Exhibit 10.2
 
 
Securities Purchase Agreement
 
This Securities Purchase Agreement, dated as of August 2, 2012 (this
“Agreement”), is entered into by and between North Bay Resources, Inc., a
Delaware corporation (the “Company”), and Tonaquint, Inc., a Utah corporation,
its successors and/or assigns (“Buyer”).
 
RECITALS:
 
A.           The Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration for offers
and sales to accredited investors afforded, inter alia, under Regulation D
(“Regulation D”) as promulgated by the United States Securities and Exchange
Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933
Act”), and/or Section 4(2) of the 1933 Act.
 
B.           The Buyer wishes to acquire from the Company, and the Company
desires to issue and sell to the Buyer, the Note (as defined below), which Note
will be convertible into shares of common stock of the Company, par value $0.001
per share (the “Common Stock”), upon the terms and subject to the conditions of
the Note, this Agreement and the other Transaction Documents (as defined below).
 
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
 
1. CERTAIN DEFINITIONS. As used herein, each of the following terms has the
meaning set forth below, unless the context otherwise requires:
 
“Affiliate” means, with respect to a specific Person referred to in the relevant
provision, another Person who or which controls or is controlled by or is under
common control with such specified Person.
 
“Buyer’s Counsel” means Hansen Black Anderson PLLC.
 
“Buyer Control Person” means each manager, executive officer, promoter, and such
other Persons as may be deemed in control of the Buyer pursuant to Rule 405
under the 1933 Act or Section 20 of the 1934 Act (as defined below).
 
“Certificate of Incorporation” means the certificate of incorporation, articles
of incorporation or other charter document (howsoever denominated) of the
Company, as amended to date.
 
“Closing Date” means the date of the closing of the purchase and sale of the
Securities.
 
“Company Control Person” means each director, executive officer, promoter, and
such other Persons as may be deemed in control of the Company pursuant to Rule
405 under the 1933 Act or Section 20 of the 1934 Act.
 
“Company Counsel” means Thomas E. Boccieri, Esq.
 
“Company’s SEC Documents” means the Company’s filings on the SEC’s EDGAR system.
 
“Conversion Date” means the date a Holder submits a Conversion Notice, as
provided in the Note.
 
 
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“Conversion Notice” has the meaning ascribed to it in the Note.
 
“Conversion Shares” means the shares of Common Stock issuable upon any
conversion of the Note and/or in payment of accrued interest, as contemplated in
the Note.
 
“Delivery Date” has the meaning ascribed to it in the Note (with respect to
Conversion Shares).
 
“DTC” means the Depository Trust Company.
 
“DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer Program.
 
“DWAC” means Deposit Withdrawal at Custodian as defined by the DTC.
 
“DWAC Eligible” means that (i) the Common Stock is eligible at DTC for full
services pursuant to the DTC’s Operational Arrangements, including without
limitation transfer through DTC’s DWAC system, (ii) the Company has been
approved (without revocation) by the DTC’s underwriting department, and (iii)
the Transfer Agent is approved as an agent in the DTC/FAST Program.
 
“Holder” means the Person holding the relevant Securities at the relevant time.
 
“Last Audited Date” means March 9, 2012.
 
“Material Adverse Effect” means an event or combination of events, which
individually or in the aggregate, would reasonably be expected to (a) adversely
affect the legality, validity or enforceability of the Note or any of the
Transaction Documents, (b)  have or result in a material adverse effect on the
results of operations, assets, or financial condition of the Company and its
subsidiaries, taken as a whole, or (c) adversely impair the Company’s ability to
perform fully on a timely basis its material obligations under any of the
Transaction Documents or the transactions contemplated thereby.
 
“Maturity Date” has the meaning ascribed to it in the Note.
 
“Permitted Liens” means (i) any Lien (as defined herein) for taxes not yet due
or delinquent or being contested in good faith by appropriate proceedings for
which adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent, (iii) any Lien
created by operation of law, such as materialmen’s liens, mechanics’ liens and
other similar liens, arising in the ordinary course of business with respect to
a liability that is not yet due or delinquent or that are being contested in
good faith by appropriate proceedings, and (iv) any Lien in existence as of the
Issuance Date.
 
“Person” means any living person or any entity, such as, but not necessarily
limited to, a corporation, partnership or trust.
 
“Principal Trading Market” means (a) NYSE Amex, (b) the New York Stock Exchange,
(c) the Nasdaq Global Market, (d) the Nasdaq Capital Market, (e) the OTC
Bulletin Board, (f) the OTCQX or OTCQB, or (g) such other market on which the
Common Stock is principally traded at the relevant time, but shall not include
the “pink sheets.”
 
“Registration Statement” means a registration statement of the Company under the
1933 Act covering securities of the Company (including Common Stock) on Form
S-3, if the Company is then eligible to file using such form, and if not
eligible, on Form S-1 or other appropriate form.
 
 
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“Rule 144” means (a) Rule 144 promulgated under the 1933 Act or (b) any other
similar rule or regulation of the SEC that may at any time permit a Holder to
sell securities of the Company to the public without registration under the 1933
Act.
 
“Securities” means the Note and the Shares.
 
“Shares” means the shares of Common Stock representing any or all of the
Conversion Shares.
 
“State of Incorporation” means Delaware.
 
“Subsidiary” or “Subsidiaries” means, as of the relevant date, any subsidiary or
subsidiaries of the Company (whether or not included in the Company’s SEC
Documents) whether now existing or hereafter acquired or created.
 
“Trading Day” means any day during which the Principal Trading Market shall be
open for business.
 
“Transaction Documents” means this Agreement, the Note, the Transfer Agent
Letter (defined below), and all other certificates (including without limitation
the Secretary’s Certificate), documents, agreements, resolutions and instruments
delivered to any party under or in connection with this Agreement, as the same
may be amended from time to time.
 
“Transfer Agent” means, at any time, the transfer agent for the Common Stock.
 
“Wire Instructions” means the wire instructions for the Purchase Price (as
defined below), as provided by the Company, set forth on ANNEX I.
 
2. AGREEMENT TO PURCHASE; PURCHASE PRICE.
 
2.1. Purchase.
 
(a) Subject to the terms and conditions of this Agreement and the other
Transaction Documents, the undersigned Buyer hereby agrees to purchase from the
Company a Convertible Promissory Note in the principal amount of $113,000.00
substantially in the form attached hereto as ANNEX II (the “Note”). In
consideration thereof, the Buyer shall pay the purchase price amount set forth
on the Buyer’s signature page to this Agreement (the “Purchase Price”). The
Purchase Price shall be paid to the Company at Closing (defined below) in
accordance with the Wire Instructions.
 
(b) In consideration for the Purchase Price, the Company shall, at the Closing
(defined below):
 
(i) Execute and deliver to the Transfer Agent, and the Transfer Agent shall
execute to indicate its acceptance thereof, the irrevocable transfer agent
instruction letter substantially in the form attached hereto as ANNEX III (the
“Transfer Agent Letter”).
 
(c) At the Closing, the Buyer shall deliver to the Company the Purchase Price.
 
(d) The Company shall also cause to be executed and delivered to the Buyer a
fully executed secretary’s certificate and written consent of directors
evidencing the Company’s approval of the Transaction Documents substantially in
the forms attached hereto as ANNEX IV (together, the “Secretary’s Certificate”).
 
 
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2.2. Form of Payment; Delivery of Securities.  The purchase and sale of the
Securities shall take place at a closing (the “Closing”) to be held at the
offices of the Buyer on the Closing Date.  At the Closing, the Company will
deliver the Transaction Documents to the Buyer against delivery by the Buyer to
the Company of the Purchase Price.
 
2.3. Purchase Price. The Note carries an original issue discount of $10,000.00
(the “OID”).  In addition, the Company agrees to pay $3,000.00 to the Buyer to
cover the Buyer’s legal fees, accounting costs, due diligence, monitoring and
other transaction costs incurred in connection with the purchase and sale of the
Securities, all of which amount is included in the initial principal balance of
the Note (the “Transaction Expenses”).  The Purchase Price, therefore, shall be
$100,000.00, computed as follows: $113,000.00 original principal balance, less
the OID, less the Transaction Expenses.
 
3. BUYER REPRESENTATIONS AND WARRANTIES. The Buyer represents and warrants to,
and covenants and agrees with, the Company, as of the date hereof and as of the
Closing Date, as follows:
 
3.1. Binding Obligation. The Transaction Documents to which the Buyer is a
party, and the transactions contemplated hereby and thereby, have been duly and
validly authorized by the Buyer.  This Agreement has been executed and delivered
by the Buyer, and this Agreement is, and each of the other Transaction Documents
to which the Buyer is a party, when executed and delivered by the Buyer (if
necessary), will be valid and binding obligations of the Buyer enforceable in
accordance with their respective terms, subject as to enforceability to general
principles of equity and to bankruptcy, insolvency, moratorium and other similar
laws affecting the enforcement of creditors’ rights generally.
 
3.2. Accredited Investor Status. The Buyer is an “accredited investor” as that
term is defined in Regulation D.
 
4. COMPANY REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to the Buyer as of the date hereof and as of the Closing Date that:
 
4.1. Rights of Others Affecting the Transactions.  There are no preemptive
rights of any stockholder of the Company, as such, to acquire the Securities. No
other party has a currently exercisable right of first refusal which would be
applicable to any or all of the transactions contemplated by the Transaction
Documents.
 
