CENTURION GOLD HOLDINGS, INC.
SECURITIES PURCHASE AGREEMENT
FEBRUARY 18, 2005
TABLE OF CONTENTS
PAGE
1. Agreement to Sell and Purchase.........................................1
2. Fees and Warrant.......................................................1
3. Closing, Delivery and Payment..........................................2
3.1 Closing........................................................2
3.2 Delivery.......................................................2
4. Representations and Warranties of the Company..........................2
4.1 Organization, Good Standing and Qualification..................3
4.2 Subsidiaries...................................................3
4.3 Capitalization; Voting Rights..................................4
4.4 Authorization; Binding Obligations.............................4
4.5 Liabilities....................................................5
4.6 Agreements; Action.............................................5
4.7 Obligations to Related Parties.................................6
4.8 Changes........................................................6
4.9 Title to Properties and Assets; Liens, Etc.....................7
4.10 Intellectual Property..........................................8
4.11 Compliance with Other Instruments..............................8
4.12 Litigation.....................................................9
4.13 Tax Returns and Payments.......................................9
4.14 Employees......................................................9
4.15 Registration Rights and Voting Rights.........................10
4.16 Compliance with Laws; Permits.................................10
4.17 Environmental and Safety Laws.................................10
4.18 Valid Offering................................................11
4.19 Full Disclosure...............................................11
4.20 Insurance.....................................................11
4.21 SEC Reports...................................................11
4.22 Listing.......................................................12
4.23 No Integrated Offering........................................12
4.24 Stop Transfer.................................................12
4.25 Dilution......................................................12
4.26 Patriot Act ..................................................12
5. Representations and Warranties of the Purchaser.......................13
5.1 No Shorting...................................................13
5.2 Requisite Power and Authority.................................13
5.3 Investment Representations....................................13
5.4 Purchaser Bears Economic Risk.................................14
5.5 Acquisition for Own Account...................................14
5.6 Purchaser Can Protect Its Interest............................14
5.7 Accredited Investor...........................................14
5.8 Legends.......................................................14
6. Covenants of the Company..............................................15
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6.1 Stop-Orders...................................................15
6.2 Listing.......................................................15
6.3 Market Regulations............................................16
6.4 Reporting Requirements........................................16
6.5 Use of Funds..................................................16
6.6 Access to Facilities..........................................16
6.7 Taxes.........................................................17
6.8 Insurance.....................................................17
6.9 Intellectual Property.........................................18
6.10 Properties....................................................18
6.11 Confidentiality...............................................18
6.12 Required Approvals............................................18
6.13 Reissuance of Securities......................................19
6.14 Opinion.......................................................20
6.15 Margin Stock..................................................19
6.16 Restricted Cash Disclosure....................................19
6.17 Financing Right of First Refusal..............................19
6.18 Foreign Security Agreements and Guarantees....................19
7. Covenants of the Purchaser............................................21
7.1 Confidentiality...............................................21
7.2 Non-Public Information........................................21
8. Covenants of the Company and Purchaser Regarding Indemnification......21
8.1 Company Indemnification.......................................21
8.2 Purchaser's Indemnification...................................21
9. Conversion of Convertible Note........................................21
9.1 Mechanics of Conversion.......................................21
10. Registration Rights...................................................23
10.1 Registration Rights Granted...................................23
10.2 Offering Restrictions.........................................23
11. Miscellaneous.........................................................23
11.1 Governing Law.................................................23
11.2 Survival......................................................24
11.3 Successors....................................................24
11.4 Entire Agreement..............................................24
11.5 Severability..................................................24
11.6 Amendment and Waiver..........................................24
11.7 Delays or Omissions...........................................24
11.8 Notices.......................................................25
11.9 Attorneys' Fees...............................................26
11.10 Titles and Subtitles..........................................26
11.11 Facsimile Signatures; Counterparts............................26
11.12 Broker's Fees.................................................26
11.13 Construction..................................................26
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LIST OF EXHIBITS
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Form of Convertible Term Note....................................... Exhibit A
Form of Warrant..................................................... Exhibit B
Form of Opinion..................................................... Exhibit C
Form of Escrow Agreement............................................ Exhibit D
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of February 18, 2005, by and between Centurion Gold Holdings, Inc., a
Florida corporation (the "Company"), CENTURION DELAWARE GOLD HOLDINGS, INC., a
Delaware corporation and wholly-owned subsidiary of the Company (the
Subsidiary"), and Laurus Master Fund, Ltd., a Cayman Islands company (the
"Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale to the Purchaser of a
Convertible Term Note in the aggregate principal amount of Ten Million Dollars
($10,000,000) (as amended, modified or supplemented from time to time, the
"Note"), which Note is convertible into shares of the Company's common stock,
$0.0001 par value per share (the "Common Stock") at an initial fixed conversion
price of $0.30 per share of Common Stock ("Fixed Conversion Price");
WHEREAS, the Company wishes to issue a warrant to the Purchaser to
purchase up to 3,750,000 shares of the Company's Common Stock (subject to
adjustment as set forth therein) in connection with Purchaser's purchase of the
Note;
WHEREAS, Purchaser desires to purchase the Note and the Warrant (as
defined in Section 2) on the terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and Warrant to
Purchaser on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Sell and Purchase. Pursuant to the terms and
conditions set forth in this Agreement, on the Closing Date (as defined in
Section 3), the Company agrees to sell to the Purchaser, and the Purchaser
hereby agrees to purchase from the Company, a Note in the aggregate principal
amount of $10,000,000 convertible in accordance with the terms thereof into
shares of the Company's Common Stock in accordance with the terms of the Note
and this Agreement. The Note purchased on the Closing Date shall be known as the
"Offering." A form of the Note is annexed hereto as Exhibit A. The Note will
mature on the Maturity Date (as defined in the Note). Collectively, the Note and
Warrant and Common Stock issuable in payment of the Note, upon conversion of the
Note and upon exercise of the Warrant are referred to as the "Securities."
2. Fees and Warrant. On the Closing Date:
(a) The Company will issue and deliver to the Purchaser a Warrant to
purchase up to3,750,000 shares of Common Stock in connection with the
Offering (as amended, modified or supplemented from time to time, the
"Warrant") pursuant to Section 1 hereof. The Warrant must be delivered on
the Closing Date. A form of Warrant is annexed hereto as Exhibit B. All
the representations, covenants, warranties, undertakings, and
indemnification, and other rights made or granted to or for the benefit of
the Purchaser by the Company are hereby also made and granted in respect
of the Warrant and shares of the Company's Common Stock issuable upon
exercise of the Warrant (the "Warrant Shares").
(b) Subject to the terms of Section 2(d) below, the Company shall
pay to Laurus Capital Management, LLC, the manager of the Purchaser, a
closing payment in an amount equal to three and six tenths percent (3.60%)
of the aggregate principal amount of the Note. The foregoing fee is
referred to herein as the "Closing Payment."
(c) The Company shall reimburse the Purchaser for its reasonable
expenses (including legal fees and expenses) incurred in connection with
the preparation and negotiation of this Agreement and the Related
Agreements (as hereinafter defined), and expenses incurred in connection
with the Purchaser's due diligence review of the Company and its
Subsidiaries (as defined in Section 6.8) and all related matters. Amounts
required to be paid under this Section 2(c) will be paid on the Closing
Date and shall be $37,500 for such expenses referred to in this Section
2(c) (net of deposits previously paid).
(d) The Closing Payment and the expenses referred to in the
preceding clause (c) (net of deposits previously paid by the Company)
shall be paid at closing out of funds held pursuant to a Escrow Agreement
(as defined below) and a disbursement letter (the "Disbursement Letter").
3. Closing, Delivery and Payment.
3.1 Closing. Subject to the terms and conditions herein, the
closing of the transactions contemplated hereby (the "Closing"), shall take
place on the date hereof, at such time or place as the Company and Purchaser may
mutually agree (such date is hereinafter referred to as the "Closing Date").
