”), and (iii) the Company’s Amendment to
Current Report on Form 8-K/A dated March 14, 2003 and filed on
May 27, 2003, and (iv) the Company’s Current Report on Form 8-K dated
June 26, 2003 and filed on July 1, 2003; and have utilized such access
to
my satisfaction to verify any information I may have sought relating
to
the Company and relevant to my investment decision. I have been given
the
opportunity to discuss all material aspects of this transaction with
representatives of the Company and any questions asked have been
answered
to my full satisfaction.
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(e)
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I
recognize that investment in the Units involves a high degree of
risk,
that the purchase of the Units is a long-term investment, that
transferability and sale of the Units are restricted in many ways,
and
that I could sustain a total loss of my investment. I have carefully
reviewed the Risk Factors in the Company’s Annual Report on Form 10-K, the
Company’s First Quarter 10-Q and those additional Risk Factors attached
hereto as Exhibit B.
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(f)
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I
am an “Accredited Investor” as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act of 1933, as amended (the “Securities
Act”). This representation is based on the following (check one or more,
as applicable):
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3
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___
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(1)
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I
have had an individual income in excess of $200,000 in each of the
two
most recent years or joint income with my spouse in excess of $300,000
in
each of the two most recent fiscal years and reasonably expect reaching
the same income level in the current year;
or
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___
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(2)
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As
of the date hereof, I (either individually or with my spouse) have
a net
worth in excess of $1,000,000; or
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(3)
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I
am a director or executive officer of the Company;
or
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(4)
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The
undersigned is a corporation or partnership not formed for the specific
purpose of acquiring the Units and has total assets in excess of
$5,000,000.
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___
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(5)
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The
undersigned, if not an individual, is an entity all of whose equity
owners
meet one of the tests set forth in (1) through (4) above (if relying
on
this category alone, each equity owner must complete a separate copy
of
this Agreement).
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(g)
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I
have ____/have not _____ used the services of a purchaser representative
in connection with this investment. If I have used a purchaser
representative I have received a fully completed and executed Purchaser
Representative Questionnaire.
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(h)
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I
am not relying upon the Company with respect to the economic
considerations involved in determining to make an investment in the
Units.
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(i)
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I
have no need for immediate liquidity with respect to my investments
and
have sufficient income to meet my current and anticipated obligations.
The
total loss of the Purchase Price being paid herewith would not cause
financial hardship to me and would not adversely affect my current
standard of living. In addition, my overall commitment to investments
which are not readily marketable is not disproportionate to my net
worth
and my investment in the Units will not cause such overall commitment
to
become excessive.
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7. Investment
Purpose of Subscriber.
I
represent and warrant that it is my intention to acquire the Units for my own
account for investment purposes and not with a view to resale in connection
with
any distribution thereof.
In
order
to assure the Company that I have no present intention to resell or dispose
of
the Units, I hereby represent and warrant the following facts:
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(a)
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I
am domiciled in the State of _____________ or Country of ______________
and intend to receive and hold the Units for my personal
account.
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(b)
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I
have no contract, undertaking, agreement or arrangement with any
person or
company to sell or transfer the Units to any such person or company
or to
have any such person or company sell the Units on my
behalf.
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4
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(c)
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I
am not aware of any occurrence, event, or circumstance upon the happening
of which I intend to transfer or sell the Units and I do not have
any
present intention to transfer or sell the Units after a lapse of
any
particular period of time.
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(d)
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I
have been informed that in the view of some state securities commissions,
a purchase now with an intent to resell, by reason of any foreseeable
specific contingency or anticipated change in market values, or any
change
in the condition of the Company, or that of the industry, or in connection
with a contemplated liquidation or settlement of any loan obtained
for the
acquisition of the Units, would represent a purchase with an intent
inconsistent with the representations set forth above, and that such
state
securities commissions might regard such sale or disposition as a
deferred
sale with regard to which an exemption from registration is not
available.
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(e)
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I
further represent and agree that if, contrary to the foregoing
representations and warranties, I should later desire to dispose
of or
transfer any of the Units in any manner, I shall not do so without
first
obtaining an opinion of counsel satisfactory to the Company that
such
proposed disposition or transfer may be made lawfully without the
registration of the Units pursuant to the Securities Act and applicable
state laws.
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8. Registration
Status of Securities.
I
understand that the Units to be issued hereunder have not been registered under
the Securities Act or under applicable state securities acts, on the grounds
that the Units are being issued in a transaction involving a limited group
of
knowledgeable investors fully familiar with the affairs and proposed operations
of the Company and not involving a public offering and that, consequently,
such
transaction is exempt from registration under the Securities Act and state
securities acts.
In
that
regard, I understand that the Units may not be sold, transferred or otherwise
disposed of except pursuant to an effective registration statement or
appropriate exemption from registration under applicable state law and, as
a
result, I may be required to hold the Units for an indefinite period of time.
