NOTE AND WARRANT PURCHASE AGREEMENT Dated as of February 11, 2008 by and between WITS BASIN PRECIOUS MINERALS INC. and PLATINUM LONG TERM GROWTH V, LLC
Exhibit
10.1
NOTE
AND WARRANT PURCHASE
AGREEMENT
Dated
as of February 11, 2008
by
and between
and
PLATINUM
LONG TERM GROWTH V, LLC
This
NOTE
AND WARRANT PURCHASE AGREEMENT dated as of February 11, 2008 (this “Agreement”)
by and
between Wits Basin Precious Minerals Inc., a Minnesota corporation (the
“Company”),
and
Platinum Long Term Growth V, LLC, a Delaware limited liability company (the
“Purchaser”).
The
parties hereto agree as follows:
ARTICLE
I
PURCHASE
AND SALE OF NOTE AND WARRANT
Section
1.1 Purchase
and Sale of Note and Warrant.
(a) Upon
the
following terms and conditions, the Company shall issue and sell to the
Purchaser, and the Purchaser shall purchase from the Company, (i) a 10% senior
secured convertible promissory note in the aggregate principal amount of
$1,020,000, convertible into shares of the Company’s common stock, par value
$0.01 per share (the “Common
Stock”),
in
substantially the form attached hereto as Exhibit
A
(the
“Note”).
The
Company and the Purchaser are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities registration
afforded by Section 4(2) of the U.S. Securities Act of 1933, as amended, and
the
rules and regulations promulgated thereunder (the “Securities
Act”),
including Regulation D (“Regulation
D”),
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
to be made hereunder.
(b) Upon
the
following terms and conditions, the Purchaser shall be issued a Warrant, in
substantially the form attached hereto as Exhibit
B
(the
“Warrant”),
to
purchase, subject to adjustment as set forth in the Warrant, 2,500,000 shares
of
Common Stock at an exercise price per share equal to the Warrant Price (as
defined in the Warrant) for a term of five (5) years following the Closing
Date.
Section
1.2 Purchase
Price and Closing.
Subject
to the terms and conditions hereof, the Company agrees to issue and sell to
the
Purchaser and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchaser agrees to purchase the Note and the Warrant for an aggregate
purchase price of $1,020,000 (the “Purchase
Price”).
The
closing under this Agreement (the “Closing”)
shall
take place on or before February 11, 2008 (the “Closing
Date”).
The
closing of the purchase and sale of the Note and Warrant to be acquired by
the
Purchaser from the Company under this Agreement shall take place at the offices
of the Purchaser, ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇; provided,
that
all of the conditions set forth in Article IV hereof and applicable to the
Closing shall have been fulfilled or waived in accordance herewith. Subject
to
the terms and conditions of this Agreement, at the Closing, the Company shall
deliver or cause to be delivered to the Purchaser the Note and the Warrant.
At
the Closing, the Purchaser shall deliver the Purchase Price by wire transfer
of
immediately available funds to the
Company.
1
Section
1.3 Conversion
Shares / Warrant Shares.
The
Company has authorized and has reserved and covenants to continue to reserve,
free of preemptive rights and other similar contractual rights of stockholders
a
number of its authorized but unissued shares of Common Stock equal to one
hundred twenty percent (120%) of the aggregate number of shares of Common Stock
issuable upon the conversion of the Note and the exercise of the Warrant, and
shall, within thirty (30) days of the date hereof, take all necessary action
to
increase such reserve to one hundred fifty percent (150%) of the aggregate
number of shares of Common Stock issuable upon conversion of the Note and
exercise of the Warrant. Any shares of Common Stock issuable upon conversion
of
the Note are herein referred to as the “Conversion
Shares”.
Any
shares of Common Stock issuable upon exercise of the Warrant (and such shares
when issued) are herein referred to as the “Warrant
Shares”.
The
Note, the Warrant, the Conversion Shares and the Warrant Shares are sometimes
collectively referred to herein as the “Securities”.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES
Section
2.1 Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Purchaser, as of the date hereof
and the Closing Date (except as set forth on the Schedule of Exceptions attached
hereto with each numbered Schedule corresponding to the section number herein),
as follows:
(a) Organization,
Good Standing and Power.
The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Minnesota and has the requisite
corporate power to own, lease and operate its properties and assets and to
conduct its business as it is now being conducted. The Company does not have
any
direct or indirect Subsidiaries (as defined in Section 2.1(g)) or own securities
of any kind in any other entity except as set forth on Schedule
2.1(g)
hereto.
The Company and each Guarantor (as defined in Section 2.1(b)) is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted or property owned
by
it makes such qualification necessary except for any jurisdiction(s) (alone
or
in the aggregate) in which the failure to be so qualified will not have a
Material Adverse Effect. For the purposes of this Agreement, “Material
Adverse Effect”
means
any material adverse effect on the business, operations, prospects or financial
condition of the Company and its Subsidiaries, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company or any Guarantor to perform
any of its respective obligations under this Agreement or any of the Transaction
Documents in any material respect.
(b) Authorization;
Enforcement.
The
Company, and each of the Guarantors, as applicable, has the requisite corporate
power and authority to enter into and perform this Agreement, the Note, the
Warrant, the Security Agreement by and among the Company and the Guarantors,
on
the one hand, and the Purchaser, on the other hand, dated as of the date hereof,
substantially in the form of Exhibit
C
attached
hereto (the “Security
Agreement”),
the
Guaranty to be delivered by ▇▇▇▇▇▇▇ Gold Producers, Inc. (together with any
additional guarantors of the Company’s obligations to the Purchaser, the
“Guarantors”),
dated
as of the date hereof, substantially
in the form of Exhibit
D
attached
hereto (the “Guaranty”),
the
Officer’s Certificate, dated as of the Closing Date, substantially in the form
of Exhibit
E
attached
hereto (the “Officer’s
Certificate”)
and
the Irrevocable Transfer Agent Instructions (as defined in Section 3.16 hereof)
(collectively, the “Transaction
Documents”)
and to
issue and sell the Securities in accordance with the terms hereof. The
execution, delivery and performance of the Transaction Documents by the Company
and the Guarantors and the consummation by each of them of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action, and no further consent or authorization of the
Company, the Guarantors, their Boards of Directors or stockholders is required.
When executed and delivered by the Company and each of the Guarantors, as
applicable, each of the Transaction Documents shall constitute a valid and
binding obligation of the Company (or each such Guarantor, as applicable)
enforceable against the Company (or each such Guarantor, as applicable) in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditor’s rights and remedies or by other equitable principles of general
application.
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(c) Capitalization.
The
authorized capital stock and the issued and outstanding shares of capital stock
of the Company as of the Closing Date is set forth on Schedule
2.1(c)
hereto.
All of the outstanding shares of the Common Stock and any other outstanding
security of the Company have been duly and validly authorized. Except as set
forth in this Agreement or as set forth on Schedule
2.1(c)
hereto,
no shares of Common Stock or any other security of the Company are entitled
to
preemptive rights and there are no outstanding options, warrants, scrip, rights
to subscribe to, call or commitments of any character whatsoever relating to,
or
securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth in this Agreement and as set forth
on
Schedule
2.1(c)
hereto,
there are no contracts, commitments, understandings, or arrangements by which
the Company is or may become bound to issue additional shares of the capital
stock of the Company or options, securities or rights convertible into shares
of
capital stock of the Company. Except for customary transfer restrictions
contained in agreements entered into by the Company in order to sell restricted
securities or as provided on Schedule
2.1(c)
hereto,
the Company is not a party to or bound by any agreement or understanding
granting anti-dilution rights to any person with respect to any of its equity
or
debt securities. Except as set forth on Schedule
2.1(c),
the
Company is not a party to, and it has no knowledge of, any agreement or
understanding restricting the voting or transfer of any shares of the capital
stock of the Company.
(d) Issuance
of Securities.
The
Note and the Warrant to be issued at the Closing have been duly authorized
by
all necessary corporate action and, when paid for or issued in accordance with
the terms hereof, the Note shall be validly issued and outstanding, free and
clear of all liens, encumbrances and rights of refusal of any kind. When the
Conversion Shares and Warrant Shares are issued and paid for in accordance
with
the terms of this Agreement and as set forth in the Note and Warrant, such
shares will be duly authorized by all necessary corporate action and validly
issued and outstanding, fully paid and nonassessable, free and clear of all
liens, encumbrances and rights of refusal of any kind and the holders thereof
shall be entitled to all rights accorded to a holder of Common Stock.