3.2 Delivery. Pursuant to the Escrow Agreement, at the Closing
on the Closing Date, the Company will deliver to the Purchaser, among other
things, a Note in the form attached as Exhibit A representing the aggregate
principal amount of $10,000,000 and a Warrant in the form attached as Exhibit B
in the Purchaser's name representing 3,750,000 Warrant Shares and the Purchaser
will deliver to the Company, among other things, the amounts set forth in the
Disbursement Letter by certified funds or wire transfer (it being understood
that the Company shall deposit, on behalf of the Subsidiary, $ 9,000,000 of the
proceeds of the Note shall be placed in the Restricted Account (as defined in
the Restricted Account Agreement referred to below)).
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4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows (which representations and
warranties are supplemented by the Company's filings under the Securities
Exchange Act of 1934 made prior to the date of this Agreement (collectively, the
"Exchange Act Filings"), copies of which have been provided to the Purchaser):
4.1 Organization, Good Standing and Qualification. Each of the
Company and each of its Subsidiaries is a corporation, partnership or limited
liability company, as the case may be, duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization. Each of the
Company and each of its Subsidiaries has the corporate power and authority to
own and operate its properties and assets, to execute and deliver (i) this
Agreement, (ii) the Note and the Warrant to be issued in connection with this
Agreement, (iii) the Master Security Agreement dated as of the date hereof
between the Company, certain Subsidiaries of the Company and the Purchaser (as
amended, modified or supplemented from time to time, the "Master Security
Agreement"), (iv) the Registration Rights Agreement relating to the Securities
dated as of the date hereof between the Company and the Purchaser (as amended,
modified or supplemented from time to time, the "Registration Rights
Agreement"), (v) the Stock Pledge Agreement dated as of the date hereof between
the Company and the Purchaser, (vi) the Escrow Agreement dated as of the date
hereof among the Company, the Purchaser and the escrow agent referred to
therein, substantially in the form of Exhibit D hereto (as amended, modified or
supplemented from time to time, the "Escrow Agreement"), (vii) the Restricted
Account Agreement dated as of the date hereof among the Company, the Purchaser
and North Fork Bank (as amended, modified or supplemented from time to time, the
"Restricted Account Agreement"), (viii) the Restricted Account Side Letter
related to the Restricted Account Agreement dated as of the date hereof between
the Company and the Purchaser (as amended, modified or supplemented from time to
time, the "Restricted Account Side Letter"), (ix) the Subordination Agreement
dated as of the date hereof between the subordinated lender party thereto and
the Purchaser (as amended, modified or supplemented from time to time, the
"Subordination Agreement") and (x) all other agreements related to this
Agreement and the Note and referred to herein (the preceding clauses (ii)
through (x), collectively, the "Related Agreements"), to issue and sell the Note
and the shares of Common Stock issuable upon conversion of the Note (the "Note
Shares"), to issue and sell the Warrant and the Warrant Shares, and to carry out
the provisions of this Agreement and the Related Agreements and to carry on its
business as presently conducted. Each of the Company and each of its
Subsidiaries is duly qualified and is authorized to do business and is in good
standing as a foreign corporation, partnership or limited liability company, as
the case may be, in all jurisdictions in which the nature of its activities and
of its properties (both owned and leased) makes such qualification necessary,
except for those jurisdictions in which failure to do so has not, or could not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the business, assets, liabilities, condition (financial or
otherwise), properties, operations or prospects of the Company and it
Subsidiaries, taken individually and as a whole (a "Material Adverse Effect").
4.2 Subsidiaries. Each direct and indirect Subsidiary of the
Company, the direct owner of such Subsidiary and its percentage ownership
thereof, is set forth on Schedule 4.2. For the purpose of this Agreement, a
"Subsidiary" of any person or entity means (i) a corporation or other entity
whose shares of stock or other ownership interests having ordinary voting power
(other than stock or other ownership interests having such power only by reason
of the happening of a contingency) to elect a majority of the directors of such
corporation, or other persons or entities performing similar functions for such
person or entity, are owned, directly or indirectly, by such person or entity or
(ii) a corporation or other entity in which such person or entity owns, directly
or indirectly, more than 50% of the equity interests at such time.
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4.3 Capitalization; Voting Rights.
(a) The authorized capital stock of the Company, as of the date
hereof consists of 320,000,000 shares, of which 300,000,000 are shares of
Common Stock, par value $.0001 per share, 54,823,750 shares of which are
issued and outstanding and 20,000,000 are shares of preferred stock, par
value $.0001 per share of which 0 shares of preferred stock are issued and
outstanding. The authorized capital stock of each Subsidiary of the
Company is set forth on Schedule 4.3.
(b) Except as disclosed on Schedule 4.3 and the Exchange Act
Filings, other than: (i) the shares reserved for issuance under the
Company's stock option plans; and (ii) shares which may be granted
pursuant to this Agreement and the Related Agreements, there are no
outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or stockholder agreements, or
arrangements or agreements of any kind for the purchase or acquisition
from the Company of any of its securities. Except as disclosed on Schedule
4.3, neither the offer, issuance or sale of any of the Note or the
Warrant, or the issuance of any of the Note Shares or Warrant Shares, nor
the consummation of any transaction contemplated hereby will result in a
change in the price or number of any securities of the Company
outstanding, under anti-dilution or other similar provisions contained in
or affecting any such securities.
(c) All issued and outstanding shares of the Company's Common Stock:
(i) have been duly authorized and validly issued and are fully paid and
nonassessable; and (ii) were issued in compliance with all applicable
state and federal laws concerning the issuance of securities.
(d) The rights, preferences, privileges and restrictions of the
shares of the Common Stock are as stated in the Company's Certificate of
Incorporation (the "Charter"). The Note Shares and Warrant Shares have
been duly and validly reserved for issuance. When issued in compliance
with the provisions of this Agreement and the Company's Charter, the
Securities will be validly issued, fully paid and nonassessable, and will
be free of any liens or encumbrances; provided, however, that the
Securities may be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein or as otherwise required by
such laws at the time a transfer is proposed.
4.4 Authorization; Binding Obligations. All corporate,
partnership or limited liability company, as the case may be, action on the part
of the Company and each of its Subsidiaries (including the respective officers
and directors) necessary for the authorization of this Agreement and the Related
Agreements, the performance of all obligations of the Company and its
Subsidiaries hereunder and under the other Related Agreements at the Closing
and, the authorization, sale, issuance and delivery of the Note and Warrant has
been taken or will be taken prior to the Closing. This Agreement and the Related
Agreements, when executed and delivered and to the extent it is a party thereto,
will be valid and binding obligations of each of the Company and each of its
Subsidiaries, enforceable against each such person in accordance with their
terms, except:
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(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and
(b) general principles of equity that restrict the availability of
equitable or legal remedies.
The sale of the Note and the subsequent conversion of the Note into Note Shares
are not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with. The issuance of the
Warrant and the subsequent exercise of the Warrant for Warrant Shares are not
and will not be subject to any preemptive rights or rights of first refusal that
have not been properly waived or complied with.
4.5 Liabilities. Neither the Company nor any of its
Subsidiaries has any contingent liabilities, except current liabilities incurred
in the ordinary course of business and liabilities disclosed in any Exchange Act
Filings.
4.6 Agreements; Action. Except as set forth on Schedule 4.6 or
as disclosed in any Exchange Act Filings:
(a) there are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the
Company or any of its Subsidiaries is a party or by which it is bound
which may involve: (i) obligations (contingent or otherwise) of, or
payments to, the Company in excess of $50,000 (other than obligations of,
or payments to, the Company arising from purchase or sale agreements
entered into in the ordinary course of business); or (ii) the transfer or
license of any patent, copyright, trade secret or other proprietary right
to or from the Company (other than licenses arising from the purchase of
"off the shelf" or other standard products); or (iii) provisions
restricting the development, manufacture or distribution of the Company's
products or services; or (iv) indemnification by the Company with respect
to infringements of proprietary rights.
(b) Since March 31, 2004, neither the Company nor any of its
Subsidiaries has: (i) declared or paid any dividends, or authorized or
made any distribution upon or with respect to any class or series of its
capital stock; (ii) incurred any indebtedness for money borrowed or any
other liabilities (other than ordinary course obligations) individually in
excess of $50,000 or, in the case of indebtedness and/or liabilities
individually less than $50,000, in excess of $100,000 in the aggregate;
(iii) made any loans or advances to any person not in excess, individually
or in the aggregate, of $100,000, other than ordinary course advances for
travel expenses; or (iv) sold, exchanged or otherwise disposed of any of
its assets or rights, other than the sale of its inventory in the ordinary
course of business.