4.2. Status.  The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Incorporation and has the
requisite corporate power to own its properties and to carry on its business as
now being conducted.  The Company is duly qualified as a foreign corporation to
do business and is in good standing in each jurisdiction where the nature of the
business conducted or property owned by it makes such qualification necessary,
other than those jurisdictions in which the failure to so qualify would not have
or result in a Material Adverse Effect.  The Company has registered its stock
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
“1934 Act”), and is obligated to file reports pursuant to Section 13 or
Section 15(d) of the 1934 Act. The Company has not taken any action designed to
terminate, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the 1934 Act, nor has the
Company received any notification that the SEC is contemplating terminating such
registration.  The Common Stock is quoted on the Principal Trading Market.  The
Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for quotation on the Principal Trading
Market, and the Company has maintained all requirements on its part for the
continuation of such quotation. The Company has not, in the twelve (12) months
preceding the date hereof, received notice from the Principal Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such Principal Trading Market. The Company is, and has no reason to believe that
it will not in the foreseeable future continue to be, in compliance with all
such listing and maintenance requirements.
 
 
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4.3. Authorized Shares.
 
(a) The authorized capital stock of the Company consists of 100 shares of
Preferred Stock Series I, $0.001 par value per share, of which 100 shares are
outstanding, 4,000,000 shares of Preferred Stock Series A, $0.001 par value per
share, of which 4,000,000 shares are outstanding, 1,500,000 shares of Preferred
Stock Series G, $0.001 par value per share, of which 100,000 shares are
outstanding, and 250,000,000 shares of Common Stock, $0.001 par value per share,
of which approximately 99,945,201 are outstanding. Of the outstanding shares of
Common Stock, approximately 16,206,474 shares are beneficially owned by
Affiliates of the Company.
 
(b) Other than as set forth in the Company’s SEC Documents, there are no
outstanding securities which are convertible into or exchangeable for shares of
Common Stock, whether such conversion is currently exercisable or exercisable
only upon some future date or the occurrence of some event in the future.
 
(c) All issued and outstanding shares of Common Stock have been duly authorized
and validly issued and are fully paid and non-assessable. After considering all
other commitments that may require the issuance of Common Stock, the Company has
sufficient authorized and unissued shares of Common Stock as may be necessary to
effect the issuance of the Shares on the Closing Date, were the Note issued and
fully converted on that date.
 
(d) The Shares have been duly authorized by all necessary corporate action on
the part of the Company, and, when issued (1) on conversion of, or in payment of
interest on the Note in accordance with the terms thereof, or (2) at the Closing
in accordance with the terms of this Agreement, as applicable, will have been
duly and validly issued, fully paid and non-assessable, free from all taxes,
liens, claims, pledges, mortgages, restrictions, obligations, security interests
and encumbrances of any kind, nature and description, and will not subject the
Holder thereof to personal liability by reason of being a Holder.
 
(e) The Conversion Shares are enforceable against the Company and the Company
presently has no claims or defenses of any nature whatsoever with respect to the
Conversion Shares.
 
4.4. Transaction Documents and Stock. This Agreement and each of the other
Transaction Documents, and the transactions contemplated hereby and thereby,
have been duly and validly authorized by the Company. This Agreement has been
duly executed and delivered by the Company and this Agreement is, and the Note,
and each of the other Transaction Documents, when executed and delivered by the
Company, will be, valid and binding obligations of the Company enforceable in
accordance with their respective terms, subject as to enforceability to general
principles of equity and to bankruptcy, insolvency, moratorium, and other
similar laws affecting the enforcement of creditors’ rights generally.
 
 
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4.5. Non-contravention. The execution and delivery of this Agreement and each of
the other Transaction Documents by the Company, the issuance of the Securities
in accordance with the terms hereof and thereof, and the consummation by the
Company of the other transactions contemplated by this Agreement, the Note, and
the other Transaction Documents do not and will not conflict with or result in a
breach by the Company of any of the terms or provisions of, or constitute a
default under (i) the Certificate of Incorporation or bylaws of the Company,
each as currently in effect, (ii) any indenture, mortgage, deed of trust, or
other material agreement or instrument to which the Company is a party or by
which such party or any of its properties or assets are bound, including any
listing agreement for the Common Stock except as herein set forth, or (iii) to
the Company’s knowledge, any existing applicable law, rule, or regulation or any
applicable decree, judgment, or order of any court, United States federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of the Company’s properties or assets,
except such conflict, breach or default which would not have or result in a
Material Adverse Effect.
 
4.6. Approvals.  No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
 
4.7. Filings; Financial Statements.  None of the Company’s SEC Documents
contained, at the time they were filed, any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company with
the SEC under the 1934 Act on a timely basis or has received a valid extension
of such time of filing and has filed any such report, schedule, form, statement
or other document prior to the expiration of any such extension.  As of their
respective dates, the financial statements of the Company included in the
Company’s SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto.  Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).  No other
information provided by or on behalf of the Company to the Buyer which is not
included in the Company’s SEC Documents, including, without limitation,
information referred to in this Agreement, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstance under which they are or
were made, not misleading.
 
4.8. Absence of Certain Changes.  Since the Last Audited Date, there has been no
Material Adverse Effect. Since the Last Audited Date, the Company has not (i)
incurred or become subject to any material liabilities (absolute or contingent)
except liabilities incurred in the ordinary course of business consistent with
past practices; (ii) discharged or satisfied any material lien or encumbrance or
paid any material obligation or liability (absolute or contingent), other than
current liabilities paid in the ordinary course of business consistent with past
practices; (iii) declared or made any payment or distribution of cash or other
property to stockholders with respect to its capital stock, or purchased or
redeemed, or made any agreements to purchase or redeem, any shares of its
capital stock; (iv) sold, assigned or transferred any other material tangible
assets, or canceled any material debts owed to the Company by any third party or
material claims of the Company against any third party, except in the ordinary
course of business consistent with past practices; (v) waived any rights of
material value, whether or not in the ordinary course of business, or suffered
the loss of any material amount of existing business; (vi) made any increases in
employee compensation, except in the ordinary course of business consistent with
past practices; or (vii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment.
 
 
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4.9. Full Disclosure.  There is no fact known to the Company or that the Company
should know after having made all reasonable inquiries (other than conditions
known to the public generally or as disclosed in the Company’s SEC Documents
since the Last Audited Date) that has not been disclosed in writing to the Buyer
that would reasonably be expected to have or result in a Material Adverse
Effect.
 
4.10. Absence of Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Company, threatened against or affecting the Company before or
by any governmental authority or non-governmental department, commission, board,
bureau, agency or instrumentality or any other person, wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, any of the Transaction
Documents.  The Company is not aware of any valid basis for any such claim that
(either individually or in the aggregate with all other such events and
circumstances) could reasonably be expected to have a Material Adverse Effect.
There are no outstanding or unsatisfied judgments, orders, decrees, writs,
injunctions or stipulations to which the Company is a party or by which the
Company or any of its properties is bound, that involve the transactions
contemplated herein or that, alone or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
 
4.11. Absence of Events of Default.  Neither the Company nor any of its
Subsidiaries is in violation of or in default with respect to (i) its
Certificate of Incorporation or bylaws or other organizational documents, each
as currently in effect, or any material judgment, order, writ, decree, statute,
rule or regulation applicable to such entity; or (ii) any material mortgage,
indenture, agreement, instrument or contract to which such entity is a party or
by which it or any of its properties or assets are bound (nor is there any
waiver in effect which, if not in effect, would result in such a violation or
default), except such breach or default which would not have or result in a
Material Adverse Effect.
 
4.12. Absence of Certain Company Control Person Actions or Events.  None of the
following has occurred during the past five (5) years with respect to a Company
Control Person:
 
(a) A petition under the federal bankruptcy laws or any state insolvency law was
filed by or against, or a receiver, fiscal agent or similar officer was
appointed by a court for the business or property of such Company Control
Person, or any partnership in which he or she was a general partner at or within
two (2) years before the time of such filing, or any corporation or business
association of which he or she was an executive officer at or within two (2)
years before the time of such filing;
 
(b) Such Company Control Person was convicted in a criminal proceeding or is a
named subject of a pending criminal proceeding (excluding traffic violations and
other minor offenses);
 
 
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(c) Such Company Control Person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him or her from, or
otherwise limiting, the following activities:
 
(i) acting, as an investment advisor, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance company, as a futures
commission merchant, introducing broker, commodity trading advisor, commodity
pool operator, floor broker, any other Person regulated by the Commodity Futures
Trading Commission (“CFTC”) or engaging in or continuing any conduct or practice
in connection with such activity;
 
(ii) engaging in any type of business practice; or
 
(iii) engaging in any activity in connection with the purchase or sale of any
security or commodity or in connection with any violation of federal or state
securities laws or federal commodities laws;
 
(d) Such Company Control Person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any federal or state
authority barring, suspending or otherwise limiting for more than sixty (60)
calendar days the right of such Company Control Person to engage in any activity
described in Section 4.12(c)) above, or to be associated with Persons engaged in
any such activity; or
 
(e) Such Company Control Person was found by a court of competent jurisdiction
in a civil action or by the CFTC or SEC to have violated any federal or state
securities law, and the judgment in such civil action or finding by the CFTC or
SEC has not been subsequently reversed, suspended, or vacated.
 
4.13. No Undisclosed Liabilities or Events. The Company has no liabilities or
obligations other than those disclosed in the Transaction Documents or the
Company’s most recently filed SEC Documents (Form 10-K or 10-Q) or those
incurred in the ordinary course of the Company’s business since the Last Audited
Date, or which individually or in the aggregate, do not or would not have a
Material Adverse Effect.  No event or circumstance has occurred or exists with
respect to the Company or its properties, business, operations, condition
(financial or otherwise), or results of operations, which, under applicable
laws, rules or regulations, requires public disclosure or announcement prior to
the date hereof by the Company but which has not been so publicly announced or
disclosed.  There are no proposals currently under consideration or currently
anticipated to be under consideration by the Board of Directors or the executive
officers of the Company which proposal would (i) change the Certificate of
Incorporation or bylaws of the Company, each as currently in effect, with or
without stockholder approval, which change would reduce or otherwise adversely
affect the rights and powers of the stockholders of the Common Stock or (ii)
materially or substantially change the business, assets or capital of the
Company, including its interests in Subsidiaries.
 