(e) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the Guarantors, the performance by the Company of its obligations under
the
Note and Warrant and the consummation by the Company of the transactions
contemplated hereby and thereby, and the issuance of the Securities as
contemplated hereby, do not and will not (i) violate or conflict with any
provision of the Company’s Articles of Incorporation (the “Articles”)
or
Bylaws (the “Bylaws”),
each
as amended to date, or any Guarantor’s comparable charter documents, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights
of
termination, amendment, acceleration or cancellation of, any agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Company or any Guarantor is a party or
by
which the Company or any of the Guarantors’ respective properties or assets are
bound, (iii) result in a violation of any federal, state, local or foreign
statute, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations) applicable to the Company or any
Guarantor or by which any property or asset of the Company or any Guarantor
are
bound or affected, or (iv) create or impose a lien, mortgage, security interest,
charge or encumbrance of any nature on any property or asset of the Company
or
any Guarantor under any agreement or any commitment to which the Company or
any
Guarantor is a party or by which the Company or any Guarantor is bound or by
which any of their respective properties or assets are bound, except, in all
cases, for such conflicts, defaults, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect (other than violations pursuant to clauses (i)
or
(iii) (with respect to federal and state securities laws)). Neither
the Company nor any Guarantor is required under federal, state, foreign or
local
law, rule or regulation to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under the
Transaction Documents or issue and sell the Securities in accordance with the
terms hereof. The business of the Company and the Guarantors is not being
conducted in violation of any laws, ordinances or regulations of any
governmental entity.
3
(f) Commission
Documents, Financial Statements.
The
Common
Stock of the Company is registered pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
and
the Company
has timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Commission pursuant to the reporting
requirements of the Exchange Act (all of the foregoing including filings
incorporated by reference therein being referred to herein as the “Commission
Documents”).
At
the times of their respective filings, the Form 10-QSB for the fiscal quarters
ended March 31, 2007, June 30, 2007 and September 30, 2007 (collectively, the
“Form
10-QSB”)
and
the Form 10-KSB for the fiscal year ended December 31, 2006 (the “Form
10-KSB”)
complied in all material respects with the requirements of the Exchange Act
and
the rules and regulations of the Commission promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to such
documents, and the Form 10-QSB and Form 10-KSB did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the
Commission Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of
the Commission or other applicable rules and regulations with respect thereto.
Such financial statements have been prepared in accordance with
generally accepted accounting principles (“GAAP”)
applied on a consistent basis during the periods involved (except (i) as may
be
otherwise indicated in such financial statements or the notes thereto or (ii)
in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in
all
material respects the financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
4
(g) Subsidiaries.
Schedule
2.1(g)
hereto
sets forth each Subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of each person’s
ownership of the outstanding stock or other interests of such Subsidiary. For
the purposes of this Agreement, “Subsidiary”
shall
mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other Subsidiaries. All of the outstanding shares of capital
stock of each Guarantor have been duly authorized and validly issued, and are
fully paid and nonassessable. Except as set forth on Schedule
2.1(g)
hereto,
there are no outstanding preemptive, conversion or other rights, options,
warrants or agreements granted or issued by or binding upon any Guarantor for
the purchase or acquisition of any shares of capital stock of any Guarantor
or
any other securities convertible into, exchangeable for or evidencing the rights
to subscribe for any shares of such capital stock. Neither the Company nor
any
Guarantor is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any Guarantor
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence except as set forth in the Commission Documents or
on
Schedule
2.1(g)
hereto.
Neither the Company nor any Guarantor is party to, nor has any knowledge of,
any
agreement restricting the voting or transfer of any shares of the capital stock
of any Guarantor. Other than with respect to the Guarantors and China Global
Mining Resources Ltd., a British Virgin Islands corporation (“China Global -
BVI”), no Subsidiary holds any material asset or has any material liabilities as
of the date hereof.
(h) No
Material Adverse Change.
Since
December 31, 2006, the Company has not experienced or suffered any Material
Adverse Effect, except as disclosed in the Commission Documents or on
Schedule
2.1(h)
hereto.
(i) No
Undisclosed Liabilities.
Except
as disclosed in the Commission Documents or on Schedule
2.1(i)
hereto,
neither the Company nor any Guarantor has incurred any liabilities, obligations,
claims or losses (whether liquidated or unliquidated, secured or unsecured,
absolute, accrued, contingent or otherwise) other than those incurred in the
ordinary course of the Company’s or the Guarantors’ respective businesses or
which, individually or in the aggregate, are not reasonably likely to have
a
Material Adverse Effect.
(j) [Reserved].
(k) Indebtedness.
Schedule
2.1(k)
hereto
sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company and each Guarantor, or for which the Company or
any
Guarantor has commitments. For the purposes of this Agreement, “Indebtedness”
shall mean (a) any liabilities for borrowed money or amounts owed in excess
of
$100,000 (other than trade accounts payable incurred in the ordinary course
of
business), (b) all guaranties, endorsements and other contingent obligations
in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection
or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $100,000 due under leases required
to
be capitalized in accordance with GAAP. Neither the Company nor any Guarantor
is
in default with respect to any Indebtedness.
5
(l) Title
to Assets.
Each of
the Company and the Guarantors has good and valid title to all of its real
and
personal property reflected in the Commission Documents, free and clear of
any
mortgages, pledges, charges, liens, security interests or other encumbrances,
except for those indicated in the Commission Documents or on Schedule
2.1(l)
hereto
or such that, individually or in the aggregate, do not cause a Material Adverse
Effect. Any leases of the Company and each Guarantor are valid and subsisting
and in full force and effect.
(m) Actions
Pending.
There
is no action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or other proceeding pending or, to the knowledge of the
Company, threatened against the Company or any Guarantor which questions the
validity of this Agreement or any of the other Transaction Documents or any
of
the transactions contemplated hereby or thereby or any action taken or to be
taken pursuant hereto or thereto. Except as set forth in the Commission
Documents or on Schedule
2.1(m)
hereto,
there is no action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or other proceeding pending or, to the knowledge of the
Company, threatened against or involving the Company, any Guarantor or any
of
their respective properties or assets, which individually or in the aggregate,
would reasonably be expected, if adversely determined, to have a Material
Adverse Effect. There are no outstanding orders, judgments, injunctions, awards
or decrees of any court, arbitrator or governmental or regulatory body against
the Company or any Guarantor or any officers or directors of the Company or
any
Guarantor in their capacities as such, which individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(n) Compliance
with Law.
The
business of the Company has been and is presently being conducted in accordance
with all applicable federal, state and local governmental laws, rules,
regulations and ordinances, except such that, individually or in the aggregate,
the noncompliance therewith could not reasonably be expected to have a Material
Adverse Effect. The Company has all franchises, permits, licenses, consents
and
other governmental or regulatory authorizations and approvals necessary for
the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental
or
regulatory authorizations and approvals, individually or in the aggregate,
could
not reasonably be expected to have a Material Adverse Effect.
(o) Taxes.
The
Company and each Guarantor has accurately prepared and filed all federal, state
and other tax returns required by law to be filed by it, has paid or made
provisions for the payment of all taxes shown to be due and all additional
assessments, and adequate provisions have been and are reflected in the
financial statements of the Company for all current taxes and other charges
to
which the Company is subject and which are not currently due and
payable. Except as disclosed on Schedule
2.1(o)
hereto
or in the Commission Documents, none of the federal income tax returns of the
Company or any Guarantor have been audited by the Internal Revenue Service.
The
Company has no knowledge of any additional assessments, adjustments or
contingent tax liability (whether federal or state) of any nature whatsoever,
whether pending or threatened against the Company or any Guarantor for any
period, nor of any basis for any such assessment, adjustment or
contingency.
6
(p) Certain
Fees.
Except
as set forth on Schedule
2.1(p)
hereto,
the Company has not employed any broker or finder or incurred any liability
for
any brokerage or investment banking fees, commissions, finders’ structuring
fees, financial advisory fees or other similar fees in connection with the
Transaction Documents.
(q) Disclosure.
To the
best of the Company’s knowledge, neither this Agreement or the Schedules hereto
nor any other documents, certificates or instruments furnished to the Purchaser
by or on behalf of the Company or any Guarantor in connection with the
transactions contemplated by this Agreement contain any untrue statement of
a
material fact or omit to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under
which
they were made herein or therein, not misleading.
(r) Operation
of Business.
Except
as set forth in the Commission Documents or on Schedule
2.1(r)
hereto,
the Company and each of the Guarantors owns or possesses the rights to all
patents, trademarks, domain names (whether or not registered) and any patentable
improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations which are necessary for the conduct
of
its business as now conducted, and to the Company’s knowledge, without any
conflict with the rights of others.
(s) [Reserved].
(t) Books
and Records; Internal Accounting Controls.