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(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are
affiliated therewith) shall be aggregated for the purpose of meeting the
individual minimum dollar amounts of such subsections.
4.7 Obligations to Related Parties. Except as set forth on
Schedule 4.7, there are no obligations of the Company or any of its Subsidiaries
to officers, directors, stockholders or employees of the Company or any of its
Subsidiaries other than:
(a) for payment of salary for services rendered and for bonus
payments;
(b) reimbursement for reasonable expenses incurred on behalf of the
Company and its Subsidiaries;
(c) for other standard employee benefits made generally available to
all employees (including stock option agreements outstanding under any
stock option plan approved by the Board of Directors of the Company); and
(d) obligations listed in the Company's financial statements or
disclosed in any of its Exchange Act Filings.
Except as described above or set forth on Schedule 4.7, none of the officers,
directors or, to the best of the Company's knowledge, key employees or
stockholders of the Company or any members of their immediate families, are
indebted to the Company, individually or in the aggregate, in excess of $50,000
or have any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation which competes with the Company, other
than passive investments in publicly traded companies (representing less than
one percent (1%) of such company) which may compete with the Company. Except as
described above, no officer, director or stockholder, or any member of their
immediate families, is, directly or indirectly, interested in any material
contract with the Company and no agreements, understandings or proposed
transactions are contemplated between the Company and any such person. Except as
set forth on Schedule 4.7, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
4.8 Changes. Since March 31, 2004, except as disclosed in any
Exchange Act Filing or in any Schedule to this Agreement or to any of the
Related Agreements, there has not been:
(a) any change in the business, assets, liabilities, condition
(financial or otherwise), properties, operations or prospects of the
Company or any of its Subsidiaries, which individually or in the aggregate
has had, or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(b) any resignation or termination of any officer, key employee or
group of employees of the Company or any of its Subsidiaries;
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(c) any material change, except in the ordinary course of business,
in the contingent obligations of the Company or any of its Subsidiaries by
way of guaranty, endorsement, indemnity, warranty or otherwise;
(d) any damage, destruction or loss, whether or not covered by
insurance, has had, or could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect;
(e) any waiver by the Company or any of its Subsidiaries of a
valuable right or of a material debt owed to it;
(f) any direct or indirect loans made by the Company or any of its
Subsidiaries to any stockholder, employee, officer or director of the
Company or any of its Subsidiaries, other than advances made in the
ordinary course of business;
(g) any material change in any compensation arrangement or agreement
with any employee, officer, director or stockholder of the Company or any
of its Subsidiaries;
(h) any declaration or payment of any dividend or other distribution
of the assets of the Company or any of its Subsidiaries;
(i) any labor organization activity related to the Company or any of
its Subsidiaries;
(j) any debt, obligation or liability incurred, assumed or
guaranteed by the Company or any of its Subsidiaries, except those for
immaterial amounts and for current liabilities incurred in the ordinary
course of business;
(k) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets owned by the Company
or any of its Subsidiaries;
(l) any change in any material agreement to which the Company or any
of its Subsidiaries is a party or by which either the Company or any of
its Subsidiaries is bound which either individually or in the aggregate
has had, or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(m) any other event or condition of any character that, either
individually or in the aggregate, has had, or could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect; or
(n) any arrangement or commitment by the Company or any of its
Subsidiaries to do any of the acts described in subsection (a) through (m)
above.
4.9 Title to Properties and Assets; Liens, Etc. Except as set
forth on Schedule 4.9, each of the Company and each of its Subsidiaries has good
and marketable title to its properties and assets, and good title to its
leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than:
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(a) those resulting from taxes which have not yet become delinquent;
(b) minor liens and encumbrances which do not materially detract
from the value of the property subject thereto or materially impair the
operations of the Company or any of its Subsidiaries; and
(c) those that have otherwise arisen in the ordinary course of
business.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company and its Subsidiaries are in good operating
condition and repair and are reasonably fit and usable for the purposes for
which they are being used. Except as set forth on Schedule 4.9, the Company and
its Subsidiaries are in compliance with all material terms of each lease to
which it is a party or is otherwise bound.
4.10 Intellectual Property.
(a) Each of the Company and each of its Subsidiaries owns or
possesses sufficient legal rights to all patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information and
other proprietary rights and processes necessary for its business as now
conducted and to the Company's knowledge, as presently proposed to be
conducted (the "Intellectual Property"), without any known infringement of
the rights of others. There are no outstanding options, licenses or
agreements of any kind relating to the foregoing proprietary rights, nor
is the Company or any of its Subsidiaries bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes of any
other person or entity other than such licenses or agreements arising from
the purchase of "off the shelf" or standard products.
(b) Neither the Company nor any of its Subsidiaries has received any
communications alleging that the Company or any of its Subsidiaries has
violated any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other
person or entity, nor is the Company or any of its Subsidiaries aware of
any basis therefor.
(c) The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any of
its employees made prior to their employment by the Company or any of its
Subsidiaries, except for inventions, trade secrets or proprietary
information that have been rightfully assigned to the Company or any of
its Subsidiaries.
4.11 Compliance with Other Instruments. Neither the Company
nor any of its Subsidiaries is in violation or default of (x) any term of its
Charter or Bylaws, or (y) of any provision of any indebtedness, mortgage,
indenture, contract, agreement or instrument to which it is party or by which it
is bound or of any judgment, decree, order or writ, which violation or default,
in the case of this clause (y), has had, or could reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect. The
execution, delivery and performance of and compliance with this Agreement and
the Related Agreements to which it is a party, and the issuance and sale of the
Note by the Company and the other Securities by the Company each pursuant hereto
and thereto, will not, with or without the passage of time or giving of notice,
result in any such material violation, or be in conflict with or constitute a
default under any such term or provision, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or any of its Subsidiaries or the suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to the Company, its business or operations or any of its
assets or properties.
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4.12 Litigation. Except as set forth on Schedule 4.12 hereto,
there is no action, suit, proceeding or investigation pending or, to the
Company's knowledge, currently threatened against the Company or any of its
Subsidiaries that prevents the Company or any of its Subsidiaries from entering
into this Agreement or the other Related Agreements, or from consummating the
transactions contemplated hereby or thereby, or which has had, or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect or any change in the current equity ownership of the
Company or any of its Subsidiaries, nor is the Company aware that there is any
basis to assert any of the foregoing. Neither the Company nor any of its
Subsidiaries is a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company or any of its Subsidiaries currently pending or which the Company or any
of its Subsidiaries intends to initiate.
4.13 Tax Returns and Payments. Each of the Company and each of
its Subsidiaries has timely filed all tax returns (federal, state and local)
required to be filed by it. All taxes shown to be due and payable on such
returns, any assessments imposed, and all other taxes due and payable by the
Company or any of its Subsidiaries on or before the Closing, have been paid or
will be paid prior to the time they become delinquent. Except as set forth on
Schedule 4.13, neither the Company nor any of its Subsidiaries has been advised:
(a) that any of its returns, federal, state or other, have been or
are being audited as of the date hereof; or
(b) of any deficiency in assessment or proposed judgment to its
federal, state or other taxes.
The Company has no knowledge of any liability of any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.
4.14 Employees. Except as set forth on Schedule 4.14, neither
the Company nor any of its Subsidiaries has any collective bargaining agreements
with any of its employees. There is no labor union organizing activity pending
or, to the Company's knowledge, threatened with respect to the Company or any of
its Subsidiaries. Except as disclosed in the Exchange Act Filings or on Schedule
4.14, neither the Company nor any of its Subsidiaries is a party to or bound by
any currently effective employment contract, deferred compensation arrangement,
bonus plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation plan or agreement. To the Company's knowledge, no employee
of the Company or any of its Subsidiaries, nor any consultant with whom the
Company or any of its Subsidiaries has contracted, is in violation of any term
of any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company or any of its Subsidiaries because of the nature of
the business to be conducted by the Company or any of its Subsidiaries; and to
the Company's knowledge the continued employment by the Company or any of its
Subsidiaries of its present employees, and the performance of the Company's and
its Subsidiaries' contracts with its independent contractors, will not result in
any such violation. Neither the Company nor any of its Subsidiaries is aware
that any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with their duties to the Company or any of its Subsidiaries. Neither
the Company nor any of its Subsidiaries has received any notice alleging that
any such violation has occurred. Except for employees who have a current
effective employment agreement with the Company or any of its Subsidiaries, no
employee of the Company or any of its Subsidiaries has been granted the right to
continued employment by the Company or any of its Subsidiaries or to any
material compensation following termination of employment with the Company or
any of its Subsidiaries. Except as set forth on Schedule 4.14, the Company is
not aware that any officer, key employee or group of employees intends to
terminate his, her or their employment with the Company or any of its
Subsidiaries, nor does the Company or any of its Subsidiaries have a present
intention to terminate the employment of any officer, key employee or group of
employees.