4.14. No Integrated Offering.  Neither the Company nor any of its Affiliates nor
any Person acting on its or their behalf has, directly or indirectly, made any
offer or sale of any security of the Company or solicited any offer to buy any
such security under circumstances that would eliminate the availability of the
exemption from registration under Regulation D in connection with the offer and
sale of the Securities as contemplated hereby.
 
4.15. Dilution.  Each of the Company and its executive officers and directors is
aware that the number of shares of Common Stock issuable upon the execution of
this Agreement, the conversion of the Note, or pursuant to the other terms of
the Transaction Documents may have a dilutive effect on the ownership interests
of the other stockholders (and Persons having the right to become stockholders)
of the Company.  The Company specifically acknowledges that its obligation to
issue the Conversion Shares upon conversion of the Note, is binding upon the
Company and enforceable regardless of the dilution such issuance may have on the
ownership interests of other stockholders of the Company, and the Company will
honor such obligations, including honoring every Conversion Notice, unless the
Company is subject to an injunction (which injunction was not sought by the
Company or any of its directors or executive officers) prohibiting the Company
from doing so.
 
 
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4.16. Fees to Brokers, Placement Agents and Others.  The Company has taken no
action which would give rise to any claim by any Person for a brokerage
commission, placement agent or finder’s fees or similar payments by the Buyer
relating to this Agreement or the transactions contemplated hereby except as
follows: a commission payable to Carter-Terry, the payment of which is the sole
obligation of the Company. Except for such fees arising as a result of any
agreement or arrangement entered into by the Buyer without the knowledge of the
Company (a “Buyer’s Fee”), the Buyer shall have no obligation with respect to
such fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this subsection that may be due in connection
with the transactions contemplated hereby.  The Company shall indemnify and hold
harmless each of the Buyer, its employees, officers, directors, stockholders,
managers, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorneys’ fees) and expenses suffered in respect of any such claimed or
existing fees (other than a Buyer’s Fee, if any).
 
4.17. Disclosure.  All information relating to or concerning the Company set
forth in the Transaction Documents or in the Company’s SEC Documents or other
public filings provided by or on behalf of the Company to the Buyer is true and
correct in all material respects and the Company has not omitted to state any
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.  No event or
circumstance has occurred or exists with respect to the Company or its business,
properties, prospects, operations or financial conditions, which under
applicable laws, rules or regulations, requires public disclosure or
announcement by the Company.
 
4.18. Confirmation.  The Company agrees that, if, to the knowledge of the
Company, any events occur or circumstances exist prior to the payment of the
Purchase Price by the Buyer to the Company which would make any of the Company’s
representations or warranties set forth herein materially untrue or materially
inaccurate as of such date, the Company shall immediately notify the Buyer in
writing prior to such date of such events or circumstances, specifying which
representations or warranties are affected and the reasons therefor.
 
4.19. Title. The Company and the Subsidiaries, if applicable, own and have good
and marketable title in fee simple absolute to, or a valid leasehold interest
in, all their respective real properties and good title to their other
respective assets and properties, subject to no liens, claims or encumbrances
except as have been disclosed to the Buyer.
 
4.20. Intellectual Property.
 
(a) Ownership.  The Company owns or possesses or can obtain on commercially
reasonable terms sufficient legal rights to all patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses (software or otherwise),
information, know-how, inventions, discoveries, published and unpublished works
of authorship, processes and any and all other proprietary rights (“Intellectual
Property”) necessary to the business of the Company as presently conducted, the
lack of which could reasonably be expected to have a Material Adverse
Effect.  Except for agreements with its own employees or consultants, standard
end-user license agreements, support/maintenance agreements and agreements
entered in the ordinary course of the Company’s business, all of which have been
made available for review by the Buyer, there are no outstanding options,
licenses or agreements relating to the Intellectual Property of the Company, and
the Company is not bound by or a party to any options, licenses or agreements
with respect to the Intellectual Property of any other person or entity.  The
Company has not received any written communication alleging that the Company has
violated or, by conducting its business as currently conducted, would violate
any of the Intellectual Property of any other person or entity, nor is the
Company aware of any basis therefor.  The Company is not obligated to make any
payments by way of royalties, fees or otherwise to any owner or licensor of or
claimant to any Intellectual Property with respect to the use thereof in
connection with the present conduct of its business other than in the ordinary
course of its business.  There are no agreements, understandings, instruments,
contracts, judgments, orders or decrees to which the Company is a party or by
which it is bound which involve indemnification by the Company with respect to
infringements of Intellectual Property, other than in the ordinary course of its
business.
 
 
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(b) No Breach by Employees.  The Company is not aware that any of its employees
is obligated under any contract or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would materially
interfere with the use of his or her efforts to promote the interests of the
Company or that would conflict with the Company’s business as presently
conducted.  Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company’s business by the employees of the Company, nor the
conduct of the Company’s business as presently conducted, will, to the Company’s
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any such employee is now obligated.  The Company does not
believe it is or will be necessary to use any inventions of any of its employees
made prior to their employment by the Company of which it is aware.
 
4.21. Opinion. Either (a) counsel to the Company has delivered to the Buyer an
opinion letter, or (b) the Company shall accept, in its reasonable discretion,
an opinion letter prepared by legal counsel of Buyer’s choosing (in either case,
the “Opinion Letter”), stating that (i) the Company is not a “Shell Company” as
such term is defined in Rule 144, (ii) the Company has not been a Shell Company
for the preceding twelve (12) months, (iii) the Company is in compliance with
all filing requirements under Rule 144 as of the date hereof, and (iv) the
Shares may be sold by the Buyer without any restrictions pursuant to Rule 144,
so long as the applicable holding period specified by Rule 144 is satisfied,
and, as applicable, the Company shall give instructions to its Transfer Agent to
issue shares of Common Stock upon conversion of the Note based upon or otherwise
consistent with such Opinion Letter.
 
4.22. Environmental Matters.
 
(a) No Violation. There are, to the Company’s knowledge, with respect to the
Company or any of its Subsidiaries or any predecessor of the Company, no past or
present violations of Environmental Laws (as defined below), releases of any
material into the environment, actions, activities, circumstances, conditions,
events, incidents, or contractual obligations which may give rise to any common
law environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or similar
federal, state, local or foreign laws and neither the Company nor any of its
Subsidiaries has received any notice with respect to any of the foregoing, nor
is any action pending or, to the Company’s knowledge, threatened in connection
with any of the foregoing. The term “Environmental Laws” means all federal,
state, local or foreign laws relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
 
 
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(b) No Hazardous Materials. Other than those that are or were stored, used or
disposed of in compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or used by the
Company or any of its Subsidiaries, and no Hazardous Materials were released on
or about any real property previously owned, leased or used by the Company or
any of its Subsidiaries during the period the property was owned, leased or used
by the Company or any of its Subsidiaries, except in the normal course of the
Company’s or any of its Subsidiaries’ business.
 
(c) No Storage Tanks.  There are no underground storage tanks on or under any
real property owned, leased or used by the Company or any of its Subsidiaries
that are not in compliance with applicable law.
 
5. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
 
5.1. Covenants and Acknowledgements of the Buyer.
 
(a) Transfer Restrictions.  The Buyer acknowledges that (1) the Securities have
not been and are not being registered under the provisions of the 1933 Act and,
except as included in an effective Registration Statement, the Shares have not
been and are not being registered under the 1933 Act, and may not be transferred
unless (A) subsequently registered thereunder, or (B) the Buyer shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from
registration under the 1933 Act; (2) any sale of the Securities made in reliance
on Rule 144 may be made only in accordance with the terms of such Rule and
further, if such Rule is not applicable, any resale of such Securities under
circumstances in which the seller, or the Person through whom the sale is made,
may be deemed to be an underwriter, as that term is used in the 1933 Act, may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (3) except as otherwise provided herein,
neither the Company nor any other Person is under any obligation to register the
Securities under the 1933 Act or to comply with the terms and conditions of any
exemption thereunder.
 
(b) Restrictive Legend.  The Buyer acknowledges and agrees that, until such time
as the relevant Securities have been registered under the 1933 Act, and may be
sold in accordance with an effective Registration Statement, or until such
Securities can otherwise be sold without restriction, whichever is earlier, the
certificates and other instruments representing any of the Securities shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):
 
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
 
 
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(c) Short Sales. Provided that the Company is in compliance in all material
respects with its obligations under this Agreement and the other Transaction
Documents, during the period beginning on the Closing Date and ending when all
of the Company’s obligations under the Note are paid and performed in full and
the Warrant is exercised in full (or otherwise expired), the Buyer will not
directly or through an Affiliate engage in any open market Short Sales (as
defined below) of the Common Stock, other than Short Sales of not more than the
number of shares that are the subject of a warrant exercise which is submitted
within three (3) Trading Days after such sale; provided, however, that unless
and until the Company has affirmatively demonstrated by the use of specific
evidence that the Buyer is engaging in such open market Short Sales, the Buyer
shall be assumed to be in compliance with the provisions of this subsection and
the Company shall remain obligated to fulfill all of its obligations under the
Transaction Documents; and provided, further, that (a) the Company shall under
no circumstances be entitled to request or demand that the Buyer either (i)
provide trading or other records of the Buyer or of any party or (ii)
affirmatively demonstrate that the Buyer or any other party has not engaged in
any such Short Sales in breach of these provisions as a condition to the
Company’s fulfillment of its obligations under any of the Transaction Documents,
and (b) the Company shall not assert the Buyer’s or any other party’s failure to
demonstrate such absence of such Short Sales or to provide any trading or other
records of the Buyer or any other party as all or part of a defense to any
breach of the Company’s obligations under any of the Transaction Documents. As
used herein, “Short Sale” has the meaning provided in Rule 3b-3 under the 1934
Act.
 
