Document:

Unassociated Document

Exhibit 10.2

 

AMENDMENT NO. 1 TO

AMENDED AND RESTATED

ENGAGEMENT AGREEMENT

This Amendment No. 1 (the “Amendment”) dated April 7, 2011, to that certain  Amended and Restated Engagement Agreement (the “Agreement”) effective as of the 1st day of January, 2009 between Capital Gold Corporation, a Delaware Corporation having an office at 76 Beaver Street, 14th Floor, New York, NY 10005 (hereinafter referred to as the “Company”), and Christopher M. Chipman (hereinafter referred to as “Executive”) amends Exhibit A to the Agreement, the Agreement Regarding Change in Control.

Pursuant to Section 10 of Exhibit A of the Agreement, Company and Executive hereby agree to amend the Agreement, effective on the date hereof, as follows:

 

 

1.           Section 3(a).                                Section 3(a) of Exhibit A to the Agreement relating to change in control payments is hereby amended in its entirety as follows:

(a)           The Executive shall be entitled to a lump sum payment payable at the sole election of Gammon Gold Inc. (“Gammon”) in common shares of Gammon or in cash (the “Change of Control Payment”); provided, however, that Gammon shall make such Change of Control Payment in cash if the Toronto Stock Exchange (the “TSX”) does not approve such payment in Gammon common shares, and in either case, such Change of Control Payment shall be made no later than twenty (20) business days after the Executive’s date of termination (following, for avoidance of doubt, the Transition Period (as defined below), in an amount equal to the sum of:

(i)           three times the Executive’s base salary in effect on the date of the Change in Control or, or if greater, as in effect immediately prior to the date of termination; plus

(ii)          three times the Executive’s bonus award for the year immediately preceding the year of the Change in Control.

If such Change of Control Payment is to be made in Gammon common shares, the number of Gammon common shares to be paid to Executive shall be determined by dividing the total cash value of the payment set forth in (i) and (ii) above by the volume weighted average price of Gammon common stock on the New York Stock Exchange for the five trading days immediately preceding the closing date of the merger (the “Merger”) between Gammon and the Company (or at such other price as is required by the TSX).  Such Gammon common stock shall be registered and freely tradable under applicable Canadian and United States securities Laws; provided, however, that such Gammon common stock shall be subject to any restrictions under applicable Canadian securities laws relating to distributions by control persons, and any restrictions under the Securities Act of 1933, as amended, applicable to sales by affiliates of an issuer.

The amount payable under this paragraph (a) shall be inclusive of the amounts, if any, to which the Executive would otherwise be entitled by law and shall be in addition to (and not inclusive of) any amount payable under any written agreement(s) directly between the Executive and the Company or any of its subsidiaries.

 

  

  

  

 

2.           Transition Services.  Notwithstanding the provisions of Section 2 of Exhibit A to the Agreement, the Company hereby offers, and Executive hereby accepts, employment with the Company or its successor following the closing of the Merger (the “Closing”) for a transition period of 60 days (the “Transition Period”) as follows:

(a) Executive will receive the same base fee during the Transition Period from the Company on the same payment schedule as received immediately prior to the Closing.

(b) Executive will perform such services, consistent with Executives prior duties, as Gammon and/or the Company may reasonably request.

(c) Should Gammon and / or the Company or either of their successors desire to retain Executive for further ad hoc services beyond the Transition Period, Executive shall be paid $1,200 per each day that Executive performs any such services, not subject to hourly pro-ration, provided, however, that Executive shall not be obligated to provide any such ad hoc services.

(d) It is expressly understood that the Change of Control Payment shall be made following the 60 day Transition Period, and shall not be further tolled by ad hoc services performed under subsection (c) above.

 

3.           Limitation on Good Reason Termination Right.  Notwithstanding the provisions of Section 2 of Exhibit A to the Agreement, by signing below, Executive hereby (i) during the Transition Period, waives any right to terminate Executive’s employment for “Good Reason” (as defined in Section 2(c) of Exhibit A to the Agreement) for the reasons set forth in Sections 2(c)(i), 2(c)(iv), 2(c)(v), 2(c)(vi) of Exhibit A to the Agreement, provided that the Executive agrees that any termination for Good Reason pursuant to Section 2(c)(vii) of Exhibit A of the Agreement can not be based on any arrangements agreed to with Gammon and/or the Company (including this Amendment) in connection with the Merger Agreement or the services to be rendered during the Transition Period and (ii) understands, acknowledges and agrees that termination by Executive during the Transition Period pursuant to Section 2(c)(i) or 2(c)(iv) through and including 2(c)(vi), as well as any purported termination pursuant to Section 2(c)(vii) in breach of the proviso at the end of clause (i) above, of Exhibit A to the Agreement following the consummation of the Merger shall be treated as a voluntary resignation without Good Reason for which Executive shall not be entitled to receive any of the severance benefits described in Section 3 of Exhibit A to the Agreement.  For the avoidance of doubt, the foregoing shall not limit Executive’s rights under Exhibit A of the Agreement in connection with any termination of Executive’s employment by the Company for any reason other than “Permanent Disability” or “Cause” (as defined in Sections 2(a) and 2(b), respectively, of Exhibit A to the Agreement) following the consummation of the Merger or Executive’s rights under Exhibit A of the Agreement to terminate his employment by the Company for Good Reason for the reasons set forth in Sections 2(c)(ii), 2(c)(iii) or 2(c)(vii), provided for further avoidance of doubt, that with respect to Section 2(c)(vii), Good Reason shall not be deemed to include any lack of satisfaction with the arrangements contemplated by the Merger or this Amendment.

