Document:

Exhibit 10.45

 

AMENDED AND RESTATED

INDEMNIFICATION AGREEMENT

 

This AMENDED AND RESTATED INDEMNIFICATION AGREEMENT, dated as of November 23, 2009 (this “Agreement”), is entered into by and among HDS Investment Holding, Inc., a Delaware corporation (the “Company”), HD Supply, Inc., a Delaware corporation (formerly incorporated in Texas) (“Opco” and, together with the Company, the “Company Entities”), Clayton, Dubilier & Rice Fund VII, L.P., a Cayman Islands exempted limited partnership (the “Fund”), CD&R Parallel Fund VII, L.P., a Cayman Islands exempted limited partnership (the “Parallel Fund”), Clayton, Dubilier & Rice Fund VII (Co-Investment), L.P., a Cayman Islands exempted limited partnership (the “Co-Investment Fund” and, together with the Parallel Fund, the “Other Investors”), Clayton, Dubilier & Rice, Inc., a Delaware corporation, (“CD&R Inc.”), Clayton, Dubilier & Rice, LLC, a Delaware limited liability company (the “Manager”) and the successor to the investment management business of CD&R Inc., and Clayton, Dubilier & Rice Holdings, L.P., a Cayman Islands exempted limited partnership (“CD&R LP”).  Capitalized terms used herein without definition have the meanings set forth in Section 1 of this Agreement.

 

RECITALS

 

A.                                    The general partner of the Fund is CD&R Associates VII, Ltd., a Cayman Islands exempted company (the “GP of the Fund”) and the special limited partner of the Fund is CD&R Associates VII, L.P., a Cayman Islands exempted limited partnership (together with (i) the GP of the Fund and (ii) any general partner of any Other Investor and any other investment vehicle that is a direct or indirect stockholder in the Company managed by Manager or its Affiliates, “Manager Associates”).

 

B.                                    The Company entered into that certain Purchase and Sale Agreement, dated as of June 19, 2007, as amended (the “Purchase Agreement”), by and among The Home Depot, Inc., HDS Acquisition Subsidiary, Inc., THD Holdings, LLC, Home Depot International, Inc., Homer TLC, Inc. and the Company, pursuant to which the Company caused its indirect wholly-owned Subsidiaries to acquire all of the capital stock of Opco and CND Holdings, Inc. and certain related intellectual property rights described in the Purchase Agreement (such acquisition, the “Acquisition”).

 

C.                                    In connection with the Acquisition, each of the Fund and the Other Investors (each, a “Committing Investor”) entered into a Subscription Agreement, dated as of August 30, 2007, with the Company, pursuant to which such Committing Investor agreed, subject to the conditions set forth therein, to purchase shares of the Company’s common stock, par value US$0.01 per share (“Shares”).

 

 

D.                                    The Company, the Committing Investors and certain other parties entered into a Stockholders Agreement (as the same may have been and may be amended from time to time in accordance with the terms thereof, the “Stockholders Agreement”), dated as of August 30, 2007, setting forth certain agreements with respect to, among other things, the management of the Company and transfers of its shares in various circumstances.

 

E.                                     In order to finance the Acquisition and related transactions, the Company sold Shares to the Committing Investors and to certain co-investors, including such other stockholders of the Company as are listed in the signature pages of the Stockholders Agreement (the “Equity Offering”).

 

F.                                      In order to finance the Acquisition, an indirect wholly-owned Subsidiary of the Company, which subsequently merged with Opco, entered into (i) a senior secured term loan facility, a senior secured revolving credit facility and an asset-based senior secured revolving loan facility and (ii) an indenture pursuant to which Opco issued unsecured senior cash pay notes and an indenture pursuant to which Opco issued unsecured senior subordinated payment-in-kind notes (such notes issued in a transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) that were subsequently exchanged for notes registered under the Securities Act bearing substantially identical terms) (collectively, the “Financings”).

 

G.                                    The Company Entities, the Fund, the Other Investors and CD&R Inc. entered into an Indemnification Agreement, dated as of August 30, 2007 (the “Original Indemnification Agreement”).

 

H.                                   Concurrently with the execution and delivery of the Original Indemnification Agreement, the Company Entities entered into a Consulting Agreement with each of (i) CD&R Inc., (ii) TC Group V, L.L.C. and (iii) Bain Capital Partners, LLC, each dated as of August 30, 2007 (the “Consulting Agreements”), and CD&R Inc. has performed the Initial Services (as defined and provided for in its Consulting Agreement).

 

I.                                        Prior to the date hereof, the Fund has been managed by CD&R Inc.

 

J.                                        CD&R Inc. has reorganized and contributed and assigned to Manager all of CD&R Inc.’s right, title and interest in and to substantially all of CD&R Inc.’s assets and properties, with certain enumerated exceptions, and Manager has accepted such assets and properties and assumed all of the liabilities, obligations and commitments of CD&R Inc. related to such assets and properties.

 

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K.                                   CD&R Inc. has directly or indirectly contributed and assigned its right, title and interest in certain of its assets and properties, including its equity interests in Manager, to CD&R LP.

 

L.                                     The Company or one or more of its Subsidiaries from time to time since the Acquisition has, and in the future may (i) offer and sell or cause to be offered and sold equity or debt securities (such offerings, collectively, the “Subsequent Offerings”), including without limitation (x) offerings of shares of capital stock of the Company or any of its Subsidiaries, and/or options to purchase such shares to employees, directors, managers, dealers, franchisees and consultants of and to the Company or any of its Subsidiaries (any such offering, a “Management Offering”), (y) offerings of shares of capital stock of the Company or any of its Subsidiaries to the public and (z) one or more offerings of debt securities for the purpose of refinancing any indebtedness of the Company or any of its Subsidiaries or for other corporate purposes, and (ii) repurchase, redeem or otherwise acquire certain securities of the Company or any of its Subsidiaries or engage in recapitalization or structural reorganization transactions relating thereto (any such repurchase, redemption, acquisition, recapitalization or reorganization, a “Redemption”), in each case subject to the terms and conditions of the Stockholders Agreement and any other applicable agreement.

 

M.                                 The parties hereto recognize the possibility that claims might be made against and liabilities incurred by Manager, CD&R Inc., CD&R LP, the Fund, the Other Investors, Manager Associates, or Related Persons or Affiliates under applicable securities laws or otherwise in connection with the Transactions or the Securities Offerings, or relating to other actions or omissions of or by members of the Company Group, or relating to the provision of management, consulting and financial services (the “Transaction Services”) to the Company Group by Manager, CD&R Inc. or Affiliates thereof, and the parties hereto accordingly wish to provide for Manager, CD&R Inc., CD&R LP, the Fund, the Other Investors and Manager Associates and Related Persons and Affiliates to be indemnified in respect of any such claims and liabilities.

 

N.                                    Concurrently with the execution and delivery of this Agreement, the Company Entities and Manager are amending and restating CD&R Inc.’s Consulting Agreement, dated as of the date hereof (as the same may be amended from time to time in accordance with the terms thereof, the “Amended and Restated Consulting Agreement”) to take account of Manager as the successor to the investment management business of CD&R Inc.

 

NOW, THEREFORE, in consideration of the foregoing premises, and the mutual agreements and covenants and provisions herein set forth, the parties hereto hereby agree as follows:

 

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1.                                      Definitions.

 

(a)                                “Acquisition” has the meaning given to such term in the recitals.

 

(b)                                “Affiliate” means, with respect to any Person, (i) any other Person directly or indirectly Controlling, Controlled by or under common Control with, such Person (ii) any Person directly or indirectly owning or Controlling 10% or more of any class of outstanding voting securities of such Person or (iii) any officer, director, general partner or trustee of any such Person or any such other Person described in clause (i) or (ii).  “Control” of any Person shall consist of the power to direct the management and policies of such Person (whether through the ownership of voting securities, by contract, as trustee or executor, or otherwise).

 

(c)                                 “Agreement” has the meaning given to such term in the preamble.

 

(d)                                “Amended and Restated Consulting Agreement” has the meaning given to such term in the recitals.

 

(e)                                 “CD&R Inc.” has the meaning given to such term in the preamble.

 

(f)                                  “CD&R LP” has the meaning given to such term in the preamble.

 

(g)                                 “Claim” means, with respect to any Indemnitee, any claim by or against such Indemnitee involving any Obligation with respect to which such Indemnitee may be entitled to be indemnified by any member of the Company Group under this Agreement.

 

(h)                                “Co-Investment Fund” has the meaning given to such term in the preamble.

 

(i)                                    “Commission” means the United States Securities and Exchange Commission or any successor entity thereto.

 

(j)                                   “Committing Investor” has the meaning given to such term in the recitals.

 

(k)                                “Company” has the meaning given to such term in the preamble.

 

(l)                                    “Company Entities” has the meaning given to such term in the preamble.

 

(m)                            “Company Group” means the Company Entities and any of their respective Subsidiaries.

 

(n)                                “Consulting Agreements” has the meaning given to such term in the recitals.

 

(o)                                “Equity Offering” has the meaning given to such term in the recitals.

 

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(p)                                “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

(q)                                “Expenses” means all reasonable attorneys’ fees and expenses, retainers, court, arbitration and mediation costs, transcript costs, fees of experts, bonds, witness fees, costs of collecting and producing documents, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, appealing or otherwise participating in a Proceeding.

 

(r)                                   “Financings” has the meaning given to such term in the recitals.

 

(s)                                  “Fund” has the meaning given to such term in the preamble.

 

(t)                                   “GP of the Fund” has the meaning given to such term in the recitals.

 

(u)                                “Indemnifying Party” and “Indemnifying Parties” have the meaning given to such terms in Section 2(a).