The
records and documents of the Company accurately reflect in all material respects
the information relating to the business of the Company, the location and
collection of its assets, and the nature of all transactions giving rise to
the
obligations or accounts receivable of the Company. The Company is in material
compliance with all provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 which are
applicable to it as of the Closing Date. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurance that
(i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that information required to be
disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the Commission’s rules and forms. The Company’s certifying officers
have evaluated the effectiveness of the Company’s disclosure controls and
procedures as of the end of the
period covered by the Company’s most recently filed periodic report under the
Exchange Act (such date, the “Evaluation
Date”).
The
Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no changes in the
Company’s internal control over financial reporting (as such term is defined in
the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
7
(u) Material
Agreements.
Except
as disclosed in the Commission Documents or as set forth on Schedule
2.1(u)
hereto,
or as would not be reasonably likely to have a Material Adverse Effect, (i)
the
Company has performed all obligations required to be performed by it to date
under any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, filed or required to be filed with the
Commission (the “Material
Agreements”),
(ii)
neither the Company nor any Guarantor has received any notice of default under
any Material Agreement and, (iii) to the best of the Company’s knowledge,
neither the Company nor any Guarantor is in default under any Material Agreement
now in effect.
(v) Transactions
with Affiliates.
Except
as set forth on Schedule
2.1(v)
hereto
or in the Commission Documents, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions between (a) the Company, any Guarantor or any of their
respective customers or suppliers on the one hand, and (b) on the other hand,
any officer, employee, consultant or director of the Company, or any Guarantor,
or any person owning at least 5% of the outstanding capital stock of the Company
or any Guarantor or any member of the immediate family of such officer,
employee, consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder,
or a
member of the immediate family of such officer, employee, consultant, director
or stockholder which, in each case, is required to be disclosed in the
Commission Documents or in the Company’s most recently filed definitive proxy
statement on Schedule 14A, that is not so disclosed in the Commission Documents
or in such proxy statement.
(w) Securities
Act of 1933.
The
Company has complied and will comply with all applicable federal and state
securities laws in connection with the offer, issuance and sale of the
Securities hereunder. Neither the Company nor anyone acting on its behalf,
directly or indirectly, has or will sell, offer to sell or solicit offers to
buy
any of the Securities or similar securities to, or solicit offers with respect
thereto from, or enter into any negotiations relating thereto with, any person,
or has taken or will take any action so as to bring the issuance and sale of
any
of the Securities under the registration provisions of the Securities Act and
applicable state securities laws, and neither the Company nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale
of
any of the Securities.
(x) Employees.
Neither
the Company nor any Guarantor has any collective bargaining arrangements or
agreements covering any of its employees, except as set forth on Schedule
2.1(x)
hereto.
Except as set forth on Schedule
2.1(x)
hereto
or in the Commission Documents,
neither the Company nor any Guarantor has any employment contract, agreement
regarding proprietary information, non-competition agreement, non-solicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or such Guarantor required
to be disclosed in the Commission Documents that is not so disclosed. No
officer, consultant or key employee of the Company or any Guarantor whose
termination, either individually or in the aggregate, would be reasonably likely
to have a Material Adverse Effect, has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment or
engagement with the Company or any Guarantor.
8
(y) Absence
of Certain Developments.
Except
as set forth in the Commission Documents or provided on Schedule
2.1(y)
hereto,
since December 31, 2006, neither the Company nor any Guarantor has:
(i) issued
any stock, bonds or other corporate securities or any right, options or warrants
with respect thereto;
(ii) borrowed
any amount in excess of $100,000 or incurred or become subject to any other
liabilities in excess of $100,000 (absolute or contingent) except current
liabilities incurred in the ordinary course of business which are comparable
in
nature and amount to the current liabilities incurred in the ordinary course
of
business during the comparable portion of its prior fiscal year, as adjusted
to
reflect the current nature and volume of the business of the Company and the
Guarantors;
(iii) discharged
or satisfied any lien or encumbrance in excess of $100,000 or paid any
obligation or liability (absolute or contingent) in excess of $100,000, other
than current liabilities paid in the ordinary course of business;
(iv) declared
or made any payment or distribution of cash or other property to stockholders
with respect to its stock, or purchased or redeemed, or made any agreements
so
to purchase or redeem, any shares of its capital stock, in each case in excess
of $50,000 individually or $100,000 in the aggregate;
(v) sold,
assigned or transferred any other tangible assets, or canceled any debts or
claims, in each case in excess of $100,000, except in the ordinary course of
business;
(vi) sold,
assigned or transferred any patent rights, trademarks, trade names, copyrights,
trade secrets or other intangible assets or intellectual property rights in
excess of $100,000, or disclosed any proprietary confidential information to
any
person except to customers in the ordinary course of business or to the
Purchaser or its representatives;
(vii) suffered
any material losses or waived any rights of material value, whether or not
in
the ordinary course of business, or suffered the loss of any material amount
of
prospective business;
(viii) made
any
changes in employee compensation except in the ordinary course of business
and
consistent with past practices;
(ix) made
capital expenditures or commitments therefor that aggregate in excess of
$100,000;
(x) entered
into any material transaction, whether or not in the ordinary course of
business;
(xi) made
charitable contributions or pledges in excess of $10,000;
9
(xii) suffered
any material damage, destruction or casualty loss, whether or not covered by
insurance;
(xiii) experienced
any material problems with labor or management in connection with the terms
and
conditions of their employment; or
(xiv) entered
into an agreement, written or otherwise, to take any of the foregoing
actions.
(z) Investment
Company Act Status.
The
Company is not, and as a result of and immediately upon the Closing will not
be,
an “investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as
amended.
(aa) ERISA.
No
liability to the Pension Benefit Guaranty Corporation has been incurred with
respect to any Plan by the Company or any Guarantor which is or would be
materially adverse to the Company and the Guarantors. The execution and delivery
of this Agreement and the issuance and sale of the Securities will not involve
any transaction which is subject to the prohibitions of Section 406 of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or in
connection with which a tax could be imposed pursuant to Section 4975 of the
Internal Revenue Code of 1986, as amended, provided that, if the Purchaser,
or
any person or entity that owns a beneficial interest in the Purchaser, is an
“employee pension benefit plan” (within the meaning of Section 3(2) of ERISA)
with respect to which the Company is a “party in interest” (within the meaning
of Section 3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e)
of
ERISA, if applicable, are met. As used in this Section 2.1(aa), the term “Plan”
shall mean an “employee pension benefit plan” (as defined in Section 3 of ERISA)
which is or has been established or maintained, or to which contributions are
or
have been made, by the Company or any Guarantor or by any trade or business,
whether or not incorporated, which, together with the Company or any Guarantor,
is under common control, as described in Section 414(b) or (c) of the
Code.
(bb) [Reserved].
(cc) No
Integrated Offering.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security
or
solicited any offers to buy any security under circumstances that would cause
the offering of the Securities pursuant to this Agreement to be integrated
with
prior offerings by the Company for purposes of the Securities Act which would
prevent the Company from selling the Securities pursuant to Regulation D and
Rule 506 thereof under the Securities Act, or any applicable exchange-related
stockholder approval provisions, nor will the Company or any of its affiliates
or subsidiaries take any action or steps that would cause the offering of the
Securities to be integrated with other offerings.
Except
as set forth on Schedule 2.1(cc) hereto, the Company does not have any
registration statement pending before the Commission or currently under the
Commission’s review and, since June 1, 2007, the Company has not offered or sold
any of its equity securities or debt securities convertible into shares of
Common Stock except pursuant to the grant or exercise of compensatory stock
option plans.
10
(dd) Dilutive
Effect.
The
Company understands and acknowledges that its obligation to issue Conversion
Shares upon conversion of the Note in accordance with this Agreement and the
Note and its obligations to issue the Warrant Shares upon the exercise of the
Warrant in accordance with this Agreement and the Warrant, is, in each case,
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interest of other stockholders of the
Company.
(ee) DTC
Status.
Except
as set forth on Schedule
2.1(ee)
hereto,
the Company’s transfer agent is a participant in and the Common Stock is
eligible for transfer pursuant to the Depository Trust Company Automated
Securities Transfer Program. The name, address, telephone number, fax number,
contact person and email of the Company transfer agent is set forth on
Schedule
2.1(ee)
hereto.
(ff) Consulting
Warrants.
The
Company and MHG Consultants LLC executed the Consulting Agreement (the
“Consulting Agreement”), dated as of July 27, 2007, which became effective on
November 1, 2007. The holding period, under Rule 144, of the Commencement
Warrant (as defined in the Consulting Agreement) commenced on November 1, 2007.