4.           Mutual Drafting.  This Amendment is the joint product of Executive and the Company and each provision hereof has been subject to the mutual consultation, negotiation and agreement of such parties and shall not be construed for or against any party hereto.

 

  

  

  

 

5.           No Other Amendments; Governing Law; Counterparts.  Except as specifically set forth in this Amendment, there are no other amendments to the Agreement and the Agreement shall remain unmodified and in full force and effect.  This Amendment shall be governed by and construed in accordance with the internal laws of the State of New York without regard to conflict of laws provisions.  This Amendment may be executed in one or more counterparts.  In the event that any signature is delivered by facsimile transmission or any other form of electronic delivery, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

[Signature page follows.]

 

  

  

  

 

IN WITNESS WHEREOF, the parties have executed this Amendment to the Agreement as of the date first set forth above.

	 	
CAPITAL GOLD CORPORATION

	 
	 	 	 	 
	 	
By:

	
/s/ Christopher M. Chipman

	 
	 	
Name:

	
Christopher M. Chipman

	 
	 	
Title:

	
Chief Financial Officer

	 

 

	 	
EXECUTIVE

	 
	 	 	 	 
	 	
By:

	
/s/ Christopher M. Chipman

	 
	 	
Name:

	
Christopher M. Chipman, individuallyExhibit 10.6

FORM OF SUBSCRIPTION AGREEMENT

Loreto Resources Corporation

1266 1st Street, Suite 4

Sarasota, FL 34236

This Subscription Agreement (this “Agreement”) has been executed by the subscriber set forth in the signature page attached hereto (the “Subscriber”) in connection with the private placement offering (the “Offering”) of $90,000 principal amount of convertible promissory notes (the “Notes”) of Loreto Resources Corporation, a Nevada Corporation (the “Company”).  This subscription is being submitted to you in accordance with and subject to the terms and conditions described in this Agreement.

 

The Notes being subscribed for pursuant to this Agreement, or the securities into which the Notes may be converted, have not been registered under the Securities Act of 1933, as amended (the “Securities Act”).  The Offering is being made on a “best efforts” basis to “accredited investors,” as defined in Regulation D under the Securities Act, and subscribers who are not ”U.S. persons,” as defined in Regulation S under the Securities Act.  The Company reserves the right, in its sole discretion and for any reason, to reject any Subscriber’s subscription in whole or in part, or to allot less than the number of Notes subscribed for.

 

The closing of the Offering (the “Closing;” and the date on which such Closing occurs hereinafter referred to as the “Closing Date”) shall be at the offices of Gottbetter & Partners, LLP, as escrow agent (the “Escrow Agent”), at 488 Madison Avenue, New York, New York 10022 (or such other place as is mutually agreed to by the Company).  The Company may conduct multiple closings for the sale of the Notes until the termination of the Offering.  The Offering shall continue until the maximum amount of the Offering is reached or it is otherwise terminated by the Company.

 

1.          Subscription.  The undersigned Subscriber hereby subscribes to purchase the principal amount of Notes set forth on the signature page attached hereto (the “Purchase Price”), subject to the terms and conditions of this Agreement and on the basis of the representations, warranties, covenants and agreements contained herein.

 

2.          Subscription Procedure.  To complete a subscription for the Notes, the Subscriber must fully comply with the subscription procedure provided in this Section on or before the Closing Date.

 

a.           Transaction Documents.  On or before the Closing Date, the Subscriber shall review, complete and execute the Signature Page to this Agreement, the Anti-Money Laundering Investor Form (with attachments) and the Investor Certification, attached hereto as Appendix A (collectively, the “Transaction Documents”), and deliver the Transaction Documents to the Escrow Agent.  Executed documents may be delivered to the Escrow Agent by facsimile or electronic mail (e-mail), if the Subscriber delivers the original copies of the documents to the Escrow Agent as soon as practicable thereafter.

 

  

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b.           Purchase Price.  Simultaneously with the delivery of the Transaction Documents to the Escrow Agent as provided herein, and in any event on or prior to the Closing Date, the Subscriber shall deliver to the Escrow Agent the full Purchase Price, plus $500 (the “Escrow Fee”) for services rendered by the Escrow Agent in such capacity hereunder, by check or by wire transfer of immediately available funds.