 

(v)                                “Indemnitee” means each of Manager, CD&R Inc., CD&R LP, the Fund, the Other Investors, Manager Associates, their respective Affiliates, their respective successors and assigns, and the respective directors, officers, shareholders, partners, members, employees, agents, advisors, consultants, representatives and controlling persons (within the meaning of the Securities Act) of each of them, or of their partners, shareholders or members in their capacity as such.

 

(w)                              “JAMS Comprehensive Rules” has the meaning given to such term in Section 7(a).

 

(x)                                “JAMS Streamlined Rules” has the meaning given to such term in Section 7(a).

 

(y)                                “Management Offering” has the meaning given to such term in the recitals.

 

(z)                                 “Manager” has the meaning given to such term in the preamble.

 

(aa)                         “Manager Associates” has the meaning given to such term in the recitals.

 

(bb)                         “Notice of Advances” has the meaning given to such term in Section 4(b).

 

(cc)                           “Notice of Claim” has the meaning given to such term in Section 4(a).

 

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(dd)                         “Notice of Payment” has the meaning given to such term in Section 4(c).

 

(ee)                           “Obligations” means, collectively, any and all claims, obligations, liabilities, causes of actions, Proceedings, investigations, judgments, decrees, losses, damages (including punitive and exemplary damages), fees, fines, penalties, amounts paid in settlement, costs and Expenses (including without limitation interest, assessments and other charges in connection therewith and disbursements of attorneys, accountants, investment bankers and other professional advisors), in each case whether incurred, arising or existing with respect to third parties or otherwise at any time or from time to time.

 

(ff)                             “Opco” has the meaning given to such term in the preamble.

 

(gg)                           “Original Indemnification Agreement” has the meaning given to such term in the recitals.

 

(hh)                         “Other Investors” has the meaning given to such term in the preamble.

 

(ii)                                 “Other Managers” means Bain Capital Partners, LLC and TC Group V, L.L.C.

 

(jj)                               “Parallel Fund” has the meaning given to such term in the preamble.

 

(kk)                         “Person” means an individual, corporation, limited liability company, limited or general partnership, trust or other entity, including a governmental or political subdivision or an agency or instrumentality thereof.

 

(ll)                                 “Proceeding” means a threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including without limitation a claim, demand, discovery request, formal or informal investigation, inquiry, administrative hearing, arbitration or other form of alternative dispute resolution, including an appeal from any of the foregoing.

 

(mm)                 “Purchase Agreement” has the meaning given to such term in the recitals.

 

(nn)                         “Redemption” has the meaning given to such term in the recitals.

 

(oo)                         “Related Document” means any agreement, certificate, instrument or other document to which any member of the Company Group may be a party or by which it or any of its properties or assets may be bound or affected from time to time relating in any way to the Transactions or any Securities Offering or any of the transactions contemplated thereby, including without limitation, in each case as the same may be amended from time to time, (i) any registration statement filed by or on behalf of any member of the Company Group with the Commission in connection with the

 

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Transactions or any Securities Offering, including all exhibits, financial statements and schedules appended thereto, and any submissions to the Commission in connection therewith, (ii) any prospectus, preliminary, free-writing or otherwise, included in such registration statements or otherwise filed by or on behalf of any member of the Company Group in connection with the Transactions or any Securities Offering or used to offer or confirm sales of their respective securities in any Securities Offering, (iii) any private placement or offering memorandum or circular, information statement or other information or materials distributed by or on behalf of any member of the Company Group or any placement agent or underwriter in connection with the Transactions or any Securities Offering, (iv) any federal, state or foreign securities law or other governmental or regulatory filings or applications made in connection with any Securities Offering, the Transactions or any of the transactions contemplated thereby, (v) any dealer-manager, underwriting, subscription, purchase, stockholders, option or registration rights agreement or plan entered into or adopted by any member of the Company Group in connection with any Securities Offering, (vi) any purchase, repurchase, redemption, recapitalization or reorganization or other agreement entered into by any member of the Company Group in connection with any Redemption or (vii) any quarterly, annual or current reports or other filing filed, furnished or supplementally provided by any member of the Company Group with or to the Commission or any securities exchange, including all exhibits, financial statements and schedules appended thereto, and any submission to the Commission or any securities exchange in connection therewith.

 

(pp)                         “Related Person” has the meaning given to such term in Section 2(a).

 

(qq)                         “Securities Act” has the meaning given to such term in the recitals.

 

(rr)                               “Securities Offerings” means the Equity Offering, any Management Offering, any Redemption and any Subsequent Offering.

 

(ss)                             “Shares” has the meaning given to such term in the recitals.

 

(tt)                               “Stockholders Agreement” has the meaning given to such term in the recitals.

 

(uu)                         “Subsequent Offerings” has the meaning given to such term in the recitals.

 

(vv)                         “Subsidiary” means each corporation or other Person in which a Person owns or Controls, directly or indirectly, capital stock or other equity interests representing more than 50% of the outstanding voting stock or other equity interests.

 

(ww)                     “Third-Party Claim” means any (i) claim brought by a Person other than a member of the Company Group, Manager, the Other Managers or any Related Person of Manager or the Other Managers and (ii) any derivative claim brought in the name of any

 

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member of the Company Group that is initiated by a Person other than Manager, the Other Managers or any Related Person of Manager or the Other Managers.

 

(xx)                         “Transactions” means the Acquisition, the Equity Offering, the Financings, transactions for which Transaction Services are provided and any other transactions contemplated by CD&R Inc.’s Consulting Agreement or the Amended and Restated Consulting Agreement.

 

(yy)                         “Transaction Services” has the meaning given to such term in the recitals.

 

The word “including” and words of similar import when used in this Agreement shall mean “including without limitation” unless the context otherwise requires or unless otherwise specified.

 

2.                                      Indemnification.

 

(a)                                Each of the Company Entities (each, an “Indemnifying Party” and collectively, the “Indemnifying Parties”), jointly and severally, agrees to indemnify, defend and hold harmless each Indemnitee:

 

(i)                                     from and against any and all Obligations, whether incurred with respect to third parties or otherwise, in any way resulting from, arising out of or in connection with, based upon or relating to (A) the Securities Act, the Exchange Act or any other applicable securities or other laws, in any way relating to the Company Group, including in connection with any Securities Offering, the Financings, any Related Document or any of the transactions contemplated thereby, (B) any other action or failure to act of any member of the Company Group or any of their predecessors, whether such action or failure has occurred or is yet to occur or any obligation of any member of the Company Group or any of their predecessors, (C) the performance by Manager or CD&R Inc. of Transaction Services for any member of the Company Group (whether performed prior to the date hereof, hereafter, pursuant to CD&R Inc.’s Consulting Agreement or the Amended and Restated Consulting Agreement or otherwise) or (D) any Obligations assumed or incurred by any Indemnitee to or on behalf of any member of the Company Group or any of their representatives (including, without limitation, accountants), agents or Affiliates; and

 

(ii)                                  to the fullest extent permitted by the law specified herein as governing this Agreement, by the law of the place of incorporation of an Indemnifying Party, or by any other applicable law in effect as of the date hereof or as amended to increase the scope of permitted indemnification, whichever is greater (except, with respect to any Indemnifying Party, to the extent that such indemnification may be prohibited by the law of the place of incorporation of

 

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such Indemnifying Party), from and against any and all Obligations whether incurred with respect to third parties or otherwise, in any way resulting from, arising out of or in connection with, based upon or relating to (A) the fact that such Indemnitee is or was a controlling person, a director or an officer of any member of the Company Group or is or was serving at the request of such corporation as a director, officer, member, employee or agent of or advisor or consultant to another corporation, partnership, joint venture, trust or other enterprise, (B) any breach or alleged breach by such Indemnitee of his or her fiduciary duty as a director or an officer of any member of the Company Group or (C) any payment or reimbursement by any Indemnitee, pursuant to indemnification arrangements or otherwise, of any Obligations contemplated in the foregoing clauses (A) or (B) of this Section 2(a)(ii);

 

in each case including but not limited to any and all fees, costs and Expenses (including without limitation fees and disbursements of attorneys and other professional advisers) incurred by or on behalf of any Indemnitee in asserting, exercising or enforcing any of its rights, powers, privileges or remedies in respect of this Agreement, CD&R Inc.’s Consulting Agreement or the Amended and Restated Consulting Agreement; provided that no Indemnifying Party shall be obligated to indemnify and hold harmless any Indemnitee under this Section 2(a) in respect of any claim made against the Indemnitee by any of its own directors, officers, directors, shareholders, partners, members, employees, agents, advisors, consultants, representatives and controlling persons (any of the foregoing, a “Related Person”) to the extent arising from any obligation of such Indemnitee to such Related Person (whether arising from contract, by law or otherwise), other than to the extent such claim arises out of any indemnification obligation by such Indemnitee to such Related Person as a result of such Related Person’s service as an officer or director of the Company Group.

 

(b)                                Without in any way limiting the foregoing Section 2(a), each of the Indemnifying Parties agrees, jointly and severally, to indemnify, defend and hold harmless each Indemnitee from and against any and all Obligations resulting from, arising out of or in connection with, based upon or relating to liabilities under the Securities Act, the Exchange Act or any other applicable securities or other laws, rules or regulations in connection with (i) the inaccuracy or breach of or default under any representation, warranty, covenant or agreement in any Related Document, (ii) any untrue statement or alleged untrue statement of a material fact contained in any Related Document or (iii) any omission or alleged omission to state in any Related Document a material fact required to be stated therein or necessary to make the statements therein not misleading.  Notwithstanding the foregoing, the Indemnifying Parties shall not be obligated to indemnify such Indemnitee from and against any such Obligation to the extent that such Obligation arises out of or is based upon an untrue statement or omission made in such Related Document in reliance upon and in conformity with written information furnished to the Indemnifying Parties, as the case may be, in an instrument

 

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duly executed by such Indemnitee and specifically stating that it is for use in the preparation of such Related Document.