The holding period, under Rule 144, for (i) that portion of the Monthly Fee
Warrant exercisable for 1,000,000 shares commenced on November 1, 2008 (on
which
date such shares vested and became exercisable), (ii) that portion of the
Monthly Fee Warrant exercisable for an additional 250,000 shares commenced
on
November 30, 2007 (on which date such shares vested and became exercisable),
(iii) that portion of the Monthly Fee Warrant exercisable for an additional
250,000 shares commenced on December 31, 2007 (on which date such shares vested
and became exercisable), (iv) that portion of the Monthly Fee Warrant
exercisable for an additional 250,000 shares commenced on January 31, 2008
(on
which date such shares vested and became exercisable) and (v) that portion
of
the Monthly Fee Warrant exercisable for 1,250,000 shares of Common Stock will
commence on the date hereof. Upon transfer of the Merit Warrants as contemplated
herein, the Purchaser shall be permitted to “tack” such holding periods for
purposes of Rule 144.
(gg) Easyknit
Merger.
The
Agreement and Plan of Merger and Reorganization, dated April 20, 2007, as
amended (the “Easyknit
Merger Agreement”),
by
and among Easyknit Enterprises
Holdings Limited, Race Merger, Inc. and the Company has been terminated and
is
no longer of any further force and effect, and no consent of any party (or
such
party’s affiliates) to the Easyknit Merger Agreement (other than the Company)
pursuant to the Easyknit Merger Agreement, the Settlement Agreement referenced
below or any other document, agreement or understanding is required for the
consummation of the transactions contemplated by the Transaction Documents.
Each
of the parties to the Easyknit Merger Agreement have released any and all claims
against the Company relating in any way thereto, and have taken all necessary
action to dismiss any suits filed in connection therewith. The parties to the
Easyknit Merger Agreement have entered into a Settlement Agreement and General
Release dated December 19, 2007, the provisions of which are in effect on the
date hereof.
Section
2.2 Representations
and Warranties of the Purchaser.
The
Purchaser hereby represents and warrants to the Company as follows as of the
date hereof and as of the Closing Date:
11
(a) Organization
and Standing of the Purchaser.
The
Purchaser is a corporation, limited liability company or partnership duly
incorporated or organized, validly existing and in good standing under the
laws
of the jurisdiction of its incorporation or organization.
(b) Authorization
and Power.
The
Purchaser has the requisite power and authority to enter into and perform the
Transaction Documents and to purchase the Securities being sold to it hereunder.
The execution, delivery and performance of the Transaction Documents by the
Purchaser and the consummation by it of the transactions contemplated hereby
and
thereby have been duly authorized by all necessary corporate or partnership
action, and no further consent or authorization of the Purchaser or its Board
of
Directors, stockholders, or partners, as the case may be, is required. When
executed and delivered by the Purchaser, the Transaction Documents shall
constitute valid and binding obligations of the Purchaser enforceable against
the Purchaser in accordance with their terms, except as such enforceability
may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor’s rights and remedies or by
other equitable principles of general application.
(c) Acquisition
for Investment.
The
Purchaser is purchasing the Securities solely for its own account and not with
a
view to or for sale in connection with distribution. The Purchaser does not
have
a present intention to sell any of the Securities, nor a present arrangement
(whether or not legally binding) or intention to effect any distribution of
any
of the Securities to or through any person or entity; provided,
however,
that by
making the representations herein, the Purchaser does not agree to hold the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with Federal and state
securities laws applicable to such disposition. The Purchaser acknowledges
that
it (i) has such knowledge and experience in financial and business matters
such
that Purchaser is capable of evaluating the merits and risks of Purchaser’s
investment in the Company, (ii) is able to bear the financial risks associated
with an investment in the Securities and (iii) has been given full access
to
such
records of the Company and the Guarantors and to the officers of the Company
and
the Guarantors as it has deemed necessary or appropriate to conduct its due
diligence investigation.
(d) Rule
144.
The
Purchaser understands that the Securities must be held indefinitely unless
such
Securities are registered under the Securities Act or an exemption from
registration is available. The Purchaser acknowledges that such person is
familiar with Rule 144 of the rules and regulations of the Commission, as
amended, promulgated pursuant to the Securities Act (“Rule
144”),
and
that the Purchaser has been advised that Rule 144 permits resales only under
certain circumstances. The Purchaser understands that to the extent that Rule
144 is not available, the Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(e) General.
The
Purchaser understands that the Securities are being offered and sold in reliance
on a transactional exemption from the registration requirements of federal
and
state securities laws and the Company is relying upon the truth and accuracy
of
the representations, warranties, agreements, acknowledgments and understandings
of the Purchaser set forth herein in order to determine the applicability of
such exemptions and the suitability of the Purchaser to acquire the Securities.
The Purchaser understands that no United States federal or state agency or
any
government or governmental agency has passed upon or made any recommendation
or
endorsement of the Securities.
12
(f) No
General Solicitation.
The
Purchaser acknowledges that the Securities were not offered to the Purchaser
by
means of any form of general or public solicitation or general advertising,
or
publicly disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio,
or
(ii) any seminar or meeting to which the Purchaser was invited by any of the
foregoing means of communications. The Purchaser, in making the decision to
purchase the Securities, has relied upon independent investigation made by
it
and has not relied on any information or representations made by third
parties.
(g) Accredited
Investor.
The
Purchaser is an “accredited investor” (as defined in Rule 501 of Regulation D),
and the Purchaser has such experience in business and financial matters that
it
is capable of evaluating the merits and risks of an investment in the
Securities. The Purchaser is not required to be registered as a broker-dealer
under Section 15 of the Exchange Act and the Purchaser is not a broker-dealer.
The Purchaser acknowledges that an investment in the Securities is speculative
and involves a high degree of risk.
(h) Certain
Fees.
The
Purchaser has not employed any broker or finder or incurred any liability for
any brokerage or investment banking fees, commissions, finders’ structuring
fees, financial advisory fees or other similar fees in connection with the
Transaction Documents.
(i) No
Short Position.
The
Purchaser covenants and agrees that it will not effect any short sale with
respect to the shares of Common Stock for so long as the Purchaser holds the
Note, the Warrant or any of the Merit Warrants that may be transferred to it;
provided, that, it is understood and agreed that nothing in this Section 2.2(i)
shall be deemed to prohibit Purchaser
from disposing of any shares of Common Stock held by it (whether received upon
conversion of the Note, exercise of the Warrant or otherwise).
ARTICLE
III
COVENANTS
Unless
terminated earlier in accordance with the terms the provisions below, for so
long as the Note or the Warrant is outstanding, the Company covenants with
the
Purchaser as follows, which covenants are for the benefit of the Purchaser
and
its permitted assignees.
Section
3.1 Securities
Compliance.
The
Company shall notify the Commission in accordance with its rules and
regulations, of the transactions contemplated by any of the Transaction
Documents and shall take all other necessary action and proceedings as may
be
required and permitted by applicable law, rule and regulation, for the legal
and
valid issuance of the Securities to the Purchaser or its assigns.
Section
3.2 Registration
and Listing.
The
Company shall cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) of the Exchange Act, to comply in all respects with its reporting
and filing obligations under the Exchange Act, to comply with all requirements
related to any registration statement filed pursuant to this Agreement, and
to
not take any action or file any document (whether or not permitted by the
Securities Act or the rules promulgated thereunder) to terminate or suspend
such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act, except as permitted herein. The
Company will take all action necessary to continue the listing or trading of
its
Common Stock on the OTC Bulletin Board or other exchange or market on which
the
Common Stock is trading. If required, the Company will promptly file the
“Listing Application” for, or in connection with, the issuance and delivery of
the Shares and the Warrant Shares. Subject to the terms of the Transaction
Documents, the Company further covenants that it will take such further action
as the Purchaser may reasonably request, all to the extent required from time
to
time to enable the Purchaser to sell the Securities without registration under
the Securities Act within the limitation of the exemptions provided by Rule
144
promulgated under the Securities Act. Upon the request of the Purchaser, the
Company shall deliver to the Purchaser a written certification of a duly
authorized officer as to whether it has complied with such
requirements.
13
Section
3.3 [Reserved].
Section
3.4 Compliance
with Laws.
The
Company shall comply, and cause each Guarantor to comply, with all applicable
laws, rules, regulations and orders, noncompliance with which would be
reasonably likely to have a Material Adverse Effect.
Section
3.5 Keeping
of Records and Books of Account.
The
Company shall keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied, reflecting
all financial transactions of the Company and the Guarantors, and in which,
for
each fiscal year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in connection
with its business shall be made.
Section
3.6 Reporting
Requirements.