 

c.           Company Discretion.  The Subscriber understands and agrees that the Company in its sole discretion reserves the right to accept or reject this or any other subscription for Notes, in whole or in part, notwithstanding prior receipt by the Subscriber of notice of acceptance of this subscription.  The Company shall have no obligation hereunder until the Company shall execute and deliver to the Subscriber an executed copy of this Agreement.  If this subscription is rejected in whole, or the offering of Notes is terminated, all funds received from the Subscriber will be returned without interest or offset, and this Agreement shall thereafter be of no further force or effect.  If this subscription is rejected in part, the funds for the rejected portion of this subscription will be returned without interest or offset, and this Agreement will continue in full force and effect to the extent this subscription was accepted.

 

d.           No Trading.  The Subscriber represents and warrants to the Company that neither the Subscriber nor any of its affiliates has directly or indirectly traded any securities of the Company, including without limitation, making any short sales or engaging in any hedging transaction with respect to such securities (collectively, “Prohibited Transactions”), since becoming aware of the Offering.  Furthermore, Subscriber shall not engage in any Prohibited Transactions through the final Closing Date.

 

3.           Representations and Warranties of the Company.  The Company hereby represents and warrants to the Subscriber the following:

 

a.           Organization and Qualification.  The Company is a corporation duly organized and validly existing under the laws of the State of Nevada.  The Company has all requisite power and authority to carry on its business as currently conducted, other than such failures that would not reasonably be expected to have a material adverse effect on the Company’s business, properties or financial condition (a “Material Adverse Effect”).  The Company is duly qualified to transact business in each jurisdiction in which the failure to be so qualified would reasonably be expected to have a Material Adverse Effect.

 

b.           Authorization.  As of the Closing, all action on the part of the Company, its board of directors, officers and existing stockholders necessary for the authorization, execution and delivery of this Agreement and the performance of all obligations of the Company hereunder and thereunder shall have been taken, and this Agreement, assuming due execution by the parties hereto and thereto, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their respective terms, subject to: (i) judicial principles limiting the availability of specific performance, injunctive relief, and other equitable remedies and (ii) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect generally relating to or affecting creditors’ rights.

 

  

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c.           Governmental Consents.  No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the offer, sale or issuance of the Notes, except for the following: (i) the filing of such notices as may be required under the Securities Act and (ii) the compliance with any applicable state securities laws, which compliance will have occurred within the appropriate time periods therefor.

d.           Litigation.  There are no actions, suits, proceedings or investigations pending or, to the best of the Company’s knowledge, threatened before any court, administrative agency or other governmental body against the Company which question the validity of this Agreement, or the right of the Company to enter into either of them, or to consummate the transactions contemplated hereby or thereby, or which would reasonably be expected to have a Material Adverse Effect.  The Company is not a party or subject to, and none of its assets is bound by, the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality which would reasonably be expected to have a Material Adverse Effect.

e.           Compliance with Other Instruments.  The Company is not in violation or default of any provision of its Articles of Incorporation, each as in effect immediately prior to the Closing, except for such failures as would not reasonably be expected to have a Material Adverse Effect. The Company is not in violation or default of any provision of any material instrument, mortgage, deed of trust, loan, contract, commitment, judgment, decree, order or obligation to which it is a party or by which it or any of its properties or assets are bound which would reasonably be expected to have a Material Adverse Effect.  To the best of its knowledge, the Company is not in violation or default of any provision of any federal, state or local statute, rule or governmental regulation which would reasonably be expected to have a Material Adverse Effect.  The execution, delivery and performance of and compliance with this Agreement and the issuance and sale of the Notes, will not result in any such violation, be in conflict with or constitute, with or without the passage of time or giving of notice, a default under any such provision, require any consent or waiver under any such provision (other than any consents or waivers that have been obtained), or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company pursuant to any such provision.

f.           Certain Registration Matters.  Assuming the accuracy of the Subscriber’s representations and warranties set forth in this Agreement and the Transaction Documents, and the representations and warranties made by all other purchasers of Notes in the Offering, no registration under the Securities Act is required for the offer and sale of the Notes by the Company to the Subscriber hereunder.

g.           No General Solicitation.  Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Notes by any form of general solicitation or general advertising (within the meaning of Regulation D).

 

  

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4.           Representations and Warranties of the Subscriber.  The Subscriber represents and warrants to the Company the following:

 

a.           Subscriber Knowledge and Experience.  The Subscriber, its advisers, if any, and designated representatives, if any, have the knowledge and experience in financial and business matters necessary to evaluate the merits and risks of its prospective investment in the Company, and have carefully reviewed and understand the risks of, and other considerations relating to, the purchase of Notes and the tax consequences of the investment, and have the ability to bear the economic risks of the investment.