5.2. Covenants, Acknowledgements and Agreements of the Company. As a condition
to the Buyer’s obligation to purchase the Securities contemplated by this
Agreement, and as a material inducement for the Buyer to enter into this
Agreement and the other Transaction Documents, until all of the Company’s
obligations hereunder and the Note are paid and performed in full, or within the
timeframes otherwise specifically set forth below, the Company shall comply with
the following covenants:
 
(a) Filings.  From the date hereof until the date that is six (6) months after
all the Conversion Shares either have been sold by the Buyer, or may permanently
be sold by the Buyer without any restrictions pursuant to Rule 144 (the
“Registration Period”), the Company shall  timely make all filings required to
be made by it under the 1933 Act, the 1934 Act, Rule 144 or any United States
state securities laws and regulations thereof applicable to the Company or by
the rules and regulations of the Principal Trading Market, and such filings
shall conform to the requirements of applicable laws, regulations and government
agencies, and, unless such filings are publicly available on the SEC’s EDGAR
system (via the SEC’s web site at no additional charge), the Company shall
provide a copy thereof to the Buyer promptly after such filings. Without
limiting the foregoing, the Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to the
Buyer promptly after such filing. Additionally, within four (4) Trading Days
following the date of this Agreement, the Company shall file a current report on
Form 8-K describing the terms of the transactions contemplated by the
Transaction Documents in the form required by the 1934 Act and approved by the
Buyer and attaching the material Transaction Documents as exhibits to such
filing. The Company shall further redact all confidential information from such
Form 8-K. Additionally, the Company shall furnish to the Buyer, so long as the
Buyer owns any Securities, promptly upon request, (1) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (2) a copy of the most recent annual or quarterly
report of the Company, and (3) such other information as may be reasonably
requested to permit the Buyer to sell such Securities pursuant to Rule 144
without registration.
 
 
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(b) Reporting Status.  So long as the Buyer beneficially owns Securities and for
at least twenty (20) Trading Days thereafter, the Company shall file all reports
required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934
Act, and shall take all reasonable action under its control to ensure that
adequate current public information with respect to the Company, as required in
accordance with Rule 144, is publicly available, and shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would permit such termination.
 
(c) Listing.  The Common Stock shall be listed or quoted for trading on any of
(1) NYSE Amex, (2) the New York Stock Exchange, (3) the Nasdaq Global Market,
(4) the Nasdaq Capital Market, (5) the OTC Bulletin Board, or (6) the OTCQX or
OTCQB. The Company shall promptly secure the listing of all of the Conversion
Shares upon each national securities exchange and automated quotation system, if
any, upon which the Common Stock is then listed (subject to official notice of
issuance) and shall maintain such listing of all securities from time to time
issuable under the terms of the Transaction Documents. The Company shall comply
in all material respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Principal Trading Market and/or the
Financial Industry Regulatory Authority, Inc. (“FINRA”) or any successor
thereto, as the case may be, applicable to it at least through the date which is
sixty (60) calendar days after the date on which the Note has been converted or
paid in full.
 
(d) Use of Proceeds.  The Company shall use the net proceeds received hereunder
for working capital and general corporate purposes only; provided, however, the
Company will not use such proceeds to pay fees payable to any broker or finder
relating to the offer and sale of the Note other than to Carter-Terry, or (2) to
any other party relating to any financing transaction effected prior to the
Closing Date.
 
(e) Publicity, Filings, Releases, Etc.  Neither party shall disseminate any
information relating to the Transaction Documents or the transactions
contemplated thereby, including issuing any press releases, holding any press
conferences or other forums, or filing any reports (collectively, “Publicity”),
without giving the other party reasonable advance notice and an opportunity to
comment on the contents thereof.  Neither party will include in any such
Publicity any statement or statements or other material to which the other party
reasonably objects, unless in the reasonable opinion of counsel to the party
proposing such statement, such statement is legally required to be included.  In
furtherance of the foregoing, the Company shall provide to the Buyer’s Counsel a
draft of the first current report on Form 8-K or a quarterly or annual report on
Form 10-Q or 10-K, as the case may be, intended to be made with the SEC which
refers to the Transaction Documents or the transactions contemplated thereby as
soon as practicable (but at least two (2) Trading Days before such filing will
be made) and shall not include in such filing (or any other filing filed before
then) any statement or statements or other material to which the Buyer
reasonably objects, unless in the reasonable opinion of counsel to the Company
such statement is legally required to be included. Notwithstanding the
foregoing, each of the parties hereby consents to the inclusion of the text of
the Transaction Documents in filings made with the SEC (but any descriptive text
accompanying or part of such filing shall be subject to the other provisions of
this subsection).
 
(f) FINRA Rule 5110. In the event that the Corporate Financing Rule 5110 of
FINRA is or becomes applicable to the transactions contemplated by the
Transaction Documents or to the sale by a Holder of any of the Securities, then
the Company shall, to the extent required by such rule, timely make any filings
and cooperate with any broker or selling stockholder in respect of any consents,
authorizations or approvals that may be necessary for FINRA to timely and
expeditiously permit the Holder to sell the Securities.
 
 
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(g) Keeping of Records and Books of Account. The Company shall keep and cause
each Subsidiary to keep adequate records and books of account, in which complete
entries shall be made in accordance with GAAP consistently applied, reflecting
all financial transactions of the Company and such Subsidiaries, and in which,
for each fiscal year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in connection
with its business shall be made.
 
(h) Corporate Existence.  The Company shall (1) do all things necessary to
remain duly qualified and in good standing in each jurisdiction in which the
character of the properties owned or leased by it or in which the transaction of
its business makes such qualification necessary; (2) preserve and keep in full
force and effect all licenses or similar qualifications required by it to engage
in its business in all jurisdictions in which it is at the time so engaged; (3)
continue to engage in business of the same general type as conducted as of the
date hereof; and (4) continue to conduct its business substantially as now
conducted or as otherwise permitted hereunder.
 
(i) Taxes.  The Company shall pay and discharge promptly when due all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property before the same shall become
delinquent or in default, which, if unpaid, might reasonably be expected to give
rise to liens or charges upon such properties or any part thereof, unless, in
each case, the validity or amount thereof is being contested in good faith by
appropriate proceedings and the Company has maintained adequate reserves with
respect thereto in accordance with GAAP.
 
(j) Compliance. The Company shall comply in all material respects with all
federal, state and local laws and regulations, orders, judgments, decrees,
injunctions, rules, regulations, permits, licenses, authorizations and
requirements (collectively, “Requirements”) of all governmental bodies,
insurers, departments, commissions, boards, courts, authorities, officials or
officers which are applicable to the Company, its business, operations, or any
of its properties, except where the failure to so comply would not have a
Material Adverse Effect; provided, however, that nothing provided herein shall
prevent the Company from contesting in good faith the validity or the
application of any Requirements.
 
(k) Section 3(a)(9) and 3(a)(10) Transaction Right of First Refusal.  Pursuant
to the terms of this subsection, the Company hereby grants the Buyer a right of
first refusal with respect to any transaction or arrangement structured, in
whole or in part, in accordance with Section 3(a)(9) or Section 3(a)(10) of the
1933 Act (a “Section 3(a)(9) or 3(a)(10) Transaction”) that the Company proposes
to enter into any time during the period beginning on the date hereof and ending
on the earlier of (a) two (2) years after the date hereof and (b) the date that
all of the Company’s obligations hereunder and the Note are paid and performed
in full (the “Restricted Period”). The Company shall give written notice of any
such proposed Section 3(a)(9) or 3(a)(10) Transaction to the Buyer (the “Section
3(a)(9) or 3(a)(10) Notice”), which Section 3(a)(9) or 3(a)(10) Notice shall
identify the proposed parties and the terms of the proposed Section 3(a)(9) or
3(a)(10) Transaction. The Buyer shall then have a period of ten (10) calendar
days from receipt of the Section 3(a)(9) or 3(a)(10) Notice to notify the
Company whether the Buyer elects to exercise its right of first refusal with
respect to such Section 3(a)(9) or 3(a)(10) Transaction. If the Buyer elects not
to exercise its right of first refusal, the Company and the proposed parties
shall have a period of sixty (60) calendar days to consummate the proposed
Section 3(a)(9) or 3(a)(10) Transaction on the terms set forth in the Section
3(a)(9) or 3(a)(10) Notice. In such case, if the Section 3(a)(9) or 3(a)(10)
Transaction is not consummated within such period or if the terms of the
proposed Section 3(a)(9) or 3(a)(10) Transaction change from those set forth in
the applicable Section 3(a)(9) or 3(a)(10) Notice, the Company shall again
submit the Section 3(a)(9) or 3(a)(10) Transaction to the Buyer before
consummating it so that Buyer may exercise its right of first refusal with
respect thereto pursuant to this subsection. If the Buyer elects to exercise its
right of first refusal with respect to any proposed Section 3(a)(9) or 3(a)(10)
Transaction, the Company shall diligently proceed to consummate the Section
3(a)(9) or 3(a)(10) Transaction with the Buyer on the terms identified in the
Section 3(a)(9) or 3(a)(10) Notice and within a timeframe reasonably acceptable
to both the Buyer and the Company.
 
 
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(l) Litigation.  From and after the date hereof and until all of the Company’s
obligations hereunder and the Note are paid and performed in full, the Company
shall notify the Buyer in writing, promptly upon learning thereof, of any
litigation or administrative proceeding commenced or threatened against the
Company involving a claim in excess of $100,000.00.
 
(m) Performance of Obligations.  The Company shall promptly and in a timely
fashion perform and honor all demands, notices, requests and obligations that
exist or may arise under the Transaction Documents.
 