9
4.15 Registration Rights and Voting Rights. Except as set
forth on Schedule 4.15 and except as disclosed in Exchange Act Filings, neither
the Company nor any of its Subsidiaries is presently under any obligation, and
neither the Company nor any of its Subsidiaries has granted any rights, to
register any of the Company's or its Subsidiaries' presently outstanding
securities or any of its securities that may hereafter be issued. Except as set
forth on Schedule 4.15 and except as disclosed in Exchange Act Filings, to the
Company's knowledge, no stockholder of the Company or any of its Subsidiaries
has entered into any agreement with respect to the voting of equity securities
of the Company or any of its Subsidiaries.
4.16 Compliance with Laws; Permits. Neither the Company nor
any of its Subsidiaries is in violation of any applicable statute, rule,
regulation, order or restriction of any domestic or foreign government or any
instrumentality or agency thereof in respect of the conduct of its business or
the ownership of its properties which has had, or could reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement or any
other Related Agreement and the issuance of any of the Securities, except such
as has been duly and validly obtained or filed, or with respect to any filings
that must be made after the Closing, as will be filed in a timely manner. Each
of the Company and its Subsidiaries has all material franchises, permits,
licenses and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which could, either individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
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4.17 Environmental and Safety Laws. Neither the Company nor
any of its Subsidiaries is in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and to
its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation. Except as set forth on
Schedule 4.17, no Hazardous Materials (as defined below) are used or have been
used, stored, or disposed of by the Company or any of its Subsidiaries or, to
the Company's knowledge, by any other person or entity on any property owned,
leased or used by the Company or any of its Subsidiaries. For the purposes of
the preceding sentence, "Hazardous Materials" shall mean:
(a) materials which are listed or otherwise defined as "hazardous"
or "toxic" under any applicable local, state, federal and/or foreign laws
and regulations that govern the existence and/or remedy of contamination
on property, the protection of the environment from contamination, the
control of hazardous wastes, or other activities involving hazardous
substances, including building materials; or
(b) any petroleum products or nuclear materials.
4.18 Valid Offering. Assuming the accuracy of the
representations and warranties of the Purchaser contained in this Agreement, the
offer, sale and issuance of the Securities will be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws.
4.19 Full Disclosure. Each of the Company and each of its
Subsidiaries has provided the Purchaser with all information requested by the
Purchaser in connection with its decision to purchase the Note and Warrant,
including all information the Company and its Subsidiaries believe is reasonably
necessary to make such investment decision. Neither this Agreement, the Related
Agreements, the exhibits and schedules hereto and thereto nor any other document
delivered by the Company or any of its Subsidiaries to Purchaser or its
attorneys or agents in connection herewith or therewith or with the transactions
contemplated hereby or thereby, contain any untrue statement of a material fact
nor omit to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances in which they are
made, not misleading. Any financial projections and other estimates provided to
the Purchaser by the Company or any of its Subsidiaries were based on the
Company's and its Subsidiaries' experience in the industry and on assumptions of
fact and opinion as to future events which the Company or any of its
Subsidiaries, at the date of the issuance of such projections or estimates,
believed to be reasonable.
4.20 Insurance. Each of the Company and each of its
Subsidiaries has general commercial, product liability, fire and casualty
insurance policies with coverages which the Company believes are customary for
companies similarly situated to the Company and its Subsidiaries in the same or
similar business.
4.21 SEC Reports. Except as set forth on Schedule 4.21, the
Company has filed all proxy statements, reports and other documents required to
be filed by it under the Securities ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, as amended (the "Exchange
Act"). The Company has furnished the Purchaser with copies of: (i) its Annual
Report on Form 10-KSB for its fiscal year ended March 31, 2004; and (ii) its
Quarterly Report on Form 10-QSB for its fiscal quarter ended June 30, 2004, and
the Form 8-K filings which it has made during its fiscal year ending March 31,
2005 to date (collectively, the "SEC Reports"). Except as set forth on Schedule
4.21, each SEC Report was, at the time of its filing, in substantial compliance
with the requirements of its respective form and none of the SEC Reports, nor
the financial statements (and the notes thereto) included in the SEC Reports, as
of their respective filing dates, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
11
4.22 Listing. The Company's Common Stock is traded on the
National Association of Securities Dealers Over the Counter Bulletin Board
("NASD OTCBB") and satisfies all requirements for the continuation of such
trading. The Company has not received any notice that its Common Stock will not
be eligible to be traded on the NASD OTCBB or that its Common Stock does not
meet all requirements for such trading.
4.23 No Integrated Offering. Neither the Company, nor any of
its Subsidiaries or 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 or any of the Related Agreements 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 Rule
506 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.
4.24 Stop Transfer. The Securities are restricted securities
as of the date of this Agreement. Neither the Company nor any of its
Subsidiaries will issue any stop transfer order or other order impeding the sale
and delivery of any of the Securities at such time as the Securities are
registered for public sale or an exemption from registration is available,
except as required by state and federal securities laws.
4.25 Dilution. The Company specifically acknowledges that its
obligation to issue the shares of Common Stock upon conversion of the Note and
exercise of the Warrant is binding upon the Company and enforceable regardless
of the dilution such issuance may have on the ownership interests of other
shareholders of the Company.
4.26 Patriot Act. The Company certifies that, to the best of
Company's knowledge, neither the Company nor any of its Subsidiaries has been
designated, and is not owned or controlled, by a "suspected terrorist" as
defined in Executive Order 13224. The Company hereby acknowledges that the
Purchaser seeks to comply with all applicable laws concerning money laundering
and related activities. In furtherance of those efforts, the Company hereby
represents, warrants and agrees that: (i) none of the cash or property that the
Company or any of its Subsidiaries will pay or will contribute to the Purchaser
has been or shall be derived from, or related to, any activity that is deemed
criminal under United States law; and (ii) no contribution or payment by the
Company or any of its Subsidiaries to the Purchaser, to the extent that they are
within the Company's and/or its Subsidiaries' control shall cause the Purchaser
to be in violation of the United States Bank Secrecy Act, the United States
International Money Laundering Control Act of 1986 or the United States
International Money Laundering Abatement and Anti-Terrorist Financing Act of
2001. The Company shall promptly notify the Purchaser if any of these
representations ceases to be true and accurate regarding the Company or any of
its Subsidiaries. The Company agrees to provide the Purchaser any additional
information regarding the Company or any of its Subsidiaries that the Purchaser
deems necessary or convenient to ensure compliance with all applicable laws
concerning money laundering and similar activities. The Company understands and
agrees that if at any time it is discovered that any of the foregoing
representations are incorrect, or if otherwise required by applicable law or
regulation related to money laundering similar activities, the Purchaser may
undertake appropriate actions to ensure compliance with applicable law or
regulation, including but not limited to segregation and/or redemption of the
Purchaser's investment in the Company. The Company further understands that the
Purchaser may release confidential information about the Company and its
Subsidiaries and, if applicable, any underlying beneficial owners, to proper
authorities if the Purchaser, in its sole discretion, determines that it is in
the best interests of the Purchaser in light of relevant rules and regulations
under the laws set forth in subsection (ii) above.
12
5. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows (such representations
and warranties do not lessen or obviate the representations and warranties of
the Company set forth in this Agreement):
5.1 No Shorting. The Purchaser or any of its affiliates and
investment partners has not, will not and will not cause any person or entity to
directly engage in "short sales" of the Company's Common Stock as long as the
Note shall be outstanding.