 

b.           Investment Purpose.  The Subscriber is acquiring the Notes for investment for its own account and not with the view to, or for resale in connection with, any distribution thereof.  The Subscriber understands and acknowledges that the Notes and the securities that may be issued upon conversion of the Notes (collectively, the “Securities”) have not been registered under the Securities Act or any state securities laws, by reason of a specific exemption from the registration provisions of the Securities Act and applicable state securities laws, which depends upon, among other things, the bona fide nature of the investment intent as expressed herein.  The Subscriber further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to any third person with respect to any of the Securities.  The Subscriber understands and acknowledges that the offering of the Notes pursuant to this Agreement will not be registered under the Securities Act nor under the state securities laws on the ground that the sale provided for in this Agreement and the issuance of securities hereunder is exempt from the registration requirements of the Securities Act and any applicable state securities laws.

 

c.           No Public Market.  The Subscriber understands that no public market now exists, and there never will be a public market for, the Notes, that an active public market for the Company’s common stock does not now exist and that there may never be an active public market for the common stock of the Company.

 

d.           Information.  The Subscriber, its advisers, if any, and designated representatives, if any, have received and reviewed information about the Company and have had an opportunity to discuss the Company’s business, management and financial affairs with its management.  The Subscriber understands that such discussions, as well as any written information provided by the Company, were intended to describe the aspects of the Company’s business and prospects which the Company believes to be material, but were not necessarily a thorough or exhaustive description, and except as expressly set forth in this Agreement, the Company makes no representation or warranty with respect to the completeness of such information and makes no representation or warranty of any kind with respect to any information provided by any entity other than the Company.  Some of such information includes projections as to the future performance of the Company, which projections may not be realized, are based on assumptions which may not be correct and are subject to numerous factors beyond the Company’s control.

 

e.           Investment Authorization.  As of the Closing, all action on the part of Subscriber, and its officers, directors and partners, if applicable, necessary for the authorization, execution and delivery of this Agreement and the performance of all obligations of the Subscriber hereunder and thereunder shall have been taken, and this Agreement, assuming due execution by the parties hereto and thereto, constitute valid and legally binding obligations of the Subscriber, enforceable in accordance with their respective terms, subject to: (i) judicial principles limiting the availability of specific performance, injunctive relief, and other equitable remedies and (ii) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect generally relating to or affecting creditors’ rights.

 

  

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f.           Accredited Investor Status.  The Subscriber either (i) is an “accredited investor” as defined in Rule 501 of Regulation D as promulgated by the Securities and Exchange Commission under the Securities Act or (ii) is not a “U.S. Person” as defined in Regulation S as promulgated by the Securities and Exchange Commission under the Securities Act, and, in each case, shall submit to the Company such further assurances of such status as may be reasonably requested by the Company.

 

g.           Non-U.S. Person Status.  The Subscriber, if a non-U.S. Person, agrees that it is acquiring the Notes in an offshore transaction pursuant to Regulation S and hereby represents to the Company as follows:

 

(i)           The Subscriber is outside the United States when receiving and executing this Subscription Agreement;

 

(ii)          The Subscriber has not acquired the Notes as a result of, and will not itself engage in, any “directed selling efforts” (as defined in Regulation S) in the United States in respect of the Notes which would include any activities undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the resale of the Notes; provided, however, that the Subscriber may sell or otherwise dispose of the Notes pursuant to registration of the Notes under the Securities Act and any applicable state and provincial securities laws or under an exemption from such registration requirements and as otherwise provided herein;

 

(iii)         The Subscriber understands and agrees that offers and sales of any of the Notes prior to the expiration of a period of one year after the date of transfer of the Notes under this Subscription Agreement (the “Distribution Compliance Period”), shall only be made in compliance with the safe harbor provisions set forth in Regulation S, pursuant to the registration provisions of the Securities Act or an exemption therefrom, and that all offers and sales after the Distribution Compliance Period shall be made only in compliance with the registration provisions of the Securities Act or an exemption therefrom, and in each case only in accordance with all applicable securities laws;

 

(iv)         The Subscriber understands and agrees not to engage in any hedging transactions involving the Notes prior to the end of the Distribution Compliance Period unless such transactions are in compliance with the Securities Act; and

 

(v)          The Subscriber hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Notes or any use of this Subscription Agreement, including: (a) the legal requirements within its jurisdiction for the purchase of the Notes; (b) any foreign exchange restrictions applicable to such purchase; (c) any governmental or other consents that may need to be obtained; and (d) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer of the Notes. Such Subscriber’s subscription and payment for, and its continued beneficial ownership of the Notes, will not violate any applicable securities or other laws of the Subscriber’s jurisdiction.