 

(c)                                 Without limiting the foregoing, in the event that any Proceeding is initiated by an Indemnitee or any member of the Company Group to enforce or interpret this Agreement or any rights of such Indemnitee to indemnification or advancement of expenses (or related Obligations of such Indemnitee) under any member of the Company Group’s certificate of incorporation or bylaws, any other agreement to which Indemnitee and any member of the Company Group are party, any vote of directors of any member of the Company Group, the Delaware General Corporate Law, any other applicable law or any liability insurance policy, the Indemnifying Parties shall indemnify such Indemnitee against all costs and Expenses incurred by such Indemnitee or on such Indemnitee’s behalf (including by any Manager Associates for all costs and Expenses incurred by such Person) in connection with such Proceeding, whether or not such Indemnitee is successful in such Proceeding, except to the extent that the court presiding over such Proceeding determines that material assertions made by such Indemnitee in such Proceeding were in bad faith or were frivolous.

 

(d)                                If Indemnitees related to Manager and Indemnitees related to the Other Managers are similarly situated with respect to their interests in connection with a matter that may be an Obligation and such Obligation is not based on a Third-Party Claim, the Indemnitees may enforce their rights pursuant to this Section 2 or Section 3 with respect to such matter only with the written consent of Manager and at least one Other Manager.

 

3.                                      Contribution.

 

(a)                                If for any reason the indemnity provided for in Section 2(a) is unavailable or is insufficient to hold harmless any Indemnitee from any of the Obligations covered by such indemnity, then the Indemnifying Parties, jointly and severally, shall contribute to the amount paid or payable by such Indemnitee as a result of such Obligation in such proportion as is appropriate to reflect (i) the relative fault of each member of the Company Group, on the one hand, and such Indemnitee, on the other, in connection with the state of facts giving rise to such Obligation, (ii) if such Obligation results from, arises out of, is based upon or relates to the Transactions or any Securities Offering, the relative benefits received by each member of the Company Group, on the one hand, and such Indemnitee, on the other, from such Transaction or Securities Offering and (iii) if required by applicable law, any other relevant equitable considerations.

 

(b)                                If for any reason the indemnity specifically provided for in Section 2(b) is unavailable or is insufficient to hold harmless any Indemnitee from any of the Obligations covered by such indemnity, then the Indemnifying Parties, jointly and severally, shall contribute to the amount paid or payable by such Indemnitee as a result of such Obligation in such proportion as is appropriate to reflect (i) the relative fault of each

 

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of the members of the Company Group, on the one hand, and such Indemnitee, on the other, in connection with the information contained in or omitted from any Related Document, which inclusion or omission resulted in the inaccuracy or breach of or default under any representation, warranty, covenant or agreement therein, or which information is or is alleged to be untrue, required to be stated therein or necessary to make the statements therein not misleading, (ii) the relative benefits received by the members of the Company Group, on the one hand, and such Indemnitee, on the other, from such Transaction or Securities Offering and (iii) if required by applicable law, any other relevant equitable considerations.

 

(c)                                 For purposes of Section 3(a), the relative fault of each member of the Company Group, on the one hand, and of an Indemnitee, on the other, shall be determined by reference to, among other things, their respective relative intent, knowledge, access to information and opportunity to correct the state of facts giving rise to such Obligation.  For purposes of Section 3(b), the relative fault of each of the members of the Company Group, on the one hand, and of an Indemnitee, on the other, shall be determined by reference to, among other things, (i) whether the included or omitted information relates to information supplied by the members of the Company Group, on the one hand, or by such Indemnitee, on the other, (ii) their respective relative intent, knowledge, access to information and opportunity to correct such inaccuracy, breach, default, untrue or alleged untrue statement, or omission or alleged omission, and (iii) applicable law.  For purposes of Section 3(a) or 3(b), the relative benefits received by each member of the Company Group, on the one hand, and an Indemnitee, on the other, shall be determined by weighing the direct monetary proceeds to the Company Group, on the one hand, and such Indemnitee, on the other, from such Transaction or Securities Offering.

 

(d)                                The parties hereto acknowledge and agree that it would not be just and equitable if contributions pursuant to Section 3(a) or 3(b) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in such respective Section.  No Indemnifying Party shall be liable under Section 3(a) or 3(b), as applicable, for contribution to the amount paid or payable by any Indemnitee except to the extent and under such circumstances as such Indemnifying Party would have been liable to indemnify, defend and hold harmless such Indemnitee under the corresponding Section 2(a) or 2(b), as applicable, if such indemnity were enforceable under applicable law.  No Indemnitee shall be entitled to contribution from any Indemnifying Party with respect to any Obligation covered by the indemnity specifically provided for in Section 2(b) in the event that such Indemnitee is finally determined to be guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) in connection with such Obligation and the Indemnifying Parties are not guilty of such fraudulent misrepresentation.

 

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4.                                      Indemnification Procedures.

 

(a)                                Whenever any Indemnitee shall have actual knowledge of the assertion of a Claim against it, the Manager (acting on its own behalf or, if requested by any such Indemnitee other than itself, on behalf of such Indemnitee) or such Indemnitee shall notify the appropriate member of the Company Group in writing of the Claim (the “Notice of Claim”) with reasonable promptness after such Indemnitee has such knowledge relating to such Claim and has notified the Manager thereof; provided the failure or delay of such Indemnitee or the Manager to give such Notice of Claim shall not relieve any Indemnifying Party of its indemnification obligations under this Agreement except to the extent that such omission results in a failure of actual notice to it and it is materially injured as a result of the failure to give such Notice of Claim.  The Indemnifying Parties shall, at their expense, undertake the defense of such Claim with attorneys of their own choosing reasonably satisfactory in all respects to the Manager, subject to the right of the Manager to undertake such defense as hereinafter provided.  The Manager may participate in such defense with counsel of the Manager’s choosing at the expense of the Indemnifying Parties.  In the event that the Indemnifying Parties do not undertake the defense of the Claim within a reasonable time after the Manager (or, if given by the Indemnitee, the Indemnitee) has given the Notice of Claim, or in the event that the Manager shall in good faith determine that the defense of any claim by the Indemnifying Parties is inadequate or may conflict with the interest of any Indemnitee (including, without limitation, Claims brought by or on behalf of any member of the Company Group), the Manager may, at the expense of the Indemnifying Parties and after giving notice to the Indemnifying Parties of such action, undertake the defense of the Claim and compromise or settle the Claim, all for the account of and at the risk of the Indemnifying Parties.  In the defense of any Claim against an Indemnitee, no Indemnifying Party shall, except with the prior written consent of Manager, consent to entry of any judgment or enter into any settlement that includes any injunctive or other non-monetary relief or any payment of money by such Indemnitee, or that does not include as an unconditional term thereof the giving by the Person or Persons asserting such Claim to such Indemnitee of an unconditional release from all liability on any of the matters that are the subject of such Claim and an acknowledgement that Indemnitee denies all wrongdoing in connection with such matters.  The Indemnifying Parties shall not be obligated to indemnify Indemnitee against amounts paid in settlement of a Claim if such settlement is effected by such Indemnitee without the prior written consent of the Company (on behalf of all Indemnifying Parties), which shall not be unreasonably withheld.  In each case, the Manager and each other Indemnitee seeking indemnification hereunder on its own behalf or on behalf of an Indemnitee will cooperate with the Indemnifying Parties, so long as an Indemnifying Party is conducting the defense of the Claim, in the preparation for and the prosecution of the defense of such Claim, including making available evidence within the control of the Manager or such Indemnitee, as the case may be, and persons needed as witnesses who are employed by the Manager or such Indemnitee, as the case may be, in each case as reasonably needed for such defense and at

 

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cost, which cost, to the extent reasonably incurred, shall be paid by the Indemnifying Parties.

 

(b)                                The Manager shall notify the Indemnifying Parties in writing of the amount requested for advances (“Notice of Advances”).  The Indemnifying Parties hereby agree to advance reasonable costs and Expenses incurred by the Manager (acting on its own behalf or, if requested by any such Indemnitee other than itself, on behalf of such Indemnitee) or any Indemnitee in connection with any Claim (but not for any Claim initiated or brought voluntarily by an Indemnitee other than a Proceeding pursuant to Section 2(c)) in advance of the final disposition of such Claim without regard to whether Indemnitee will ultimately be entitled to be indemnified for such costs and expenses upon receipt of an undertaking by or on behalf of Manager or such Indemnitee to repay amounts so advanced if it shall ultimately be determined in a decision of a court of competent jurisdiction from which no appeal can be taken that Manager or such Indemnitee is not entitled to be indemnified by the Indemnifying Parties as authorized by this Agreement.  The Indemnifying Parties shall make payment of such advances no later than 10 days after the receipt of the Notice of Advances.

 

(c)                                 The Manager shall notify the Indemnifying Parties in writing of the amount of any Claim actually paid by the Manager or any other Indemnitee (the “Notice of Payment”).  The amount of any Claim actually paid by the Manager or such Indemnitee shall bear simple interest at the rate equal to the JPMorgan Chase Bank, N.A. prime rate as of the date of such payment plus 2% per annum, from the date the Indemnifying Parties receive the Notice of Payment to the date on which any Indemnifying Party shall repay the amount of such Claim plus interest thereon to, or as directed by, the Manager or such Indemnitee.  The Indemnifying Parties shall make indemnification payments to, or as directed by, the Manager or such Indemnitee no later than 30 days after receipt of the Notice of Payment.