(n) Failure to Make Timely Filings.  The Company agrees that, if the Company
fails to timely file on the SEC’s EDGAR system any information required to be
filed by it, whether on a Form 10-K, Form 10-Q, Form 8-K, Proxy Statement or
otherwise so as to be deemed a “reporting issuer” with current public
information under the 1934 Act, the Company shall be liable to pay to the
Holder, in addition to any other available remedies in the Transaction Documents
or at law or equity, an amount based on the following schedule (where “No.
Trading Days Late” refers to each Trading Day after the latest due date for the
relevant filing):
 

 
Late Payment for Each $10,000.00
 
No. Trading Days Late
of Outstanding Principal of the Note
             
1
    $100.00
 
2
    $200.00
 
3
    $300.00
 
4
    $400.00
 
5
    $500.00
 
6
    $600.00
 
7
    $700.00
 
8
    $800.00
 
9
    $900.00
 
10
 $1,000.00
 
>10
 $1,000.00 + $200.00 for each Trading Day Late beyond 10 days

 
The filing of SEC Form NT and subsequent filing of the required forms within the
applicable grace period shall not be deemed a failure to timely file under this
subsection. The Company shall pay any payments incurred under this subsection in
immediately available funds upon demand by the Holder; provided, however, that
the Holder making the demand may specify that the payment shall be made in
shares of Common Stock at the Conversion Price (as defined in and determined
pursuant to the Note) applicable to the date of such demand.  If the payment is
to be made in shares of Common Stock, such shares shall be considered Conversion
Shares under the Note, with the “Delivery Date” for such shares being determined
from the date of such demand. The demand for payment of such amount in shares of
Common Stock shall be considered a “Conversion Notice” under the Note (but the
delivery of such shares shall be in payment of the amount contemplated by this
subsection and not in payment of any principal or interest on the Note).
 
 
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(o) Authorized Shares.  The Company shall take all action necessary to, at all
times, have authorized and reserved for the purpose of issuance: the higher of
such number of shares of Common Stock (1) as shall be necessary to effect the
full conversion of the Note as of the relevant date of determination, multiplied
by four, and (2) equal to four times the Outstanding Balance (as defined in the
Note) of the Note as of the relevant date of determination, divided by the
then-current Market Price (as defined in and determined pursuant to the Note)
(the “Share Reserve”). If at any time the Share Reserve is less than required
herein at such time, the Company shall immediately increase the Share Reserve in
an amount equal to no less than the deficiency. If the Company does not have
sufficient authorized and unissued shares of Common Stock available to increase
the Share Reserve, the Company shall call a special meeting of the stockholders
and hold such meeting within sixty (60) calendar days from such occurrence, for
the sole purpose of increasing the number of authorized shares of Common Stock.
The Company’s management shall recommend to the Company’s stockholders to vote
in favor of increasing the number of authorized shares of Common
Stock.  Management shall also vote all of its shares in favor of increasing the
number of authorized shares of Common Stock. The Company shall use its best
efforts to cause such additional shares of Common Stock to be authorized so as
to comply with the requirements of this Section. All calculations with respect
to determining the Share Reserve shall be made without regard to any limitations
on conversion of the Note.
 
(p) DWAC Eligibility. For so long as any portion of the Note remains
outstanding, the Company shall use its best efforts to (i) keep the Common Stock
DWAC Eligible. In the event the Common Stock is not DWAC Eligible, or delivers
Shares to the Buyer pursuant to a conversion of all or any portion of the Note
in certificated rather than electronic form, then in addition to any other
available remedies, the outstanding principal balance of the Note shall
automatically increase by an amount equal to the decline in Value (as defined
below) of the Conversion Shares, if any, between the Delivery Date for the
Conversion Shares and the date that is twenty (20) Trading Days after such
Conversion Shares are actually delivered to the Buyer, without the need for any
additional action or notice by Buyer or any other party.  “Value”, as used in
this Section 5.2(p), shall mean the five (5) Trading Day trailing average VWAP
(as defined in the Note) for the Conversion Shares.
 
(q) Anti-Dilution Certification.  For so long as any portion of the Note remains
outstanding, the Company shall deliver to the Buyer a certification in the form
attached hereto as ANNEX V (“Anti-Dilution Certificate”) whereby the Company
shall notify the Buyer within five (5) Trading Days after the occurrence of a
Dilutive Issuance (as defined in the Note), or any other event that occurs that
triggers anti-dilution protection or other adjustments to the applicable
Conversion Price (as defined in and determined pursuant to the Note) (each an
“Anti-Dilution Event”). The Company further agrees to provide an Anti-Dilution
Certificate to the Buyer no later than five (5) Trading Days after Buyer’s
written request.
 
(r) Reserved.
 
(s) Change in Nature of Business. The Company shall not directly or indirectly
engage in any material line of business substantially different from those lines
of business conducted by or publicly contemplated to be conducted by the Company
on the date of this Agreement or any business substantially related or
incidental thereto. The Company shall not, and the Company shall cause each of
its Subsidiaries to not, directly or indirectly, modify its or their corporate
structure or purpose if such modification may have a material adverse effect on
any rights of, or benefits to, the Holder under any of the Transaction
Documents.
 
(t) Maintenance of Properties, Etc. The Company shall maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, all of its properties
which are necessary or useful in the proper conduct of its business, in good
working order and condition, ordinary wear and tear excepted, and comply, and
cause each of its Subsidiaries to comply, at all times with the provisions of
all leases to which it is a party as lessee or under which it occupies property,
so as to prevent any loss or forfeiture thereof or thereunder.
 
 
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(u) Maintenance of Insurance.  The Company shall maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable insurance
companies or associations (including, without limitation, comprehensive general
liability, hazard, rent and business interruption insurance) with respect to its
properties (including all real properties leased or owned by it) and business,
in such amounts and covering such risks as is required by any governmental
authority having jurisdiction with respect thereto or as is carried generally in
accordance with sound business practice by companies in similar businesses
similarly situated.
 
(v) Restriction on Redemption. The Company shall not, directly or indirectly,
redeem or repurchase its capital stock without the prior express written consent
of the Holder.
 
(w) Restriction on Transfer of Assets. The Company shall not, and the Company
shall cause each of its Subsidiaries to not, directly or indirectly, sell,
lease, license, assign, transfer, convey or otherwise dispose of any assets or
rights of the Company or any Subsidiary owned or hereafter acquired, whether in
a single transaction or a series of related transactions, other than (A) sales,
leases, licenses, assignments, transfers, conveyances and other dispositions of
such assets or rights supported by fair market value consideration as determined
in the reasonable discretion of the board of directors or the Chief Executive
Officer of the Company or its Subsidiary, as the case may be, (B) sales of
inventory in the ordinary course of business, or (C) in connection with
agreements that have been disclosed in the Company’s SEC Documents prior to the
Issuance Date.
 
(x) Existence of Liens. The Company shall not, and the Company shall cause each
of its Subsidiaries to not, directly or indirectly, allow, grant, or suffer to
exist any mortgage, lien, pledge, charge, security interest, tax lien, judgment,
or other encumbrance (collectively, “Liens”), upon the property or assets
(including accounts and contract rights) owned by the Company or any of its
Subsidiaries, other than Permitted Liens.
 
(y) Intellectual Property.  The Company shall not, and the Company shall not
permit any of its Subsidiaries, directly or indirectly, to encumber or allow any
Liens on, any of its copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work, whether published or unpublished, any patents, patent applications and
like protections, including improvements, divisions, continuations, renewals,
reissues, extensions, and continuations-in-part of the same, trademarks, service
marks and, to the extent permitted under applicable law, any applications
therefor, whether registered or not, and the goodwill of the business of the
Company and its Subsidiaries connected with and symbolized thereby, know-how,
operating manuals, trade secret rights, rights to unpatented inventions, and any
claims for damage by way of any past, present, or future infringement of any of
the foregoing, other than Permitted Liens.
 
(z) Transactions with Affiliates.  The Company shall not, nor shall it permit
any of its Subsidiaries to, enter into, renew, extend or be a party to, any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease, transfer or exchange of property or assets of any
kind or the rendering of services of any kind) with any Affiliate, except in the
ordinary course of business in a manner and to an extent consistent with past
practice and necessary or desirable for the prudent operation of its business,
for fair consideration and on terms no less favorable to it or its Subsidiaries
than would be obtainable in a comparable arm’s length transaction with a person
that is not an Affiliate thereof.
 
 
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(aa) Certain Negative Covenants of the Company.  From and after the date hereof
and until all of the Company’s obligations hereunder and the Note are paid and
performed in full, the Company shall not:
 
(i) During the Restricted Period, enter into a Section 3(a)(9) or 3(a)(10)
Transaction without complying with the Buyer’s right of first refusal set forth
in Section 5.2(k) hereof; provided, however, that if the Company is in breach of
any of its obligations under this Agreement, then Buyer shall also have the
right, in its sole and absolute discretion, to disallow any new indebtedness for
borrowed money without the prior written consent of Buyer.
 
(ii) Enter into any transaction, including, without limitation, any purchase,
sale, lease or exchange of property or the rendering of any service, with any
Affiliate of the Company, or amend or modify any agreement related to any of the
foregoing, except on terms that are no less favorable, in any material respect,
than those obtainable from any person or entity who is not an Affiliate of the
Company.
 
(iii) Except for the Dividend Cap described below, so long as the Note is
outstanding, the Company shall not, and the Company shall not permit any of its
Subsidiaries to, directly or indirectly, pay cash dividends or distributions on
any equity securities of the Company or of its Subsidiaries without the consent
of the Buyer. Notwithstanding the foregoing, so long as no Equity Conditions
Failure (as defined in the Note) has occurred, the Company may issue a dividend
up to a maximum of 10% of the Company’s gross profit (as determined under GAAP)
for the immediately preceding fiscal year (the “Dividend Cap”).
 