If the
Company ceases to file its periodic reports with the Commission, or if the
Commission ceases making these periodic reports available via the Internet
without charge, then, upon the request of the Purchaser, the Company shall
furnish the following to the Purchaser so long as the Purchaser shall be
obligated hereunder to purchase the Securities or shall beneficially own the
Securities:
(a) Quarterly
Reports filed with the Commission on Form 10-QSB;
(b) Annual
Reports filed with the Commission on Form 10-KSB; and
(c) Copies
of
all notices, information and proxy statements in connection with any meetings,
that are, in each case, provided to holders of shares of Common
Stock.
Section
3.7 Other
Agreements.
The
Company shall not enter into any agreement in which the terms of such agreement
would restrict or impair the right or ability to perform of the Company or
any
Guarantor under any Transaction Document.
Section
3.8 Use
of
Proceeds.
The net
proceeds from the sale of the Securities hereunder shall be used by the Company
for working capital and general corporate purposes, including, but not limited
to, growth and capital initiatives, investor and public relations and
acquisitions, and not to redeem any Common Stock or securities convertible,
exercisable or exchangeable into Common Stock or to settle any outstanding
litigation.
14
Section
3.9 Reporting
Status. The
Company shall timely file all reports required to be filed with the Commission
pursuant to the Exchange Act, and the Company shall not terminate its status
as
an issuer required to file reports under the Exchange Act even if the Exchange
Act or the rules and regulations thereunder would permit such
termination.
Section
3.10 Disclosure
of Transaction.
The
Company shall issue a press release describing the material terms of the
transactions contemplated hereby (the “Press
Release”)
by the
second Trading Day following Closing. The Company shall also file with the
Commission a Current Report on Form 8-K (the “Form
8-K”)
describing the material terms of the transactions contemplated hereby (and
attaching as exhibits thereto this Agreement, the Note, the Security Agreement,
the Warrant and the Press Release) as soon as practicable following the Closing
Date but in no event more than four (4) Trading Days following the Closing
Date,
which Press Release and Form 8-K shall be subject to prior review and comment
by
the Purchaser. “Trading
Day”
means
any day during which the principal exchange on which the Common Stock is traded
shall be open for trading.
Section
3.11 Disclosure
of Material Information.
The
Company covenants and agrees that neither it nor any other person acting on
its
behalf will provide the Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto the Purchaser shall have executed a written agreement regarding
the confidentiality and use of such information. The Company understands
and confirms
that the Purchaser shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
Section
3.12 Pledge
of Securities.
The
Company acknowledges that the Securities may be pledged by the Purchaser in
connection with a bona fide
margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer,
sale
or assignment of the Securities hereunder, and Purchaser effecting a pledge
of
the Securities shall not be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement
or any other Transaction Document. The Company hereby agrees to execute and
deliver such documentation as a pledgee of the Securities may reasonably request
in connection with a pledge of the Securities to such pledgee by the
Purchaser.
Section
3.13 Amendments.
The
Company shall not amend or waive any provision of the Articles or Bylaws of
the
Company in any way that would adversely affect exercise rights, voting rights,
conversion rights, prepayment rights or redemption rights of the holder of
the
Note or the Warrant.
Section
3.14 Distributions.
Other
than a distribution or dividend of the Company’s interests in materially the
form described in Schedule 3.14 hereto (as described in Schedule 3.14, the
“FSC
Dividend”
and
the
“▇▇▇▇▇-▇▇▇▇▇▇
Dividend,”
respectively and collectively referred to herein as the “Subsidiary
Dividends”,
which
shall be expressly permitted so long as the Company’s obligations under the Note
have not matured and remain unpaid or so long as the Note has not been
accelerated by the Purchaser) to the holders of its Common Stock, for so long
as
the Note is outstanding, the Company agrees that it shall not, and shall not
permit any Guarantor to, (i) declare
or pay any dividends or make any distributions to any equity holder (other
than
the Company in the case of the Guarantors) or (ii) purchase or otherwise acquire
for value, directly or indirectly, any Common Stock or other equity security
of
the Company,
or
(iii) transfer, assign, pledge, issue or otherwise permit any equity or other
ownership interests in the Guarantors to be beneficially owned or held by any
person other than the Company. Notwithstanding
the foregoing, in the event the distribution and/or dividend relating to a
Subsidiary Dividend is not in all material respects in the nature and form
described on Schedule 3.14 hereof, the Company shall be required to obtain
the
prior written consent of the Purchaser to consummate such dividend or
distribution, which consent shall not be unreasonably withheld (so long as
the
Company’s obligations under the Note have not matured and remain unpaid or so
long as the Note has not been accelerated by the Purchaser).
15
Section
3.15 Reservation
of Shares.
The
Company shall take all action necessary to at all times have authorized and
reserved for the purpose of issuance, one hundred fifty percent (150%) of the
aggregate number of shares of Common Stock needed to provide for the issuance
of
the Conversion Shares and the Warrant Shares.
Section
3.16 Transfer
Agent Instructions.
The
Company shall issue irrevocable instructions to its transfer agent, and any
subsequent transfer agent, to issue certificates, registered in the name of
the
Purchaser or its nominee(s), for the Conversion Shares and the Warrant Shares
in
such amounts as specified from time to time by the Purchaser to the Company
upon
conversion of the Note or exercise of the Warrant in the form of Exhibit
F
attached
hereto (the
“Irrevocable
Transfer Agent Instructions”).
The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 3.16 will be given by the Company
to
its transfer agent with respect to the terms of this Agreement and the
Transaction Documents and that the Conversion Shares and Warrant Shares shall
otherwise be freely transferable on the books and records of the Company as
and
to the extent provided in this Agreement and under law. Nothing in this Section
3.16 shall affect in any way the Purchaser’s obligations and agreements set
forth in Section 5.1 to comply with all applicable prospectus delivery
requirements, if any, upon resale of the Conversion Shares and the Warrant
Shares. If the Purchaser provides the Company with an opinion of counsel
(whether pursuant to Section 3.17 hereof or otherwise), in a generally
acceptable form, to the effect that a public sale, assignment or transfer of
the
Conversion Shares or Warrant Shares may be made without registration
under the Securities Act or the Purchaser provides the Company with reasonable
assurances that the Conversion Shares or Warrant Shares can be sold pursuant
to
Rule 144 without any restriction as to the number of securities acquired as
of a
particular date that can then be immediately sold, the Company shall permit
the
transfer, and, in the case of the Conversion Shares and the Warrant Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by the Purchaser and without any
restrictive legend. The Company acknowledges that a breach by it of its
obligations under this Section 3.16 will cause irreparable harm to the Purchaser
by vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of
its
obligations under this Section 3.16 will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of
this
Section 3.16, that the Purchaser shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
16
Section
3.17 Opinions. The
Company will provide, at the Company’s expense, such legal opinions in the
future as are reasonably appropriate and necessary for the issuance and resale
of the Common Stock issuable upon conversion of the Note and exercise of the
Warrant and the Merit Warrants (as defined below) pursuant to an effective
registration statement, Rule 144 under the 1933 Act or an exemption from
registration. In the event that such Common Stock is sold in a manner that
complies with an exemption from registration, the Company will promptly cause
its counsel (at its expense) to issue to the transfer agent an opinion
permitting removal of the legend (indefinitely, if pursuant to Rule 144(k)
of
the 1933 Act (or its successor provisions, including any provision that permits
unlimited resales after the relevant holding periods set forth in Rule 144),
or
to permit sale of the shares if pursuant to the other provisions of Rule 144
of
the 1933 Act).
Section
3.18 Acquisition
of Assets.
For so
long as the Note is outstanding, in the event the Company, any Guarantor or
any
other Subsidiary acquires any assets or other properties, such assets or
properties shall constitute a part of the Collateral (as defined in the Security
Agreement) and the Company or such Subsidiary shall take all action reasonably
necessary to assist the Purchaser in perfecting Purchaser’s security interest in
such assets or properties pursuant to the Security Agreement;
provided
that,
for
purposes of this ▇▇▇▇▇▇▇ ▇.▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇, ▇▇▇▇▇ Global Mining Resources
Ltd., a Hong Kong corporation (“China Global - HK”), Wits-China Acquisition
Corp., a Minnesota corporation (“Wits-China”), and wholly
owned subsidiaries of such entities (such entities and wholly owned subsidiaries
thereof shall be referred to herein as the “China Subsidiaries”), shall not
constitute Subsidiaries to the extent all or substantially all of the assets
of
such China Subsidiaries are located in, relate to or are proceeds resulting
from
assets located in or relating to, China. If any Subsidiary that is not a
Guarantor acquires any material assets, such Subsidiary shall promptly
thereafter become a Guarantor hereunder and execute a joinder to the Security
Agreement in the form attached thereto. Notwithstanding the foregoing, upon
completion of any Subsidiary Dividend, (i) any pledge of the equity interests
in
any entity formed by the Company or its subsidiaries for purposes of effecting
the Subsidiary Dividend, shall, with respect to that portion of the equity
of
such entity distributed pursuant to the Subsidiary Dividend, be released (it
being understood that any equity interest in such entity held by the Company
or
any such Subsidiary after consummation of the Subsidiary Dividend shall remain
as collateral under the Security Agreement) and (ii) any security interest
in
the assets of a Dividend Subsidiary shall be promptly released by the Purchaser.