 

5.                                      Certain Covenants.  The rights of each Indemnitee to be indemnified under any other agreement, document, certificate or instrument or applicable law are independent of and in addition to any rights of such Indemnitee to be indemnified under this Agreement.  The rights of the Manager and each Indemnitee and the obligations of the Indemnifying Parties hereunder shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnitee.  Following the Transactions, each of the Company Entities, and each of their corporate successors, shall implement and maintain in full force and effect any and all corporate charter and by-law provisions that may be necessary or appropriate to enable it to carry out its obligations hereunder to the fullest extent permitted by applicable law, including without limitation a provision of its certificate of incorporation (or comparable organizational document under its jurisdiction of incorporation) eliminating liability of a director for breach of fiduciary duty to the fullest extent permitted by applicable law, as amended from time to time.  So long as the Company or any other member of the Company Group maintains liability insurance for

 

13

 

any directors, officers, employees or agents of any such Person, the Indemnifying Parties shall ensure that each Indemnitee serving in such capacity is covered by such insurance in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s and the Company Group’s then current directors and officers.  No Indemnifying Party shall seek or agree to any order of a court or other governmental authority that would prohibit or otherwise interfere with the performance of any of the Indemnifying Parties’ advancement, indemnification and other obligations under this Agreement.

 

6.                                      Notices.  All notices and other communications to be given to any party hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered by hand, courier or overnight delivery service, or three days after being mailed by certified or registered mail, return receipt requested, with appropriate postage prepaid, or when received in the form of a facsimile (receipt confirmation requested), and shall be directed to the address set forth below (or at such other address or facsimile number as such party shall designate by like notice):

 

(a)                                 If to any Company Entity, to:

 

HDS Investment Holding, Inc.

c/o HD Supply, Inc.

3100 Cumberland Blvd

Suite 1480

Atlanta, GA  30339

Attention:                             General Counsel

Facsimile:                             (770) 852-9466

 

with a copy to:

 

Bain Capital Partners, LLC

111 Huntington Avenue

Boston, MA  02199

Attention:                             Steve Zide

Facsimile:                             (212) 421-2225

 

TC Group V, L.L.C.

1001 Pennsylvania Avenue NW

Washington DC  20004-2505

Attention:                             Daniel A. Pryor

Facsimile:                             (202) 347-1818

 

Clayton, Dubilier & Rice, LLC
 375 Park Avenue

 

14

 

18th Floor
 New York, New York  10152
 Attention: Theresa Gore
 Facsimile:  (212) 407-5252

 

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

 

Clayton, Dubilier & Rice Limited

Cleveland House

33 King Street

SW1Y 6RJ

London, United Kingdom

Attention: David Novak
 Facsimile: +44-207-747-3801

 

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

 

Debevoise & Plimpton LLP

919 Third Avenue

New York, New York  10022

Attention:                             Paul S. Bird, Esq.
                                                                                      Jonathan E. Levitsky, Esq.

Facsimile:                             (212) 909-6836

 

Ropes & Gray LLP

One International Place

Boston, MA  02110-2624

Attention:                             R. Newcomb Stillwell, Esq.

Facsimile:                             (617) 235-0213

 

Latham & Watkins LLP

555 Eleventh Street, NW

Suite 1000

Washington DC  20004-1304

Attention:                             David S. Dantzic, Esq.

Facsimile:                             (202) 637-2201

 

(b)                                 If to Manager, CD&R Inc. or CD&R LP, to:

 

Clayton, Dubilier & Rice, LLC
 375 Park Avenue
 18th Floor
 New York, New York  10152

 

15

 

Attention: Theresa Gore
 Facsimile:  (212) 407-5252

 

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

 

Clayton, Dubilier & Rice Limited

Cleveland House

33 King Street

SW1Y 6RJ

London, United Kingdom

Attention: David Novak
 Facsimile: +44-207-747-3801

 

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

 

Debevoise & Plimpton LLP

919 Third Avenue

New York, New York  10022

Attention:                             Paul S. Bird, Esq.

Jonathan E. Levitsky, Esq.

Facsimile:                             (212) 909-6836

 

(c)                                  If to the Fund, to:

 

Clayton, Dubilier & Rice Fund VII, L.P.

1403 Foulk Road, Suite 106

Wilmington, Delaware  19803

Attention:                             Theresa A. Gore

Facsimile:                             (212) 407-5252

 

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

 

Clayton, Dubilier & Rice Limited
 Cleveland House 
 33 King Street 
 SW1Y 6RJ 
 London, United Kingdom
 Attention: David Novak
 Facsimile: +44-207-747-3801

 

16

 

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

 

Debevoise & Plimpton LLP

919 Third Avenue

New York, New York  10022

Attention:                             Paul S. Bird, Esq.

Jonathan E. Levitsky, Esq.

Facsimile:                             (212) 909-6836

 

(d)                                 If to any of the Other Investors, to the notice address set forth on such party’s signature page;

 

or to such other address or such other person as the Company Entities, the Manager, CD&R Inc., CD&R LP, the Fund or any of the Other Investors, as the case may be, shall have designated by notice to the other parties hereto.

 

7.                                      Arbitration

 

(a)                                Any dispute, claim or controversy arising out of, relating to, or in connection with this contract, or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be finally determined by arbitration.  The arbitration shall be administered by JAMS.  If the disputed claim or counterclaim exceeds $250,000, not including interest or attorneys’ fees, the JAMS Comprehensive Arbitration Rules and Procedures (“JAMS Comprehensive Rules”) in effect at the time of the arbitration shall govern the arbitration, except as they may be modified herein or by mutual written agreement of the parties.  If no disputed claim or counterclaim exceeds $250,000, not including interest or attorneys’ fees, the JAMS Streamlined Arbitration Rules and Procedures (“JAMS Streamlined Rules”) in effect at the time of the arbitration shall govern the arbitration, except as they may be modified herein or by mutual written agreement of the parties.

 

(b)                                The seat of the arbitration shall be New York, New York.  The parties submit to jurisdiction in the state and federal courts of the State of New York for the limited purpose of enforcing this agreement to arbitrate.

 

(c)                                 The arbitration shall be conducted by one neutral arbitrator unless the parties agree otherwise.  The parties agree to seek to reach agreement on the identity of the arbitrator within thirty days after the initiation of arbitration.  If the parties are unable to reach agreement on the identity of the arbitrator within such time, then the appointment of the arbitrator shall be made in accordance with the process set forth in JAMS Comprehensive Rule 15.

 

17

 

(d)           The arbitration award shall be in writing, state the reasons for the award, and be final and binding on the parties.  The arbitrator may, in the award, allocate all or part of the costs of the arbitration, including the fees of the arbitrator and the attorneys’ fees of the prevailing party.  Judgment on the award may be entered by any court having jurisdiction thereof or having jurisdiction over the relevant party or its assets.  Notwithstanding applicable state law, the arbitration and this agreement to arbitrate shall be governed by the Federal Arbitration Act, 9 U.S.C. § 1, et seq.

 

(e)           The parties agree that the arbitration shall be kept confidential and that  the existence of the proceeding and any element of it (including but not limited to any pleadings, briefs or other documents submitted or exchanged, any testimony or other oral submissions, and any awards) shall not be disclosed beyond the tribunal, JAMS, the parties, their counsel, accountants and auditors, insurers and re-insurers, and any person necessary to the conduct of the proceeding.  The confidentiality obligations shall not apply (i) if disclosure is required by law, or in judicial or administrative proceedings, or (ii) as far as disclosure is necessary to enforce the rights arising out of the award.

 

8.             Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts executed and to be performed wholly within such State and without reference to the choice-of-law principles that would result in the application of the laws of a different jurisdiction.

 

9.             Severability.  If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby.

 

10.          Successors; Binding Effect.  Each Indemnifying Party will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business and assets of such Indemnifying Party, by agreement in form and substance satisfactory to Manager, CD&R Inc., CD&R LP, the Fund, the Other Investors and their counsel, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that such Indemnifying Party would be required to perform if no such succession had taken place.  This Agreement shall be binding upon and inure to the benefit of each party hereto and its successors and permitted assigns, and each other Indemnitee, but neither this Agreement nor any right, interest or obligation hereunder shall be assigned, whether by operation of law or otherwise, by the Company Entities without the prior written consent of Manager, CD&R Inc., CD&R LP, the Fund and the Other Investors.

 

11.          Miscellaneous.  The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  This Agreement is not intended to confer any right or remedy hereunder upon any Person other than each of the parties hereto and their respective successors and

 

18

 

permitted assigns and each other Indemnitee.  No amendment, modification, supplement or discharge of this Agreement, and no waiver hereunder shall be valid and binding unless set forth in writing and duly executed by the party or other Indemnitee against whom enforcement of the amendment, modification, supplement or discharge is sought.  Neither the waiver by any of the parties hereto or any other Indemnitee of a breach of or a default under any of the provisions of this Agreement, nor the failure by any party hereto or any other Indemnitee on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right, powers or privilege hereunder, shall be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any provisions hereof, or any rights, powers or privileges hereunder.  The rights, indemnities and remedies herein provided are cumulative and are not exclusive of any rights, indemnities or remedies that any party or other Indemnitee may otherwise have by contract, at law or in equity or otherwise, provided that (i) to the extent that any Indemnitee is entitled to be indemnified by any member of the Company Group and by any other Indemnitee or any insurer under a policy procured by any Indemnitee, the obligations of the members of the Company Group hereunder shall be primary and the obligations of such other Indemnitee or insurer secondary, and (ii) no member of the Company Group shall be entitled to contribution or indemnification from or subrogation against such other Indemnitee or insurer.  This Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.