5.2 Requisite Power and Authority. The Purchaser has all
necessary power and authority under all applicable provisions of law to execute
and deliver this Agreement and the Related Agreements and to carry out their
provisions. All corporate action on Purchaser's part required for the lawful
execution and delivery of this Agreement and the Related Agreements have been or
will be effectively taken prior to the Closing. Upon their execution and
delivery, this Agreement and the Related Agreements will be valid and binding
obligations of Purchaser, enforceable in accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and
(b) as limited by general principles of equity that restrict the
availability of equitable and legal remedies.
5.3 Investment Representations. Purchaser understands that the
Securities are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon Purchaser's representations
contained in the Agreement, including, without limitation, that the Purchaser is
an "accredited investor" within the meaning of Regulation D under the Securities
Act of 1933, as amended (the "Securities Act"). The Purchaser confirms that it
has received or has had full access to all the information it considers
necessary or appropriate to make an informed investment decision with respect to
the Note and the Warrant to be purchased by it under this Agreement and the Note
Shares and the Warrant Shares acquired by it upon the conversion of the Note and
the exercise of the Warrant, respectively. The Purchaser further confirms that
it has had an opportunity to ask questions and receive answers from the Company
regarding the Company's and its Subsidiaries' business, management and financial
affairs and the terms and conditions of the Offering, the Note, the Warrant and
the Securities and to obtain additional information (to the extent the Company
possessed such information or could acquire it without unreasonable effort or
expense) necessary to verify any information furnished to the Purchaser or to
which the Purchaser had access.
13
5.4 Purchaser Bears Economic Risk. The Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests. The Purchaser must bear the
economic risk of this investment until the Securities are sold pursuant to: (i)
an effective registration statement under the Securities Act; or (ii) an
exemption from registration is available with respect to such sale.
5.5 Acquisition for Own Account. The Purchaser is acquiring
the Note and Warrant and the Note Shares and the Warrant Shares for the
Purchaser's own account for investment only, and not as a nominee or agent and
not with a view towards or for resale in connection with their distribution.
5.6 Purchaser Can Protect Its Interest. The Purchaser
represents that by reason of its, or of its management's, business and financial
experience, the Purchaser has the capacity to evaluate the merits and risks of
its investment in the Note, the Warrant and the Securities and to protect its
own interests in connection with the transactions contemplated in this Agreement
and the Related Agreements. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement
or the Related Agreements.
5.7 Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
5.8 Legends.
(a) The Note shall bear substantially the following legend:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE AND THE
COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO CENTURION GOLD HOLDINGS, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED."
14
(b) The Note Shares and the Warrant Shares, if not issued by DWAC
system (as hereinafter defined), shall bear a legend which shall be in
substantially the following form until such shares are covered by an
effective registration statement filed with the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE
STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
CENTURION GOLD HOLDINGS, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
(c) The Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR THE
UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO CENTURION GOLD HOLDINGS, INC. THAT SUCH REGISTRATION
IS NOT REQUIRED."
6. Covenants of the Company. The Company covenants and agrees with
the Purchaser as follows:
6.1 Stop-Orders. The Company will advise the Purchaser,
promptly after it receives notice of issuance by the Securities and Exchange
Commission (the "SEC"), any state securities commission or any other regulatory
authority of any stop order or of any order preventing or suspending any
offering of any securities of the Company, or of the suspension of the
qualification of the Common Stock of the Company for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such purpose.
15
6.2 Listing. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon conversion of the Note and upon the
exercise of the Warrant on the NASD OTCBB (the "Principal Market") upon which
shares of Common Stock are listed (subject to official notice of issuance) and
shall maintain such listing so long as any other shares of Common Stock shall be
so listed. The Company will maintain the listing of its Common Stock on the
Principal Market, and will comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
National Association of Securities Dealers ("NASD") and such exchanges, as
applicable.
6.3 Market Regulations. The Company shall notify the SEC, NASD
and applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, 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 and promptly provide copies thereof to the Purchaser.
6.4 Reporting Requirements. The Company will timely file with
the SEC all reports required to be filed pursuant to the Exchange Act and
refrain from terminating its status as an issuer required by the Exchange Act to
file reports thereunder even if the Exchange Act or the rules or regulations
thereunder would permit such termination.
6.5 Use of Funds. The Company agrees that it will use the
proceeds of the sale of (x) the Note for (i) acquisitions approved by the
Purchaser and funded through Centurion Delaware Gold Holdings, Inc. (ii) general
working capital purposes and (y) the Warrant for general working capital
purposes only (it being understood that $9,000,000 of the proceeds of the Note
will be deposited in the Restricted Account on the Closing Date and shall be
subject to the terms and conditions of the Restricted Account Agreement and the
Restricted Account Side Letter).
6.6 Access to Facilities. Each of the Company and each of its
Subsidiaries will permit any representatives designated by the Purchaser (or any
successor of the Purchaser), upon reasonable notice and during normal business
hours, at such person's expense and accompanied by a representative of the
Company, to:
(a) visit and inspect any of the properties of the Company or any of
its Subsidiaries;
(b) examine the corporate and financial records of the Company or
any of its Subsidiaries (unless such examination is not permitted by
federal, state or local law or by contract) and make copies thereof or
extracts therefrom; and
(c) discuss the affairs, finances and accounts of the Company or any
of its Subsidiaries with the directors, officers and independent
accountants of the Company or any of its Subsidiaries.
Notwithstanding the foregoing, neither the Company nor any of its Subsidiaries
will provide any material, non-public information to the Purchaser unless the
Purchaser signs a confidentiality agreement and otherwise complies with
Regulation FD, under the federal securities laws.
16
6.7 Taxes. Each of the Company and each of its Subsidiaries
will promptly pay and discharge, or cause to be paid and discharged, when due
and payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Company and its
Subsidiaries; provided, however, that any such tax, assessment, charge or levy
need not be paid if the validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Company and/or such Subsidiary shall
have set aside on its books adequate reserves with respect thereto, and
provided, further, that the Company and its Subsidiaries will pay all such
taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security therefor.
6.8 Insurance. Each of the Company and its Subsidiaries will
keep its assets which are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in similar business similarly situated
as the Company and its Subsidiaries; and the Company and its Subsidiaries will
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons and property to the extent and in the
manner which the Company reasonably believes is customary for companies in
similar business similarly situated as the Company and its Subsidiaries and to
the extent available on commercially reasonable terms. The Company, and each of
its Subsidiaries will jointly and severally bear the full risk of loss from any
loss of any nature whatsoever with respect to the assets pledged to the
Purchaser as security for its obligations hereunder and under the Related
Agreements. At the Company's and each of its Subsidiaries' joint and several
cost and expense in amounts and with carriers reasonably acceptable to
Purchaser, the Company and each of its Subsidiaries shall (i) keep all its
insurable properties and properties in which it has an interest insured against
the hazards of fire, flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts, as is customary
in the case of companies engaged in businesses similar to the Company's or the
respective Subsidiary's including business interruption insurance; (ii) maintain
a bond in such amounts as is customary in the case of companies engaged in
businesses similar to the Company's or the respective Subsidiary's insuring
against larceny, embezzlement or other criminal misappropriation of insured's
officers and employees who may either singly or jointly with others at any time
have access to the assets or funds of the Company or any of its Subsidiaries
either directly or through governmental authority to draw upon such funds or to
direct generally the disposition of such assets; (iii) maintain public and
product liability insurance against claims for personal injury, death or
property damage suffered by others; (iv) maintain all such worker's compensation
or similar insurance as may be required under the laws of any state or
jurisdiction in which the Company or the respective Subsidiary is engaged in
business; and (v) furnish Purchaser with (x) copies of all policies and evidence
of the maintenance of such policies at least thirty (30) days before any
expiration date, (y) evidence that as to Purchaser the insurance coverage shall
not be impaired or invalidated by any act or neglect of the Company or any
Subsidiary. .
6.9 Intellectual Property. Each of the Company and each of its
Subsidiaries shall maintain in full force and effect its existence, rights and
franchises and all licenses and other rights to use Intellectual Property owned
or possessed by it and reasonably deemed to be necessary to the conduct of its
business.
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6.10 Properties. Each of the Company and each of its
Subsidiaries will keep its properties in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and each of the Company and each of its Subsidiaries will at all times
comply with each provision of all leases to which it is a party or under which
it occupies property if the breach of such provision could, either individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
6.11 Confidentiality. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of the
Purchaser, unless expressly agreed to by the Purchaser or unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement. Notwithstanding the foregoing, the Company may
disclose Purchaser's identity and the terms of this Agreement to its current and
prospective debt and equity financing sources.