Except as described above, I understand that the Company has not agreed to
register the Units for distribution in accordance with the provisions of the
Act
or state law, and that the Company has not agreed to comply with any exemption
under the Act or state law for the resale of the Units.
I
understand that the Units have not been approved or disapproved by the
Securities and Exchange Commission or any state securities commission.
I
acknowledge that the Company will rely on my representations herein as a basis
for the exemption from registration. I agree to indemnify the Company for and
from any claim, liability, cost or expense, including reasonable attorneys’
fees, arising from any unlawful sale by me or offer by me to sell or transfer
any of the Units subscribed for hereby.
I
understand that no assurance can be made that any of the Units can be resold
at
any price. I understand that no representations or warranties of any kind are
intended nor should any be inferred with respect to the economic viability
of
this investment or with respect to any benefits which may accrue to investment
in the Company. I understand that the Company, its directors, officers and
employees, do not in any way represent, guarantee or warrant any economic gain
or profit with regard to the business or that favorable income tax consequences
will flow therefrom.
5
9. Legend
on Certificates to be Issued.
I
understand and acknowledge that the certificates representing the Shares and
Warrants subscribed for hereby and to be issued by the Company upon acceptance
of this Subscription Agreement, will contain substantially the following
legend:
“The
Shares represented by this Certificate has not been registered under the
Securities Act of 1933, as amended, or any state Blue Sky law. Such Shares
have
been acquired by the registered holder hereof for his or her own account for
investment purposes and may not be sold, transferred or otherwise disposed
of
for value, except pursuant to registration under all applicable securities
laws
or the receipt by the Company of an opinion of counsel, satisfactory in form
and
substance to the Company, that registration is not required under such
securities laws.”
10. Registration
Rights.
The
Company agrees to file a “resale” registration statement (the "Registration
Statement") with the United States Securities and Exchange Commission (“SEC”) on
an appropriate form and to include therein the Common Stock included in the
Units and the Common Stock purchasable by the undersigned upon the exercise
of
the Warrant, to allow the resale of such Securities by the undersigned, and
to
use its best efforts to cause the Registration Statement to become effective
within ninety (90) days from the date of issuance of the Securities. In the
event the Registration Statement has not been declared effective by the SEC
within one hundred twenty (120) days following the termination of the Offering
by the Company, the Company shall be obligated to promptly pay the undersigned
a
penalty equal to 1/5 of a share of Common Stock for each Unit purchased
hereby. The
Company shall bear all expenses and fees incurred in connection with the
preparation, filing, and amendment of the Registration Statement with the
Commission, except that the undersigned shall pay all fees, disbursements and
expenses of any counsel or expert retained by the undersigned and all
underwriting discounts and commissions, filing fees and any transfer or other
taxes relating to the Securities included in the Registration Statement. The
undersigned agrees to cooperate with the Company in the preparation and filing
of any Registration Statement, and in the furnishing of information concerning
the undersigned for inclusion therein, or in any efforts by the Company to
establish that the proposed sale is exempt under the 1933 Act as to any proposed
distribution. The undersigned understands that if the Company has not received
such information requested by the Company in the Registration Notice within
20
days after undersigned’s receipt thereof, the Company shall have no obligation
to include any of undersigned’s Securities in the Registration
Statement.
11. Redemption
-
The
Warrant
shall be redeemable in whole at the option of the Corporation for [$.01 per
share] in the event that (i) the average of the high and low trading prices
is
equal to or greater than $1.50 for at least 10 consecutive trading days during
the term of the Warrant; and (ii) a registration statement enabling the resale
of the Shares (as described in paragraph 8 above) has been declared effective
by
the Securities and Exchange Commission. The Corporation shall give the
undersigned at least ten days prior written notice of its intent to redeem
the
Warrant, at the address of the undersigned as last recorded on the Corporation’s
records, which notice shall state the record date fixed for the redemption
and
the place designated for the surrender of the Warrant. Following any such
redemption, the Warrant, unless previously exercised, shall be null and
void.
12. Additional
Information Available.
I
acknowledge that the Company has provided me with access to such other
information as I have deemed necessary or important in my evaluation of the
investment in the Units.
6
13. Binding
Effect.
This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and to the successors and assigns of the Company and to the personal
and
legal representatives, heirs, guardians, successors, and permitted assignees
of
the undersigned.
14. Entire
Agreement.
This
instrument contains the entire agreement of the parties, and there are no
representations, covenants or other agreements except as stated or referred
to
herein.
15. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Minnesota.
I
further
acknowledge that I have determined that an investment in the Units is
appropriate for me, in view of my overall financial condition.