 

[The remainder of this page has been left blank intentionally.]

 

19

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement by their authorized representatives as of the date first above written.

 

	
 
    	
CLAYTON,   DUBILIER & RICE, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Theresa A. Gore
    
	
 
    	
 
    	
Name:
    	
Theresa   A. Gore
    
	
 
    	
 
    	
Title:
    	
Vice   President, Treasurer and
    
	
 
    	
 
    	
 
    	
Assistant   Secretary
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
CLAYTON,   DUBILIER & RICE, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Theresa A. Gore
    
	
 
    	
 
    	
Name:
    	
Theresa   A. Gore
    
	
 
    	
 
    	
Title:
    	
Vice   President, Treasurer and
    
	
 
    	
 
    	
 
    	
Assistant   Secretary
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
CLAYTON,   DUBILIER & RICE HOLDINGS, L.P.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Clayton,   Dubilier & Rice Holdings GP,
    
	
 
    	
 
    	
LLC,   its general partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Clayton,   Dubilier & Rice, Inc.,
    
	
 
    	
 
    	
its   sole managing member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Theresa A. Gore
    
	
 
    	
 
    	
Name:
    	
Theresa   A. Gore
    
	
 
    	
 
    	
Title:   
    	
Vice   President, Treasurer and
    
	
 
    	
 
    	
 
    	
Assistant   Secretary
    

 

 

	
 
    	
CLAYTON,   DUBILIER & RICE FUND VII, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
CD&R   Associates VII Ltd.,
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Theresa A. Gore
    
	
 
    	
 
    	
Name:
    	
Theresa   A. Gore
    
	
 
    	
 
    	
Title:
    	
Vice   President, Treasurer and
    
	
 
    	
 
    	
 
    	
Assistant   Secretary
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
CD&R   PARALLEL FUND VII, L.P.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
CD&R   Parallel Fund Associates VII, Ltd.,
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Theresa A. Gore
    
	
 
    	
 
    	
Name:
    	
Theresa   A. Gore
    
	
 
    	
 
    	
Title:
    	
Vice   President, Treasurer and
    
	
 
    	
 
    	
Assistant   Secretary
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
CLAYTON,   DUBILIER & RICE FUND VII (CO-INVESTMENT), L.P.
    
	
 
    	
By:
    	
CD&R   Associates VII (Co-Investment), Ltd., its general 
    
	
 
    	
partner
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Theresa A. Gore
    
	
 
    	
 
    	
Name:
    	
Theresa   A. Gore
    
	
 
    	
 
    	
Title:
    	
Vice   President, Treasurer and
    
	
 
    	
 
    	
 
    	
Assistant   Secretary
    

 

 

Notices to:

 

Clayton, Dubilier & Rice, LLC

375 Park Avenue

18th Floor

New York, New York  10152

Attention: Theresa Gore

Facsimile:  (212) 407-5252

 

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

 

Clayton, Dubilier & Rice Limited

Cleveland House

33 King Street

SW1Y 6RJ

London, United Kingdom

Attention: David Novak

Facsimile: +44-207-747-3801

 

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

 

Debevoise & Plimpton LLP

919 Third Avenue

New York, New York  10022

Attention:                                         Paul S. Bird, Esq.

Jonathan E. Levitsky, Esq.

Facsimile:                                         (212) 909-6836

 

 

	
 
    	
HDS   INVESTMENT HOLDING, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Ricardo Nunez
    
	
 
    	
 
    	
Name:
    	
Ricardo   Nunez
    
	
 
    	
 
    	
Title:
    	
Senior   Vice President, General Counsel
    
	
 
    	
 
    	
 
    	
and   Corporate Secretary
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
HD SUPPLY, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Ricardo Nunez
    
	
 
    	
 
    	
Name:
    	
Ricardo   Nunez
    
	
 
    	
 
    	
Title:
    	
Senior   Vice President, General Counsel
    
	
 
    	
 
    	
 
    	
and   Corporate SecretaryGold and GemStone Mining Inc.: Exhibit 10.16 - Filed by newsfilecorp.com

SECURITIES PURCHASE AGREEMENT 

          This
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of February 22,
2013, by and between GOLD AND GEMSTONE MINING INC., a Nevada corporation,
with headquarters located at 2144 Whitekirk Way, Draper, UT 84020 (the
“Company”), and ASHER ENTERPRISES, INC., a Delaware corporation, with its
address at 1 Linden Place, Suite 207, Great Neck, NY 11021 (the “Buyer”). 

WHEREAS: 

          A.           The
Company and the Buyer are executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by the rules and
regulations as promulgated by the United States Securities and Exchange
Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933
Act”); 

          B.          
Buyer desires to purchase and the Company desires to issue and sell, upon the
terms and conditions set forth in this Agreement an 8% convertible note of the
Company, in the form attached hereto as Exhibit A, in the aggregate principal
amount of $42,500.00 (together with any note(s) issued in replacement thereof or
as a dividend thereon or otherwise with respect thereto in accordance with the
terms thereof, the “Note”), convertible into shares of common stock, $0.001 par
value per share, of the Company (the “Common Stock”), upon the terms and subject
to the limitations and conditions set forth in such Note. 

          C.           The
Buyer wishes to purchase, upon the terms and conditions stated in this
Agreement, such principal amount of Note as is set forth immediately below its
name on the signature pages hereto; and 

          NOW
THEREFORE, the Company and the Buyer severally (and not jointly) hereby
agree as follows: 

                         1.          
Purchase and Sale of Note. 

                                        a.      Purchase
of Note. On the Closing Date (as defined below), the Company shall issue and
sell to the Buyer and the Buyer agrees to purchase from the Company such
principal amount of Note as is set forth immediately below the Buyer’s name on
the signature pages hereto. 

                                        b.     
Form of Payment. On the Closing Date (as defined below), (i) the Buyer
shall pay the purchase price for the Note to be issued and sold to it at the
Closing (as defined below) (the “Purchase Price”) by wire transfer of
immediately available funds to the Company, in accordance with the Company’s
written wiring instructions, against delivery of the Note in the principal
amount equal to the Purchase Price as is set forth immediately below the Buyer’s
name on the signature pages hereto, and (ii) the Company shall deliver such duly
executed Note on behalf of the Company, to the Buyer, against delivery of such
Purchase Price.

                                        c.      Closing
Date. Subject to the satisfaction (or written waiver) of the conditions
thereto set forth in Section 6 and Section 7 below, the date and time of the
issuance and sale of the Note pursuant to this Agreement (the “Closing Date”)
shall be 12:00 noon, Eastern Standard Time on or about February 26, 2013, or
such other mutually agreed upon time. The closing of the transactions
contemplated by this Agreement (the “Closing”) shall occur on the Closing Date
at such location as may be agreed to by the parties. 

                         2.          
Buyer’s Representations and Warranties. The Buyer represents and warrants
to the Company that: 

                                        a.      Investment
Purpose. As of the date hereof, the Buyer is purchasing the Note and the
shares of Common Stock issuable upon conversion of or otherwise pursuant to the
Note (including, without limitation, such additional shares of Common Stock, if
any, as are issuable (i) on account of interest on the Note, (ii) as a result of
the events described in Sections 1.3 and 1.4(g) of the Note or (iii) in payment
of the Standard Liquidated Damages Amount (as defined in Section 2(f) below)
pursuant to this Agreement, such shares of Common Stock being collectively
referred to herein as the “Conversion Shares” and, collectively with the Note,
the “Securities”) for its own account and not with a present view towards the
public sale or distribution thereof, except pursuant to sales registered or
exempted from registration under the 1933 Act; provided, however,
that by making the representations herein, the Buyer does not agree to hold any
of the Securities for any minimum or other specific term and reserves the right
to dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act. 

                                        b.      Accredited
Investor Status. The Buyer is an “accredited investor” as that term is
defined in Rule 501(a) of Regulation D (an “Accredited Investor”). 

                                        c.      Reliance
on Exemptions. The Buyer understands that the Securities are being offered
and sold to it in reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer’s compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities. 

                                        d.     
Information. The Buyer and its advisors, if any, have been, and for so
long as the Note remain outstanding will continue to be, furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which have been
requested by the Buyer or its advisors. The Buyer and its advisors, if any, have
been, and for so long as the Note remain outstanding will continue to be,
afforded the opportunity to ask questions of the Company. Notwithstanding the
foregoing, the Company has not disclosed to the Buyer any material nonpublic
information and will not disclose such information unless such information is
disclosed to the public prior to or promptly following such disclosure to the
Buyer. Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall modify, amend
or affect Buyer’s right to rely on the Company’s representations and warranties
contained in Section 3 below. The Buyer understands that its investment in
the Securities involves a significant degree of risk. The Buyer is not aware of
any facts that may constitute a breach of any of the Company's representations
and warranties made herein. 

2 

                                        e.     
Governmental Review. The Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the Securities. 

                                        f.      Transfer
or Re-sale. The Buyer understands that (i) the sale or resale of the
Securities has not been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Buyer shall have delivered to the Company,
at the cost of the Buyer, an opinion of counsel that shall be in form, substance
and scope customary for opinions of counsel in comparable transactions to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration, which opinion shall be accepted
by the Company, (c) the Securities are sold or transferred to an “affiliate” (as
defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule
144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only
in accordance with this Section 2(f) and who is an Accredited Investor, (d) the
Securities are sold pursuant to Rule 144, or (e) the Securities are sold
pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation
S”), and the Buyer shall have delivered to the Company, at the cost of the
Buyer, an opinion of counsel that shall be in form, substance and scope
customary for opinions of counsel in corporate transactions, which opinion shall
be accepted by the Company; (ii) any sale of such Securities made in reliance on
Rule 144 may be made only in accordance with the terms of said Rule and further,
if said Rule is not applicable, any re-sale 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 defined 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 (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case). Notwithstanding the foregoing or anything
else contained herein to the contrary, the Securities may be pledged as
collateral in connection with a bona fide margin account or other
lending arrangement.