Further notwithstanding the foregoing, the terms of this Section 3.18 shall
not
apply to any assets, or the proceeds from any sale or transfer of such assets,
transferred from a China Subsidiary to the Company, a Guarantor or Subsidiary
to
the extent the same is pledged to China Gold, LLC (“China
Gold”)
pursuant to the Security Agreement, dated as of June 19, 2007, between the
Company and China Gold, the Amended and Restated Pledge Agreement dated as
of
February 7, 2008 by and between the Company and China Gold, or a Subsidiary
Security Agreement by and between China Gold, on the one hand, and any China
Subsidiary, on the other hand, to secure outstanding obligations to China Gold.
Section
3.19 [Reserved].
17
Section
3.20 Registration
Rights.
If the
Company shall determine to prepare and file with the Commission a registration
statement (a “Registration
Statement”)
relating to an offering for its own account or the account of others under
the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act), or their then equivalents,
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to the Purchaser a written notice of such determination and, if
within ten days after the date of such notice, the Purchaser shall so request
in
writing, the Company shall include in such Registration Statement all or any
part of the Conversion Shares or Warrant Shares as the Purchaser requests to
be
registered so long as such Conversion Shares or Warrant Shares are proposed
to
be disposed in the same manner as those set forth in the Registration Statement;
provided, however, that if the number of Conversion Shares or Warrant Shares
offered for participation in the proposed offering is greater than, in the
reasonable opinion of the managing underwriter of the proposed offering, can
be
accommodated without adversely affecting the proposed offering, then the number
of shares of Common Stock included in such registration shall be subject to
reduction to a number deemed satisfactory by the managing underwriter, which
reduction shall be allocated pro rata among all parties offering securities
pursuant to such Registration Statement. The Company shall use its best efforts
to cause any Registration Statement to be declared effective by the Commission
as promptly as is possible following it being filed with the Commission and
to
remain effective until all Conversion Shares and Warrant Shares subject thereto
have been sold or may be sold without limitations as to volume or the
availability of current public information under Rule 144. All fees and expenses
incident to the performance of or compliance with this Section 3.20 by the
Company
shall be borne by the Company whether or not any Conversion Shares or Warrant
Shares are sold pursuant to the Registration Statement. The Company shall
indemnify and hold harmless the Purchaser, the officers, directors, members,
partners, agents, brokers, investment advisors and employees of each of them,
each person who controls the Purchaser (within the meaning of Section 15 of
the
Securities Act or Section 20 of the Exchange Act), and the officers, directors,
members, shareholders, partners, agents and employees of each such controlling
person, to the fullest extent permitted by applicable law, from and against
any
and all losses, claims, damages, liabilities, costs (including, without
limitation, reasonable attorneys’ fees) and expenses (collectively,
“Losses”),
as
incurred, arising out of or relating to (1) any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
prospectus included therein or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to
be
stated therein or necessary to make the statements therein (in the case of
any
prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading or (2) any violation
or
alleged violation by the Company of the Securities Act, the Exchange Act or
any
state securities law, or any rule or regulation thereunder, in connection with
the performance of its obligations under this Section 3.20, except to the
extent, but only to the extent, that such untrue statements or omissions
referred to in (1) above are based solely upon information regarding the
Purchaser furnished in writing to the Company by the Purchaser expressly for
use
therein.
Section
3.21 MFN.
For so
long as the Note is outstanding, if the Company enters into any subsequent
equity or equity linked financing (a “Subsequent
Financing”)
on
terms more favorable, as determined by the Purchaser in its discretion, than
the
terms governing the Note, then the Purchaser in its sole discretion may exchange
its Note, valued at its stated value, together with accrued but unpaid interest
(which interest payments shall be payable, at the sole option of the Purchaser,
in cash or in the form of the new securities to be issued in the Subsequent
Financing), for the securities issued or to be issued in the Subsequent
Financing. The Company covenants and agrees to notify in writing the Purchasers
of the terms and conditions of any such proposed Subsequent Financing as
promptly as practicable, but in no event less than 10 days prior to such
Subsequent Financing. Neither an exchange pursuant to this provision nor any
repayment or conversion of the Note shall have any effect on the Purchaser’s
Warrants. The Warrants constitute a separate, detachable security from the
Note.
Notwithstanding any such exchange, repayment or conversion, the Purchasers
shall
retain all of the outstanding Warrants which they received upon Closing, or
otherwise, that have not been exercised by the Purchasers. Notwithstanding
the
above, (i) the transactions set forth on Schedule
3.21
hereof
and (ii) issuances described in clauses (a) through (c) of Section 3.5(c) of
the
Note shall not be deemed to be Subsequent Financings and shall not be subject
to
the provisions of this Section 3.21.
18
Section
3.22 Transactions
with Affiliates.
Except
as set forth in Schedule
3.22
hereto,
for so long as the Note is outstanding, the Company shall not, and shall not
permit any Guarantor to, engage in any transactions with any officer, director,
employee or any Affiliate of the Company, including any contract, agreement
or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any entity in which any officer, director, or any such employee
has a
substantial interest or is an officer, director, trustee or partner, in each
case in excess of $100,000, other than (i) for payment of reasonable salary
for
services actually rendered, as approved by the Board of Directors of the Company
as fair in all respects to the Company, and (ii) reimbursement for expenses
incurred on behalf of the Company.
Section
3.23 Merger;
Sale of Assets.
Except
for any transaction involving only the assets of China Gold - BV, China Gold
-
HK, Wits-China and/or any other China Subsidiary, such exclusion to apply only
to the extent of such assets, for so long as the Note is outstanding the Company
shall not, and shall not permit any Guarantor to, (i) merge or consolidate
or
sell or dispose of all its assets or any substantial portion thereof or (ii)
in
any way or manner alter its organizational structure or effect a change of
entity. For so long as the Note is outstanding, the Company shall not, and
shall
not permit any Guarantor to, transfer any material assets to any Subsidiary
that
is not a guarantor of the Company’s obligations under the Note without the
Purchaser’s prior written consent.
Section
3.24 Participation
Rights.
For so
long as the Note remains outstanding, the Company covenants and agrees to
promptly notify (in no event later than five (5) days after making or receiving
an applicable offer) in writing (a “Rights
Notice”)
the
Purchaser of the terms and conditions of any proposed offer or sale to, or
exchange with (or other type of distribution to) any third party (a
“New
Financing”),
of
Common Stock or any securities convertible, exercisable or exchangeable into
Common Stock, including convertible debt securities (collectively, the
“Financing
Securities”).
The
Rights Notice shall describe, in reasonable detail, the proposed New Financing,
the names and investment amounts of all investors participating in the New
Financing, the proposed closing date of the New Financing, which shall be within
sixty (60) calendar days from the date of the Rights Notice, and all of the
terms and conditions thereof and proposed definitive documentation to be entered
into in connection therewith. The Rights Notice shall provide the Purchaser
an
option (the “Rights
Option”)
during
the five (5) business days following delivery of the Rights Notice (the
“Option
Period”)
to
inform the Company whether the Purchaser will purchase securities in such New
Financing on the same, absolute terms and conditions as contemplated by such
New
Financing. Delivery of any Rights Notice constitutes a representation and
warranty by the Company that there are no other material terms and conditions,
arrangements, agreements or otherwise except for those disclosed in the Rights
Notice, to provide additional compensation to any party participating in any
proposed New Financing, including, but not limited to, additional compensation
based on changes in the Purchase Price or any type of reset or adjustment of
a
purchase or conversion price or to issue additional securities at any time
after
the closing date of a New Financing. If the Company does not receive notice
of
exercise of the Rights Option from the Purchaser within the Option Period,
the
Company shall have the right to close the New Financing on the scheduled closing
date with a third party; provided that all of the material terms and conditions
of the closing are substantially the same as those provided to the Purchasers
in
the Rights Notice. If the closing of the proposed New Financing does not occur
on that date, any closing of the contemplated New Financing or any other New
Financing shall be subject to all of the provisions of this Section 3.24,
including, without limitation, the delivery of a new Rights Notice. The
provisions of this Section 3.24 shall not apply to issuances of securities
in a
Exempt Issuance (as defined in the Notes). The Company shall be deemed to have,
on the date hereof, delivered to the Purchaser a Rights Notice with respect
to
the New Financings described on Schedule
3.21
hereto
and the Purchaser has notified the Company that it has elected not to
participate in such New Financings.