 

  

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h.           Anti-Money Laundering.  Subscriber represents that neither it nor, to its knowledge, any person or entity controlling, controlled by or under common control with it, nor any person having a beneficial interest in it, nor any person on whose behalf the Subscriber is acting: (i) is a person listed in the Annex to Executive Order No. 13224 (2001) issued by the President of the United States (Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism); (ii) is named on the List of Specially Designated Nationals and Blocked Persons maintained by the U.S. Office of Foreign Assets Control; (iii) is a non-U.S. shell bank or is providing banking services indirectly to a non-U.S. shell bank; (iv) is a senior non-U.S. political figure or an immediate family member or close associate of such figure; or (v) is otherwise prohibited from investing in the Company pursuant to applicable U.S. anti-money laundering, anti-terrorist and asset control laws, regulations, rules or orders (categories (i) through (v), each a “Prohibited Subscriber”). The Subscriber agrees to provide the Company, promptly upon request, all information that the Company reasonably deems necessary or appropriate to comply with applicable U.S. anti-money laundering, anti-terrorist and asset control laws, regulations, rules and orders. The Subscriber consents to the disclosure to U.S. regulators and law enforcement authorities by the Company and its affiliates and agents of such information about the Subscriber as the Company reasonably deems necessary or appropriate to comply with applicable U.S. antimony laundering, anti-terrorist and asset control laws, regulations, rules and orders. If the Subscriber is a financial institution that is subject to the USA Patriot Act, the Subscriber represents that it has met all of its obligations under the USA Patriot Act. The Subscriber acknowledges that if, following its investment in the Company, the Company reasonably believes that the Subscriber is a Prohibited Subscriber or is otherwise engaged in suspicious activity or refuses to promptly provide information that the Company requests, the Company has the right or may be obligated to prohibit additional investments, segregate the assets constituting the investment in accordance with applicable regulations or immediately require the Subscriber to transfer the Securities.  The Subscriber further acknowledges that the Subscriber will have no claim against the Company or any of its affiliates or agents for any form of damages as a result of any of the foregoing actions.

 

i.           High Risk Investment.  The Subscriber or its duly authorized representative realizes that because of the inherently speculative nature of businesses of the kind conducted and contemplated by the Company, the Company’s financial results may be expected to fluctuate from month to month and from period to period and will, generally, involve a high degree of financial and market risk that could result in substantial or, at times, even total losses for investors in securities of the Company.

 

j.           Subscriber Liquidity.  The Subscriber has adequate means of providing for its current and anticipated financial needs and contingencies, is able to bear the economic risk for an indefinite period of time and has no need for liquidity of the investment in the Notes and could afford complete loss of such investment.

 

  

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k.           No General Solicitation.  The Subscriber is not subscribing for Notes as a result of or subsequent to any advertisement, article, notice or other communication, published in any newspaper, magazine or similar media or broadcast over television, radio, or the internet, or presented at any seminar or meeting, or any solicitation of a subscription by a person not previously known to the Subscriber in connection with investments in securities generally.

 

l.           Subscriber Information.  All of the information that the Subscriber has heretofore furnished or which is set forth herein is correct and complete as of the date of this Agreement, and, if there should be any material change in such information prior to the admission of the undersigned to the Company, the Subscriber will immediately furnish revised or corrected information to the Company.

 

5.           Transfer Restrictions.  The Subscriber acknowledges and agrees as follows:

 

a.           Reliance on Exemptions.  The Notes have not been registered for sale under the Securities Act, in reliance on the private offering exemption in Section 4(2) thereof and under Regulation D or Regulation S thereunder; the Company does not intend to register the Notes under the Securities Act at any time in the future.

 

b.           Shell Company Status.  The Company is presently a “shell company” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Pursuant to Rule 144(i), securities issued by a current or former shell company (that is, the Notes) that otherwise meet the holding period and other requirements of Rule 144 nevertheless cannot be sold in reliance on Rule 144 until one year after the Company (a) is no longer a shell company; and (b) has filed current “Form 10 information“ (as defined in Rule 144(i)) with the SEC reflecting that it is no longer a shell company, and provided that at the time of a proposed sale pursuant to Rule 144, the Company is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act and has filed all reports and other materials required to be filed by section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months (or for such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports.  As a result, the restrictive legends on certificates for the Securities cannot be removed except in connection with an actual sale meeting the foregoing requirements or pursuant to an effective registration statement.

 

c.           Legends.  The Subscriber understands that the certificates representing the Securities, until such time as they have been registered under the Securities Act, shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such certificates or other instruments):

For U.S. Persons:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN EXEMPTION FROM SUCH REGISTRATION EXISTS AND THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.

 

  

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For Non-U.S. Persons:

 

THESE SECURITIES WERE ISSUED IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”). ACCORDINGLY, NONE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES OR, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT, AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH THE 1933 ACT.

 

The legend(s) set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Securities upon which it is stamped, if (a) such Securities are sold pursuant to a registration statement under the Securities Act, or (b) such holder delivers to the Company an opinion of counsel, reasonably acceptable to the Company, that a disposition of the Securities is being made pursuant to an exemption from such registration and that the Securities, after such transfer, shall no longer be “restricted securities” within the meaning of Rule 144.

 

d.           No Governmental Review.  No governmental agency has passed upon the Securities or made any finding or determination as to the wisdom of any investments therein.