                                        g.      Legends.
The Buyer understands that the Note and, until such time as the Conversion
Shares have been registered under the 1933 Act may be sold pursuant to Rule 144
or Regulation S without any restriction as to the number of securities as of a
particular date that can then be immediately sold, the Conversion Shares may
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such
Securities): 

  
    
      
        
          “NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED
            BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
            EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
            SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
            OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
            THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
            OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
            ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
            SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
            FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
            ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.” 

        

      

    

  

3 

          The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective registration statement
filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities as of a
particular date that can then be immediately sold, or (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope customary
for opinions of counsel in comparable transactions, to the effect that a public
sale or transfer of such Security may be made without registration under the
1933 Act, which opinion shall be accepted by the Company so that the sale or
transfer is effected. The Buyer agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, in
compliance with applicable prospectus delivery requirements, if any. In the
event that the Company does not accept the opinion of counsel provided by the
Buyer with respect to the transfer of Securities pursuant to an exemption from
registration, such as Rule 144 or Regulation S, at the Deadline, it will be
considered an Event of Default pursuant to Section 3.2 of the Note. 

                                        h.      Authorization;
Enforcement. This Agreement has been duly and validly authorized. This
Agreement has been duly executed and delivered on behalf of the Buyer, and this
Agreement constitutes a valid and binding agreement of the Buyer enforceable in
accordance with its terms. i. Residency. The Buyer is a resident of the
jurisdiction set forth immediately below the Buyer’s name on the signature pages
hereto.

                         3.           Representations
and Warranties of the Company. The Company represents and warrants to the
Buyer that: 

4 

                                        a.     
Organization and Qualification. The Company and each of its Subsidiaries
(as defined below), if any, is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is
incorporated, with full power and authority (corporate and other) to own, lease,
use and operate its properties and to carry on its business as and where now
owned, leased, used, operated and conducted. Schedule 3(a) sets forth a list of
all of the Subsidiaries of the Company and the jurisdiction in which each is
incorporated. The Company and each of its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which its ownership or use of property or the nature of the business
conducted by it makes such qualification necessary except where the failure to
be so qualified or in good standing would not have a Material Adverse Effect.
“Material Adverse Effect” means any material adverse effect on the business,
operations, assets, financial condition or prospects of the Company or its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection
herewith. “Subsidiaries” means any corporation or other organization, whether
incorporated or unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest. 

                                        b.     
Authorization; Enforcement. (i) The Company has all requisite corporate
power and authority to enter into and perform this Agreement, the Note and to
consummate the transactions contemplated hereby and thereby and to issue the
Securities, in accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement, the Note by the Company and the consummation by
it of the transactions contemplated hereby and thereby (including without
limitation, the issuance of the Note and the issuance and reservation for
issuance of the Conversion Shares issuable upon conversion or exercise thereof)
have been duly authorized by the Company’s Board of Directors and no further
consent or authorization of the Company, its Board of Directors, or its
shareholders is required, (iii) this Agreement has been duly executed and
delivered by the Company by its authorized representative, and such authorized
representative is the true and official representative with authority to sign
this Agreement and the other documents executed in connection herewith and bind
the Company accordingly, and (iv) this Agreement constitutes, and upon execution
and delivery by the Company of the Note, each of such instruments will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. c. Capitalization. As
of the date hereof, the authorized capital stock of the Company consists of: (i)
400,000,000 shares of Common Stock, $0.001 par value per share, of which
150,750,000 shares are issued and outstanding; and (ii) there are no authorized
shares of Preferred Stock; no shares are reserved for issuance pursuant to the
Company’s stock option plans, no shares are reserved for issuance pursuant to
securities (other than the Note) exercisable for, or convertible into or
exchangeable for shares of Common Stock and 21,000,000 shares are reserved for
issuance upon conversion of the Note. All of such outstanding shares of capital
stock are, or upon issuance will be, duly authorized, validly issued, fully paid
and non-assessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the shareholders of the Company
or any liens or encumbrances imposed through the actions or failure to act of
the Company. As of the effective date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe for, puts, calls,
rights of first refusal, agreements, understandings, claims or other commitments
or rights of any character whatsoever relating to, or securities or rights convertible
into or exchangeable for any shares of capital stock of the Company or any of
its Subsidiaries, or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries, (ii) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933 Act and (iii)
there are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to security
holders) that will be triggered by the issuance of the Note or the Conversion
Shares. The Company has furnished to the Buyer true and correct copies of the
Company’s Certificate of Incorporation as in effect on the date hereof
(“Certificate of Incorporation”), the Company’s Bylaws, as in effect on the date
hereof (the “By-laws”), and the terms of all securities convertible into or
exercisable for Common Stock of the Company and the material rights of the
holders thereof in respect thereto. The Company shall provide the Buyer with a
written update of this representation signed by the Company’s Chief Executive on
behalf of the Company as of the Closing Date. 

5 

                                        d.      Issuance
of Shares. The Conversion Shares are duly authorized and reserved for
issuance and, upon conversion of the Note in accordance with its respective
terms, will be validly issued, fully paid and non-assessable, and free from all
taxes, liens, claims and encumbrances with respect to the issue thereof and
shall not be subject to preemptive rights or other similar rights of
shareholders of the Company and will not impose personal liability upon the
holder thereof. 

                                        e.     
Acknowledgment of Dilution. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares upon conversion of the Note. The Company further acknowledges
that its obligation to issue Conversion Shares upon conversion of the Note in
accordance with this Agreement, the Note is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the Company. 

                                        f.      No
Conflicts. The execution, delivery and performance of this Agreement, the
Note by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance and
reservation for issuance of the Conversion Shares) will not (i) conflict with or
result in a violation of any provision of the Certificate of Incorporation or
By-laws, or (ii) violate or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which with notice or lapse of
time or both could become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument to which the Company or any of
its Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and regulations of any self-regulatory organizations to
which the Company or its securities are subject) applicable to the Company or
any of its Subsidiaries or by which any property or asset of the Company or any
of its Subsidiaries is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect). Neither
the Company nor any of its Subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and neither the
Company nor any of its Subsidiaries is in default (and no event has occurred
which with notice or lapse of time or both could put the Company or any of its
Subsidiaries in default) under, and neither the Company nor any of its
Subsidiaries has taken any action or failed to take any action that would give
to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party or by which any property or assets of the Company or any
of its Subsidiaries is bound or affected, except for possible defaults as would
not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its Subsidiaries, if any, are not being conducted,
and shall not be conducted so long as the Buyer owns any of the Securities, in
violation of any law, ordinance or regulation of any governmental entity. Except
as specifically contemplated by this Agreement and as required under the 1933
Act and any applicable state securities laws, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory agency, self
regulatory organization or stock market or any third party in order for it to
execute, deliver or perform any of its obligations under this Agreement, the
Note in accordance with the terms hereof or thereof or to issue and sell the
Note in accordance with the terms hereof and to issue the Conversion Shares upon
conversion of the Note. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company is not in violation of the listing requirements of the Over-the-Counter
Bulletin Board (the “OTCBB”) and does not reasonably anticipate that the Common
Stock will be delisted by the OTCBB in the foreseeable future. The Company and
its Subsidiaries are unaware of any facts or circumstances which might give rise
to any of the foregoing.

6 

                                        g.      SEC
Documents; Financial Statements. The Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents (other than exhibits to such documents) incorporated by
reference therein, being hereinafter referred to herein as the “SEC Documents”).
Upon written request the Company will deliver to the Buyer true and complete
copies of the SEC Documents, except for such exhibits and incorporated
documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the statements made in any such SEC Documents is, or has
been, required to be amended or updated under applicable law (except for such
statements as have been amended or updated in subsequent filings prior the date
hereof). As of their respective dates, the financial statements of the Company
included in the 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 United States generally accepted accounting principles,
consistently applied, during the periods involved and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to October 31, 2012, and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
such financial statements, which, individually or in the aggregate, are not
material to the financial condition or operating results of the Company. The
Company is subject to the reporting requirements of the 1934 Act. 

7 

                                        h.      Absence
of Certain Changes. Since October 31, 2012, there has been no material
adverse change and no material adverse development in the assets, liabilities,
business, properties, operations, financial condition, results of operations,
prospects or 1934 Act reporting status of the Company or any of its
Subsidiaries. 

                                        i.      Absence
of Litigation. There is no action, suit, claim, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its Subsidiaries, threatened against or affecting the Company or any
of its Subsidiaries, or their officers or directors in their capacity as such,
that could have a Material Adverse Effect. Schedule 3(i) contains a complete
list and summary description of any pending or, to the knowledge of the Company,
threatened proceeding against or affecting the Company or any of its
Subsidiaries, without regard to whether it would have a Material Adverse Effect.
The Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing. 

                                        j.     
Patents, Copyrights, etc. The Company and each of its Subsidiaries owns
or possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
(“Intellectual Property”) necessary to enable it to conduct its business as now
operated (and, as presently contemplated to be operated in the future); there is
no claim or action by any person pertaining to, or proceeding pending, or to the
Company’s knowledge threatened, which challenges the right of the Company or of
a Subsidiary with respect to any Intellectual Property necessary to enable it to
conduct its business as now operated (and, as presently contemplated to be
operated in the future); to the best of the Company’s knowledge, the Company’s
or its Subsidiaries’ current and intended products, services and processes do
not infringe on any Intellectual Property or other rights held by any person;
and the Company is unaware of any facts or circumstances which might give rise
to any of the foregoing. The Company and each of its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of their Intellectual Property. 