6.12 Required Approvals. For so long as twenty-five percent
(25%) of the principal amount of the Note is outstanding, the Company, without
the prior written consent of the Purchaser, shall not, and shall not permit any
of its Subsidiaries to:
(a) (i) directly or indirectly declare or pay any dividends, other
than dividends paid to the Company or any of its wholly-owned
Subsidiaries, (ii) issue any preferred stock that is manditorily
redeemable prior to the one year anniversary of Maturity Date (as defined
in the Note) or (iii) redeem any of its preferred stock or other equity
interests
(b) liquidate, dissolve or effect a material reorganization (it
being understood that in no event shall the Company dissolve, liquidate or
merge with any other person or entity (unless the Company is the surviving
entity);
(c) become subject to (including, without limitation, by way of
amendment to or modification of) any agreement or instrument which by its
terms would (under any circumstances) restrict the Company's or any of its
Subsidiaries right to perform the provisions of this Agreement, any
Related Agreement or any of the agreements contemplated hereby or thereby;
(d) materially alter or change the scope of the business of the
Company and its Subsidiaries taken as a whole;
(e) (i) create, incur, assume or suffer to exist any indebtedness
(exclusive of trade debt and debt incurred to finance the purchase of
equipment (not in excess of five percent (5%) of the fair market value of
the Company's and its Subsidiaries' assets) whether secured or unsecured
other than (w) up to $5,000,000 principal amount of unsecured subordinated
indebtedness subject to terms, conditions and documentation satisfactory
to the Purchaser, (x) the Company's indebtedness to the Purchaser, (y)
indebtedness set forth on Schedule 6.12(e) attached hereto and made a part
hereof and any refinancings or replacements thereof on terms no less
favorable to the Purchaser than the indebtedness being refinanced or
replaced, and (z) any debt incurred in connection with the purchase of
assets in the ordinary course of business, or any refinancings or
replacements thereof on terms no less favorable to the Purchaser than the
indebtedness being refinanced or replaced; (ii) cancel any debt owing to
it in excess of $50,000 in the aggregate during any 12 month period; (iii)
assume, guarantee, endorse or otherwise become directly or contingently
liable in connection with any obligations of any other Person, except the
endorsement of negotiable instruments by the Company for deposit or
collection or similar transactions in the ordinary course of business or
guarantees of indebtedness otherwise permitted to be outstanding pursuant
to this clause (e); and
18
(f) create or acquire any Subsidiary after the date hereof unless
(i) such Subsidiary is a wholly-owned Subsidiary of the Company and (ii)
such Subsidiary becomes party to the Master Security Agreement (either by
executing a counterpart thereof or an assumption or joinder agreement in
respect thereof), executes such other documentation satisfactory to the
Purchaser and, to the extent required by the Purchaser, satisfies each
condition of this Agreement and the Related Agreements as if such
Subsidiary were a Subsidiary on the Closing Date.
6.13 Reissuance of Securities. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Section 5.8 above at such time as:
(a) the holder thereof is permitted to dispose of such Securities
pursuant to Rule 144(k) under the Securities Act; or
(b) upon resale subject to an effective registration statement after
such Securities are registered under the Securities Act.
The Company agrees to cooperate with the Purchaser in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the selling Purchaser and broker, if
any.
6.14 Opinion. On the Closing Date, the Company will deliver to
the Purchaser an opinion acceptable to the Purchaser from the Company's external
legal counsel. The Company will provide, at the Company's expense, such other
legal opinions in the future as are deemed reasonably necessary by the Purchaser
(and acceptable to the Purchaser) in connection with the conversion of the Note
and exercise of the Warrant.
6.15 Margin Stock. The Company will not permit any of the
proceeds of the Note or the Warrant to be used directly or indirectly to
"purchase" or "carry" "margin stock" or to repay indebtedness incurred to
"purchase" or "carry" "margin stock" within the respective meanings of each of
the quoted terms under Regulation U of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect.
6.16 Restricted Cash Disclosure. The Company agrees that, in
connection with its filing of its 8-K Report with the SEC concerning the
transactions contemplated by this Agreement and the Related Agreements (such
report, the "Laurus Transaction 8-K") in a timely manner after the date hereof,
it will disclose in such Laurus Transaction 8-K the amount of the proceeds of
the Note issued to the Purchaser that has been placed in a restricted cash
account and is subject to the terms and conditions of this Agreement and the
Related Agreements. Furthermore, the Company agrees to disclose in all public
filings required by the Commission (where appropriate) following the filing of
the Laurus Transaction 8-K, the existence of the restricted cash referred to in
the immediately preceding sentence, together with the amount thereof.
19
6.17 Financing Right of First Refusal. (a) The Company hereby
grants to the Purchaser a right of first refusal to provide any Additional
Financing (as defined below) to be issued by the Company and/or any of its
Subsidiaries, subject to the following terms and conditions. From and after the
date hereof, prior to the incurrence of any additional indebtedness and/or the
sale or issuance of any equity interests of the Company or any of its
Subsidiaries (an "Additional Financing"), the Company and/or any Subsidiary of
the Company, as the case may be, shall notify the Purchaser of its intention to
enter into such Additional Financing. In connection therewith, the Company
and/or the applicable Subsidiary thereof shall submit a fully executed term
sheet (a "Proposed Term Sheet") to the Purchaser setting forth the terms,
conditions and pricing of any such Additional Financing (such financing to be
negotiated on "arm's length" terms and the terms thereof to be negotiated in
good faith) proposed to be entered into by the Company and/or such Subsidiary.
The Purchaser shall have the right, but not the obligation, to deliver its own
proposed term sheet (the "Purchaser Term Sheet") setting forth the terms and
conditions upon which Purchaser would be willing to provide such Additional
Financing to the Company and/or such Subsidiary. The Purchaser Term Sheet shall
contain terms no less favorable to the Company and/or such Subsidiary than those
outlined in Proposed Term Sheet. The Purchaser shall deliver such Purchaser Term
Sheet within ten business days of receipt of each such Proposed Term Sheet. If
the provisions of the Purchaser Term Sheet are at least as favorable to the
Company and/or such Subsidiary, as the case may be, as the provisions of the
Proposed Term Sheet, the Company and/or such Subsidiary shall enter into and
consummate the Additional Financing transaction outlined in the Purchaser Term
Sheet.
(b) The Company will not, and will not permit its Subsidiaries
to, agree, directly or indirectly, to any restriction with any person or entity
which limits the ability of the Purchaser to consummate an Additional Financing
with the Company or any of its Subsidiaries..
6.18 Foreign Security Agreements and Guarantees. No later than
30 days following a request by the Purchaser, the Company shall cause each
Subsidiary of the Company requested by the Purchaser and organized in a
jurisdiction outside of the United States (collectively, the "Foreign
Subsidiaries") to, to the extent permitted by applicable law, execute such
documentation as the Purchaser deems necessary or desirable to (x) grant in
favor of the Purchaser a security interest in all of such Foreign Subsidiary's
assets, (y) cause the equity interests of any such Foreign Subsidiary to be
pledged to the Purchaser and (y) cause such Foreign Subsidiary to guaranty the
obligations of the Company set forth in this Agreement and the Related
Agreements, in each case pursuant to documentation governed by the jurisdiction
of organization of such Foreign Subsidiary (the preceding clauses (x) and (y),
collectively, the "Foreign Documentation"). All such Foreign Documentation shall
be in form and substance satisfactory to the Purchaser, and the Company agrees
to cause the respective Foreign Subsidiary to deliver all such other
documentation as is requested by the Purchaser in connection with the execution
and delivery of such Foreign Documentation (including, without limitation, an
opinion of counsel satisfactory to the Purchaser).
20
7. Covenants of the Purchaser. The Purchaser covenants and agrees
with the Company as follows:
7.1 Confidentiality. The Purchaser agrees that it will not
disclose, and will not include in any public announcement, the name of the
Company, unless expressly agreed to by the Company or unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement.
7.2 Non-Public Information. The Purchaser agrees not to effect
any sales in the shares of the Company's Common Stock while in possession of
material, non-public information regarding the Company if such sales would
violate applicable securities law.