 

e.           Restrictions on Transfer.  There are substantial restrictions on the transferability of the Securities, and if the Company decides to issue certificates representing the Securities, restrictive legends will be placed on any such certificates.

6.           Indemnification.  The Subscriber agrees to indemnify and hold harmless the Company, the Escrow Agent and their respective officers, directors, employees, agents, control persons and affiliates from and against all losses, liabilities, claims, damages, costs, fees and expenses whatsoever (including, but not limited to, any and all expenses incurred in investigating, preparing or defending against any litigation commenced or threatened) based upon or arising out of any actual or alleged false acknowledgment, representation or warranty, or misrepresentation or omission to state a material fact, or breach by the Subscriber of any covenant or agreement made by the Subscriber herein or in any other document delivered in connection with this Agreement.

 

  

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7.           Irrevocability; Binding Effect.  The Subscriber hereby acknowledges and agrees that the subscription hereunder is irrevocable by the Subscriber, except as required by applicable law, and that this Agreement shall survive the death or disability of the Subscriber and shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives and permitted assigns.  If the Subscriber is more than one person, the obligations of the Subscriber hereunder shall be joint and several and the agreements, representations, warranties and acknowledgments herein shall be deemed to be made by and be binding upon each such person and such person’s heirs, executors, administrators, successors, legal representatives and permitted assigns.

8.           Modification.  This Agreement shall not be modified or waived except by an instrument in writing signed by the party against whom any such modification or waiver is sought.

 

9.           Notices.  Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be mailed by certified mail, return receipt requested, or delivered against receipt to the party to whom it is to be given (a) if to the Company, at the address set forth above, or (b) if to the Subscriber, at the address set forth on the signature page hereof (or, in either case, to such other address as the party shall have furnished to the other in writing in accordance with the provisions of this Section 10).  Any notice or other communication given by certified mail shall be deemed given at the time of certification thereof, except for a notice changing a party’s address which shall be deemed given at the time of receipt thereof.

10.         Assignability.  This Agreement and the rights, interests and obligations hereunder are not transferable or assignable by the Subscriber and the transfer or assignment of the Notes shall be made only in accordance with all applicable laws.

11.         Applicable Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to the principles thereof relating to the conflict of laws.

 

12.         Arbitration.  The parties agree to submit all controversies to arbitration in accordance with the provisions set forth below and understand that:

(a)           Arbitration is final and binding on the parties.

(b)           The parties are waiving their right to seek remedies in court, including the right to a jury trial.

(c)           Pre-arbitration discovery is generally more limited and different from court proceedings.

(d)           The arbitrator’s award is not required to include factual findings or legal reasoning and any party’s right to appeal or to seek modification of rulings by arbitrators is strictly limited.

(e)           The panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry.

 

  

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(f)           All controversies which may arise between the parties concerning this Agreement shall be determined by arbitration pursuant to the rules then pertaining to the Financial Industry Regulatory Authority in New York City, New York.  Judgment on any award of any such arbitration may be entered in the Supreme Court of the State of New York or in any other court having jurisdiction of the person or persons against whom such award is rendered.  Any notice of such arbitration or for the confirmation of any award in any arbitration shall be sufficient if given in accordance with the provisions of this Agreement.  The parties agree that the determination of the arbitrators shall be binding and conclusive upon them.

13.         Blue Sky Qualification.  The purchase of Notes under this Agreement is expressly conditioned upon the exemption from qualification of the offer and sale of the Notes from applicable federal and state securities laws.  The Company shall not be required to qualify this transaction under the securities laws of any jurisdiction and, should qualification be necessary, the Company shall be released from any and all obligations to maintain its offer, and may rescind any sale contracted, in the jurisdiction.

14.         Use of Pronouns.  All pronouns and any variations thereof used herein shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the person or persons referred to may require.

15.         Confidentiality.  The Subscriber acknowledges and agrees that any information or data the Subscriber has acquired from or about the Company, not otherwise properly in the public domain was received in confidence.  The Subscriber agrees not to divulge, communicate or disclose, except as may be required by law or for the performance of this Agreement, or use to the detriment of the Company or for the benefit of any other person, or misuse in any way, any confidential information of the Company, including any scientific, technical, trade or business secrets of the Company and any scientific, technical, trade or business materials that are treated by the Company as confidential or proprietary, including, but not limited to, ideas, discoveries, inventions, developments and improvements belonging to the Company and confidential information obtained by or given to the Company about or belonging to third parties.

16.         Miscellaneous.

(a)           This Agreement constitutes the entire agreement between the Subscriber and the Company with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings, if any, relating to the subject matter hereof.  The terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by a written document executed by the party entitled to the benefits of such terms or provisions.

(b)           The representations and warranties of the Company and the Subscriber made in this Agreement shall survive the execution and delivery hereof and delivery of the Notes.

 

  

10

  

(c)           Each of the parties hereto shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby, whether or not the transactions contemplated hereby are consummated.