Dated:
______________, 2003.
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Signature |
Signature |
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Name Typed or Printed |
Name Typed or Printed |
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ACCEPTANCE
On
behalf
of Wits Basin Precious Minerals Inc., the undersigned authorized officer hereby
accepts this Subscription and agrees to issue a certificate representing
_____________ Units consisting of Shares of Common Stock and Warrants to the
foregoing subscriber.
Dated:
__________________, 2003.
WITS
BASIN PRECIOUS MINERALS
INC.
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Name
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7
SUBSCRIBER
INFORMATION
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Name
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Name
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Tax
Identification or Social Security Number
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Tax
Identification or Social Security Number
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Residence
Address
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Mailing
Address (for registration on
books of the Company)
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Type
of Ownership (Check One):
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o
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Individual
Ownership
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o
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Joint
Tenants with right of Survivorship
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o
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Trust
or Estate (Describe, and enclose authority)
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o
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Tenants-in-Common
(both parties must sign)
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o
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Other
(explain):________________
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____________________________
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8
EXHIBIT
A
TERM
SHEET
No
securities commission or other similar regulatory authority has passed on the
merits of the securities offered herein nor has it reviewed this Term Sheet
and
any representation to the contrary is an offence. This Term Sheet is not, and
under no circumstances is to be interpreted as, a prospectus, public information
or advertisement of the securities described herein. Reference should be made
to
the subscription agreement, which terms shall govern.
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Private
Placement
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September
4,
2003
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PRIVATE
PLACEMENT OF UNITS
Minimum
Offering - US $1,250,000
Maximum
Offering - US $1,750,000
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Issuer:
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Wits
Basin Precious Minerals Inc. (the “Company”)
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Issue:
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The
Company intends to raise a minimum of US$1,250,000 and a maximum
of
US$1,750,000 from the issuance of Units of the Company at a price
of
US$0.25 per Unit, each Unit consisting of one common share and one-half
of
one common share purchase warrant. Each whole common share purchase
warrant (a “Warrant”) is exercisable on or before August 31, 2004 for one
common share upon payment of US$0.75 per common share.
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Outstanding
Share Capital:
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The
Company currently has 17,057,181 common shares issued and outstanding.
It
has reserved 7,000,000 common shares for issuance of the Units, and
a
further 3,750,000 common shares for issuance upon exercise of the
Warrants
attached to the units. In addition, there are currently 16,733,594
common
shares reserved for issuance on the exercise of outstanding stock
options
and/or warrants.
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Use
of Proceeds:
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Proceeds
from the issuance of the Units will be used to fund exploration on
the
Company’s FSC Farm-In Project with Kwagga Gold (Proprietary) Limited and
for general working capital purposes including general and administrative
expenses.
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Commission:
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The
Company may engage registered securities dealers or finders (“Agents”) to
distribute the Units. The total amount of commission payable to the
Agents
will not exceed 10%. The commission may be paid in cash from the
Company’s
working capital or common shares of the Company priced at US$0.25
per
share or any combination of the above, subject to regulatory
approval.
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9
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Offering
Jurisdictions:
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The
Units are being offered to residents of such jurisdictions as the
Company
may approve (collectively, the “Qualifying
Jurisdictions”).
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Qualification
for Subscription:
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Subscribers
must qualify as exempt purchasers pursuant to the exemptions from
prospectus and/or registration requirements of their respective
jurisdictions of residence. The Company reserves the right to reject
any
subscriptions at its sole discretion.
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Resale
Restrictions:
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The
Units will be issued pursuant to exemptions from prospectus requirements
and will be subject to resale restrictions under the securities laws
of
the Qualifying Jurisdictions.
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Registration
Rights
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The
Company will use its best efforts to cause the shares and the shares
underlying the warrants to be registered for resale within 90 days
from
the Closing. The Company will pay each Subscriber a penalty equal
to 1/5
of a share for each Unit purchased in the event such registration
has not
occurred within 120 days of the final termination of the
Offering.
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Costs
and Expenses:
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Whether
or not the Offering is completed, offering costs and expenses are
to be
borne by the Company, including the fees and disbursements of its
designated legal counsel, payable on Closing.
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Closing
Date:
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All
subscriptions must be received by September 19, 2003, or such later
date
as the Company determines and the closing will take place on or before
September 24, 2003 or such other date(s) as may be determined by
the
Company.
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Regulatory
Approval:
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All
terms contained herein are subject to regulatory approvals where
necessary.
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10
EXHIBIT
B
ADDITIONAL
RISK FACTORS
An
investment in the Units involves certain risks. The following risk factors,
as
well as the other information contained in the Term Sheet and in the documents
incorporated by reference herein, should be considered carefully by prospective
investors.