19
Section
3.25 Corporate
Existence.
The
Company shall, and shall cause each of the Guarantors to, maintain in full
force
and effect its corporate existence, rights and franchises and all licenses
and
other rights to use property owned or possessed by it and reasonably deemed
to
be necessary to the conduct of its business.
Section
3.26 Investment
Company Act.
The
Company shall conduct its businesses in a manner so that it will not become
subject to the Investment Company Act of 1940, as amended.
ARTICLE
IV
CONDITIONS
Section
4.1 Conditions
Precedent to the Obligation of the Company to Close and to Sell the
Securities.
The
obligation hereunder of the Company to close and issue and sell the Securities
to the Purchaser at the Closing is subject to the satisfaction or waiver, at
or
before the Closing of the conditions set forth below. These conditions are
for
the Company’s sole benefit and may be waived by the Company at any time in its
sole discretion.
(a) Accuracy
of the Purchaser’s Representations and Warranties.
The
representations and warranties of the Purchaser shall be true and correct in
all
material respects as of the date when made and as of the Closing Date as though
made at that time, except for representations and warranties that are expressly
made as of a particular date, which shall be true and correct in all material
respects as of such date.
20
(b) Performance
by the Purchaser.
The
Purchaser shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by the Purchaser at or prior to the
Closing Date.
(c) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
(d) Delivery
of Purchase Price.
The
Purchase Price for the Note and Warrant shall have been delivered to the Company
on the Closing Date.
(e) Delivery
of Transaction Documents.
The
Transaction Documents shall have been duly executed and delivered by the
Purchaser to the Company.
(f) Lock-Up
Agreement.
The
Purchaser shall have executed and delivered the Lock-Up Agreement attached
hereto as Exhibit G to the Company.
Section
4.2 Conditions
Precedent to the Obligation of the Purchaser to Close and to Purchase the
Securities.
The
obligation hereunder of the Purchaser to purchase the Securities and consummate
the transactions contemplated by this Agreement is subject to the satisfaction
or waiver, at or before the Closing, of each of the conditions set forth below.
These conditions are for the Purchaser’s sole benefit and may be waived by the
Purchaser at any time in its sole discretion.
(a) Accuracy
of the Company’s Representations and Warranties.
Each of
the representations and warranties of the Company in this Agreement and the
other Transaction Documents shall be true and correct in all material respects
as of the Closing Date, except for representations and warranties that speak
as
of a particular date, which shall be true and correct in all material respects
as of such date.
(b) Performance
by the Company.
The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by the Company at or prior to the Closing
Date.
(c) No
Suspension, Etc.
Trading
in the Common Stock shall not have been suspended by the Commission or the
OTC
Bulletin Board, and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg Financial Markets (“Bloomberg”)
shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by Bloomberg, or on the
New
York Stock Exchange, nor shall a banking moratorium have been declared either
by
the United States or New York State authorities,
nor
shall there have occurred any material outbreak or escalation of hostilities
or
other national or international calamity or crisis of such magnitude in its
effect on, or any material adverse change in any financial market which, in
each
case, in the judgment of the Purchaser, makes it impracticable or inadvisable
to
purchase the Securities.
21
(d) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
(e) No
Proceedings or Litigation.
No
action, suit or proceeding before any arbitrator or any governmental authority
shall have been commenced, and no investigation by any governmental authority
shall have been threatened, against the Company or any Guarantor, or any of
the
officers, directors or affiliates of the Company or any Guarantor seeking to
restrain, prevent or change the transactions contemplated by this Agreement,
or
seeking damages in connection with such transactions.
(f) Opinions
of Counsel.
The
Purchaser shall have received an opinion of counsel to the Company, dated the
date of the Closing, substantially in the form of Exhibit
H
hereto,
with such exceptions and limitations as shall be acceptable the Purchaser and
counsel to the Purchaser. The Purchaser shall have received an opinion of
counsel to the Company, dated the date of the Closing, addressing the
availability of Rule 144 for the resale of Common Stock issuable upon conversion
of the Merit Warrants, in form and substance satisfactory to the Purchaser
and
counsel to the Purchaser.
(g) Note
and Warrant.
At or
prior to the Closing, the Company shall have delivered to the Purchaser the
Note
and the Warrant.
(h) Secretary’s
Certificate.
The
Company shall have delivered to the Purchaser a secretary’s certificate, dated
as of the Closing Date, as to (i) the resolutions adopted by the Board of
Directors approving the transactions contemplated hereby, (ii) the Articles,
(iii) the Bylaws, each as in effect at the Closing, and (iv) the authority
and
incumbency of the officers of the Company executing the Transaction Documents
and any other documents required to be executed or delivered in connection
therewith.
(i) Officer’s
Certificate.
On the
Closing Date, the Company shall have delivered to the Purchaser a certificate
signed by an executive officer on behalf of the Company, dated as of the Closing
Date, confirming the accuracy of the Company’s representations, warranties and
covenants as of such Closing Date and confirming the compliance by the Company
with the conditions precedent set forth in paragraphs (a)-(e) and (k) of this
Section 4.2 as of the Closing Date (provided that, with respect to the matters
in paragraphs (d) and (e) of this Section 4.2, such confirmation shall be based
on the knowledge of the executive officer after due inquiry).
(j) Guaranty.
As of
the Closing Date, the Guarantors shall have executed and delivered the Guaranty
to the Purchaser.
(k) Material
Adverse Effect.
No
Material Adverse Effect shall have occurred.
22
(l) Transfer
Agent Instructions.
The
Irrevocable Transfer Agent Instructions, in the form of Exhibit
F
attached
hereto, shall have been delivered to and executed by the Company’s transfer
agent.
(m) UCC
Financing Statements; Consents.
The
Company and the Guarantors shall have executed and delivered the Security
Agreement and authorized the filing of all UCC financing statements in form
and
substance satisfactory to the Purchaser at the appropriate offices to create
a
valid and perfected security interest in the Collateral (as defined in the
Security Agreement), which filings are to be made promptly following Closing.
The Company shall have provided evidence of the consent of China Gold to the
transactions contemplated hereby and in the other Transaction Documents.
(n) Merit
Warrants.
The
Company shall have effected the transfer of the Common Stock Purchase Warrants,
dated July 26, 2007, exercisable for an aggregate of 5,100,000 shares of Common
Stock (the “Merit
Warrants”)
from
MHG Consultants LLC to the Purchaser, and shall have amended the Monthly Fee
Warrant to provide for immediate exercisability upon Closing hereunder. The
Consulting Agreement between MHG Consultants LLC and the Company shall have
been
terminated.
ARTICLE
V
CERTIFICATE
LEGEND
Section
5.1 Legend.
Each
certificate representing the Securities shall be stamped or otherwise imprinted
with a legend substantially in the following form (in addition to any legend
required by applicable state securities or “blue sky” laws):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR WITS BASIN PRECIOUS MINERALS INC. SHALL HAVE RECEIVED
AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.
The
Company agrees to issue or reissue certificates representing any of the
Conversion Shares and the Warrant Shares, without the legend set forth above
if
at such time, prior to making any transfer of any such Conversion Shares or
Warrant Shares, such holder thereof shall give written notice to the Company
describing the manner and terms of such transfer and removal as the Company
may
reasonably request, and (x) such Conversion Shares and/or Warrant Shares have
been registered for sale under the Securities Act and the holder is selling
such
shares and is complying with its prospectus delivery requirement under the
Securities Act, (y) the holder is selling such Conversion Shares and/or Warrant
Shares in compliance with the provisions of Rule 144 or (z) the provisions
of
paragraph (k) of Rule 144 (or its successor provisions, including any provision
that permits unlimited resales after the relevant holding periods set forth
in
Rule 144) apply to such Shares. Whenever a certificate representing the
Conversion Shares or Warrant Shares is required to be issued to the Purchaser
without a legend, in lieu of delivering physical certificates representing
the
Conversion Shares or Warrant Shares, provided the Company's transfer agent
is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, the Company shall use its reasonable best efforts to cause
its
transfer agent to electronically transmit the Conversion Shares or Warrant
Shares to the Purchaser by crediting the account of the Purchaser's Prime Broker
with DTC through its Deposit Withdrawal Agent Commission (“DWAC”)
system.