                                        k.      No
Materially Adverse Contracts, Etc. Neither the Company nor any of its
Subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of the
Company’s officers has or is expected in the future to have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to any contract or
agreement which in the judgment of the Company’s officers has or is expected to
have a Material Adverse Effect. 

8 

                                        l.      Tax
Status. The Company and each of its Subsidiaries has made or filed all
federal, state and foreign income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the assessment or
collection of any foreign, federal, state or local tax. None of the Company’s
tax returns is presently being audited by any taxing authority. 

                                        m.      Certain
Transactions. Except for arm’s length transactions pursuant to which the
Company or any of its Subsidiaries makes payments in the ordinary course of
business upon terms no less favorable than the Company or any of its
Subsidiaries could obtain from third parties and other than the grant of stock
options disclosed on Schedule 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner. 

                                        n.      Disclosure.
All information relating to or concerning the Company or any of its Subsidiaries
set forth in this Agreement and provided to the Buyer pursuant to Section 2(d)
hereof and otherwise in connection with the transactions contemplated hereby 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 herein or
therein, 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 any of its Subsidiaries or its or their business, properties,
prospects, operations or financial conditions, which, under applicable law, rule
or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed (assuming for this purpose
that the Company’s reports filed under the 1934 Act are being incorporated into
an effective registration statement filed by the Company under the 1933 Act).

9 

                                        o.     
Acknowledgment Regarding Buyer’ Purchase of Securities. The Company
acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s
length purchasers with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that the Buyer is not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any statement made by the Buyer or any of its respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to the Buyer’ purchase of the Securities. The Company further represents to the
Buyer that the Company’s decision to enter into this Agreement has been based
solely on the independent evaluation of the Company and its representatives.

                                        p.     
No Integrated Offering. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has directly or indirectly made
any offers or sales in any security or solicited any offers to buy any security
under circumstances that would require registration under the 1933 Act of the
issuance of the Securities to the Buyer. The issuance of the Securities to the
Buyer will not be integrated with any other issuance of the Company’s securities
(past, current or future) for purposes of any shareholder approval provisions
applicable to the Company or its securities. 

                                        q.     
No Brokers. The Company has taken no action which would give rise to any
claim by any person for brokerage commissions, transaction fees or similar
payments relating to this Agreement or the transactions contemplated hereby.

                                        r.      Permits;
Compliance. The Company and each of its Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted (collectively, the “Company Permits”), and there is no action pending
or, to the knowledge of the Company, threatened regarding suspension or
cancellation of any of the Company Permits. Neither the Company nor any of its
Subsidiaries is in conflict with, or in default or violation of, any of the
Company Permits, except for any such conflicts, defaults or violations which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. Since October 31, 2012, neither the Company nor any of
its Subsidiaries has received any notification with respect to possible
conflicts, defaults or violations of applicable laws, except for notices
relating to possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse Effect. 

                                        s.      Environmental
Matters. 

                                                  (i)     
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. 

10 

                                                  (ii)     
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. 

                                                  (iii)      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. 

                                        t.      Title
to Property. The Company and its Subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as are described in Schedule 3(t) or such as would not have a
Material Adverse Effect. Any real property and facilities held under lease by
the Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as would not have a Material Adverse
Effect. 

                                        u.      Insurance.
The Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect. Upon written
request the Company will provide to the Buyer true and correct copies of all
policies relating to directors’ and officers’ liability coverage, errors and
omissions coverage, and commercial general liability coverage. 

11 

                                        v.     
Internal Accounting Controls. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient, in the judgment of
the Company’s board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. 

                                        w.     
Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any Subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended, or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee. 

                                        x.      Solvency.
The Company (after giving effect to the transactions contemplated by this
Agreement) is solvent (i.e., its assets have a fair market value in
excess of the amount required to pay its probable liabilities on its existing
debts as they become absolute and matured) and currently the Company has no
information that would lead it to reasonably conclude that the Company would
not, after giving effect to the transaction contemplated by this Agreement, have
the ability to, nor does it intend to take any action that would impair its
ability to, pay its debts from time to time incurred in connection therewith as
such debts mature. The Company did not receive a qualified opinion from its
auditors with respect to its most recent fiscal year end and, after giving
effect to the transactions contemplated by this Agreement, does not anticipate
or know of any basis upon which its auditors might issue a qualified opinion in
respect of its current fiscal year. 

                                        y.     
No Investment Company. The Company is not, and upon the issuance and sale
of the Securities as contemplated by this Agreement will not be an “investment
company” required to be registered under the Investment Company Act of 1940 (an
“Investment Company”). The Company is not controlled by an Investment Company.

                                        z.      Breach
of Representations and Warranties by the Company. If the Company breaches
any of the representations or warranties set forth in this Section 3, and in
addition to any other remedies available to the Buyer pursuant to this
Agreement, it will be considered an Event of default under Section 3.4 of the
Note. 

                         4.           COVENANTS.

                                        a.      Best
Efforts. The parties shall use their best efforts to satisfy timely each of
the conditions described in Section 6 and 7 of this Agreement.

12 

                                        b.     
Form D; Blue Sky Laws. 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. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for sale to the Buyer at the applicable
closing pursuant to this Agreement under applicable securities or “blue sky”
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to the
Buyer on or prior to the Closing Date. 

                                        c.      Use
of Proceeds. The Company shall use the proceeds for general working capital
purposes. 

                                        d.      Right
of First Refusal. Unless it shall have first delivered to the Buyer, at
least seventy two (72) hours prior to the closing of such Future Offering (as
defined herein), written notice describing the proposed Future Offering,
including the terms and conditions thereof and proposed definitive documentation
to be entered into in connection therewith, and providing the Buyer an option
during the seventy two (72) hour period following delivery of such notice to
purchase the securities being offered in the Future Offering on the same terms
as contemplated by such Future Offering (the limitations referred to in this
sentence and the preceding sentence are collectively referred to as the “Right
of First Refusal”) (and subject to the exceptions described below), the Company
will not conduct any equity financing (including debt with an equity component)
(“Future Offerings”) during the period beginning on the Closing Date and ending
twelve (12) months following the Closing Date. In the event the terms and
conditions of a proposed Future Offering are amended in any respect after
delivery of the notice to the Buyer concerning the proposed Future Offering, the
Company shall deliver a new notice to the Buyer describing the amended terms and
conditions of the proposed Future Offering and the Buyer thereafter shall have
an option during the seventy two (72) hour period following delivery of such new
notice to purchase its pro rata share of the securities being offered on the
same terms as contemplated by such proposed Future Offering, as amended. The
foregoing sentence shall apply to successive amendments to the terms and
conditions of any proposed Future Offering. The Right of First Refusal shall not
apply to any transaction involving (i) issuances of securities in a firm
commitment underwritten public offering (excluding a continuous offering
pursuant to Rule 415 under the 1933 Act) or (ii) issuances of securities as
consideration for a merger, consolidation or purchase of assets, or in
connection with any strategic partnership or joint venture (the primary purpose
of which is not to raise equity capital), or in connection with the disposition
or acquisition of a business, product or license by the Company. The Right of
First Refusal also shall not apply to the issuance of securities upon exercise
or conversion of the Company’s options, warrants or other convertible securities
outstanding as of the date hereof or to the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option or restricted stock plan approved by the shareholders of the Company.

                                        e.     
Expenses. At the Closing, the Company shall reimburse Buyer for expenses
incurred by them in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and the other agreements to be
executed in connection herewith (“Documents”), including, without limitation,
reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees,
fees for stock quotation services, fees relating to any amendments or
modifications of the Documents or any consents or waivers of provisions in the
Documents, fees for the preparation of opinions of counsel, escrow fees, and
costs of restructuring the transactions contemplated by the Documents. When
possible, the Company must pay these fees directly, otherwise the Company must
make immediate payment for reimbursement to the Buyer for all fees and expenses
immediately upon written notice by the Buyer or the submission of an invoice by
the Buyer. The Company’s obligation with respect to this transaction is to
reimburse Buyer’ expenses shall be $2,500. 

13 

                                        f.     
Financial Information. Upon written request the Company agrees to send or
make available the following reports to the Buyer until the Buyer transfers,
assigns, or sells all of the Securities: (i) within ten (10) days after the
filing with the SEC, a copy of its Annual Report on Form 10-K its Quarterly
Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within one (1)
day after release, copies of all press releases issued by the Company or any of
its Subsidiaries; and (iii) contemporaneously with the making available or
giving to the shareholders of the Company, copies of any notices or other
information the Company makes available or gives to such shareholders. 

                                        g.      [INTENTIONALLY
DELETED] 

                                        h.      Listing.
The Company shall promptly secure the listing of the Conversion Shares upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance)
and, so long as the Buyer owns any of the Securities, shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable upon conversion of the Note. The
Company will obtain and, so long as the Buyer owns any of the Securities,
maintain the listing and trading of its Common Stock on the OTCBB or any
equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the
Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange
(“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all
respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and
such exchanges, as applicable. The Company shall promptly provide to the Buyer
copies of any notices it receives from the OTCBB and any other exchanges or
quotation systems on which the Common Stock is then listed regarding the
continued eligibility of the Common Stock for listing on such exchanges and
quotation systems. 