Fluctuations
in Gold Prices
The
Corporation’s development efforts and the profitability of the Corporation's
operations once commenced, will be significantly affected by changes in the
market price of gold. Mine production and the willingness of third parties
such
as central banks to sell or lease gold affect the supply of gold. Demand for
gold can be influenced by economic conditions, attractiveness as an investment
vehicle and the relative strength of the US dollar and local investment
currencies. Other factors include the level of interest rates, exchange rates,
inflation and political stability. The aggregate effect of these factors is
impossible to predict with accuracy. Gold prices are also affected by worldwide
production levels. In addition, the price of gold has on occasion been subject
to very rapid short-term changes due to speculative activities. Fluctuations
in
gold prices may adversely affect the Corporation's financial performance and
results of operations.
Uncertainty
of Reserve and Mineral Resource Estimates
The
figures for proved and probable ore reserves and mineral resources presented
by
the Corporation are estimates and no assurance can be given that the anticipated
tonnages and grades will be achieved or that the indicated level of recovery
will be realized. The ore grade actually recovered by the Corporation may differ
from the estimated grades of the reserves and mineral resources. Such figures
have been determined based upon assumed gold prices and operating costs. Future
production could differ dramatically from ore reserve estimates for, among
others, the following reasons:
| · |
mineralization
or formations could be different from those predicted by drilling,
sampling and similar examinations;
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| · |
increases
in operating mining costs and processing costs could adversely affect
ore
reserves;
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| · |
the
grade of the ore reserves may vary significantly from time to time
and
there is no assurance that any particular level of gold may be recovered
from the ore reserves; and
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declines
in the market price of gold may render the mining of some or all
of the
Corporation's ore reserves uneconomic.
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Any
of
these factors may require the Corporation to reduce its ore reserves estimates
or increase its costs. Short term factors, such as the need for the additional
development of a deposit or the processing of new different grades, may impair
the Corporation's profitability. Should the market price of gold fall, the
Corporation could be required to materially write down its investment in mining
properties or delay or discontinue production or the development of new
projects.
Nature
of Mineral Exploration and Mining
The
exploration for and development of mineral deposits involves significant
financial risks which even a combination of careful evaluation, experience
and
knowledge may not eliminate. While the discovery of an ore body may result
in
substantial rewards, few properties which are explored are ultimately developed
into producing mines. Major expenses may be required to establish ore reserves,
to develop metallurgical processes and to construct mining and processing
facilities at a site. It is impossible to ensure that the current programs
planned for the Corporation will result in a profitable commercial mining
operation.
11
The
Corporation's operations are subject to all of the hazards and risks normally
incident to exploration, development and production of gold, any of which could
result in damage to life or property, environmental damage and possible legal
liability for any or all damage. The Corporation's activities may be subject
to
prolonged disruptions due to weather conditions depending on the location of
operations in which the Corporation has interests. Hazards, such as unusual
or
unexpected formations, rock bursts, pressures, cave-in, flooding or other
conditions may be encountered in the drilling and removal of material. While
the
Corporation may obtain insurance against certain risks in such amounts as it
considers adequate, the nature of these risks are such that liabilities could
exceed policy limits or could be excluded from coverage. There are also risks
against which the Corporation cannot insure or against which it may elect not
to
insure. The potential costs which could be associated with any liabilities
not
covered by insurance or in excess of insurance coverage or compliance with
applicable laws and regulations may cause substantial delays and require
significant capital outlays, adversely affecting the Corporation's earnings
and
competitive position in the future and, potentially, its financial position
and
results of operation.
Whether
a
gold deposit will be commercially viable depends on a number of factors, some
of
which are the particular attributes of the deposit, such as its size and grade,
proximity to infrastructure, financing costs and governmental regulations,
including regulations relating to prices, taxes, royalties, infrastructure,
land
use, importing and exporting of gold and environmental protection. The effect
of
these factors cannot be accurately predicted, but the combination of these
factors may result in the Corporation not receiving an adequate return on
invested capital.
Capital
Investment
Mining
exploration involves financial risk and capital investment. The Corporation's
only means of acquiring investment capital will be by the sale of equity shares
or the rights to acquire equity shares. It will have no source of funds to
engage in additional exploration and development which may be necessary to
exploit its properties other than interest earned on its short-term investments,
and further financing.
Additional
Financing Needed for Joint Venture Investment
To
maintain the Corporation’s interest in the Joint Venture, additional financing
in excess of USD$2,000,000 will be required. If the additional financing cannot
be obtained, the Corporation will lose its initial investment and any future
investment. No assurance can be made that the Corporation will be able to obtain
such additional financing.
The
Corporation's activities will be initially directed to the search for and the
development of new mineral deposits, and significant capital investment will
be
required to achieve commercial production from successful exploration efforts.
There is no assurance that the Corporation will have, or be able to raise,
the
required funds to continue these activities.
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