(d)           This Agreement may be executed in one or more original or facsimile counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same instrument.

(e)           Each provision of this Agreement shall be considered separable and, if for any reason any provision or provisions hereof are determined to be invalid or contrary to applicable law, such invalidity or illegality shall not impair the operation of or affect the remaining portions of this Agreement.

(f)           Paragraph titles are for descriptive purposes only and shall not control or alter the meaning of this Agreement as set forth in the text.

(g)           The Subscriber understands and acknowledges that there may be multiple Closings for the Offering.

(h)           The Subscriber hereby agrees to furnish the Company such other information as the Company may request prior to the Closing with respect to its subscription hereunder.

18.           Public Disclosure.  Neither the Subscriber nor any officer, manager, director, member, partner, stockholder, employee, affiliate, affiliated person or entity of the Subscriber shall make or issue any press releases or otherwise make any public statements or make any disclosures to any third person or entity with respect to the transactions contemplated herein and will not make or issue any press releases or otherwise make any public statements of any nature whatsoever with respect to the Company without the Company’s express prior approval.  The Company has the right to withhold such approval in its sole discretion.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

  

11

  

 

How to subscribe for Notes in the private offering of

Loreto Resources Corporation:

	
1.

	
Date and Fill in the principal amount of Notes being purchased and Complete and Sign the Signature Page.

	
2.

	
Initial the Investor Certification page.

	
3.

	
Fax or email all forms and then send all signed original documents to:

Gottbetter & Partners, LLP

488 Madison Avenue, 12th Floor

New York, NY  10022

Facsimile Number:  (212) 400-6901

Telephone Number:  (212) 400-6900

Attn:  Haley M. Sapp

E-mail Address:  rlg@gottbetter.com

	
4.

	
If you are paying the Purchase Price by check, a check for the exact dollar amount of the Purchase Price for the principal amount of Notes you are offering to purchase and the $500 Escrow Fee should be made payable to the order of “Gottbetter & Partners, LLP, Escrow Agent for LORETO RESOURCES CORPORATION” and should be sent to Gottbetter & Partners, LLP, 488 Madison Avenue, 12th Floor, New York, NY 10022.

	
5.

	
If you are paying the Purchase Price by wire transfer, you should send a wire transfer for the exact dollar amount of the Purchase Price for the number of Notes you are offering to purchase and the $500 Escrow Fee according to the following instructions:

BANK:  Citibank, N.A.

ABA#:  021000089

SWIFT CODE: CITIUS33

ACCOUNT NAME:  Gottbetter & Partners, LLP Attorney Trust

ACCOUNT:  9951660945

REFERENCE:  Loreto Resources Corporation Escrow –   [insert Subscriber’s name]”

Thank you for your interest,

Loreto Resources Corporation

 

  

12

  

 

LORETO RESOURCES COPORATION

SIGNATURE PAGE TO

SUBSCRIPTION AGREEMENT

IN WITNESS WHEREOF, the Subscriber hereby executes this Subscription Agreement.

 

Dated:                                                     , 2011

	
SUBSCRIBER (individual)

	  	
SUBSCRIBER (entity)

	  	  	  
	  	  	  
	
Signature

	  	
Name of Entity

	  	  	  
	  	  	  
	
Print Name

	  	
Signature

	  	  	
Print Name: 

	  
	
Signature (if Joint Tenants or Tenants in Common)

	  	  	  

	  	  	
Title:

	  

	
Address of Principal Residence:

	  	
Address of Executive Offices:

	  	  	  
	  	  	  
	  	  	  
	  	  	  
	  	  	  
	
Social Security Number(s):

	  	
IRS Tax Identification Number:

	  	  	  
	  	  	  
	
Telephone Number:

	  	
Telephone Number:

	  	  	  
	  	  	  
	
Facsimile Number:

	  	
Facsimile Number:

	  	  	  
	  	  	  
	
E-mail Address:

	  	
E-mail Address:

	  	  	  

$                                          

Principal Amount of Notes

 

$500 Escrow Fee

  

13

  

LORETO RESOURCES CORPORATION

 

IN WITNESS WHEREOF, the Company has duly executed this Subscription Agreement with respect to ______________ Notes as of the ___ day of ____________, 2011.

 

	  	
LORETO RESOURCES CORPORATION

	  	  	  
	  	
By:

	
  

	  	
Name: 

	
Luis F. Saenz

	  	
Title:

	
Chief Executive Officer

  

14

  

ANTI-MONEY LAUNDERING INFORMATION FORM

The following is required in accordance with the AML provision of the USA PATRIOT ACT.

(Please fill out and return with requested documentation.)

	
INVESTOR NAME:

	  	
   

	  
	  	  	  	  
	
LEGAL ADDRESS:

	  	
   

	  
	  	  	
   

	  
	 	 	 	 
	  	  	  	  
	
SS# or TAX ID#

of INVESTOR:

	  	
   

	  

IDENTIFICATION, DOCUMENTATION AND SOURCE OF FUNDS:

	
1.