7.3 Limitation on Acquisition of Common Stock of the Company.
Notwithstanding anything to the contrary contained herein, in any Related
Agreement or any document, instrument or agreement entered into in connection
with any other transactions between the Purchaser and the Company, the Purchaser
may not acquire stock in the Company (including, without limitation, pursuant to
a contract to purchase, by exercising an option or warrant, by converting any
other security or instrument, by acquiring or exercising any other right to
acquire, shares of stock or other security convertible into shares of stock in
the Company, or otherwise, and such contracts, options, warrants, conversion or
other rights shall not be enforceable or exercisable) to the extent such stock
acquisition would cause any interest (including any original issue discount)
payable by the Company to Laurus not to qualify as "portfolio interest" within
the meaning of Section 881(c)(2) of the Code, by reason of Section 881(c)(3) of
the Code, taking into account the constructive ownership rules under Section
871(h)(3)(C) of the Code (the "Stock Acquisition Limitation"). The Stock
Acquisition Limitation shall automatically become null and void without any
notice to the Company upon the earlier to occur of either (a) the Company's
delivery to Laurus of a Notice of Redemption (as defined in the Note) or (b) the
existence of an Event of Default (as defined in the Note) at a time when the
average closing price of the Company's common stock as reported by Bloomberg,
L.P. on the Principal Market for the immediately preceding five trading days is
greater than or equal to 130% of the Fixed Conversion Price (as defined in the
Note).
8. Covenants of the Company and Purchaser Regarding Indemnification.
8.1 Company Indemnification. The Company agrees to indemnify,
hold harmless, reimburse and defend the Purchaser, each of the Purchaser's
officers, directors, agents, affiliates, control persons, and principal
shareholders, against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon the Purchaser which results, arises out of or is based upon: (i) any
misrepresentation by the Company or any of its Subsidiaries or breach of any
warranty by the Company or any of its Subsidiaries in this Agreement, any other
Related Agreement or in any exhibits or schedules attached hereto or thereto; or
(ii) any breach or default in performance by Company or any of its Subsidiaries
of any covenant or undertaking to be performed by Company or any of its
Subsidiaries hereunder, under any other Related Agreement or any other agreement
entered into by the Company and/or any of its Subsidiaries and Purchaser
relating hereto or thereto.
21
8.2 Purchaser's Indemnification. Purchaser agrees to
indemnify, hold harmless, reimburse and defend the Company and each of the
Company's officers, directors, agents, affiliates, control persons and principal
shareholders, at all times against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company which results, arises out of or is based
upon: (i) any misrepresentation by Purchaser or breach of any warranty by
Purchaser in this Agreement or in any exhibits or schedules attached hereto or
any Related Agreement; or (ii) any breach or default in performance by Purchaser
of any covenant or undertaking to be performed by Purchaser hereunder, or any
other agreement entered into by the Company and Purchaser relating hereto.
9. Conversion of Convertible Note.
9.1 Mechanics of Conversion.
(a) Provided the Purchaser has notified the Company of the
Purchaser's intention to sell the Note Shares and the Note Shares are
included in an effective registration statement or are otherwise exempt
from registration when sold: (i) upon the conversion of the Note or part
thereof, the Company shall, at its own cost and expense, take all
necessary action (including the issuance of an opinion of counsel
reasonably acceptable to the Purchaser following a request by the
Purchaser) to assure that the Company's transfer agent shall issue shares
of the Company's Common Stock in the name of the Purchaser (or its
nominee) or such other persons as designated by the Purchaser in
accordance with Section 9.1(b) hereof and in such denominations to be
specified representing the number of Note Shares issuable upon such
conversion; and (ii) the Company warrants that no instructions other than
these instructions have been or will be given to the transfer agent of the
Company's Common Stock and that after the Effectiveness Date (as defined
in the Registration Rights Agreement) the Note Shares issued will be
freely transferable subject to the prospectus delivery requirements of the
Securities Act and the provisions of this Agreement, and will not contain
a legend restricting the resale or transferability of the Note Shares.
(b) Purchaser will give notice of its decision to exercise its right
to convert the Note or part thereof by telecopying or otherwise delivering
an executed and completed notice of the number of shares to be converted
to the Company (the "Notice of Conversion"). The Purchaser will not be
required to surrender the Note until the Purchaser receives a credit to
the account of the Purchaser's prime broker through the DWAC system (as
defined below), representing the Note Shares or until the Note has been
fully satisfied. Each date on which a Notice of Conversion is telecopied
or delivered to the Company in accordance with the provisions hereof shall
be deemed a "Conversion Date." Pursuant to the terms of the Notice of
Conversion, the Company will issue instructions to the transfer agent
accompanied by an opinion of counsel within one (1) business day of the
date of the delivery to the Company of the Notice of Conversion and shall
cause the transfer agent to transmit the certificates representing the
Conversion Shares to the Holder by crediting the account of the
Purchaser's prime broker with the Depository Trust Company ("DTC") through
its Deposit Withdrawal Agent Commission ("DWAC") system within three (3)
business days after receipt by the Company of the Notice of Conversion
(the "Delivery Date").
22
(c) The Company understands that a delay in the delivery of the Note
Shares in the form required pursuant to Section 9 hereof beyond the
Delivery Date could result in economic loss to the Purchaser. In the event
that the Company fails to direct its transfer agent to deliver the Note
Shares to the Purchaser via the DWAC system within the time frame set
forth in Section 9.1(b) above and the Note Shares are not delivered to the
Purchaser by the Delivery Date, as compensation to the Purchaser for such
loss, the Company agrees to pay late payments to the Purchaser for late
issuance of the Note Shares in the form required pursuant to Section 9
hereof upon conversion of the Note in the amount equal to the greater of:
(i) $500 per business day after the Delivery Date; or (ii) the Purchaser's
actual damages from such delayed delivery. Notwithstanding the foregoing,
the Company will not owe the Purchaser any late payments if the delay in
the delivery of the Note Shares beyond the Delivery Date is solely out of
the control of the Company and the Company is actively trying to cure the
cause of the delay. The Company shall pay any payments incurred under this
Section in immediately available funds upon demand and, in the case of
actual damages, accompanied by reasonable documentation of the amount of
such damages. Such documentation shall show the number of shares of Common
Stock the Purchaser is forced to purchase (in an open market transaction)
which the Purchaser anticipated receiving upon such conversion, and shall
be calculated as the amount by which (A) the Purchaser's total purchase
price (including customary brokerage commissions, if any) for the shares
of Common Stock so purchased exceeds (B) the aggregate principal and/or
interest amount of the Note, for which such Conversion Notice was not
timely honored.
Nothing contained herein or in any document referred to herein or delivered in
connection herewith shall be deemed to establish or require the payment of a
rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest or dividends required to
be paid or other charges hereunder exceed the maximum amount permitted by such
law, any payments in excess of such maximum shall be credited against amounts
owed by the Company to a Purchaser and thus refunded to the Company.
10. Registration Rights.
10.1 Registration Rights Granted. The Company hereby grants
registration rights to the Purchaser pursuant to a Registration Rights Agreement
dated as of even date herewith between the Company and the Purchaser.
10.2 Offering Restrictions. Except as previously disclosed in
the SEC Reports or in the Exchange Act Filings, or stock or stock options
granted to employees or directors of the Company (these exceptions hereinafter
referred to as the "Excepted Issuances"), neither the Company nor any of its
Subsidiaries will issue any securities with a continuously variable/floating
conversion feature which are or could be (by conversion or registration)
free-trading securities (i.e. common stock subject to a registration statement)
prior to the full repayment or conversion of the Note (together with all accrued
and unpaid interest and fees related thereto) (the "Exclusion Period").
23
11. Miscellaneous.
11.1 Governing Law. THIS AGREEMENT AND EACH RELATED AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT
BY EITHER PARTY AGAINST THE OTHER CONCERNING THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT AND EACH RELATED AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE
COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK.