(bb) Piggyback Registrations. (1) During the ninety (90) calendar days
immediately following the Closing Date, and (2) any time after the six-month
anniversary of the Closing Date during which  the Buyer is not eligible to sell
Shares under Rule 144, the Company shall notify the Buyer in writing at least
fifteen (15) Trading Days prior to the filing of any Registration Statement for
purposes of a public offering of securities of the Company (including, but not
limited to, Registration Statements relating to secondary offerings of
securities of the Company) and will afford the Buyer an opportunity to include
in such Registration Statement all or part of the Shares it holds. If the Buyer
desires to include in any such Registration Statement all or any part of the
Shares held by it, the Buyer shall, within fifteen (15) Trading Days after the
above-described notice from the Company, so notify the Company in writing. Such
notice shall state the intended method of disposition of the Shares by the
Buyer. In the event the Buyer desires to include less than all of its Shares in
any Registration Statement it shall continue to have the right to include any
Shares in any subsequent Registration Statement or Registration Statements as
may be filed by the Company with respect to offerings of its securities, all
upon the terms and conditions set forth herein. The parties acknowledge and
agree that the Buyer’s registration rights as described in this subsection shall
not apply to any Registration Statement filed with the SEC pertaining to
securities being registered and offered on a delayed or continuous basis
pursuant to Rule 415 on behalf of Tangiers Investors, LP.
 
(cc) Rule 144 Opinion.  The Company shall accept, in its reasonable discretion,
an opinion letter prepared by legal counsel of the Buyer’s choosing, stating
that (1) the Company is not a “Shell Company” as such term is defined in Rule
144, (2) the Company has not been a Shell Company for the preceding twelve (12)
months, (3) the Company is in compliance with all filing requirements under Rule
144, and (4) the Shares may be sold by the Buyer without any restrictions
pursuant to Rule 144, so long as the applicable holding period specified by Rule
144 is satisfied, and, as applicable, the Company shall give instructions to its
Transfer Agent to issue shares of Common Stock upon conversion of the Note based
upon or otherwise consistent with such opinion.
 
 
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(dd) Transfer Agent Reserve.  From and after the date hereof and until all of
the Company’s obligations hereunder and the Note are paid and performed in full:
 
(i) the Company shall at all times require its Transfer Agent to establish a
reserve of shares of authorized but unissued Common Stock in an amount not less
than the Share Reserve (the “Transfer Agent Reserve”);
 
(ii) the Company shall require its Transfer Agent to hold the Transfer Agent
Reserve for the exclusive benefit of the Holder and shall authorize the Transfer
Agent to issue the shares of Common Stock held in the Transfer Agent Reserve to
the Holder only (subject to subsection (iii) immediately below);
 
(iii) the Company shall cause the Transfer Agent to agree that when the Transfer
Agent issues shares of Common Stock to the Holder pursuant to the Transaction
Documents, the Transfer Agent will not issue such shares from the Transfer Agent
Reserve, unless such issuance is pre-approved in writing by the Holder;
 
(iv) the Company shall cause the Transfer Agent to agree that it will not reduce
the Transfer Agent Reserve under any circumstances, unless such reduction is
pre-approved in writing by the Holder;
 
(v) Within five (5) Trading Days of the Holder’s written request, the Company
shall recalculate the Transfer Agent Reserve as of such time (each a “Transfer
Agent Reserve Calculation”), and if additional shares of Common Stock are
required to be added to the Transfer Agent Reserve pursuant to subsection (i)
immediately above, the Company shall immediately give written instructions to
the Transfer Agent to cause the Transfer Agent to set aside and increase the
Transfer Agent Reserve by the necessary number of shares of Common Stock; and
 
(vi) Within five (5) Trading Days of the Holder’s written request, the Company
shall certify in writing to the Holder (1) the correctness of the Company’s
Transfer Agent Reserve Calculation and (2) that either (A) the Company has
instructed the Transfer Agent to increase the Transfer Agent Reserve in
accordance with the terms hereof, or (B) there was no need to increase the
Transfer Agent Reserve, in either case consistent with the Transfer Agent
Reserve Calculation.
 
For the avoidance of any doubt, the requirements of this Section 5.2 are
material to this Agreement and any violation or breach thereof by the Company
shall constitute a default under this Agreement.
 
6. TRANSFER AGENT INSTRUCTIONS.
 
6.1. The Company covenants that, with respect to the Securities, other than the
stop transfer instructions to give effect to Section 5.1(a) hereof, the Company
will give the Transfer Agent no instructions inconsistent with the Transfer
Agent Letter. Except as required by Sections 5.1(a) and 5.1(b) of this Agreement
and the Transfer Agent Letter, the Shares shall otherwise be freely transferable
on the books and records of the Company as and to the extent provided in this
Agreement and the other Transaction Documents.  Nothing in this Section shall
affect in any way the Buyer’s obligations and agreement to comply with all
applicable securities laws upon resale of the Securities.  If the Buyer provides
the Company with an opinion of counsel reasonably satisfactory to the Company
that registration of a resale by the Buyer of any of the Securities in
accordance with clause (1)(B) of Section 5.1(a) of this Agreement is not
required under the 1933 Act or upon request from a Holder while an applicable
Registration Statement is effective, the Company shall (except as provided in
clause (2) of Section 5.1(a) of this Agreement) permit the transfer of the
Securities and, in the case of the Conversion Shares, use its best efforts to
cause the Transfer Agent to promptly electronically transmit to the Holder via
the DWAC system such Conversion Shares. The Company specifically covenants that,
as of the Closing Date, the (a) Transfer Agent shall be participating in the
DTC/FAST Program, and (b) the Common Stock shall be DWAC Eligible.  Moreover,
the Company shall notify the Buyer in writing if the Company at any time while
the Holder holds Securities becomes aware of any plans of the Transfer Agent to
voluntarily or involuntarily terminate its participation in the DTC/FAST
Program. While any Holder holds Securities, the Company shall at all times after
the Closing Date maintain a transfer agent which participates in the DTC/FAST
Program, and the Company shall not appoint any transfer agent which does not
participate in the DTC/FAST Program.  Nevertheless, if at any time that the
Company receives a Conversion Notice the Transfer Agent is not participating in
the DTC/FAST Program or the Conversion Shares are not otherwise transferable via
DWAC, then the Company shall instruct the Transfer Agent to immediately issue
one or more certificates for Common Stock without legend in such name and in
such denominations as specified by the Holder.  In the event the Common Stock is
not DWAC Eligible on any Conversion Date, and consequently the Company issues
Conversion Shares pursuant to a Conversion Notice in certificated rather than
electronic form, then in such event the amount set forth in Section 5.2(p) shall
be added to the principal balance of the Note.
 
 
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6.2. Delay in Issuing Shares.
 
(a) The Company understands that a delay in the delivery of Conversion Shares,
whether on conversion of all or any portion of the Note and/or in payment of
accrued interest, beyond the relevant Delivery Date could result in economic
loss to the Holder. As compensation to the Holder for such loss, in addition to
any other available remedies in the Transaction Documents or at law or equity,
the Company shall pay late payments to the Holder for late delivery of the
Conversion Shares in accordance with the following schedule (where “No. Trading
Days Late” is defined as the number of Trading Days beyond three (3) Trading
Days after the Delivery Date):
 

 
Late Payment for Each $10,000.00
 
No. Trading Days Late
of Principal or Interest Being Converted
             
1
    $100.00
 
2
    $200.00
 
3
    $300.00
 
4
    $400.00
 
5
    $500.00
 
6
    $600.00
 
7
    $700.00
 
8
    $800.00
 
9
    $900.00
 
10
 $1,000.00
 
>10
 $1,000.00 + $200.00 for each Trading Day Late beyond 10 days

 
As elected by the Holder, the amount of any payments incurred under this
Section 6.2(a) shall either be automatically added to the principal balance of
the Note or otherwise paid by the Company in immediately available funds upon
demand. Nothing herein shall limit the Holder’s right to pursue additional
damages for the Company’s failure to issue and deliver the Conversion Shares to
the Holder within a reasonable time.  Furthermore, in addition to any other
remedies which may be available to a Holder, in the event that the Company fails
for any reason to effect delivery of such Conversion Shares within three (3)
Trading Days after the Delivery Date, the Holder will be entitled to revoke the
Conversion Notice by delivering a notice to such effect to the Company prior to
such Holder’s receipt of the relevant Conversion Shares, whereupon the Company
and the Holder shall each be restored to their respective positions immediately
prior to delivery of such Conversion Notice; provided, however, that any
payments contemplated by this Section 6.2(a) which have accrued through the date
of such revocation notice shall remain due and owing to the Holder
notwithstanding such revocation.
 
 
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(b) If, by the third Trading Day after the relevant Delivery Date, the Company
fails for any reason to deliver the Conversion Shares, but at any time after the
Delivery Date, the Holder purchases, in an arm’s-length open market transaction
or otherwise, shares of Common Stock (the “Covering Shares”) in order to make
delivery in satisfaction of a sale of Common Stock by the Holder (the “Sold
Shares”), which delivery such Holder anticipated to make using the shares of
Common Stock to be issued upon such conversion or exercise (a “Buy-In”), the
Holder shall have the right to require the Company to pay to the Holder, in
addition to and not in lieu of the amounts contemplated in other provisions of
the Transaction Documents, including, but not limited to, the provisions of the
immediately preceding Section 6.2(a), the Buy-In Adjustment Amount (as defined
below).  The “Buy-In Adjustment Amount” is the amount equal to the number of
Sold Shares multiplied by the excess, if any, of (1) the Holder’s total purchase
price per share (including brokerage commissions, if any) for the Covering
Shares over (2) the net proceeds per share (after brokerage commissions, if any)
received by the Holder from the sale of the Sold Shares.  The Company shall pay
the Buy-In Adjustment Amount to the Holder in immediately available funds
immediately upon demand by the Holder.  By way of illustration and not in
limitation of the foregoing, if the Holder purchases shares of Common Stock
having a total purchase price (including brokerage commissions) of $11,000.00 to
cover a Buy-In with respect to shares of Common Stock the Holder sold for net
proceeds of $10,000.00, the Buy-In Adjustment Amount which Company will be
required to pay to the Holder will be $1,000.00.
 