	
Please submit a copy of a non-expired identification for the authorized signatory(ies) on the investment documents, showing name, date of birth and signature:

	
Current Driver’s License

	
or

	
Valid Passport

(Circle one or more)

	
or

	
Identity Card

 

	
2.

	
If the Investor is a corporation, limited liability company, trust or other type of entity, please submit the following requisite documents: (i) Articles of Incorporation, By-Laws, Certificate of Formation, Operating Agreement, Trust or other similar documents for the type of entity; and (ii) Corporate Resolution or power of attorney or other similar document granting authority to signatory(ies) and designating that they are permitted to make the proposed investment.

	
3.

	
Please advise where the funds were derived from to make the proposed investment:

	
Investments

	
Savings

	
Proceeds of Sale

	
Other ____________

(Circle one or more)

	
Signature:

	  	  

	
Print Name:

	  	  

	
Title (if applicable):

	  	  

	
Date:

	  	  

  

15

  

LORETO RESOURCES CORPORATION

INVESTOR CERTIFICATION

For Individual Accredited Investors Only

(all Individual Accredited Investors must INITIAL where appropriate):

 

	
Initial _______

	
I have a net worth (excluding the value of my primary residence) in excess of $1,000,000 either individually or through aggregating my individual holdings and those in which I have a joint, community property or other similar shared ownership interest with my spouse.

	
Initial _______

	
I have had an annual gross income for the past two years of at least $200,000 (or $300,000 jointly with my spouse) and expect my income (or joint income, as appropriate) to reach the same level in the current year.

For Non-Individual Accredited Investors

(all Non-Individual Accredited Investors must INITIAL where appropriate):

	
Initial _______

	
The investor certifies that it is a partnership, corporation, limited liability company or business trust that is 100% owned by persons who meet at least one of the criteria for Individual Investors set forth above.

	
Initial _______

	
The investor certifies that it is a partnership, corporation, limited liability company or business trust that has total assets of at least $5 million and was not formed for the purpose of investing in the Company.

	
Initial _______

	
The investor certifies that it is an employee benefit plan whose investment decision is made by a plan fiduciary (as defined in ERISA §3(21)) that is a bank, savings and loan association, insurance company or registered investment adviser.

	
Initial _______

	
The investor certifies that it is an employee benefit plan whose total assets exceed $5,000,000 as of the date of this Agreement.

	
Initial _______

	
The undersigned certifies that it is a self-directed employee benefit plan whose investment decisions are made solely by persons who meet either of the criteria for Individual Investors.

	
Initial _______

	
The investor certifies that it is a U.S. bank, U.S. savings and loan association or other similar U.S. institution acting in its individual or fiduciary capacity.

	
Initial _______

	
The undersigned certifies that it is a broker-dealer registered pursuant to §15 of the Securities Exchange Act of 1934.

	
Initial _______

	
The investor certifies that it is an organization described in §501(c)(3) of the Internal Revenue Code with total assets exceeding $5,000,000 and not formed for the specific purpose of investing in the Company.

	
Initial _______

	
The investor certifies that it is a trust with total assets of at least $5,000,000, not formed for the specific purpose of investing in the Company, and whose purchase is directed by a person with such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment.

	
Initial _______

	
The investor certifies that it is a plan established and maintained by a state or its political subdivisions, or any agency or instrumentality thereof, for the benefit of its employees, and which has total assets in excess of $5,000,000.

	
Initial _______

	
The investor certifies that it is an insurance company as defined in §2(13) of the Securities Act, or a registered investment company.

  

16

  

Appendix A

For Non-U.S. Person Investors

(all Investors who are not a U.S. Person must INITIAL this section):

	
Initial _______

	
The Investor is not a “U.S. Person” as defined in Regulation S; and specifically the Purchaser is not:

	
  

	
A.

	
a natural person resident in the United States of America, including its territories and possessions (“United States”);

	
  

	
B.

	
a partnership or corporation organized or incorporated under the laws of the United States;

	
  

	
C.

	
an estate of which any executor or administrator is a U.S. Person;

	
  

	
D.

	
a trust of which any trustee is a U.S. Person;

	
  

	
E.

	
an agency or branch of a foreign entity located in the United States;

	
  

	
F.

	
a non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. Person;

	
  

	
G.

	
a discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; or

	
  

	
H.

	
a partnership or corporation: (i) organized or incorporated under the laws of any foreign jurisdiction; and (ii) formed by a U.S. Person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a) under the Act) who are not natural persons, estates or trusts.

And, in addition:

	
  

	
I.

	
the Purchaser was not offered the Notes in the United States;

	
  

	
J.

	
at the time the buy-order for the Notes was originated, the Purchaser was outside the United States; and

	
  

	
K.

	
the Purchaser is purchasing the Notes for its own account and not on behalf of any U.S. Person (as defined in Regulation S) and a sale of the Notes has not been pre-arranged with a purchaser in the United States.

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