BOTH PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT AND THE RELATED
AGREEMENTS ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION OF SUCH
COURTS AND WAIVE TRIAL BY JURY. IN THE EVENT THAT ANY PROVISION OF THIS
AGREEMENT OR ANY RELATED AGREEMENT DELIVERED IN CONNECTION HEREWITH IS INVALID
OR UNENFORCEABLE UNDER ANY APPLICABLE STATUTE OR RULE OF LAW, THEN SUCH
PROVISION SHALL BE DEEMED INOPERATIVE TO THE EXTENT THAT IT MAY CONFLICT
THEREWITH AND SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH STATUTE OR RULE OF
LAW. ANY SUCH PROVISION WHICH MAY PROVE INVALID OR UNENFORCEABLE UNDER ANY LAW
SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS
AGREEMENT OR ANY RELATED AGREEMENT.
11.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby to the extent provided
therein. All statements as to factual matters contained in any certificate or
other instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument.
11.3 Successors. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of the Securities from time to time, other than the holders of Common
Stock which has been sold by the Purchaser pursuant to Rule 144 or an effective
registration statement. Purchaser may not assign its rights hereunder to a
competitor of the Company.
11.4 Entire Agreement. This Agreement, the Related Agreements,
the exhibits and schedules hereto and thereto and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein and therein.
24
11.5 Severability. In case any provision of the Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
11.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the written
consent of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the Purchaser
under this Agreement may be waived only with the written consent of the
Purchaser.
(c) The obligations of the Purchaser and the rights of the Company
under this Agreement may be waived only with the written consent of the
Company.
11.7 Delays or Omissions. It is agreed that no delay or
omission to exercise any right, power or remedy accruing to any party, upon any
breach, default or noncompliance by another party under this Agreement or the
Related Agreements, shall impair any such right, power or remedy, nor shall it
be construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. All remedies, either under this Agreement or the Related
Agreements, by law or otherwise afforded to any party, shall be cumulative and
not alternative.
11.8 Notices. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile if sent during normal business
hours of the recipient, if not, then on the next business day;
(c) three (3) business days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or
(d) one (1) day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of
receipt.
All communications shall be sent as follows:
If to the Company, to: Centurion Gold Holdings, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
Attention: Chief Financial Officer
Facsimile: 011-27-0-11-881-5611
25
with a copy to:
▇▇▇▇▇▇▇, Savage, Kaplowitz, Wolf & Marcus, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser, to: Laurus Master Fund, Ltd.
c/o M&C Corporate Services Limited
▇.▇. ▇▇▇ ▇▇▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇
South Church Street
Grand Cayman, Cayman Islands
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.
11.9 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including, without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
11.10 Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
11.11 Facsimile Signatures; Counterparts. This Agreement may
be executed by facsimile signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
11.12 Broker's Fees. Except as set forth on Schedule 11.12
hereof, each party hereto represents and warrants that no agent, broker,
investment banker, person or firm acting on behalf of or under the authority of
such party hereto is or will be entitled to any broker's or finder's fee or any
other commission directly or indirectly in connection with the transactions
contemplated herein. Each party hereto further agrees to indemnify each other
party for any claims, losses or expenses incurred by such other party as a
result of the representation in this Section 11.12 being untrue.
26
11.13 Construction. Each party acknowledges that its legal
counsel participated in the preparation of this Agreement and the Related
Agreements and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Agreement to favor any party against the other.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
CENTURION GOLD HOLDINGS, INC. LAURUS MASTER FUND, LTD.
By: By:
----------------------------- --------------------------------
Name: Name:
----------------------------- --------------------------------
Title: Title:
----------------------------- --------------------------------
27
EXHIBIT A
FORM OF CONVERTIBLE NOTE
A-1
EXHIBIT B
FORM OF WARRANT
B-1
EXHIBIT C
FORM OF OPINION
1. Each of the Company and each of its Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Florida and has all requisite corporate power and authority to own, operate
and lease its properties and to carry on its business as it is now being
conducted.
2. Each of the Company and each of its Subsidiaries has the requisite
corporate power and authority to execute, deliver and perform its obligations
under the Agreement and the Related Agreements. All corporate action on the part
of the Company and each of its Subsidiaries and its officers, directors and
stockholders necessary has been taken for: (i) the authorization of the
Agreement and the Related Agreements and the performance of all obligations of
the Company and each of its Subsidiaries thereunder; and (ii) the authorization,
sale, issuance and delivery of the Securities pursuant to the Agreement and the
Related Agreements. The Note Shares and the Warrant Shares, when issued pursuant
to and in accordance with the terms of the Agreement and the Related Agreements
and upon delivery shall be validly issued and outstanding, fully paid and non
assessable.
3. The execution, delivery and performance by each of the Company and each
of its Subsidiaries of the Agreement and the Related Agreements to which it is a
party and the consummation of the transactions on its part contemplated by any
thereof, will not, with or without the giving of notice or the passage of time
or both:
(a) Violate the provisions of their respective charter or bylaws; or
(b) Violate any judgment, decree, order or award of any court
binding upon the Company or any of its Subsidiaries; or
(c) Violate any laws of the State of New York, the corporate laws of
the State of Delaware or federal law
4. The Agreement and the Related Agreements will constitute, valid and
legally binding obligations of each of the Company and each of its Subsidiaries
(to the extent such person is a party thereto), and are enforceable against each
of the Company and each of its Subsidiaries in accordance with their respective
terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and
(b) general principles of equity that restrict the availability of
equitable or legal remedies.
5. To such counsel's knowledge, the sale of the Note and the subsequent
conversion of the Note into Note Shares are not subject to any preemptive rights
or rights of first refusal that have not been properly waived or complied with.
To such counsel's knowledge, the sale of the Warrant and the subsequent exercise
of the Warrant for Warrant Shares are not subject to any preemptive rights or,
to such counsel's knowledge, rights of first refusal that have not been properly
waived or complied with.
C-1
6. Assuming the accuracy of the representations and warranties of the
Purchaser contained in the Agreement, the offer, sale and issuance of the
Securities on the Closing Date will be exempt from the registration requirements
of the Securities Act. To such counsel's knowledge, 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 and security under circumstances that would cause the offering of the
Securities pursuant to the Agreement or any Related 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 Rule 506 under
the Securities Act, or any applicable exchange-related stockholder approval
provisions.
7. There is no action, suit, proceeding or investigation pending or, to
such counsel's knowledge, currently threatened against the Company or any of its
Subsidiaries that prevents the right of the Company or any of its Subsidiaries
to enter into this Agreement or any of the Related Agreements, or to consummate
the transactions contemplated thereby. To such counsel's knowledge, the Company
is not a party or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality; nor is
there any action, suit, proceeding or investigation by the Company currently
pending or which the Company intends to initiate.
8. The terms and provisions of the Master Security Agreement and the Stock
Pledge Agreement create a valid security interest in favor of the Purchaser, in
the respective rights, title and interests of the Company and its Subsidiaries
in and to the Collateral (as defined in each of the Master Security Agreement
and the Stock Pledge Agreement). Each UCC-1 Financing Statement naming the
Company or any Subsidiary thereof as debtor and the Purchaser as secured party
are in proper form for filing and assuming that such UCC-1 Financing Statements
have been filed with the Secretary of State of Florida the security interest
created under the Master Security Agreement will constitute a perfected security
interest under the Uniform Commercial Code in favor of the Purchaser in respect
of the Collateral that can be perfected by filing a financing statement. After
giving effect to the delivery to the Purchaser of the stock certificates
representing the ownership interests of each Subsidiary of the Company (together
with effective endorsements) and assuming the continued possession by the
Purchaser of such stock certificates in the State of New York, the security
interest created in favor of the Purchaser under the Stock Pledge Agreement
constitutes a valid and enforceable first perfected security interest in such
ownership interests (and the proceeds thereof) in favor of the Purchaser,
subject to no other security interest. No filings, registrations or recordings
are required in order to perfect (or maintain the perfection or priority of) the
security interest created under the Stock Pledge Agreement in respect of such
ownership interests.
9. Assuming that North Fork Bank is a "bank" (as such term is defined in
Section 9-102(a)(8) of the UCC), and that the Restricted Account (as defined in
the Restricted Account Agreement) constitutes a "deposit account" (as such term
is defined in Section 9-102(a)(29) of the UCC), under the Uniform Commercial
Code, the due execution and delivery of the Restricted Account Agreement
perfects the Purchaser's security interest in the Restricted Account.
C-2
EXHIBIT D
FORM OF ESCROW AGREEMENT
D-4