                                        i.      Corporate
Existence. So long as the Buyer beneficially owns any Note, the Company
shall maintain its corporate existence and shall not sell all or substantially
all of the Company’s assets, except in the event of a merger or consolidation or
sale of all or substantially all of the Company’s assets, where the surviving or
successor entity in such transaction (i) assumes the Company’s obligations
hereunder and under the agreements and instruments entered into in connection
herewith and (ii) is a publicly traded corporation whose Common Stock is listed
for trading on the OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX. 

14 

                                        j.      No
Integration. The Company shall not make any offers or sales of any security
(other than the Securities) under circumstances that would require registration
of the Securities being offered or sold hereunder under the 1933 Act or cause
the offering of the Securities to be integrated with any other offering of
securities by the Company for the purpose of any stockholder approval provision
applicable to the Company or its securities. 

                                        k.     
Breach of Covenants. If the Company breaches any of the covenants set
forth in this Section 4, and in addition to any other remedies available to the
Buyer pursuant to this Agreement, it will be considered an event of default
under Section 3.4 of the Note. 

                                        l.     
Failure to Comply with the 1934 Act. So long as the Buyer beneficially
owns the Note, the Company shall comply with the reporting requirements of the
1934 Act; and the Company shall continue to be subject to the reporting
requirements of the 1934 Act. 

                                        m.     
Trading Activities. Neither the Buyer nor its affiliates has an open
short position in the common stock of the Company and the Buyer agree that it
shall not, and that it will cause its affiliates not to, engage in any short
sales of or hedging transactions with respect to the common stock of the
Company.

                         5.          
Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates, registered in the name
of the Buyer or its nominee, for the Conversion Shares in such amounts as
specified from time to time by the Buyer to the Company upon conversion of the
Note in accordance with the terms thereof (the “Irrevocable Transfer Agent
Instructions”). In the event that the Borrower proposes to replace its transfer
agent, the Borrower shall provide, prior to the effective date of such
replacement, a fully executed Irrevocable Transfer Agent Instructions in a form
as initially delivered pursuant to the Purchase Agreement (including but not
limited to the provision to irrevocably reserve shares of Common Stock in the
Reserved Amount) signed by the successor transfer agent to Borrower and the
Borrower. Prior to registration of the Conversion Shares under the 1933 Act or
the date on which the Conversion Shares may be sold pursuant to Rule 144 without
any restriction as to the number of Securities as of a particular date that can
then be immediately sold, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company warrants that:
(i) no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5, and stop transfer instructions to give effect to
Section 2(f) hereof (in the case of the Conversion Shares, prior to registration
of the Conversion Shares under the 1933 Act or the date on which the Conversion
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of Securities as of a particular date that can then be immediately sold), will
be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Note; (ii) it will not direct
its transfer agent not to transfer or delay, impair, and/or hinder its transfer
agent in transferring (or issuing)(electronically or in certificated form) any
certificate for Conversion Shares to be issued to the Buyer upon conversion of
or otherwise pursuant to the Note as and when required by the Note and this
Agreement; and (iii) it will not fail to remove (or directs its transfer agent
not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive
legend (or to withdraw any stop transfer instructions in respect thereof) on any
certificate for any Conversion Shares issued to the Buyer upon conversion of or
otherwise pursuant to the Note as and when required by the Note and this
Agreement. Nothing in this Section shall affect in any way the Buyer’s
obligations and agreement set forth in Section 2(g) hereof to comply with all
applicable prospectus delivery requirements, if any, upon re-sale of the
Securities. If the Buyer provides the Company, at the cost of the Buyer, with
(i) an opinion of counsel in form, substance and scope customary for opinions in
comparable transactions, to the effect that a public sale or transfer of such
Securities may be made without registration under the 1933 Act and such sale or
transfer is effected or (ii) the Buyer provides reasonable assurances that the
Securities can be sold pursuant to Rule 144, the Company shall permit the
transfer, and, in the case of the Conversion Shares, promptly instruct its
transfer agent to issue one or more certificates, free from restrictive legend,
in such name and in such denominations as specified by the Buyer. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyer, by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 may be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that the Buyer shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach and requiring immediate transfer, without the necessity of showing
economic loss and without any bond or other security being required. 

15 

                         6.           Conditions
to the Company’s Obligation to Sell. The obligation of the Company hereunder
to issue and sell the Note to the Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the following conditions
thereto, provided that these conditions are for the Company’s sole benefit and
may be waived by the Company at any time in its sole discretion: 

                                        a.      The
Buyer shall have executed this Agreement and delivered the same to the Company.

                                        b.      The
Buyer shall have delivered the Purchase Price in accordance with Section 1(b)
above. 

                                        c.      The
representations and warranties of the Buyer shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date), and the Buyer shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Buyer at or
prior to the Closing Date.

                                        d.      No
litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement. 

16 

                         7.           Conditions
to The Buyer’s Obligation to Purchase. The obligation of the Buyer hereunder
to purchase the Note at the Closing is subject to the satisfaction, at or before
the Closing Date of each of the following conditions, provided that these
conditions are for the Buyer’s sole benefit and may be waived by the Buyer at
any time in its sole discretion: 

                                        a.      The
Company shall have executed this Agreement and delivered the same to the Buyer.

                                        b.      The
Company shall have delivered to the Buyer the duly executed Note (in such
denominations as the Buyer shall request) in accordance with Section 1(b) above.

                                        c.      The
Irrevocable Transfer Agent Instructions, in form and substance satisfactory to a
majority-in-interest of the Buyer, shall have been delivered to and acknowledged
in writing by the Company’s Transfer Agent. 

                                        d.     
The representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at such time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. The Buyer shall have received a
certificate or certificates, executed by the chief executive officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by the Buyer including, but not
limited to certificates with respect to the Company’s Certificate of
Incorporation, By-laws and Board of Directors’ resolutions relating to the
transactions contemplated hereby. 

                                        e.      No
litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement. 

                                        f.      No
event shall have occurred which could reasonably be expected to have a Material
Adverse Effect on the Company including but not limited to a change in the 1934
Act reporting status of the Company or the failure of the Company to be timely
in its 1934 Act reporting obligations. 

                                        g.      The
Conversion Shares shall have been authorized for quotation on the OTCBB and
trading in the Common Stock on the OTCBB shall not have been suspended by the
SEC or the OTCBB. 

                                        h.      The
Buyer shall have received an officer’s certificate described in Section 3(c)
above, dated as of the Closing Date. 

17 

                         8.           Governing
Law; Miscellaneous. 

                                        a.     
Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state
and county of Nassau. The parties to this Agreement hereby irrevocably waive any
objection to jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or based upon
forum non conveniens. The Company and Buyer waive trial by jury. The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents to
process being served in any suit, action or proceeding in connection with this
Agreement or any other Transaction Document by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner permitted by law. 

                                        b.      Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original but all of which shall constitute one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party.

                                        c.      Headings.
The headings of this Agreement are for convenience of reference only and shall
not form part of, or affect the interpretation of, this Agreement. 

                                        d.      Severability.
In the event that any provision of this Agreement is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof. 

                                        e.      Entire
Agreement; Amendments. 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 the Company nor the Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the majority in interest of the Buyer. 

18 

                                        f.      Notices.
All notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:

If to the Company,
to:
     GOLD AND GEMSTONE MINING
INC. 
     2144 Whitekirk
Way 
     Draper, UT
84020 
     Attn: CHARMAINE KING, Chief
Executive Officer 
     facsimile: [enter fax
number] 

With a copy by fax only to (which copy
shall not constitute notice):
     [enter name of
law firm] 
     Attn: [attorney
name] 
     [enter address line
1] 
     [enter city, state,
zip] 
     facsimile: [enter fax number]

If to the
Buyer: 
     ASHER ENTERPRISES,
INC. 
     1 Linden Pl., Suite
207 
     Great Neck, NY.
11021 
     Attn: Curt Kramer,
President
     facsimile: 516-498-9894 

With a copy by fax only to (which copy
shall not constitute notice): 
     Naidich
Wurman Birnbaum & Maday LLP 
     80
Cuttermill Road, Suite 410 
     Great Neck, NY
11021 
     Attn: Bernard S. Feldman,
Esq. 
     facsimile: 516-466-3555 

               Each
party shall provide notice to the other party of any change in address. 

19 

                                        g.      Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties and their successors and assigns. Neither the Company nor the
Buyer shall assign this Agreement or any rights or obligations hereunder without
the prior written consent of the other. Notwithstanding the foregoing, subject
to Section 2(f), the Buyer may assign its rights hereunder to any person that
purchases Securities in a private transaction from the Buyer or to any of its
“affiliates,” as that term is defined under the 1934 Act, without the consent of
the Company. 

                                        h.     
Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person. 

                                        i.      Survival.
The representations and warranties of the Company and the agreements and
covenants set forth in this Agreement shall survive the closing hereunder
notwithstanding any due diligence investigation conducted by or on behalf of the
Buyer. The Company agrees to indemnify and hold harmless the Buyer and all their
officers, directors, employees and agents for loss or damage arising as a result
of or related to any breach or alleged breach by the Company of any of its
representations, warranties and covenants set forth in this Agreement or any of
its covenants and obligations under this Agreement, including advancement of
expenses as they are incurred. 

                                        j.     
Publicity. The Company, and the Buyer shall have the right to review a
reasonable period of time before issuance of any press releases, SEC, OTCBB or
FINRA filings, or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of the Buyer, to make any press release or
SEC, OTCBB (or other applicable trading market) or FINRA filings with respect to
such transactions as is required by applicable law and regulations (although the
Buyer shall be consulted by the Company in connection with any such press
release prior to its release and shall be provided with a copy thereof and be
given an opportunity to comment thereon). 

                                        k.     
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. 

                                        l.      No
Strict Construction. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. 

                                        m.      Remedies.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyer by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Agreement will be
inadequate and agrees, 

20

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