6.3. The Company shall assume any fees or charges of the Transfer Agent or
Company Counsel regarding (i) the removal of a legend or stop transfer
instructions with respect to the Securities, and (ii) the issuance of
certificates or DWAC registration to or in the name of the Holder or the
Holder’s designee or to a transferee as contemplated by an effective
Registration Statement.  Notwithstanding the foregoing, it shall be the Holder’s
responsibility to obtain all needed formal requirements (specifically: medallion
guarantee and prospectus delivery compliance) in connection with any electronic
issuance of shares of Common Stock.
 
6.4. The Holder of the Note shall be entitled to exercise its conversion
privilege with respect to such Note, notwithstanding the commencement of any
case under 11 U.S.C. §101 et seq. (the “Bankruptcy Code”).  In the event the
Company is a debtor under the Bankruptcy Code, the Company hereby waives, to the
fullest extent permitted, any rights to relief it may have under 11 U.S.C. §362
in respect of such Holder’s exercise privilege.  The Company hereby waives, to
the fullest extent permitted, any rights to relief it may have under 11 U.S.C.
§362 in respect of the conversion of such Note. The Company agrees, without cost
or expense to such Holder, to take or to consent to any and all action necessary
to effectuate relief under 11 U.S.C. §362.
 
7. CLOSING DATE.
 
7.1. The Closing Date shall occur on the date which is the first Trading Day
after each of the conditions contemplated by Sections 8 and 9 hereof shall have
either been satisfied or been waived by the party in whose favor such conditions
run.
 
 
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7.2. Closing of the purchase and sale of the Securities, which the parties
anticipate shall occur concurrently with the execution of this Agreement, shall
occur at the offices of the Buyer and shall take place no later than 3:00 P.M.,
Eastern Time, or on such day or such other time as is mutually agreed upon by
the Company and the Buyer.
 
8. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. The Company’s obligation to
sell the Securities to the Buyer pursuant to this Agreement on the Closing Date
is conditioned upon and subject to the fulfillment, on or prior to the Closing
Date, of all of the following conditions, any of which may be waived in whole or
in part by the Company:
 
8.1. The execution and delivery of this Agreement and, as applicable, the other
Transaction Documents by the Buyer.
 
8.2. Delivery by the Buyer of good funds as payment in full of an amount equal
to the Purchase Price in accordance with this Agreement.
 
8.3. The accuracy on the Closing Date of the representations and warranties of
the Buyer contained in this Agreement, each as if made on such date, and the
performance by the Buyer on or before such date of all covenants and agreements
of the Buyer required to be performed on or before such date.
 
8.4. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
 
9. CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE. The Buyer’s obligation to
purchase the Securities from the Company pursuant to this Agreement on the
Closing Date is conditioned upon and subject to the fulfillment, on or prior to
the Closing Date, of all of the following conditions, any of which may be waived
in whole or in part by the Buyer:
 
9.1. The execution and delivery of this Agreement, the Transfer Agent Letter,
the Secretary’s Certificate, and, as applicable, the other Transaction Documents
by the Company.
 
9.2. The delivery by the Company to the Buyer of the Note, in original form,
duly executed by the Company, in accordance with this Agreement.
 
9.3. On the Closing Date, each of the Transaction Documents executed by the
Company on or before such date shall be in full force and effect and the Company
shall not be in default thereunder.
 
9.4. The Share Reserve shall be sufficient to effect the full conversion of the
Note as of the Closing Date.
 
9.5. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement and
the other Transaction Documents, each as if made on such date, and the
performance by the Company on or before such date of all covenants and
agreements of the Company required to be performed on or before such date.
 
9.6. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
 
 
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9.7. From and after the date hereof up to and including the Closing Date, each
of the following conditions will remain in effect: (i) the trading of the Common
Stock shall not have been suspended by the SEC or on the Principal Trading
Market; (ii) trading in securities generally on the Principal Trading Market
shall not have been suspended or limited; (iii) no minimum prices shall been
established for securities traded on the Principal Trading Market; (iv) there
shall not have been any material adverse change in any financial market; and (v)
there shall not have occurred any Material Adverse Effect.
 
9.8. Except for any notices required or permitted to be filed after the Closing
Date with certain federal and state securities commissions, the Company shall
have obtained (i) all governmental approvals required in connection with the
lawful sale and issuance of the Securities, and (ii) all third party approvals
required to be obtained by the Company in connection with the execution and
delivery of the Transaction Documents by the Company or the performance of the
Company’s obligations thereunder.
 
9.9. All corporate and other proceedings in connection with the transactions
contemplated at the Closing and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and form to the
Buyer.
 
10. INDEMNIFICATION.
 
10.1. The Company agrees to defend, indemnify and forever hold harmless the
Buyer and its stockholders, directors, officers, managers, members, partners,
Affiliates, employees, attorneys, and agents, and each Buyer Control Person
(collectively, the “Buyer Parties”) from and against any losses, claims,
damages, liabilities or expenses incurred (collectively, “Damages”), joint or
several, and any action in respect thereof to which the Buyer or any of the
other Buyer Parties becomes subject, resulting from, arising out of or relating
to any misrepresentation, breach of warranty or nonfulfillment of or failure to
perform any covenant or agreement on the part of the Company contained in this
Agreement or any of the other Transaction Documents, as such Damages are
incurred. The Buyer Parties with the right to be indemnified under this Section
(the “Indemnified Parties”) shall have the right to defend any such action or
proceeding with attorneys of their own selection, and the Company shall be
solely responsible for all costs and expenses related thereto.  If the
Indemnified Parties opt not to retain their own counsel, the Company shall
defend any such action or proceeding with attorneys of its choosing at its sole
cost and expense, provided that such attorneys have been pre-approved by the
Indemnified Parties, which approval shall not be unreasonably withheld, and
provided further that the Company may not settle any such action or proceeding
without first obtaining the written consent of the Indemnified Parties.
 
10.2. The indemnity contained in this Agreement shall be in addition to (i) any
cause of action or similar rights of the Buyer Parties against the Company or
others, and (ii) any other liabilities the Company may be subject to.
 
11. SPECIFIC PERFORMANCE.  The Company and the Buyer acknowledge and agree that
irreparable damage would occur in the event that any provision of this Agreement
or any of the other Transaction Documents were not performed in accordance with
its specific terms or were otherwise breached.  It is accordingly agreed that
the parties (including any Holder) shall be entitled to an injunction or
injunctions, without the necessity to post a bond (except as specified below),
to prevent or cure breaches of the provisions of this Agreement or any of the
other Transaction Documents and to enforce specifically the terms and provisions
hereof or thereof, this being in addition to any other remedy to which any of
them may be entitled by law or equity; provided, however, that the Company, upon
receipt of a Conversion Notice, may not fail or refuse to deliver certificates
representing shares of Common Stock and the related legal opinions, if any, or
if there is a claim for a breach by the Company of any other provision of this
Agreement or any of the other Transaction Documents, the Company shall not raise
as a legal defense any claim that the Holder or anyone associated or affiliated
with the Holder has violated any provision hereof or any of the other
Transaction Documents or has engaged in any violation of law or any other claim
or defense, unless the Company has first posted a bond for one hundred fifty
percent (150%) of the principal amount and, if relevant, then obtained a court
order specifically directing it not to deliver such certificates to the Holder.
The proceeds of such bond shall be payable to the Holder to the extent that the
Holder obtains judgment or its defense is recognized.  Such bond shall remain in
effect until the completion of the relevant proceeding and, if the Holder
appeals therefrom, until all such appeals are exhausted.  This provision is
deemed incorporated by reference into each of the Transaction Documents as if
set forth therein in full.
 
 
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12. OWNERSHIP LIMITATION. If at any time after the Closing, the Buyer shall or
would receive shares of Common Stock in payment of interest or principal under
the Note or upon conversion of the Note, so that the Buyer would, together with
other shares of Common Stock held by it or its Affiliates, hold by virtue of
such action or receipt of additional shares of Common Stock a number of shares
exceeding the Maximum Percentage (as defined in the Note), the Company shall not
be obligated and shall not issue to the Buyer shares of Common Stock which would
exceed the Maximum Percentage, but only until such time as the Maximum
Percentage would no longer be exceeded by any such receipt of shares of Common
Stock by the Buyer. The foregoing limitations regarding the Maximum Percentage
are enforceable, unconditional and non-waivable and shall apply to all
Affiliates and assigns of the Buyer. Additionally, if at any time after the
Closing the Market Capitalization of the Common Stock falls below $3,000,000,
then from that point on, for so long as the Buyer or its Affiliate owns Common
Stock or rights to acquire Common Stock, the Company shall post, no less
frequently than every thirty (30) calendar days, the then-current number of
issued and outstanding shares of its capital stock to the following web page:
http://www.northbayresources.com/investors.htm (or such other web page approved
by the Holder). The Company understands that its failure to so post its shares
outstanding could result in economic loss to the Holder.  As compensation to the
Holder for such loss, in addition to any other available remedies in the
Transaction Documents or at law or equity, the Company shall pay the Holder a
late fee of $500.00 per calendar day for each calendar day that the Company
fails to comply with the foregoing obligation to post its shares
outstanding.  As elected by the Holder, the amount of any late fees incurred
under this Section 12 shall either be automatically added to the principal
balance of the Note or otherwise paid by the Company in immediately available
funds upon demand.
 
13. MISCELLANEOUS. The Company and the Buyer hereby agree that the provisions of
this Section 13 shall apply to this Agreement and all of the Transaction
Documents.
 