23
ARTICLE
VI
INDEMNIFICATION
Section
6.1 General
Indemnity.
The
Company agrees to indemnify and hold harmless the Purchaser (and its directors,
officers, affiliates, agents, successors and assigns) from and against any
and
all losses, liabilities, deficiencies, costs, damages and expenses (including,
without limitation, reasonable attorneys’ fees, charges and disbursements)
incurred by the Purchaser as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein.
Section
6.2 Indemnification
Procedure.
Any
party entitled to indemnification under this Article VI (an “indemnified party”)
will give written notice to the indemnifying party of any matter giving rise
to
a claim for indemnification; provided, that the failure of any party entitled
to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VI except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action, proceeding or claim is brought against
an
indemnified party in respect of which indemnification is sought hereunder,
the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnifying party a conflict of interest between
it
and the indemnified party exists with respect to such action, proceeding or
claim (in which case the indemnifying party shall be responsible for the
reasonable fees and expenses of one separate counsel for the indemnified
parties), to assume the defense thereof with counsel reasonably satisfactory
to
the indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle
or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then
the
indemnified party may, at its option, defend, settle or otherwise compromise
or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party’s costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party
and
shall furnish to the indemnifying party all information reasonably available
to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto.
If
the indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party shall not
be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent. Notwithstanding anything in this Article VI to the
contrary, the indemnifying party shall not, without the indemnified party’s
prior written consent, settle or compromise any claim or consent to entry of
any
judgment in respect thereof which imposes any future obligation on the
indemnified party or which does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the indemnified party of a
release from all liability in respect of such claim. The indemnification
obligations to defend the indemnified party required by this Article VI shall
be
made by periodic payments of the amount thereof during the course of
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred, so long as the indemnified party shall refund
such moneys if it is ultimately determined by a court of competent jurisdiction
that such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to pursuant to the
law.
24
ARTICLE
VII
MISCELLANEOUS
Section
7.1 Fees
and Expenses.
Each
party shall pay the fees and expenses of its advisors, counsel, accountants
and
other experts, if any, and all other expenses, incurred by such party incident
to the negotiation, preparation, execution, delivery and performance of this
Agreement; provided,
however,
that
the Company shall pay all actual attorneys’ fees and expenses (including
disbursements and out-of-pocket expenses) incurred by the Purchaser in
connection with the preparation, negotiation, execution and delivery of the
Transaction Documents and the transactions contemplated thereunder, which
payment shall be made at Closing and shall not exceed $20,000 (which payment
may
be withheld from the amount delivered to the Company by the Purchaser on
Closing). In addition, the Company shall pay all reasonable fees and expenses
incurred by the Purchaser in connection with the enforcement of this Agreement
or any of the other Transaction Documents, including, without limitation, all
reasonable attorneys’ fees and expenses.
Section
7.2 Specific
Performance; Consent to Jurisdiction; Venue.
(a) The
Company and the Purchaser acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement or the other
Transaction Documents were not performed in accordance with their specific
terms
or were otherwise breached. It is accordingly agreed that the parties shall
be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement or the other Transaction Documents and to enforce
specifically the terms and provisions hereof or thereof, this being in addition
to any other remedy to which any of them may be entitled by law or
equity.
(b) The
parties agree that venue for any dispute arising under this Agreement will
lie
exclusively in the state or federal courts located in New York County, New
York,
and the parties irrevocably waive any right to raise forum
non conveniens
or any
other argument that New York is not the proper venue. The parties irrevocably
consent to personal jurisdiction in the state and federal courts of the state
of
New York. The Company and the Purchaser consent to process being served in
any
such suit, action or proceeding by mailing a copy thereof to such party at
the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 7.2 shall affect or limit any right to serve
process in any other manner permitted by law. The Company and the Purchaser
hereby agree that the prevailing party in any suit, action or proceeding arising
out of or relating to the Securities, this Agreement or the other Transaction
Documents, shall be entitled to reimbursement for reasonable legal fees from
the
non-prevailing party. The parties hereby waive all rights to a trial by jury.
25
Section
7.3 Entire
Agreement; Amendment.
This
Agreement and the Transaction Documents contain the entire understanding and
agreement of the parties with respect to the matters covered hereby and, except
as specifically set forth herein or in the other Transaction Documents, neither
the Company nor the Purchaser make any representation, warranty, covenant or
undertaking with respect to such matters, and they supersede all prior
understandings and agreements with respect to said subject matter, all of which
are merged herein. No provision of this Agreement may be waived or amended
other
than by a written instrument signed by the Company and the Purchaser. Any
amendment or waiver effected in accordance with this Section 7.3 shall be
binding upon the Purchaser (and its assigns) and the Company.
Section
7.4 Notices.
Any
notice, demand, request, waiver or other communication required or permitted
to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery by telecopy or facsimile at the address or number designated below
(if
delivered on a business day during normal business hours where such notice
is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice
is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses
for
such communications shall be:
|
If
to the Company:
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|
|
▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
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|
|
▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇
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|
|
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
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|
|
Attention:
▇▇▇▇ ▇. ▇▇▇▇▇
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|
with
copies (which copies
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|
|
shall
not constitute notice
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to
the Company) to:
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▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Brand, LLP
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|
3300
▇▇▇▇▇ Fargo Center
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▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
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Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
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Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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26
|
If
to the Purchaser:
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Platinum
Long Term Growth V, LLC
|
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▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
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▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
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Fax:
________________
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Attention:
▇▇▇▇ ▇▇▇▇▇▇▇
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|
|
with
copies (which copies
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|
shall
not constitute notice
|
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to
the Company) to:
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▇▇▇▇▇
▇▇▇▇▇▇▇▇ & Melloni, PLC
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▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
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▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
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Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
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Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Any
party
hereto may from time to time change its address for notices by giving written
notice of such changed address to the other party hereto.
Section
7.5 [Reserved]
Section
7.6 Headings.
The
article, section and subsection headings in this Agreement are for convenience
only and shall not constitute a part of this Agreement for any other purpose
and
shall not be deemed to limit or affect any of the provisions
hereof.
Section
7.7 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns. After the Closing, the assignment by a party
to
this Agreement of any rights hereunder shall not affect the obligations of
such
party under this Agreement. The Purchaser may assign the Securities and its
rights under this Agreement and the other Transaction Documents and any other
rights hereto and thereto, in whole or in part, without the consent of the
Company.
Section
7.8 No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
Section
7.9 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts
of
law principles which would result in the application of the substantive law
of
another jurisdiction. This Agreement shall not be interpreted or construed
with
any presumption against the party causing this Agreement to be
drafted.
Section
7.10 Survival.
The
representations and warranties of the Company and the Purchaser shall survive
the execution and delivery hereof and the Closing until the second anniversary
of the Closing Date. The agreements and covenants set forth in Articles I,
III,
V, VI and VII of this Agreement shall survive the execution and delivery hereof
and such Closing hereunder until terminated in accordance with the terms of
such
sections.
27
Section
7.11 Counterparts.
This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and shall become effective
when counterparts have been signed by each party and delivered to the other
parties hereto, it being understood that all parties need not sign the same
counterpart.
Section
7.12 Publicity.
The
Company agrees that it will not disclose, and will not include in any public
announcement, the name of the Purchaser without the consent of the Purchaser,
which consent shall not be unreasonably withheld or delayed, or unless and
until
such disclosure is required by law, rule or applicable regulation, including
without limitation any disclosure pursuant to the Registration Statement, and
then only to the extent of such requirement. Notwithstanding the foregoing,
the
Purchaser consents to being identified in any filings the Company makes with
the
Commission to the extent required by law or the rules and regulations of the
Commission.
Section
7.13 Severability.
The
provisions of this Agreement are severable and, in the event that any court
of
competent jurisdiction shall determine that any one or more of the provisions
or
part of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part
of a
provision of this Agreement and this Agreement shall be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible.
Section
7.14 Further
Assurances.
From
and after the date of this Agreement, upon the request of the Purchaser or
the
Company, the Company and the Purchaser shall execute and deliver such
instruments, documents and other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement and the other Transaction Documents
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IN
WITNESS WHEREOF, the parties hereto have caused this Note and Warrant Purchase
Agreement to be duly executed by their respective authorized officers as of
the
date first above written.
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By:
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/s/
▇▇▇▇ ▇. ▇▇▇▇▇
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Name:
▇▇▇▇ ▇. ▇▇▇▇▇
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Title:
Chief Financial Officer
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PLATINUM
LONG TERM GROWTH V, LLC
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By:
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/s/
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title:
General Manager
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Signature
Page