13.1. Governing Law; Venue. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Utah for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws.  Each party hereto hereby (i) consents to and
submits to the exclusive personal jurisdiction of any state or federal court
sitting in Salt Lake County, Utah in connection with any dispute or proceeding
arising out of or relating to this Agreement, (ii) agrees that all claims in
respect of any such dispute or proceeding may be heard and determined in any
such court, (iii) expressly submits to the exclusive personal jurisdiction and
venue of any such court for the purposes hereof, and (iv) waives any claim of
improper venue and any claim or objection that such courts are an inconvenient
forum or any other claim or objection to the bringing of any such proceeding in
such jurisdictions or to any claim that such venue of the suit, action or
proceeding is improper. Each party hereto hereby irrevocably consents to the
service of process of any of the aforementioned courts in any such proceeding by
the mailing of copies thereof by overnight courier (e.g., FedEx) or certified
mail, postage prepaid, to its address as set forth herein, such service to
become effective ten (10) calendar days after such mailing.
 
 
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13.2. Successors and Assigns; Third Party Beneficiaries. This Agreement shall
inure to the benefit of and be binding upon the successors and permitted assigns
of the parties hereto. Except as otherwise expressly provided herein, no Person
other than the parties hereto and their successors and permitted assigns is
intended to be a beneficiary of this Agreement.
 
13.3. Pronouns.  All pronouns and any variations thereof in this Agreement refer
to the masculine, feminine or neuter, singular or plural, as the context may
permit or require.
 
13.4. Counterparts.  This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument. The parties hereto confirm that any
electronic copy of another party’s executed counterpart of this Agreement (or
its signature page thereof) will be deemed to be an executed original thereof.
 
13.5. Headings.  The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
 
13.6. Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such provision shall be modified to achieve the objective of the
parties to the fullest extent permitted and such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this
Agreement or the validity or enforceability of this Agreement in any other
jurisdiction.
 
13.7. Entire Agreement. This Agreement, together with the other Transaction
Documents, constitutes and contains the entire agreement between the parties
hereto, and supersedes all prior oral or written agreements and understandings
between Buyer, Company, their Affiliates and Persons acting on their behalf with
respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither Company nor Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters.
 
13.8. Amendment. Any amendment, supplement or modification of or to any
provision of this Agreement, shall be effective only if it is made or given by
an instrument in writing (excluding any email message) and signed by Company and
Buyer.
 
13.9. No Waiver. No forbearance, failure or delay on the part of a party hereto
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver of any provision of this Agreement
shall be effective (i) only if it is made or given in writing (including an
email message) and (ii) only in the specific instance and for the specific
purpose for which made or given.
 
13.10. Currency. All dollar amounts referred to or contemplated by this
Agreement or any other Transaction Documents shall be deemed to refer to US
Dollars, unless otherwise explicitly stated to the contrary.
 
13.11. Assignment. Notwithstanding anything to the contrary herein, the rights,
interests or obligations of the Company hereunder may not be assigned, by
operation of law or otherwise, in whole or in part, by the Company without the
prior written consent of the Buyer, which consent may be withheld at the sole
discretion of the Buyer; provided, however, that in the case of a merger, sale
of substantially all of the Company’s assets or other corporate reorganization,
the Buyer shall not unreasonably withhold, condition or delay such consent. This
Agreement or any of the severable rights and obligations inuring to the benefit
of or to be performed by Buyer hereunder may be assigned by Buyer to a third
party, including its financing sources, in whole or in part.
 
 
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13.12. Advice of Counsel. In connection with the preparation of this Agreement
and all other Transaction Documents, the Company, for itself and on behalf of
its stockholders, officers, agents, and representatives acknowledges and agrees
that Buyer’s Counsel prepared initial drafts of this Agreement and all of the
other Transaction Documents and acted as legal counsel to the Buyer only.  The
Company, for itself and on behalf of its stockholders, officers, agents, and
representatives, (i) hereby acknowledges that he/she/it has been, and hereby is,
advised to seek legal counsel and to review this Agreement and all of the other
Transaction Documents with legal counsel of his/her/its choice, and (ii) either
has sought such legal counsel or hereby waives the right to do so.
 
13.13. No Strict Construction. The language used in this Agreement is the
language chosen mutually by the parties hereto and no doctrine of construction
shall be applied for or against any party.
 
13.14. Attorney’s Fees. In the event of any litigation or dispute arising from
this Agreement or the other Transaction Documents, the parties agree that the
party who is awarded the most money shall be deemed the prevailing party for all
purposes and shall therefore be entitled to an additional award of the full
amount of the attorneys' fees and expenses paid by said prevailing party in
connection with the litigation and/or dispute without reduction or apportionment
based upon the individual claims or defenses giving rise to the fees and
expenses.  Nothing herein shall restrict or impair a court's power to award fees
and expenses for frivolous or bad faith pleading.
 
13.15. Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY
AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE RELATIONSHIPS OF
THE PARTIES HERETO BE TRIED BY JURY.  THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS
TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE,
LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT IT IS
KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.
 
13.16. Rights and Remedies Cumulative.  All rights, remedies, and powers
conferred in this Agreement and the Transaction Documents are cumulative and not
exclusive of any other rights or remedies, and shall be in addition to every
other right, power, and remedy that Buyer may have, whether specifically granted
in this Agreement or any other Transaction Document, or existing at law, in
equity, or by statute; and any and all such rights and remedies may be exercised
from time to time and as often and in such order as the Buyer may deem
expedient.
 
13.17. Further Assurances. Each party shall do and perform or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
 
13.18. Notices. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of:
 
 
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(a) the date delivered, if delivered by personal delivery as against written
receipt therefor or by confirmed facsimile or electronic mail transmission,
 
(b) the fifth Trading Day after deposit, postage prepaid, in the United States
Postal Service by registered or certified mail, or
 
(c) the third Trading Day after mailing by domestic or international express
courier, with delivery costs and fees prepaid,
 
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) calendar days’ advance written notice similarly given to each of the
other parties hereto):

If to the Company:

North Bay Resources, Inc.
Attn: Perry Leopold
2120 Bethel Road
Lansdale, Pennsylvania 19446

with a copy to (which shall not constitute notice):

Thomas E. Boccierei, Esq.
561 Schaefer Avenue
Oradell, New Jersey 07649

If to the Buyer:

Tonaquint, Inc.
Attn: John M. Fife
303 East Wacker Drive, Suite 1200
Chicago, Illinois  60601

with a copy to (which shall not constitute notice):

Hansen Black Anderson PLLC
Attn: Jonathan K. Hansen
2940 West Maple Loop Drive, Suite 103
Lehi, Utah 84043
Telephone: 801.922.5000

13.19. Survival of Representations and Warranties. All of the representations
and warranties made herein shall survive the execution and delivery of this
Agreement for the maximum time allowable by applicable law.
 
13.20. Cross Default. Any Event of Default (as defined in the Note) shall be
deemed a default under this Agreement. Upon such a default of this Agreement by
the Company, the Buyer shall have all those rights and remedies available at law
or equity, including without limitation those remedies set forth in the Note.
 
 
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13.21. Buyer’s Expenses.  In the event the Company elects not to effect the
Closing for any reason, the Company shall pay $10,000 in cash to the Buyer for
the Buyer’s legal, administrative and due diligence expenses.  Except as
provided in the immediately preceding sentence and in Section 13.14, and except
for the fees required to be paid by the Company to the Buyer pursuant to Section
2.3 for Buyer’s legal, administrative and due diligence expenses, the Company
and the Buyer shall be responsible for paying such party’s own fees and expenses
(including legal expenses) incurred in connection with the preparation and
negotiation of this Agreement and the other Transaction Documents and the
closing of the transactions contemplated hereby and thereby.
 
13.22. Replacement of the Note. Subject to any restrictions on or conditions to
transfer set forth in the Note, the Holder of the Note, at its option, may in
person or by duly authorized attorney surrender the same for exchange at the
Company’s principal corporate office, and promptly thereafter and at the
Company’s expense, except as provided below, receive in exchange therefor one or
more new convertible promissory note(s), each in the principal amount requested
by such Holder, dated the date to which interest shall have been paid on the
Note so surrendered or, if no interest shall have yet been so paid, dated the
date of the Note so surrendered and registered in the name of such person or
persons as shall have been designated in writing by such Holder or its attorney
for the same principal amount as the then unpaid principal amount of the Note so
surrendered. As applicable, upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of the Note and (i) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it; or (ii) in the case of mutilation, upon
surrender thereof, the Company, at its expense, will execute and deliver in lieu
thereof a new convertible promissory note executed in the same manner as the
Note being replaced, in the same principal amount as the unpaid principal amount
of such Note and dated the date to which interest shall have been paid on the
Note or, if no interest shall have yet been so paid, dated the date of the Note.
 
14. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. The Company’s and the
Buyer’s covenants, agreements, representations and warranties contained herein
shall survive the execution and delivery of this Agreement and the other
Transaction Documents and the Closing hereunder, and shall inure to the benefit
of the Buyer and the Company and their respective successors and permitted
assigns.
 
[Remainder of the page intentionally left blank; signature page to follow]
 
 
 
 
 
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IN WITNESS WHEREOF, each of the undersigned represents that the foregoing
statements made by it above are true and correct and that it has caused this
Agreement to be duly executed on its behalf (if an entity, by one of its
officers thereunto duly authorized) as of the date first above written.

PURCHASE
PRICE:                                                            $100,000

THE BUYER:

Tonaquint, Inc.

By: _/s/ John M. Fife                       
       John M. Fife, President

THE COMPANY:

North Bay Resources, Inc.

By:           /s/ Perry Leopold                
                                                                
Name:      Perry Leopold                        
Title:        CEO/Chairman                     
                                                                
 
 
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ATTACHMENTS:
 
ATTACHMENTS:
     
ANNEX I
WIRE INSTRUCTIONS
ANNEX II
NOTE
ANNEX III
TRANSFER AGENT LETTER
ANNEX IV
SECRETARY’S CERTIFICATE
ANNEX V
FORM OF ANTI-DILUTION CERTIFICATION